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Home My WebLink About26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1MEETING DATE: PREPARED BY : REQUEST: Recommendation ClTY COUNCILACTION APPROVED'--:/ ..... _ --- RECEIVED----~ -.N.!$. /-< Adopt Resolution Nos . 2021-38 and 2021-39 , 1) A Resolution Authorizing the Issuance of Special Tax Refunding Bonds , Series 2021 , by City of Palm Desert Community Facilities District No . 2005- 1 (University Park), and 2) A Resolution Authorizing the Issuance of Special Tax Bonds , Series 2021 , by City of Palm Desert Community Facilities District No . 2021-1 (University Park), and Approving Related Documents and Actions That the City Council waive further reading and adopt , 1) Resolution No . 2021-38 , a Resolution of the City Council of the City of Palm Desert , acting for itself and as the legislative body of City of Palm Desert Community District No. 2005- 1 (University Park), to authorize the issuance of the District's special tax refunding bonds, Series 2021 , and approving certain documents and taking certain other action in connection therewith ; and 2) Resolution No . 2021-39 , a Resolution of the City Council of the City of Palm Desert , acting for itself and as the legislative body of City of Palm Desert Community District No . 2021- 1 (University Park), to authorize the issuance of the District's special tax bonds , Series 2021 , and approving certain documents and taking certain other actions in connection therewith . Strategic Plan Approval of the attached resolutions supports the Land Use , Housing and Open Space Priority 2 by achieving savings in property owner special taxes that will benefit the owners and by taking the next steps for a funding mechanism to assist in financing further development of University Park . Executive Summary Approval of the resolutions and attached documents in substantial form , is required in order for the City of Palm Desert to refund the existing CFO 2005 -1 special tax bonds , Series 2006A, to provide cost savings to the property owners within the University Park area of the City and to facilitate the public financing needs of UPl 's development. Background CFO 2005-1 issued two series of debt in 2006 and 2007 with a combined par amount of $67.915 million . The repayment of that debt is a burden that is carried by the property owners within the boundaries of CFO 2005-1 . June 24, 2021 - Staff Report Adopt Resolution No. 2021-38 Reso of Issuance for CFD 2005-1 Refunding Bonds, Series 2021 Adopt Resolution No. 2021-39 Reso of Issuance for CFD 2021-1 Special Tax Bonds, Series 2021 Page 2 of 4 \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021- 1\01 SR Adopt Resolution Reso of Issuance UPI CFD Refunding 6.24.21 w RWG Revs 6.11.21.docx Due to timing, market conditions and subsequent market downturn, the property within CFD 2005- 1 has been slow to develop with significantly more property currently remaining undeveloped. University Park Investor (UPI) presently owns 165.661 acres within CFD 2005-1 and is now actively engaged in the development process. By a Petition submitted to the City in February 2021, UPI formally initiated the process under the Mello-Roos Act to form CFD 2021-1 to issue bonds to finance public facilities costs related to the development of UPI’s property. On May 13, 2021 the City Council adopted Resolution No. 2021-21 approving and authorizing a tender bonds alternative as part of the Refunding Program. Notice and Participation Forms were distributed by the Placement Agent to undeveloped property owners pursuant to the Resolution, with one undeveloped property owner returning their form by the June 4, 2021 deadline (Lennar Homes of California). Participation in the tender bonds alternative will allow the proceeds to be applied in the refunding to pay their proportionate share of the existing Series 2006A Bonds. In general, and pursuant to the City’s Debt Policy, a net present value savings of 3.00% or greater is considered significant. Estimated NPV savings for CFD 2005-1. Based on current rates and the credit worthiness of the CFD 2005-1 issue, the Underwriting team has indicated a potential savings of approximately $384,800 in annual debt service payments and approximately $5.773 million over the life of the bonds. That equates to about $4.758 million net present value savings (or 17.41% NPV savings). The actual savings is subject to market conditions. The City’s Debt Policy requires that a compelling reason or financial benefit to the City exists to support an increase to the weighted average life of refinanced debt. Both requirements have been identified to support the extension of the term of the refinanced debt for CFD 2021-1 and. still produce net present value savings of at least 3%, as required by the Debt Policy. Estimated NPV savings and New Money for CFD 2021-1. Based on current rates and the credit worthiness of the CFD 2021-1 issue, the Underwriting team has indicated that CFD 2021-1’s refunding of the outstanding debt, with the term extension, may generate a total of about $787,000 net present value savings (or 4.59% NPV savings) and approximately $2.3 million in estimated new money for public facilities. The actual savings and amount for the new money portion is subject to market conditions. Approval of the resolutions will meet the requirements of the debt policy and continue the process for the refunding of bonds and assisting UPI with the financing needs for its development. Following a marketing period in late June and early July, the bonds are expected to be sold in mid-July and issued at the end of July. The following is a summary of the documents included in the two Resolutions of Issuance for approval. June 24, 2021 - Staff Report Adopt Resolution No. 2021-38 Reso of Issuance for CFD 2005-1 Refunding Bonds, Series 2021 Adopt Resolution No. 2021-39 Reso of Issuance for CFD 2021-1 Special Tax Bonds, Series 2021 Page 3 of 4 \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021- 1\01 SR Adopt Resolution Reso of Issuance UPI CFD Refunding 6.24.21 w RWG Revs 6.11.21.docx DOCUMENT WHAT IS DOES Preliminary Official Statement The CFD’s offering and disclosure document for the bonds. Includes info regarding the proposed bonds, the CFD, development status, property ownership, assessment delinquencies, demographic, financial and other information and related investment risks is disclosed by the CFD to investors in the Preliminary/Final Official Statement. Must contain all material info related to the CFD that a reasonable investor would consider significant in its investment decision. Bond Indenture Governs the terms and conditions of the bonds Bond Purchase Agreement The CFD sells the bonds to the underwriter for concurrent resale to investors Bond Purchase Contract In the tender bonds alternative, CFD 2005-1 sells the Series B Bond to the undeveloped property owner, who agrees to tender the bond back to CFD 2005-1 to extinguish the parcel’s special tax obligation Continuing Disclosure Agreement (included as Appendix to Preliminary Official Statement) Listing of info from the Official Statement that the CFD must update annually and disclose to the bond market during the life of the bonds Acquisition Agreement Governs the process for payment and acquisition of public facilities from bond funds Escrow Agreement Governs the defeasance escrow where the refunding bond proceeds are deposited to redeem the 2006A bonds The final interest rates and terms will be inserted in each of the documents mentioned above, after the bonds are priced. Fiscal Analysis The tables below provide the good faith estimates from the City’s financial advisor pursuant to Section 5852.1 of the Government Code: CFD 2005-1 Refunding Bonds4 Series 2021A Refunding Bonds True Annual Interest Cost Finance Charge of the Bonds1 Proceeds from Sale of Bonds2 Total DS Payments3 2.859115% $280,749 $5,085,614 $7,227,724 Series 2021B (Subordinate) Refunding Bonds True Annual Interest Cost Finance Charge of the Bonds1 Proceeds from Sale of Bonds2 Total DS Payments3 3.00% $34,000 $1,602,180 $2,052,407 June 24, 2021 - Staff Report Adopt Resolution No. 2021-38 Reso of Issuance for CFD 2005-1 Refunding Bonds, Series 2021 Adopt Resolution No. 2021-39 Reso of Issuance for CFD 2021-1 Special Tax Bonds, Series 2021 Page 4 of 4 \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021- 1\01 SR Adopt Resolution Reso of Issuance UPI CFD Refunding 6.24.21 w RWG Revs 6.11.21.docx CFD 2021-1 Bonds5 Series 2021 New Money and Refunding Bonds True Annual Interest Cost Finance Charge of the Bonds1 Proceeds from Sale of Bonds2 Total DS Payments3 4.200853% $518,470 $14,864,919 $28,781,960 1. The sum of all fees and charges paid to third parties 2. Proceeds from the sale of the bonds, less the finance charge of the bonds described in item (B) and any reserves or capitalized interest paid or funded with proceeds of the bonds. 3. The sum total of all debt service payments on the bonds. 4. The 2005-1 refunding bonds will be issued as nonrated bonds in a public offering through bond underwriter Piper Sandler & Co. in regular minimum amounts of $5,000. Investors are expected to be institutional investors, such as mutual funds and banks. 5. The 2021-1 bonds will be issued as nonrated bonds in a public offering through Piper Sandler & Co. Investments will be a minimum of $100,000 to help ensure that the bonds are sold only to investors who are capable of making sizeable investments and more prepared to bear the higher risk, until greater development thresholds are met to allow bonds to be traded in typical minimum amounts of $5,000. Investors are expected to be institutional investors, such as mutual funds and banks. The refunding bonds will be issued with a reserve fund consisting of debt service for approximately one year, which provides back-up for payment on the bonds if there is a shortfall of special tax revenues. As disclosed in the Preliminary Official Statements, the bonds are payable solely from special taxes levied in the applicable CFD. The costs of issuance of the refunding bonds will be included and are eligible to be paid from proceeds of the refunding bonds, if and when issued, except for the costs of the CFD 2005-1 Series B Bond which are reimbursed to the City from a deposit posted by Lennar with the City. The savings generated by the refunding will benefit the property owners within CFD 2005-1. There is no impact to the City’s General Fund from this request. LEGAL REVIEW DEPT. REVIEW FINANCIAL REVIEW ASSISTANT CITY MANAGER WLS William L. Strausz Bond Counsel Janet M. Moore Janet M. Moore Director of Finance Janet M. Moore Janet M. Moore Director of Finance Andy Firestine Andy Firestine Assistant City Manager L. Todd Hileman, City Manager: L. Todd Hileman ATTACHMENTS: Resolution No. 2021-38 Resolution of Issuance related to CFD 2005-1 Resolution No. 2021-39 Resolution of Issuance related to CFD 2021-1 Preliminary Official Statement Bond Indenture Bond Purchase Agreement Bond Purchase Contract Escrow Agreement* Preliminary Official Statement Bond Indenture Bond Purchase Agreement Acquisition Agreement Escrow Agreement* *There is only one Escrow Agreement that applies to both Resolutions -1- \\srv-everyone\everyo ne\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\02 Resolution of Issuance (Palm Desert CFD 2005-1 Ref STBs 2021) 6.24.21.DOCX RESOLUTION NO. 2021-38 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT, ACTING FOR ITSELF AND AS THE LEGISLATIVE BODY OF CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005- 1 (UNIVERSITY PARK), TO AUTHORIZE THE ISSUANCE OF THE DISTRICT’S SPECIAL TAX REFUNDING BONDS, SERIES 2021, AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH RECITALS: WHEREAS, the City Council of the City of Palm Desert (the “City”), located in Riverside County, California (the “City Council”, and hereinafter sometimes referred to also as the “legislative body of the District”), has heretofore undertaken proceedings and declared the necessity of City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”) to issue bonds, pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “Act”); and WHEREAS, based upon Resolution Nos. 06-6 and 06-7 adopted by the legislative body of the District on January 12, 2006 and an election held January 12, 2006 authorizing the levy of a special tax and the issuance of bonds by the District, the District is now authorized to issue bonds for one or more series, pursuant to the Act, in an aggregate principal amount not to exceed $70,000,000; and WHEREAS, the District has previously issued its $50,000,000 aggregate initial principal amount Special Tax Bonds, Series 2006A (the “2006A Bonds”), of which $26,250,000 in aggregate principal amount is currently outstanding; and WHEREAS, on September 10, 2020, the City Council authorized and directed City staff to work with a team of financing professionals on the issuance of refunding bonds to refund the outstanding 2006A Bonds for debt service savings (the “Refunding Program”); and WHEREAS, at this time, the legislative body of the District intends to refinance a portion of the outstanding 2006A Bonds through the issuance of refunding bonds designated as the “City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Series 2021A” (the “Series 2021A Bonds”), and “City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Subordinate Series 2021B (Taxable)” (the “Series 2021B Bonds;” and together with the Series 2021A Bonds, the “Series 2021 Bonds”); and WHEREAS, on May 13, 2021, the legislative body of the District adopted Resolution No. 2021-21 approving and authorizing a tender bonds alternative (the “Tender Bonds Alternative”) as part of the Refunding Program pursuant to the authority conferred by California Government Code Section 53344.1 and Resolution No. 05-87, adopted by the City Council on October 13, 2005 in connection with the formation RESOLUTION NO. 2021-38 -2- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\02 Resolution of Issuance (Palm Desert CFD 2005-1 Ref STBs 2021) 6.24.21.DOCX proceedings for the District, to allow the purchase and tender of the Series 2021B Bonds by owners of undeveloped property within the District to the District Treasurer in full payment of the special tax obligation secured by such property, on such terms and conditions as the City may establish, which may be beneficial to development plans for undeveloped property within the District which otherwise is precluded from prepaying special taxes of the District under the rate and method of apportionment for the District; and WHEREAS, by Resolution No. 2021-21, the legislative body of the District appointed Piper Sandler & Co. as placement agent (the “Placement Agent”) for the Tender Bonds Alternative component of the Refunding Program, and Notice and Participation Forms (as defined in Resolution No. 2021-21) were duly distributed by the Placement Agent, with one undeveloped property owner returning a Notice and participation Form by the June 4, 2021 deadline specified therein to elect to participate in the Tender Bonds Alternative; and WHEREAS, as part of the Refunding Program and in accordance with a request set forth in a Petition dated February 24, 2021, submitted to the City Council by University Park Investor, LLC, the owner of certain of the land within CFD 2005-1, and as part of the Refunding Program, the City Council has undertaken proceedings, including the adoption of resolutions and an ordinance in March, April, and May 2021, to form “City of Palm Desert Community Facilities District No. 2021-1 (University Park)” (“CFD 2021- 1”) to encompass a portion of the property within the District consisting of approximately 174 acres, authorize the levy of special taxes therein, and authorize the issuance of special tax bonds by CFD 2021-1 (the “CFD 2021-1 Bonds”) to pay and defease a portion of 2006A Bonds allocable to the property within CFD 2021-1 and finance additional public facilities required for the development of the property within CFD 2021-1 without affecting the special taxes for the other properties within the District; and WHEREAS, the legislative body of the District has determined that it is prudent in the management of its fiscal affairs to issue the Series 2021 Bonds; and WHEREAS, the value of the real property in the District subject to the special tax to pay debt service on the Series 2021 Bonds is not less than three times the principal amount of the Series 2021 Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District, which fact is required as a precondition to the issuance of the Series 2021 Bonds; and WHEREAS, in order to effect the issuance of the Series 2021 Bonds, the City Council, for itself and as the legislative body of the District, desires to approve the form of a Preliminary Official Statement for the Series 2021A Bonds and to approve the forms of, and authorize the execution and delivery of, a Bond Indenture for the Series 2021 Bonds, an Escrow Agreement relating to the defeasance and redemption of the 2006A Bonds, a Bond Purchase Agreement with respect to the Series 2021A Bonds, a Bond Purchase Contract with respect to the Series 2021B Bonds, and a Continuing RESOLUTION NO. 2021-38 -3- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\02 Resolution of Issuance (Palm Desert CFD 2005-1 Ref STBs 2021) 6.24.21.DOCX Disclosure Agreement for the Series 2021A Bonds, the forms of which are on file with the City Clerk; and WHEREAS, on January 10, 2019, the City Council approved an updated local debt policy (the “Local Debt Policy”) in furtherance of Section 8855(i) of the California Government Code, as amended by SB 1029, enacted as Chapter 307, Statutes of 2016. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT, ACTING FOR ITSELF AND AS THE LEGISLATIVE BODY OF CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK), DOES HEREBY RESOLVE, FIND, DECLARE AND ORDER AS FOLLOWS: Section 1. Each of the above recitals is true and correct and is adopted by the City Council, acting for itself and as the legislative body of the District. Section 2. The City Council hereby determines that (a) the Local Debt Policy is consistent with the requirements of Government Code Section 8855(i), and (b) the proposed Series 2021 Bonds to be issued in accordance with the parameters set forth in this Resolution are consistent with the Local Debt Policy. Section 3. The legislative body of the District hereby finds and determines that, as determined in accordance with Section 53345.8 of the Act and as required by the City’s Goals and Policies for Community Facilities Districts adopted by Resolution No. 05-86 approved by the City Council on October 13, 2005 pursuant to Section 53312.7 of the Act (the “CFD Goals and Policies”), the value of the real property in the District subject to the special tax to pay debt service on the Series 2021 Bonds is not less than three times the principal amount of the Series 2021 Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District. This determination is based on the full cash value of certain real property within the District as shown on the ad valorem assessment roll and an appraisal with respect to other real property within the District, which appraisal has been made in a manner consistent with the CFD Goals and Policies, all as further described in the Preliminary Official Statement (as defined in Section 10 below). Section 4. The issuance of the Series 2021A Bonds in an aggregate principal amount not to exceed $6,250,000 is hereby authorized, with the exact principal amount of the Series 2021A Bonds to be determined by the official signing the Bond Purchase Agreement in accordance with Section 8 below. The issuance of the Series 2021B Bonds in an aggregate principal amount not to exceed $1,605,000 is hereby authorized, with the exact principal amount of the Series 2021B Bonds to be determined by the official signing the Bond Purchase Contract in accordance with Section 9 below. The legislative body of the District hereby determines that it is prudent in the management of its fiscal affairs to issue the Series 2021 Bonds. The Series 2021A Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed by the District in accordance with Section 8 hereof, and the Series 2021B Bonds shall mature on the dates and pay interest at the rates set forth in the Bond RESOLUTION NO. 2021-38 -4- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\02 Resolution of Issuance (Palm Desert CFD 2005-1 Ref STBs 2021) 6.24.21.DOCX Purchase Contract to be executed by the District in accordance with Section 9 hereof. The Series 2021 Bonds shall be governed by the terms and conditions of the Bond Indenture presented at this meeting, on file with the City Clerk and incorporated herein by reference (the “Indenture”). The Indenture shall be executed by any one of the Mayor of the City of Palm Desert, the Mayor Pro Tem of the City of Palm Desert (in the Mayor’s absence), the City Manager of the City of Palm Desert, the Assistant City Manager of the City of Palm Desert (in the City Manager’s absence), or any deputy of such officers (each, an “Authorized Officer”), acting singly, in substantially the form presented at this meeting, with such additions thereto and changes therein as may be approved by such officer upon consultation with Bond Counsel. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Indenture by any one of the Authorized Officers. The date or dates, maturity or maturities, pledge or assignment of any revenues of the District to the repayment of the Series 2021 Bonds, the manner of investment of any bond proceeds and other revenues, manner of payment, interest rate or rates, interest payment dates, denominations, form, registration privileges, manner of execution, place of payment, terms of redemption, rebate provisions, funds designated to pay the costs of issuance of the Series 2021 Bonds, and other terms of the Series 2021 Bonds shall be as provided in the Indenture as finally executed and shall be in conformance with any such terms set forth in (a) with respect to the Series 2021A Bonds, the Bond Purchase Agreement described in Section 8 below and the Official Statement described in Section 10 below and delivered to the purchasers of the Series 2021A Bonds, and (b) with respect to the Series 2021B Bonds, the Bond Purchase Contract described in Section 9 below. Capitalized terms used in this Resolution which are not defined herein have the meanings ascribed to them in the Indenture. Section 5. The Series 2021 Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor of the City and attested with the manual or facsimile signature of the City Clerk. The appointment of U.S. Bank National Association, a national banking association, as trustee (the “Trustee”) under the Indenture and as escrow agent (the “Escrow Agent”) under the Escrow Agreement described in Section 7 is hereby approved. Section 6. Pursuant to Section 53356.1 of the Act, the legislative body of the District hereby covenants, for the benefit of the Bondowners, to commence and diligently pursue any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of interest or principal of the Series 2021 Bonds, such foreclosure action to be commenced and pursued as more completely set forth in the Indenture. Section 7. The Escrow Agreement (the “Escrow Agreement”) relating to the defeasance and redemption of the 2006A Bonds, proposed to be entered into by and among the District, CFD 2021-1, and the Escrow Agent, in the form presented and on file in the office of the City Clerk, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the District, to execute and deliver the Escrow Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may approve (such approval to be conclusively evidenced by such officer’s execution and delivery thereof). The date on RESOLUTION NO. 2021-38 -5- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\02 Resolution of Issuance (Palm Desert CFD 2005-1 Ref STBs 2021) 6.24.21.DOCX which the 2006A Bonds shall be defeased and no longer deemed to be outstanding shall be as provided in the Escrow Agreement as finally executed. Section 8. With respect to the Series 2021A Bonds, the form of the Bond Purchase Agreement by and between the District and the Underwriter presented at this meeting, on file with the City Clerk and incorporated herein by reference (the “Bond Purchase Agreement”), is hereby approved, and any one of the Authorized Officers is hereby authorized to execute the Bond Purchase Agreement in substantially the form hereby approved, with such additions thereto and changes therein as may be approved by such officer upon consultation with Bond Counsel. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Bond Purchase Agreement; provided, however, that the Bond Purchase Agreement shall be signed only if (i) the Series 2021A Bonds are purchased by the Underwriter at an overall interest rate that does not exceed 4.00% per annum for the issue as a whole (calculated utilizing the true interest cost method), (ii) the total interest cost to maturity on the Series 2021A Bonds plus the principal amount of the Series 2021A Bonds is less than the remaining total interest cost to maturity on the portion of outstanding 2006A Bonds being refunded by the Series 2021A Bonds plus the remaining principal amount of such portion of 2006A Bonds, (iii) the discount paid to the Underwriter (exclusive of original issue discount) does not exceed 1.00% of the principal amount of the Series 2021A Bonds, (iv) the aggregate principal amount of the Series 2021A Bonds does not exceed $6,250,000, and (v) the refinancing by the Series 2021A Bonds of the allocable portion of the 2006A Bonds produces net present value savings of at least 3% of the principal amount of such portion of 2006A Bonds being refinanced by the Series 2021A Bonds. The legislative body of the District hereby finds and determines, pursuant to Section 53360.4 of the Act, that the sale of the Series 2021A Bonds at a negotiated sale to the Underwriter, as contemplated by the Bond Purchase Agreement, will result in a lower overall cost than a public sale. Each of the Authorized Officers is authorized to determine the day on which the Series 2021A Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the District and may reject any terms presented by the Underwriter if determined not to be in the best interest of the District. Section 9. With respect to the Series 2021B Bonds, the form of the Bond Purchase Contract, by and between the District and the undeveloped property owner participating in the Tender Bonds Alternative, presented at this meeting and on file with the City Clerk and incorporated herein by reference (the “Bond Purchase Contract”), is hereby approved, and any one of the Authorized Officers is hereby authorized to execute the Bond Purchase Contract in substantially the form hereby approved, with such additions thereto and changes therein as may be approved by such officer upon consultation with Bond Counsel. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Bond Purchase Contract; provided, however, that the Bond Purchase Contract shall be signed only if (i) the total interest cost to maturity on the Series 2021B Bonds plus the principal amount of the Series 2021B Bonds does not exceed the remaining total interest cost to maturity on the portion of outstanding 2006A Bonds being redeemed in connection with tender of the Series 2021B Bonds plus the remaining principal amount of such portion of 2006A Bonds, and (ii) the aggregate principal amount of the Series 2021B Bonds does not exceed RESOLUTION NO. 2021-38 -6- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\02 Resolution of Issuance (Palm Desert CFD 2005-1 Ref STBs 2021) 6.24.21.DOCX $1,605,000. The legislative body of the District hereby finds and determines, pursuant to Section 53360.4 of the Act, that the sale of the Series 2021B Bonds at a negotiated sale to said undeveloped property owner, as contemplated by the Bond Purchase Contract, will result in a lower overall cost than a public sale. Section 10. The form of the Preliminary Official Statement for the Series 2021A Bonds presented at this meeting, on file with the City Clerk and incorporated herein by reference (the “Preliminary Official Statement”) is hereby approved. For purposes of this Section 10, the term “Authorized Officers” shall include the City Treasurer. The Underwriter is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Series 2021A Bonds in substantially the form hereby approved, together with such additions thereto and changes therein as are determined necessary by any one of the Authorized Officers, upon consultation with Bond Counsel and Disclosure Counsel, to make the Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 of the Securities and Exchange Commission, including, but not limited to, such additions and changes as are necessary to make all information set forth therein accurate and not misleading. Each of the Authorized Officers is hereby authorized to execute a final Official Statement in substantially the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Authorized Officer executing the Official Statement, upon consultation with Bond Counsel, to make such Official Statement complete and accurate as of its date. The Underwriter is further authorized to distribute the final Official Statement for the Series 2021A Bonds and any supplement thereto to the purchasers thereof upon its execution on behalf of the District as described above. Section 11. The form of the Continuing Disclosure Agreement for the Series 2021A Bonds presented at this meeting and appended to the Preliminary Official Statement, on file with the City Clerk and incorporated herein by reference (the “Continuing Disclosure Agreement”), is hereby approved, and any one of the Authorized Officers is hereby authorized and directed to execute the Continuing Disclosure Agreement in substantially the form hereby approved, with such additions thereto and changes therein as may be approved by such officer upon consultation with Bond Counsel and Disclosure Counsel, with such approval to be conclusively evidenced by the execution and delivery of the Continuing Disclosure Agreement. Section 12. All actions heretofore taken by the officers and agents of the City and the District with respect to the issuance and sale of the Series 2021 Bonds, the establishment and implementation of the Tender Bonds Alternative component of the Refunding Program, or in connection with or related to any of the agreements or documents referenced herein are hereby approved, confirmed, and ratified. The Mayor, each of the Authorized Officers, the Director of Finance, the Deputy Development Services Director, the Interim Public Works Director, and other officers and staff of the City and the District responsible for the fiscal affairs of the District are hereby authorized and directed to take any actions, and execute and deliver any and all documents as are necessary to accomplish (a) the issuance, sale and delivery of the Series 2021 Bonds in accordance with the provisions of this Resolution; (b) the transactions contemplated by the Indenture, the Bond Purchase Agreement, the Bond Purchase Contract, the Escrow RESOLUTION NO. 2021-38 -7- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\02 Resolution of Issuance (Palm Desert CFD 2005-1 Ref STBs 2021) 6.24.21.DOCX Agreement, and the Continuing Disclosure Agreement; and (c) the fulfillment of the purposes of the Series 2021 Bonds as described in the Indenture, including, but not limited to, providing certificates as to the accuracy of any information relating to the District which is included in the Official Statement. Any document authorized herein to be signed by the City Clerk may be signed by a duly appointed deputy clerk. Section 13. Effective Date. This Resolution shall take effect immediately upon adoption. PASSED, APPROVED and ADOPTED by the City Council of the City of Palm Desert, California, on this 24h day of June, 2021, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: ________________________________ KATHLEEN KELLY, MAYOR ATTEST: ________________________________ M. GLORIA SANCHEZ, ACTING CITY CLERK CITY OF PALM DESERT, CALIFORNIA [This page has intentionally been left blank.] This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. PRELIMINARY OFFICIAL STATEMENT DATED __________, 2021 NEW ISSUE - BOOK-ENTRY-ONLY NO RATING In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax, and (ii) interest on the Bonds is exempt from State of California personal income taxes. Interest on the Bonds may be subject to certain federal income taxes imposed only on certain corporations. Bond Counsel expresses no opinion as to any other tax consequences regarding the Bonds. For a more complete discussion of the tax aspects, see “TAX MATTERS” herein. $___________* CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS, SERIES 2021A Dated: Date of Issuance Due: September 1, as shown on the inside cover page The City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Series 2021A (the “Bonds”) are being issued by City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”) to provide funds: (i) to refund a portion of the District’s outstanding Special Tax Bonds, Series 2006A (the “2006 Bonds”); (ii) to fund a Reserve Account for the Bonds; and (iii) to pay costs incurred in connection with the issuance of the Bonds. The 2006 Bonds were issued for the purpose of providing funds to pay the costs of acquiring certain public facilities. The District is located in the City of Palm Desert, California (the “City”). The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California), and pursuant to a Bond Indenture dated as of [July ] 1, 2021 (the “Indenture”), by and between the District and U.S. Bank National Association, as trustee (the “Trustee”). The Bonds are special obligations of the District and are payable solely from Net Taxes (as defined herein), and the other assets pledged therefor under the Indenture, all as further described herein. Special Taxes (as defined herein) are to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within the District. The City Council is the legislative body of the District. The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases of Bonds may be made in principal amounts of $5,000 and integral multiples thereof. Purchasers of Bonds will not receive certificates representing their interests in the Bonds purchased. Interest on the Bonds will be payable on each March 1 and September 1, commencing March 1, 2022. Principal of, and interest on, the Bonds will be paid by the Trustee to directly to DTC, DTC is in turn obligated to remit such principal and interest to DTC participants for subsequent disbursement to the beneficial owners of the Bonds. See “THE BONDS — General Provisions” and APPENDIX F — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM” herein. The Bonds are subject to optional, extraordinary and mandatory redemption as described under the caption “THE BONDS — Redemption.” NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The purchase of the Bonds involves certain risks. See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds. This cover page contains certain information for general reference only. It is not a summary of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Indian Wells, California, as City Attorney, and for the District by Best Best & Krieger LLP, Riverside California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. It is expected that the Bonds in book-entry form will be will be available for delivery through the facilities of DTC on or about [_______], 2021. [PIPER LOGO] Dated: ________ __, 2021. * Preliminary, subject to change. $___________ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS, SERIES 2021A MATURITY SCHEDULE Maturity Date (September 1) Principal Amount Interest Rate Yield Price CUSIP† No. $_______ ____% Term Bonds due September 1, 20__ Yield: ____% Price: _____ CUSIP† No. ___ † CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of The American Bankers Association. This information is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the City, the District or the Underwriter and are included solely for the convenience of the registered owners of the applicable Bonds. None of the City, the District or the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.  Preliminary, subject to change. CITY OF PALM DESERT CITY COUNCIL Kathleen Kelly, Mayor Jan Harnik, Mayor Pro Tem Sabby Jonathan, Councilmember Gina Nestande, Councilmember Karina Quintanilla, Councilmember STAFF Todd Hileman, City Manager Janet Moore, City Treasurer/Director of Finance M. Gloria Sanchez, Acting City Clerk Veronica Tapia, Senior Management Analyst Best Best & Krieger LLP, City Attorney MUNICIPAL ADVISOR Del Rio Advisors, LLC Modesto, California BOND COUNSEL Richards, Watson & Gershon, A Professional Corporation Los Angeles, California DISCLOSURE COUNSEL Best Best & Krieger LLP Riverside, California SPECIAL TAX CONSULTANT Willdan Financial Services Temecula, California APPRAISER Capital Realty Analysts La Quinta, California MARKET ABSORPTION CONSULTANT Empire Economics, Inc. Capistrano Beach, California TRUSTEE AND ESCROW AGENT U.S. Bank National Association Los Angeles, California Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the District for further information in connection therewith. Certain statements included or incorporated by reference in this Official Statement constitute “forward- looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a “plan,” “expect,” “estimate,” “project,” “budget” or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the captions “THE COMMUNITY FACILITIES DISTRICT” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD- LOOKING STATEMENTS A wide variety of other information, including financial information concerning the City, is available from publications and websites of the City and others. No such information is a part of or incorporated into this Official Statement. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE TABLE OF CONTENTS i INTRODUCTION ................................................... 3 General .................................................................. 3 The District ............................................................ 3 Market Absorption Study ...................................... 5 Value of Property in the District ............................ 5 Security and Sources of Payment for the Bonds ................................................................. 6 Description of the Bonds ....................................... 7 Tax Exemption ...................................................... 7 Professionals Involved in the Offering .................. 7 Continuing Disclosure ........................................... 8 Parity Bonds .......................................................... 8 Bond Owners’ Risks .............................................. 8 Other Information .................................................. 8 PLAN OF REFUNDING ......................................... 9 ESTIMATED SOURCES AND USES OF FUNDS ............................................................... 10 THE BONDS ......................................................... 10 Authority for Issuance ......................................... 10 General Provisions .............................................. 10 Redemption ......................................................... 11 Registration, Transfer and Exchange ................... 15 Debt Service Schedule ......................................... 16 Book-Entry System ............................................. 16 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ............................................. 16 Limited Obligations ............................................. 16 Special Taxes ....................................................... 17 Covenant for Superior Court Foreclosure ............ 22 Special Tax Fund ................................................. 23 Reserve Account of the Special Tax Fund .......... 24 Parity Bonds for Refunding Only ........................ 25 Estimated Debt Service Coverage ....................... 26 THE COMMUNITY FACILITIES DISTRICT .... 27 General Description of the District ...................... 27 Formation Proceedings ........................................ 27 Relationship to CFD No. 2021-1 ......................... 27 Tender Bonds Alternative .................................... 28 Market Absorption Study .................................... 28 Appraisal Report .................................................. 31 Development Status and Valuation ..................... 32 Direct and Overlapping Debt ............................... 33 Developed Property Ownership (Assessed Parcels) ............................................................ 34 Undeveloped Property Ownership (Appraised Parcels) .......................................... 34 Special Tax Levy by Development Status ........... 35 Estimated Value-to-Lien Ratios .......................... 36 Delinquency History ............................................ 37 SPECIAL RISK FACTORS .................................. 38 Concentration of Ownership ................................ 39 Risks of Real Estate Secured Investments Generally .......................................................... 39 Property Values ................................................... 39 Levy of the Special Tax ....................................... 40 Collection of the Special Tax .............................. 41 Exempt Properties ............................................... 41 Maximum Special Tax ........................................ 42 Payment of the Special Tax is Not a Personal Obligation of the Owners .................. 42 Disclosures to Future Purchasers ......................... 42 Parity Taxes and Special Assessments ................ 43 Ballot Initiatives .................................................. 43 Proposition 218 .................................................... 43 Depletion of Reserve Account ............................. 44 Enforcement Delays - Bankruptcy....................... 44 FDIC/Federal Government Interests in Properties ......................................................... 45 COVID-19 (Coronavirus) Pandemic ................... 46 Geologic, Topographic and Climatic Conditions ........................................................ 46 Flood Zone .......................................................... 47 Drought ................................................................ 47 Hazardous Substances ......................................... 48 No Acceleration Provision .................................. 48 Limited Obligations ............................................. 48 Litigation with Respect to Community Facilities Districts ............................................ 49 Loss of Tax Exemption ....................................... 50 No Ratings – Limited Secondary Market ............ 50 Limitations on Remedies ..................................... 51 Potential Early Redemption of Bonds from Special Tax Prepayments ................................. 51 Teeter Plan ........................................................... 51 CONTINUING DISCLOSURE ............................. 52 TAX MATTERS .................................................... 52 ABSENCE OF LITIGATION ................................ 54 NO RATING .......................................................... 55 LEGAL OPINION ................................................. 55 UNDERWRITING ................................................. 55 FINANCIAL INTERESTS .................................... 55 MUNICIPAL ADVISOR ....................................... 55 MISCELLANEOUS ............................................... 56 APPENDIX A - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.............. A-1 APPENDIX B - RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES ..... B-1 APPENDIX C - GENERAL INFORMATION CONCERNING THE CITY OF PALM DESERT ............................................................ C-1 APPENDIX D - PROPOSED FORM OF OPINION OF BOND COUNSEL ..................... D-1 APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT ......................... E-1 APPENDIX F - INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK- ENTRY SYSTEM.............................................. F-1 APPENDIX G - MARKET ABSORPTION STUDY .............................................................. G-1 APPENDIX H - APPRAISAL REPORT .............. H-1 [INSERT AREA MAP] [INSERT AERIAL PHOTO] 3 $_____________ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS, SERIES 2021A INTRODUCTION General This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. The purpose of this Official Statement, which includes the cover page, the table of contents and all appendices, is to provide certain information concerning the issuance by City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”) of Special Tax Refunding Bonds, Series 2021A in the aggregate principal amount of $___________ (the “Bonds”). The proceeds of the Bonds will be used to provide funds: (i) to refund a portion of the District’s outstanding Special Tax Bonds, Series 2006A (the “2006 Bonds”); (ii) to fund a Reserve Account for the Bonds; and (iii) to pay costs incurred in connection with the issuance of the Bonds. See the captions “PLAN OF REFUNDING” and “ESTIMATED SOURCES AND USES OF FUNDS.” The Bonds are being issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and the Bond Indenture, dated as of [July 1, 2021] (the “Indenture”), by and between the District and U.S. Bank National Association, as trustee (the “Trustee”). The Bonds are secured under the Indenture by a pledge of, constituting a lien on and security interest in, the Net Taxes (as such term is defined herein) and all moneys in the Special Tax Fund (other than the Administrative Expenses Account therein) as described in the Indenture. The District is required to levy the Special Taxes on the Taxable Property (as such term is defined in the hereinafter defined Rate and Method) within certain territory within the District in accordance with the rate and method of apportionment of special taxes approved by the City Council of the City, acting as the legislative body of the District, and by the votes of the qualified landowner-electors in the District (the “Rate and Method”). A copy of the Rate and Method is attached to this Official Statement as Appendix B. The Special Tax will be collected in the same manner and at the same time as the ad valorem property taxes applicable to the Taxable Property. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Taxes.” All capitalized terms used in this Official Statement and not defined have the meanings set forth in Appendix A. The District General. The City of Palm Desert (the “City”) is located in the County of Riverside (the “County”) within the area known as the Coachella Valley. The City is situated approximately midway  Preliminary, subject to change. 4 between the cities of Indio and Palm Springs, approximately 117 miles east of Los Angeles, approximately 118 miles northeast of San Diego and approximately 515 miles southeast of San Francisco. The City covers an area of approximately 24 square miles and has a current population of approximately 52,575. The City was incorporated in 1973 and is a charter city operating under a council-manager form of government. The District is located north of Frank Sinatra Drive, south of Gerald Ford Drive, west of Cook Street and east of Portola Avenue. The area is locally known as “University Park,” due to the location immediately west of the facilities and future facility expansion area of the satellite campus of California State University, San Bernardino and University of California at Riverside, at the northeast corner of Frank Sinatra Drive and Cook Street. A majority of the land is currently undeveloped and consists of approximately 267 acres, currently comprising 67 parcels. As described in detail below, upon the issuance of the Bonds, only 55 parcels (the “Remainder Parcels”) consisting of approximately 41 acres will be subject to the Special Taxes securing the Bonds. 50 of the Remainder Parcels are fully developed and consist of commercial property. Five (5) of the Remainder Parcels are undeveloped and expected to be developed for commercial uses although no assurance can be given as to actual development which may occur. See “SPECIAL RISK FACTORS” herein. See “ – Value of Property in the District” below The District was formed on January 12, 2006 and issued 2006 Bonds and its Special Tax Bonds, Series 2007 (the “2007 Bonds”) in a combined aggregate principal amount of $67,915,000. The 2007 Bonds were redeemed with funds on hand on March 1, 2016 and only the 2006 Bonds remain outstanding in a principal amount of $26,250,000. At formation, it was anticipated that the properties within the District would be developed with a mix of residential, commercial, office and open space. The property within the District has been slow to develop with significantly more property currently remaining undeveloped within the District than having completed development. UPI requested that the City refund the 2006 Bonds and form the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (“CFD No. 2021-1”) to facilitate the financing of new facilities and costs required for UPI’s property without adversely affecting the Special Taxes for the other properties within the District. Relationship to CFD No. 2021-1. CFD No. 2021-1 was formed by the City Council of the City on April 22, 2021 pursuant to the Act and consists of approximately 174 acres of property, which includes 10 parcels owned by UPI, that is also within the boundaries of the District. The development within CFD No. 2021-1 is planned to included 1,069 units at buildout consisting of eight product types of for-sale single-family detached homes, for-sale attached townhomes and for-rent multifamily apartments and single-family homes. The first phase, consisting of 236 single-family lots, is currently under development, with grading complete and horizontal infrastructure under construction. Concurrently with the issuance of the Bonds, CFD No. 2021-1 will issue its Special Tax Bonds, Series 2021 (the “CFD No. 2021-1 Bonds”). Proceeds of the CFD No. 2021-1 Bonds will primarily be used to pay and defease UPI’s pro rata portion of the 2006 Bonds (the “UPI Pro Rata Bonds”), as well as fund a portion of the public capital improvements required for development of the property within CFD No. 2021-1. The UPI Pro Rata Bonds will be paid and defeased concurrently with the delivery of the Bonds, and upon such defeasance, the UPI Property will not be subject to the Special Tax obligation for the District. Special taxes levied and collected within CFD No. 2021-1 will not secure the Bonds . Tender Bonds Alternative. As described above, the property within the District has been slow to develop with significantly more property currently remaining undeveloped within the District than having completed development. Among the undeveloped property owners is AG Essential Housing CA 4, L.P., a property holding company for Lennar Homes of California, Inc. (“Lennar”), the developer of approximately 21.36 acres 5 within the District (the “Lennar Parcel”). Lennar expressed their desire for the City to implement a tender bonds alternative component to the issuance of the Bonds to allow the Lennar Parcel to extinguish their portion of the Special Tax lien for the District. Government Code Section 53344.1 and Resolution No. 05-87, adopted by the City Council on October 13, 2005 as part of the formation proceedings for the District, authorize the City to implement the this program (the “Tender Bonds Alternative”). Concurrently with the issuance of the Bonds, the District will issue its City of Palm Desert Community Facilitates District No. 2005-1 (University Park) Special Refunding Bonds, Subordinate Series 2021B (Taxable) (the “Tender Bonds”) which will be subordinate to the Bonds. The Tender Bonds Alternative will allows owners of parcels of undeveloped property under the Rate and Method to, at their option, purchase and tender the Tender Bonds to the District Treasurer in full payment of their Special Tax obligation secured by their property and extinguish the Special Tax lien on their parcels. A Notice and Participation Form was mailed out to the owners of parcels currently classified as Undeveloped Property (as defined in the Rate and Method). Only one parcel, the Lennar Parcel, elected to participate in the Tender Bonds Alternative and will purchase the Tender Bonds from the District for tender to the District in full payment of the Special Taxes secured by its property. Upon the closing of the Tender Bonds, the Special Tax obligation for the Lennar Parcel will be cancelled and extinguished. See “THE COMMUNITY FACILITIES DISTRICT — Developed Property Ownership and Undeveloped Property Ownership.” Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds. Market Absorption Study In preparation for the issuance of the Bonds, the City hired Empire Economics, Inc., Capistrano Beach, California (the “Market Absorption Analyst”) to determine the projected absorption of the residential and nonresidential projects within the District. The Market Absorption Analyst performed a comprehensive analysis of the product mix characteristics, macroeconomic factors, and microeconomic factors as well as the potential risk factors that are expected to influence the absorption of the residential and nonresidential products within the District. The Market Absorption Analyst delivered its Market Absorption Study titled “Community Facilities District No. 2005-1 (University Park Remaining Parcels) City of Palm Desert Riverside County, California Market Absorption Study” on March 11, 2021 and revised it on April 15, 2021 to make grammatical revisions and disclose an additional potential risk factor (as revised, the “Market Absorption Study”). A copy of the Market Absorption Study is attached hereto as APPENDIX G. See “THE COMMUNITY FACILITIES DISTRICT — Market Absorption Study” for a summary of the Market Absorption Study’s conclusions. Value of Property in the District The estimated assessed value of the property within the District that will be subject to the Special Tax lien following the issuance of the Bonds, as shown on the County of Riverside (the “County”) secured property tax roll for Fiscal Year 2020-21, is $58,953,314. However, a property’s assessed value is not necessarily indicative of its market value. Capital Realty Analysts, La Quinta, California (the “Appraiser”) prepared an appraisal report dated May 15, 2021 with a date of value as of May 15, 2021 (the “Appraisal Report”) of the parcels of the undeveloped property within the District, but excluding the 6 parcels within the boundaries of CFD No. 2021-1. As described above, the Lennar Parcel will participate in the Tender Bonds Alternative and will not be subject to the Special Tax lien following the issuance of the Bonds. The Lennar Parcel consists of Assessor’s Parcel No. 694-190-046. Although the Appraisal Report provides an appraised value for all six (6) parcels, only the appraised value of five (5) of the parcels (the “Appraised Parcels”) that will remain subject to the Special Tax lien will be discussed in this Official Statement. The Appraiser estimated that the fee simple interest of the Appraised Parcels had an estimated market value of $13,575,000. The 50 parcels of developed property subject to the lien of the Special Tax (the “Assessed Parcels”) were valued using the Fiscal Year 2020-21 assessed value, which totals $54,934,249. The total value of the Appraised Parcels and the Assessed Parcels (the “Composite Value”) is $68,509,249. The Appraised Parcels and the Assessed Parcels are collectively referred to herein as (the “Remainder Parcels”) and are the only parcels that will be subject to the Special Tax lien upon the issuance of the Bonds. See “THE COMMUNITY FACILITIES DISTRICT — Development Status and Assessed Valuation and — Appraisal Report” and “APPENDIX H — APPRAISAL REPORT.” Security and Sources of Payment for the Bonds Special Taxes. As used in this Official Statement, the term “Special Tax” means the annual special tax which has been authorized pursuant to the Act and the Rate and Method to be levied upon taxable property within the District. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and “APPENDIX B — RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” See the caption “THE DISTRICT.” Under the Indenture, the District has pledged to repay the Bonds and any Parity Bonds (as defined herein) from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses of the District (the “Net Taxes”) and from other amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) established under the Indenture. The Special Taxes are the primary source of security for the repayment of the Bonds and any Parity Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds and any Parity Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, to the limited extent described in the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund.” Foreclosure Proceeds. The District will covenant in the Indenture for the benefit of the owners of the Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings against any parcel with either (A) at least four (4) consecutive installments of delinquent Special Taxes or (B) delinquent Special Taxes in excess of $10,000 on any one parcel, in each instance by the December 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the December 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount on deposit in the Reserve Account is at least equal to the Reserve Requirement, and such delinquencies will not cause moneys in the Reserve Account to be withdrawn on the next succeeding Interest Payment Date. The District will covenant that it will deposit the net proceeds of any foreclosure in the Special Tax Fund. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” There is no assurance that the property within the District can be sold for the appraised or assessed values described herein, or for a price sufficient to pay the principal of and interest on the Bonds in the event of a default in 7 payment of Special Taxes by the current or future landowners within the District. See the caption “SPECIAL RISK FACTORS—Property Values.” EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN. Description of the Bonds The Bonds will initially be issued and delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). The Bonds will be available to actual purchasers thereof (the “Beneficial Owners”) in integral multiples of $5,000 under the book-entry system maintained by DTC only through brokers and dealers who are or who act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. So long as the Bonds are held in book-entry form, principal of, premium, if any, and interest on the Bonds are payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and will be paid principal and interest by the Trustee, all as described herein. See the caption “THE BONDS — Book-Entry System.” The Bonds are subject to redemption as described under the caption “THE BONDS — Redemption.” For more complete descriptions of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption “THE BONDS” and Appendix A. Tax Exemption In the opinion of Richards, Watson & Gershon, A Professional Corporation, (“Bond Counsel”), under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax, and (ii) interest on the Bonds is exempt from State of California personal income taxes. Interest on the Bonds may be subject to certain federal income taxes imposed only on certain corporations. Bond Counsel expresses no opinion as to any other tax consequences regarding the Bonds. Set forth in Appendix D is the form of opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and certain tax consequences incident to the ownership of the Bonds, see the caption “TAX MATTERS.” Professionals Involved in the Offering U.S. Bank National Association, Los Angeles, California, will act as Trustee under the Indenture. Piper Sandler & Co. (the “Underwriter”) is the Underwriter of the Bonds. Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel to the District in connection with the issuance of the Bonds. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Indian Wells, City Attorney, and Best Best & Krieger LLP, 8 Riverside, California, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Other professional services have been performed by Willdan Financial Services, Temecula, California, as Special Tax Consultant (the “Special Tax Consultant”), by Empire Economics, Inc., Capistrano Beach, California, as Market Absorption Analyst, and by Capital Realty Analysts, La Quinta, California, as Appraiser. For information concerning circumstances in which certain of the above-mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see the caption “FINANCIAL INTERESTS.” Continuing Disclosure The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system certain annual financial information and operating data and, in a timely manner, notice of certain listed events. These covenants will be made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission. See the caption “CONTINUING DISCLOSURE” and Appendix E for a description of the specific nature of the annual report and notices of listed events and a summary description of the terms of the continuing disclosure agreement pursuant to which such reports are to be made. Parity Bonds The District may issue additional indebtedness secured by the Net Taxes on a parity with the Bonds (“Parity Bonds”) for the sole purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding. Parity Bonds will be payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds issued under the Indenture or under any Supplemental Indenture. Parity Bonds issued are subject to specific conditions, which are set forth in the Indenture. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Parity Bonds for Refunding Only” and Appendix A. Bond Owners’ Risks Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Bonds and the Constitution and laws of the State, as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. 9 Capitalized terms not otherwise defined in this Official Statement have the meanings set forth in Appendix A. Copies of the Indenture and other documents and information are available for inspection and copies may be obtained from the City, 73510 Fred Waring Drive, Palm Desert, California, 92260, Attention: City Clerk. PLAN OF REFUNDING The Bonds are being issued for the purpose of refunding the portion of the 2006 Bonds allocable to the parcels remaining subject to the levy of Special Taxes of the District on the delivery date of the Bonds. Concurrently with the issuance of the Bonds, the District, City of Palm Desert Community Facilities District No. 2021-1 (University Park), and U.S. Bank National Association, a national banking association, as escrow agent, relating to the refunding of 2006 Bonds (the “Escrow Agent”), will enter into an Escrow Agreement, dated as of [July 1, 2021], relating to the 2006 Bonds (the “Escrow Agreement”). A portion of the proceeds derived from the sale of the Bonds, together with moneys held in certain funds and accounts relating to the 2006 Bonds, proceeds from Lennar’s purchase of the Tender Bonds, and a portion of the proceeds derived from the concurrent sale and issuance of the CFD No. 2021- 1 Bonds will be deposited in an escrow fund (the “2006 Escrow Fund”) established for the 2006 Bonds pursuant to the Escrow Agreement. The aggregate amount of such deposits will be sufficient to redeem the 2006 Bonds on September 1, 2021 at a redemption price equal to 100% of the principal amount thereof plus the interest accrued thereon to such redemption date. The moneys held in the 2006 Escrow Fund will be invested in non-callable direct obligations of the United States Treasury (the “Securities”) and will be pledged solely for the redemption of the 2006 Bonds. Cash and Securities deposited in the 2006 Escrow Fund will not be available for the payment of the Bonds, nor will any interest or other earnings thereon be available for such payment. Robert Thomas CPA, LLC, Minneapolis, Minnesota, upon delivery of the Bonds, will deliver a report on the mathematical accuracy of certain computations, contained in schedules provided and prepared by the Underwriter, relating to the sufficiency of cash and securities deposited into the 2006 Escrow Fund to pay, when due, the principal, whether at maturity or upon prior redemption, and interest requirements of the 2006 Bonds. The report of Robert Thomas CPA, LLC, Minneapolis, Minnesota, will include the statement that the scope of its engagement is limited to verifying the mathematical accuracy of the computations contained in such schedules provided to it, and that it has no obligation to update its report because of events occurring, or data or information coming to its attention, subsequent to the date of its report. 10 ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the expected sources and uses of Bond proceeds and certain other amounts. Sources: Principal Amount of Bonds Plus/Less: [Net] Original Issue Premium/Discount Plus: District Contribution(1) Less: Underwriter’s Discount Total Sources: Uses: 2006 Escrow Fund Reserve Account of the Special Tax Fund(3) Costs of Issuance Fund(4) Total Uses: (1) Includes moneys held in funds and accounts established in connection with the 2006 Bonds. (2) To be funded with moneys held in funds and accounts established in connection with the 2006 Bonds. (3) Equal to the initial Reserve Requirement. (4) Includes fees of Bond Counsel, the Municipal Advisor, the Special Tax Consultant, the Trustee, printing costs and certain other miscellaneous costs. THE BONDS Authority for Issuance The Act was adopted by the State Legislature to provide an alternate method of financing certain public capital facilities and services, especially in developing areas of the State. Once duly established by a local governmental agency, a community facilities district such as the District is itself a legally constituted governmental entity, with the governing board or legislative body of the local agency that established it constituting the legislative body of such community facilities district. Subject to approval by a two-thirds vote of a community facilities district’s qualified electors and compliance with the provisions of the Act, the legislative body may authorize the issuance of bonds for the community facilities district in order to finance certain public improvements, and the legislative body may levy and collect a special tax within such community facilities district to repay such indebtedness. The specific actions taken by the City Council to form the District, authorize the levy of the Special Tax on the Taxable Property within the District and authorize the issuance of the Bonds are described under the caption “THE COMMUNITY FACILITIES DISTRICT — Proceedings for Formation of District.” General Provisions The Bonds will be issued in fully registered form without coupons in denominations of $5,000 and any integral multiple thereof. The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semiannually on each March 1 and September 1, commencing March 1, 2022 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. 11 Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest on any Bond will be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest will be payable from such date of authentication; (ii) the date of authentication is after the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (each, a “Record Date”) but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date, in which event interest will be payable from the dated date of the Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default, interest on such Bond will be payable from the last Interest Payment Date to which the interest has been paid or made available for payment, or, if no interest has been paid or made available for payment on such Bond, interest on such Bond will be payable from its dated date. Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Principal of, premium, if any, due upon redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee in Los Angeles, California. The Bonds will initially be issued in book-entry form, and DTC will act as securities depository. So long as the Bonds are held in book-entry form, principal of, premium, if any, and interest on the Bonds will be paid by the Trustee directly to DTC for distribution to the Beneficial Owners of the Bonds in accordance with procedures adopted by DTC. See the caption “—Book-Entry System” and Appendix F. In the event the Bonds are not held in book-entry form, interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Bondowner at its address on the registration books kept by the Trustee. Pursuant to a written request prior to the Record Date of a Bondowner of at least $1,000,000 in aggregate principal amount of Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States. The Bonds are not general or special obligations of the City but are special obligations of the District payable solely from Net Taxes and the other amounts held under the Indenture in the Special Tax Fund (other than the Administrative Expenses Account therein), including the Reserve Account therein. Neither the faith and credit nor the taxing power of the City, the District (except to the limited extent set forth in the Indenture), the State or any political subdivision thereof is pledged to the payment of the Bonds. See the caption “SPECIAL RISK FACTORS — Limited Obligations.” Redemption Optional Redemption.* The Bonds maturing on or before September 1, 2028 are not subject to optional redemption prior to maturity. The Bonds maturing on or after September 1, 2029 shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District, from any source of funds on any date on or after September 1, 2028 in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: * Preliminary, subject to change. 12 Redemption Dates Redemption Price September 1, 2028 through August 31, 2029 103% September 1, 2029 through August 31, 2030 102 September 1, 2030 through August 31, 2031 101 September 1, 2031 and any date thereafter 100 In the event the District elects to redeem Bonds as provided above, the District shall give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee shall be given at least forty-five (45) but no more than ninety (90) days prior to the redemption date, or by such later date as is acceptable to the Trustee, in its sole discretion. Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20__ and September 1, 20__ (collectively the Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter prior to maturity, in accordance with the respective schedules of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Series Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: TERM BONDS MATURING SEPTEMBER 1, 20__ Redemption Date (September 1) Principal Amount $ (maturity) SERIES TERM BONDS MATURING SEPTEMBER 1, 20__ Redemption Date (September 1) Principal Amount $ (maturity) In the event of a partial optional redemption or extraordinary redemption of the Series Term Bonds, each of the remaining Sinking Fund Payments for such Series Term Bonds, as applicable, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000. If during the Fiscal Year immediately preceding one of the redemption dates specified above the District purchases Term Bonds pursuant to the Indenture, at least forty-five (45) days prior to the redemption date, the District shall notify the Trustee as to the principal amount purchased and the amount of Term Bonds so purchased, as applicable, shall be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce such upcoming Sinking Fund Payment for the applicable maturity of the Term Bonds, as applicable, so purchased. All Bonds purchased pursuant to this subsection shall be cancelled pursuant to the requirements of the Indenture. 13 Extraordinary Redemption from Special Tax Prepayments. The Bonds are subject to extraordinary redemption as a whole, or in part, and on a pro rata basis among maturities in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and will be redeemed by the Trustee, from any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method (the “Prepayments”) deposited to the Redemption Account pursuant to the Indenture, plus amounts authorized to be transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Date Redemption Price Any Interest Payment Date through March 1, 2029 103% September 1, 2029 and March 1, 2030 102 September 1, 2030 and March 1, 2031 101 September 1, 2031 and any Interest Payment Date thereafter 100 The District will give written notice to the Trustee of its intention to redeem Bonds pursuant to extraordinary redemption, the redemption date, and the principal amount of the Bonds and of each maturity to be redeemed at least 45 but no more than 90 days prior to the redemption date, or by such later date as is acceptable to the Trustee, in its sole discretion. Notice of Redemption. So long as the Bonds are held in book-entry form, notice of redemption will be sent by the Trustee to DTC and not to the Beneficial Owners of the Bonds under the DTC book- entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be notified in accordance with the procedures in effect for the DTC book-entry system. See “APPENDIX F — BOOK-ENTRY ONLY SYSTEM.” The Trustee will give notice, in the name of the District, of the redemption of Bonds or Parity Bonds. Such notice of redemption will: (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redemption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemption, or all of the Bonds or Parity Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the Bonds or Parity Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds or Parity Bonds are to be redeemed; (e) in the case of Bonds or Parity Bonds to be redeemed only in part, state the portion of such Bond or Parity Bond which is to be redeemed; (f) state the date of issue of the Bonds or Parity Bonds as originally issued; (g) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (h) state any other descriptive information needed to identify accurately the Bonds or Parity Bonds being redeemed as specified by the Trustee. Such notice will further state that on the date fixed for redemption, there will become due and payable on each Bond or Parity Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon will cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Trustee will mail a copy of such notice of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register; provided, however, so long as the Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. The actual receipt by the Owner of any Bond or Parity Bond of notice of such redemption is not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will affect the validity of the proceedings for the redemption of such Bonds or Parity Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as provided in the Indenture will 14 be conclusive as against all parties and the Owner is not entitled to show that he or she failed to receive notice of such redemption. In addition to the foregoing notice, further notice will be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption will be sent (i) not later than two (2) Business Days before the date that notice of redemption is mailed to the Bondowners pursuant to the Indenture, to the Depository in such electronic format and manner as specified by the Depository and to any other registered securities depositories (in such electronic format and manner as specified thereby) then in the business of holding substantial amounts of obligations of types comprising the Bonds and Parity Bonds as determined by Trustee, and (ii) not later than the date that notice of redemption is mailed to the Bondowners pursuant to the Indenture, to the Information Services in such electronic format and manner as specified by the Information Services. The District will have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds or Parity Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. Upon the payment of the redemption price of any Bonds and Parity Bonds being redeemed, each check or other transfer of funds issued for such purpose will to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds and Parity Bonds being redeemed with the proceeds of such check or other transfer. Selection of Bonds for Redemption. If less than all of the Bonds or Parity Bonds Outstanding are to be redeemed, the Trustee will select the Bonds or Parity Bonds to be redeemed from all Outstanding Bonds or Parity Bonds of such Series or such given portion thereof not previously called for redemption, on a pro rata basis among the maturities (unless the maturity or maturities are otherwise specified in the Indenture or in writing by the District) and by lot within a maturity in any manner which the Trustee in its discretion deems appropriate. For purposes of such selection, all Bonds or Parity Bonds of a denomination of more than $5,000 will be deemed to be comprised of separate $5,000 portions, and such portions will be treated as separate Bonds or Parity Bonds, as applicable, which may be separately redeemed. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption. Partial Redemption of Bonds or Parity Bonds. Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District will execute and the Trustee will authenticate and deliver to the Bondowner, at the expense of the District, a new Bond or Bonds or a new Parity Bond or Parity Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity or, in the case of surrender of a Parity Bond, a new Parity Bond or Parity Bonds subject to the foregoing limitations. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in the Indenture, and the amount necessary for the redemption having been made 15 available for that purpose and being available therefor on the date fixed for such redemption: (a) the Bonds and Parity Bonds, or portions thereof, designated for redemption will, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in the Indenture or in any Supplemental Indenture with respect to Parity Bonds, anything in the Indenture or in the Bonds or the Parity Bonds to the contrary notwithstanding; (b) upon presentation and surrender thereof at the Principal Office of the Trustee, the redemption price of such Bonds and Parity Bonds will be paid to the Owners thereof; (c) as of the redemption date the Bonds or the Parity Bonds, or portions thereof so designated for redemption will be deemed to be no longer Outstanding and such Bonds or Parity Bonds, or portions thereof, will cease to bear further interest; and (d) as of the date fixed for redemption no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture or any Supplemental Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. Registration, Transfer and Exchange Registration. The Trustee will keep or cause to be kept, at the Principal Office of the Trustee, sufficient books for the registration and transfer of the Bonds and any Parity Bonds which will upon reasonable prior notice be open to inspection by the District during all regular business hours, and, subject to the limitations set forth in the Indenture, upon presentation for such purpose, the Trustee will, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as provided in the Indenture. The District and the Trustee may treat the Owner of any Bond or Parity Bond whose name appears on the Bond Register as the absolute Owner of that Bond or Parity Bond for any and all purposes, and the District and the Trustee will not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It will be the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner’s address so that the Bond Register may be revised accordingly. Transfer or Exchange. Subject to the limitations set forth in the following paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the Principal Office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Bondowner or his or her duly authorized attorney. Bonds or Parity Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount of Bonds or Parity Bonds for other authorized denominations of the same maturity and issue. The Trustee may not collect from the Owner any charge for any new Bond or Parity Bond issued upon any exchange or transfer, but will require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds or Parity Bonds are surrendered for registration of transfer or exchange, the District will execute and the Trustee will authenticate and deliver a new Bond or Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee is not required to register transfers or make exchanges of: (i) Bonds or Parity Bonds for a period of 15 days next preceding any selection of the Bonds or Parity Bonds to be redeemed; or (ii) any Bonds or Parity Bonds chosen for redemption 16 Debt Service Schedule The following table presents the annualized debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional or extraordinary redemptions. See the caption “— Redemption” above. Year Ending September 1 Principal Interest Total Debt Service 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Total Source: The Underwriter. Book-Entry System DTC will act as the initial securities depository for the Bonds, and the Bonds will be registered in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Bond certificate for each maturity will be issued for the Bonds in the aggregate principal amount of such maturity, and will be deposited with DTC. So long as Cede & Co. is the registered owner of the Bonds, references herein to the Owners of the Bonds mean Cede & Co. and do not mean the Beneficial Owners. The District does not give any assurance that DTC, its Participants or others will distribute payments with respect to the Bonds or notices concerning the Bonds to the Beneficial Owners thereof or that DTC will serve and act in the manner described in this Official Statement. See Appendix F for a description of DTC and its book-entry only system. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Limited Obligations The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources. The Net Taxes are the primary source of security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses in an amount not to exceed the Administrative Expenses Priority Amount (as defined in the Indenture)) and from amounts held in the 17 Special Tax Fund (other than amounts held in the Administrative Expenses Account therein). Net Taxes consist of a portion of the Special Taxes levied on the Taxable Property in the District pursuant to the Rate and Method. The Indenture defines “Net Taxes” as Gross Taxes minus amounts set aside to pay Administrative Expenses not to exceed the Administrative Expenses Priority Amount. The term “Gross Taxes” means (i) the amount of all Special Taxes received by the District, together with (ii) the proceeds collected from the sale of property pursuant to the foreclosure provisions of the Indenture for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions. The Administrative Expenses Priority Amount is equal to $50,000 per Bond Year, escalating by 2% each Bond Year commencing July 1, 2022. In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are the proceeds collected from the sale of property pursuant to the foreclosure provisions of the Indenture for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions, and amounts held by the Trustee in the Special Tax Fund (other than the Administrative Expenses Account therein), including amounts held in the Reserve Account therein, for the exclusive benefit of the Owners of the Bonds. As described in more detail under “— Special Tax Fund” below, the Trustee will transfer the Special Taxes on deposit in the Special Tax Fund to the various specified accounts and funds established and held by the Trustee under the Indenture in a specified order of priority, in certain amounts, and at certain specified times during each Bond Year. Following the deposits specified in the Indenture to the Administrative Expenses Account, the Interest Account, the Principal Account, the Redemption Account, and the Reserve Account of the Special Tax Fund, remaining Special Taxes (if any), are transferred to the Rebate Fund and the Surplus Fund. Net Taxes deposited in the Rebate Fund and the Surplus Fund will no longer be considered to be pledged to the Bonds or any Parity Bonds, and none of the Rebate Fund, the Surplus Fund, the Costs of Issuance Fund, or the Administrative Expenses Account of the Special Tax Fund will be construed as a trust fund held for the benefit of the Owners of the Bonds or any Parity Bonds. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. Furthermore, the obligations of the property owners within the District to pay Special Taxes are nonrecourse and none of such property owners or any of their respective members, partners, managers and officers has any personal liability with respect to the Bonds. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes - Proceeds of Foreclosure Sales.” See “APPENDIX A — SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” Special Taxes Capitalized terms used in this caption and not otherwise defined are defined in the Rate and Method. See Appendix B. Authorization and Pledge. In accordance with the provisions of the Act, the City Council established the District on January 12, 2006 for the purpose of financing the acquisition, construction and 18 installation of various public improvements to serve the District. At a special election held on January 12, 2006, the qualified electors within the District authorized the District to incur indebtedness secured by Special Taxes levied on property in the District in an aggregate principal amount not to exceed $70,000,000, and approved the rate and method of apportionment of special taxes, which authorized the Special Tax to be levied to repay District indebtedness, including the Bonds. The term “Special Tax” means the taxes authorized to be levied by the District on property within the District in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the election in the District, including any scheduled payments and any Prepayments thereof, the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien, and penalties and interest thereon. The Bonds will be repaid only from annual Net Taxes derived from the levy and collection of Special Taxes pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an Assessor’s Parcel, and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. The Net Taxes collected from the annual Special Tax levy and the proceeds of any Prepayment have been pledged under the Indenture to the repayment of the Bonds and Parity Bonds. The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See “— Rate and Method of Apportionment of Special Tax” and “APPENDIX B —RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Net Taxes will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS—Insufficiency of Special Tax Revenues.” Rate and Method. The District is legally authorized and will covenant in the Indenture to cause the levy of the Special Taxes in an amount determined according to the Rate and Method. The Rate and Method apportions the total amount of Special Taxes to be collected among the taxable parcels in the District as more particularly described below. The following is a synopsis of the provisions of the Rate and Method for the District, which should be read in conjunction with the complete text of the Rate and Method which is attached as APPENDIX B — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The meaning of the defined terms used in this section are as set forth in APPENDIX B. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the entire Rate and Method attached as APPENDIX B. Determination of Special Tax Requirement. Each year, the City Council, as legislative body of the District, will determine the Special Tax Requirement of the District for the upcoming fiscal year. The “Special Tax Requirement” means that amount of Special Tax revenue required in any Fiscal Year for the District to: (i) pay annual debt service on all Outstanding Bonds due in the Bond Year beginning in such Fiscal Year; (ii) pay other periodic costs on Outstanding Bonds, including but not limited to, credit enhancement and rebate payment; (iii) pay Administrative Fees and Expenses; (iv) pay any amounts required to establish or replenish any Reserve Accounts for all Outstanding Bonds in accordance with the Indenture; (v) subject to the limitation that the Special Tax levied against any parcel of Residential Property shall not be increased by more than ten percent per year as a consequence of delinquency or default in the payment of Special Taxes by the owner of any other parcel in the District, to pay for reasonably anticipated Special Tax delinquencies based on the delinquency rates for the Special Tax levy in the previous Fiscal Year, and (vi) pay directly for acquisition and/or construction of public improvements which are authorized to be financed by the District provided that the inclusion of such amount does not cause an increase in the levy of Special Tax on the Undeveloped Property; less (vii) a credit for Available Funds. 19 The Special Tax Requirement is the basis for the amount of Special Tax to be levied within the District. In no event may the City levy a Special Tax in any year above the Maximum Annual Special Tax identified for each parcel in the Rate and Method. Parcels Subject to the Special Tax. The City will prepare a list of the parcels subject to the Special Tax using the records of the City and the County Assessor. The City will cause the District to tax all parcels within the District except property which is exempt from the Special Tax pursuant to the Rate and Method. Assignment to Land Use Classes. Each Fiscal Year, all Assessor’s Parcel of Taxable Property within the District will be (a) categorized as being located in either Zone A, Zone B, Zone C, Zone D, or Zone E (b) classified as Developed Property, Undeveloped Property or Provisional Undeveloped Property and (c) subject to the levy of annual Special Taxes determined pursuant to the Rate and Method. Developed Property will be further classified as either Residential Property or Non-Residential Property. Each Assessor’s Parcel of Residential Property will further be classified as Single Family Property or Multifamily Property, and each Assessor’s Parcel of Single Family Property will be assigned to its appropriate Assigned Special Tax rate based on its Residential Floor Area. Exempt Property. The CFD Administrator will classify as Exempt Property (i) Public Property, (ii) Property Owner Association Property, (iii) Open Space and (iv) Assessor’s Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, provided that no such classification would reduce the sum of all Taxable Property to less than 7.07 Acres for Zone A, 17.64 Acres for Zone B, 22.37 Acres for Zone C, 10.1 Acres for Zone D, and 129.5 Acres for Zone E. Assessor’s Parcels which cannot be classified as Exempt Property because of the above acreage limitations will be classified as Provisional Undeveloped Property and will be taxed pursuant to the Rate and Method. Exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Exempt Property. Maximum Annual Special Tax, Assigned Special Tax and Backup Special Tax. Maximum Special Tax. The Maximum Annual Special Tax for each Assessor’s Parcel of Residential Property or Non-Residential Property shall be the greater of (1) the Assigned Special Tax or (2) the Backup Special Tax. The Maximum Special Tax for each Assessor’s Parcel of Undeveloped Property and Provisional Undeveloped Property shall be $21,000 per Acre for Zone A, $27,000 per Acre for Zone B, $27,000 per Acre for Zone C, $23,000 per Acre for Zone D, and $28,000 per Acre for Zone E. Assigned Special Tax. The Assigned Special Tax Developed Property shall be $21,000 per Acre for Zone A, $27,000 per Acre for Zone B, $27,000 per Acre for Zone C and $23,000 per Acre for Zone D. The Assigned Special Tax for each Land Use Class of Developed Property for Zone E is shown in Table 1 of the Section C of the Rate and Method. Backup Special Tax. When a Final Subdivision Map is recorded within a Zone, the Backup Special Tax for Residential Property and Non-Residential Property is determined by the specific formula set forth in the Rate and Method. For each Assessor’s Parcel of Developed Property classified as Non- Residential Property or for each Assessor’s Parcel of Undeveloped Property to be classified as Non- Residential Property within the Final Subdivision Map area, the Backup Special Tax shall be determined by multiplying $21,000 per Acre for Zone A, $27,000 per Acre for Zone B, $27,000 per Acre for Zone C, $23,000 per Acre for Zone D, and $28,000 per Acre for Zone E by the total Acreage of any such Assessor’s Parcel. 20 Method of Apportionment of Special Tax. Each Fiscal Year, the City Council will determine the Special Tax Requirement and levy the Special Tax until the amount of Special Taxes equals the Special Tax Requirement. The Special Tax will be levied each Fiscal Year as follows: First: The Special Tax shall be levied proportionately on all Developed Property at a rate up to 100% of the applicable Assigned Special Tax to satisfy the Special Tax Requirement. Second: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on all Undeveloped Property within Zone A, Zone B, Zone C, Zone D, and Zone E, at a rate up to 100% of the Maximum Annual Special Tax for Undeveloped Property. In determining the Acreage of an Assessor’s Parcel of Undeveloped Property for purposes of determining the annual Special Tax to be levied on such Assessor’s Parcels of Undeveloped Property, the CFD Administrator shall not include any Acreage shown on any applicable tentative subdivision map or other land use entitlement approved by the City that designates such Acreage for a use that would be classified as Open Space, Property Owner Association Property, or Public Property. Third: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, the Special Tax to be levied on each Assessor’s Parcel of Developed Property whose Maximum Annual Special Tax is derived by the application of the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to the Maximum Annual Special Tax for each such Assessor’s Parcel. Fourth: If additional monies are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax shall be levied Proportionately on all Provisional Undeveloped Property at a rate up to 100% of the Maximum Annual Special Tax for Undeveloped Property. Notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor’s Parcel of Residential Property be increased by more than ten percent (10%) per year as a consequence of delinquency or default in the payment of Special Taxes by the owner of any other Assessor’s Parcel in the District. Prepayment of Special Tax. The Rate and Method provides that landowners of Developed Property or Undeveloped Property for which a building permit has been issued, or Provisional Undeveloped Property, may prepay and permanently satisfy all or a portion of the Maximum Annual Special Tax obligation attributable to the applicable parcels. The amount of the prepayment required is to be calculated according to a formula set forth in the Rate and Method, which is generally based on the Assessors Parcel’s share of the outstanding Bonds and remaining facilities costs which have not been bonded, the Reserve Account, fees, call premiums, negative arbitrage and any expenses incurred by the City in connection with the prepayment and expected future facilities costs, all as specified in APPENDIX B — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX — Section F.” The Bonds are subject to extraordinary redemption from any such prepayments. See “THE BONDS — Redemption — Extraordinary Redemption from Special Tax Prepayments.” Mandatory redemption of Bonds from Special Tax prepayments may result in the reduction in the otherwise expected yield on such Bonds if the Bonds were purchased at a price greater than par. See “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Special Tax Prepayments.” Estimated Debt Service Coverage. In connection with the issuance of the Bonds, the Special Tax Consultant will certify that the Maximum Special Tax that may be levied in each Fiscal Year on 21 Assessor’s Parcels within the District classified as Taxable Property will be at least equal to the sum of: (i) 110% of Maximum Annual Debt Service on the Bonds; plus (ii) the Administrative Expenses Priority Amount of $50,000. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. Even if the Maximum Special Tax, if levied in accordance with the Rate and Method, would produce coverage levels which are higher than 110% of debt service in certain circumstances, because of the limitations imposed by Section 53321(d) of the Act, investors should assume that the maximum amount that could be levied in any Fiscal Year is the amount that would produce 110% of debt service due on the Bonds in the corresponding Bond Year. Levy, Collection and Application of Special Taxes. The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, although it is possible that the District could elect to provide handbills to property owners within the District. The District will covenant in the Indenture that each year it will levy Special Taxes, subject to the maximum rates permitted under the Rate and Method, in an amount equal to the Special Tax Requirement (as defined in the Rate and Method) which includes, but is not limited to, an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds when due, to replenish the Reserve Account to the Reserve Requirement and to pay Administrative Expenses. The District will make certain covenants in the Indenture which are intended to ensure that the current maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the District’s ability to collect sufficient Special Taxes to pay debt service on the Bonds, Parity Bonds and Administrative Expenses when due. First, the District will covenant in the Indenture that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. Second, the District will covenant in the Indenture, to the maximum extent that the law permits it to do so, not to initiate proceedings to reduce the maximum Special Tax rates for the District. Third, the District will covenant in the Indenture that, in the event that any initiative is adopted by the qualified electors within the District which purports to reduce the maximum Special Tax below the levels specified in the preceding paragraph or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. The District can provide no assurance that any such legal action will be successful. See the caption “SPECIAL RISK FACTORS — Proposition 218.” Fourth, the District will covenant in the Indenture that, except as provided in the Indenture with respect to the Tender Bonds, it will not adopt any policy pursuant to the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds and Parity Bonds when due. See Appendix A under the caption “COVENANTS AND WARRANTY.” 22 Although the Special Taxes constitute liens on taxed parcels within the District, they do not constitute a personal indebtedness of the owners of property within the District. Moreover, other liens for taxes and assessments already exist on the property located within the District and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners in the District. See the captions “THE COMMUNITY FACILITIES DISTRICT—Direct and Overlapping Debt.” There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described under the caption “SPECIAL RISK FACTORS.” Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, although it is possible that the District could elect to provide handbills to property owners within the District. When the County apportions Special Taxes to the District, the District will transmit the Special Taxes to the Trustee for deposit in the Special Tax Fund established by the Indenture. Covenant for Superior Court Foreclosure The net proceeds received following a judicial foreclosure sale of property within the District resulting from a property owner’s failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds under the Indenture. Pursuant to Section 53356.1 of the Act, the City Council, as the legislative body of the District, may covenant for the benefit of the Owners of the Bonds to commence and diligently pursue a Superior Court action to foreclose the lien within specified time limits to collect delinquent installments of Special Taxes. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the District will covenant in the Indenture for the benefit of the owners of the Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings against any parcel with either (A) at least four (4) consecutive installments of delinquent Special Taxes or (B) delinquent Special Taxes in excess of $10,000 on any one parcel, in each instance by the December 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the December 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount on deposit in the Reserve Account is at least equal to the Reserve Requirement, and such delinquencies will not cause moneys in the Reserve Account to be withdrawn on the next succeeding Interest Payment Date. The District will covenant in the Indenture that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. Notwithstanding the foregoing, the Indenture provides that, if at any time, the County’s Teeter Plan (adopted pursuant to Sections 4701 through 4717 of the California Revenue and Taxation Code) is in effect and is made applicable to the District and the Special Taxes being levied in connection with the Bonds, the District may, in its discretion, elect not to commence any judicial foreclosure proceeding pursuant to the foregoing provisions or defer the commencement of such proceedings until such time as the District deems appropriate. The Special Taxes for the District are currently included in the County’s 23 Teeter Plan. However, the County may decide to remove the District from the Teeter Plan, and then the collections of Special Taxes levied would reflect actual delinquencies. The District cannot provide any assurances that the County will continue to include the District in the Teeter Plan. See “SPECIAL RISK FACTORS — Teeter Plan.” If foreclosure is necessary and other funds (including amounts in the Reserve Account) have been exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City and the District. See the caption “SPECIAL RISK FACTORS — Enforcement Delays — Bankruptcy” and “— FDIC/Federal Government Interests in Properties.” Moreover, no assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the net proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption “SPECIAL RISK FACTORS — Property Values.” Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes. The mere commencement of foreclosure proceedings will not assure a prompt and favorable resolution of Special Tax delinquencies. The ability of the District to foreclose the lien of delinquent unpaid Special Taxes may be limited. See “SPECIAL RISK FACTORS — Enforcement Delays - Bankruptcy” and “— FDIC/Federal Government Interests in Properties.” Moreover, even if a judgment of foreclosure and order of sale is obtained, the District must cause a notice of levy to be issued. Under current law, the property owner has 120 days from the date of service of the notice of levy in which to redeem the subject property. If the property owner fails to redeem the property and it is sold, the property owner’s only remedy is an action to set aside the sale, which action must be brought within 90 days of the date of sale. If such an action results in the setting aside of the foreclosure sale, the judgment is revived, and the District would be entitled to receive interest on the revived judgment as if the sale had not been made. Under former law a property owner had a period of one year within which to redeem property to be sold, and the constitutionality of the legislation that eliminated the one year redemption period has not been tested. There can be no assurance that, even if the subject property is sold, the proceeds from such sale will be sufficient to pay the delinquent installments of the Special Tax. The Act does not require the District or any other governmental agency to purchase or otherwise acquire any Assessor’s Parcel being sold if there is no other purchaser at such sale. The Act does require that property being sold pursuant to foreclosure under the Act must be sold for not less than the judgment amount (which must include reasonable attorneys’ fees, together with interest, penalties, and other authorized charges and costs) plus post judgment interest and authorized costs, unless a lower bid price is authorized by the Owners of not less than 75% by value of the Bonds Outstanding. Special Tax Fund Except for Prepayments, which will be deposited with the Trustee, together with a Certificate of Authorized Representative designating such Special Taxes as Prepayments and specifying the respective amounts to be deposited in the various funds and accounts held under the Indenture, the Trustee will, on or promptly after each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. In general, the Indenture provides that 24 the Trustee shall transfer the Special Taxes on deposit in the Special Tax Fund on the dates, in the amounts and in the following order of priority, to: First: To the Administrative Expenses Account in an amount up to the Administrative Expenses Priority Amount. Second: To the Interest Account, an amount such that the balance in the Interest Account three (3) Business Days prior to each Interest Payment Date is equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account will be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. Third: To the Principal Account, an amount such that the balance in the Principal Account three (3) Business Days prior to September 1 of each year, commencing September 1, 2022, is equal to the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity. Fourth: To the Redemption Account, the amount needed to make the balance in the Redemption Account three (3) Business Days prior to each September 1 on which a Sinking Fund Payment is due equal to the Sinking Fund Payment due on any Outstanding Bonds and Parity Bonds on such September 1 and thereafter, to pay the principal and premium, if any, due in connection with an optional redemption of Bonds or Parity Bonds; provided, in the event of a shortfall of amounts on deposit in the Special Tax Fund (such shortfall being determined excluding amounts on deposit in, and prior to drawing upon, the Reserve Account) to make the transfers to the Principal Account and to the Redemption Account (pursuant to the paragraph immediately above and this paragraph) necessary to pay in full both (x) the principal payment due on the Bonds and any Parity Bonds maturing on the applicable September 1 and (y) the Sinking Fund Payment due on any Outstanding Bonds and any Parity Bonds on such September 1, the Trustee shall transfer the available amount from the Special Tax Fund to the Principal Account and the Redemption Account on a pro rata basis (calculated with reference to the respective principal payment and Sinking Fund Payment coming due and payable on such September 1) at least three (3) Business Days prior to such September 1. Fifth: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement. Sixth: To the Rebate Fund established by the Indenture to the extent directed by the City pursuant to the Indenture. Seventh: To the Surplus Fund established by the Indenture such remaining amounts in the Special Tax Fund after making the foregoing transfers as soon as practicable after each September 1, and in any event prior to each October 1. Unless on or prior to such date, the Trustee has received a Certificate of Authorized Representative directing that certain amounts be retained in the Special Tax Fund because the District has included such amounts as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes in such Fiscal Year. Reserve Account of the Special Tax Fund In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the 25 Reserve Account an amount equal to the Reserve Requirement. The Reserve Requirement may be satisfied by crediting to the Reserve Account moneys or one or more Reserve Policies or any combination thereof, which in the aggregate make funds available equal to the Reserve Requirement. “Reserve Requirement” with respect to the Bonds is defined in the Indenture to mean, as of the date of calculation an amount equal to the least of: (i) Maximum Annual Debt Service on the then Outstanding Bonds; (ii) 10% of the original amount of the Bonds (“amount” meaning the principal amount of the Bonds, unless the Bonds were issued with original issue discount greater than two percent of the principal amount, or original issue premium greater than the sum of two percent of the principal amount plus original issue premium attributable exclusively to reasonable underwriters’ compensation, in which case “amount” means issue price); or (iii) 125% of average Annual Debt Service on the then Outstanding Bonds. Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in the Indenture, the District will covenant in the Indenture to levy Special Taxes in an amount sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the Reserve Requirement. Amounts in the Reserve Account are to be applied: (i) to pay debt service on the Bonds, or any Parity Bonds, including Sinking Fund Payments, to the extent that other monies are not available therefor; (ii) to redeem Bonds or Parity Bonds in the event of prepayment of Special Taxes, to optionally redeem Bonds or Parity Bonds or in connection with a partial defeasance of Bonds or Parity Bonds, so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement (taking into account Outstanding Bonds and Parity Bonds after such redemption or partial defeasance) and in accordance with the Indenture; and (iii) to pay any rebate requirements, to the extent of Net Taxes remaining following the deposits required by the Indenture each Bond Year to the Interest Account, the Principal Account, the Redemption Account, and to the Reserve Account if needed to replenish the Reserve Requirement. See “— Special Tax Fund” above. See, also, Appendix A under the caption “CREATION OF FUNDS AND APPLICATION OF PROCEEDS — Reserve Account of the Special Tax Fund.” Parity Bonds for Refunding Only The District may issue Parity Bonds for the sole purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding. Parity Bonds will be payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds issued under the Indenture or under any Supplemental Indenture. Parity Bonds issued are subject to specific conditions, which are set forth in the Indenture. See APPENDIX A – “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” 26 Estimated Debt Service Coverage The table below shows the estimated debt service coverage on the Bonds. TABLE 1 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) PROJECTED DEBT SERVICE COVERAGE Year Ending September 1 Maximum Special Tax Revenues Less: Administrative Expenses Priority Amount Net Maximum Special Tax Revenues Bonds Debt Service Debt Service Coverage 2022 $ $ $ $ % 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Sources: Underwriter; Special Tax Consultant.  Preliminary, subject to change. 27 THE COMMUNITY FACILITIES DISTRICT General Description of the District The District is located north of Frank Sinatra Drive, south of Gerald Ford Drive, west of Cook Street and east of Portola Avenue. The area is locally known as “University Park,” due to the location immediately west of the facilities and future facility expansion area of the satellite campus of California State University, San Bernardino and University of California at Riverside, at the northeast corner of Frank Sinatra Drive and Cook Street. A majority of the land is currently undeveloped and consists of approximately 267 acres, currently comprising 67 parcels. Upon the issuance of the Bonds, only the Remainder Parcels consisting of approximately 41 acres will be subject to the Special Taxes securing the Bonds. 50 of the Remainder Parcels are fully developed and consist of commercial property. Five (5) of the Remainder Parcels are undeveloped and expected to be developed for commercial uses although no assurance can be given as to actual development which may occur. See “SPECIAL RISK FACTORS” herein. See “THE COMMUNITY FACILITIES DISTRICT — Developed Property Ownership and Undeveloped Property Ownership.” Formation Proceedings On October 13, 2005, the City Council adopted Resolution No. 05-87 (the “Resolution of Intention”) to form a community facilities district under the Act, to levy a special tax and to incur bonded indebtedness for the purpose of financing the project and making contributions to certain public facilities. After conducting a noticed public hearing, on January 12, 2006, the City Council adopted Resolution No. 06-6 (the “Resolution of Formation”), which established the District, set forth the Rate and Method within the District and set forth the necessity to incur bonded indebtedness in a total amount not to exceed $70 million. On the same day, an election was held within the District in which the then-landowners unanimously approved the proposed bonded indebtedness and the levy of the Special Tax. See Appendix B herein for the Rate and Method. On February 9, 2006, the City Council, acting as the legislative body of the District, adopted Ordinance No. 1107 providing for the levy of the Special Taxes on property in the District. The District issued the 2006 Bonds and its Special Tax Bonds, Series 2007 (the “2007 Bonds”) in a combined aggregate principal amount of $67,915,000. The 2007 Bonds were redeemed with funds on hand on March 1, 2016 and only the 2006 Bonds remain outstanding in a principal amount of $26,250,000. At formation, it was anticipated that the properties within the District would be developed with a mix of residential, commercial, office and open space. Due to timing, market conditions and subsequent market downturn, only about 20% of the property within the District has been developed to date, based on acreage. UPI requested that the City refund the 2006 Bonds and form CFD No. 2021-1 to facilitate the financing of new facilities and costs required for UPI’s property without adversely affecting the Special Taxes for the other properties within the District. Relationship to CFD No. 2021-1 CFD No. 2021-1 was formed by the City Council of the City on April 22, 2021 pursuant to the Act and consists of approximately 174 acres of property, which includes 10 parcels owned by UPI, that is also within the boundaries of the District. The development within CFD No. 2021-1 is planned to included 1,069 units at buildout consisting of eight product types of for-sale single-family detached homes, for-sale attached townhomes and for-rent multifamily apartments and single-family homes. The 28 first phase, consisting of 236 single-family lots, is currently under development, with grading complete and horizontal infrastructure under construction. Concurrently with the issuance of the Bonds, the CFD No. 2021-1 Bonds will be issued. Proceeds of the CFD No. 2021-1 Bonds will primarily be used to pay and defease the UPI Pro Rata Bonds, as well as fund a portion of the public capital improvements required for development of the property within CFD No. 2021-1. The UPI Pro Rata Bonds will be paid and defeased concurrently with the delivery of the Bonds, and upon such defeasance, the UPI Property will not be subject to the Special Tax obligation for the District. Special taxes levied and collected within CFD No. 2021-1 will not secure the Bonds. Tender Bonds Alternative As described above, the property within the District has been slow to develop with significantly more property currently remaining undeveloped within the District than having completed development. Among the undeveloped property owners is Lennar, the developer of the Lennar Parcel. Lennar expressed their desire for the City to implement a tender bonds alternative component to the issuance of the Bonds to allow the Lennar Parcel to extinguish their portion of the Special Tax lien for the District. Government Code Section 53344.1 and Resolution No. 05-87, adopted by the City Council on October 13, 2005 as part of the formation proceedings for the District, authorize the City to implement the Tender Bonds Alternative. Concurrently with the issuance of the Bonds, the District will issue the Tender Bonds which will be subordinate to the Bonds. The Tender Bonds Alternative allows owners of parcels of undeveloped property under the Rate and Method to, at their option, purchase and tender the Tender Bonds to the District Treasurer in full payment of their Special Tax obligation secured by their property and extinguish the Special Tax lien on their parcels. A Notice and Participation Form was mailed out to the owners of parcels currently classified as Undeveloped Property (as defined in the Rate and Method). The Lennar Parcel elected to participate in the Tender Bonds Alternative and will purchase the Tender Bonds from the District for tender to the District in full payment of the Special Taxes secured by its property. The Lennar Parcel consists of Assessor’s Parcel No. 694-190-046. Upon the closing of the Tender Bonds, the Special Tax obligation for the Lennar Parcel will be cancelled and extinguished. Market Absorption Study General. In order to determine the projected absorption of the residential and nonresidential projects within the District, the City engaged the Market Absorption Analyst to perform a comprehensive analysis of the product mix characteristics, macroeconomic and microeconomic factors as well as the potential risk factors that are expected to influence the absorption of the residential and nonresidential products within the District. The Market Absorption Analyst delivered the Market Absorption Study in April 2021. The Market Absorption Study includes an estimated absorption schedule for forthcoming residential products in the District and an overview of the marketing potential of the nonresidential properties in the District. The Market Absorption Analyst notes that actual absorption rates will differ from projections in the Market Absorption Study. Such differences could be material. Factors which may influence the pace of absorption of the residential products within the District include COVID-19, economic downturn, a substantial increase in mortgage rates, and competition from developments within the vicinity of the District. See “SPECIAL RISK FACTORS — Risks of Real Estate Secured Investments Generally.” The Market Absorption Study is attached hereto as APPENDIX G. Favorable Factors. The Market Absorption Study states that the District has a favorable location in the City adjacent to Interstate 10, there are three types of residential product that provide a diversity of 29 single-family detached and duet product types in various price ranges. Property in the District has been mass graded however, there does not appear to be additional site development activity ongoing. The Market Absorption Study states that University Park has an amenity package that includes a 3.4 acre private park for residents of the community only, and six pocket parks as well as walking trails for usage by the general public. The residential product types feature a broad diversity of single-family detached homes in various price ranges. The Market Absorption Study observes that the competitive market analysis revealed that based on the developer’s proposed prices as well as the special taxes, the forthcoming projects are regarded as being competitive in the marketplace. The Market Absorption Analyst observes that mortgage rates have declined significantly, reducing housing payments while housing prices have risen significantly, increasing the housing payments due to higher principal component as well as higher property taxes. The combined impacts of these factors have counter- balanced each other, resulting in stable monthly payments. Challenging Factors. The Market Absorption Study states that COVID-19 put the Coachella Valley economy in a deep recession in April 2020, with employment losses of approximately 27,000 jobs. Since then, the economy has had a moderate recovery, but as of December 2020, employment losses were still approximately 10,250 jobs. The Market Absorption Study states that the composition of Coachella Valley’s economy has been more impacted by COVID-19 due to the relatively higher concentration of employment in accommodation and food services of approximately 22% for the Coachella Valley as compared to about 10% for the State and the Coachella Valley has lower shares of employment in the sectors that are showing significant improvement, such as essential industries and those that can accommodate telecommuting. Therefore, the Market Absorption Study observes that the Coachella Valley economy is expected to take a longer amount of time to fully recover from the downturn caused by COVID-19, as compared to the State, as a whole, due to its concentration of employment and sectors that are socially challenged. However, COVID-19 did have a positive impact on suburban single-family home ownership. The Market Absorption Study observes that since 2008 there has only been a moderate increase in the development of new single-family detached homes in the Coachella Valley and the City’s share of the Coachella Valley’s activity has declined from 20% during 2010-2014 to less than 5% in recent years. The Market Absorption Analyst identified five currently active comparable projects situated in the City and its vicinity. The Market Absorption Study observes that the comparable projects have sales rates that range from six to 20 homes per year for an overall average of 12 homes per year which is well below what is typically observed in the marketplace. The demand for residential products in the District was originally conceived as supporting the development of the “Campus Long-term Planning Area” which anticipated higher educational facilities; however, this has not yet materialized in a significant manner. Consequently, the demand for the homes in the District is expected to be driven primarily by local households employed in the City and other nearby cities. Additionally, the Market Absorption Analyst was recently notified by Lennar Homes that it is obligated to prepay 100% of the Special Taxes for the District. This prepayment for each of the forthcoming residential homes was expected to occur at the time of issuance of the building permit for each of the homes at the time the report was prepared. Since the Lennar prepayment had not yet been made at the time the report was prepared and the timing of the market entry for each its homes has not been identified, the Market Absorption Analyst utilizes a Special Tax scenario set forth in the Market Absorption Study as a conservative safeguard. 30 Marketing Potential Forecast for Nonresidential Property. The term “marketing development potential” used in the Market Absorption Study is meant to signify to what degree general economic and nonresidential/residential market conditions in the Coachella Valley and the City provide a sufficient amount of support for the development of the various parcels. The Market Absorption Analyst notes that the time required between market development potential and the “actual absorption/occupancy” of the buildings may be about 2-3 years due to planning approvals and construction. The Market Absorption Analyst also observes that the owner of property may have a different perspective regarding its development and/or investment potential, and as such may not respond as expected to the current market conditions. Below is a description of the marketing development potential for the nonresidential properties in the District. MARKETING POTENTIAL FORECAST NONRESIDENTIAL PROPERTIES Assessor's Parcel Number County Land Description Parcel Acreage Location Features Traffic Count Timing Best Use Remarks 694-200-021 Vacant Commercial 7.74 West of UCR Palm Desert, east of apt homes, north of hotel 33k and 12k 2023 Hotel Best use in the near term is a hotel. Retail a strong possibility but will require more housing development. 694-190-011 Vacant Commercial 7.45 West of mixed commerical/retail and south of future hotels/motels ~15k 2024 75% Commerical / 25% Retail Mixed retail/commercial space able to fit in with existing developments. 694-190-032 Vacant Commercial 3.02 West of mixed commerical/retail and south of future hotels/motels. Further away main intersection ~15k 2025 50% Commerical / 50% Light Industrial Most likely use is office and/or light industrial. Source: Market Absorption Study. 31 Appraisal Report The estimated assessed value of the property within the District, as shown on the County’s secured property roll for Fiscal Year 2020-21, is approximately $58,953,314. However, as a result of the requirements of Article XIIIA of the California Constitution, a property’s assessed value is not necessarily indicative of its market value. In order to provide information with respect to the market value of the fee simple estate by parcel of undeveloped taxable property within the District, the City engaged the Appraiser, to prepare the Appraisal Report. The Appraiser has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land-secured municipal bonds. The Appraiser was selected by the City and has no material relationships with the City, the Underwriter or the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal Report. The Appraisal Report is intended to comply with the appraisal guidelines of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the Uniform Standards of Appraisal Practice, adopted by the Appraisal Standards Board of the Appraisal Foundation. The City instructed the Appraiser to prepare its analysis and report in conformity with City-approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the California Debt and Investment Advisory Commission. A copy of the Appraisal Report is included as “APPENDIX H — APPRAISAL REPORT” to this Official Statement. The purpose of the Appraisal Report was to estimate the market value of the fee simple estate by parcel of undeveloped property within the District. Three of the parcels are vacant land parcels, with significant offsite infrastructure completed with funds from the District and two of the parcels are finished commercial pads with all offsite, and some onsite improvements in place. Subject to the assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser concluded that, as of the Date of Value May 15, 2021, the market value of the Appraised Parcels was $13,575,000. In valuing the Appraised Parcels, the Appraiser used a sales comparison approach for each of the parcels. The chart below shows the appraised value of the Appraised Parcels set forth in the Appraisal Report as of the Date of Value. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT” below. SUMMARY OF APPRAISED VALUE BY PARCEL FOR THE REMAINDER PARCELS (AS OF THE DATE OF VALUE) Assessor’s Parcel Number Owner Acreage Appraised Value 694-190-011 UP Investors 7.45 $ 3,895,000 694-190-019 AP Palm Desert 0.69 1,050,000 694-190-024 Desert California 0.57 870,000 694-190-032 UP Investors 3.02 1,645,000 694-200-021 Lind 7.74 6,115,000 Total Appraised Value 19.47 13,575,000 Source: The Appraiser. Reference is made to APPENDIX H for a complete list of the Appraiser’s assumptions and limiting conditions and a full discussion of the appraisal methodology and the basis for the Appraiser’s opinions. In the event that any of the assumptions and limiting conditions are not actually realized, the value of the property within the District may be less than the amount reported in the Appraisal Report. In any case, there can be no assurance that any parcels of Taxable Property within the District would actually sell for the amount indicated by the Appraisal Report. 32 The Appraisal Report is a statement of the Appraiser’s opinion as to the market value of the taxable property in the District as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future. See “SPECIAL RISK FACTORS — Property Values.” It is a condition precedent to the issuance of the Bonds that the Appraiser deliver to the District a certification to the effect that, nothing has come to the attention of the Appraiser subsequent to the date of the Appraisal Report that would cause the Appraiser to believe that the value of the property in the District is less than the value reported in the Appraisal Report. However, the Appraiser notes that acts and events may have occurred since the date of the Appraisal Report which could result in both positive and negative effects on market value within the District. Neither the City nor the Underwriter makes any representation as to the accuracy of the Appraisal Report. See “APPENDIX H — APPRAISAL REPORT.” There is no assurance that the property within the District can be sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by the landowner. See “SPECIAL RISK FACTORS — Property Values” and “APPENDIX H — APPRAISAL REPORT.” Development Status and Valuation Upon the issuance of the Bonds, the property in the District subject to the Special Tax is made up of the Assessed Parcels (50 parcels considered Developed Property under the Rate and Method) and the Appraised Parcels (5 parcels considered Undeveloped Property under the Rate and Method). The ownership of the Appraised Parcels is as follows: two (2) parcels are owned by UP Investors (“UP Investors”); one (1) parcel is owned by AP Palm Desert Retail (“AP Palm Desert”); one (1) parcel is owned by Desert California Investment (“Desert California”); and one (1) parcel is owned by Wes Lind (“Lind”). The aggregate assessed value of the Remainder Parcels in the District, those parcels that will be subject to the Special Tax lien following the issuance of the Bonds, as shown on the Riverside County Assessor’s roll for Fiscal Year 2020-21 is $58,953,314. The table below sets forth historic assessed values of the Remainder Parcels within the District from Fiscal Years 2016-17 through 2020-21. TABLE 2 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) HISTORICAL ASSESSED VALUES (OF REMAINDER PARCELS) Fiscal Year Assessed Value Land Assessed Value Improvement Total Assessed Value Percent Change 2016-17 $17,294,415 $31,942,301 $49,236,716 NA 2017-18 16,828,806 33,817,731 50,646,537 2.86% 2018-19 17,247,262 38,722,922 55,970,184 10.51 2019-20 17,521,392 40,390,762 57,912,154 3.47 2020-21 17,991,850 40,961,464 58,953,314 1.80 Sources: Riverside County Assessor’s Office; Special Tax Consultant. 33 Direct and Overlapping Debt The ability of an owner of land within the District to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property. These other taxes and assessments which secure direct and overlapping debt outstanding as of April 1, 2021 in the District are set forth in Table 3 below (the “Debt Report”). The Debt Report sets forth those entities which have issued debt and does not include entities which only levy or assess fees, charges, ad valorem taxes or special taxes. See “—Expected Tax Burden” below for information regarding other entities levying taxes, assessments or other charges on property in the District. The Debt Report includes the principal amount of the Bonds. The Debt Report has been derived from data assembled and reported to the District by the County as of April 1, 2021. None of the District, the City, or the Underwriter has independently verified the information in the Debt Report and do not guarantee its completeness or accuracy. As discussed under “SPECIAL RISK FACTORS — Parity Taxes and Special Assessments,” the property within the District may be subject to additional taxes and assessments imposed by other public agencies in the future. Table 3 below does not include any authorized and unissued debt of other agencies. TABLE 3 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) DIRECT AND OVERLAPPING DEBT OF REMAINDER PARCELS 2020-21 Local Secured Assessed and Appraised Valuation: $68,509,249 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/21 Desert Community College District General Obligation Bonds 0.061% $ 237,640 Palm Springs Unified School District General Obligation Bonds 0.161 566,486 City of Palm Desert Community Facilities District No. 2005-1 22.867 5,355,000(1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $6,159,126 OVERLAPPING GENERAL FUND DEBT: Riverside County General Fund Obligations 0.017% $123,551 Riverside County Pension Obligation Bonds 0.017 150,502 TOTAL OVERLAPPING GENERAL FUND DEBT $274,053 OVERLAPPING TAX INCREMENT DEBT (SUCCESSOR AGENCY): $1,217,616 COMBINED TOTAL DEBT $7,650,795(2) Ratios to 2020-21 Assessed Valuation: Direct Debt ($5,355,000) ......................................................... 7.82% Total Direct and Overlapping Tax and Assessment Debt .......... 8.99% Combined Total Debt ............................................................... 11.17% (1) Includes issue to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc.; Special Tax Consultant. 34 Developed Property Ownership (Assessed Parcels) The table below sets forth the top taxpayers for Fiscal Year 2020-21 of the Assessed Parcels within the District based on assessed value. TABLE 4 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) TOP TAXPAYERS BY ASSESSED VALUE (DEVELOPED PROPERTY) Owner (1) No. Parcels Assessed Value (1) Bonded Indebtedness Maximum Special Tax(3) Percentage of Projected Special Tax Value to Lien Ratio AP Palm Desert 2 19 $20,146,729 $1,502,985 $284,953 28.07% 13.40:1 Palm Desert Hospitality 1 7,418,229 417,265 79,110 7.79 17.78:1 Cook Street Inv 1 2,402,100 56,965 10,800 1.06 42.17:1 Clk Real Estate 1 2,402,081 72,630 13,770 1.36 33.07:1 Ck Chan & Sg Lin 3 2,320,500 85,550 16,220 1.60 27.12:1 Benyou 2 1,836,000 93,629 17,751 1.75 19.61:1 Desert Calif Inv 1 1,616,549 72,630 13,770 1.36 22.26:1 Mirage Derm 2 1,569,175 54,578 10,348 1.02 28.75:1 Younes Bachir K 1 1,428,401 40,624 7,702 0.76 35.16:1 Palm Springs Medical Prop 2 $1,309,131 $72,857 $13,813 1.36 17.97:1 Total 33 $42,448,895 $2,469,713 $468,237 46.12% 17.19:1 (1) Owners and assessed values of undeveloped property according to Riverside County Assessor. (2) Includes property owned by AP Palm Desert Retail, AP Palm Desert Village, AP Palm Desert Village 5 and AP Palm Desert Village 6 (the “AP Palm Desert Entities”). (3) Based on Maximum Special Tax according to the Rate and Method of Apportionment. Source: Special Tax Consultant. See the caption “SPECIAL RISK FACTORS — Concentration of Ownership.” Undeveloped Property Ownership (Appraised Parcels) UP Investors Property. UP Investors owns APNs 694-190-011 (7.45 acres) and 694-190-032 (3.02 acres) (the “UP Investors Property”). The UP Investors Property was acquired on August 30, 2011 for an unknown sale price. The UP Investors Property is located in the Town Center Neighborhood General Plan designation which allows for a wide variety of commercial development types. AP Palm Desert Property. AP Palm Desert owns APN 694-190-019 (0.69 acres) (the “AP Palm Desert Undeveloped Property”). The AP Palm Desert Undeveloped Property was acquired on August 12, 2015 as a component of a larger transaction. The AP Palm Desert Undeveloped Property is a small retail commercial pad located in the Neighborhood Center General Plan designation which allows for a wide variety of commercial development types. AP Palm Desert also owns two parcels of developed property and 17 other parcels are owned by other companies that have common ownership with AP Palm Desert at the holding company. See the caption “SPECIAL RISK FACTORS — Concentration of Ownership.” Desert California Property. Desert California owns APN 694-190-024 (0.57 acres) (the “Desert California Property”). The Desert California Property was acquired on February 26, 2010 for $1,174,545 or $47.31 per foot. The Desert California Property is a small retail commercial pad located in the 35 Neighborhood Center General Plan designation which allows for a wide variety of commercial development types. The Desert California Property is currently listed for sale unpriced by Mr. Zen Siddiqui of EZ Realty & Property Management. Lind Property. Lind owns APN 694-190-021 (7.74 acres) (the “Lind Property”). The Lind Property was acquired on May 25, 2010 for $2,100,000 or $271,318 per acre. The Lind Property is located in the Neighborhood Center General Plan designation and is zoned Planned Residential, and as such, Lind has created a mixed-use conceptual site plan that includes single-family development on 6.44 acres and a 1.3 acre commercial corner parcel. The Lind Property is currently for sale unpriced by Lind. Special Tax Levy by Development Status The table below illustrates the Fiscal Year 2020-21 Special Tax levy on Taxable Property in the District. Under the Rate and Method, all Taxable Property in the District will be classified as Developed Property or Undeveloped Property and will be subject to a Special Tax levy as described in the Rate and Method. TABLE 5 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) FISCAL YEAR 2020-21 SPECIAL TAX LEVY BY DEVELOPMENT STATUS Land Use Description(1) Number of Parcels 2020-21 Assessed Land 2020-21 Assessed Structure 2020-21 Total Assessed Values 2020-21 Special Tax Levied Developed 50 $13,972,785 $40,961,464 $54,934,249 $577,893 Undeveloped 5 4,019,065 0 4,019,065 148,873 Grand Total 55 $17,991,850 $40,961,464 $58,305,614 $726,766 (1) Developed status is determined as parcels having a building permit issued prior to March 1st preceding the Fiscal Year in which the Special Tax is being levied. Source: Riverside County 2020-21 Secured Property Roll, as compiled by the Special Tax Consultant. 36 Estimated Value-to-Lien Ratios The table below sets forth the estimated value-to-lien ratio distribution within the District by property classification and by property owner for the Appraised Parcels based on the estimated Fiscal Year 2021-22 Special Tax levy and the total principal amount of the Bonds. The Special Tax levy for Fiscal Year 2021-22 is expected to be $1,015,263. TABLE 6 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) VALUE-TO-LIEN RATIOS BY DEVELOPMENT STATUS AND UNDEVELOPED OWNERS Owner (1) Estimated Value (2) Bonded Indebtedness* Fiscal Year 2021-22 Maximum Special Tax Percentage of Projected Special Tax* Value to Lien Ratio* AP Palm Desert $ 1,050,000 $ 98,264 $ 18,630(3) 1.83% 10:69:1 Desert California 870,000 81,174 15,390(3) 1.52 10.72:1 Lind Wesley R 6,115,000 857,356 162,540(3) 16.01 6.72:1 University Park Investors 5,540,000 1,270,151 240,810(3) 23.72 4.36:1 Subtotal Und. Property $13,575,000 $2,306,905 $ 437,370(3) 43.08 5.73:1 Developed Property 54,934,249 3,048,095 577,893 56.92 17.81:1 All Property $68,509,249 $5,355,000 $1,015,263 100.00% 12.61:1 * Preliminary; subject to change. (1) Owners of undeveloped property according to Riverside County Assessor. (2) Estimated Value of parcels of Undeveloped Property as reflected in Appraisal Report prepared by Appraiser with a date of value of May 15, 2021. Estimated Value of parcels of Developed Property as reflected on the County Assessor’s Secured Roll for Fiscal Year 2020-21. (3) Based on Maximum Special Tax according to the Rate and Method of Apportionment. Source: Special Tax Consultant. 37 Delinquency History The table below summarizes historical delinquencies within the District for Fiscal Years 2015-16 through 2020-21 as of May 1, 2021. Under the provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, will be billed to property owners on their regular property tax bills. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Special Tax installment payments cannot generally be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future. See the caption “SPECIAL RISK FACTORS—Special Tax Delinquencies.” TABLE 7 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX LEVIES, DELINQUENCIES AND DELINQUENCY RATES Fiscal Year(1) Numbers of Parcels Levied Number of Parcels Delinquent Total Annual Special Tax Delinquent of Special Tax Amount Percent of Delinquent Special Tax 2015-16 67 0 $4,179,939 $ 0 0.00% 2016-17 67 0 1,625,396 0 0.00 2017-18 67 1 2,530,288 7,422 0.29 2018-19 67 0 2,532,982 0 0.00 2019-20 67 0 2,534,089 0 0.00(2) 2020-21(2) 67 4 2,533,646 21,932 0.87 (1) First and second installment as of September of each year. (2) As of May 1, 2021. Sources: Riverside County Tax Collector, as compiled by the Special Tax Consultant. 38 SPECIAL RISK FACTORS The Bonds have not been rated by any rating agency, and the purchase of the Bonds involves significant risks that are not appropriate for certain investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. The Bonds have not been rated by a rating agency. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. See “— Property Values” and “— Limited Secondary Market” below. The principal source of payment of debt service on the Bonds will be payments of the Special Tax made with respect to the Taxable Property. As discussed under “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Taxes,” the Special Tax is to be levied annually against all such Taxable Property either at the maximum rate authorized by the Rate and Method or at such lower rates as are determined by the District Administrator to raise sufficient funds to comply with the agreements, conditions, covenants and terms contained in the Indenture, and in accordance with the Act. The Special Tax is to be collected on the tax roll of the District at the same time and in the same manner as general ad valorem real property taxes are collected. The Special Tax cannot be levied at a tax rate higher than the maximum tax rate even if the maximum tax rate will not produce sufficient Net Taxes to pay the principal and interest then payable with respect to the Bonds. See discussions below under “— Levy of the Special Tax” and “— Collection of the Special Tax.” Payment of the Special Tax levied on a parcel is secured by a continuing lien against such parcel. In the event an installment of the Special Tax included in the tax bill for a parcel of Taxable Property is not paid when due, the District has covenanted to institute foreclosure proceedings in court to cause the parcel to be sold in order to attempt to recover the delinquent amount from the sale proceeds. Foreclosure and sale may not always result in the recovery of the full amount of delinquent installments of the Special Tax. See “— Collection of the Special Tax.” The sufficiency of the foreclosure sale proceeds to cover the delinquent amount depends in part upon the market for and the value of the parcel at the time of the sale. Sufficiency of the foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior or parity liens and similar claims. Further, other governmental claims, such as hazardous substance claims, may affect the realizable value even though such claims may not rise to the status of liens. See “— Hazardous Substances.” Timely foreclosure and sale proceedings with respect to a parcel of Taxable Property may be forestalled or delayed by a stay in the event the owner of the parcel becomes the subject of bankruptcy proceedings. Not only may foreclosure and sale proceedings be forestalled or delayed, but the sale of a parcel may also be similarly affected by a bankruptcy stay. Further, should the stay not be lifted, payment of the Special Tax may be subordinated to bankruptcy law priorities. See “— Enforcement Delays - Bankruptcy.” Although bankruptcy proceedings may forestall or delay a foreclosure and sale or a tax sale of a delinquent parcel of Taxable Property, the Special Tax is secured by a lien which, assuming proper procedures are followed, may be enforced against the parcel. There may not be any recourse against a bankrupt property owner since the owner is not personally obligated to pay the Special Tax. Further, if proper disclosure of the authorization of the Special Tax is not made to the owner, the willingness or 39 ability of an owner to pay the Special Tax may be adversely affected. See “— Payment of the Special Tax is Not a Personal Obligation of the Owners.” The District is not obligated to advance funds to pay such debt service except from moneys on deposit in the Reserve Account. See “— Limited Obligations.” Even if debt service is timely paid, interest on the Bonds may have to be included in the gross income of the owner of the Bonds by reason of some circumstance occurring subsequent to issuance of the Bonds, thereby reducing the after-tax yield. See “— Loss of Tax Exemption.” Concentration of Ownership Based on the ownership of property within the District as of January 1, 2021, the AP Palm Desert Entities and the AP Palm Desert Undeveloped Property are projected to be responsible for approximately 29.90% of the total projected Fiscal Year 2021-22 Special Tax to be levied within the District. The willingness and ability of the AP Palm Desert Entities and the AP Palm Desert Undeveloped Property, as well as other property owners, to pay property taxes and the Special Taxes could be adversely affected by changes in general or local economic conditions, fluctuations in the real estate market and other factors. Failure of the AP Palm Desert Entities and the AP Palm Desert Undeveloped Property (or any future owner of a significant amount of taxable property within the District) to pay Special Taxes when due could cause the depletion of the Reserve Account held under the Indenture prior to reimbursement from the resale of foreclosed property and repayment of the delinquent Special Taxes. In such an event, there may be insufficient revenues from Special Taxes to meet the District’s obligations under the Indenture. In that event, there could be a delay or failure in payments of the principal of and interest on the Bonds. Risks of Real Estate Secured Investments Generally Purchasers of the Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of property in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors.. No assurance can be given that the individual property owners within the District will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “— Enforcement Delays — Bankruptcy” for a discussion of certain limitations on the District’s ability to pursue judicial proceedings with respect to delinquent parcels within the District. Property Values The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Land development and land values could be adversely affected by economic and other factors beyond the District and the City’s control, such as a general economic downturn, adverse judgments in future litigation that could affect the scope, timing or viability of development, relocation of employers out of the area, stricter land use regulations, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood or other 40 natural disasters, environmental pollution or contamination, or unfavorable economic conditions which will adversely impact the security underlying the Special Taxes. The Appraisal Report indicates the Appraiser’s opinion as to the market value of the properties referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future. See “THE COMMUNITY FACILITIES DISTRICT — Appraisal Report” and “APPENDIX H — APPRAISAL REPORT.” Prospective purchasers of the Bonds should not assume that the taxable land within the District could be sold for the appraised amount or for the assessed values at a foreclosure sale for delinquent Special Taxes. In arriving at the estimate of market value of the Appraised Property, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See Appendix H for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value of the taxable land and improvements within the District from the market value estimated by the Appraiser. No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Covenant for Foreclosure.” Neither the District nor the City has evaluated development risks. Since these are largely business risks of the type that the landowner customarily evaluates individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the District is issuing the Bonds without regard to any such evaluation. Thus, the creation of the District and the issuance of the Bonds in no way implies that either the City or the District has evaluated these risks or the reasonableness of these risks. On the contrary, the City and the District have made no such evaluation and are undertaking acquisition and construction of the facilities being financed by the Bonds even though these risks may be serious and may ultimately halt or slow the progress of land development and forestall the realization of Taxable Property values in the event of delinquency and foreclosure. Levy of the Special Tax The principal source of money with which to pay debt service on the Bonds is the proceeds derived from the annual levy and collection of the Special Tax applicable to the Taxable Property in the District. The amount of the Special Tax that can be levied is limited to the maximum tax rates authorized pursuant to the Rate and Method. As a result, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax on residential parcels in all years. The levies cannot be made at higher rates even if the failure to do so would result in insufficient Net Taxes to pay the principal of and interest on the Bonds as the same become due and payable. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of a particular parcel and the amount of the levy of the Special Tax against such parcel. Thus, there will rarely, if ever, be a uniform relationship between the value of a parcel and its proportionate share of the debt service on the Bonds. The Special Tax levied in any particular Fiscal Year on a parcel is based upon the revenue needs of the District and the application of the Rate and Method. The application of the Rate and Method will, in turn, be dependent upon certain development factors with respect to each parcel by 41 comparison with similar development factors with respect to the other parcels in the District. Thus, in addition to annual variations in the revenue needs of the District that must be met from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular parcel to vary from the Special Tax that might otherwise be expected: Reduction in the number of parcels of Taxable Property, for reasons such as acquisition of such parcels by a governmental entity and failure of the governmental entity to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property; and Failure of the owners of certain parcels of Taxable Property to pay the applicable Special Tax and delays in the collection of or inability to collect such Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. Collection of the Special Tax The timely payment of the principal of and interest on the Bonds is ultimately dependent upon the timely payment of all Special Taxes. Any money on deposit in the Reserve Account can be used to make such payment in the event of delinquencies, but the replenishment of the Reserve Account will be dependent on the recovery of such delinquencies. The Indenture provides that the Special Tax is to be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable (or in such other manner as the City Council shall determine, including direct billing of the affected property owners) and, except as provided in the special covenant for foreclosure described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure” and in the Act, is to be subject to the same proportionate penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem taxes on real property. Pursuant to the Act, in the event of any delinquency in the payment of the Special Tax, the District may order the institution of a superior court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial foreclosure action is not mandatory. However, the District has covenanted for the benefit of the owners of the Bonds that it will institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installments of the Special Tax under certain circumstances. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure.” In the event that foreclosure proceedings are commenced, such foreclosure proceedings could be stayed by the commencement of bankruptcy proceedings by or against the owner of the property being foreclosed. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Account is depleted. The District may be unable to make full or timely payment of debt service on the Bonds if property owners in the District fail to pay installments of the Special Tax when due, if the Reserve Account is depleted, or if the District is unable to sell foreclosed parcels for amounts sufficient to cover the delinquent installments of the Special Tax. Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method. In addition, the Act provides that properties or entities of the State, federal or local government are exempt 42 from the Special Tax; provided, however, that property in the District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested. In particular, insofar as the Act requires payment of the Special Tax by a federal entity acquiring property in the District, it may be unconstitutional. If for any reason property in the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the maximum authorized rates, the Special Tax will be reallocated to the remaining Taxable Properties in the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax. Moreover, if a substantial portion of property in the District becomes exempt from the Special Tax because of public ownership, or otherwise, the Maximum Annual Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default would occur with respect to the payment of such principal and interest. Maximum Special Tax Within the limits of the Rate and Method, the District may adjust the Special Tax levied on all property in the District to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to cure delinquencies and replenish the Reserve Account to an amount equal to the Reserve Requirement for the respective Bonds and to pay Administrative Expenses. However, the amount of the Special Tax that may be levied against any property in the District is subject to the Maximum Special Tax applicable to it. The Rate and Method provides that the Maximum Special Taxes shall not increase in future years. There is no assurance that the Maximum Special Tax on the property in the District will be sufficient to pay the amounts required to be paid by the Indenture at all times. Payment of the Special Tax is Not a Personal Obligation of the Owners An owner of a parcel of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcel of Taxable Property. If the value of a parcel is not sufficient, taking into account other obligations also payable thereby, to fully secure the Special Tax, the District has no recourse against the owner. Disclosures to Future Purchasers The District has recorded a notice of the Special Tax Lien in the Office of the County Recorder. 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 a parcel of land, a commercial or industrial facility in the District or the lending of money thereon. The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello–Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and 43 existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Parity Taxes and Special Assessments The ability or willingness of a property owner in the District to pay the Special Tax could be affected by the existence of other taxes and assessments imposed upon the property. The Special Tax and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special tax and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes, other special taxes, and certain special assessments regardless of when they are imposed upon the same property. The Special Tax has priority over all existing and future private liens imposed on the property. In addition, other public agencies whose boundaries overlap those of the District could, with or in some circumstances without the consent of the owners of the land in the District, impose additional taxes or assessment liens on the property in the District in order to finance public improvements to be located inside or outside of the District. The District has no control over the ability of other entities and districts to issue indebtedness secured by special tax or assessments payable from all or a portion of the property in the District. In addition, the City is not prohibited itself from establishing assessment districts, community facilities districts or other districts which might impose assessments or taxes against property in the District. In the event any additional improvements are financed pursuant to the establishment of an assessment district, community facilities district or other district, any taxes or assessments levied to finance such improvements will have a lien on a parity with the lien of the Special Tax. The imposition of additional liens on a parity with the Special Tax could reduce the ability or willingness of the property owners to pay the Special Tax and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Tax or the principal of and interest on the Bonds when due. Ballot Initiatives Articles XIII A, XIII B, XIII C, and XIII D of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to the State’s constitutional initiative process. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City, or other local agencies to increase revenues or to increase appropriations. Proposition 218 An initiative measure entitled “The Right to Vote on Taxes Act” (“Proposition 218”) was approved by the voters at the November 5, 1996 statewide general election. Among other things, Proposition 218 added a new Article XIII C to the California Constitution which states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. While the application of Proposition 218 in this context has not yet been interpreted by the courts and the matter is not completely free from doubt, it is not likely that Proposition 218 has conferred on the voters the power to effect a repeal or reduction of the Special Tax if the result thereof would be to impair the security of the Bonds. 44 It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the future levy of Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Nevertheless, to the maximum extent that the law permits it to do so, the District will covenant that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates for the District. The District also will covenant that, in the event an initiative is adopted which purports to reduce or otherwise alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants. Depletion of Reserve Account The Reserve Account is to be maintained at an amount equal to the Reserve Requirement. Money in said fund may be used to pay debt service on the Bonds in the event the proceeds of the levy and collection of the Special Tax against property in the District are insufficient. If funds in the Reserve Account are used to pay debt service on the Bonds, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay all amounts to be paid pursuant to the Indenture. However, no replenishment from the proceeds of a levy of the Special Tax can occur as long as the proceeds that are collected from the levy of the Special Tax at the maximum tax rates, together with other available funds, remain insufficient to pay all such amounts. Thus it is possible that the Reserve Account will be depleted by its use to pay such amounts and will not be replenished by the levy of the Special Tax. There is no assurance that the amount in the Reserve Account will, at any particular time, be sufficient to pay all such amounts or that any amounts of the Reserve Requirement used for debt service on the Bonds will be fully replenished from the proceeds of the levy and collection of the Special Tax. Enforcement Delays - Bankruptcy The payment of the Special Tax and the ability of the District to foreclose the lien of a delinquent unpaid tax, as discussed in “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State of California relating to judicial foreclosure. In addition, the prosecution of a foreclosure action could be delayed due to crowded local court calendars or delays in the legal process. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the obligation to pay the Special Tax to become extinguished, the bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings because federal bankruptcy laws may provide for an automatic stay of foreclosure and sale of tax sale proceedings. Any such delays could increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent tax installments not being paid in full. Moreover, if the value of the subject property is less than the lien of the Special Tax, such excess could be treated as an unsecured claim by the bankruptcy court. Further, should remedies be exercised under the federal bankruptcy laws against Taxable Property, payment of the Special Tax may be subordinated to bankruptcy law priorities. Thus, certain claims may have priority over the Special Tax in a bankruptcy proceeding even though they would not outside of a bankruptcy proceeding. 45 FDIC/Federal Government Interests in Properties The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest. In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes. The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County, California, in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre- receivership liens based upon delinquent property tax. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale. In the case of Fannie Mae and Freddie Mac, in the event a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or in the event a private deed of trust secured by a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of Taxable Property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. 46 The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest. COVID-19 (Coronavirus) Pandemic The spread of the novel strain of coronavirus called COVID-19 (“COVID-19”) is causing significant negative impacts throughout the world, including in the City. Since mid-March 2020, based on guidance and directives from the State and public health agencies, the County and the City have undergone varying degrees of closure and limited reopening of public buildings and businesses. The City initially closed certain non-essential functions of the City, while City Hall remained opened, by appointment only, and community services and public safety functions remained open to the public to service City residents and businesses. The City’s Building & Safety Department remained opened and continued to issue building permits and inspect unoccupied dwellings for the lots within the City. Other City Departments that serve businesses and residents within the District telecommuted and/or continued in-person work schedules to meet the needs of the community. Other public agencies serving the property and residents within the District may have taken similar actions in response to the COVID-19 pandemic, though the District and the City can provide no assurance regarding the actions of any other public agencies. Such actions may affect the landowners ability to complete their planned development within the District as described in the Official Statement. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” The COVID-19 pandemic is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak, and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impacts are uncertain. However, the impact of the COVID-19 outbreak could adversely impact development within the District, including, but not limited to, one or more of the following ways: (i) continued extreme fluctuations in financial markets and contraction in available liquidity; (ii) extensive job losses and declines in business activity across important sectors of the economy; (iii) declines in business and consumer confidence that negatively impact economic conditions or cause an economic recession; (iv) the failure of government measures to stabilize the financial sector and introduce fiscal stimulus to counteract the economic impact of the pandemic; (vii) inability to lease office space due to lower demand; and (ix) delays in sales, or cancellations, due to mortgage lending issues. Any adverse impact of COVID-19 on the District and property owners willingness and ability to pay the Special Taxes when due, and the real estate market in general cannot be predicted. Geologic, Topographic and Climatic Conditions The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. The District is not located within a designated fault zone and located in an area of minimal flood hazard. Palm Desert shares many of the hazards associated with earthquakes faults in Southern California. There are three major faults and several minor faults that could impact the City of Palm Desert. The major faults include the San Andreas Fault near San Gorgonio Pass, the Palm Desert Fault, and the Elsinore Fault. 47 In recent years, portions of Southern California have experienced wildfires that have burned thousands of acres and destroyed thousands of homes and structures, even in areas not previously thought to be prone to wildfires. While the District is not aware of any particular risk of wildfire within the District, there can be no assurances that wildfires won’t occur within the District. Property damage due to wildfire could result in a significant decrease in the market value of property in District and in the ability or willingness of property owners to pay Special Taxes when due. The District is located in Basin No. 1. In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes. Flood Zone The City of Palm Desert has experienced numerous winter storm flood and high wind damages in the past. Flood control improvements enacted after the devastating floods caused by Tropical Storm Kathleen in 1976 have mitigated any future occurrences thus far. However, heavy rains can lead to problems with storm drainage and create localized flood problems. The District is not located within a Special Flood Hazard Area. Drought California has been subject to droughts from time-to-time in the past. The State of California is currently in a statewide drought with regions ranging from severe drought to exceptional drought. Riverside County is experiencing severe to extreme drought conditions. Water service to the City and the District is provided by the Coachella Valley Water District (“CVWD”). CVWD faces various challenges in the continued supply of water to the City. A description of these challenges as well as a variety of other operating information with respect to CVWD is included in certain disclosure documents prepared by CVWD. CVWD periodically prepares official statements and other disclosure documents in connection with its bonds and other obligations. CVWD has also entered into certain continuing disclosure agreements pursuant to which CVWD is contractually obligated for the benefit of owners of certain of its outstanding obligations to file certain annual reports, including audited financial statements and notice of certain events, pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended (“Rule 15c2-12”). Such official statements, other disclosure documents, annual reports and notices (collectively, the “CVWD Information”) are filed with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”) at http://emma.msrb.org. The CVWD Information is not incorporated herein by reference thereto, and the City makes no representation as to the accuracy or completeness of such information. CVWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE CVWD INFORMATION TO THE CITY OR THE OWNERS OF THE BONDS. Although the City does not believe any future drought would impact development in the District, no assurances can be given in this regard and no assurance can be given that a future drought affecting homes in the District would not result in decreased values. In the event that the CVWD’s water supply is severely limited or cut off by virtue of future actions beyond its control resulting from ongoing or future drought conditions, development within the District may be delayed or even stopped. Should the City need to restrict development, it must do so Citywide and cannot single out the District property in restricting development activity. In turn, the anticipated diversity of ownership of land within the District could also be reduced.. Furthermore, such an increased period of concentrated ownership of undeveloped 48 land increases the potential negative impact of any bankruptcy or other financial difficulties experienced by the owners of undeveloped land in the District. Hazardous Substances While government taxes, assessments and charges are a common claim against the value of a parcel, other less common claims may also be relevant. One of the most serious in terms of the potential reduction in the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Super Fund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar in effect. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of a parcel whether or not the owner (or operator) had anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels within the District be affected by a hazardous substance, is to reduce the marketability and value by the costs of remedying the condition. The District is not aware of the presence of any federally or state classified hazardous substances in violation of any environmental laws, located on the property within the District. However, it is possible that such materials do currently exist and that the District is not aware of them. It is possible that property in the District may be liable for hazardous substances in the future as a result of the existence, currently, of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or the existence, currently, on the property of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling such substance. All of these possibilities could have the effect of reducing the value of the applicable property. No Acceleration Provision The Indenture does not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture. Limited Obligations The Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture. The District’s legal obligations with respect to any delinquent Special Taxes are limited to: (i) payments from the Reserve Account to the extent of funds on deposit therein; and (ii) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure.” The Bonds cannot be accelerated in the event of any default. 49 The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption “—Payment of the Special Tax is Not a Personal Obligation of the Property Owners.” Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so. Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Special Taxes levied against such parcels may result in the inability of the District to make full or timely payments of debt service on the Bonds, which may in turn result in the depletion of the Reserve Account. See the caption “— Enforcement Delays – Bankruptcy.” Litigation with Respect to Community Facilities Districts Shapiro. The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.App.4th 756 (the “San Diego Decision”). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego (“San Diego”). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD. The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district. Horizon. The Sacramento County Superior Court issued a tentative ruling in Horizon Capital Investments, LLC v. City of Sacramento et al. (Case No. 34-2017-80002661). That ruling subsequently became the court’s final order. As described below, this case involved an election to approve the levy of a special tax within a community facilities district (“CFD”) formed under the Act. In 2017, the City of Sacramento initiated proceedings to form a CFD to finance certain costs to operate and maintain a streetcar line. As permitted by the Act, the proposed district included non-contiguous parcels of non- residential property. Because there were fewer than 12 registered voters residing within the territory of the proposed CFD, the City Council submitted the special tax proposed to be levied within the proposed CFD to the owners of land within the proposed CFD, as required by the Act. The proposed special tax received the requisite two-thirds vote in the landowner election. Petitioners Horizon Capital Investments, LLC et al. filed a writ of mandate and complaint for reverse validation and declaratory relief. Petitioners argued, and the superior court agreed in its final ruling, that under section 4(a) of article XIII A of the California Constitution (which provides that “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district [sic], may impose special taxes on such district…”) the phrase “qualified electors” means the registered voters of the entire City of Sacramento and not just the owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, the tentative ruling 50 states that the phrase “qualified electors of the district” refers to the registered voters of the entity imposing the special tax, which in this case was the City of Sacramento. Because the vote within the proposed CFD was by landowners only and not by all registered voters in the City of Sacramento, the final ruling states that the special tax is invalid. The superior court’s final ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Tax, or the Bonds. The City of Sacramento did not appeal the decision. The Special Tax Election in the District. With respect to the San Diego Decision, the facts of such case show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in San Diego). At the time of the landowner elections to authorize the Special Tax for the District, there were no registered voters within the District. In the San Diego Decision, the court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the court’s holding in the San Diego Decision does not apply to the Special Tax election in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. The petitioners in Horizon filed the writ of mandate within 30 days of the landowner election. Landowners in the District approved the levy of Special Tax in accordance with the Rate and Method on January 12, 2006. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings, and court decisions, the City believes that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought. In connection with the issuance of the Bonds, Bond Counsel expects to deliver its opinion in the proposed form attached hereto as Appendix Loss of Tax Exemption As discussed under the heading “TAX EXEMPTION,” interest on the Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the District. In addition, it is possible that future changes in applicable federal tax laws could cause interest on the Bonds to be included in gross income for federal income taxation or could otherwise reduce the equivalent taxable yield of such interest and thereby reduce the value of the Bonds. No Ratings – Limited Secondary Market The District has not applied to have the Bonds rated by any nationally recognized bond rating company, and it does not expect to do so in the future. There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain financial and operating information, there can be no assurance that such information will be available to Bond owners on a timely basis. The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the 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. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. 51 Limitations on Remedies Remedies available to the Owners of the Bonds 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 interest on the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting generally the enforcement of creditor’s rights, by equitable principles and by the exercise of judicial discretion and by limitations on remedies against public agencies in the State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners. Potential Early Redemption of Bonds from Special Tax Prepayments Property owners within the District are permitted to prepay their Special Taxes at any time. Such payments will result in a mandatory redemption of Bonds from Special Tax prepayments on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of such Special Tax prepayment. The resulting redemption of Bonds purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See “THE BONDS — Redemption — Extraordinary Redemption from Special Tax Prepayments.” Teeter Plan The Riverside County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. The City’s ad valorem taxes and the Special Taxes for the District are currently included in the Teeter Plan. However, the County may decide to remove the District from the Teeter Plan and then the District would not draw on the County Tax Loss Reserve Account in the event of delinquencies in Special Tax payments. Cybersecurity The City, like many other public and private entities, relies on a large and complex technology environment to conduct its operations. As a recipient and provider of personal private or sensitive information, the City is subject to multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the City’s digital systems for the purposes of misappropriating assets or information or causing operational disruption and damage. To date, the City has not experienced an attack on its computer operating systems which resulted in a breach of its cybersecurity system that are in place. However, no assurances can be given that the City’s effort to manage cyber threats and attacks will be successful or that any such attack will not materially impact the operations or finances of the City. 52 CONTINUING DISCLOSURE Pursuant to the District Continuing Disclosure Agreement, the District will covenant for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by March 31 of each year (the “Annual Report”), commencing with the report for [March 31, 2022], and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed with EMMA. The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in “APPENDIX E — FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT.” These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 (the “Rule”). The District, which is the obligated party under the Disclosure Agreement, previously entered into undertakings pursuant to the Rule in connection with the issuance of the 2006 Bonds and the 2007 Bonds. The former redevelopment agency of the City, the Successor Agency to the City’s former redevelopment agency, and the City, which are related entities to the District through the City, have also previously entered into continuing disclosure undertakings under the Rule in connection with the issuance of municipal obligations. In the past five years, certain annual report filings of the related entities [UPDATE ON CONTINUING DISCLOSURE COMPLIANCE BY RELATED ENTITIES]. Except as disclosed in this Official Statement, within the last five years, the District and the related entities have not failed to timely comply with their respective prior continuing disclosure obligations under the Rule in all material respects. The full text of the form of the District Continuing Disclosure Agreement is set forth in APPENDIX E. TAX MATTERS The Internal Revenue Code of 1986, as amended (the “Code”), establishes certain requirements which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from gross income for federal income tax purposes. Noncompliance with such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to their date of issue. These requirements include, but are not limited to, provisions which limit how the proceeds of the Bonds may be spent and invested, and generally require that certain investment earnings be rebated on a periodic basis to the United States of America. The City and the Authority have made certifications and representations and have covenanted to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes pursuant to Section 103 of the Code. In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under existing law and assuming the accuracy of such certifications and representations by, and compliance with such covenants of, the City and the Authority, (i) interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Code, and (ii) the Bonds are not “specified private activity bonds” within the meaning of Section 57(a)(5) of the Code and, therefore, interest on the Bonds is not a preference item for purposes of computing the alternative minimum tax imposed by Section 55 of the Code. Bond Counsel is also of the opinion that, under existing law, interest on the Bonds is exempt from State of California personal income taxes. Bond counsel expresses no opinion as to any other tax consequences regarding the Bonds. Under the Code, interest on the Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for 53 federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Bonds. Bond Counsel will express no opinion regarding these and other such consequences. Bond Counsel has not undertaken to advise in the future whether any circumstances or events occurring after the date of issue of the Bonds may affect the tax status of interest on the Bonds. Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the California legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. No assurance can be given that legislation enacted or proposed, or actions by a court, after the date of issue of the Bonds, will not eliminate, or directly or indirectly reduce the benefit of the exclusion of interest on the Bonds from gross income for federal income tax purposes, or have an adverse effect on the market value or marketability of the Bonds. For example, federal tax legislation enacted on December 22, 2017, reduced corporate tax rates, modified individual tax rates, eliminated many deductions, repealed the corporate alternative minimum tax, and generally eliminated the tax-exempt advance refunding of tax-exempt bonds and other tax advantaged bonds, among other things. In addition, investors in the Bonds should be aware that future legislative actions might increase, reduce, or otherwise change (including retroactively) the financial benefits and the treatment of all or a portion of the interest on the Bonds for federal income tax purposes for all or certain taxpayers. In all such events, the market value of the Bonds may be adversely affected and the ability of holders to sell their Bonds in the secondary market may be reduced. The Bonds are not subject to extraordinary redemption, and the interest rates on the Bonds are not subject to adjustment, in the event of any such change. Investors should consult their own financial and tax advisors to analyze the importance of these risks. Certain requirements and procedures contained or referred to in relevant documents may be changed and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. Bond Counsel expresses no opinion as to any Bond, or the interest thereon, if any such change occurs or action is taken upon the advice or approval of bond counsel other than Richards, Watson & Gershon, A Professional Corporation. If the issue price of a Bond (the first price at which a substantial amount of the bonds of a maturity are sold to the public) is less than the stated redemption price at maturity of such Bond, the difference constitutes original issue discount, the accrual of which is excluded from gross income for federal income tax purposes to the same extent as interest on the Bonds. Further, such original issue discount accrues actuarially on a constant yield method over the term of each such Bond and the basis of each Bond acquired at such initial offering price by an initial purchaser thereof will be increased by the amount of such accrued original issue discount. The accrual of original issue discount may be taken into account as an increase in the amount of tax-exempt income for purposes of determining various other tax consequences of owning such Bonds. Purchasers who acquire Bonds with original issue discount are advised that they should consult with their own independent tax advisors with respect to the state and local tax consequences of owning such Bonds. 54 If the issue price of a Bond is greater than the stated redemption price at maturity of such Bond, the difference constitutes original issue premium, the amortization of which is not deductible from gross income for federal income tax purposes. Original issue premium is amortized over the period to maturity of such Bond based on the yield to maturity of that Bond (or, in the case of a Bond callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on that Bond), compounded semiannually. For purposes of determining gain or loss on the sale or other disposition of such Bond, the purchaser is required to decrease such purchaser’s adjusted basis in such Bond by the amount of premium that has amortized to the date of such sale or other disposition. As a result, a purchaser may realize taxable gain for federal income tax purposes from the sale or other disposition of such Bond for an amount equal to or less than the amount paid by the purchaser for that Bond. A purchaser of that Bond in the initial public offering at the issue price for that Bond who holds it to maturity (or, in the case of a callable Bond, to its earlier call date that results in the lowest yield on that Bond) will realize no gain or loss upon its retirement. Payments of interest on tax-exempt obligations, including the Bonds, are generally subject to IRS Form 1099-INT information reporting requirements. If an owner of a Bond is subject to backup withholding under those requirements, then payments of interest will also be subject to backup withholding. Those requirements do not affect the exclusion of such interest from gross income for federal income tax purposes. Prospective purchasers of the Bonds should consult their own independent tax advisers regarding pending or proposed federal and state tax legislation and court proceedings, and prospective purchasers of the Bonds at other than their original issuance at the respective prices indicated on the inside cover of this Official Statement should also consult their own tax advisers regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion. Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority or the owners of the Bonds regarding the tax status of interest thereon in the event of an audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Bonds, under current IRS procedures, the IRS will treat the Authority as the taxpayer and the beneficial owners of the Bonds will have only limited rights, if any, to obtain and participate in judicial review of such audit. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of other obligations presenting similar tax issues, may affect the market value of the Bonds. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix D. ABSENCE OF LITIGATION In connection with the issuance of the Bonds, the City Attorney will deliver an opinion to the effect that, to their best knowledge, after due inquiry and investigation, there is no litigation pending with respect to which the District or the City has been served with process or threatened against the District or the City to restrain or enjoin the issuance of any of the Bonds or the collection of the Special Taxes pledged under the Indenture. 55 NO RATING The District has not made, and does not contemplate making, application to any rating organization for a rating on the Bonds. LEGAL OPINION The legal opinion of Bond Counsel approving the validity of the Bonds, in substantially the form set forth as Appendix D hereto, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the District by Best Best & Krieger LLP, Indian Wells, California, City Attorney, and for the District by Best Best & Krieger LLP, Riverside, California, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Bond Counsel undertakes no responsibility to the purchasers of the Bonds for the accuracy, completeness or fairness of this Official Statement. UNDERWRITING The Bonds are being purchased by Piper Sandler & Co. (the “Underwriter”). The Underwriter has agreed to purchase the Bonds at a price of $____________ (being the $_________ aggregate principal amount of the Bonds, less an Underwriter’s discount of $_________ and plus/less [net] original issue premium/discount of $___________). The bond purchase agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter’s compensation is contingent upon the successful issuance of the Bonds. Under certain circumstances, the Underwriter may offer and sell the Bonds to certain dealers and others at prices lower or yields higher than those stated on the page immediately following the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter. FINANCIAL INTERESTS The fees being paid to the Underwriter and its counsel and the Trustee are contingent upon the issuance and delivery of the Bonds. From time to time Best Best & Krieger LLP represents the Underwriter on matters unrelated to the Bonds. MUNICIPAL ADVISOR The District has retained Del Rio Advisors, LLC, Modesto, California, as Municipal Advisor for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Preliminary Official Statement. Del Rio Advisors, LLC is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. 56 MISCELLANEOUS So far as any statements made in this Official Statement involve matters of opinion, assumptions, projections, anticipated events or estimates, whether or not expressly stated, they are set forth as such and not as presentations of fact, and actual results may differ substantially from those set forth therein. Neither this Official Statement nor any statement that may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds. The summaries of certain provisions of the Bonds, statutes and other documents or agreements referred to in this Official Statement do not purport to be complete, and reference is made to each of them for a complete statement of their provisions. Copies are available for review by making requests to the City. The execution and delivery of this Official Statement by the City Treasurer has been duly authorized by the City Council of the City of Palm Desert acting in its capacity as the legislative body of the District. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) By: Janet Moore, City Treasurer A-1 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE [TO COME FROM BOND COUNSEL] B-1 APPENDIX B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX C-1 APPENDIX C GENERAL INFORMATION CONCERNING THE CITY OF PALM DESERT AND THE COUNTY OF RIVERSIDE The following information concerning the City of Palm Desert, the County of Riverside and surrounding areas is included only for the purpose of supplying general information regarding the community. The Bonds are not an obligation of the City. The following information concerning the City and surrounding areas are included only for the purpose of supplying general information regarding the community. The Local Obligations and the Bonds are not a debt of the City, the State, or any of its political subdivisions and neither said City, said State, nor any of its political subdivisions is liable therefor. Overview The City of Palm Desert (the “City”), incorporated in November 26, 1973 as a general law city, became a charter city through the adoption of Ordinance 858 by the City Council on January 8, 1998. The City is located in the Coachella Valley and is approximately mid-way between the cities of Indio and Palm Springs, 117 miles east of Los Angeles, 118 miles northeast of San Diego and 515 miles southeast of San Francisco. The City occupies an area of approximately 26 square miles. Elevation of the City is 243 feet and the mean temperature is 73.1 degrees. Except in summer, the weather is mild and annual average rainfall is 3.38 inches. According to the State Department of Finance, the City population as of January 1, 2020 was approximately 52,986. Government The City Council is comprised of five members, elected to four-year terms every two years. In 2020, changes were made to the City’s elections as a result of a legal settlement related to the California Voting Rights Act. A new downtown district, comprising about 20% of the City’s population was created which is represented by one (1) elected City Council member and a larger surrounding district, comprising about 80% of the City’s population was created, which is represented by four (4) elected City Council members. The City will implement ranked choice voting in both districts beginning in 2022. The general municipal election is conducted in November of even-numbered years, and councilmembers are sworn in and take office at the first meeting in December following each election. The City Council selects one of its members to serve as Mayor for a one-year term and appoints a City Manager to conduct the day to day business of the City and the City Clerk. The City Attorney is appointed by City Council. The City operates as “Contract City” utilizing, primarily, agreements with other governmental entities, private companies and individuals to provide services. Contracted services include police and fire protection provided through the County, animal control, health services, legal services and landscape maintenance. C-2 TABLE C-1 CITY OF PALM DESERT CITY COUNCIL MEMBERS Name Office Kathleen Kelly Mayor Jan Harnik Mayor Pro Tem Sabby Jonathan Council Member Gina Nestande Council Member Karina Quintanilla Council Member Labor Force and Employment The main sources of revenue in the City are derived from tourism and sales tax. Historically, the unemployment rate in the City has been lower than that for the County and the State. Table C-2 represents the labor patterns in the City, the County, the State, and the United States from 2016 through 2020. TABLE C-2 CITY OF PALM DESERT, RIVERSIDE COUNTY, STATE OF CALIFORNIA AND UNITED STATES CIVILIAN LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT (2016 THROUGH 2020) Year and Area Labor Force Employment Unemployment Unemployment Rate 2016 City 23,900 22,400 1,400 6.0% County 1,051,600 987,200 64,400 6.1 State 19,012,000 17,965,400 1,046,600 5.5 United States 159,190,000 151,440,000 7,750,000 4.9 2017 City 24,300 23,000 1,200 5.1 County 1,071,600 1,014,900 56,700 5.3 State 19,173,800 18,246,800 927,000 4.8 United States 160,320,0000 153,340,000 6,980,000 4.4 2018 City 24,600 23,500 1,100 4.4 County 1,090,100 1,041,500 48,600 4.5 State 19,263,900 18,442,400 821,500 4.3 United States 162,070,000 155,760,000 6,310,000 3.9 2019 City 24,800 23,700 1,100 4.3 County 1,105,700 1,058,700 47,000 4.2 State 19,353,700 18,550,500 803,200 4.2 United States 163,540,000 157,540,000 6,000,000 3.7 2020 City 25,100 22,400 2,700 10.8 County 1,107,700 997,700 110,000 9.9 State 18,821,200 16,913,100 1,908,100 10.1 United States 160,740,000 147,790,000 12,950,000 8.1 _____________________ Sources: State of California Employment Development Department and U.S. Department of Labor, Bureau of Labor Statistics. C-3 TABLE C-3 CITY OF PALM DESERT TAXABLE RETAIL SALES DATA (in the thousands) (2015 through 2019) Retail and Food Services 2019(1) 2018 2017 2016 2015 Motor Vehicle and Parts Dealers $ 65,093,550 $ 82,725,948 $ 44,491,689 $ 49,529,836 $ 25,832,749 Home Furnishings and Appliance Stores 122,046,532 132,768,970 124,455,814 129,458,711 112,784,398 Bldg. Matrl. and Garden Equip. and Supplies 84,436,299 82,014,590 89,170,778 89,027,862 85,154,640 Food and Beverage Stores 81,813,404 77,869,295 75,359,174 70,326,406 71,526,119 Gasoline Stations 69,984,089 67,733,653 64,915,851 61,869,476 73,512,687 Clothing and Clothing Accessories Stores 253,045,206 250,503,344 244,443,566 251,417,762 250,206,480 General Merchandise Stores 358,374,011 341,563,319 329,251,150 320,437,183 337,171,923 Food Services and Drinking Places 252,836,165 238,890,591 229,246,725 220,353,868 211,445,325 Other Retail Group 191,502,580 165,413,351 157,504,642 184,721,184 185,221,170 Total Retail and Food Services $1,479,131,836 $1,439,483,061 $1,358,839,389 $1,377,142,288 $1,352,855,491 All Other Outlets $ 324,470,184 $ 313,228,922 $ 302,675,938 $ 274,092,741 $ 263,319,995 Total All Outlets $1,803,602,020 $1,752,711,983 $1,661,515,327 $1,651,235,029 $1,616,175,486 _____________________ (1) Last year available. Sources: California Department of Tax and Fee Administration. Utilities Water, sewage treatment and wastewater disposal are provided by the Coachella Valley Water District. Southern California Gas Company supplies natural gas to the City and electric power is provided by the Southern California Edison Company. Waste Disposal is provided by Burrtec Waste & Recycling Services. Telephone/Internet service is available through Frontier Communications. Cable television/Internet service is provided by Time Warner Cable/Spectrum. Transportation Inter-City transportation is provided by SunLine Transit Agency which provides service throughout the entire Coachella Valley. The City’s central highways are California Highway 111 and 74 which connect to US Interstate 10 and to California Highway 62 and 86. Shipping is provided by numerous truck carriers which have overnight service to Los Angeles, San Francisco, San Diego and Phoenix. Rail transportation is provided by the Southern Pacific Railroad located in Indio, 10 miles east of the City, and by Amtrak, which has two stations located in Coachella Valley. A full service airport is located in Palm Springs, 12 miles northwest of the City, with approximately seven carriers providing service. The airport has an 8,500 foot runway and general aviation facilities. There is also a private airport in Bermuda Dunes, eight miles northeast of the City. Community Services The City of Palm Desert provides both police and fire protection through contracts with the County of Riverside. C-4 The Riverside County Public Library System provides library services to the City. The City/County also operates a 43,000 square foot public library on the College of the Desert campus which is jointly used by the public and the College of the Desert. The Desert Willow Golf Resort, two championship 18-hole, public golf course, is located on approximately 540 acres in the northern area of the City. This golf course also features a 33,000 square foot clubhouse with restaurant, dining and banquet facilities. The City also is home to five other public golf courses and resorts and 20 private or semi-private golf clubs and resorts. Population The following sets forth the City, the County and the State population estimates as of January 1 for the years 2017-2021: TABLE C-4 CITY OF PALM DESERT, RIVERSIDE COUNTY AND STATE OF CALIFORNIA Estimated Population (2017-2021) Year (January 1) City of Palm Desert Riverside County State of California 2017 53,334 2,374,555 39,352,398 2018 53,554 2,397,662 39,519,535 2019 53,695 2,419,057 39,605,361 2020 53,828 2,440,719 39,648,938 2021 53,892 2,454,453 39,466,855 _________________________ Source: State of California Department of Finance, Demographic Research Unit . Employment and Industry The City is included in the Riverside-San Bernardino labor market area. The unemployment rate in the Riverside-San Bernardino-Ontario MSA was 8.1% in February 2021. This compares with an unadjusted unemployment rate of 8.4% for California and 6.6% for the nation during the same period. The unemployment rate was 8.0% for Riverside County and 8.1% in San Bernardino County. The following table summarizes the civilian labor force, employment and unemployment in the County for calendar years 2015 through 2019. C-5 TABLE C-5 RIVERSIDE-SAN BERNARDINO METROPOLITAN STATISTICAL AREA (RIVERSIDE COUNTY CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT (Annual Averages) TITLE 2015 2016 2017 2018 2019(1) Civilian Labor Force(2) 1,033,500 1,051,600 1,071,600 1,090,100 1,105,700 Civilian Employment 963,800 987,200 1,014,900 1,041,500 1,058,700 Civilian Unemployment 69,600 64,400 56,700 48,600 47,000 Civilian Unemployment Rate 6.7% 6.1% 5.3% 4.5% 4.2% Total, All Industries(3) 657,900 688,400 718,400 748,500 768,400 Total Farm 12,600 12,800 12,300 12,300 12,900 Total Nonfarm 645,300 675,500 706,100 736,200 755,400 Goods Producing 94,500 101,600 105,500 112,300 113,200 Mining and Logging 300 300 400 400 500 Construction 52,900 58,600 62,200 67,400 67,600 Manufacturing 41,300 42,700 42,900 44,500 45,100 Durable Goods 28,600 29,300 29,100 30,200 30,400 Nondurable Goods 12,700 13,400 13,800 14,300 14,700 Service Providing 550,800 574,000 600,600 623,900 642,200 Trade, Transportation & Utilities 146,100 152,800 158,900 163,600 168,500 Wholesale Trade 23,300 23,800 23,900 24,900 25,700 Retail Trade 88,700 91,600 92,700 92,900 93,500 Transportation, Warehousing & Utilities 34,100 37,400 42,400 45,800 49,300 Information 6,400 6,300 6,100 6,200 6,500 Financial Activities 20,900 21,400 21,800 22,100 21,600 Finance & Insurance 11,600 11,700 11,900 11,900 11,100 Real Estate & Rental & Leasing 9,400 9,700 9,900 10,200 10,500 Professional & Business Services 62,600 65,200 66,600 70,500 73,000 Professional, Scientific & Technical Services 19,100 19,000 19,400 20,500 21,000 Management of Companies & Enterprises 3,000 3,000 2,400 2,500 3,100 Administrative & Support & Waste Services 40,500 43,200 44,700 47,500 49,000 Educational & Health Services 95,200 100,200 107,000 114,900 120,700 Educational Services 7,600 8,200 8,200 8,300 8,500 Health Care & Social Assistance 87,600 92,000 98,800 106,700 112,200 Leisure & Hospitality 83,400 88,200 91,200 93,700 97,400 Arts, Entertainment & Recreation 10,900 11,300 11,600 12,000 12,400 Accommodation & Food Services 72,500 76,900 79,600 81,700 84,900 Other Services 21,700 22,300 22,600 22,800 23,100 Government 114,500 117,600 126,400 130,100 131,600 Federal Government 6,900 7,100 7,100 7,200 7,200 State Government 16,300 17,000 17,500 17,500 17,700 Local Government 91,400 93,600 101,800 105,400 106,700 ___________________________ (1) Latest year available. (2) Civilian labor force data are by place of residence; include self-employed individuals, unpaid family workers, household domestic workers, & workers on strike. Data may not add due to rounding. The unemployment rate is calculated using unrounded data. (3) Industry employment is by place of work; excludes self-employed individuals unpaid family workers, household domestic workers, & workers on strike. Data may not add due to rounding. Source: State of California Employment Development Department. C-6 TABLE C-6 COUNTY OF RIVERSIDE Major Employers (2021) Employer Name Location Industry Abbott Vascular Inc. Temecula Hospital Equipment & Supplies-Mfrs Abbott Vascular Inc. Temecula Hospital Equipment & Supplies-Mfrs Agua Caliente Casino Resort Spa Rancho Mirage Casinos Amazon Fulfillment Ctr Moreno Valley Mail Order Fulfillment Service Collins Aerospace Riverside Aircraft Components-Manufacturers Corona City Hall Corona Government Offices-City/Village & Twp Corona Regional Medical Ctr Corona Hospitals Department-Corrections-Rehab Norco Government Offices-State Desert Regional Medical Ctr Palm Springs Hospitals Eisenhower Health Rancho Mirage Hospitals Fantasy Springs Resort Casino Indio Casinos J Ginger Masonry LP Riverside Masonry Contractors Kleinfelder Construction Svc Riverside Engineers-Structural La Quinta Golf Course La Quinta Golf Courses Parkview Community Hosp Med Riverside Hospitals Pechanga Resort Casino Temecula Casinos Riverside Community Hospital Riverside Hospitals Riverside County Public Health Riverside Government Offices-County Riverside University Health Moreno Valley Hospitals Southwest Healthcare System Murrieta Health Care Management Spa Resort Casino Palm Springs Casinos Starcrest of California Perris Internet & Catalog Shopping Starcrest Products Perris Internet & Catalog Shopping Sun World Intl LLC Coachella Fruits & Vegetables-Wholesale Time Rack Corona Computer Software ________________________ Source: State of California Employment Development Department. D-1 APPENDIX D PROPOSED FORM OF OPINION OF BOND COUNSEL [TO COME FROM BOND COUNSEL] E-1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT dated as of [______ 1, 2021] (the “Disclosure Agreement”) is executed and delivered by and between the City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”) and Willdan Financial Services as Dissemination Agent in connection with the issuance of $______ City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Series 2021A (the “Bonds”). The Bonds are issued pursuant to a Bond Indenture, dated as of _______, 2021 (the “Indenture”), between the City and U.S. Bank National Association, as trustee (the “Trustee”). The District covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (defined below). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure 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 the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Beneficial Owner” shall mean any person, which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). “City” means the City of Palm Desert, County of Riverside, California. “Disclosure Representative” shall mean the City Manager, Director of Finance of the City or the designee of any one of such officers, or such other officer or employee as the City Manager shall designate in writing from time to time. “Dissemination Agent” shall mean the Willdan Financial Services, or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation. “EMMA” shall mean the Electronic Municipal Market Access system of the MSRB. “Financial Obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term Financial Obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. “Listed Events” shall mean any of the events listed in Section 5(a) or (b) of this Disclosure Agreement and any other event legally required to be reported pursuant to the Rule. “MSRB” shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. E-2 “Official Statement” means the Preliminary Official Statement, dated __________, 2021, relating to the Bonds. “Participating Underwriter” shall mean Piper Sandler & Co. “Repository” shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the EMMA website of the MSRB, currently located at http://emma.msrb.org. “Rule” shall mean Rule 15c2-12 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” shall mean the State of California. SECTION 3. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to, not later than March 31 of each year, commencing March 31, 2022, provide to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure 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 Disclosure Agreement; provided that the audited financial statements of the District, if any are prepared, 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 District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(d). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report. (b) Not later than five (5) days prior to the date for the filing of an Annual Report, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by five (5) days prior to such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to inquire if the District is in compliance with subsection (a). (c) If the District is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Dissemination Agent, in a timely manner, shall send a notice to the Repository in the form required by the Repository stating that the Annual Report has not been filed and, if provided by the District, the date the District anticipates the filing to be made. (d) The Dissemination Agent shall: (i) determine each year prior to date for providing the Annual Report the name and address of the Repository if other than the MSRB; and (ii) file a report with the District certifying that the Annual Report has been provided to the Repository pursuant to this Disclosure Agreement and stating the date it was provided to the Repository. E-3 SECTION 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following: (a) Financial Statements. The audited financial statements of the District for the prior fiscal year, if any have been prepared and which, if prepared, shall be prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board; provided, however, that the District may, from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the District shall modify the basis upon which its financial statements are prepared, the District shall provide the information referenced in Section 8(b) below regarding such modification. If the District is preparing audited financial statements and such 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. (b) Financial and Operating Data. To the extent not included in the audited financial statements of the District, the Annual Report shall also include the following additional items: 1. principal amount of Bonds outstanding as of the September 2 preceding the filing of the Annual Report; 2. the balance in each fund under the Indenture and the Reserve Requirement as of the September 2 preceding the filing of the Annual Report; 3. an update of the estimated assessed value-to-lien ratio for the District substantially in the form of Table [__] in the Official Statement based upon the most recent Special Tax levy preceding the date of the Annual Report and on the assessed values of property for the current fiscal year; 4. a statement regarding the amount of Special Tax prepayments, if any, in the Fiscal Year for which the Annual Report is prepared; 5. the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes; 6. a table showing the total Special Taxes levied and the total Special Taxes collected for the prior fiscal year and the total Special Taxes that, as of December 31, remain unpaid for each prior fiscal year in which Special Taxes were levied and the number of delinquent parcels in the District; 7. a list of the property owners within the District responsible for 5% or more of the Special Tax levy for the current Fiscal Year, if any, the percentage of the Special Tax levy for which each such property owner is responsible, and whether any of such owners, as of December 31 preceding the Annual Report, was delinquent in the payment of Special Taxes; and 8. any information not already included under 1. through 7. above that the District is required to file in its annual report pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, with the California Debt and Investment Advisory Commission. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which E-4 have been submitted to each of EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The District shall clearly identify each such other document so included by reference. In the event that the District shall modify the basis upon which its financial statements are prepared, the Dissemination Agent shall provide a notice of such modification to the Repository, including the information set forth in Section 8(b) below. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the District shall give, or cause the Dissemination Agent to give, notice to the Repository of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) business days after the occurrence of the event: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB); 6. tender offers; 7. defeasances; 8. rating changes; 9. bankruptcy, insolvency, receivership or similar event of the City; or 10. default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties. Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, Trustee or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. E-5 (b) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not more than ten (10) business days after the occurrence of such event: 1. unless described in paragraph 5(a)(5), material notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 2. modifications to rights of Bond holders; 3. Bond calls; 4. release, substitution, or sale of property securing repayment of the Bonds; 5. non-payment related defaults; 6. the consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; 7. appointment of a successor or additional Trustee or the change of name of a Trustee; or 8. incurrence of a Financial Obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event under 5(b) above, the District shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If a Listed Event under Section 5(a) has occurred, or if the District determines that knowledge of the occurrence of a Listed Event under 5(b) above would be material under applicable federal securities laws, the District shall file a notice of such Listed Event with the Repository in a timely manner not more than 10 business days after the event. Notwithstanding the foregoing, notice of the Listed Event described in subsection (b)(6) need not be given under this section any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Indenture. (e) The District hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the District and that the Dissemination Agent shall not be responsible for determining whether the District’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The obligations of the District under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. E-6 The Dissemination Agent may resign by providing thirty days written notice to the District and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the District and shall have no duty to review any information provided to it by the District. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the District in a timely manner and in a form suitable for filing. SECTION 8. Amendment; Waiver. (a) Notwithstanding any other provision of this Disclosure Agreement, the District may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (1) If the amendment or waiver related to the provisions of Sections 3(a), 4, or 5, 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, or the type of business conducted; (2) The undertaking hereunder, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original execution and delivery of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (3) The amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the Bonds. (b) In the event of any amendment or waiver of a provision of this Disclosure Agreement, the District 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 District. In addition, if the amendment is related to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(a), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Format of Filings with Repository. Any report or filing with the Repository pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the Repository. SECTION 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure 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 addition to that which is required by this Disclosure Agreement. If the District 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 E-7 Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the District to comply with this Disclosure Agreement shall be an action to compel performance and the District shall have no monetary liability to any person as a result of any failure to comply with the terms of this Disclosure Agreement. SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the District, the Owners, or any other party. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 13. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the District: City of Palm Desert Community Facilities District No. 2005-1 (University Park) 73510 Fred Waring Drive Palm Desert, CA 992260 Attention: Director of Finance To the Dissemination Agent: Willdan Financial Services 27368 Via Industria #200 Temecula, CA 92590 SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 15. Counterparts. This Disclosure 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 instrument. IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. E-8 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) By: Kathleen Kelly, Mayor WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Officer E-9 EXHIBIT A FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Palm Desert Community Facilities District No. 2005-1 (University Park) Name of Bond Issue: $_________ City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Series 2021A Date of Issuance: __________, 2021 NOTICE IS HEREBY GIVEN that the City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”) has not provided an Annual Report with respect to the above- named Bonds as required by Section 3 of the Disclosure Agreement of the District, dated the Date of Issuance. The District anticipates that the Annual Report will be filed by ______________________. Dated: ________________ WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Officer F-1 APPENDIX F INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The 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 for each annual maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC. DTC, the world’s largest securities 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 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 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 is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. 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 a Standard & Poor’s rating of “AA+.” 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 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 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 F-2 through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 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 Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all 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 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 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 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 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults, and proposed amendments to the Series 2021 Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the 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 Bonds within a maturity are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the 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 the District or the 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, the Trustee, or the District, 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 District 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. F-3 A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. G-1 APPENDIX G MARKET ABSORPTION STUDY H-1 APPENDIX H APPRAISAL REPORT RWG DRAFT 6/8/21 P6401-1052\2518682v4.doc BOND INDENTURE By and Between CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) and U.S. BANK NATIONAL ASSOCIATION, as Trustee with reference to $__________ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS SERIES 2021A and $__________ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS SUBORDINATE SERIES 2021B (TAXABLE) Dated as of [July 1, 2021] TABLE OF CONTENTS Page -i- P6401-1052\2518682v4.doc ARTICLE I DEFINITIONS .......................................................................................... 2 Section 1.1 Definitions......................................................................... 2 ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS ........................ 15 Section 2.1 Amount, Issuance, Purpose and Nature of Bonds .............................................................................. 15 Section 2.2 Type and Nature of Bonds and Parity Bonds.................. 15 Section 2.3 Pledge of Net Taxes ........................................................ 16 Section 2.4 Description of Bonds; Interest Rates .............................. 17 Section 2.5 Place and Form of Payment ............................................ 18 Section 2.6 Form of Bonds and Parity Bonds .................................... 18 Section 2.7 Execution and Authentication ......................................... 19 Section 2.8 Bond Register.................................................................. 19 Section 2.9 Registration of Exchange or Transfer ............................. 20 Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds ................... 23 Section 2.11 Validity of Bonds and Parity Bonds ............................... 23 Section 2.12 Book-Entry System ......................................................... 23 Section 2.13 Representation Letter ...................................................... 24 Section 2.14 Transfers Outside Book-Entry System ........................... 24 Section 2.15 Payments to the Nominee ............................................... 25 Section 2.16 Initial Depository and Nominee ...................................... 25 ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS ............................................................................................ 25 Section 3.1 Creation of Funds; Application of Proceeds ................... 25 Section 3.2 Deposits to and Disbursements from Special Tax Fund ......................................................................... 26 Section 3.3 Administrative Expenses Account of the Special Tax Fund ............................................................ 27 Section 3.4 Interest Account and Principal Account of the Special Tax Fund ...................................................... 28 Section 3.5 Redemption Account of the Special Tax Fund; Cancellation of Series 2021B Bonds Tendered on Delivery Date ............................................. 29 Section 3.6 Reserve Account of the Special Tax Fund ...................... 30 Section 3.7 Rebate Fund .................................................................... 32 Section 3.8 Surplus Fund ................................................................... 32 Section 3.9 Costs of Issuance Fund ................................................... 33 Section 3.10 Investments ..................................................................... 33 ARTICLE IV REDEMPTION OF BONDS .................................................................. 35 Section 4.1 Redemption of Bonds ..................................................... 35 Section 4.2 Selection of Bonds and Parity Bonds for Redemption ..................................................................... 38 Section 4.3 Notice of Redemption ..................................................... 38 Section 4.4 Partial Redemption of Bonds or Parity Bonds .............................................................................. 40 TABLE OF CONTENTS (cont.) Page -ii- P6401-1052\2518682v4.doc Section 4.5 Effect of Notice and Availability of Redemption Money ......................................................... 40 ARTICLE V COVENANTS AND WARRANTY....................................................... 40 Section 5.1 Warranty ......................................................................... 40 Section 5.2 Covenants ........................................................................ 40 ARTICLE VI AMENDMENTS TO INDENTURE ...................................................... 44 Section 6.1 Supplemental Indentures or Orders Not Requiring Bondowner Consent ....................................... 44 Section 6.2 Supplemental Indentures or Orders Requiring Bondowner Consent ....................................... 45 Section 6.3 Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds ............................... 46 ARTICLE VII TRUSTEE ............................................................................................... 46 Section 7.1 Trustee............................................................................. 46 Section 7.2 Removal of Trustee ......................................................... 47 Section 7.3 Resignation of Trustee .................................................... 47 Section 7.4 Liability of Trustee ......................................................... 47 Section 7.5 Merger or Consolidation ................................................. 49 ARTICLE VIII EVENTS OF DEFAULT; REMEDIES .................................................. 49 Section 8.1 Events of Default ............................................................ 49 Section 8.2 Remedies of Owners ....................................................... 50 Section 8.3 Application of Revenues and Other Funds After Default ................................................................... 50 Section 8.4 Power of Trustee to Control Proceedings ....................... 51 Section 8.5 Appointment of Receivers .............................................. 51 Section 8.6 Non-Waiver..................................................................... 52 Section 8.7 Limitation on Rights and Remedies of Owners ............................................................................ 52 Section 8.8 Termination of Proceedings ............................................ 53 ARTICLE IX DEFEASANCE AND PARITY REFUNDING BONDS ....................... 53 Section 9.1 Defeasance ...................................................................... 53 Section 9.2 Conditions for the Issuance of Parity Refunding Bonds ............................................................ 54 ARTICLE X MISCELLANEOUS ............................................................................... 56 Section 10.1 Cancellation of Bonds and Parity Bonds ........................ 56 Section 10.2 Execution of Documents and Proof of Ownership ....................................................................... 57 Section 10.3 Unclaimed Moneys ......................................................... 57 Section 10.4 Provisions Constitute Contract ....................................... 58 Section 10.5 Future Contracts .............................................................. 58 Section 10.6 Further Assurances.......................................................... 58 Section 10.7 Severability ..................................................................... 58 Section 10.8 Notices ............................................................................ 58 TABLE OF CONTENTS (cont.) Page -iii- P6401-1052\2518682v4.doc EXHIBITS: EXHIBIT A FORM OF SPECIAL TAX REFUNDING BOND, SERIES 2021A ................. A-1 EXHIBIT B FORM OF SPECIAL TAX REFUNDING BOND, SUBORDINATE SERIES 2021B (TAXABLE).............................................................................................B-1 EXHIBIT C ADMINISTRATIVE EXPENSE PAYMENT REQUEST FORM .....................C-1 -1- P6401-1052\2518682v4.doc BOND INDENTURE THIS BOND INDENTURE dated as of [July 1, 2021] (this “Indenture”), by and between CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) (the “District”) and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as trustee (the “Trustee”), governs the terms of the Special Tax Refunding Bonds, Series 2021A, and Special Tax Refunding Bonds, Subordinate Series 2021B (Taxable), of the District and any Parity Bonds issued in accordance herewith from time to time. R E C I T A L S : WHEREAS, the City Council (hereinafter sometimes referred to as the “legislative body of the District”) of the City of Palm Desert (the “City”), located in Riverside County, California, has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the District pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the “Act”); and WHEREAS, based upon Resolution Nos. 06-6 and 06-7 adopted by the legislative body of the District on January 12, 2006 and an election held January 12, 2006 authorizing the levy of a special tax and the issuance of bonds by the District, the District is now authorized to issue bonds for one or more series, pursuant to the Act, in an aggregate principal amount not to exceed $70,000,000; and WHEREAS, the District has previously issued its $50,000,000 aggregate initial principal amount Special Tax Bonds, Series 2006A (the “2006A Bonds”), of which $26,250,000 in aggregate principal amount is currently outstanding; and WHEREAS, the legislative body of the District intends to refinance a portion of the outstanding 2006A Bonds in the aggregate principal amount of $______________ (the “2006A Refunded Bonds”) through the issuance of refunding bonds in an aggregate principal amount of $______________, designated as the “City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Series 2021” (the “Series 2021A Bonds”), and in an aggregate principal amount of $______________, designated as the “City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Subordinate Series 2021B (Taxable)” (the “Series 2021B Bonds;” and together with the Series 2021A Bonds, the “Series 2021 Bonds”); and WHEREAS, the District has determined that all requirements of the Act for the issuance of the Series 2021 Bonds have been satisfied; NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Series 2021 Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Series 2021 Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree, for the benefit of the Owners of the -2- P6401-1052\2518682v4.doc Series 2021 Bonds and any Parity Bonds (as defined herein) which may be issued hereunder from time to time, as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. Unless the context otherwise requires, the following terms shall have the following meanings: “2006A Bonds” means the District’s $50,000,000 aggregate initial principal amount Special Tax Bonds, Series 2006A, currently outstanding in the aggregate principal amount of $26,250,000. “2006A Bonds Trustee” means the U.S. Bank National Association, in its capacity as trustee for the 2006A Bonds. “2006A Refunded Bonds” means a portion of the outstanding 2006A Bonds in the aggregate principal amount of $______________. “Account” means any account created pursuant to this Indenture. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311 et seq. of the California Government Code. “Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees and expenses of the Trustee, any fees and related costs for credit enhancement for the Bonds or any Parity Bonds which are not otherwise paid as Costs of Issuance, any costs related to the District’s compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District hereunder. “Administrative Expenses Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Administrative Expenses Priority Amount” means an amount equal to $50,000 per Bond Year, escalating by 2% each Bond Year commencing July 1, 2022. “Annual Debt Service” means the principal amount of any Outstanding Bonds or Parity Bonds, as applicable, payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds or Parity Bonds, as applicable, in such Bond Year, if the Bonds and any Parity Bonds, as applicable, are retired as scheduled. “Authorized Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein -3- P6401-1052\2518682v4.doc (the Trustee authorized to rely upon investment direction of the District as a determination that an investment is a legal investment under the laws of the State): (1) (A) Direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America (“United States Treasury Obligations”); (B) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America; (C) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America; or (D) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. (2) Federal Housing Administration debentures. (3) The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America: - Federal Home Loan Mortgage Corporation (FHLMC) Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) Senior Debt obligations - Farm Credit Banks (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) Consolidated system-wide bonds and notes - Federal Home Loan Banks (FHL Banks) Consolidated debt obligations - Federal National Mortgage Association (FNMA) Senior debt obligations Mortgage-backed securities (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) - Financing Corporation (FICO) Debt obligations -4- P6401-1052\2518682v4.doc - Resolution Funding Corporation (REFCORP) Debt obligations (4) Unsecured certificates of deposit, time deposits, money-market deposits, and bankers’ acceptances of any bank (including the Trustee and any affiliate) the short- term obligations of which are rated “A-1” or better by S&P. (5) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (FDIC) or fully collateralized by Permitted Investments described in clauses (1), (2), or (3), in banks (including the Trustee and any affiliate) which have capital and surplus of at least $5 million. (6) Commercial paper (having original maturities of not more than 270 days rated, at the time of investment, “A-1+” or better by S&P and “Prime-1” or better by Moody’s and issued by an entity meeting the criteria in either clause (A) or (B): (A) the entity (i) is organized and operating in the United States as a general corporation, (ii) has total assets in excess of $500,000,000, and (iii) has debt other than commercial paper, if any, that is rated “A” or higher by S&P or Moody’s; or (B) the entity (i) is organized within the United States as a special purpose corporation, trust, or limited liability company, (ii) has programwide credit enhancements including, but not limited to, overcollateralization, letters of credit, or surety bond, and (ii) has commercial paper rated “A-1” or higher by S&P or “A1” by Moody’s. (7) Money market funds rated “AAm” or “AAm-G” by S&P, or better (including funds for which the Trustee or its affiliates provide investment advisory or other management services), but excluding such funds with a floating net asset value. (8) “State Obligations,” which means: (A) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated “A3” by Moody’s and “A” by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (B) Direct general short-term obligations of any state agency or subdivision or agency thereof described in (A) above and rated “A-1+” by S&P and “Prime-l” (“MIG-1”) by Moody’s, or better. (C) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state, state agency or subdivision described in (A) above and rated “AA” or better by S&P and “Aa” or better by Moody’s. -5- P6401-1052\2518682v4.doc (9) Pre-refunded municipal obligations rated “AAA” by S&P and “Aaa” by Moody’s meeting the following requirements: (A) the municipal obligations are (1) not subject to redemption prior to maturity or (2) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (B) the municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; (C) the principal of and interest on the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations (“Verification”); (D) the cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; (E) no substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury Obligation and upon delivery of a new Verification; and (F) the cash or United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent. (10) Repurchase agreements: (A) With (1) any domestic bank, or domestic branch of a foreign bank, the long term debt of which is rated at least “A” by S&P and Moody’s; or (2) any broker-dealer with “retail customers” or a related affiliate thereof which broker- dealer has, or the parent company (which guarantees the provider) of which has, long-term debt rated at least “A” by S&P and Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated “A” or better by S&P and Moody’s, provided that: (a) The market value of the collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated structured financing (with a market value approach); (b) The Trustee or a third party acting solely as agent therefor or for the District (the “Holder of the Collateral”) has possession of the collateral or the collateral has been transferred to the Holder of the -6- P6401-1052\2518682v4.doc Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books); (c) The repurchase agreement shall state and an opinion of counsel shall be rendered, addressed to the District and the Trustee, at the time such collateral is delivered that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); (d) All other requirements of S&P in respect of repurchase agreements shall be met; and (e) The repurchase agreement shall provide that if during its term the provider’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “A-“ by S&P or “A3” by Moody’s, as appropriate, the provider must, at the direction of the District or the Trustee, within 10 days of receipt of such direction, repurchase all collateral and terminate the agreement, with no penalty or premium to the District or Trustee. (B) Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no evergreen provision), collateral levels need not be as specified in (a) above, so long as such collateral levels are 103% or better and the provider is rated at least “A” by S&P and Moody’s, respectively. (11) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long-term debt of which or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated at least “AA-” by S&P or “Aa3” by Moody’s; provided that, by the terms of the investment agreement: (A) interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service on the Bonds; (B) the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days’ prior notice; the District and the Trustee hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; (C) the investment agreement shall state that is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof, or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors; -7- P6401-1052\2518682v4.doc (D) the District and the Trustee receives the opinion of domestic counsel (which opinion shall be addressed to the District and the Trustee) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in form and substance acceptable to the District, and addressed to, the District and the Trustee; (E) the investment agreement shall provide that if during its term. (1) the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3”, respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider’s books) to the District, the Trustee or a third party acting solely as agent therefor (the “Holder of the Collateral”) collateral free and clear of any third-party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated structured financing (with a market value approach); or (ii) repay the principal of and accrued but unpaid interest on the investment; and (2) the provider’s rating by either S&P or Moody’s is withdrawn or suspended or falls below “A-” or “A3”, respectively, the provider must, at the direction of the District or the Trustee, within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the District or Trustee; and (F) The investment agreement shall state and an opinion of counsel shall be rendered, addressed to the District and the Trustee, in the event collateral is required to be pledged by the provider under the terms of the investment agreement at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); and (G) the investment agreement must provide that if during its term: (1) the provider shall default in its payment obligations, the provider’s obligations under the investment agreement shall, at the direction of the District or the Trustee, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or Trustee, as appropriate, and -8- P6401-1052\2518682v4.doc (2) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or Trustee, as appropriate. (12) The State of California Local Agency Investment Fund; provided that the Trustee may restrict investments in such Fund to the extent necessary to keep moneys available for the purposes of this Indenture. (13) Certificates of deposit, savings accounts, deposit accounts or money market deposits (including those of the Trustee and its affiliates) which are fully insured by the Federal Deposit Insurance Corporation, including certificates of deposit placed through the CDARS program. “Authorized Representative of the City” means the City Manager of the City, the Assistant City Manager of the City, the Director of Finance of the City, or any other person or persons designated by the City Manager or the Director of Finance by a written certificate signed by the City Manager or the Director of Finance and containing the specimen signature of each such person. “Authorized Representative of the District” means the City Manager of the City, the Assistant City Manager of the City, the Director of Finance of the City, or any other person or persons designated by the City Manager or the Director of Finance by a written certificate signed by the City Manager or the Director of Finance and containing the specimen signature of each such person. “Bond Counsel” means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the Tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law in any state of the United States of America or the District of Columbia. “Bond Register” means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds and any Parity Bonds shall be recorded. “Bondowner” or “Owner” means the person or persons in whose name or names any Bond or Parity Bond is registered. “Bonds” means the Series 2021 Bonds. “Bond Year” means the twelve-month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds or an issue of Parity Bonds shall begin on the Delivery Date and end on the first September 1 which is not more than 12 months after the Delivery Date. -9- P6401-1052\2518682v4.doc “Business Day” means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Trustee is located, are not required or authorized to remain closed. “Certificate of an Authorized Representative” means a written certificate executed by an Authorized Representative of the City or District, as applicable. “Certificate of the Special Tax Administrator” means a written certificate of an Authorized Representative of the District, Willdan Financial Services, or any successor entity appointed by the City, to administer the calculation and collection of the Special Taxes. “City” means the City of Palm Desert, California. “Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. “Continuing Disclosure Agreement” means that certain Continuing Disclosure Agreement dated as of [July __, 2021], by and between the District and Willdan Financial Services, as dissemination agent, together with any amendments thereto. “Costs of Issuance” means the costs and expenses incurred in connection with the issuance and sale of the Bonds or any Parity Bonds, including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses, costs of printing the Bonds and any Parity Bonds and the preliminary and final official statements for the Bonds and any Parity Bonds, fees of financial consultants, and all other related fees and expenses, as set forth in a Certificate of an Authorized Representative of the City. “Costs of Issuance Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. “Delivery Date” means, with respect to the Bonds and each issue of Parity Bonds, the date on which the bonds of such Series were issued and delivered to the initial purchasers thereof. “Depository” means The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Bonds, or any other securities depository acting as Depository under Article II hereof. “District” means City of Palm Desert Community Facilities District No. 2005-1 (University Park), established pursuant to the Act and the Resolution of Formation. “District Treasurer” means the Director of Finance-Treasurer of the City. “Escrow Agreement” means the Escrow Agreement, dated as of even date herewith, by and among the District, City of Palm Desert Community Facilities District No. 2021-1 (University Park), and U.S. Bank National Association, a national banking association, as escrow agent, relating to the refunding of 2006A Bonds, including but not limited to the 2006A -10- P6401-1052\2518682v4.doc Refunded Bonds, scheduled to mature on September 1, 2021 and thereafter through September 1, 2036. “Escrow Fund” means the fund by that name established under the Escrow Agreement. “Event of Default” means an “event of default” described in Section 8.1 hereof. “Federal Securities” means any of the following: (a) non-callable direct obligations of the United States of America (“Treasuries”), (b) evidence of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, and (c) pre-refunded municipal obligations rated “AAA” and “Aaa” by S&P and Moody’s, respectively, (d) securities eligible for “AAA” defeasance under then existing criteria of S&P, or (e) any combination of the foregoing. “Fiscal Year” means the period beginning on July 1 of each year and ending on the next following June 30. “Gross Taxes” means the amount of all Special Taxes received by the District, together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of this Indenture for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions. “Indenture” means this Bond Indenture, together with any Supplemental Indenture approved and entered into pursuant to Article VI hereof. “Independent Financial Consultant” means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District, who, or each of whom: (1) is in fact independent and not under the domination of the District or the City; (2) does not have any substantial interest, direct or indirect, in the District or the City; and (3) is not connected with the District or the City as a member, officer or employee of the District or the City, but who may be regularly retained to make annual or other reports to the District or the City. “Information Services” means the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board, at www.emma.msrb.org; provided, however, in accordance with then current guidelines of the Securities and Exchange Commission, Information Services shall mean such other organizations providing information with respect to called bonds as the District may designate to the Trustee in writing. -11- P6401-1052\2518682v4.doc “Interest Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Interest Payment Date” means each March 1 and September 1, commencing March 1, 2022; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date. “Investment Agreement” means one or more agreements for the investment of funds of the District complying with the criteria therefor as set forth in subsection (11) of the definition of Authorized Investments herein. “Maximum Annual Debt Service” means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds and any Parity Bonds, as applicable, by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds and Parity Bonds, as applicable, payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds and Parity Bonds, as applicable, Outstanding in such Bond Year if the Bonds and Parity Bonds, as applicable, are retired as scheduled. “Moody’s” means Moody’s Investors Service, its successors and assigns. “Net Taxes” means Gross Taxes minus amounts set aside to pay Administrative Expenses not to exceed the Administrative Expenses Priority Amount. “Nominee” shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.16 hereof. “Ordinance” means Ordinance No. 1107 adopted by the legislative body of the District on February 9, 2006, providing for the levying of the Special Tax. “Outstanding Bonds” or “Outstanding Bonds and Parity Bonds” means all Bonds and/or Parity Bonds, as applicable, theretofore issued by the District, except: (1) Bonds and Parity Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 10.1 hereof; (2) Bonds and Parity Bonds for payment or redemption of which moneys shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds or Parity Bonds), provided that, if such Bonds or Parity Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Indenture or any applicable Supplemental Indenture for Parity Bonds; and -12- P6401-1052\2518682v4.doc (3) Bonds and Parity Bonds which have been surrendered to the Trustee for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof. “Parity Bonds” means all bonds, notes, or other similar evidences of indebtedness hereafter issued, payable out of the Net Taxes and which, as provided in this Indenture or any Supplemental Indenture, rank on a parity with the Series 2021A Bonds. “Participants” shall mean those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds or Parity Bonds as securities depository. “Person” means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. “Placement Agent” means Piper Sandler & Co. with respect to the Series 2021B Bonds. “Prepayments” means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method. “Principal Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Principal Office of the Trustee” means the corporate trust office of the Trustee located in Los Angeles, California, or such other office or offices as the Trustee may designate from time to time, or the office of any successor Trustee where it principally conducts its business of serving as trustee under indentures pursuant to which municipal or governmental obligations are issued, provided, for registration, transfer, exchange, surrender and payment of the Bonds, shall be the corporate trust operations office of the Trustee located in Saint Paul, Minnesota, or such other office designated by the Trustee. “Project” means those public facilities described in the Resolution of Formation which are to be acquired or constructed within and outside of the District, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within the District from time to time. “Rate and Method” means the rate and method of apportionment of Special Taxes for the District approved by the Resolution of Formation and appended as Exhibit “B” to the Notice of Special Tax Lien for the District, recorded in the Official Records of the County of Riverside Recorder as Document No. 2006-0053744 on January 24, 2006, as it may be amended or modified from time to time. “Rating Agency” means Moody’s and S&P, or both, as the context requires. “Rebate Fund” means the fund by that name established pursuant to Section 3.1 hereof in which there are established the Accounts described in Section 3.7 hereof. -13- P6401-1052\2518682v4.doc “Record Date” means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. “Redemption Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Regulations” means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. “Representation Letter” shall mean the Blanket Letter of Representations from the District to the Depository as described in Section 2.13 hereof. “Reserve Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Reserve Policy” means an irrevocable standby or direct-pay letter of credit, insurance policy, or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to Section 3.6, provided that all of the following requirements are met at the time of acceptance thereof by the Trustee: (a) the long-term credit rating of such bank or insurance company is A+ or better from S&P or A1 or better from Moody’s; (b) such letter of credit, insurance policy, or surety bond has a term of at least twelve (12) months; (c) such letter of credit, insurance policy, or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released; and (d) the Trustee is authorized pursuant to the terms of such letter of credit, insurance policy, or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Interest Account and the Principal Account for the purpose of making payments required pursuant to this Indenture. “Reserve Requirement” shall mean (A) with respect to the Series 2021A Bonds, as of the date of calculation, an amount equal to the least of (i) Maximum Annual Debt Service on the then Outstanding Bonds of such Series; (ii) 10% of the original amount of the Bonds of such Series (“amount” meaning the principal amount of the Series 2021 Bonds, unless such Series was issued with original issue discount greater than two percent of the principal amount, or original issue premium greater than the sum of two percent of the principal amount plus original issue premium attributable exclusively to reasonable underwriters’ compensation, in which case “amount” means issue price); or (iii) 125% of average Annual Debt Service on the then Outstanding Bonds of such Series; and (B) with respect to the Series 2021B Bonds, $0.00. “Resolution of Formation” means Resolution No. 06-6 adopted by the City Council of the City on January 12, 2006, pursuant to which the City formed the District. “Resolution of Intention” means Resolution No. 05-87 adopted by the City Council of the City on October 13, 2005, pursuant to which the City Council declared its intention to establish the District. “S&P” means S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC, its successors and assigns. -14- P6401-1052\2518682v4.doc “Series” means, when used with reference to the Bonds, all of the Bonds authenticated and delivered on original issuance and identified pursuant to this Indenture or a Supplemental Indenture authorizing such Bonds as a separate series or issue of Bonds, and any Bonds thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to this Indenture. “Series 2021 Bonds” means, collectively, the Series 2021A Bonds and the Series 2021B Bonds. “Series 2021 Term Bonds” means, collectively, the Series 2021A Term Bonds and the Series 2021B Term Bonds. “Series 2021A Bonds” means the District’s Special Tax Bonds, Series 2021A, issued on their Delivery Date in the aggregate principal amount of $__________. “Series 2021A Term Bonds” means, collectively, the Series 2021A Bonds maturing on September 1, 20__ and September 1, 20__. “Series 2021B Bonds” means the District’s Special Tax Bonds, Subordinate Series 2021B (Taxable), issued on their Delivery Date in the aggregate principal amount of $__________. “Series 2021B Term Bonds” means the Series 2021B Bonds maturing on September 1, 20__. “Sinking Fund Payment” means the annual payment to be deposited in the Redemption Account to redeem a portion of the Series 2021 Term Bonds in accordance with the schedules set forth in Section 4.1(b) hereof and any annual sinking fund payment schedule to retire any Parity Bonds which are designated as Term Bonds. “Special Tax Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. “Special Taxes” means the taxes authorized to be levied by the District on property within the District in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the January 12, 2006 election in the District, including any scheduled payments and any Prepayments thereof, the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien, and penalties and interest thereon. “Subaccount” means any subaccount created pursuant to this Indenture. “Supplemental Indenture” means any supplemental indenture amending or supplementing this Indenture. “Surplus Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. -15- P6401-1052\2518682v4.doc “Tax Certificate” means the Certificate Regarding Compliance with Certain Tax Matters (or similar document) pertaining to the use and investment of proceeds of a Series of Bonds, executed and delivered by a duly authorized officer of the District and of the City on the related Delivery Date, including any and all exhibits and attachments thereto. “Tax-exempt” means, with respect to interest on any obligations of a state or local government, including the interest on the Series 2021 Bonds, that such interest is excluded from gross income for federal income tax purposes whether or not such interest is an item of tax preference for purposes of the alternative minimum tax under the Code or otherwise taken into account in calculating tax liabilities under the Code. “Term Bonds” means the Series 2021 Term Bonds and any Parity Bonds which are designated as Term Bonds in the Supplemental Indenture providing for the issuance of such Parity Bonds. “Trustee” means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, at its corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3 and any successor thereto. “Underwriter” means Piper Sandler & Co. with respect to the Series 2021A Bonds. ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1 Amount, Issuance, Purpose and Nature of Bonds. Under and pursuant to the Act, the Series 2021A Bonds in the aggregate principal amount of $__________ (___________________ Dollars) and the Series 2021B Bonds in the aggregate principal amount of $__________ (___________________ Dollars) shall be issued for the purpose of refinancing the Project, funding the Reserve Account at the initial Reserve Requirement, and paying Costs of Issuance; provided that the aggregate principal amount of the Bonds and any Parity Bonds authorized by the legislative body in accordance with Section 9.2 hereof (for the sole purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding) shall not exceed the total indebtedness presently authorized or subsequently authorized by the qualified electors of the District in accordance with the Act. The Bonds and any Parity Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the Special Tax Fund (other than amounts in the Administrative Expenses Account of the Special Tax Fund). Section 2.2 Type and Nature of Bonds and Parity Bonds. Neither the faith and credit nor the taxing power of the City, the State of California or any political subdivision thereof other than the District is pledged to the payment of the Bonds or any Parity Bonds. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds or any Parity Bonds. The Bonds and any Parity Bonds are not general or special obligations of the City nor general -16- P6401-1052\2518682v4.doc obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund (exclusive of the Administrative Expenses Account), as more fully described herein. The District’s limited obligation to pay the principal of, premium, if any, and interest on the Bonds and any Parity Bonds from amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds or any Parity Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and any Parity Bonds and premiums upon the redemption thereof, if any, are not a debt of the City, the State of California or any of its political subdivisions in contravention of any constitutional or statutory limitation or restriction. The Bonds and any Parity Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any of the District’s property, or upon any of its income, receipts or revenues, except the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) which are, under the terms of this Indenture and the Act, set aside for the payment of the Bonds and any Parity Bonds, and interest thereon, and neither the members of the legislative body of the District or the City Council of the City nor any persons executing the Bonds or any Parity Bonds, are liable personally on the Bonds or any Parity Bonds by reason of their issuance. Notwithstanding anything to the contrary contained in this Indenture, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds or any Parity Bonds, or for the performance of any covenants contained herein. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.3 Pledge of Net Taxes. Pursuant to the Act and this Indenture, the Series 2021A Bonds and any Parity Bonds shall be equally payable from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account), without priority for number, date of the Series 2021A Bonds or Parity Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Series 2021A Bonds and any Parity Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account), which are hereby pledged and set aside for the payment of the Series 2021A Bonds and any Parity Bonds. Said pledge shall constitute a first lien on and security interest in the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account). Pursuant to the Act and this Indenture and subject to the pledge and first lien thereupon for the benefit of the Series 2021A Bonds and any Parity Bonds, the Series 2021B Bonds shall be equally payable from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account), without priority for number, date of the Series 2021B Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Series 2021B Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account), which are hereby pledged and set aside for the payment of -17- P6401-1052\2518682v4.doc the Series 2021B Bonds. Said pledge and the second lien created thereby shall be subordinate solely to the pledge of, and first lien on, the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) to secure payment of the Series 2021A Bonds. Amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and any Parity Bonds and so long as any of the Bonds and any Parity Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture. Notwithstanding any provision contained in this Indenture to the contrary, Net Taxes deposited in the Rebate Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds or any Parity Bonds, and none of the Rebate Fund, the Surplus Fund, the Costs of Issuance Fund, or the Administrative Expenses Account of the Special Tax Fund shall be construed as a trust fund held for the benefit of the Owners. Section 2.4 Description of Bonds; Interest Rates. The Series 2021A Bonds and any Parity Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Series 2021B Bonds shall be issued in fully registered form in denominations of $0.01 and or any integral multiple thereof. The Bonds and any Parity Bonds of each issue shall be numbered as desired by the Trustee. The Series 2021A Bonds shall be designated “CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK), SPECIAL TAX REFUNDING BONDS, SERIES 2021A.” The Series 2021A Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on March 1, 2022 and each Interest Payment Date thereafter: Maturity Date (September 1) Principal Amount Interest Rate $ % The Series 2021B Bonds shall be designated “CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK), SPECIAL TAX BONDS, TAXABLE SERIES 2021B.” The Series 2021B Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on March 1, 2022 and each Interest Payment Date thereafter: -18- P6401-1052\2518682v4.doc Maturity Date (September 1) Principal Amount Interest Rate $ % Interest shall be payable on each Bond and Parity Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of that Bond or Parity Bond has been paid; provided, however, that if at the maturity date of any Bond or Parity Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds and Parity Bonds shall then cease to bear interest. Interest due on the Bonds and Parity Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. Section 2.5 Place and Form of Payment. The Bonds and Parity Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and Parity Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal Office of the Trustee, or at the designated office of any successor Trustee. Interest on any Bond or Parity Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond or Parity Bond, unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond or Parity Bond, in which event interest shall be payable from the dated date of such Bond or Parity Bond, as applicable; provided, however, that if at the time of authentication of such Bond or Parity Bond, interest is in default, interest on that Bond or Parity Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that Bond or Parity Bond, interest on that Bond or Parity Bond shall be payable from its dated date. Interest on any Bond or Parity Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond or Parity Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed on the Interest Payment Date by first class mail, postage prepaid, to such Bondowner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the Bonds or of any issue of Parity Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account designated by such Owner. Section 2.6 Form of Bonds and Parity Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate -19- P6401-1052\2518682v4.doc of authentication shall be substantially in the forms attached hereto as Exhibit A and Exhibit B, which form is hereby approved and adopted as the form of such Bonds and of the certificate of authentication. Each issue of Parity Bonds and the certificate of authentication therefor shall be in the form provided in the Supplemental Indenture for such issue of Parity Bonds. Until definitive Bonds or Parity Bonds, as applicable, shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds or Parity Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds or Parity Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds or Parity Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds or Parity Bonds. If the District issues temporary Bonds or Parity Bonds, it shall execute and furnish definitive Bonds or Parity Bonds, as applicable, without unnecessary delay and thereupon any temporary Bond or Parity Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond or Parity Bond of the same issue, maturity, interest rate and principal amount in any authorized denomination. All temporary Bonds or Parity Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued. Section 2.7 Execution and Authentication. The Bonds and Parity Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Clerk of the City, or any duly appointed deputy City Clerk, in their capacity as officers of the District, and the seal of the District (or a facsimile thereof) may be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the City Clerk of the City Council. In case any one or more of the officers who shall have signed or sealed any of the Bonds or Parity Bonds shall cease to be such officer before the Bonds or Parity Bonds so signed and sealed have been authenticated and delivered by the Trustee (including new Bonds or Parity Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or Parity Bonds or to lost, stolen, destroyed or mutilated Bonds or Parity Bonds), such Bonds or Parity Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds or Parity Bonds had not ceased to hold such office. Also, any Bond or Parity Bond may be signed on behalf of the District by any individual who on the actual date of the execution of such Bond or Parity Bond shall be the proper officer although on the nominal date of such Bond such individual shall not have been such officer. Only the Bonds as shall bear thereon such certificate of authentication in the forms set forth in Exhibit A and Exhibit B attached hereto shall be entitled to any right or benefit under this Indenture, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Section 2.8 Bond Register. The Trustee will keep or cause to be kept, at the Principal Office of the Trustee, sufficient books for the registration and transfer of the Bonds and any Parity Bonds which shall upon reasonable prior notice be open to inspection by the District during all regular business hours, and, subject to the limitations set forth in Section 2.9 below, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it -20- P6401-1052\2518682v4.doc may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as herein provided. The District and the Trustee may treat the Owner of any Bond or Parity Bond whose name appears on the Bond Register as the absolute Owner of that Bond or Parity Bond for any and all purposes, and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner’s address so that the Bond Register may be revised accordingly. Section 2.9 Registration of Exchange or Transfer. (a) Series 2021A Bonds. Subject to the limitations set forth in the following paragraph, the registration of any Series 2021A Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Series 2021A Bond or Parity Bond for cancellation at the Principal Office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Bondowner or his or her duly authorized attorney. Series 2021A Bonds or Parity Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount of Series 2021A Bonds or Parity Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Series 2021A Bond or Parity Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Series 2021A Bonds or Parity Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Series 2021A Bond or Series 2021A Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of (i) Series 2021A Bonds or Parity Bonds for a period of fifteen (15) days next preceding any selection of the Series 2021A Bonds or Parity Bonds to be redeemed; or (ii) any Series 2021A Bonds or Parity Bonds chosen for redemption. (b) Series 2021B Bonds. Any Series 2021B Bond, or any portion thereof which is equal to $100,000.00 or greater in integral multiples of $0.01 in principal amount, may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Series 2021B Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed, and a purchaser letter, duly executed by the proposed transferee and addressed to the District, the Placement Agent, and the Trustee, pursuant to which such proposed transferee certifies, represents, and warrants, for the benefit of the District, the Placement Agent, and the Trustee, as follows: -21- P6401-1052\2518682v4.doc (1) The transferee agrees to the terms and provisions set forth in the Series 2021B Bonds and in this Indenture, has the authority to purchase the Series 2021B Bonds, and to execute the letter and any other instruments and documents required to be executed by the transferee in connection with the purchase of the Series 2021B Bonds. (2) The transferee has fully sufficient knowledge and experience in financial and business matters, including purchase and ownership of municipal obligations, as to be capable of evaluating the merits and risks of the investment represented by the Series 2021B Bonds on the basis of the information and review described in paragraphs (6), (7), and (8) below. (3) The transferee is purchasing the Series 2021B Bonds for its own account and is not purchasing the Series 2021B Bonds for the purpose of resale or distribution. The transferee understands that its rights under the Series 2021B Bonds may not be transferred, assigned or sold to any person or entity except in accordance with the purchaser letter and this Indenture, and (except for any tender of the Series 2021B Bonds by the transferee to the District pursuant to this Indenture) unless it first obtains from the transferee and delivers to the District a purchaser letter substantially in the form required by this Indenture, with no material revisions except as may be approved in writing by the District. (4) The transferee understands that (i) the Series 2021B Bonds are a limited obligation of the District secured by a subordinate lien upon, and payable solely from, Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) as provided in this Indenture, (ii) no other fund or property of the District or the City is liable for the payment of the Series 2021B Bonds, (iii) none of the payment obligations with respect to the Series 2021B Bonds are secured by a pledge of any money received or to be received from taxation by the City or any political subdivision thereof, other than the Net Taxes of the District, and (iv) there is no reserve fund for the Series 2021B Bonds. (5) The transferee understands that (i) neither this Indenture nor the Series 2021B Bonds have been registered with any federal or state securities agency or commission or otherwise qualified for sale under the “Blue Sky” laws or regulations of any state, and such registration is not legally required as of the date hereof; (ii) the Series 2021B Bonds will not be listed on any stock or other securities exchange; (iii) the Series 2021B Bonds do not and will not carry a rating from any rating service; (iv) the Series 2021B Bonds will be delivered in a form which may not be readily marketable; and (v) the Series 2021B Bonds are not subject any continuing disclosure undertaking pursuant to SEC Rule 15c-12, as amended. The transferee agrees that it will comply with any applicable state and federal securities laws then in effect with respect to any disposition of the Series 2021B Bonds by it, and further acknowledges that any current exemption from registration of the Series 2021B Bonds does not affect or diminish such requirements. (6) The transferee, as a sophisticated investor, has made its own credit inquiry and analyses with respect to the Series 2021B Bonds and the security therefor. The -22- P6401-1052\2518682v4.doc transferee has assumed the responsibility for obtaining and making such review as the transferee has deemed necessary or desirable in connection with the decision to purchase the Series 2021B Bonds. The transferee is aware that the District involves certain economic variables and risks that could adversely affect the security for the Series 2021B Bonds. (7) The transferee acknowledges and understands that no official statement or private placement memorandum of any kind has been or will be prepared or provided to the transferee, and to the extent the transferee has required or desired any information related to the Series 2021B Bonds, the transferee has requested and received such information. (8) The transferee has been provided an opportunity to ask questions of, and the transferee has received answers from, representatives of the District regarding the terms and conditions of this Indenture, and the transferee has obtained all additional information requested by it in connection with this Indenture and the Series 2021B Bonds. Any additional information specifically requested by the transferee from the District or the City, on behalf of the District, and provided to the transferee prior to the Delivery Date constitutes all the information, review and investigation that the transferee has deemed necessary or desirable prior to and in connection with its decision to purchase the Series 2021B Bonds. (9) The purchaser letter is expressly for the benefit of the addressees thereof and may not be relied upon by any other party. (10) The person signing the purchaser letter on behalf of the transferee is a duly appointed, qualified and acting representative of the transferee and authorized to make the certifications, representations and warranties contained therein. Whenever any Series 2021B Bond shall be surrendered for transfer in accordance with the foregoing, the District shall execute and the Trustee shall thereupon authenticate and deliver to the transferee a new Series 2021B Bond or Series 2021B Bonds of the same series and of like tenor, maturity and aggregate principal amount. In the event only a portion of any Bond is transferred, then upon surrender of such Series 2021B Bond the District shall execute and the Trustee shall authenticate and deliver to the Owner of the untransferred portion of such Series 2021B Bond and to the transferee of the transferred portion of such Series 2021B Bond, at the expense of the District a new Series 2021B Bond or Series 2021B Bonds of the same series, tenor and maturity date, of authorized denominations in aggregate principal amount equal to the Outstanding portion of the Series 2021B Bond to be delivered (or surrendered) for transfer, and in the respective principal amounts for the portion of such Series 2021B Bond not transferred and the transferred portion of such Series 2021B Bond. The cost of printing any Series 2021B Bonds and any services rendered or expenses incurred by the Trustee in connection with any such transfer shall be paid by the District, except that the Trustee shall require the payment by the Owner requesting such transfer of any tax or other governmental change required to be paid with respect to such transfer. The Trustee shall not be required to transfer, pursuant to this Section 2.09, either (i) any Series 2021B Bond during the period established by the Trustee for -23- P6401-1052\2518682v4.doc the selection of Series 2021B Bonds for redemption, or (ii) any Series 2021B Bond selected for redemption pursuant to Section 4.1. Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond or Parity Bond shall become mutilated, the District shall execute, and the Trustee shall authenticate and deliver, a new Bond or Parity Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond or Parity Bond so mutilated, but only upon surrender to the Trustee of the Bond or Parity Bond so mutilated. Every mutilated Bond or Parity Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond or Parity Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District shall execute and the Trustee shall authenticate and deliver, a new Bond or Parity Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond or Parity Bond so lost, destroyed or stolen. Any Bond or Parity Bond issued in lieu of any Bond or Parity Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds and Parity Bonds issued hereunder. The Trustee shall not treat both the original Bond or Parity Bond and any replacement Bond or Parity Bond as being Outstanding for the purpose of determining the principal amount of Bonds or Parity Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds or Parity Bonds Outstanding hereunder, but both the original and replacement Bond or Parity Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond or Parity Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds or Parity Bonds. Section 2.11 Validity of Bonds and Parity Bonds. The validity of the authorization and issuance of the Bonds and any Parity Bonds shall not be affected in any way by any defect in any proceedings taken by the District for the financing of the Project, or by the invalidity, in whole or in part, of any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the financing of the Project or upon the performance by any Person of his obligation with respect to the Project, and the recital contained in the Bonds or any Parity Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. Section 2.12 Book-Entry System. The Series 2021A Bonds shall be initially delivered in the form of a separate single fully registered Series 2021A Bond (which may be typewritten) for each of the maturities of the Series 2021A Bonds. Upon initial delivery, the ownership of each such Series 2021A Bond shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository. Except as provided in Section 2.14 hereof, all of the Outstanding Series 2021A Bonds shall be registered in the registration books kept by the Trustee in the name of the Nominee. At the election of the District, any Parity Bonds may also be issued as book-entry bonds registered in the name of the Nominee as provided herein, in which case the references in Sections 2.12 through 2.15 to “Series 2021A Bonds” or “Bonds” shall be applicable to such Parity Bonds. -24- P6401-1052\2518682v4.doc With respect to Bonds registered in the registration books kept by the Trustee in the name of the Nominee, the District and the Trustee shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds are redeemed in part, or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest due with respect to the Bonds. The District and the Trustee may treat and consider the Person in whose name each Bond is registered in the registration books kept by the Trustee as the holder and absolute owner of such Bond for the purpose of payment of the principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest due on the Bonds only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the District’s obligations with respect to payment of the principal, premium, if any, and interest due on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Trustee, shall receive a Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant to this Indenture. Upon delivery by the Depository to the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Indenture shall refer to such new nominee of the Depository. Section 2.13 Representation Letter. In order to qualify the Bonds and any Parity Bonds which the District elects to register in the name of the Nominee for the Depository’s book-entry system, an authorized representative of the District is hereby authorized to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way limit the provisions of Section 5.1 or in any other way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners, as shown on the registration books kept by the Trustee. The District agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Authorized Representatives of the District are hereby authorized to take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository’s book-entry program. Section 2.14 Transfers Outside Book-Entry System. In the event (i) the Depository determines not to continue to act as securities depository for the Bonds, or (ii) the District determines that the Depository shall no longer so act, then the District will discontinue the book-entry system with the Depository. If the District fails to identify another qualified -25- P6401-1052\2518682v4.doc securities depository to replace the Depository then the Bonds so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 hereof. Section 2.15 Payments to the Nominee. Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, premium, if any, and interest due with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. Section 2.16 Initial Depository and Nominee. The initial Depository under this Article shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS Section 3.1 Creation of Funds; Application of Proceeds. (a) There is hereby created and established and shall be maintained by the Trustee the following funds and accounts: (1) The City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Fund (the “Special Tax Fund”) (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account (in which there shall be established and created a separate Subaccount with respect to each Series of Bonds and Parity Bonds, if any, designated as the “Series ______ Reserve Subaccount”), and an Administrative Expenses Account). (2) The City of Palm Desert Community Facilities District No. 2005-1 (University Park) Costs of Issuance Fund (the “Costs of Issuance Fund”) (in which there shall be established and created a separate Account with respect to each Series of Bonds and Parity Bonds, if any, designated as the “Series ______ Costs of Issuance Account”). (3) The City of Palm Desert Community Facilities District No. 2005-1 (University Park) Rebate Fund (the “Rebate Fund”). (4) The City of Palm Desert Community Facilities District No. 2005-1 (University Park) Surplus Fund (the “Surplus Fund”). The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Trustee, and the Trustee shall invest and disburse the amounts in such funds, accounts and subaccounts in accordance with the provisions of this Article III and shall deposit investment earnings thereon in accordance with the provisions of Section 3.10 hereof. -26- P6401-1052\2518682v4.doc In connection with the issuance of any Parity Bonds, the Trustee, at the written direction of an Authorized Representative of the District, may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds. (b) A portion of the proceeds of the sale of the Series 2021A Bonds in the amount of $_____________ (such amount being equal to the principal amount of the Series 2021A Bonds, [plus/less] original issue [premium/discount] of $_____________, less an Underwriter’s discount of $_____________) shall be received by the Trustee on behalf of the District and deposited as follows: (1) $_____________ shall be transferred to the escrow agent under the Escrow Agreement and deposited in the Escrow Fund established thereunder (which together with (a) $_____________ transferred by the 2006A Trustee from the funds and accounts held in connection with the 2006A Refunded Bonds, and (b) $_________ of CFD 2005-1 monies transferred by the City equals a total amount of $_____________ transferred to the escrow agent under the Escrow Agreement for deposit into the Escrow Fund established thereunder); (2) $_____________ shall be deposited in the Series 2021A Account of the Costs of Issuance Fund to pay the Costs of Issuance of the Series 2021A Bonds; and (3) $_____________ shall be deposited in the Reserve Account of the Special Tax Fund, which is equal to the initial Reserve Requirement for the Series 2021A Bonds. The Trustee may, in its discretion, establish a temporary fund or account in its books and records to facilitate such deposits. (c) Proceeds of the sale of the Series 2021B Bonds in the amount of $_____________ (such amount being equal to the principal amount of the Series 2021B Bonds) shall be transferred by the City to the Trustee, received by the Trustee on behalf of the District, and transferred to the escrow agent under the Escrow Agreement and deposited in the Escrow Fund established thereunder. The Trustee may, in its discretion, establish a temporary fund or account in its books and records to facilitate such deposits. Section 3.2 Deposits to and Disbursements from Special Tax Fund. (a) To the extent the District receives any Prepayments, the District shall deposit such Prepayments with the Trustee, together with a Certificate of an Authorized Representative designating such Special Taxes as Prepayments and specifying the respective amounts to be deposited in the various funds and accounts hereunder, and the Trustee shall make such deposits as specified in such certificate promptly after its receipt thereof. Except for any Prepayments to be deposited pursuant to the foregoing, the Trustee shall, on or promptly after each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee shall transfer the Special Taxes on deposit -27- P6401-1052\2518682v4.doc in the Special Tax Fund on the dates and in the amounts set forth in the following Sections 3.3 through 3.8, in the following order of priority, to: (1) the Administrative Expenses Account of the Special Tax Fund; (2) the Interest Account of the Special Tax Fund; (3) the Principal Account of the Special Tax Fund; (4) the Redemption Account of the Special Tax Fund; (5) the Reserve Account of the Special Tax Fund; (6) the Rebate Fund; and (7) the Surplus Fund. Notwithstanding the foregoing and any other provision of this Indenture to the contrary, in the event of a shortfall of amounts on deposit in the Special Tax Fund (such shortfall being determined excluding amounts on deposit in, and prior to drawing upon, the Reserve Account) to make the transfers, pursuant to Sections 3.4 and 3.5 herein, to the Principal Account of the Special Tax Fund and to the Redemption Account of the Special Tax Fund necessary to pay in full both (x) the principal payment due on the Bonds and any Parity Bonds maturing on the applicable September 1 and (y) the Sinking Fund Payment due on any Outstanding Bonds and any Parity Bonds on such September 1, the Trustee shall transfer the available amount from the Special Tax Fund to the Principal Account and the Redemption Account on a pro rata basis (calculated with reference to the respective principal payment and Sinking Fund Payment coming due and payable on such September 1) at least three (3) Business Days prior to such September 1. (b) At maturity of all of the Bonds and any Parity Bonds and, after all principal and interest then due on the Bonds and any Parity Bonds then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose. Section 3.3 Administrative Expenses Account of the Special Tax Fund. From time to time, the District may provide the Trustee with a Certificate of an Authorized Representative of the District in substantially the form provided as Exhibit C hereto, requesting the payment of Administrative Expenses as set forth therein. Upon its receipt of any such certificate, the Trustee shall transfer from the Special Tax Fund and deposit in the Administrative Expenses Account of the Special Tax Fund amounts necessary to make timely payment of any such Administrative Expenses as set forth in the Certificate of an Authorized Representative of the District; provided, however, that, except as set forth in the following sentence, the total amount transferred in a Bond Year shall not exceed the Administrative Expenses Priority Amount until such time as there has been deposited (a) to the Interest Account and the Principal Account an amount, together with any amounts already on deposit therein, that is sufficient to pay the interest and principal on all Bonds and any Parity Bonds due in such Bond Year, (b) to the Redemption Account an amount, together with any amounts already on deposit therein, that is sufficient to -28- P6401-1052\2518682v4.doc call and redeem Series 2021 Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedule in the Supplemental Indenture for such Parity Bonds, and (c) to the Reserve Account an amount, together with any amounts already on deposit therein, that is sufficient to restore the Reserve Account to the Reserve Requirement. Notwithstanding the foregoing, amounts in excess of the Administrative Expenses Priority Amount may be transferred to the Administrative Expenses Account to the extent necessary to collect delinquent Special Taxes. Moneys in the Administrative Expenses Account of the Special Tax Fund may be invested in any Authorized Investments as directed in writing by an Authorized Representative of the District and shall be disbursed as directed in a Certificate of an Authorized Representative. The Trustee shall have no obligation to transfer any amount from the Special Tax Fund for deposit in the Administrative Expenses Account of the Special Tax Fund except upon its receipt of a Certificate of an Authorized Representative of the District pursuant to this section. Section 3.4 Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon redemption, shall be paid by the Trustee from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds and any Parity Bonds will be made when due and after making the transfer required by Section 3.3, if any, at least three (3) Business Days prior to each March 1 and September 1, the Trustee shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds or any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund (exclusive of the Reserve Account) are inadequate to make the foregoing transfers, then any deficiency shall be made up by transfers from the Reserve Account: (a) To the Interest Account, an amount such that the balance in the Interest Account three (3) Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. (b) To the Principal Account, an amount such that the balance in the Principal Account three (3) Business Days prior to September 1 of each year, commencing September 1, 2022, shall equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity. -29- P6401-1052\2518682v4.doc Section 3.5 Redemption Account of the Special Tax Fund; Cancellation of Series 2021B Bonds Tendered on Delivery Date. (a) With respect to each September 1 on which a Sinking Fund Payment is due and after the deposits have been made to the Administrative Expenses Account, the Interest Account, and the Principal Account of the Special Tax Fund as required by Sections 3.3 and 3.4 hereof, the Trustee shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account three (3) Business Days prior to each September 1 equal to the Sinking Fund Payment due on any Outstanding Bonds and any Parity Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account, if funded, pursuant to Section 3.6 below. Moneys so deposited in the Redemption Account shall be used and applied by the Trustee to call and redeem Series 2021 Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof, and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedules in the Supplemental Indenture for such Parity Bonds. (b) After making the deposits to the Administrative Expenses Account, the Interest Account and the Principal Account of the Special Tax Fund pursuant to Sections 3.3 and 3.4 above and to the Redemption Account for Sinking Fund Payments then due pursuant to subparagraph (a) of this Section, and in accordance with the District’s election to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, or to call Parity Bonds for optional redemption as set forth in any Supplemental Indenture for Parity Bonds, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) may be applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (c) Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to Section 4.1(c) hereof for the use of such Prepayments to the payment of the principal of, premium, and interest on the Bonds and Parity Bonds to be redeemed with such Prepayments. (d) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and Parity Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds or Parity Bonds to be redeemed upon presentation and surrender of such Bonds or Parity Bonds and in the case of an optional redemption or an extraordinary redemption from Prepayments to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account, other than Prepayments, may be used to purchase Outstanding Bonds or Parity Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds or Parity Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an -30- P6401-1052\2518682v4.doc optional redemption or an extraordinary redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.1(a) or 4.1(c) hereof, as applicable, or in the case of Parity Bonds the premium established in any Supplemental Indenture. Any accrued interest payable upon the purchase of Bonds or Parity Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. (e) Pursuant to Section 53344.1 of the Act and Section 13 of the Resolution of Intention, any interested owner of property within the District that is classified, as of March 1, 2021, as “Undeveloped Property” pursuant to the Rate and Method may tender, on the Delivery Date of the Series 2021B Bonds, to the District Treasurer in full payment of the Special Tax obligation secured by such property, any Series 2021B Bond, the Series 2021B Bond to be taken at par. The District Treasurer shall thereupon direct the Trustee to cancel any Series 2021B so tendered and shall cause proper credit therefor to be entered on the records of the District and in the office of the auditor and tax collector. Section 3.6 Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The Reserve Requirement may be satisfied by crediting to the Reserve Account moneys or one or more Reserve Policies or any combination thereof, which in the aggregate make funds available in the Reserve Account in an amount equal to the Reserve Requirement. Upon the deposit with the Trustee of any such Reserve Policy, the Trustee shall release moneys from the Reserve Account to the Interest Account of the Special Tax Fund, in an amount equal to the face amount of such Reserve Policy. If funded, the amounts in the Reserve Account shall be applied as follows: (a) Transfers from Reserve Account in the Event of Insufficiency for Interest, Principal, and Sinking Fund Payments. Except as otherwise provided in this Section 3.6, moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.7 hereof upon written direction from the District. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds and Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve Account for deposit (in order of priority) in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund (subject to the pro rata allocation between the Principal Account and the Redemption Account described in the following sentence), or the Rebate Fund, as applicable, moneys necessary for such purposes. Any such withdrawal from the Reserve Account for the principal of, including Sinking Fund Payments, then due shall be deposited on a pro rata basis (calculated with reference to the respective principal payment and Sinking Fund Payment coming due and payable on such September 1) into the Principal Account and the Redemption Account, respectively. -31- P6401-1052\2518682v4.doc (b) Replenishment of Reserve Account to Reserve Requirement. On or after March 2 and September 2 of each year, after making the required transfers referred to in Sections 3.3, 3.4 and 3.5 above, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Administrative Expenses Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund on or before the next September 1. If amounts available in the Special Tax Fund together with any other amounts transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the District shall include the amount necessary fully to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates. (c) Application of Moneys in Reserve Account to Optional or Extraordinary Redemption or Defeasance. In connection with a redemption of Bonds pursuant to Section 4.1(a) or (c), or Parity Bonds in accordance with any Supplemental Indenture, or a partial defeasance of Bonds or Parity Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement (taking into account Outstanding Bonds and Parity Bonds after such redemption or partial defeasance). The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to Section 9.1(b) or (c), as applicable, to partially defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. (d) Application of Moneys in Reserve Account to Debt Service Payments in Final Bond Year. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds in accordance herewith or, if applicable, with any Supplemental Indenture for a Series of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds and Parity Bonds, as applicable, in the final Bond Year for such Series. (e) Moneys in Reserve Account in Excess of Reserve Requirement. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this section shall be withdrawn from the Reserve Account on the fifth (5th) Business Day before each March 1 and September 1, and such moneys shall be transferred and deposited into the Interest Account of the Special Tax Fund; provided, however, to the extent that, as of a date ninety (90) days prior to the next occurring Interest Payment Date, the amount on deposit in the Reserve Account is equal to or greater than the aggregate remaining principal payments to be paid on the Bonds and any Parity Bonds, any and all amounts in the Reserve Account may be applied to effect a redemption of all Outstanding Bonds pursuant to Section 4.1(a) and any Outstanding Parity Bonds in accordance with any Supplemental Indenture. The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption -32- P6401-1052\2518682v4.doc date or to be transferred pursuant to Section 9.1(b) or (c), as applicable, to defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date. Section 3.7 Rebate Fund. (a) To the extent and at such time necessary to accommodate rebate amounts pursuant to the Tax Certificate, the Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund. Upon establishing the Rebate Fund, the Trustee shall establish a separate Account within the Rebate Fund with respect to the Series 2021A Bonds and each Series of Tax-exempt Parity Bonds. All amounts on deposit in the Rebate Fund with respect to the Series 2021A Bonds or a Series of Tax-exempt Parity Bonds shall be governed by this Section 3.7 and the Tax Certificate for such Series, unless the District obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest payments on the Bonds and Parity Bonds, as applicable, will not be adversely affected if such requirements are not satisfied. The District shall calculate and make, or cause to be calculated and made, the rebate amount in accordance with the Tax Certificate. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund (including the Accounts therein) with respect to the Series 2021A Bonds or a Series of Tax- exempt Parity Bonds after redemption and payment of such Series and after making the payments required under the Tax Certificate, shall be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District for any lawful purpose. (c) Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Series 2021A Bonds and any Tax- exempt Parity Bonds with respect to which an Account has been created in the Rebate Fund. (d) Amendment Without Consent of Owners. This Section 3.7 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2021A Bonds and any Series of Parity Bonds issued on a Tax- exempt basis. The Trustee shall not be responsible for calculating rebatable arbitrage or for the adequacy or correctness or any rebate report or rebate calculations. The Trustee shall be deemed conclusively to have complied with the provisions of this Indenture regarding calculation and payment of rebatable arbitrage if it follows the directions of the District, and it shall have no independent duty to review such calculations or enforce the compliance by the District with such rebate requirements. Section 3.8 Surplus Fund. After making the transfers required by Sections 3.3, 3.4, 3.5, 3.6 and 3.7 hereof, as soon as practicable after each September 1, and in any event prior to each October 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received a Certificate of an Authorized -33- P6401-1052\2518682v4.doc Representative directing that certain amounts be retained in the Special Tax Fund because the District has included such amounts as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(b) hereof. Moneys deposited in the Surplus Fund will be transferred by the Trustee at the direction of an Authorized Representative of the District (i) to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, premium, if any, and interest on the Bonds and any Parity Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor, (ii) to the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement, (iii) to the Administrative Expenses Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expenses Account of the Special Tax Fund are insufficient to pay Administrative Expenses, or (iv) for any other lawful purpose of the District. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds or any Parity Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds or Parity Bonds, the District will notify the Trustee in a Certificate of an Authorized Representative, and the Trustee will segregate such amount into a separate account of the Surplus Fund. The moneys on deposit in such account of the Surplus Fund shall be invested at the written direction of the District in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the Series of Bonds or Parity Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a Tax-exempt basis for federal income tax purposes. Section 3.9 Costs of Issuance Fund. The moneys in the Accounts of the Costs of Issuance Fund shall be disbursed by the Trustee pursuant to a Certificate of an Authorized Representative of the District. Any balance therein shall be transferred by the Trustee to the corresponding Account of the Special Tax Fund 180 days after the Delivery Date of the Bonds or Parity Bonds, as applicable, and the Trustee shall thereafter close the Costs of Issuance Fund and the Accounts therein. Section 3.10 Investments. Moneys held in any of the Funds, Accounts, and Subaccounts under this Indenture shall be invested at the written direction of the District in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds, Accounts and Subaccounts. Any loss resulting from such Authorized Investments shall be credited or charged to the Fund, Account or Subaccount from which such investment was made, and any investment earnings on a Fund, Account or Subaccount shall be applied as follows: (i) investment earnings on all amounts deposited in the Costs of Issuance Fund, the Special Tax Fund, the Surplus Fund and the Rebate Fund and each Account and Subaccount therein shall be deposited in those respective Funds, Accounts, and Subaccounts, and (ii) investment earnings on all amounts deposited in the Reserve -34- P6401-1052\2518682v4.doc Account shall be deposited therein to be applied as set forth in Section 3.6. Moneys in the Funds, Accounts, and Subaccounts held under this Indenture may be invested by the Trustee as directed in writing by the District, from time to time, in Authorized Investments subject to the following restrictions: (a) Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Costs of Issuance Fund. (b) Moneys in the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same become due. (c) Moneys in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which, taken together, have a weighted average maturity not in excess of five (5) years; provided that such amounts may be invested in an Investment Agreement to the later of the final maturity of the Bonds or any Parity Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.6 hereof; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds or an issue of Parity Bonds shall mature later than the respective final maturity date of the Bonds or the issue of Parity Bonds, as applicable. (d) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (1) of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.7 hereof or in Authorized Investments of the type described in clause (7) of the definition thereof. (e) In the absence of written investment directions from the District, the Trustee shall hold all monies uninvested. The Trustee shall sell, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the market value thereof at least semiannually on or before each Interest Payment Date. In making any valuations hereunder, the Trustee may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything herein to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Indenture. -35- P6401-1052\2518682v4.doc The Trustee or an affiliate may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for such investment. The Trustee or its affiliate, as applicable, may sell at the best market price reasonably obtainable at the time by the Trustee or its affiliate, as applicable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Authorized Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. The Trustee shall furnish the District periodic cash transaction statements which shall include detail for all investment transactions effected by the Trustee or brokers selected by the District. The District waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The District further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost, and other trade confirmations may be obtained from the applicable broker. ARTICLE IV REDEMPTION OF BONDS Section 4.1 Redemption of Bonds. (a) Optional Redemption. The Series 2021 Bonds maturing on or before September 1, 2028 are not subject to optional redemption prior to maturity. The Series 2021 Bonds maturing on or after September 1, 2029 shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District, from any source of funds on any date on or after September 1, 2028 in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price September 1, 2028 through August 31, 2029 103% September 1, 2029 through August 31, 2030 102 September 1, 2030 through August 31, 2031 101 September 1, 2031 and any date thereafter 100 In the event the District elects to redeem Series 2021 Bonds as provided above, the District shall give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Series 2021 Bonds of each maturity to be redeemed. The notice to the Trustee shall be given at least forty-five (45) but no more than ninety (90) days prior to the redemption date, or by such later date as is acceptable to the Trustee, in its sole discretion. -36- P6401-1052\2518682v4.doc (b) Mandatory Sinking Fund Redemption. (i) The Series 2021A Bonds maturing on September 1, 20__ and September 1, 20__ (collectively, the “Series 2021A Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter prior to maturity, in accordance with the respective schedules of Sinking Fund Payments set forth below. The Series 2021A Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Series 2021A Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: SERIES 2021A TERM BONDS MATURING SEPTEMBER 1, 20__ Redemption Date (September 1) Principal Amount $ (maturity) SERIES 2021A TERM BONDS MATURING SEPTEMBER 1, 20__ Redemption Date (September 1) Principal Amount $ (maturity) In the event of a partial optional redemption or extraordinary redemption of the Series 2021A Term Bonds, each of the remaining Sinking Fund Payments for such Series 2021A Term Bonds, as applicable, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000. (ii) The Series 2021B Bonds maturing on September 1, 20__ (the “Series 2021B Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Series 2021B Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each -37- P6401-1052\2518682v4.doc redeemed Series 2021B Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: SERIES 2021B TERM BONDS MATURING SEPTEMBER 1, 20__ Redemption Date (September 1) Principal Amount $ (maturity) In the event of a partial optional redemption or extraordinary redemption of the Series 2021B Term Bonds, each of the remaining Sinking Fund Payments for such Series 2021B Term Bonds, as applicable, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000. (iii) Purchase of Series 2021 Term Bonds in Lieu of Redemption. If during the Fiscal Year immediately preceding one of the redemption dates specified above the District purchases Series 2021A Term Bonds or Series 2021B Term Bonds pursuant to Section 4.1(d), at least forty-five (45) days prior to the redemption date, the District shall notify the Trustee as to the principal amount purchased and the amount of Series 2021A Term Bonds or Series 2021B Term Bonds so purchased, as applicable, shall be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce such upcoming Sinking Fund Payment for the applicable maturity of the Series 2021A Term Bonds or Series 2021B Term Bonds, as applicable, so purchased. All Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof. (c) Extraordinary Redemption. The Series 2021 Bonds are subject to extraordinary redemption as a whole, or in part, and on a pro rata basis among maturities of such Series in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account pursuant to Section 3.2, plus any amounts authorized to be transferred from the Reserve Account pursuant to Section 3.6(c), at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price Any Interest Payment Date through March 1, 2029 103% September 1, 2029 and March 1, 2030 102 September 1, 2030 and March 1, 2031 101 September 1, 2031 and any Interest Payment Date thereafter 100 -38- P6401-1052\2518682v4.doc The District shall give written notice to the Trustee of its intention to redeem Series 2021 Bonds pursuant to this subsection, the redemption date, and the principal amount of the Series 2021 Bonds and of each maturity to be redeemed within such Series at least forty-five (45) but no more than ninety (90) days prior to the redemption date, or by such later date as is acceptable to the Trustee, in its sole discretion. (d) Purchase In Lieu of Redemption. As provided in Section 3.5(d) and Section 4.1(b)(ii), as applicable, in lieu or partially in lieu of any optional redemption, extraordinary redemption or mandatory sinking fund redemption as described above, moneys deposited in the Redemption Account, other than Prepayments, may be used to purchase Outstanding Series 2021 Bonds. Such purchases of Series 2021 Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or an extraordinary redemption, the premium applicable at the next following call date. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. All Series 2021 Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof. (e) The redemption provisions for Parity Bonds shall be set forth in a Supplemental Indenture. Section 4.2 Selection of Bonds and Parity Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of any Series of Bonds or Parity Bonds Outstanding, the Trustee shall select the Bonds or Parity Bonds to be redeemed from all Outstanding Bonds or Parity Bonds of such Series or such given portion thereof not previously called for redemption, on a pro rata basis among the maturities (unless the maturity or maturities are otherwise specified in this Indenture or in writing by the District) and by lot within a maturity in any manner which the Trustee in its discretion shall deem appropriate. For purposes of such selection, all Bonds or Parity Bonds of a denomination of more than $5,000 shall be deemed to be comprised of separate $5,000 portions, and such portions shall be treated as separate Bonds or Parity Bonds, as applicable, which may be separately redeemed. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption. Section 4.3 Notice of Redemption. When Bonds or Parity Bonds are due for redemption under Section 4.1 above or under another redemption provision set forth in a Supplemental Indenture relating to any Parity Bonds, the Trustee shall give notice, in the name of the District, of the redemption of such Bonds or Parity Bonds. Such notice of redemption shall (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redemption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemption, or all the Bonds or Parity Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the Bonds or Parity Bonds to be redeemed; (c) state -39- P6401-1052\2518682v4.doc the redemption price; (d) state the place or places where the Bonds or Parity Bonds are to be redeemed; (e) in the case of Bonds or Parity Bonds to be redeemed only in part, state the portion of such Bond or Parity Bond which is to be redeemed; (f) state the date of issue of the Bonds or Parity Bonds as originally issued; (g) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (h) state any other descriptive information needed to identify accurately the Bonds or Parity Bonds being redeemed as shall be specified by the Trustee. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond or Parity Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least thirty (30) days but no more than forty-five (45) days prior to the redemption date, the Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond or Parity Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds or Parity Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption shall be sent (i) not later than two (2) Business Days before the date that notice of redemption is mailed to the Bondowners pursuant to the first paragraph of this Section, to the Depository in such electronic format and manner as specified by the Depository and to any other registered securities depositories (in such electronic format and manner as specified thereby) then in the business of holding substantial amounts of obligations of types comprising the Bonds and Parity Bonds as determined by Trustee, and (ii) not later than the date that notice of redemption is mailed to the Bondowners pursuant to the first paragraph of this Section, to the Information Services in such electronic format and manner as specified by the Information Services. The District shall have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under this Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. Upon the payment of the redemption price of any Bonds and Parity Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent -40- P6401-1052\2518682v4.doc practicable bear the CUSIP number identifying, by issue and maturity, the Bonds and Parity Bonds being redeemed with the proceeds of such check or other transfer. Section 4.4 Partial Redemption of Bonds or Parity Bonds. Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Bondowner, at the expense of the District, a new Bond or Bonds or a new Parity Bond or Parity Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity or, in the case of surrender of a Parity Bond, a new Parity Bond or Parity Bonds subject to the foregoing limitations. Section 4.5 Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3 hereof, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (a) the Bonds and Parity Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture or in any Supplemental Indenture with respect to any Parity Bonds, anything in this Indenture or in the Bonds or the Parity Bonds to the contrary notwithstanding; (b) upon presentation and surrender thereof at the Principal Office of the Trustee, the redemption price of such Bonds and Parity Bonds shall be paid to the Owners thereof; (c) as of the redemption date the Bonds or the Parity Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or Parity Bonds, or portions thereof, shall cease to bear further interest; and (d) as of the date fixed for redemption no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture or any Supplemental Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. ARTICLE V COVENANTS AND WARRANTY Section 5.1 Warranty. The District shall preserve and protect the security pledged hereunder to the Bonds and any Parity Bonds against all claims and demands of all persons. Section 5.2 Covenants. So long as any of the Bonds or Parity Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: -41- P6401-1052\2518682v4.doc (a) Punctual Payment; Against Encumbrances. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond and Parity Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds and in accordance with this Indenture to the extent that Net Taxes and other amounts pledged hereunder are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, and this Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Supplemental Indentures and of the Bonds and any Parity Bonds issued hereunder. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in this Indenture, and will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, other than Parity Bonds issued in accordance with Section 9.2 hereof for the sole purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding. Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds and the Parity Bonds. (b) Levy of Special Tax. The legislative body of the District represents it has levied the Special Tax for Fiscal Year 2020-21 pursuant to the Rate and Method, and so long as any Bonds or Parity Bonds issued under this Indenture are Outstanding, but subject to the Rate and Method, the legislative body of the District covenants it will continue to levy the Special Tax in an amount equal to the Special Tax Requirement (as defined in the Rate and Method), which includes, but is not limited to, amounts sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay (1) the principal of and interest on the Bonds and any Parity Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. (c) Commence Foreclosure Proceedings. The District covenants for the benefit of the Owners of the Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings against any parcel with either (A) at least four (4) consecutive installments of delinquent Special Taxes or (B) delinquent Special Taxes in excess of $10,000 on any one parcel, in each instance by the December 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the December 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount on deposit in the Reserve Account is at least equal to the Reserve Requirement, and such delinquencies will not cause moneys in the Reserve Account to be withdrawn on the next succeeding Interest Payment Date. In no event shall such foreclosure actions exceed the time periods specified in Section 53356.1 of the Act. -42- P6401-1052\2518682v4.doc The District covenants that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. Notwithstanding the foregoing, the District may elect (but is not obligated) to advance the amount of any particular delinquency (excluding penalties and interest) and deposit such amount to the Special Tax Fund. Upon a deposit of such money in the Special Tax Fund, the District will not need to initiate a foreclosure action as provided above; provided, however, the District may reimburse itself for such advance when the Special Tax on such property is paid in the amount of such advance plus interest on such amount at a rate equal to the yield on the Outstanding Bonds. Interest and penalties paid in excess of the amount advanced by the District shall be deposited in the Special Tax Fund. Notwithstanding the foregoing, if at any time, the County’s Teeter Plan (adopted pursuant to Sections 4701 through 4717 of the California Revenue and Taxation Code) is in effect and is made applicable to the District and the Special Taxes being levied in connection with the Bonds, the District may, in its discretion, elect not to commence any judicial foreclosure proceeding pursuant to this Section 5.2(c) or defer the commencement of such proceedings until such time as the District deems appropriate. (d) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Trustee (who shall have no duty or obligation to inspect) or of the Owners of not less than 10% of the principal amount of the Bonds or the Owners of not less than 10% of any issue of Parity Bonds then Outstanding or their representatives authorized in writing. (e) Federal Tax Covenants. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and any Parity Bonds issued on a Tax-exempt basis for federal income tax purposes will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (1) The District shall not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the Tax-exempt status of interest on the Bonds or any Parity Bonds under Section 103(a) of the Code or cause interest on the Bonds or any Parity Bonds to be an item of tax preference for purposes of the alternative minimum tax under the Code. (2) In furtherance of the foregoing tax covenant, the District shall comply with the provisions of the Tax Certificate, which is incorporated herein as if fully set -43- P6401-1052\2518682v4.doc forth herein. These covenants shall survive payment in full or defeasance of the Bonds and any Parity Bonds. (f) Against Reduction of Maximum Special Taxes. The District hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the District hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the District below the levels provided in this Section 5.2(f) would interfere with the timely retirement of the Bonds and Parity Bonds. The District determines it to be necessary in order to preserve the security for the Bonds and Parity Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District hereby does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the District. (g) Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(f) above or to limit the power of the District to levy the Special Taxes for the purposes set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (h) Limitation on Right to Tender Bonds. Except as provided in Section 3.5(e) of this Indenture with respect to the Series 2021B Bonds, the District hereby covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District shall have first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds and Parity Bonds when due. (i) Continuing Disclosure. The District covenants to comply with the terms of the Continuing Disclosure Agreement and with the terms of any certificate or agreement executed by the District with respect to any Parity Bonds, which assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Trustee hereby agrees to inform the District within three (3) Business Days after obtaining knowledge that any of the events listed in Section 5(a) of the Continuing Disclosure Agreement has occurred, or as soon as reasonably practicable thereafter. (j) Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in this Indenture. -44- P6401-1052\2518682v4.doc ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1 Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District may from time to time, without notice to or consent of any of the Bondowners, adopt Supplemental Indentures for any of the following purposes (provided that no such Supplemental Indenture shall modify any of the rights or obligations of the Trustee without its written consent thereto): (a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Indenture or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond or Parity Bond payments; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this Indenture, including without limitation Section 9.2 hereof; (d) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity Bonds then Outstanding; (e) to modify, alter or amend the Rate and Method in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is below the levels provided in Section 5.2(f) of this Indenture, and in any event not less than the sum of the estimated Administrative Expenses and 110% of the principal and interest due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment; or (f) to the extent necessary to obtain a municipal bond insurance policy or to obtain a rating on the Bonds, or in connection with satisfying all or a portion of the Reserve Requirement by crediting a Reserve Policy to the Reserve Account; provided that such amendments which shall not materially adversely affect the interests of the Owners of the then Outstanding Bonds; or (g) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Bondowners. -45- P6401-1052\2518682v4.doc Section 6.2 Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Indentures described in Section 6.1, the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however, that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity Bond, (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond or the rate of interest thereon, (c) a preference or priority of any Bond or Parity Bond over any other Bond or Parity Bond, or (d) a reduction in the aggregate principal amount of the Bonds and Parity Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds and Parity Bonds then Outstanding; provided, further, that no such Supplemental Indenture shall modify any of the rights or obligations of the Trustee without its written consent thereto. If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Bondowners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the Principal Office of the Trustee for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds and any Parity Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental Indenture, Bonds or Parity Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds in instances where such consent is required pursuant to the provisions of this section, this Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds and Parity Bonds shall -46- P6401-1052\2518682v4.doc thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. Section 6.3 Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date and presentation of his Bond or Parity Bond for the purpose at the Principal Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity Bonds. If the District shall so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity Bonds shall be exchanged at the Principal Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds or Parity Bonds, upon surrender of such Outstanding Bonds or Parity Bonds. ARTICLE VII TRUSTEE Section 7.1 Trustee. U.S. Bank National Association, a national banking association, shall be the Trustee for the Bonds and any Parity Bonds unless and until another Trustee is appointed by the District hereunder. The District may, at any time, appoint a successor Trustee satisfying the requirements of Section 7.2 below for the purpose of receiving all money which the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5 above, interest payments to the Bondowners, to select Bonds and Parity Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation of Bonds and Parity Bonds all as provided in this Indenture, and to provide for the authentication of Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds and Parity Bonds paid, discharged and cancelled by it. The Trustee is hereby authorized to pay the Bonds and Parity Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds and Parity Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof. The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee -47- P6401-1052\2518682v4.doc for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless from and against costs, claims, expenses and liabilities, including, without limitation, fees and expenses of its attorneys, not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder. The foregoing obligation of the District to indemnify the Trustee shall survive the removal or resignation of the Trustee or the discharge of the Bonds. Section 7.2 Removal of Trustee. The District may at any time in its sole discretion remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a bank, national banking association, or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least $100,000,000, and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank, national banking association, or trust company appointed as a successor publishes a report 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 section the combined capital and surplus of such bank, national banking association, or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee and notice being sent by the successor Trustee to the Bondowners of the successor Trustee’s identity and address. Section 7.3 Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the Principal Office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying the criteria in Section 7.2 above by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed and have accepted appointment within forty-five (45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bondholder (on behalf of itself and all other Owners of the Bonds) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Section 7.4 Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any Parity Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Indenture, the Bonds or any Parity Bonds, and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein, in the Bonds and any Parity Bonds, or in the certificate of authentication assigned to or imposed upon -48- P6401-1052\2518682v4.doc the Trustee. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds or any Parity Bonds for value. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee shall be responsible for the performance of the duties of the Trustee expressly set forth in this Indenture, and no implied duties or obligations shall be read into this Indenture against the Trustee. The Trustee shall have no responsibility for, and makes no representations with respect to, any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. Before taking any action under Article VIII hereof or this Article the Trustee may require indemnity satisfactory to the Trustee be furnished from any expenses and to protect it against any liability it may incur hereunder. The Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of the Owners of at least twenty-five percent (25%) (or other percentage provided for herein) in aggregate principal amount of Outstanding Bonds relating to the exercise of any right, power or remedy available to the Trustee. The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty. The Trustee may become the owner or pledgee of Bonds with the same rights it would have if it were not Trustee. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond, Parity Bond, facsimile transmission, electronic mail or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond or Parity Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties 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 bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. -49- P6401-1052\2518682v4.doc The Trustee shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it shall actually receive. No provision in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers. The Trustee shall not be deemed to have knowledge of any default or Event of Default until an officer at the Trustee’s corporate trust office responsible for the administration of its duties hereunder shall have actual knowledge thereof or the Trustee shall have received written notice thereof at its corporate trust office. Section 7.5 Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.1 Events of Default. Any one or more of the following events shall constitute an “event of default” (each, an “Event of Default”): (a) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond or Parity Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) default in the due and punctual payment of the interest on any Bond or Parity Bond when and as the same shall become due and payable; or (c) except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds or any Parity Bonds, and such default shall have continued for a period of sixty (60) days after the District shall have been given notice in writing of such default by the Trustee or the Owners of twenty-five percent (25%), in aggregate principal amount of the Outstanding Bonds and Parity Bonds; provided, that if such default (other than a default arising from nonpayment of the Trustee’s fees and expenses) be such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if corrective action is instituted by the District within the applicable period and diligently pursued until the default is corrected. The Trustee agrees to give notice to the Owners as soon as practicable upon the occurrence of an Event of Default under (a) or (b) above and within sixty (60) days of the Trustee’s knowledge of an Event of Default under (c) above. -50- P6401-1052\2518682v4.doc Section 8.2 Remedies of Owners. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds and Parity Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture, including: (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) By a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and Parity Bonds and if indemnified to its satisfaction, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners of the Bonds and Parity Bonds. No remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy. Every such 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 or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law; provided, under no circumstance shall the Bonds, or the obligation of the District to pay installments of principal thereof and interest thereon, be accelerated. Section 8.3 Application of Revenues and Other Funds After Default. Following the declaration by the Trustee of an Event of Default, all amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of this Indenture relating to the Bonds and Parity Bonds shall be applied by the Trustee in the following order upon presentation of the several Bonds and Parity Bonds: First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, advisors, attorneys and counsel, and to the payment of all other outstanding fees and expenses of the Trustee; and Second, to the payment of the whole amount of interest on and principal of the Bonds and Parity Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds and Parity Bonds; provided, however, that in the event such amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts shall be applied in the following order of priority: -51- P6401-1052\2518682v4.doc (a) first to the payment of all installments of interest on the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing, (b) second, to the payment of all installments of principal, including Sinking Fund Payments, of the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing, and (c) third, to the payment of interest on overdue installments of principal and interest on the Bonds and Parity Bonds on a pro rata basis based on the total amount then due and owing. Third, to deposit such amounts in the Reserve Account to restore the balance therein to the Reserve Requirement. After payment or deposit of such amounts, the Trustee may apply any remaining amounts received toward the payment of any rebate amounts pursuant to Section 3.7 or to the payment of the fees, costs and expenses of the District in connection with such Event of Default. Section 8.4 Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of twenty-five percent (25%) in aggregate principal amount of the Bonds and Parity Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds and Parity Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other such litigation. Any suit, action or proceeding which any Owner of Bonds or Parity Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds and Parity Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds and Parity Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney in fact of the respective Owners of the Bonds and Parity Bonds for the purposes of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds and Parity Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact. Section 8.5 Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Owners of the Bonds and Parity Bonds under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or -52- P6401-1052\2518682v4.doc receivers of the Net Taxes and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment(s) shall confer. Section 8.6 Non-Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the Bonds or the Parity Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds and Parity Bonds to the respective Owners of the Bonds and Parity Bonds at the respective dates of maturity, as herein provided, out of the Net Taxes and other moneys herein pledged for such payment. A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds or Parity Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or the Owners by the Act or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Owners, as the case may be. Section 8.7 Limitation on Rights and Remedies of Owners. No Owner of any Bond or Parity Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds and Parity Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds and Parity Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds and Parity Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds and Parity Bonds. The right of any Owner of any Bond and Parity Bond to receive payment of the principal of and interest and premium (if any) on such Bond and Parity Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture. -53- P6401-1052\2518682v4.doc Section 8.8 Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the District, the Trustee and the Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. ARTICLE IX DEFEASANCE AND PARITY REFUNDING BONDS Section 9.1 Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond or Parity Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond or Parity Bond under this Indenture and any Supplemental Indenture relating to such Parity Bond shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds and Parity Bonds pursuant to this Section, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds and Parity Bonds. Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond or Parity Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable; or (c) by depositing with the Trustee or an escrow agent appointed by the District, in trust, Federal Securities, in which the District may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable. -54- P6401-1052\2518682v4.doc If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligations of the District under this Indenture and any Supplemental Indenture with respect to such Bond or Parity Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond or Parity Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in Section 5.2(e) or any covenants in a Supplemental Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than ten (10) days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Trustee in the sole discretion of the Trustee. In connection with a defeasance under (c) above, there shall be provided to the District and the Trustee a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds and Parity Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable. In connection with a defeasance under (b) or (c) above, there also shall be provided to the District and the Trustee an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds or Parity Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds and Parity Bonds which have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds and Parity Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds and Parity Bonds when due. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds or Parity Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred. Section 9.2 Conditions for the Issuance of Parity Refunding Bonds. For the sole purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding, the District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued hereunder or under any Supplemental Indenture. Parity Bonds issued are subject to the following specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds: (a) The District shall be in compliance with all covenants set forth in this Indenture and any Supplemental Indenture then in effect and a certificate of the District to that effect shall have been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. -55- P6401-1052\2518682v4.doc (b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Indenture duly adopted by the District which shall specify the following: (1) that such Parity Bonds are to be issued for the purpose of refunding all or a portion of the Bonds or Parity Bonds then Outstanding, as applicable, and the fund or funds into which the proceeds thereof are to be deposited, including a provision requiring the proceeds of such Parity Bonds to be applied solely for the purpose of refunding any Outstanding Bonds or Parity Bonds, including payment of all costs and the funding of all reserves incidental to or connected with such refunding; (2) the authorized principal amount of such Parity Bonds; (3) the date and the maturity date or dates of such Parity Bonds; provided that (i) each maturity date shall fall on a September 1, (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number, and (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; (4) the description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication; (5) the denominations and method of numbering of such Parity Bonds; (6) the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds; (7) the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement; (8) the form of such Parity Bonds; and (9) such other provisions as are necessary or appropriate and not inconsistent with this Indenture. (c) The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Trustee (unless the Trustee shall accept any of such documents bearing a prior date): (1) a certified copy of the Supplemental Indenture authorizing the issuance of such Parity Bonds; (2) a written request of the District as to the delivery of such Parity Bonds; -56- P6401-1052\2518682v4.doc (3) an opinion of Bond Counsel and/or general counsel to the District to the effect that (a) the District has the right and power under the Act to adopt this Indenture and the Supplemental Indentures relating to such Parity Bonds, and this Indenture and all such Supplemental Indentures have been duly and lawfully adopted by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (b) this Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in this Indenture, subject to the application thereof to the purposes and on the conditions permitted by this Indenture; and (c) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of this Indenture and all Supplemental Indentures thereto and entitled to the benefits of this Ind enture and all such Supplemental Indentures, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and this Indenture and all such Supplemental Indentures; and a further opinion of Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a Tax-exempt basis, or the exemption from State of California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued; (4) a certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of this Indenture; (5) a certificate of an Independent Financial Consultant certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; and (6) such further documents, money and securities as are required by the provisions of this Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds. ARTICLE X MISCELLANEOUS Section 10.1 Cancellation of Bonds and Parity Bonds. All Bonds and Parity Bonds surrendered to the Trustee for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or Parity Bond purchased by the District as authorized herein and delivered to the Trustee for such purpose shall be, cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds and Parity Bonds, as provided by law, and furnish to the District a certificate of such destruction. -57- P6401-1052\2518682v4.doc Section 10.2 Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds or Parity Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority. (b) As to any Bond or Parity Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary. Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or Parity Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent. Section 10.3 Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds and Parity Bonds which remain unclaimed for two (2) years after the date when such Outstanding Bonds or Parity Bonds have become due and payable, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such payment to the District, the Trustee, at the expense of the District, shall cause to be mailed by first class mail, postage prepaid, to the registered Owners of such Outstanding Bonds or Parity Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) -58- P6401-1052\2518682v4.doc days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. Section 10.4 Provisions Constitute Contract. The provisions of this Indenture shall constitute a contract between the District and the Bondowners, and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Trustee, then the District, the Trustee and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner. Section 10.5 Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which is subordinate to the pledge hereunder, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes and other amounts pledged hereunder. Section 10.6 Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds or any Parity Bonds the rights and benefits provided in this Indenture. Section 10.7 Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds and any Parity Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8 Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, by overnight mail, or by facsimile or other form of telecommunication, confirmed by telephone at its number set forth below. Notice shall be effective either (i) upon transmission by facsimile or other form of telecommunication (provided that receipt is confirmed), (ii) 48 hours after deposit in the United States first class mail, postage prepaid, (iii) in the case of overnight mail, upon delivery to the addressed destination, or (iv) in the case of personal delivery to any person, upon actual receipt. The District or the Trustee may, -59- P6401-1052\2518682v4.doc by written notice to the other party, from time to time modify the address or number to which communications are to be given hereunder. If to the District: City of Palm Desert 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: City Manager Facsimile: (760) 340-0574 Telephone: (760) 346-0611 If to the Trustee: U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Global Corporate Trust Facsimile: (213) 615-6199 Telephone: (213) 615-6062 The District and the Trustee may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. [Remainder of page intentionally left blank.] -60- P6401-1052\2518682v4.doc IN WITNESS WHEREOF, CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK), has caused this Bond Indenture to be signed by the Mayor of the City of Palm Desert, as authorized by the City Council of the City of Palm Desert acting as the legislative body of the District, and attested thereto by the City Clerk of the City of Palm Desert, and U.S. BANK NATIONAL ASSOCIATION, in token of its acceptance of the trust created hereunder, has caused this Bond Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) By: Mayor of the City of Palm Desert, California ATTEST: City Clerk of the City of Palm Desert, California U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Its: Authorized Officer A-1 P6401-1052\2518682v4.doc EXHIBIT A FORM OF SPECIAL TAX REFUNDING BOND, SERIES 2021A Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the District or the Trustee for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. R-__ $___________ UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BOND SERIES 2021A INTEREST RATE MATURITY DATE DATED DATE CUSIP ____% September 1, 20__ __________, 20__ 696627 ___ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ________________________________ DOLLARS CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) (the “District”), which was formed by the City of Palm Desert (the “City”) and is situated in the County of Riverside, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof, unless (i) the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above. A-2 P6401-1052\2518682v4.doc Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 (each, an “Interest Payment Date”), commencing March 1, 2022, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such term is defined in the Indenture (as defined below)), initially U.S. Bank National Association (the “Trustee”). Interest on this Bond shall be paid by check of the Trustee mailed on the Interest Payment Date by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Registered Owner hereof as of the close of business on the fifteenth day of the month preceding the Interest Payment Date (the “Record Date”) at such Registered Owner’s address as it appears on the registration books maintained by the Trustee. This Bond is one of a duly authorized issue of “City of Palm Desert Community Facilities District No. 2005-1 (University Park), Special Tax Refunding Bonds, Series 2021A” (the “Bonds”) issued in the aggregate principal amount of $__________ pursuant to the Mello- Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the “Act”) for the purpose of refinancing certain public facilities, funding a reserve account, and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City acting in its capacity as the legislative body of the District (the “Legislative Body”) on ________________, 2021 and a Bond Indenture dated as of [July 1, 2021], by and between the District and the Trustee executed in connection therewith (the “Indenture”), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Pursuant to the Act and the Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District (the “Special Taxes”) and certain other amounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund (other than the Administrative Expenses Account therein) established under the Indenture, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Indenture it will commence and diligently pursue to completion judicial foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. A-3 P6401-1052\2518682v4.doc The Bonds are limited obligations of the District and are payable from, and are secured by, a first pledge of and lien on the Net Taxes (as that term is defined in the Indenture). The Bonds maturing on or before September 1, 2028 are not subject to optional redemption prior to maturity. The Bonds maturing on or after September 1, 2029 shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District, from any source of funds on any date on or after September 1, 2028 in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price September 1, 2028 through August 31, 2029 103% September 1, 2029 through August 31, 2030 102 September 1, 2030 through August 31, 2031 101 September 1, 2031 and any date thereafter 100 The Bonds maturing on September 1, 20__ and September 1, 20__ are subject to mandatory sinking fund redemption, in whole or in part by lot, on September 1 each year commencing September 1, 20__ and September 1, 20__, respectively, as provided in the Indenture. The Bonds are subject to extraordinary redemption as a whole, or in part, and on a pro rata basis among maturities of such Series in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments of Special Taxes deposited to the Redemption Account, plus any amounts authorized to be transferred from the Reserve Account pursuant to the Indenture in connection with such transfers, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price Any Interest Payment Date through March 1, 2029 103% September 1, 2029 and March 1, 2030 102 September 1, 2030 and March 1, 2031 101 September 1, 2031 and any Interest Payment Date thereafter 100 Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than thirty (30) nor more than forty-five (45) days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date, provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. A-4 P6401-1052\2518682v4.doc The District shall have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. The Trustee shall not be required to register transfers or make exchanges of (i) any Bonds for a period of fifteen (15) days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF PALM DESERT OR OF THE DISTRICT FOR WHICH THE CITY OF PALM DESERT OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY OF PALM DESERT, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this A-5 P6401-1052\2518682v4.doc Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, City of Palm Desert Community Facilities District No. 2005- 1 (University Park), has caused this Bond to be dated as of __________________, 2021, to be signed on behalf of the District by the Mayor of the City by her [manual]/[facsimile] signature and attested by the [manual]/[facsimile] signature of the City Clerk of the City. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) Mayor of the City of Palm Desert, California ATTEST: City Clerk of the City of Palm Desert, California ===================================================================== [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within-mentioned Indenture which has been registered on the Bond registration books. Dated: ___________, 20__ U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Its: Authorized Signatory ===================================================================== A-6 P6401-1052\2518682v4.doc [FORM OF ASSIGNMENT] For value received the undersigned hereby sell(s), assign(s) and transfer(s) unto (Name, Address, and Tax Identification or Social Security Number of Assignee) the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) _____________________________________________________________________ attorney, to transfer the same on the Registration Books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature must be guaranteed by a member of an institution which is a participant in the Securities Transfer Agent Medallion Program (STAMP) or other similar program. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. ===================================================================== B-1 P6401-1052\2518682v4.doc EXHIBIT B FORM OF SPECIAL TAX REFUNDING BOND, SERIES 2021B Transfer of this Bond is subject to the restrictions set forth in the Indenture referred to herein. A transfer of the Bond is limited to certain parties that qualify under the requirements of the Indenture, which include the requirement that the transferee can bear the economic risk of investment in the Bond and has such knowledge and experience in business and financial matters, including the purchase and ownership of municipal obligations of a nature similar to the Bond, to be able to evaluate the risks and merits of investment in the Bond. The Bond has not been registered with any federal or state securities agency or commission. R-__ $___________ UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BOND SUBORDINATE SERIES 2021B (TAXABLE) INTEREST RATE MATURITY DATE DATED DATE ____% September 1, 20__ __________, 20__ REGISTERED OWNER: PRINCIPAL AMOUNT: ________________________________ DOLLARS CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) (the “District”), which was formed by the City of Palm Desert (the “City”) and is situated in the County of Riverside, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof, unless (i) the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, B-2 P6401-1052\2518682v4.doc interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 (each, an “Interest Payment Date”), commencing March 1, 2022, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such term is defined in the Indenture (as defined below)), initially U.S. Bank National Association (the “Trustee”). Interest on this Bond shall be paid by check of the Trustee mailed on the Interest Payment Date by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Registered Owner hereof as of the close of business on the fifteenth day of the month preceding the Interest Payment Date (the “Record Date”) at such Registered Owner’s address as it appears on the registration books maintained by the Trustee. This Bond is one of a duly authorized issue of “City of Palm Desert Community Facilities District No. 2005-1 (University Park), Special Tax Refunding Bonds, Subordinate Series 2021B (Taxable)” (the “Bonds”) issued in the aggregate principal amount of $__________ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the “Act”) for the purpose of refinancing certain public facilities, funding a reserve account, and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City acting in its capacity as the legislative body of the District (the “Legislative Body”) on ________________, 2021 and a Bond Indenture dated as of [July 1, 2021], by and between the District and the Trustee executed in connection therewith (the “Indenture”), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Pursuant to the Act and the Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District (the “Special Taxes”) and certain other amounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund (other than the Administrative Expenses Account therein) established under the Indenture, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Indenture it will commence and diligently pursue to completion judicial foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. B-3 P6401-1052\2518682v4.doc The Bonds are limited obligations of the District and are payable from, and are secured by, a pledge of and second lien on the Net Taxes (as that term is defined in the Indenture) on a subordinate basis to the pledge and first lien on the Net Taxes for the benefit of the District’s $__________ original aggregate principal amount Special Tax Bonds, Series 2021A, issued concurrently with the Bonds. The Bonds maturing on or before September 1, 2028 are not subject to optional redemption prior to maturity. The Bonds maturing on or after September 1, 2029 shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District, from any source of funds on any date on or after September 1, 2028 in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price September 1, 2028 through August 31, 2029 103% September 1, 2029 through August 31, 2030 102 September 1, 2030 through August 31, 2031 101 September 1, 2031 and any date thereafter 100 The Bonds maturing on September 1, 20__ are subject to mandatory sinking fund redemption, in whole or in part by lot, on September 1 each year commencing September 1, 20__, as provided in the Indenture. The Bonds are subject to extraordinary redemption as a whole, or in part, and on a pro rata basis among maturities of such Series in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments of Special Taxes deposited to the Redemption Account, plus any amounts authorized to be transferred from the Reserve Account pursuant to the Indenture in connection with such transfers, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price Any Interest Payment Date through March 1, 2029 103% September 1, 2029 and March 1, 2030 102 September 1, 2030 and March 1, 2031 101 September 1, 2031 and any Interest Payment Date thereafter 100 Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than thirty (30) nor more than forty-five (45) days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date, provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, B-4 P6401-1052\2518682v4.doc the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. The District shall have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully registered form in the denomination of $0.01 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond, or any portion thereof which is equal to $100,000.00 or greater in integral multiples of $0.01 in principal amount, is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. The Trustee shall not be required to register transfers or make exchanges of (i) any Bonds for a period of fifteen (15) days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF PALM DESERT OR OF THE DISTRICT FOR WHICH THE CITY OF PALM DESERT OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY OF PALM DESERT, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. B-5 P6401-1052\2518682v4.doc This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, City of Palm Desert Community Facilities District No. 2005- 1 (University Park), has caused this Bond to be dated as of __________________, 2021, to be signed on behalf of the District by the Mayor of the City by her [manual]/[facsimile] signature and attested by the [manual]/[facsimile] signature of the City Clerk of the City. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) Mayor of the City of Palm Desert, California ATTEST: City Clerk of the City of Palm Desert, California B-6 P6401-1052\2518682v4.doc ===================================================================== [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within-mentioned Indenture which has been registered on the Bond registration books. Dated: ___________, 20__ U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Its: Authorized Signatory ===================================================================== [FORM OF ASSIGNMENT] For value received the undersigned hereby sell(s), assign(s) and transfer(s) unto (Name, Address, and Tax Identification or Social Security Number of Assignee) the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) _____________________________________________________________________ attorney, to transfer the same on the Registration Books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature must be guaranteed by a member of an institution which is a participant in the Securities Transfer Agent Medallion Program (STAMP) or other similar program. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. ===================================================================== C-1 P6401-1052\2518682v4.doc EXHIBIT C ADMINISTRATIVE EXPENSE PAYMENT REQUEST FORM U.S. Bank National Association Global Corporate Trust 633 West Fifth Street, 24th Floor Los Angeles, California 90071 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS PAYMENT REQUEST NO. ____ The Trustee is hereby requested to pay from the Administrative Expenses Account of the Special Tax Fund established pursuant to the Bond Indenture, dated as of [July 1, 2021], by and between City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”) and you, as Trustee, to the person, corporation, or other entity designated below as Payee, the sum set forth below such designation, in payment of the Administrative Expense(s) described below. The amount shown below is due and payable under a purchase order, contract, or other authorization with respect to the Administrative Expense described below and has not formed the basis of any prior request for payment. Payee: Address: Amount: $ Description: The Administrative Expense(s) described above are accepted by the District and authorized to be paid to the Payee. For the current Bond Year (September 2 through September 1), the total amount of Administrative Expenses requested by the District for payment from the Administrative Expenses Account (including this Payment Request) is $______________, and includes Payment Requests Nos. _____________. All payments shall be made by check or wire transfer in accordance with the payment instructions set forth herein, and the Trustee shall rely on such payment instructions with no duty to investigate or inquire as to the authenticity of the payment instructions or the authority under which they were given. Executed by the Authorized Representative of City of Palm Desert Community Facilities District No. 2005-1 (University Park) Signature: Name: Title: [This page has intentionally been left blank.] $___________ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS SERIES 2021A BOND PURCHASE AGREEMENT ________, 2021 City of Palm Desert Community Facilities District No. 2005-1 (University Park) 73510 Fred Waring Drive Palm Desert, CA 92260 Ladies and Gentlemen: Piper Sandler & Co., as underwriter (the “Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this “Purchase Agreement”) with the City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “Community Facilities District”), which upon acceptance will be binding upon the Underwriter and the Community Facilities District. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the Community Facilities District satisfying all of the obligations imposed upon them under this Purchase Agreement. This offer is made subject to the Community Facilities District’s acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 P.M., local time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Community Facilities District at any time prior to the acceptance hereof by the Community Facilities District. All capitalized terms used herein, which are not otherwise defined, shall have the meaning provided for such terms in the Bond Indenture, dated as of July 1, 2021 (the “Indenture”), between the Community Facilities District and U.S. Bank National Association, as trustee (the “Trustee”). 1. Purchase, Sale and Delivery of the Bonds. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein: the Underwriter hereby agrees to purchase from the Community Facilities District and the Community Facilities District hereby agrees to sell to the Underwriter all (but not less than all) of the $______ aggregate principal amount of the City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Series 2021A (the “2021A Bonds” or the “Bonds”), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit A hereto, dated the Closing Date (as hereinafter defined), bearing interest at the rates and 2 maturing on the dates and in the principal amounts set forth in Exhibit A hereto. The Bonds shall be subject to redemption as set forth in the Indenture and Official Statement. The purchase price for the 2021A Bonds shall be $_______ (being 100% of the aggregate principal amount thereof, plus an original issue premium of $_______ and less an Underwriter’s discount of $_______). The Underwriter agrees to make a bona fide public offering of all of the Bonds initially at the public offering prices (or yields) set forth in Exhibit A attached hereto and incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds, provided that the Underwriter shall not change the interest rates set forth in Exhibit A. The Bonds may be offered and sold to certain dealers at prices lower than such initial offering prices. The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Net Taxes as provided in the Indenture, the Preliminary Official Statement (as hereinafter defined), and the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Community Facilities District Act”). The issuance of the Bonds has been duly authorized by the City Council of the City of Palm Desert (the “City”), as the legislative body for the Community Facilities District pursuant to a resolution (the “Community Facilities District Resolution of Issuance”) adopted on _______, 2021. The proceeds of the Bonds will be used to: (i) to refund a portion of the Community Facilities District’s outstanding Special Tax Bonds, Series 2006A allocable to the parcels in the Community Facilities District that will remain subject to the Special Taxes following the Closing (as defined herein) (the “2006 Bonds”); (ii) to fund a Reserve Account for the 2021A Bonds; and (iii) to pay costs incurred in connection with the issuance of the Bonds. The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from Net Taxes pledged thereto as provided in the Indenture. Concurrently with the issuance of the 2021A Bonds and pursuant to the Indenture, Section 53344.1 of the Community Facilities District Act, Resolution No. 05-87 adopted by the City Council of the City on October 13, 2005, and Resolution No. 2021-21 adopted by the City Council of the City on May 13, 2021, the District is issuing on the Closing Date (as defined herein) its $___________ initial principal amount Special Tax Refunding Bond, Subordinate Series 2021B (Taxable) (the “2021B Tender Bond”) in a direct placement to AG Essential Housing CA 4, L.P. (“AG Essential Housing”), for immediate tender at the time of Closing to the Community Facilities District and cancellation by the District Treasurer in full satisfaction of the Special Tax obligation associated with the property within the Community Facilities District owned by AG Essential Housing, known as Assessor’s Parcel No. 694-190-046. The 2021B Tender Bond is secured by a pledge of and second lien upon the Net Taxes on a subordinate basis solely to the pledge of and lien upon the Net Taxes securing the 2021A Bonds. (a) The Community Facilities District hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the Community Facilities District herein. 3 The Community Facilities District acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction between the Community Facilities District and the Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as principal and not as the agent or fiduciary of the Community Facilities District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Community Facilities District with respect to (a) the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Community Facilities District on other matters) or (b) any other obligations to the Community Facilities District with respect to the offering contemplated hereby, except the obligations expressly set forth in this Purchase Agreement or otherwise imposed by law, (iv) the Underwriter has financial interests that differ from those of the Community Facilities District and (v) the Community Facilities District has consulted their own legal, financial and other advisors to the extent they have deemed appropriate in connection with this transaction. The Community Facilities District acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the Municipal Securities Rulemaking Board (“MSRB”). The Community Facilities District acknowledges and represents that it has engaged Del Rio Advisors, LLC (the “Municipal Advisor”), as its municipal advisor (as defined in Securities and Exchange Commission Rule 15Ba1) and will rely solely on the financial advice of the Municipal Advisor with respect to the Bonds. (b) Pursuant to the authorization of the Community Facilities District, the Underwriter has distributed copies of the Preliminary Official Statement dated _______, 2021, relating to the Bonds, which, together with the cover page, inside cover page and appendices thereto is herein called the “Preliminary Official Statement.” By its acceptance of this Purchase Agreement, the Community Facilities District hereby consents to the use by the Underwriter of the Preliminary Official Statement, and the Community Facilities District agrees to execute a final Official Statement relating to the Bonds (the “Official Statement”) which will consist of the Preliminary Official Statement with such changes as may be made thereto, with the approval of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel (“Bond Counsel”), Best Best & Krieger LLP, Disclosure Counsel (“Disclosure Counsel”), and the Underwriter, and to provide copies thereof to the Underwriter as set forth herein. The Community Facilities District hereby authorizes and requires the Underwriter to use and promptly distribute, in connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official Statement and any supplement or amendment thereto. The Community Facilities District further authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Indenture, the Continuing Disclosure Agreement executed by the Community Facilities District in connection with the Bonds (the “Continuing Disclosure Agreement”), the Escrow Agreement, dated as of July 1, 2021 (the “Escrow Agreement”) by and among the Community Facilities District, City of Palm Desert Community Facilities District No. 2021-1 (University Park), and U.S. Bank National Association, as escrow agent (the “Escrow Agent”), this Purchase Agreement and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. (c) To assist the Underwriter in complying with subsection (b)(5) of Securities and Exchange Commission Rule 15c2-12 (the “Rule”), the Community Facilities District will undertake pursuant to the Continuing Disclosure Agreement, in the form attached to the Official Statement as an appendix, to provide annual reports and notices of certain enumerated events. A 4 description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. (d) Except as the Underwriter and the Community Facilities District may otherwise agree, the Community Facilities District will deliver to the Underwriter, at the offices of Bond Counsel in Los Angeles, California, or at such other location as may be mutually agreed upon by the Underwriter and the Community Facilities District, the documents hereinafter mentioned; and the Community Facilities District will deliver to the Underwriter through the facilities of The Depository Trust Company (“DTC”), the Bonds, in definitive form (all Bonds bearing CUSIP numbers), duly executed by the Community Facilities District and authenticated by the Trustee in the manner provided for in the Indenture and the Community Facilities District Act at 8:30 a.m. California time, on _______, 2021 (the “Closing Date”), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in the second paragraph of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein referred to as the “Closing”). The Bonds shall be in fully registered book-entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC. The Closing is contingent upon the concurrent sale and issuance of the 2021B Tender Bond. 2. Representations, Warranties and Covenants of the Community Facilities District. The Community Facilities District represents, warrants and covenants to the Underwriter: (a) The Community Facilities District is duly organized and validly existing as a community facilities district under the laws of the State of California (the “State”), and has the full legal right, power and authority, among other things, (i) upon satisfaction of the conditions in this Purchase Agreement and the Indenture, to issue the Bonds as provided herein, and (ii) to secure the Bonds in the manner set forth in the Indenture. (b) The City Council has the full legal right, power and authority to adopt the resolutions in connection with the initial formation of the Community Facilities District and the levy of the Special Taxes (the “Community Facilities District Resolutions”) and has caused to be recorded in the real property of records of the County of Riverside, a notice of special tax lien (the “Notice of Special Tax Lien” and together, with the Community Facilities District Resolutions, and the Community Facilities District Resolution of Issuance, the “Resolutions and Formation Documents”), and the Community Facilities District has the full legal right, power and authority (i) to enter into this Purchase Agreement, the Indenture, the Escrow Agreement, and the Continuing Disclosure Agreement (collectively, the “Community Facilities District Documents”), (ii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate all other transactions on its part contemplated by the Official Statement and each of the Community Facilities District Documents, and the Community Facilities District and the City Council have complied with all provisions of applicable law, including the Community Facilities District Act, in all matters relating to such transactions. (c) The Community Facilities District has duly authorized (i) the execution and delivery by the Community Facilities District of the Bonds and the execution, delivery and due performance by the Community Facilities District of its obligations under the Community Facilities District Documents, (ii) the distribution and use of the Preliminary Official Statement and execution, delivery and distribution of the Official Statement, and (iii) the taking of any and all such action as may be required on the part of the Community Facilities District to carry out, give effect to and consummate the transactions on its part contemplated by such instruments. All consents or approvals 5 necessary to be obtained by the Community Facilities District in connection with the foregoing have been received, and the consents or approvals so received are still in full force and effect. (d) The Resolutions and Formation Documents have been duly adopted by the City Council and are in full force and effect; and the Community Facilities District Documents, when executed and delivered by the Community Facilities District and the other party thereto, will constitute a legal, valid and binding obligation of the Community Facilities District enforceable against the Community Facilities District in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally. (e) When delivered to the Underwriter, the Bonds will have been duly authorized by the City Council and duly executed, issued and delivered by the Community Facilities District and will constitute legal, valid and binding special obligations of the Community Facilities District enforceable against the Community Facilities District in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally, and will be entitled to the benefit and security of the Indenture. (f) The information (excluding information relating to The Depository Trust Company (“DTC”) and its book-entry system) contained in the Preliminary Official Statement is, and as of the Closing Date such information (excluding information relating to DTC and its book- entry system)” in the Official Statement will be true and correct in all material respects, and the Preliminary Official Statement does not as of its date and the Official Statement will not as of the Closing Date contain any untrue or misleading statement of a material fact or omit to state any material fact (excluding in each case information relating to DTC and its book-entry system) necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) If, at any time prior to the earlier of (i) receipt of notice from the Underwriter that the Official Statement is no longer required to be delivered under Rule 15c2-12 or (ii) the Closing (as described in Section 1(d) above), any event known to the officers of the Community Facilities District participating in the issuance of the Bonds occurs with respect to the Community Facilities District or the City as a result of which the Official Statement as then amended or supplemented might include an untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Community Facilities District shall promptly notify the Underwriter in writing of such event. Any information supplied by the Community Facilities District for inclusion in any amendments or supplements to the Official Statement will not contain any untrue or misleading statement of a material fact relating to the Community Facilities District or the City or omit to state any material fact relating to the Community Facilities District or the City necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) Neither the adoption of the Resolutions and Formation Documents, the execution and delivery of the Community Facilities District Documents, nor the consummation of the transactions on the part of the Community Facilities District contemplated herein or therein or the compliance by the Community Facilities District with the provisions hereof or thereof will conflict with, or constitute on the part of the Community Facilities District, a violation of, or a breach of or default under, (i) any material indenture, mortgage, commitment, note or other agreement or instrument to which the Community Facilities District is a party or by which it is bound, (ii) any provision of the State Constitution or (iii) any existing law, rule, regulation, ordinance, judgment, 6 order or decree to which the Community Facilities District or the City (or the members of the City Council or any of its officers in their respective capacities as such) is subject, in each instance that would have a material adverse effect on the ability of the Community Facilities District to perform its obligations under the Community Facilities District Documents. (i) The Community Facilities District has never been in default at any time, as to principal of or interest on any obligation which it has issued, which default may have an adverse effect on the ability of the Community Facilities District to consummate the transactions on its part under the Community Facilities District Documents, except as specifically disclosed in the Official Statement; and except as provided in the Bond Indenture, dated as of May 1, 2006, with respect to the 2006 Bonds, as such indenture as heretofore been amended and supplemented (including but not limited to the First Supplemental Indenture, dated as of May 1, 2007, respect to the Series 2007 Bonds of the Community Facilities District which as of this date are no longer outstanding), and in the Indenture with respect to the Bonds and the 2021B Tender Bond, the Community Facilities District has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Special Taxes. (j) Except as is specifically disclosed in the Official Statement, to the best knowledge of the Community Facilities District, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the Community Facilities District or the City has been served with process or threatened against the Community Facilities District or the City, which in any way questions the powers of the City Council, the City or the Community Facilities District referred to in paragraph (b) above, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the Community Facilities District Documents, or which, in any way, could adversely affect the validity or enforceability of the Resolutions and Formation Documents, the Bonds or the Community Facilities District Documents or, to the knowledge of the Community Facilities District, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes or in any other way questions the status of the Bonds under State tax laws or regulations. (k) Any certificate signed by an official of the Community Facilities District authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Community Facilities District Documents shall be deemed a representation and warranty by the Community Facilities District to the Underwriter as to the truth of the statements therein contained. (l) The Community Facilities District has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a Community Facilities District whose arbitrage certifications may not be relied upon. (m) The Bonds will be paid from Net Taxes (as defined in the Indenture) received by the Community Facilities District and amounts held in certain funds and accounts established and pledged under the Indenture. (n) The Special Taxes may lawfully be levied in accordance with the rate and method of apportionment of the Special Tax relating to the Community Facilities District (the “Rate and Method”), the Resolutions and Formation Documents as described in the Preliminary Official 7 Statement and the Official Statement, and, when levied, will be secured by a lien on the property on which they are levied. (o) The Indenture creates a valid pledge of, and first lien upon the Net Taxes deposited thereunder, and the amounts held in certain funds and accounts established and pledged under the Indenture, subject in all cases to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. (p) Except as disclosed in the Official Statement, in the last five years, neither the City, nor the Community Facilities District, nor any other entity for which the City Council is the legislative body, has failed to comply with any undertaking under Rule 15c2-12 in any material respect. The Community Facilities District hereby consents to the preparation and distribution of the Official Statement, consisting of the Preliminary Official Statement with such changes as are noted thereon and as may be made thereto, with the approval of Bond Counsel, Disclosure Counsel and the Underwriter, from time to time prior to the Closing Date. The Community Facilities District hereby consents to any prior use of and authorizes the future use by the Underwriter, in connection with the offering and sale of the Bonds, of the Preliminary Official Statement, the Official Statement, this Purchase Agreement and the other Community Facilities District Documents in connection with the transactions contemplated by this Purchase Agreement. The Community Facilities District covenants with the Underwriter that the Community Facilities District will cooperate with the Underwriter (at the cost of the Underwriter), in qualifying the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as the Underwriter may reasonably request; provided, however, that the Community Facilities District shall not be required to consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The Community Facilities District consents to the use by the Underwriter of the Community Facilities District Documents in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions. The execution and delivery of this Purchase Agreement by the Community Facilities District shall constitute a representation by the Community Facilities District to the Underwriter that the representations and warranties contained in this Section 2 with respect to the Community Facilities District are true as of the date hereof. 3. Conditions to the Obligations of the Underwriter. The obligation of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the Community Facilities District contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) At the Closing Date, the Community Facilities District Resolutions and the Community Facilities District Documents shall be in full force and effect, and shall not have been 8 amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds, and with the transactions contemplated thereby, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate. (b) At the Closing Date, except as described in the Preliminary Official Statement, the Community Facilities District shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, and the performance by the Community Facilities District of its obligations under the Bonds, the Community Facilities District Resolutions, the Indenture, the other Community Facilities District Documents, and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed hereunder, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Indenture, the other Community Facilities District Documents, the Bonds or the performance of the conditions precedent to be performed by the Community Facilities District hereunder. (c) The information contained in the Official Statement is, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant hereto, true and correct in all material respects and does not, as of the Closing Date or as of the date of any supplement or amendment thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the cover page of the Official Statement, of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the Community Facilities District terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: 1. Legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department of the United States of America or the Internal Revenue Service, with the purpose or effect, directly or 9 indirectly, of imposing federal income taxation upon such interest as would be received by any owners of the 2021A Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; or 2. Legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission (the “SEC”), or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended (the “Securities Act”), or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), or that the issuance, offering or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws as amended and then in effect; or 3. A general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; or 4. The introduction, proposal or enactment of any amendment to the federal or State Constitution or any action by any federal or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Community Facilities District, its property, income, securities (or interest thereon), the validity or enforceability of Special Taxes, or the ability of the Community Facilities District to issue the Bonds as contemplated by the Indenture and the Official Statement; or 5. Any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement, or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or 6. Any national securities exchange, the Comptroller of the Currency, or any other governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, 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, the Underwriter; or 7. There shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis, the effect of which on the financial markets of the United States is such as, in the reasonable 10 judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or 8. Any event or circumstance shall exist that either makes untrue or incorrect in any material respect any statement or information in the Official Statement (other than any statement provided by the Underwriter) or is not reflected in the Official Statement but should be reflected therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and, in either such event, the Community Facilities District refuses to permit the Official Statement to be supplemented to supply such statement or information, or the effect of the Official Statement as so supplemented is to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriters to enforce contracts for the sale of the Bonds; or 9. A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force; or 10. A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or 11. Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or 12. A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Securities Exchange Act of 1934, as amended and the Trust Indenture Act; or 13. Any proceeding shall have been commenced or be threatened in writing by the SEC against the City or the Community Facilities District; or (e) At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter and Bond Counsel: 1. The Official Statement, executed on behalf of the Community Facilities District by an authorized officer; 2. The Indenture, duly executed and delivered by the Community Facilities District and the Trustee; 3. The Resolutions and Formation Documents, together with a certificate dated as of the Closing Date of the City Clerk to the effect that the Community Facilities 11 District Resolutions are true, correct and complete copies of the ones duly adopted by the City Council; 4. The Continuing Disclosure Agreement executed and delivered by the Community Facilities District and Willdan Financial Services, as dissemination agent; 5. The Escrow Agreement executed and delivered by the Community Facilities District, City of Palm Desert Community Facilities District No. 2021-1 (University Park), and the Escrow Agent; 6. An unqualified approving opinion of Bond Counsel for the Bonds in the form attached to the Official Statement; 7. A supplemental opinion or opinions of Bond Counsel, dated the Closing Date and addressed to the Community Facilities District and the Underwriter, to the effect that: (i) The Community Facilities District is duly organized and validly existing as a community facilities district under and by virtue of the Constitution and laws of the State (including the Act); (ii) The City Council of the City, acting as legislative body of the Community Facilities District, has the full legal right, power and authority to adopt the Resolutions and Formation Documents; (iii) the statements contained in the Official Statement under the captions “INTRODUCTION – Security and Sources of Payment for the Bonds,” “INTRODUCTION – Description of the Bonds,” “THE BONDS” (other than information relating to DTC and its book- entry only system and information in the section entitled “Debt Service Schedule”, as to which no opinion is expressed), “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS,” ” “TAX MATTERS,” and in Appendices A and D thereto, excluding any material that may be treated as included under such captions by reference to other documents, insofar as such statements expressly summarize certain provisions of the Indenture and Bond Counsel’s final opinion are accurate in all material respects; (iv) this Purchase Agreement and the Continuing Disclosure Agreement have been duly executed and delivered by, and constitute valid and binding obligations of, the Community Facilities District, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors’ rights in general and to the application of equitable principles if equitable remedies are sought; and (v) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended; and (vi) All approvals, consents, authorization, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the ability of the Community Facilities District, to perform its obligations 12 under the Bonds or the Community Facilities District Documents, have been obtained or made, as the case may be, and are in full force and effect. 8. The letter of Disclosure Counsel, dated the Closing Date and addressed to the Community Facilities District and to the Underwriter, to the effect that, without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Community Facilities District, the Special Tax Consultant and others, and their examination of certain documents, nothing has come to their attention which has led them to believe that the Preliminary Official Statement as of its date and the date of this Purchase Agreement and the Official Statement as of its date and as of the Closing Date contained or contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial statements or other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archeological or environmental matters, or any information with respect to the City, or about DTC or the book-entry-only system); 9. A certificate dated the Closing Date and signed by an authorized representative of the Community Facilities District or an authorized designee, on behalf of the Community Facilities District substantially in the form attached hereto as Exhibit E; 10. An opinion of the City Attorney of the City, dated the date of Closing and addressed to the Underwriter and the City, to the effect that: (i) The City is duly organized and validly existing as a municipal corporation and charter city under and by virtue of the Constitution and laws of the State; (ii) The Resolutions and Formation Documents were duly adopted at meetings of the City Council, acting as legislative body of the Community Facilities District which were called and held under law and with all public notice required by law and at which a quorum was present and acting throughout, and the Resolutions and Formation Documents are in full force and effect and have not been amended or repealed; (iii) To their best knowledge, based on reasonable due diligence, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with respect to which the Community Facilities District has been served with process or threatened, in any way affecting the existence of the City, the Community Facilities District or the titles of the Community Facilities District’s officials to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Indenture, or the collection or application of the Special Taxes to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Community Facilities District Documents or any action of the Community Facilities District contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Preliminary Official Statement or of the Official Statement or the powers of the Community Facilities District or its authority with respect to the Bonds, the Community Facilities District Documents or any action on the part of the Community Facilities District contemplated by any of said documents, wherein an unfavorable decision, ruling, 13 or finding could materially adversely affect the validity or enforceability of the Bonds or the Community Facilities District Documents; and (iv) The execution and delivery of the Bonds and the Community Facilities District Documents, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument of which the Community Facilities District is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Community Facilities District to perform its obligations under the Bonds or the Community Facilities District Documents; 11. A certificate dated the Closing Date from Willdan Financial Services (the “Special Tax Consultant” or the “Dissemination Agent”) addressed to the Community Facilities District and the Underwriter to the effect that: (i) the Special Tax if collected in the maximum amounts permitted pursuant to the Rate and Method of Apportionment of Special Taxes of the Community Facilities District as of the Closing Date would generate at least budgeted administrative expenses plus 110% of the annual debt service payable with respect to the Bonds in each year, based on such assumptions and qualifications as shall be acceptable to the Underwriter; (ii) the statements in the Official Statement provided by the Special Tax Consultant concerning Special Taxes in the Community Facilities District and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true and correct, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (iii) the Dissemination Agent has the full power to enter into and deliver the Continuing Disclosure Agreement and to perform its duties as Dissemination Agent thereunder; (iv) as of the Closing Date, the Dissemination Agent has executed and delivered the Continuing Disclosure Agreement and, assuming due authorization, execution and delivery by the Community Facilities District, the Continuing Disclosure Agreement is a valid, legal and binding agreement of the Dissemination Agent, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights in general and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and (v) to the best knowledge of the Dissemination Agent, after due inquiry, no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Dissemination Agent that has not been obtained by the Dissemination Agent is or will be required for the execution and delivery of the Continuing Disclosure Agreement or the performance by the Dissemination Agent of its duties and obligations thereunder; 12. A certificate dated the Closing Date from Empire Economics, Inc. (the “Market Absorption Consultant”) addressed to the Community Facilities District and the Underwriter to the effect that: (i) to the best of the Market Absorption Consultant’s knowledge and belief, all information with respect to the Market Absorption Study in the Preliminary Official Statement and in the Official Statement was true and correct as of the date of the Market Absorption Study and that the Market Absorption Consultant is aware that acts and events may have occurred since the date of the Market Absorption Study which could result in both positive and negative effects on estimated residential absorption (escrow closing by homeowners) schedules; however, an updated Market Absorption Study has not been completed as of the Closing Date and (ii) the Market Absorption Consultant consents to the use of the Market Absorption Study in connection with the distribution and use of the Preliminary Official Statement and Official Statement. 14 13. Certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution of the Indenture and the Escrow Agreement and the authentication of the Bonds; 14. A certificate of the Trustee, addressed to the Underwriter, and the Community Facilities District dated the Closing Date, to the effect that: (i) the Trustee is authorized to carry out corporate trust powers, and have full power and authority to perform its duties under the Indenture and the Escrow Agreement; (ii) the Trustee is duly authorized to execute and deliver the Indenture and the Escrow Agreement, to accept the obligations created by the Indenture and the Escrow Agreement and to authenticate the Bonds pursuant to the terms of the Indenture; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication of the Bonds or the consummation by the Trustee of the other transactions contemplated to be performed by the Trustee in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Indenture and the Escrow Agreement; (iv) to the best of its knowledge, compliance with the terms of the Indenture and Escrow Agreement will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Trustee is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee or any of its activities or properties; and (v) there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Trustee or threatened against the Trustee which in the reasonable judgment of the Trustee would affect the existence of the Trustee or in any way contest the validity or enforceability of the Indenture and the Escrow Agreement or contesting the powers of the Trustee or its authority to enter into and perform its obligations under the Indenture and the Escrow Agreement; 15. An opinion of counsel to the Trustee dated the Closing Date, addressed to the Underwriter, and the Community Facilities District to the effect that the Trustee is a national banking association duly organized and validly existing under the laws of the United States having full power and being qualified to enter into, accept and agree to the provisions of the Indenture and the Escrow Agreement, and that such documents have been duly authorized, executed and delivered by the Trustee, and, assuming due execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by the application of equitable principles if equitable remedies are sought, and that the Bonds have been duly authenticated; 16. A certificate of the Community Facilities District dated the Closing Date, in a form acceptable to Bond Counsel, that the 2021A Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; 17. An opinion of Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”), dated the date of Closing and addressed to the Underwriter in form and substance acceptable to the Underwriter; 15 18. A certificate or certificates of the Escrow Agent, dated the Closing Date, in form and substance acceptable to the Underwriter and Bond Counsel; 19. A certificate in form and substance as set forth in Exhibit C hereto of Capital Realty Analysts, La Quinta, California, the appraiser of the property within the Community Facilities District, dated as of the Closing Date; 20. An opinion of Bond Counsel, addressed to the Community Facilities District, the Escrow Agent, and the Underwriter, dated the date of Closing, as to the effective defeasance of the 2006 Bonds in form and substance acceptable to the Underwriter; 21. The report of Robert Thomas CPA, LLC , (the “Verification Agent”), on the mathematical accuracy of certain computations, contained in schedules provided to them which were prepared for the Community Facilities District, relating to the sufficiency of cash deposited into the Escrow Fund to redeem on September 1, 2021, the 2006 Bonds, maturing on September 1, 2022 and thereafter through September 1, 2036; and 22. Such additional legal opinions, certificates, instruments and other documents as the Underwriter and Bond Counsel may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the material representations and warranties of the Community Facilities District contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Community Facilities District at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Community Facilities District in connection with the transactions contemplated hereby and by the Indenture and the Official Statement. If the Community Facilities District shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Community Facilities District nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the Community Facilities District set forth in Section 5 hereof shall continue in full force and effect. 4. Establishment of Issue Price. (a) The Underwriter agrees to assist the Community Facilities District in establishing the issue price of the 2021A Bonds and shall execute and deliver to the Community Facilities District at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit B, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Community Facilities District and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the 2021A Bonds.. (b) Except as otherwise set forth in Exhibit A attached hereto, the Community Facilities District will treat the first price at which 10% of each maturity of the 2021A Bonds (the “10% test”) is sold to the public as the issue price of that maturity. At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Community Facilities 16 District the price or prices at which it has sold to the public each maturity of 2021A Bonds. If at that time the 10% test has not been satisfied as to any maturity of the 2021A Bonds, the Underwriter agrees to promptly report to the Community Facilities District the prices at which it sells the unsold 2021A Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all 2021A Bonds of that maturity or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter’s reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Community Facilities District or Bond Counsel. For purposes of this Section, if 2021A Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the 2021A Bonds. (c) The Underwriter confirms that it has offered the 2021A Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the 2021A Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Community Facilities District and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Community Facilities District to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the 2021A Bonds, the Underwriter will neither offer nor sell unsold 2021A Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: 1. the close of the fifth (5th) business day after the sale date; or 2. the date on which the Underwriter has sold at least 10% of that maturity of the 2021A Bonds to the public at a price that is no higher than the initial offering price to the public. The Underwriter will advise the Community Facilities District promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the 2021A Bonds to the public at a price that is no higher than the initial offering price to the public. (d) The Underwriter confirms that: (i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the 2021A Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable: (A)(i) to report the prices at which it sells to the public the unsold 2021A Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all 2021A Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the 2021A Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of 17 the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter, (B) to promptly notify the Underwriter of any sales of 2021A Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the 2021A Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker- dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public. (ii) any selling group agreement relating to the initial sale of the 2021A Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the 2021A Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold 2021A Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the 2021A Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold-the- offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Community Facilities District acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the 2021A Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the 2021A Bonds, including, but not limited to, its agreement to comply with the hold- the-offering-price rule, if applicable to the 2021A Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the 2021A Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the 2021A Bonds, including, but not limited to, its agreement to comply with the hold-the- offering-price rule, if applicable to the 2021A Bonds, as set forth in the third-party distribution agreement and the related pricing wires. The Community Facilities District further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the 2021A Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the 2021A Bonds. (f) The Underwriter acknowledges that sales of any 2021A Bonds to any person that is a related party to an underwriter participating in the initial sale of the 2021A Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: (i) “public” means any person other than an underwriter or a related party; 18 (ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the Community Facilities District (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the 2021A Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the 2021A Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the 2021A Bonds to the public); (iii) a purchaser of any of the 2021A Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and (iv) “sale date” means the date of execution of this Purchase Agreement by all parties. 5. Expenses. Whether or not the transactions contemplated by this Purchase Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Community Facilities District shall pay all expenses and costs of the Community Facilities District incident to the performance of its obligations in connection with the authorization, execution, sale and delivery of the Bonds to the Underwriter, including, without limitation, printing costs, initial fees of the Trustee and Escrow Agent, including fees and disbursements of their counsel, if any, fees and disbursements of Bond Counsel, Disclosure Counsel and other professional advisors employed by the City, costs of preparation, printing, signing, transportation, delivery and safekeeping of the Bonds. The Underwriter shall pay all out-of-pocket expenses of the Underwriter, including, without limitation, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP Services Bureau charges, regulatory fees imposed on new securities issuers and any and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds, including fees and disbursements of Underwriter’s Counsel. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction-related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount. 6. Notices. Any notice of other communication to be given to the Community Facilities District under this Purchase Agreement may be given by delivering the same in writing to the City of Palm Desert, 73510 Fred Waring Drive, Palm Desert, CA 92260, Attention: City Manager; any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Piper Sandler & Co., 120 Vantis Drive, Suite 330, Aliso Viejo, California 92656, Attention: Public Finance. 7. Parties In Interest. This Purchase Agreement is made solely for the benefit of the Community Facilities District and Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. 19 8. Survival of Representations and Warranties. The representations and warranties of the Community Facilities District under this Purchase Agreement shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter and shall survive the delivery and payment for the Bonds and the Closing. 9. Execution in Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 10. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. 11. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding among the parties hereto in relation to the sale of the Bonds by the Community Facilities District. 12. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS] S-1 13. Effective Date. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. Very truly yours, PIPER SANDLER & CO., as Underwriter By: Managing Director The foregoing is hereby agreed to and accepted as of the date first above written: CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) By: Authorized Officer Time of Execution: _____________ p.m. California time [EXECUTION PAGE OF BOND PURCHASE AGREEMENT] A-1 EXHIBIT A $______ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS SERIES 2021A Maturity (September 1) Principal Amount Interest Rate Yield Price 10% Test Satisfied* 10% Test Not Satisfied Subject to Hold-The- Offering- Price Rule (marked if used) 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 20__(T) 20__T) _________________ (T) Term Bond. (C) Priced to optional call at [par] on September 1, 20__. *At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement. B-1 EXHIBIT B $_______ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS SERIES 2021A FORM OF ISSUE PRICE CERTIFICATE The undersigned, as underwriter of the above-referenced bonds (the “Bonds”) pursuant to that certain Bond Purchase Agreement, dated ___________, 2021, by and between Community Facilities District No. 2005-1 (University Park) (the “Issuer”) and the undersigned, acting through its authorized representative, hereby certifies as set forth below with respect to the sale and issuance of the Bonds. 1. Sale of the Bonds. As of the date of this certificate, at least 10% of each Maturity of the Bonds was sold to the Public at the respective price (“Sale Price”) listed in Schedule A. 2. [Initial Offering Price of the Hold-the-Offering-Price Maturities. (a) Underwriter offered the Hold-the-Offering-Price Maturity to the Public for purchase at the respective initial offering price listed in Schedule A (the “Initial Offering Price”) on or before the Sale Date. (b) As set forth in the Bond Purchase Agreement, the undersigned has agreed in writing that, (i) for the Hold-the-Offering-Price Maturity, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the-offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) will offer or sell any Hold-the- Offering-Price Maturity at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.] 3. The aggregate of the Sale Prices of the Bonds is $___________ (the “Issue Price”). 4. Based upon our experience in marketing and maintaining a market for obligations having terms and credit arrangements similar to those underlying the Bonds, the Reserve Requirement contemplated under the Bond Indenture, dated as of July 1, 2021, by and between the Issuer and U.S. Bank National Association, pursuant to which the Bonds are being issued, was a vital and necessary factor in marketing the Bonds to the public and is both reasonably required and necessary to the maintenance of an orderly market for the Bonds. 5. The weighted average maturity of the Bonds is _____ years. 6. The remaining Weighted Average Maturity of the 2006 Bonds being refunded by the Bonds is _____ years. B-2 7. The Yield on the Bonds is _____________%, being the discount rate which, when used in computing the present worth of all payments of principal and interest to be paid on the Bonds, computed on the basis of a 360-day year and semi-annual compounding produces an amount equal to the Issue Price of the Bonds[, computed with the following adjustment. The Bonds maturing (i) on May 1, 20__, and (ii) on May 1, 20__ are the only Bonds that are subject to optional redemption before maturity and have an Initial Offering Price that exceeds their stated redemption price at maturity by more than one-fourth of one percent multiplied by the product of their stated redemption price at maturity and the number of complete years to their first optional redemption date. Accordingly, in computing the Yield on the Bonds, such Bonds were treated as retired on their optional redemption date or at maturity to result in the lowest Yield on the Bonds.]. 8. [None of the Bonds subject to mandatory early redemption has a stated redemption price that exceeds the initial offering price of such bond by more than one-fourth of one percent multiplied by the product of its stated redemption price at maturity and the number of years to its weighted average maturity date.] 9. [None of the Bonds is subject to optional redemption within five years of the Issue Date of the Bonds, and none of the Bonds subject to optional redemption has an initial offering price that exceeds its stated redemption price at maturity by more than one-fourth of one percent multiplied by the product of its stated redemption price at maturity and the number of complete years to its first optional redemption date.] 10. Defined Terms. (a) Issuer means City of Palm Desert Community Facilities District No. 2005-1 (University Park). (b) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (c) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (d) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). Other capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Certificate Regarding Compliance with Certain Tax Matters (the “Tax Certificate”) executed by the Issuer and the City of Palm Desert (the “City”) with respect to the Bonds. B-3 The representations set forth in this Certificate are limited to factual matters only. Nothing in this Certificate represents the undersigned’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer and the City with respect to certain of the representations set forth in the Tax Certificate relating to the Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by Richards, Watson & Gershon, A Professional Corporation, in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer and the City from time to time relating to the Bonds. IN WITNESS WHEREOF, the undersigned has cause this Certificate to be executed on the date first written above. PIPER SANDLER & CO., By:_______________________________________ Name:_____________________________________ Title:______________________________________ C-1 EXHIBIT C CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS SERIES 2021A CERTIFICATE OF APPRAISER The undersigned hereby states and certifies: 1. That he or she is an authorized principal of Capital Realty Analysts, La Quinta, California (the “Appraiser”) and as such is familiar with the facts herein certified and is authorized and qualified to certify the same. 2. That the Appraiser has prepared an appraisal report dated ______, 2021, with a date of value as of May 15, 2021 (the “Appraisal Report”), on behalf the City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “Community Facilities District”) and in connection with the Official Statement dated [OS Date] (“Official Statement”), concerning the above-captioned bonds (the “Bonds”). 3. That the Appraiser hereby consents to the reproduction and use of the Appraisal Report appended to the Preliminary Official Statement and the Official Statement. The Appraiser also consents to the references to the Appraiser and the Appraisal made in the Preliminary Official Statement and the Official Statement. 4. In the opinion of the Appraiser the assumptions made in the Appraisal Report are reasonable. 5. That the Official Statement has been reviewed on behalf of the Appraiser and to the best knowledge of the Appraiser the statements concerning the Appraisal Report and the value of the property contained under the captions “INTRODUCTION – Value of Property in the District,” “THE COMMUNITY FACILITIES DISTRICT – Appraisal Report,” and “APPENDIX H – APPRAISAL REPORT” are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 6. Each of the parcels appraised by the Appraiser is encompassed within the Community Facilities District as set forth in the boundary map of the Community Facilities District and the Appraisal Report fairly and accurately described, as of the stated date of value, the market values of the properties in the Community Facilities District that are subject to the special taxes. 7. That, as of the date of the Official Statement and as of the date hereof, the Appraisal Report appended to the Official Statement, to the best of my knowledge and belief, and subject to all of the Limiting Conditions and Major Assumptions set forth in the Appraisal Report, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to C-2 make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and no events or occurrences have been ascertained by us or have come to our attention that would materially and adversely affect the conclusions as to the market value of the appraised property stated in the Appraisal Report. However, we have not performed any procedures since the date of the Appraisal Report to obtain knowledge of such events or occurrences nor are we obligated to do so in the future. 8. The Appraisal Report complies with the Appraisal Standards for Land-Secured Financings issued by the California Debt and Investment Advisory Commission dated July, 2004. The Community Facilities District and Piper Sandler & Co., as underwriter, are entitled to rely on the Certificate. Dated: [Closing Date] CAPITAL REALTY ANALYSTS By: D-1 EXHIBIT D CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) SPECIAL TAX REFUNDING BONDS SERIES 2021A COMMUNITY FACILITIES DISTRICT CLOSING CERTIFICATE I, the undersigned, hereby certify that I am the ___________________ of the City of Palm Desert (the “City”), the City Council of which is the legislative body for City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “Community Facilities District”), a community facilities district duly organized and existing under the laws of the State of California (the “State”) and that as such, I am authorized to execute this Certificate on behalf of the Community Facilities District in connection with the issuance of the above-referenced bonds (the “Bonds”). I hereby further certify on behalf of the Community Facilities District that: (A) to my best knowledge, after reasonable inquiry, no litigation is pending with respect to which the Community Facilities District or the City has been served with process or threatened against the Community Facilities District or the City (1) to restrain or enjoin the issuance of any of the Bonds or the collection of Net Taxes pledged under the Indenture; (2) in any way contesting or affecting the authority for the issuance of the Bonds or the validity or enforceability of the Bonds or the Community Facilities District Documents; or (3) in any way contesting the existence or powers of the Community Facilities District; (B) the representations and warranties made by the Community Facilities District in the Bond Purchase Agreement dated [BPA Date], between the Community Facilities District and Piper Sandler & Co. (the “Agreement”) are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date; (C) no event affecting the Community Facilities District has occurred since the date of the Final Official Statement that, as of the Closing Date, would cause any statement or information contained in the Final Official Statement under the caption “ABSENCE OF LITIGATION” to be incorrect or incomplete in any material respect or would cause the information contained under such caption in the Final Official Statement to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein, in the light of the circumstances under which they were made, not misleading; (D) as of the date hereof, the Community Facilities District Documents are in full force and effect in accordance with their terms and have not been amended, modified or supplemented except in such case as may have been agreed to by the Underwriter; and D-2 (E) the Community Facilities District has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Community Facilities District Documents prior to issuance of the Bonds. Capitalized terms not defined herein shall have the same meaning set forth in the Agreement. IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date herein below set forth. Dated: [Closing Date] CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) By: __________________________________ Name: Title: -1- RWG DRAFT 6/5/2021 P6401-1052\2527936v2.doc $_____________ City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds Subordinate Series 2021B (Taxable) BOND PURCHASE CONTRACT City of Palm Desert Community Facilities District No. 2005-1 (University Park) Palm Desert, California Ladies and Gentlemen: The undersigned, [NAME OF UNDEVELOPED PROPERTY OWNER] (the “Purchaser”), hereby offers to enter into this Bond Purchase Contract (this “Purchase Contract”) with you, the City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”), a Mello-Roos community facilities district organized and existing under the laws of the State of California. Recitals A. Pursuant to the Mello-Roos Community Facilities Act of 1982 (California Government Code Section 53311 et seq.), as amended (the “Act”), the City Council of the City of Palm Desert (the “City”) previously conducted proceedings in 2005 and 2006 to establish the District and to authorize the levy of special taxes by the District and the issuance of special tax bonds by the District to finance certain public improvements and development fees used for public improvements, which proceedings included an election held on January 12, 2006, pursuant to which the qualified electors within the District unanimously approved the levy of such special taxes and issuance of such special tax bonds by the District. B. The City Council of the City, pursuant to Resolution No. 06-33 adopted on March 23, 2006, approved the issuance by the District of its Special Tax Bonds, Series 2006A (the “Prior Bonds”), and on May 9, 2006, the District issued the Prior Bonds in the original aggregate principal amount of $50,000,000, of which $26,250,000 in aggregate principal amount presently remains outstanding. C. The boundaries of the District are depicted on the boundary map for CFD 2005-1 recorded in Book 64 of the County of Riverside Maps of Assessment and Community Facilities Districts, at page 78, in the County Recorder’s Office as Instrument No. 2005- 0904136, on November 1, 2005, which map is hereby incorporated by reference. D. On September 10, 2020, the City Council of the City authorized the reinstatement of the City’s financing team, consisting of certain financing professionals, for the purpose of refunding the Prior Bonds with the issuance of refunding bonds (collectively, the “Refunding Bonds”) for cost savings (the “Refunding Program”). E. On May 13, 2021, the City Council of the City adopted its Resolution No. 2021-21 (the “Authorizing Resolution”), authorizing as part of the Refunding Program a tender -2- P6401-1052\2527936v2.doc bonds alternative (the “Tender Bonds Alternative”), pursuant to the authority conferred by California Government Code Section 53344.1 and Resolution No. 05-87, adopted by the City Council on October 13, 2005 in connection with the formation proceedings for the District, to allow the purchase and tender of certain Refunding Bonds by owners of undeveloped property within the District to the District Treasurer in full payment of the District special taxes secured by such property, on such terms and conditions as the City may establish. F. On May 13, 2021, the City Council of the City adopted its Resolution No. 2021-20, approving a Deposit and Reimbursement Agreement with a developer of property within the District to provide monies to compensate the City for its costs relating to the establishment and implementation of the Tender Bonds Alternative as part of the Refunding Program. G. A series of Refunding Bonds in the aggregate initial principal amount of $________________ to be designated as the City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Subordinate Series 2021B (Taxable) (the “Series 2021B Bonds”) are expected to be issued pursuant to a Bond Indenture, dated as of July 1, 2021 (the “Indenture”), by an d between the District and U.S. Bank National Association, as trustee (the “Trustee”). H. The Tender Bonds Alternative will allow owners of parcels currently classified as “Undeveloped Property” under the rate and method of apportionment of special taxes for the District (the “Rate and Method”) to, in connection with the refunding of the Prior Bonds and at the option of such property owners, extinguish the special tax lien of the District on their parcels in exchange for the purchase of Series 2021B Bonds from the District in an amount equal to the parcel’s allocable share of the redemption price of the outstanding 2006A Bonds to be refunded and redeemed on the next available redemption date of September 1, 2021, and concurrently with the closing of such purchase, tender such Series 2021B Bonds to the District for cancellation. I. All acts and proceedings required by law necessary to make this Purchase Contract, when executed by the District and the Purchaser, the valid, binding and legal obligation of the parties to this Purchase Contract, and to constitute this Purchase Contract a valid and binding Purchase Contract for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Purchase Contract have been in all respects duly authorized. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto do hereby agree as follows: Section 1. Definitions. Unless the context clearly requires or unless otherwise defined herein, the capitalized terms in this Purchase Contract shall have the respective meanings which such terms are given in the Indenture. Section 2. Purchase of the Bonds; Deposit for Purchase Price. Upon the terms and conditions herein set forth, the Purchaser hereby agrees to purchase from the District, and the District hereby agrees to sell, execute and deliver to the Purchaser $_________________ -3- P6401-1052\2527936v2.doc in principal amount of Series 2021B Bonds to the Purchaser (the “Bonds”), constituting [all][a portion] of the Series 2021B Bonds. The purchase price to be paid for the Bonds shall be $_________________, representing the initial principal amount of the Bonds. The Purchaser has heretofore deposited with the City a good faith deposit (the “Purchase Deposit”) in the amount of the purchase price of the Bonds. The Bonds shall be dated the Closing Date (as defined herein), bear interest from said date (payable semiannually on March 1 and September 1, commencing March 1, 2022), at the rate pare annum, and mature on the date and in the amount set forth in Exhibit A hereto. Section 3. The Bonds. The Bonds will be delivered in definitive, fully registered form, registered in the name of the Purchaser and may be typewritten. The Bonds shall be substantially in the form described in, shall be executed and delivered, and shall be payable and subject to redemption and transfer restrictions as provided in the Indenture. The Bonds shall otherwise be as described in, and shall be secured and payable as set forth in, the Indenture. Resolution No. 2021-___, adopted by the City Council of the City, for itself and acting as legislative body of the District, on [June 24, 2021], is referred to herein as the “Resolution of Issuance,” and together with the Authorizing Resolution, as the “Resolutions.” The Bonds, the Resolutions, and the Indenture are referred to collectively herein as the “District Documents.” Section 4. Closing. At 8:00 A.M., California time, on [July 28, 2021], or at such other time or date as shall have been mutually agreed upon by the District and the Purchaser (the “Closing Date”), the District will, subject to the terms and conditions hereof, deliver to the Trustee, for the account of the Purchaser, at the Trustee’s office in Los Angeles, California, the Bonds in fully registered form, duly executed and registered; and, subject to the terms and conditions hereof, the Purchaser will accept such delivery and authorize the City to transfer the Purchase Deposit of the Bonds to be paid by wire transfer to the Trustee, for the account of the District (said delivery and payment being referred to herein as the “Closing”). The Closing is contingent upon the concurrent sale and issuance of the City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Series 2021A (the “Series 2021A Bonds”). Section 5. Representations of the District. The District represents, warrants and agrees as follows: (a) The District is a Mello-Roos community facilities district duly organized and validly existing under the Act and the laws of the State of California and has all necessary power and authority to enter into and perform its duties under the Bonds, the Indenture, the Resolutions, and this Purchase Contract. When executed and delivered by the respective parties thereto, the Bonds, the Indenture and this Purchase Contract will constitute legal, valid and binding obligations of the District enforceable in accordance with their respective terms except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and by the application of equitable principles if equitable remedies are sought; -4- P6401-1052\2527936v2.doc (b) By adoption of the Resolutions, the District has approved the issuance, sale and delivery of and the performance by the District of the obligations on its part contained in and contemplated by the Bonds, and in the Indenture and this Purchase Contract; (c) The issuance, sale and delivery of the Bonds, and the execution and delivery of the Indenture and this Purchase Contract, and compliance by the District with the provisions thereof and performance of its duties thereunder, will not conflict with, in any material respect, or constitute a material breach of or default under any law, administrative regulation, judgment, decree, note, resolution, charter, by-law or other agreement to which the District is a party or is otherwise subject or by which its properties may be affected, except as provided in the applicable District Documents; (d) There is no consent, approval, authorization or other order of, or filing with, or certification by, any regulatory authority having jurisdiction over the District that is a material condition precedent required for the issuance and sale of the Bonds or the consummation by the District of the transactions on its part contemplated by the Bonds, the Indenture and this Purchase Contract which has not been obtained; (e) The District is not in breach of or default under any applicable law or administrative regulation of the State or the United States or any applicable judgment or decree, agreement or other instrument to which the District is a party or is otherwise subject in a manner that would materially adversely affect the due performance by the District under the Indenture and the Bonds; (f) There is no action, suit, proceeding, inquiry or investigation, notice of which has been served upon the District, at law or in equity before or by any court or governmental agency or body, pending against the District or, to the best knowledge of the District, threatened against the District, except as previously disclosed in the Purchaser in writing, to restrain or enjoin the issuance or sale of the Bonds, or the collection of the Net Taxes or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture and this Purchase Contract or contesting the powers of the District to enter into or perform its obligations under any of the foregoing; and (g) The Indenture creates a valid pledge of the Net Taxes and certain funds established by the Indenture, including the investments, if any, thereof, subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture, and said pledge constitutes a second lien and security interest in all of the foregoing, subordinate only to the Series 2021A Bonds. Section 6. Representations of the Purchaser. The Purchaser represents, warrants and agrees as follows: (a) The Purchaser has fully sufficient knowledge and experience in financial and business matters, including purchase and ownership of municipal obligations, as to be capable of evaluating the merits and risks of the investment represented by the Bonds on the basis of the information and review described in paragraphs (e), (f), and (g) below. -5- P6401-1052\2527936v2.doc (b) The Purchaser is purchasing the Bonds for its own account and is not purchasing the Bonds for the purpose of resale or distribution. The Purchaser understands that its rights under the Bonds may not be transferred, assigned or sold to any person or entity except in accordance with the Indenture and a purchaser letter substantially in the form attached hereto as Exhibit B (the “Purchaser Letter”), and (except for any tender of the Bonds by the Purchaser to the District pursuant to the Indenture) unless it first obtains from the transferee and delivers to the District a purchaser letter substantially in the form of the Purchaser Letter, with no material revisions except as may be approved in writing by the District. (c) The Purchaser understands that (i) the Bonds are a limited obligation of the District secured by a subordinate lien upon, and payable solely from, Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) as provided in the Indenture, (ii) no other fund or property of the District or the City is liable for the payment of the Bonds, (iii) none of the payment obligations with respect to the Bonds are secured by a pledge of any money received or to be received from taxation by the City or any political subdivision thereof, other than the Net Taxes of the District, and (iv) there is no reserve fund for the Bonds. (d) The Purchaser understands that (i) neither the Indenture nor the Bonds have been registered with any federal or state securities agency or commission or otherwise qualified for sale under the “Blue Sky” laws or regulations of any state, and such registration is not legally required as of the date hereof; (ii) the Bonds will not be listed on any stock or other securities exchange; (iii) the Bonds do not and will not carry a rating from any rating service; (iv) the Bonds will be delivered in a form which may not be readily marketable; and (v) the Bonds are not subject to any continuing disclosure undertaking pursuant to SEC Rule 15c-12, as amended. The Purchaser agrees that it will comply with any applicable state and federal securities laws then in effect with respect to any disposition of the Bonds by it, and further acknowledges that any current exemption from registration of the Bonds does not affect or diminish such requirements. (e) The Purchaser, as a sophisticated investor, has made its own credit inquiry and analyses with respect to the Bonds and the security therefor. The Purchaser has assumed the responsibility for obtaining and making such review as the Purchaser has deemed necessary or desirable in connection with the decision to purchase the Bonds. The Purchaser is aware that the District involves certain economic variables and risks that could adversely affect the security for the Bonds. (f) The Purchaser acknowledges and understands that no official statement or private placement memorandum of any kind has been or will be prepared or provided to the Purchaser, and to the extent the Purchaser has required or desired any information related to the Bonds, the Purchaser has requested and received such information. (g) The Purchaser has been provided an opportunity to ask questions of, and the Purchaser has received answers from, representatives of the District regarding the terms and conditions of the Indenture, and the Purchaser has obtained all additional information requested by it in connection with the Indenture and the Bonds. Any additional information specifically requested by the Purchaser from the District or the City, on behalf of the District, and provided -6- P6401-1052\2527936v2.doc to the Purchaser prior to the Closing Date constitutes all the information, review and investigation that the Purchaser has deemed necessary or desirable prior to and in connection with its decision to purchase the Bonds. (h) The Purchaser is legally authorized to make the investment being made by it in the Bonds as a lawful investment of the Purchaser. (i) The person signing this Purchase Contract on behalf of the Purchaser is a duly appointed, qualified and acting representative of the Purchaser and authorized to make the certifications, representations and warranties contained in the Purchaser Letter. Section 7. Conditions to the Obligations of the Purchaser. The obligation of the Purchaser to accept delivery of, and authorize the application of the Purchase Deposit to the payment of the purchase price for, the Bonds on the Closing Date shall be subject, at the option of the Purchaser to the following conditions precedent: (a) The representations, warranties, and agreements of the City contained herein shall be true, complete, and correct in all material respects on the date hereof and on the Closing Date, as if made on and at the Closing. (b) At the Closing, the District Documents shall have been duly authorized, executed, and delivered by the respective parties thereto, all in substantially the forms heretofore made available to the Purchaser, and shall be in in full force and effect, and there shall be in full force and effect such Resolutions and such other resolution or resolutions of the City or the legislative body of the District as, in the opinion of Richards, Watson & Gershon, Los Angeles, California (“Bond Counsel”), shall be necessary or appropriate in connection with the transactions contemplated hereby and thereby. (c) At or prior to the Closing Date, the following documents shall have been delivered to Bond Counsel: (i) District Documents. Copies of the District Documents, each duly executed and delivered by the respective parties thereto; (ii) Resolutions. Certified copies of the Resolutions; (iii) District Certificate. A certificate or certificates, dated the Closing Date, signed by a duly authorized official of the District, to the effect that (a) the representations, warranties, and agreements of the District contained in this Purchase Contract are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and (b) no litigation is pending against the District or the City, notice of which has been served upon the District or the City, as applicable, or to the best knowledge of the official executing such certificate, threatened against the District or the City, seeking to restrain or enjoin the issuance, sale, or delivery of the Bonds or any of the Series 2021B Bonds, or in any way contesting or affecting the validity of the Bonds, this Purchase Contract, or the District Documents, or in any way contesting the existence or powers of the District; -7- P6401-1052\2527936v2.doc (iv) Bond Counsel Opinion. An unqualified approving opinion for the Bonds, dated the Closing Date, of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel (“Bond Counsel”), dated the Closing Date and addressed to the District, in form acceptable to the District, together with a reliance letter or letters addressed to the Trustee and the Purchaser; (v) Opinion of District Counsel. An opinion letter of Best Best & Krieger LLP, as District Counsel, dated the Closing Date and addressed to the District and the Purchaser, to the effect that (a) the Authorizing Resolution and the Resolution of Issuance were duly adopted on May 13, 2021 and [June 24, 2021], respectively, each at a regular meeting of the City Council of the City, acting as the legislative body of the District, which meeting was called and held pursuant to law, with all public notice required by law and at which a quorum was present and acting throughout, and each of the Resolutions has not been amended since its date of adoption and is now in full force and effect; (b) to the best knowledge of such counsel, the execution and delivery of the District Documents and compliance by the District with the provisions thereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the District a breach of or default under any agreement or other instrument applicable to or binding upon the District, or any existing law, regulation, court order, or consent decree to which the District is subject; and (c) there is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, or body pending with respect to which the City or the District has been properly served with process or, to the knowledge of such counsel, threatened against them, which challenges the creation, organization, existence, or powers of the City or the District, or the titles of their respective officers or the City Council members to their respective offices, or seeking to enjoin or restrain the issuance, sale, and delivery of the Bonds, the lien, the levy, and the collection of the Special Tax, or the pledge thereof, or which questions any of the rights, powers, duties, or obligations of the District with respect to the Special Tax or the moneys and assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds, or which questions any authority for the issuance of the Bonds, the validity or enforceability of the Bonds, or the District Documents, or which questions the transactions contemplated by the District Documents or this Purchase Contract; and (vi) Such other documents as may be reasonably requested by the Purchaser. If the conditions to the Purchaser’s obligations contained in this Purchase Contract are not satisfied or if the Purchaser’s obligations shall be terminated for any reason permitted herein, all obligations of the Purchaser hereunder may be terminated at, or at any time prior to, the Closing Date by written notice to the City. Section 8. Conditions to the Obligations of the District. The obligation of the District to deliver the Bonds is subject to the following conditions: (a) The Series 2021A Bonds shall have been issued concurrently with the Bonds; -8- P6401-1052\2527936v2.doc (b) As of the Closing Date, no litigation shall be pending against the District or the City, notice of which has been served upon the District or the City, as applicable, or to the best knowledge of the official executing the certificate referred to in Section 7(c)(iii) hereof, threatened against the District or the City, seeking to restrain or enjoin the issuance, sale, or delivery of the Bonds or any of the Series 2021B Bonds, or in any way contesting or affecting the validity of the Bonds, this Purchase Contract, or the District Documents, or in any way contesting the existence or powers of the District; and (c) As of the Closing Date, the District shall receive the approving opinion of Bond Counsel. Section 9. Tender of Bonds. The Bonds are being issued and sold to the Purchaser with the expectation that the Purchaser will tender the Bonds on the Closing Date in satisfaction and payment of the Purchaser’s property within the District in accordance with Section 53344.1 of the California Government Code. The Purchaser agrees to so tender the Bonds on the Closing Date in the principal amount of $__________. The District shall apply the tendered Bonds in such amount to the in full payment of the Special Tax obligation secured by such property, identified as Assessor’s Parcel Number(s) ___________________. The District hereby confirms and agrees that it shall accept the tender of the Bonds in such manner for such purpose in accordance with Section 53344.1 of the California Government Code and shall cause proper credit therefor to be entered on the records of the District and in the office of the auditor and tax collector, and following such tender and credit in full payment of said Special Tax obligation, the District shall cause a Notice of Cancellation of Special Tax Lien to be duly recorded in accordance with the Act and California Streets and Highways Code Section 3115.5. Section 10. Payment of Expenses. All expenses and costs incident to the authorization, issuance, and sale of the Series 2021B Bonds, the Tender Bonds Alternative, and the performance of the obligations of the District hereunder, including but not limited to the fees and disbursements of the Trustee and counsel to the Trustee in connection with the issuance of the Bonds, the fees and disbursements of Bond Counsel, the municipal advisor, the placement agent, the special tax consultant, and any other experts or consultants retained by the District in connection with the transactions contemplated hereby, the fees and disbursements of the District and of District Counsel in connection with the transactions contemplated hereby, and fees and expenses incurred from the California Debt and Investment Advisory Commission, shall be paid by the District from monies deposited with the City to establish and implement the Tender Bonds Alternative pursuant to the Deposit and Reimbursement Agreement approved by Resolution No. 2021-20. The Purchaser shall pay its own out-of-pocket expenses, fees of Purchaser’s counsel, if any, and federal funds interest expense, if any. Section 11. Termination. If the conditions to the parties’ obligations contained in this Purchase Contract cannot be satisfied at or prior to the Closing Date, either party may terminate this Purchase Contract. Notice of such termination shall be given to the other party to this Purchase Contract in writing. Upon any such termination neither the District nor the Purchaser shall be under any further obligation hereunder. Section 12. Parties in Interest. This Purchase Contract shall constitute the entire agreement between the Purchaser and the District and is made solely for the benefit of the -9- P6401-1052\2527936v2.doc Purchaser and the District (including their successors or assigns). No other person shall acquire or have any right hereunder or by virtue hereof. Section 13. Notice. Any notices required to be given to the District under this Purchase Contract shall be mailed, first class, postage prepaid, or personally delivered to the Director of Finance of the City of Palm Desert, 73-510 Fred Waring Drive, Palm Desert, California 92260; and all notices to the Purchaser shall be mailed, first class, postage prepaid, or personally delivered to [Name of Undeveloped Property Owner], [street address], [city], [state] [zip code], Attention: _____________________. Section 14. Governing Law. This Purchase Contract shall be construed and governed in accordance with the laws of the State of California. Section 15. Counterparts. This Purchase Contract may be executed in counterparts, each of which shall be deemed an original. [The remainder of this page is intentionally left blank.] -10- P6401-1052\2527936v2.doc IN WITNESS WHEREOF, the CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) and [NAME OF UNDEVELOPED PROPERTY OWNER], have each caused this Purchase Contract to be signed in its name by its duly authorized officer or representative, all as of the day and year first above written. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) By: City Manager of the City of Palm Desert [NAME OF UNDEVELOPED PROPERTY OWNER] By: Name: Its: A-1 P6401-1052\2527936v2.doc EXHIBIT A MATURITY SCHEDULE $_____________ City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds Subordinate Series 2021B (Taxable) The Bonds subject to purchase by the Purchaser constitute the following Series 2021B Bonds: $______________ _____% Term Bonds due September 1, 20__, Yield _____%, Price 100.00% B-1 P6401-1052\2527936v2.doc EXHIBIT B FORM OF PURCHASER LETTER July ___, 2021 City of Palm Desert Community Facilities District No. 2005-1 (University Park) Palm Desert, California Piper Sandler & Co. Sacramento, California U.S. Bank National Association Los Angeles, California Re: $_________________ aggregate initial principal amount City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Subordinate Series 2021B (Taxable) Ladies and Gentlemen: The undersigned, [Name of Undeveloped Property Owner] (the “Purchaser”), is the purchaser of $_________________ in initial principal amount of the above-referenced bonds (the “Bonds”) of the City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”). The Bonds are issued under and pursuant to Mello-Roos Community Facilities Act of 1982 (California Government Code Section 53311 et seq.), as amended (the “Act”) and a Bond Indenture, dated as of July 1, 2021 (the “Indenture”) by and between the District and U.S. Bank National Association (the “Trustee”). All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture. The undersigned acknowledges that the Bonds were issued for the purpose of refunding outstanding special tax bonds of the District upon the security of special taxes as more particularly described in the Indenture. In connection with the purchase by the Purchaser from the District of the Bonds, the Purchaser makes the following representations, warranties, and certifications upon which you may rely: (a) The Purchaser agrees to the terms and provisions set forth in the Bonds and in the Indenture, has the authority to purchase the Bonds, and to execute this letter and any other instruments and documents required to be executed by the Purchaser in connection with the purchase of the Bonds. B-2 P6401-1052\2527936v2.doc (b) The Purchaser has fully sufficient knowledge and experience in financial and business matters, including purchase and ownership of municipal obligations, as to be capable of evaluating the merits and risks of the investment represented by the Bonds on the basis of the information and review described in paragraphs (f), (g), and (h) below. (c) The Purchaser is purchasing the Bonds for its own account and is not purchasing the Bonds for the purpose of resale or distribution. The Purchaser understands that its rights under the Bonds may not be transferred, assigned or sold to any person or entity except in accordance with this Purchaser Letter and the Indenture, and (except for any tender of the Bonds by the Purchaser to the District pursuant to the Indenture) unless it first obtains from the transferee and delivers to the District a Purchaser Letter substantially in the form of this Purchaser Letter, with no material revisions except as may be approved in writing by the District. (d) The Purchaser understands that (i) the Bonds are a limited obligation of the District secured by a subordinate lien upon, and payable solely from, Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) as provided in the Indenture, (ii) no other fund or property of the District or the City of Palm Desert (the “City”) is liable for the payment of the Bonds, (iii) none of the payment obligations with respect to the Bonds are secured by a pledge of any money received or to be received from taxation by the City or any political subdivision thereof, other than the Net Taxes of the District, and (iv) there is no reserve fund for the Bonds. (e) The Purchaser understands that (i) neither the Indenture nor the Bonds have been registered with any federal or state securities agency or commission or otherwise qualified for sale under the “Blue Sky” laws or regulations of any state, and such registration is not legally required as of the date hereof; (ii) the Bonds will not be listed on any stock or other securities exchange; (iii) the Bonds do not and will not carry a rating from any rating service; (iv) the Bonds will be delivered in a form which may not be readily marketable; and (v) the Bonds are not subject any continuing disclosure undertaking pursuant to SEC Rule 15c-12, as amended. The Purchaser agrees that it will comply with any applicable state and federal securities laws then in effect with respect to any disposition of the Bonds by it, and further acknowledges that any current exemption from registration of the Bonds does not affect or diminish such requirements. (f) The Purchaser, as a sophisticated investor, has made its own credit inquiry and analyses with respect to the Bonds and the security therefor. The Purchaser has assumed the responsibility for obtaining and making such review as the Purchaser has deemed necessary or desirable in connection with the decision to purchase the Bonds. The Purchaser is aware that the District involves certain economic variables and risks that could adversely affect the security for the Bonds. (g) The Purchaser acknowledges and understands that no official statement or private placement memorandum of any kind has been or will be prepared or provided to the Purchaser, and to the extent the Purchaser has required or desired any information related to the Bonds, the Purchaser has requested and received such information. B-3 P6401-1052\2527936v2.doc (h) The Purchaser has been provided an opportunity to ask questions of, and the Purchaser has received answers from, representatives of the District regarding the terms and conditions of the Indenture, and the Purchaser has obtained all additional information requested by it in connection with the Indenture and the Bonds. Any additional information specifically requested by the Purchaser from the District or the City, on behalf of the District, and provided to the Purchaser prior to the Delivery Date constitutes all the information, review and investigation that the Purchaser has deemed necessary or desirable prior to and in connection with its decision to purchase the Bonds. (i) This Purchaser Letter is expressly for your benefit and may not be relied upon by any other party. (j) The person signing this letter on behalf of the Purchaser is a duly appointed, qualified and acting representative of the Purchaser and authorized to make the certifications, representations and warranties contained herein. IN WITNESS WHEREOF, on behalf of the undersigned Purchaser, I have hereunto set my hand as of the date first written above. [NAME OF UNDEVELOPED PROPERTY OWNER] By ______________________________________ Name ____________________________________ Title _____________________________________ RWG DRAFT 6/11/2021 P6401-1052\2545325v2.doc ESCROW AGREEMENT by and among CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK), CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK), and U.S. BANK NATIONAL ASSOCIATION as Escrow Agent Dated as of July 1, 2021 Pertaining to the Defeasance and Redemption of City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Bonds, Series 2006A TABLE OF CONTENTS Page -i- P6401-1052\2545325v2.doc Section 1. Definitions............................................................................................................. 2 Section 2. Purpose of Agreement; Escrow Agent’s Acceptance of Duties; Incorporation of Prior Bonds Indenture ................................................................ 4 Section 3. Escrow Fund ......................................................................................................... 4 Section 4. Deposits to Escrow Fund ...................................................................................... 5 Section 5. Maintenance of Escrow Fund ............................................................................... 6 Section 6. Reinvestment; Payment of Refunding Requirement............................................. 6 Section 7. Verification ........................................................................................................... 7 Section 8. Compliance with Prior Bonds Indenture............................................................... 7 Section 9. Tax Covenant ........................................................................................................ 7 Section 10. Notices .................................................................................................................. 7 Section 11. Discharge of Prior Bonds Indenture Concurrently with the Defeasance of Prior Bonds.................................................................................... 8 Section 12. Nature of Lien ....................................................................................................... 8 Section 13. Amendments ......................................................................................................... 8 Section 14. Compensation of Escrow Agent ........................................................................... 9 Section 15. Resignation or Removal of Escrow Agent; Appointment of Successor............................................................................................................... 9 Section 16. Limitation of Powers and Duties ........................................................................ 10 Section 17. Indemnification ................................................................................................... 11 Section 18. Limitation of Liability......................................................................................... 11 Section 19. Termination ......................................................................................................... 12 Section 20. Governing Law ................................................................................................... 12 Section 21. Severability ......................................................................................................... 12 Section 22. Successors Deemed Included in All References to Predecessor ........................ 12 Section 23. Counterparts ........................................................................................................ 12 SCHEDULE A REFUNDING REQUIREMENT SCHEDULE B ESCROW SECURITIES EXHIBIT A FORM OF NOTICE OF DEFEASANCE, FULL OPTIONAL REDEMPTION AND TERMINATION OF CONTINUING DISCLOSURE REPORTING OBLIGATIONS -1- P6401-1052\2545325v2.doc ESCROW AGREEMENT This Escrow Agreement (this “Agreement), is made and entered into as of July 1, 2021, by and among the City of Palm Desert Community Facilities District No. 2005-1 (University Park), a community facilities district duly formed and existing pursuant to the laws of the State of California (“CFD 2005-1”), the City of Palm Desert Community Facilities District No. 2021-1 (University Park), a community facilities district duly formed and existing pursuant to the laws of the State of California (“CFD 2021-1”), and U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, with a corporate trust office in Los Angeles, California, as Escrow Agent (the “Escrow Agent”) and Prior Bonds Trustee as hereinafter defined. RECITALS: WHEREAS, the City Council of the City of Palm Desert (the “City”) in late 2005 and early 2006 formed CFD 2005-1, which issued its Special Tax Bonds, Series 2006A, of which $26,250,000 in aggregate principal amount remain outstanding (the “Prior Bonds”); and WHEREAS, the Prior Bonds were issued pursuant to a Bond Indenture, dated as of May 1, 2006 (the “Prior Bonds Indenture”), by and between CFD 2005-1 and Wells Fargo Bank, National Association, as succeeded by U.S. Bank National Association, as successor trustee (the “Prior Bonds Trustee”); and WHEREAS, CFD 2005-1 plans to issue $______________ aggregate principal amount of Special Tax Refunding Bonds, Series 2021A (the “Series A Refunding Bonds”), and its Special Tax Refunding Bonds, Subordinate Series 2021B (Taxable) (the “Series B Refunding Bonds”; and together with the Series A Refunding Bonds, the “CFD 2005-1 Refunding Bonds”), pursuant to a Bond Indenture, dated as of July 1, 2021 (the “CFD 2005-1 Refunding Bond Indenture”), by and between CFD 2005-1 and U.S. Bank National Association, as trustee thereunder, and the Mello-Roos Community Facilities Act of 1982, as amended (the “Mello- Roos Act”), being Section 53311 et seq. of the California Government Code; and WHEREAS, the City Council of the City in early 2021 formed CFD 2021-1, which plans to issue $______________ aggregate principal amount of Special Tax Bonds, Series 2021 (the “CFD 2021-1 Refunding Bonds”), pursuant to a Bond Indenture, dated as of July 1, 2021 (the “CFD 2021-1 Refunding Bond Indenture”), by and between CFD 2021-1 and U.S. Bank National Association, as trustee thereunder, and the Mello-Roos Act; and WHEREAS, proceeds of the CFD 2005-1 Refunding Bonds and the CFD 2021- Refunding Bonds will be used to the refund all of the Prior Bonds; and WHEREAS, in accordance with the Prior Bonds Indenture, if CFD 2005-1 shall deposit, or caused to be deposited, with the Escrow Agent, as trustee thereunder, in trust, moneys or noncallable Federal Securities which, when added to other funds on hand with respect to the Prior Bonds, shall be sufficient pay to the Owners (as defined in the Prior Bonds Indenture) of Prior Bonds, the principal and interest, and premium, if any, to become due on the Prior Bonds, then the Prior Bonds shall be deemed to have been paid and the pledge of Net Taxes (as defined -2- P6401-1052\2545325v2.doc in the Prior Bonds Indenture) thereupon will cease and terminate and be discharged and satisfied; and WHEREAS, pursuant to the CFD 2005-1 Refunding Bond Indenture, a portion of the proceeds derived from the sale of the Series A Refunding Bonds and all of the proceeds derived from the sale of the Series B Refunding Bonds will be deposited in escrow with the Escrow Agent to effect the refunding of a portion of the Prior Bonds allocable to the parcels remaining subject to the levy of CFD 2005-1 Special Taxes on the Closing Date, in the principal amount of $_______________ (the “CFD 2005-1 Refunded Portion”); and WHEREAS, pursuant to the CFD 2021-1 Refunding Bond Indenture, a portion of the proceeds derived from the sale of the CFD 2021-1 Refunding Bonds will be deposited in escrow with the Escrow Agent to effect the refunding of a portion of the Prior Bonds allocable to the property within CFD 2021-1, constituting the remaining portion of the Prior Bonds in the principal amount of $_______________ (the “CFD 2021-1 Refunded Portion”); and WHEREAS, in order to provide for the proper and timely application of the moneys deposited in said escrow to the payment of the Prior Bonds, it is necessary to enter into this Escrow Agreement; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows: Section 1. Definitions. Unless the context clearly requires otherwise, capitalized terms used in this Agreement shall have the meanings ascribed to them in the introductory paragraph and the Recitals hereof. In addition, as used herein, the following terms shall have the following meanings: “Bond Counsel” means Richards, Watson & Gershon, A Professional Corporation, or such other attorney or firm of attorneys of nationally recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code selected by CFD 2005-1. “Business Day” means any day other than (i) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the corporate trust office of the Escrow Agent is located are authorized to close, or (ii) a day on which the New York Stock Exchange is closed. “CFD 2005-1” means the City of Palm Desert Community Facilities District No. 2005-1 (University Park). “CFD 2005-1 Refunded Portion” means a portion of the Prior Bonds allocable to the parcels remaining subject to the levy of CFD 2005-1 Special Taxes on the Closing Date, in the principal amount of $_______________. “CFD 2005-1 Refunding Bond Indenture” means the Bond Indenture, dated as of July 1, 2021, by and between CFD 2005-1 and the Series 2021 Trustee, pursuant to which the CFD -3- P6401-1052\2545325v2.doc 2005-1 Refunding Bonds, consisting of the Series A Refunding Bonds and the Series B Refunding Bonds, are to be issued “CFD 2005-1 Refunding Bonds” means, collectively, the Series A Refunding Bonds and the Series B Refunding Bonds. “CFD 2021-1” means the City of Palm Desert Community Facilities District No. 2021-1 (University Park). “CFD 2021-1 Refunded Portion” means a portion of the Prior Bonds allocable to the property within CFD 2021-1, in the principal amount of $_______________. “CFD 2021-1 Refunding Bond Indenture” means the Bond Indenture, dated as of July 1, 2021, by and between CFD 2005-1 and the Series 2021 Trustee, pursuant to which the CFD 2021-1 Refunding Bonds are to be issued “CFD 2021-1 Refunding Bonds” means, the $______________ initial aggregate principal amount City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2021. “City” means the City of Palm Desert. “Closing Date” means July __, 2021, the date on which the CFD 2005-1 Refunding Bonds and the CFD 2021-1 Refunding Bonds are being issued. “Code” means the Internal Revenue Code of 1986 as amended, together with regulations promulgated, and official public guidance published, thereunder. “Escrow Agent” means U.S. Bank National Association, in its capacity as the successor trustee for the Prior Bonds under the Prior Bonds Indenture and as escrow agent under this Agreement, and its successors and assigns. “Escrow Fund” means the “Escrow Fund” established and held by the Escrow Agent pursuant to Section 3. “Escrow Securities” means the Federal Securities set forth in Schedule B attached hereto. “Federal Securities” means any of the following: (a) non-callable direct obligations of the United States of America (“Treasuries”), (b) evidence of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, and (c) pre-refunded municipal obligations rated “AAA” and “Aaa” by Standard & Poor’s and Moody’s, respectively (or any combination thereof). -4- P6401-1052\2545325v2.doc “Prior Bonds” means all of the remaining outstanding City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Bonds, Series 2006A. “Prior Bonds Trustee” means U.S. Bank National Association, as successor trustee under the Prior Bonds Indenture. “Prior Bonds Indenture” means the Bond Indenture, dated as of May 1, 2006, by and between CFD 2005-1 and the Prior Bonds Trustee, pursuant to which the Prior Bonds were issued. “Redemption Date” means September 1, 2021. “Refunding Requirement” means an amount sufficient to pay the principal, interest, and the redemption premium (if any) with respect to the Prior Bonds on the Redemption Date, all as set forth in Schedule A attached hereto. “Series 2021 Trustee” means U.S. Bank National Association, as trustee under the CFD 2005-1 Refunding Bond Indenture and the CFD 2021-1 Refunding Bond Indenture. “Series A Refunding Bonds” means, the $______________ initial aggregate principal amount City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Series 2021A. “Series B Refunding Bonds” means, the $______________ initial aggregate principal amount City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Refunding Bonds, Subordinate Series 2021B (Taxable). Section 2. Purpose of Agreement; Escrow Agent’s Acceptance of Duties; Incorporation of Prior Bonds Indenture. CFD 2005-1, CFD 2021-1, and the Escrow Agent are entering into this Agreement for the benefit of the Owners of the Prior Bonds to provide for the refunding of all of the remaining outstanding Prior Bonds in the manner contemplated in Section 9.1 of the Prior Bonds Indenture. The Escrow Agent hereby accepts its duties and obligations expressly provided in this Agreement and agrees that the irrevocable instructions to the Escrow Agent contained herein are in a form satisfactory to it. The applicable and necessary provisions of the Prior Bonds Indenture, including particularly the defeasance and redemption provisions thereof, are incorporated herein by reference. Reference herein to, or citation herein of, any provisions of the Prior Bonds Indenture shall be deemed to incorporate the same as a part hereof in the same manner and with the same effect as if the same were fully set forth herein. In addition to the foregoing, the Escrow Agent hereby further acknowledges receipt of a true and correct copy of the CFD 2005-1 Refunding Bond Indenture and the CFD 2021- Refunding Bond Indenture. Section 3. Escrow Fund. There is created and established with the Escrow Agent a special and irrevocable trust fund designated the “2005-1 (University Park) 2006A Bonds Escrow Fund” (the “Escrow Fund”) to be held by the Escrow Agent separate and apart from all other funds of CFD 2005-1, CFD 2021-1, or the Escrow Agent and used only for the purposes and in the manner provided in this Agreement. -5- P6401-1052\2545325v2.doc Section 4. Deposits to Escrow Fund. (a) Amounts with respect to CFD 2005-1 Refunded Portion of Prior Bonds. On the Closing Date, CFD 2005-1 shall cause to be deposited with the Escrow Agent in the Escrow Fund with respect to the CFD 2005-1 Refunded Portion of the Prior Bonds, to be held in irrevocable trust by the Escrow Agent and to be applied solely as provided in this Escrow Agreement, (i) $___________, representing a portion of the proceeds of the Series A Refunding Bonds, (ii) $___________, representing all of the proceeds of the Series B Refunding Bonds, (iii) $___________ of CFD 2005-1 prior Fiscal Years surplus levy and investment earnings funds transferred by the City, (iv) $___________ of current Fiscal Year levy revenues transferred by the City, (v) $___________, representing a Special Tax prepayment received and transferred by the City with respect to Assessor’s Parcel No. 694-191-014, and (vi) $___________ of excess moneys from the funds and accounts under the Prior Bonds Indenture, which CFD 2005-1 hereby instructs the Prior Bonds Trustee to deliver to the Escrow Agent, as follows: (a) $_____________ from the Reserve Account of the Special Tax Fund established under the Prior Bonds Indenture, (b) $_____________ from the Backbone Infrastructure Account of the City Facilities Fund established under the Prior Bonds Indenture, (c) $_____________ from the Interest Account of the Special Tax Fund established under the Prior Bonds Indenture, (d) $_____________ from the Principal Account of the Special Tax Fund established under the Prior Bonds Indenture, (e) $_____________ from the Surplus Fund established under the Prior Bonds Indenture, and (f) $_____________ from the Redemption Account of the Special Tax Fund established under the Prior Bonds Indenture. The sum of the deposits and transfers pursuant to this Section 4(a) is $___________, and such amount, together with the total amount deposited and transferred pursuant to Section 4(b) below and interest earnings on the Escrow Securities as described in Schedule B, is equal to the Refunding Requirement as certified in the report provided by Robert Thomas CPA, LLC, referenced in Section 7 of this Agreement. (b) Amounts with respect to CFD 2021-1 Refunded Portion of Prior Bonds. On the Closing Date, CFD 2021-1 shall cause to be deposited with the Escrow Agent in the Escrow Fund with respect to the CFD 2021-1 Refunded Portion of the Prior Bonds, to be held in irrevocable trust by the Escrow Agent and to be applied solely as provided in this Escrow Agreement, (i) $___________, representing a portion of the proceeds of the CFD 2021-1 Refunding Bonds, (ii) $___________ of CFD 2005-1 prior Fiscal Years surplus levy and investment earnings funds transferred by the City, (iii) $___________ of current Fiscal Year levy revenues transferred by the City, (iv) $___________, representing a Special Tax prepayment received and transferred by the City with respect to Assessor’s Parcel No. 694-191-014, and (v) $___________ of excess moneys from the funds and accounts under the Prior Bonds Indenture, which CFD 2005-1 hereby instructs the Prior Bonds Trustee to deliver to the Escrow Agent, as follows: (a) $_____________ from the Reserve Account of the Special Tax Fund established under the Prior Bonds Indenture, (b) $_____________ from the Backbone Infrastructure Account of the City Facilities Fund established under the Prior Bonds Indenture, (c) $_____________ from the Interest Account of the Special Tax Fund established under the Prior Bonds Indenture, (d) $_____________ from the Principal Account of the Special Tax Fund established under the Prior Bonds Indenture, (e) $_____________ from the Surplus Fund established under the Prior Bonds Indenture, and (f) $_____________ from the Redemption Account of the Special Tax Fund established under the Prior Bonds Indenture. Such amount, -6- P6401-1052\2545325v2.doc together with the total amount deposited and transferred pursuant to Section 4(a) above and interest earnings on the Escrow Securities as described in Schedule B, is equal to the Refunding Requirement as certified in the report provided by Robert Thomas CPA, LLC, referenced in Section 7 of this Agreement. Section 5. Maintenance of Escrow Fund. The Escrow Agent, upon receipt of the moneys described in Section 4, shall immediately invest $___________ of such moneys in the Escrow Securities described in Schedule B and deposit such Escrow Securities in the Escrow Fund, and deposit the remaining $___________ in the Escrow Fund to hold uninvested. The Escrow Agent is hereby authorized and empowered to deposit uninvested monies held hereunder from time to time in demand deposit accounts, without payment of interest thereon as provided hereunder, established at commercial banks that are corporate affiliates of the Escrow Agent. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, at the written request of CFD 2005-1 and upon compliance with the conditions hereinafter set forth, the Escrow Agent shall have the power to sell, transfer, request the redemption of or otherwise dispose of some or all of the Escrow Securities in the Escrow Fund and to substitute Federal Securities. The foregoing may be effected only if: (a) the substitution of Federal Securities for the substituted Escrow Securities occurs simultaneously; (b) the amounts of and dates on which the anticipated transfers from the Escrow Fund for the payment of the principal or interest with respect to the Prior Bonds will not be diminished or postponed thereby, as shown in the verification report (described below) of an independent certified public accountant; (c) the Escrow Agent shall receive the unqualified opinion of counsel, addressed to the Escrow Agent, to the effect that CFD 2005-1 has the right and power to effect such disposition and substitution; and (d) the Escrow Agent shall receive from an independent certified public accountant a verification report, addressed to CFD 2005-1, CFD 2021-1, the Escrow Agent, and Bond Counsel, certifying that, immediately after such transaction, the principal of and interest on the Federal Securities in the Escrow Fund will, together with other moneys available for such purpose, be sufficient to pay the Refunding Requirement. Any cash received from the disposition and substitution of Escrow Securities pursuant to this Section to the extent that, as shown in such certification, such cash will not be required, in accordance with the Prior Bonds Indenture and this Agreement, at any time for the payment when due as provided in Section 6, shall be applied as set forth in Section 19 of this Agreement. The Escrow Agent shall furnish CFD 2005-1 periodic cash transaction statements which include detail for all investment transactions effected by the Escrow Agent or brokers selected by CFD 2005-1. Section 6. Reinvestment; Payment of Refunding Requirement. (a) As the principal of the Escrow Securities shall mature and be paid, and the investment income and earnings thereon are paid, the Escrow Agent shall reinvest such moneys in Federal Securities in accordance with the written instructions of CFD 2005-1; provided, in connection with any such reinvestment, CFD 2005-1 shall provide to the Escrow Agent a verification report of an independent certified public accountant, addressed to CFD 2005-1, the Escrow Agent, and Bond Counsel, certifying that, immediately after such reinvestment, the principal of and interest on the Federal Securities in the Escrow Fund will, together with other moneys available for such purpose, be sufficient to pay the Refunding Requirement. -7- P6401-1052\2545325v2.doc (b) On the Redemption Date, the Escrow Agent shall disburse from the Escrow Fund to the Prior Bonds Trustee an amount sufficient to pay the Refunding Requirement, and the Prior Bonds Trustee shall apply such monies to redeem the Prior Bonds for the equal and ratable benefit of the Owners of the Prior Bonds. (c) Upon CFD 2005-1’s election, such statements will be delivered via the Escrow Agent’s online service and upon electing such service, paper statements will be provided only upon request. CFD 2005-1 waives the right to receive brokerage confirmations of security transactions effected by the Escrow Agent as they occur, to the extent permitted by law. CFD 2005-1 further understands that trade confirmations for securities transactions effected by the Escrow Agent will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. Section 7. Verification. CFD 2005-1 has caused schedules to be prepared relating to the sufficiency of the anticipated receipts from the Escrow Securities, together with other moneys deposited in the Escrow Fund, to pay the Refunding Requirement. CFD 2005-1 shall furnish the Escrow Agent with the report of Robert Thomas CPA, LLC, Minneapolis, Minnesota, verifying the mathematical accuracy of the computations contained in such schedules. Section 8. Compliance with Prior Bonds Indenture. CFD 2005-1 hereby directs and the Prior Bonds Trustee hereby agrees that it will take all the actions required to be taken by it under the Prior Bonds Indenture, including the timely transfer of moneys for the payment of principal, interest and redemption premium (if any) with respect to the Prior Bonds, in order to effectuate this Agreement. The liability of the Escrow Agent for the payment of the Refunding Requirement, pursuant to this Section shall be limited to the application, in accordance with this Agreement, of moneys and the Escrow Securities in the Escrow Fund (including interest earnings thereon, if any) available for the purposes of and in accordance with this Agreement. Section 9. Tax Covenant. Notwithstanding any other provision of this Agreement, each of CFD 2005-1 and CFD 2021-1 hereby covenants that no part of the proceeds of the CFD 2005-1 Refunding Bonds or the CFD 2021-1 Refunding Bonds, as applicable, or of the moneys, funds, or securities held by the Escrow Agent hereunder shall be used, and that neither CFD 2005-1 nor CFD 2021-1 shall direct the Escrow Agent to use any of such moneys or funds at any time, directly or indirectly, in a manner that would cause any of the Series 2021 Bonds to be an “arbitrage bond” under Section 148 of the Code and regulations of the Treasury Department thereunder proposed or in effect at the time of such use and applicable to obligations issued on the date of issuance of such CFD 2005-1 Refunding Bonds and such CFD 2021-1 Refunding Bonds. None of CFD 2005-1, CFD 2021-1, or the Escrow Agent shall sell, transfer or otherwise dispose of the Escrow Securities or otherwise transfer or dispose of moneys or securities held in the Escrow Fund except as set forth in this Agreement; provided that the Escrow Agent may effectuate the transfer of such securities or moneys to a successor escrow agent in accordance with the provisions of Section 15 relating to the transfer of rights and property to successor escrow agents. Section 10. Notices. As soon as practicable upon the Escrow Agent’s receipt of moneys for deposit in the Escrow Fund pursuant to Section 4 (but in no event later than (i) 30 days before the Redemption Date set forth in Schedule A, or (ii) ten (10) Business Days after the -8- P6401-1052\2545325v2.doc Closing Date), the Escrow Agent shall send a notice of defeasance and redemption, substantially in form set forth in Appendix A, (a) to the Owners (as defined in the Prior Bonds Indenture) of the Prior Bonds at their addresses appearing on the registration books maintained with respect to the Prior Bonds in the form and manner prescribed by Section 4.3 of the Prior Bonds Indenture, and (b) to The Depository Trust Company in the form and manner prescribed by Section 4.3 of the Prior Bonds Indenture, and (c) to be filed on the Electronic Municipal Market Access System (“EMMA”), a facility of the Municipal Securities Rulemaking Board (the “MSRB”), in an electronic format accompanied by identifying information as prescribed by the MSRB. Section 11. Discharge of Prior Bonds Indenture Concurrently with the Defeasance of Prior Bonds. CFD 2005-1 hereby gives notice, pursuant to Section 4.1(a) of the Prior Bonds Indenture, that by entering into this Agreement, it is electing to defease and redeem all of the remaining outstanding Prior Bonds, notwithstanding that such Prior Bonds shall not have been surrendered for payment. Concurrently with the initial deposit of the monies and the Escrow Securities in the Escrow Fund pursuant to Sections 4 and 5 hereof, the Prior Bonds shall no longer deemed to be outstanding within the meaning and with the effect expressed in the Prior Bonds Indenture, the Prior Bonds Indenture will be discharged and terminated with respect to the Prior Bonds pursuant to Section 9.1 of the Prior Bonds Indenture, and the pledge of the “Net Taxes” and other funds provided for such Bonds under the Prior Bonds Indenture shall cease and terminate and be discharged and satisfied. Section 12. Nature of Lien. The trust hereby created shall be irrevocable. The Owners of the Prior Bonds shall have an express lien on all of the moneys and Escrow Securities in the Escrow Fund, including the interest earnings thereon, until paid out, used and applied in accordance with this Agreement. Section 13. Amendments. This Agreement is made pursuant to and in furtherance of the Prior Bonds Indenture, the CFD 2005-1 Refunding Bond Indenture, and the CFD 2021-1 Refunding Bond Indenture and for the benefit of CFD 2005-1 and the Owners from time to time of the Prior Bonds, and it shall not be repealed, revoked, altered, amended or supplemented without the written consent of all such Owners and the written consent of the Escrow Agent, CFD 2005-1, and CFD 2021-1; provided, however, that CFD 2005-1, CFD 2021-1, and the Escrow Agent may, without the consent of, or notice to, such Owners, enter into such agreement or agreements supplemental to this Agreement as shall not materially adversely affect the rights of such Owners and as shall not be inconsistent with the terms and provisions of this Agreement, for any one or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in this Agreement; (b) to grant to, or confer upon, the Escrow Agent for the benefit of the Owners of the Prior Bonds, any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such Owners or the Escrow Agent; (c) to transfer to the Escrow Agent and make subject to this Agreement additional funds, securities or properties; -9- P6401-1052\2545325v2.doc (d) to conform the Agreement to the provisions of any law or regulations governing the tax-exempt status of the Prior Bonds and the Series 2021 Bonds in order to maintain their tax-exempt status; and (e) to make any other change determined by CFD 2005-1 to be not materially adverse to the Owners of the Prior Bonds. The Escrow Agent shall be entitled to rely exclusively upon an opinion of Bond Counsel with respect to compliance with this Section, including the extent, if any, to which any change, modification or addition affects the rights of the Owners of the Prior Bonds, or that any instrument executed hereunder complies with the conditions and provisions of this Section. Section 14. Compensation of Escrow Agent. In consideration of the services rendered by the Escrow Agent under this Agreement, each of CFD 2005-1 and CFD 2021-1 agrees to and shall pay to the Escrow Agent its proper fees and expenses in accordance with the letter agreement therefor reached by the Escrow Agent and CFD 2005-1 or CFD 2021-1, as applicable, including all reasonable expenses, charges, counsel fees and other disbursements incurred by it or by its attorneys, agents and employees in and about the performance of their powers and duties hereunder, from any moneys of CFD 2005-1 or CFD 2021-1, as applicable, lawfully available therefor and the Escrow Agent shall have no lien whatsoever upon any of the moneys or Escrow Securities in the Escrow Fund for the payment of such proper fees and expenses. Section 15. Resignation or Removal of Escrow Agent; Appointment of Successor. Notwithstanding anything to the contrary in Article VII of the Prior Bonds Indenture, the Escrow Agent agrees to abide by this Section 15 with respect to its duties under this Agreement. The Escrow Agent at the time acting hereunder may at any time resign and be discharged from the trusts hereby created by giving not less than 30 days’ written notice to CFD 2005-1 and CFD 2021-1 specifying the date when such resignation will take effect, but no such resignation shall take effect unless a successor Escrow Agent shall have been appointed by the Owners of the Prior Bonds or by CFD 2005-1 and CFD 2021-1 as hereinafter provided and such successor Escrow Agent shall have accepted such appointment, in which event such resignation shall take effect immediately upon the appointment and acceptance of a successor Escrow Agent. The Escrow Agent may be removed at any time by an instrument or concurrent instruments in writing, delivered to the Escrow Agent, CFD 2005-1, and CFD 2021-1 and signed by the registered Owners of a majority in principal amount of the Prior Bonds. The Escrow Agent may also be removed at any time by CFD 2005-1 or CFD 2021-1 with not less than 30 days’ prior written notice to the Escrow Agent, the Prior Bonds Trustee (if different from the Escrow Agent), and the registered Owners of the Prior Bonds. In the event the Escrow Agent hereunder shall resign or be removed, or be dissolved, or shall be in the course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case the Escrow Agent shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor Escrow Agent may be appointed by the Owners of a majority in principal amount of the Prior Bonds, by an instrument or concurrent instruments in writing, signed by such Owners, or by their attorneys in fact, duly authorized in -10- P6401-1052\2545325v2.doc writing; provided, nevertheless, that in any such event, CFD 2005-1 and CFD 2021-1 shall appoint a temporary Escrow Agent to fill such vacancy until a successor Escrow Agent shall be appointed by the Owners of a majority in principal amount of the Prior Bonds, and any such temporary Escrow Agent so appointed by CFD 2005-1 and CFD 2021-1 shall immediately and without further act be superseded by the Escrow Agent so appointed by such Owners. In the event that no appointment of a successor Escrow Agent or a temporary successor Escrow Agent shall have been made by such Owners, CFD 2005-1, or CFD 2021-1 pursuant to the foregoing provisions of this Section within 30 days after written notice of the removal or resignation of the Escrow Agent has been given to CFD 2005-1and CFD 2021-1, the Owner of any of the Prior Bonds or any retiring Escrow Agent may apply to any court of competent jurisdiction for the appointment of a successor Escrow Agent, and such court may thereupon, after such notice, if any, as it shall deem proper, appoint a successor Escrow Agent. No successor Escrow Agent shall be appointed unless such successor Escrow Agent shall be a corporation with trust powers organized under the banking laws of the United States or any state, and shall have at the time of appointment capital and surplus of not less than $100,000,000. Every successor Escrow Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to CFD 2005-1 and CFD 2021-1, an instrument in writing accepting such appointment hereunder and thereupon such successor Escrow Agent without any further act, deed or conveyance, shall become fully vested with all the rights, immunities, powers, trusts, duties and obligations of its predecessor; but such predecessor shall, nevertheless, on the written request of such successor Escrow Agent, CFD 2005-1, or CFD 2021-1 execute and deliver an instrument transferring to such successor Escrow Agent all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Escrow Agent shall deliver all securities and moneys held by it to its successor. Should any transfer, assignment or instrument in writing from CFD 2005-1 or CFD 2021-1 be required by any successor Escrow Agent for more fully and certainly vesting in such successor Escrow Agent the estates, rights, powers and duties hereby vested or intended to be vested in the predecessor Escrow Agent, any such transfer, assignment and instrument in writing shall, on request, be executed, acknowledged and delivered by CFD 2005-1 or CFD 2021-1, as applicable. Any entity into which the Escrow Agent, or any successor to it in the trusts created by this Agreement, may be merged or converted or with which it or any successor to it may be consolidated, or any entity resulting from any merger, conversion, consolidation or tax free reorganization to which the Escrow Agent or any successor to it shall be a party, shall, if it meets the qualifications set forth in the fifth paragraph of this Section and if it is otherwise satisfactory to CFD 2005-1 and CFD 2021-1, be the successor Escrow Agent under this Agreement without the execution or filing of any paper or any other act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 16. Limitation of Powers and Duties. The Escrow Agent shall have no power or duty to invest any funds held under this Agreement except as provided in Sections 5 and 6 hereof. The Escrow Agent shall have no power or duty to transfer or otherwise dispose of the moneys held hereunder except as provided in this Agreement. -11- P6401-1052\2545325v2.doc Section 17. Indemnification. To the extent permitted by law, each of CFD 2005-1 and CFD 2021-1 hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Agent and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Agent at any time (whether or not also indemnified against the same by CFD 2005-1, CFD 2021-1, or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the moneys and securities deposited therein, the purchase of any securities to be purchased pursuant thereto, the retention of such securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Agreement; provided, however, that neither CFD 2005-1 nor CFD 2021-1 shall be required to indemnify the Escrow Agent against the Escrow Agent’s own negligence or willful misconduct or the negligence or willful misconduct of the Escrow Agent’s employees. In no event shall CFD 2005-1, CFD 2021-1, or the Escrow Agent be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this Section. The indemnities contained in this Section shall survive the termination of this Agreement and removal or resignation of the Escrow Agent. Section 18. Limitation of Liability. The Escrow Agent and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or any securities deposited therein, the purchase of the securities to be purchased pursuant hereto, the retention of such securities or the proceeds thereof, the sufficiency of the securities or uninvested moneys held hereunder to accomplish the payment and redemption of the Prior Bonds, or any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Agreement or by reason of any non-negligent act, non-negligent omission or non-negligent error of the Escrow Agent made in good faith in the conduct of its duties. The Escrow Agent shall incur no liability for losses arising from any investment made in accordance with this Agreement. The recitals of fact contained in the Recitals of this Agreement shall be taken as the statements of CFD 2005-1 and CFD 2021-1, and the Escrow Agent assumes no responsibility for the correctness thereof. The Escrow Agent makes no representation as to the sufficiency of any securities to be purchased pursuant hereto and any uninvested moneys to accomplish the payment and redemption of the Prior Bonds pursuant to the Prior Bonds Indenture or to the validity of this Agreement as to CFD 2005-1 or CFD 2021-1 and, except as otherwise provided herein, the Escrow Agent shall incur no liability in respect thereof. The Escrow Agent shall not be liable in connection with the performance of its duties under this Agreement except for its own negligence or willful misconduct and the duties and obligations of the Escrow Agent shall be determined by the express provisions of this Agreement. Anything in this Agreement notwithstanding, the Escrow Agent shall not be liable for any consequential (i.e., special or indirect) losses or damages in performing its duties or in exercising its rights or power pursuant to this Agreement. The Escrow Agent may consult with counsel, who may or may not be counsel to CFD 2005-1 or CFD 2021-1. Whenever the Escrow Agent shall deem it necessary -12- P6401-1052\2545325v2.doc or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of nationally recognized bond counsel) may be deemed to be conclusively established by a written certification of CFD 2005-1 or CFD 2021-1, as applicable. Whenever the Escrow Agent shall deem it necessary or desirable that a matter specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of nationally recognized bond counsel be proved or established prior to taking, suffering, or omitting any such action, such matter may be established only by such a certificate or such an opinion. No provision of this Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties in accordance with this Agreement, or in the exercise of its rights or powers. Section 19. Termination. This Agreement shall terminate when moneys have been withdrawn from the Escrow Fund in a sufficient amount to satisfy the Refunding Requirement and applied to redeem and pay all Prior Bonds in accordance with Section 6 of this Agreement. Upon such termination, all moneys remaining in the Escrow Fund, if any, after payment of any amounts due to the Escrow Agent hereunder, shall be transferred in the respective percentages of 34.74% and 65.26% (as nearly as possible) to the Interest Account of the Special Tax Fund established and held under the CFD 2005-1 Refunding Bond Indenture and the CFD 2021-1 Refunding Bond Indenture to pay debt service on the CFD 2005-1 Refunding Bonds and the CFD 2021-1 Refunding Bonds, as applicable. Section 20. Governing Law. This Agreement shall be governed by the laws of the State of California. Section 21. Severability. If any one or more of the covenants or agreements provided in this Agreement on the part of CFD 2005-1, CFD 2021-1, or the Escrow Agent to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. Section 22. Successors Deemed Included in All References to Predecessor. All the covenants, promises and agreements in this Agreement contained by or on behalf of CFD 2005- 1, CFD 2021-1, or the Escrow Agent shall bind and inure to the benefit of their respective successors and assigns, whether so expressed or not. Section 23. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. [Remainder of Page Intentionally Left Blank] -13- P6401-1052\2545325v2.doc IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers and appointed or elected officials as of the date first written above. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (UNIVERSITY PARK) By Mayor of the City of Palm Desert Attest: ______________________ M. Gloria Sanchez, Acting City Clerk CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) By Mayor of the City of Palm Desert Attest: ______________________ M. Gloria Sanchez, Acting City Clerk U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent and Prior Bonds Trustee By Authorized Officer Schedule A P6401-1052\2545325v2.doc SCHEDULE A REFUNDING REQUIREMENT “Prior Bonds” City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Bonds, Series 2006A Redemption Date Principal* Interest Redemption Premium Refunding Requirement September 1, 2021 $26,250,000.00 $_________ $0.00 $_________ CFD 2005-1 Refunded Portion: $9,119,977.70 $_________ $0.00 $_________ CFD 2021-1 Refunded Portion: $17,130,022.30 $_________ $0.00 $_________ * Consists of the following Prior Bonds with mandatory sinking fund redemption price coming due payable, or to be optionally redeemed, on September 1, 2021, as applicable: Maturity Date (September 1) Principal (Total) CFD 2005-1 Refunded Portion CFD 2021-1 Refunded Portion Interest Rate Redemption Price 2021 $ 704,778.06 $ 375,221.94 $1,080,000.00 5.000% 100% 2026 4,111,205.36 2,188,794.64 6,300,000.00 5.250 100 2032 3,435,793.04 1,829,206.96 5,265,000.00 5.300 100 2032 3,191,078.44 1,698,921.56 4,890,000.00 5.450 100 2036 5,687,167.40 3,027,832.60 8,715,000.00 5.500 100 Schedule B P6401-1052\2545325v2.doc SCHEDULE B ESCROW SECURITIES Type of Security Maturity Date Par Amount Rate Yield Price [SLGS] __/__/2021 $____________ ____% ____% ____% Purchase Date Cost of Securities Cash Deposit Total Escrow Cost Yield July __, 2021 $____________ $____ $____________ ____% Exhibit A P6401-1052\2545325v2.doc EXHIBIT A FORM OF NOTICE OF DEFEASANCE, FULL OPTIONAL REDEMPTION AND TERMINATION OF CONTINUING DISCLOSURE REPORTING OBLIGATIONS NOTICE OF DEFEASANCE, FULL OPTIONAL REDEMPTION AND TERMINATION OF CONTINUING DISCLOSURE REPORTING OBLIGATION City of Palm Desert Community Facilities District No. 2005-1 (University Park) Special Tax Bonds, Series 2006A NOTICE IS HEREBY GIVEN to the owners of the above-captioned bonds, dated May 9, 2006 (the “Bonds”), of the City of Palm Desert Community Facilities District No. 2005-1 (University Park) (the “District”) in accordance with that certain Bond Indenture, dated as of May 1, 2006 (the “Indenture”), by and between the District and Wells Fargo Bank, National Association, as succeeded by U.S. Bank National Association, as successor trustee (the “Trustee”), pursuant to which such Bonds were originally issued on May 9, 2006, that all of the outstanding Bonds, in the aggregate principal amount of $26,250,000, have been refunded and called for redemption on September 1, 2021 (the “Redemption Date”), subject to the provisions of the succeeding paragraphs of this notice, and pursuant to the provisions of the governing documents of the Bonds. The Bonds maturing or called for redemption have the maturity dates, principal amounts, and CUSIP numbers as set forth below: Maturity (September 1) Principal Amount Interest Rate Redemption Price Bond No. CUSIP* 2021 $1,080,000 5.000% 100% R-10 696627 BV9 2026 6,300,000 5.250 100 R-11 696627 CA4 2032 5,265,000 5.300 100 R-12 696627 CF3 2032 4,890,000 5.450 100 R-13 696627 CG1 2036 8,715,000 5.500 100 R-14 696627 CL0 Pursuant to the Indenture, on the Redemption Date, the principal and interest accrued to the Redemption Date on such Bonds, without redemption premium (the “Redemption Price”), shall become due and payable, and from and after the Redemption Date, interest on the Bonds shall cease to accrue and be payable. Pursuant to Section 9.1 of the Indenture, the lien of the above captioned Bonds issued pursuant to the Indenture has been discharged through the irrevocable deposit in escrow of cash and noncallable Federal Securities (as defined in the Indenture). Owners of the Bonds should surrender said Bonds on the Redemption Date at the following address: BY HAND OR MAIL U.S. Bank National Association Global Corporate Trust Services 111 Fillmore Ave. E St. Paul, MN 55107 For Bonds surrendered by mail, the use of registered or certified mail is suggested. Exhibit A P6401-1052\2545325v2.doc IMPORTANT NOTICE: Federal law requires the Trustee to withhold taxes at the applicable rate from the payment if an IRS Form W-9 or applicable IRS Form W-8 is not provided. Please visit www.irs.gov or contact the Internal Revenue Service for additional information on the tax forms and instructions. NOTICE IS ADDITIONALLY GIVEN that, pursuant to Section 9.1 of the Indenture, the lien pursuant to such Indenture on the above-referenced Bonds has been discharged through the irrevocable deposit of cash and non-callable Federal Securities (as defined in the Indenture) in an Escrow Fund (the “Escrow Fund”). The Escrow Fund is established and held by the Trustee as escrow agent pursuant to the Escrow Agreement, dated as of July 1, 2021 (the “Escrow Agreement”), relating to the redemption and defeasance of the Bonds. As a result of such deposit in the Escrow Fund, the above-referenced Bonds are deemed to have been paid and defeased in accordance with the Indenture. Obligations of the District to the Owners of the above- referenced Bonds shall hereafter be limited to the application of moneys and securities in the Escrow Fund for the payment of outstanding principal on such bonds and the interest payment on such bonds due and payable on or before the Redemption Date. NOTICE IS HEREBY GIVEN, FURTHER, that such defeasance constitutes the legal defeasance of all of the remaining outstanding Bonds, and accordingly, pursuant to Section 5 of the Continuing Disclosure Agreement with respect to the Bonds (the “2006 Continuing Disclosure Agreement”), the obligations of the District and Willdan Financial Services, as successor dissemination agent, under the 2006 Continuing Disclosure Agreement have also terminated. * The CUSIP numbers are included solely for the convenience of the Owners of the Bonds. None of the District, the Trustee, nor the Escrow Agent shall be responsible for any error of any nature relating to such numbers. No representation is made as to the correctness of the CUSIP number either as printed on any Bond or as contained herein, and any error in the CUSIP number shall not affect the validity of the proceedings for redemption of the Bonds. DATED this ___th day of July, 2021 By: U.S. Bank National Association, as Trustee and Escrow Agent on behalf of the City of Palm Desert Community Facilities District No. 2005-1 (University Park) [This page has intentionally been left blank.] -1- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\08 Resolution of Issuance (Palm Desert CFD 2021-1 STBs 2021) 6.24.21.DOCX RESOLUTION NO. 2021-39 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT, ACTING FOR ITSELF AND AS THE LEGISLATIVE BODY OF CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021- 1 (UNIVERSITY PARK), TO AUTHORIZE THE ISSUANCE OF THE DISTRICT’S SPECIAL TAX BONDS, SERIES 2021, AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH RECITALS: WHEREAS, the City Council of the City of Palm Desert (the “City”), located in Riverside County, California (the “City Council”, and hereinafter sometimes referred to also as the “legislative body of the District”), has heretofore undertaken proceedings and declared the necessity of City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”) to issue bonds, pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “Act”); and WHEREAS, based upon Resolution Nos. 2021-10 (the “Resolution of Formation”) and 2021-11 adopted by the legislative body of the District on April 22, 2021 and an election held on May 13, 2021 authorizing the levy of a special tax and the issuance of bonds by the District, the District is authorized to issue bonds for one or more series, pursuant to the Act, in an aggregate principal amount not to exceed $50,000,000; and WHEREAS, the property within the District is also located within and encompasses a portion of the property within the boundaries of City of Palm Desert Community Facilities District No. 2005-1 (University Park) (“CFD 2005-1”), which has previously issued its $50,000,000 aggregate initial principal amount Special Tax Bonds, Series 2006A (the “2006A Bonds”), of which $26,250,000 in aggregate principal amount is currently outstanding; and WHEREAS, on September 10, 2020, the City Council authorized and directed City staff to work with a team of financing professionals on the issuance of refunding bonds to refund the outstanding 2006A Bonds for debt service savings (the “Refunding Program”), including but not limited to the issuance of refunding bonds by CFD 2005-1 and the issuance of bonds by the District; and WHEREAS, at this time, the District intends to finance certain public facilities identified in the Resolution of Formation (including but not limited to the payment and defeasance of a portion of outstanding 2006A Bonds issued by, and secured by the special taxes of, CFD 2005-1) through the issuance of bonds up to an aggregate principal amount of $15,900,000, designated as the “City of Palm Desert Community Facilities District No. 2021-1 (University Park), Special Tax Bonds, Series 2021” (the “Series 2021 Bonds”); and RESOLUTION NO. 2021-39 -2- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\08 Resolution of Issuance (Palm Desert CFD 2021-1 STBs 2021) 6.24.21.DOCX WHEREAS, the legislative body of the District has determined that it is prudent in the management of its fiscal affairs to issue the Series 2021 Bonds; and WHEREAS, the value of the real property in the District subject to the special tax to pay debt service on the Series 2021 Bonds is not less than three times the principal amount of the Series 2021 Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District, which fact is required as a precondition to the issuance of the Series 2021 Bonds; and WHEREAS, on January 10, 2019, the City Council approved an updated local debt policy (the “Local Debt Policy”) in furtherance of Section 8855(i) of the California Government Code, as amended by SB 1029, enacted as Chapter 307, Statutes of 2016; and WHEREAS, the Local Debt Policy provides that, except for instances in which a bullet payment or spike in debt service is being refinanced, absent a compelling reason or financial benefit to the City, any refinancing should not result in an increase to the weighted average life of the refinanced debt; and WHEREAS, the District was formed by the City Council at the request and petition of University Park Investor, LLC, the owner and developer of the property within the District (the “Developer”) to finance, in addition to the payment and defeasance of a portion of the 2006A Bonds allocable to the District, certain public facilities necessary to meet the increased demands placed upon the public infrastructure, the City, and the Coachella Valley Water District as a result of the development of the property within the boundaries of the District (including development impact fees therefor) (the “New Public Facilities”), and the financing of such New Public Facilities is significantly constrained without an extension of the term and weighted average life of the refinanced debt; and WHEREAS, a compelling reason and a financial benefit to the City exist in this case, in accordance with the Local Debt Policy, to support the extension of the term and weighted average life of the refinanced debt, because (i) the District was formed to finance the New Public Facilities required for the development of the property in the District without affecting the CFD 2005-1 special tax of the other properties within CFD 2005-1, and the financing of such New Public Facilities is significantly constrained without an extension of the term and weighted average life of the refinanced debt; (ii) the City will benefit from the further development of the property within the District, as it supports the City’s land use, housing and open space priorities and is expected to generate additional property tax and sales tax revenues for the City; and (iii) the proposed term extension will be implemented in a manner such that the refinancing by the District of the allocable portion of the 2006A Bonds will still produce net present value savings of at least 3% of the debt being refinanced, as required by the Local Debt Policy; and WHEREAS, in order to effect the issuance of the Series 2021 Bonds, the City Council, for itself and as the legislative body of the District, desires to approve the form of a Preliminary Official Statement and to approve the forms of, and authorize the RESOLUTION NO. 2021-39 -3- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\08 Resolution of Issuance (Palm Desert CFD 2021-1 STBs 2021) 6.24.21.DOCX execution and delivery of, a Bond Indenture for the Series 2021 Bonds, an Escrow Agreement relating to the defeasance and redemption of the 2006A Bonds, a Bond Purchase Agreement, an Acquisition Agreement, and a Continuing Disclosure Agreement, the forms of which are on file with the City Clerk. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT, ACTING FOR ITSELF AND AS THE LEGISLATIVE BODY OF CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK), DOES HEREBY RESOLVE, FIND, DECLARE AND ORDER AS FOLLOWS: Section 1. Each of the above recitals is true and correct and is adopted by the City Council, acting for itself and as the legislative body of the District. Section 2. The City Council hereby determines that (a) the Local Debt Policy is consistent with the requirements of Government Code Section 8855(i), and (b) the proposed Series 2021 Bonds to be issued in accordance with the parameters set forth in this Resolution are consistent with the Local Debt Policy. In connection with the foregoing determination, the City Council hereby finds and determines that a compelling reason and a financial benefit to the City exist in this case, in accordance with the Local Debt Policy, to support the extension of the term and weighted average life of the refinanced debt, because (i) the District was formed to finance the New Public Facilities required for the development of the property in the District without affecting the CFD 2005- 1 special tax of the other properties within CFD 2005-1, and the financing of such New Public Facilities is significantly constrained without an extension of the term and weighted average life of the refinanced debt; (ii) the City will benefit from the further development of the property within the District, as it supports the City’s land use, housing and open space priorities and is expected to generate additional property tax and sales tax revenues for the City; and (iii) as provided in Section 8 below, the proposed term extension will be implemented in a manner such that the refinancing by the District of the allocable portion of the 2006A Bonds will still produce net present value savings of at least 3% of the debt being refinanced, as required by the Local Debt Policy. Section 3. The legislative body of the District hereby finds and determines that, as determined in accordance with Section 53345.8 of the Act and as required by the City’s Goals and Policies for Community Facilities Districts adopted by Resolution No. 05-86 approved by the City Council on October 13, 2005 pursuant to Section 53312.7 of the Act (the “CFD Goals and Policies”), the value of the real property in the District subject to the special tax to pay debt service on the Series 2021 Bonds is not less than three times the principal amount of the Series 2021 Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District. This determination is based on an appraisal with respect to the real property within the District, which appraisal has been made in a manner consistent with the CFD Goals and Policies, as further described in the Preliminary Official Statement (as defined in Section 10 below). Section 4. The issuance of the Series 2021 Bonds in an aggregate principal amount not to exceed $15,900,000 is hereby authorized, with the exact principal RESOLUTION NO. 2021-39 -4- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\08 Resolution of Issuance (Palm Desert CFD 2021-1 STBs 2021) 6.24.21.DOCX amount of the Series 2021 Bonds to be determined by the official signing the Bond Purchase Agreement in accordance with Section 8 below. The Bonds may be issued as a single issue, or as separate series, as determined by Bond Counsel to comply with applicable tax law. The legislative body of the District hereby determines that it is prudent in the management of its fiscal affairs to issue the Series 2021 Bonds. The Series 2021 Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed by the District in accordance with Section 8 hereof. The Series 2021 Bonds shall be governed by the terms and conditions of the Bond Indenture presented at this meeting, on file with the City Clerk and incorporated herein by reference (the “Indenture”). The Indenture shall be executed by any one of the Mayor of the City of Palm Desert, the Mayor Pro Tem of the City of Palm Desert (in the Mayor’s absence), the City Manager of the City of Palm Desert, the Assistant City Manager of the City of Palm Desert (in the City Manager’s absence), or any deputy of such officers (each, an “Authorized Officer”), acting singly, in substantially the form presented at this meeting, with such additions thereto and changes therein as may be approved by such officer upon consultation with Bond Counsel. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Indenture by any one of the Authorized Officers. The date or dates, maturity or maturities, pledge or assignment of any revenues of the District to the repayment of the Series 2021 Bonds, the manner of investment of any bond proceeds and other revenues, manner of payment, interest rate or rates, interest payment dates, denominations, form, registration privileges, manner of execution, place of payment, terms of redemption, rebate provisions, funds designated to pay the costs of issuance of the Series 2021 Bonds, and other terms of the Series 2021 Bonds shall be as provided in the Indenture as finally executed and shall be in conformance with any such terms set forth in the Bond Purchase Agreement described in Section 8 below and the Official Statement described in Section 10 below and delivered to the purchasers of the Series 2021 Bonds. Capitalized terms used in this Resolution which are not defined herein have the meanings ascribed to them in the Indenture. Section 5. The Series 2021 Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor of the City and attested with the manual or facsimile signature of the City Clerk. The appointment of U.S. Bank National Association, a national banking association, as trustee (the “Trustee”) under the Indenture and as escrow agent (the “Escrow Agent”) under the Escrow Agreement described in Section 7 is hereby approved. Section 6. Pursuant to Section 53356.1 of the Act, the legislative body of the District hereby covenants, for the benefit of the Bondowners, to commence and diligently pursue any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of interest or principal of the Series 2021 Bonds, such foreclosure action to be commenced and pursued as more completely set forth in the Indenture. Section 7. The Escrow Agreement (the “Escrow Agreement”) relating to the defeasance and redemption of the 2006A Bonds, proposed to be entered into by and among the District, CFD 2005-1, and the Escrow Agent, in the form presented and on file in the office of the City Clerk, is hereby approved. Each Authorized Officer, acting singly, RESOLUTION NO. 2021-39 -5- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\08 Resolution of Issuance (Palm Desert CFD 2021-1 STBs 2021) 6.24.21.DOCX is hereby authorized and directed, for and in the name and on behalf of the District, to execute and deliver the Escrow Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may approve (such approval to be conclusively evidenced by such officer’s execution and delivery thereof). The date on which the 2006A Bonds shall be defeased and no longer deemed to be outstanding shall be as provided in the Escrow Agreement as finally executed. Section 8. The form of the Bond Purchase Agreement by and between the District and the Underwriter presented at this meeting, on file with the City Clerk and incorporated herein by reference (the “Bond Purchase Agreement”), is hereby approved, and any one of the Authorized Officers is hereby authorized to execute the Bond Purchase Agreement in substantially the form hereby approved, with such additions thereto and changes therein as may be approved by such officer upon consultation with Bond Counsel. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Bond Purchase Agreement; provided, however, that the Bond Purchase Agreement shall be signed only if (i) the Series 2021 Bonds are purchased by the Underwriter at an overall interest rate that does not exceed 5.50% per annum for the issue as a whole (calculated utilizing the true interest cost method), (ii) the total interest cost to maturity on the Series 2021 Bonds plus the principal amount of the Series 2021 Bonds is less than the remaining total interest cost to maturity on the portion of outstanding 2006A Bonds being refunded by the Series 2021 Bonds plus the remaining principal amount of such portion of 2006A Bonds, (iii) the discount paid to the Underwriter (exclusive of original issue discount) does not exceed 1.239% of the principal amount of the Series 2021 Bonds, (iv) the aggregate principal amount of the Series 2021 Bonds does not exceed $15,900,000, and (v) the refinancing by the Series 2021 Bonds of the allocable portion of the 2006A Bonds and the proposed term extension in connection therewith produces net present value savings of at least 3% of the principal amount of such portion of 2006A Bonds being refinanced by the Series 2021 Bonds. The legislative body of the District hereby finds and determines, pursuant to Section 53360.4 of the Act, that the sale of the Series 2021 Bonds at a negotiated sale to the Underwriter, as contemplated by the Bond Purchase Agreement, will result in a lower overall cost than a public sale. Each of the Authorized Officers is authorized to determine the day on which the Series 2021 Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the District and may reject any terms presented by the Underwriter if determined not to be in the best interest of the District. Section 9. The form of the Acquisition Agreement by and among the City, the District, and the Developer presented at this meeting, on file with the City Clerk and incorporated herein by reference (the “Acquisition Agreement”), is hereby approved, and any one of the Authorized Officers is hereby authorized and directed to execute the Acquisition Agreement in substantially the form hereby approved, with such additions therein and changes thereto as the Authorized Officer or Authorized Officers executing the same may approve, with such approval to be conclusively evidenced by the execution and delivery of the Acquisition Agreement. Section 10. The form of the Preliminary Official Statement for the Series 2021 Bonds presented at this meeting, on file with the City Clerk and incorporated herein RESOLUTION NO. 2021-39 -6- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\08 Resolution of Issuance (Palm Desert CFD 2021-1 STBs 2021) 6.24.21.DOCX by reference (the “Preliminary Official Statement”) is hereby approved. For purposes of this Section 10, the term “Authorized Officers” shall include the City Treasurer. The Underwriter is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Series 2021A Bonds in substantially the form hereby approved, together with such additions thereto and changes therein as are determined necessary by any one of the Authorized Officers, upon consultation with Bond Counsel and Disclosure Counsel, to make the Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 of the Securities and Exchange Commission, including, but not limited to, such additions and changes as are necessary to make all information set forth therein accurate and not misleading. Each of the Authorized Officers is hereby authorized to execute a final Official Statement in substantially the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Authorized Officer executing the Official Statement, upon consultation with Bond Counsel, to make such Official Statement complete and accurate as of its date. The Underwriter is further authorized to distribute the final Official Statement for the Series 2021 Bonds and any supplement thereto to the purchasers thereof upon its execution on behalf of the District as described above. Section 11. The form of the Continuing Disclosure Agreement for the Series 2021 Bonds presented at this meeting and appended to the Preliminary Official Statement, on file with the City Clerk and incorporated herein by reference (the “Continuing Disclosure Agreement”), is hereby approved, and any one of the Authorized Officers is hereby authorized and directed to execute the Continuing Disclosure Agreement in substantially the form hereby approved, with such additions thereto and changes therein as may be approved by such officer upon consultation with Bond Counsel and Disclosure Counsel, with such approval to be conclusively evidenced by the execution and delivery of the Continuing Disclosure Agreement. Section 12. All actions heretofore taken by the officers and agents of the City and the District with respect to the establishment of the District, the issuance and sale of the Series 2021 Bonds, or in connection with or related to any of the agreements or documents referenced herein are hereby approved, confirmed, and ratified. The Mayor, each of the Authorized Officers, the Director of Finance, the Deputy Development Services Director, the Interim Public Works Director, and other officers and staff of the City and the District responsible for the fiscal affairs of the District are hereby authorized and directed to take any actions, and execute and deliver any and all documents as are necessary to accomplish (a) the issuance, sale and delivery of the Series 2021 Bonds in accordance with the provisions of this Resolution; (b) the transactions contemplated by the Indenture, the Bond Purchase Agreement, the Escrow Agreement, the Acquisition Agreement, and the Continuing Disclosure Agreement; and (c) the fulfillment of the purposes of the Series 2021 Bonds as described in the Indenture, including, but not limited to, providing certificates as to the accuracy of any information relating to the District which is included in the Official Statement. Any document authorized herein to be signed by the City Clerk may be signed by a duly appointed deputy clerk. Section 13. Effective Date. This Resolution shall take effect immediately upon adoption. RESOLUTION NO. 2021-39 -7- \\srv-everyone\everyone\Staff Reports - Shared 2\Staff Reports 06-24-2021\4 -City Clerk - 06-24-2021\26 Res 2021-38 and 2021-39 UPI Refunding Bond CFD 2021-1\08 Resolution of Issuance (Palm Desert CFD 2021-1 STBs 2021) 6.24.21.DOCX PASSED, APPROVED and ADOPTED by the City Council of the City of Palm Desert, California, on this 24h day of June, 2021, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: ________________________________ Kathleen Kelly, Mayor ATTEST: ________________________________ M. Gloria Sanchez, Acting City Clerk City of Palm Desert, California [This page has intentionally been left blank.] ..s = : �, -. L � = � � J ' _ - n'- YRLL11111V.�Rl OFFICL�L J"f.17'G�IGV"I' ll.�"Cl ll , 2021 \E�� ISSUE—B006-ENTRY ONL\' NO RATI\G In die opurian a1�R�rh�irds. II'�ilsar d Gershon. :1 Pro(eseianul Caiyoi�ulmii. Bond CoiureeC undrr evsung !<nr (rl usswrruig cont�rteii�g rwriE�linnrr �nth rrrmrn rurrnnnrs «nd �he �ircurnn' o/ crr<<�uz reF�rrern�nr�uns, uurree� on rhe Bonds is rr6�drd h�mri gros� �ncomc /or ledca��d n�come tr�i purpuve�.s �o��l i.s �mt un �t��m n( t�n prele�e�sr Ior purpn.eev o/ the /e�lrnd �r/trrnutnr nro�mumi trn. uml lul mten:�7 uii thr Bond.e cv ecen�pt h�om Stute o} C�th/unuu pee�unu/ nicome t�ne.s Lvere�t on the Bon�ls m�n• hr suh�ert to rernnn /e�/erul mrnmr ta�e� nnpna�e�l nnh• on c.�7arn roipm�unom Bon�l Cumxsr( rrpre.e.se� iio npmron u.e to �o�r nther t¢� rnna�e�luence.s rrganling the Bond.s Fur �i more rnmplrtr d�.sru.e.e�on ol the tai �aspert.�. ser dre ra��tion "T.a\"8.\'EAIPT/O,ti"he��ein. $15,200,000" CITY" OF PALM DESERT COM�IUNITti� FACILITICS DISTRICT NO. 211?1-1 (Unl�`ERSI'fl' PARKI SPECI.4L TA\ BONDS, SERIES 2021 Dated: Delivery Da[e Due: September l, as shmvn on inside cover page The City of Palm Desert Commumtv Facihhea Dmtnct No. 2021-I (Um�ersrty Purk) Spec�al Ta� Runde, Senee 30"_'I Qhe "Bonds") are bcing �ssucd by [hc City of Palm Dcscr[ Communi[v Facilitics Dis[r�c[ No _'0_' 1-1 III�ivcrsity Parkl (thc "D�s[ricf'1 [o I il pay and dcfcasc a pro rata portion ot outs[anding Scrics 3006A Spccial Tax Bonds 1[be "CFD No. 300�-1 Pro Ra[a Bonds') issucd by, and sccurcd by thc spccial taxcs of cxisting City of Palm Dcscrt Communih� Facilitics Distric[ No _'005-] �Uni�rrs�ty Park) I"CFD No _'005-1"1, liil pay a�d dctiasc thc CFD _'00�-1 Pro Ra[a Bonds; 1��0 finanee lhe acqwsuwn of cerlam pubhe miprovements necded �vilh respect lo the de�clopmenl of property localed �rLLhm lhe D�stricL mcludmg pubhe impro�emenls to he owned hy the Gty and ��ater mid se��cr facihucs to be o�aned and operated by the Coachdla Vallcy Water Dieh'ick (n ) fund a rese��e accutmt for the Runda. and (� ) pay custs of isauance fur thr Ronds. The Runds are au[huri�ed to be maued purauant tu [he �1ellu-Rous CommuniTy Facilrt�es Ac[ of ION', as amended �Sechon Si71 I et seq. uf the Governmen[ Code of the Sffi[e of CaLtorma) 1[he "Acf'1, and pursuant to that certain Bond Indcnmrc, datcd as of �July I, 2031� �[be'Yndcnturc'), by and bzhczcn thc District and U S Bank National Association, as tmstcc Idic "Tms[cc"� The Runds are pa}'able from Net Tares Ids deFned hereinl demed fi�um a certnin annual Special Ta� (aa defined here�n� tu be lev�ed un [axablc parccls ��i[hin thc Distric[ and from ccr[am othcr funds plcdgcd undcr thc Indcnturc. all as turthcr dcscribcd hcrcin Thc Spccial Ta� is [o bc Ic��cd accordmg to dic ratc and mcthod of apportionmcnt (thc "Ra[c and �4c[hod'�1 approvcd by dic Ci[y Council of thc Citv and thc qual�ticd cicctors �vuhm thc Uistncl. Scc Ihc capuon "SOURCLS Ob PA}'p7LN 1' 1 OR 1'HL BONUS — Spccial "1'aacs; "' I'HL UIS"1'RIC I' — Pormauon Procccdmgy," and "APPLNUIX A— RA'I�L ANU M1lh I HOU OP APPORllON61hN"1' OP SPLCIAL 1'Ak.'� Thc Bonds will bc �ssucd in fully rtgistcrtd torm and �chcn issucd will bc regis[crcd in thc namc of Ccdc & Co. as nomincc of Thc Ucposrtory l7ust Compmi�, Nav Yor6, Nc�� 1 or6 ("U"fC"). Indrvidual purchascs of thc l3onds will bc m book-cntry form onlv and may hc madc m prmc�pal amountc of"Authori�cd Ucnommations" dcfusd m Ihc hidcnWrc to mcan (U ��tmllv, $100,000 and any mtcgral muluplc of $5 000 m caccss [hereof, and p�� fulluv.'ing the occurmnce of a �4in�mum Denomma4on Reduction F.vent Ina defined herein), $S,Upp or anv mtegrnl multiple thereof. See "THF. RONDS - General Pro��s�ons' and "- Nohce uf Occu�rence of �1immum Denommahon Reduchon F.venC' Purchaaera of Runds will not rccen'e cer[ifica[es representing their benetic�al o�vnership of [he Ronds bu[ �eill mcerve credrt balances on the bouks of [heir reapectne numinees. The Bonds �cill not bc transfcrablc or cxchangcablc c�cept for [ransfcr [o anodicr nomincc of DTC or as othcrw�sc dcscribzd hcrzin. Intcrest on [be Bonds �vill bc pavablc on eaeh Nlareh 1 and Scptcmbzr L eommcneing 61arch 1, '_G_'2 prine�pal of and mtzrest on thz Bonds ��Il bc pa�d bv thz "Imstzc to D"1'C fur wbtiequent di�buryement lo D"1'C Panc�ipantti, �4ho �vill remil wch payments to the Beneficml O�anery of the Bunds NEITIIER TIIE FAITII AND CREDI"I NOR TIIE TARING PO\VER OF TIIE CITY, i'LIE COUNT7' OF RIVERSIDE, "IIIE 5"IAi'E OF CALIFORNIA OR AN1" POLITICAL SUBDIVISION i'IIEREOF IS PLEDGED TO TIIE PAYNIENT OF "IIIE BONDS EXCEPi' FOR TIIE NE"I "1'AhLS, N(1 O'I�HLR RLVLNUCS OR'I�ASCS ARL PLLDGLD'f0 "I'HC PAY MCN'I� Oh I HL B(1NDS. "1'HC BONDS ARC NOT GLNLRAL OR SPLCIAL OBLIGA'I�IONS OI "fHL CIIY (1R GLNLRAL OBLICA"fIONS Oh IHC DIS'fRIC'f BU'1� ARL LIM111"fLD OBLIGA"1'IONS OI''I�HC DISTRICT P.4yqRLF SOLFLY" FRUM1I NFT TAkFS .4ND UTHFR AtiIUUNTS HFLD UNDFR THF. INDFNTURF AS �10RF. FULI.ti' DFSCRIRF.D HFRFIN. Thr l3onda� m�e .cuh7.•ct to opnnnal rrdemphniq e�fi�inrdmm_r re�len�pnom m�/ m�mdumrr vmkuiK jund rrdempnnn p�vor tn m.ihu�rh' �as vet /m�th herem See !he cnptimr "THE RU.NOS Redenryt�on " IM'F,ST�9F.NT IN THF. RO\"DS IN�'Ot.�'F.S A HIGH DF.GRF.F. OF SPF.CUI.ATR`F. RISK AND RISKS THAT M1IA1� NOT RF. APPROPRIATF. FOR SO�IF. IM'F.STORS. F.ACH PROSPF,CTR'E IM'F.STOR SHOUI.D CO\"SIDF.R ITS FINANCIAI, CONDITION AND THF. RISIiS IN�'OU'ED TO DETERDIINE THE SOIT.IBILITI" O� IS�'ESTING IS THE BONDS The properlp subject to the lien of Special Taxes ��itltin the District consisfs of approximatek 167 acres that is currentl}' unde��eloped and owned bc one properlp onner, eith a bng anficipated absorption period of approximatclp tcn }�cars for [hc l,llfi9 residcntlal d��rlling uni[s currcn[I�� propascd to bc dc�rinpM Sm "SVECIAL KIS6 FAC'1'ORS — Concentrafinn of Oe�nership,-Constructlnn Risks, and- Prnperh• ��aluec" and ""fHE DIS'1'KIC'1'- �tarket AM1cnrpfion Stud�" fnr a discussion nf certain risk fac[nrs Ihat should be considered �n additiun tu the other matters set forth herein, in evaluating the imeetment yuality uf the Runds. This cu�er page cuntains infurmafiun for general reference only. It is not a cumplete summan ufthe Runds. Inveeture shuWd read the enfire Official Statement tu ubtain infurmation essential tu makin� an infurmed im estment decisiun. THIS CO\'LR PAGL IONTAINS l LRTAIN INFORhIAT10N FOR GGNLRAL RLFLRLNCL ONL}', IT IS NOT INTCNDHD TO B8 A SUMM17ARY OF THL SLCURITy pR TGRM1IS OF THIS ISSUH INVCSTURS ARL ADVISCD TO RHAD THH CNTIRC PR8LI�71NARl� OFhICIAL STATBhIGNT TO OBTAIN INFORM1IATION CSSLNTIAL TO THL M1IAI<WG OF AN INFORM17CD INVLSTMLNT DHCISION. The l3ondv arr al/errd n�he�q as �vr�l if i.esue�! m�d ��rrq�te�l hr dre (�nderirritrvt .�'��h�rrt to u/�/�rorul us to thr��r /e��6h' hr RicharJs, Ifatsnn d(ierslron..a Po�o/e.e.emnal Corpnrahmq Los .-InKe(e.c, Cuhlunuu. Uond Cmuxse/. ��nd suhjert to rertum nther rnn�litinnv Certam /r�ga/ matter.c ndl he pas.ced nn lnr the C�p' m��/ t/�e Di.envrt ht Urrt Uest & A7�itger LLP, bnGun II'r/Is. Ca/ilormu. C�tr.-ittor�ier. and /ar thr D�sn�irt ht Ue.ct Uest A Rnept.i. LLP. Rn�eroide. C�d�/ornia. D�sc/osure Comrsel. ior i/re Ci��tervater br 6utu/,- Rock LLP. G�rme Cn/�7��'��«z. anA (or �he Zrusiee br �ts roertse! !t �s �in��apatrd that rhe Baids �ii bool--enn.r loriri n�i(! he m�udnble lor delnrrr on or uhout .'!I_'1 [1NSERT P1PER LOCO] Dared. Julv .30"_'I " Po�eLmuran. suh�ert tu rhm�gr $1 g,200,000 CiTY" OF PALM DESERT COMIVZUNITY FACILITIES DISTRICT NO. 2021-1 (UNI�'ERSITY PARIi) SPECIAL TAK BONDS, SERIES 2021 I�IATURITY SCHEDULE BASE CUSIP'"` � J Maturitl' Dafe Po�incipal 7�zteresf (Septenzber 1) A�nount Rate Yie1d Price CL�SIP' No. °i� Tcnn Bonds duc Scptcmbcr 1, 20 Yicld: `% Term Bonds due Seplember l, 20_ Yield: °/n PT1CC: `io Price: CUSIP� No. CUSIP' No. � A�e(mnnm�r, subjert m rhunge ' CUSIP�s is a registered trademark ot the American 6ankers Association. CUSIP data herein is provided by CUSIP Global Scrviccs, managcd by S lP Global �1arAct Intclhgcncc on bchalf of Thc Amcncan Bankcrc Accociation This mformation is not mtended [o cmate x databxse and does no[ ser� e in sny way ss x substitute for the CUSIP Ser� �ces Bumau. CUSIP numbers have been assigned by an independent compam� not affiliated �vith the City, the Dishict or the Undenvriter and are included solely tor the convenience of the reeistered o��ners of the applicable Bonds. None of the City, the Dishict or tlie Undenvriter is responsible for the selection or uses of these CUSIP numbers, and no representatinn is made as to their corrcetnesc on the apphcable Bonds or as mcluded herein. The CUSIP number for a specific matunTy �> >ub�ect to bemg chsnged after the �ssuance of the Bonds as x result ot various subsequent actions including, but not limired to, a retunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain matur�ticc of thc Bonds. CiTY OF PALM DESERT CITY COUNCIL Kathleen Kellv. A9aior Jan Harnik, Mm or Pro Tem Sabby Jonathan, Com7cihnember Gina Nestande, Councihnember Karina Quintanilla, Com7cilrnembe�� STAFF Todd Hileman, Cih'tllnnager Janet Moore, Crh Treu.r�n�cr/Directur oj'F�nroice M. Gloria Sanchcz, .lctirrg Citr Clerk VeronicaTapia, Senior[lfunagementAnrrh.st Best Best & Krieger LLP, Cin� At�orner nq�1N[C[PAL AD�7SOR Del Riu Advisors, LLC Modesto, California BOND COUNSEL Richards, Watson & Gershon, A Professional Corporation Los Angeles, California DiSCLOSURE COUNSEL Best Best & Krieger LLP Rivcrsidc, California SPECiAL TA� CONSULTANT Willdan Financial Services Tcmccula, California APPRAiSER Capital Rcalty Analysts La Quinta, California MARIiET ABSORPTION CONSULTANT Empirc Economics, lnc. Capistrano Bcach, California TRUSTEE AND ESCROW AGENT U.S. Bank National Association Los Angcics, California E�cept where od�er�vise indicated, all mfonnahon contamed in this Prelimwary OfFicml St�tement has been pro�ided by lhz City and the DistricL No dealzr, brokzr, salesperson or other pzrson has bezn authorizzd by lhe City, the District, [hc Trustcc or thc Underwritcr to givc nm mYbrmation or to makc uny rcprescntations m com�cction wrth thc ofti;r or sale of die f3onds other than diose contamed herem and, �f g��en or made, such other mfonnation or representahons must not be rzlied upon as having been authorized by the Cily, the District, thz Trustzz or the Underwriter. This Prclmimury Otfic�al Statement does not coiistitute un offer [o scll or the solicitation uf an otfer to buv, iior shull therc be any sale of the 13onds by o person m an}' jurisdichon m�vliicl� �t is unlawful for such person to m�ke such an offer, solicilalion or sale. This Preliminary Official Statement �s not to be construed as � contract �vuh the purchasers or Oi�•ners of the Bonds. Slalemenls conlainzd in lhis Preliminary Olticial Statzmznt which im�ohz eslimates, forzcasls or matlzrs ol opimon, whether or ��ot c�pressly so described herem, are mtcnded solcly as such and arc not to bc construed as representations of fact Thc Undcrwritcr has prov�dcd thc followmg scntcncc Yor indusion m this Pmlimmary OYticiul Statcmcnt The Under�vriter has rz�ie��ed lhe informalion in this Przliminary Official Statemenl m accordanec �vith, and as a paR of, �ts msponsibdit�cs to mvestors under the federal szcurities laws as applied to thz facts and circumstances oi this transactiun, but the Undern•riter docs not guarantec the accuracy or completeness of such informatron. The infurmation and e�przssions uf upiniun herzin are subject to change ��ithuut notice and neither the delivery of th�s Prclimmary Official Statcmcnt nor any salc madc hcrcundcr shall, undcr any c�rcumstances, crcatc any imphcatwn that there has been no change m the affays of the City, the D�stnct or any other part�es descnbed herem smce the date hzreuf. All summaries of the Indenture or other ducuments are made subject to the provisions of such documents respcetivcly and do not purpoR [o bc complctc statcmcnts of any or all of such prov�sions. Rcfcmncc is hercby madc to such documents nn file �vith the Crty for further mfonnation m connechon therewrth. I� CONNECTION �VITH THE OFFERING OF THE BONDS, THE UNDERH'RITER MA1' O��F,RALLOT OR F,FFECT TR�NSACTiONS W'HiCH STABiLi7.E OR nIAIVTAiV THE DTARRF.T PRiCF. OF SIICH BONDS AT A LE�'EL ABOVE THAT �VHICH hIICHT OTHERNISE PREVAIL IN THE OPEN DIARKET. SUCH STABILIZING, IF CODIDIENCED, h1A1' BE DISCONTINUED AT.4Nl' TIh1E. THE BONDS HA�'E NOT BEEN RECISTERED UVDER THE SECIIRITIES ACT OF 1933, AS AMENDED, IV RELIANCE UPON AN EXEMPTIOV CONTAINED W SUCH ACT. THE BONDS HA�'E NOT AF.EN RF,GISTERF.D OR QUALIFiED UNDF,R THF. SF.CURITIF.S LA�VS OF ANY STATF.. Certam statements included or mcorpomted by referenec m tlns Prclimmary Official Statemen[ coiistitutc "fonvard-loohmg etatementc" ��athm the meanmg of the Umted States Pnvate Szcurities Lingation Reform Act of 1995, Scction'1F of thc Unitcd Statcs Sccuritics F�changt Act of 193d, as amtndcd, and Scction 27A of tht Unitcd Statcs Sceun[ics Act of 1933, as amended. Such statemen[s are generally identifiable by tls terminology uscd such as a"plan," "espect; "'eshmate; "'pro�ect; "'budget " or similar morde Such fonvard-looking starements mclude, but are not l�mrted W ccrtain Statcmcnts cuntaintd in thc information undcr thc captiuns "THF. DISTRICT" and "PROPERT�' OWNF.RSHIP AND TIIE DEVELOPMENT." THE ACHIE�'EMENT OF CERTAIN RESLiLTS OR OTHER E�PECT.4TIONS COVTAINED IN SUCH FOR�NARD-LOOKINC STATE�IENTS IN�'OLVE KNO�VN AND UNItiNOW'N RISKS, LiNCF.RTAINTIF,S AVD OTHF.R FACTORS R'HICH D1AY CAUSE ACTUAL RF,SULTS, PERFOR�7AnCE OR ACH1E�'E1�1EN'1'S llESCR1BED '1'O BE MA'I'ERIALLY DIFFEKENI' FROI�I AN]' FU'1'UKE RESUL'I'S, PERFORMANCE OR ACHIEVEM1IENTS EXPRESSED OR IMPLIED BY SOCH FORH'ARD-LOOKING STATEbIENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY LiPDATES OR RE�'ISIONS TO THE FORN'AKD-LOOKINC S"PA"PEDIEN'PS SE'P FOR"PH IN 1'H1S PREL11�11AARY OFFICI�L S'PA'PEI�IEN"P. 1V E�'ALOATIVG SUCH STATEb1ENTS, POTENTIAL IN�'ESTORS SHOULD SPECIFIC.4LLY CONSIDER 'PHE VARIOUS FAC'1'ORS W'H1CH COULD CAUSE AC'1'UAL E�'EN'PS OR RESUL'PS 'PO DIFFER MATERI.4LLY" FROM THOSE I�DICATED Bl' SOCH FOR�i'ARD-LOOKING STATEMENTS. Thc City maintains a wcbsitc. Howcvcr, thc i�formation prescntcd un such �acbsitc is not part of this Prcliminary Official Statement mid should not bz rzhed upon m makmg an mvestment decision wrth respect to the F3onds. TABLE OF CONTENTS IN TRO D UCTI ON ..........................................................1 ThcDistrxt .................................................................1 In��estor Suitabilrty .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..'_ Sources of Payment for the Bonds .............................3 binrkct Absorption Studv ...........................................�4 Appraisal Report .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. _4 Description of the Bonds ............................................4 Tas Escmp[iun ...........................................................5 Professionals Im�oked m the Offering .. .. .. .. .. .. .. ..5 Conlinuing Disdosurz ................................................5 PuntyBonds ...............................................................6 E3ond O��•ners' Risks .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. _6 Other Inlormation .......................................................6 ESTIMATED SOURCES AND USES OF FUNDS.....J PLAN OF FINANCC ...................................J THF. BONDS .................................................................9 Authonty for Issuance ................................................9 General Provis�ons .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..9 Notice of Occurrence of Minimum Dcnominat�on Rcduction Eecnt ................................10 Debt Senace Schedulz .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. I I Rcdcmpt�on ..............................................................12 Reg�strahon, Transfer and 8�change .. .. .. .. .. .. .. .. 16 SOURCF.S OF PAYNIENT FOR THF. BONDS..........17 Limitcd Obligatwns ..................................................17 Specml Tases .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. I S Covenant for Superior Court Fureclusure ................2' Spccial Ta� Fund .....................................................?4 Reserve Account oithe Specml Tar Fund .. .. .. .. .. 25 District Not Included In Teeter Plan ........................?6 PantyBonds .. .. .. .. .. .. .. .. .. .. ..............................26 TH8 DISTRICT ....................................... 2S Gcncral Dcscription of tht District ..........................?H Rclationsh�p to CFD No. 2005-1 ..............................28 Formahon Procezdings .............................. 29 Dcscription of Authuri�cd Facilitic5 ........................30 Dvcct and Overlappmg Dcbt .. .. .. .. .. .. .. .. .. .. ......30 8xpected Tax Burden . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. :l M1Tarkct Absurption Studv ........................................3' Appra�sal Rcport .. .. .. .. .. .. .. .. .. .. ........................3�{ 8stimared Appraised Valuz-to-Lien Ratios.........:6 Largcst Ta�paycr .....................................................3H PROPERTI' OWNERSIIIP ANU TIIE D8 V BLOPM ENT . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 39 Property Owncrship .................................................39 The Developer .. .. .. .. .. .. .. .. .. .. ...........................39 Proposed Devzlopmznt and Current Dcvclopmcnt Status ..................................................-l0 SP�.CIAL R1S6 FACTORS . .. .. .. .. .. .. .. .. .. .. .. .. .. �lti Concentration of Ownership .. .. .. .. .. .. .. .. .. .. ......47 Risks of Real Estate Secured Invzstments Generallv.. .. .. .. .. .. .. .. .. .. ....................................47 Construction Risks ....................................................-lR lnsuffic�encv of Speci�l ras Revenues . .. .. .. .. .. .. �13 Properiy Valuzc .............................................49 Escmpt Prupertics ....................................................50 COVID-191Corona��ims) Pandem�c ................ 51 Geologic, Topographic and Climatic Conditio��s ................................................................52 Flood Zone . . . . . . . . . . . . . . . . . . . . . 5? Hazardous Substances ..............................................53 Cvbcrsccunty ............................................................5 i Depletion of Reserve Account . . . . . . . . . . ..5� Enforcement Delays — Bankruplcy ...........................54 FDIC/Fcdcral Guvcmmcnt Intcrests m Properties . . . . . . . . . . . . . . . . . . . . . ..5� Direct and O�zrlapping Indeblednzss .......................56 Eftcct of Purrty Bonds on Crcdit Quahty ..................56 Pay�nent of Special Taxes �s not a Person�l Obligation ol lhe Properly Ownzrs ...........................56 No Acccicration Provisioa .......................................56 Limired Obligahons . . . . . . . . . . . .. .. .. .. .. ..57 Rallot Initiati�es .......................................................57 Proposit�on 218 .........................................................57 Litigahon �vith Respect to Communit}� Facilities Districts .....................................................58 Loss of Tax Excmption .............................................59 No Ratings — Lunited Secondary Market .. .. .. .. .. .S9 Limitations on Remedms ..........................................60 Porential �arly Redempt�on of Bonds from Prepayments.............................................................60 D�strict Not Included m Tcc[cr Plan .........................60 CONTINUWGDISCLOSURC. . . . . . . . . . . _60 TAX ERF.N1PTION ......................................................61 LEGAL OPINION .......................................................6i ABSLNCC OF LITIGATION . . . . . . . . . . . .. _63 NORATING ................................................................63 LiNDERW RITING .......................................................64 FINANCIAL INTBRLSTS ........................... _6a NIUNICIPAL ADVISOR .............................................64 M I S C E L LAN E O Li S .....................................................63 APPFNDIX A- RATE AND n7F.THOD OF APPORTIONMENT OF SPECIAL TAX ............. A-1 APPENDIX B- FORM OF OPINION UF ROND COLINSF.L .................................................R-1 APPENDI,l' C - MARKET ABSORPTION STUDY..........................................._ Gl APPFNDIX D- APPRAISAL RF.PORT .................. D-1 APPENDI,l' E- SUb1b[ARY OF TIIE IND�NTURB ..................... ................ L-1 APPFNDIX F- FORNIS OF DiSTRiCT CONTINUING DISCLOSURE AGREEMENT AND DEVELOPER CONTINUING DISCLOSURE crxriricaT� ..................... .............. r-t APPENDIX G - BOOK-ENTRY" ONLI' S]'STEbI .......................................... G-1 APPENDIX H - GENERAL ECONOMIC DATA CONCERNING THE CITY OF PALM UESERT ANU T11E COUNTY OF RIVERSIDE .......................................................... H-1 [INSERT VICINITY MAP] $15,200,000` CITY OF PALM DESERT COMMUNIT�' FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAR BONDS, SERiES 2021 INTRODUCTION Tlris i�tbo�luction is itoi a sununa��r oJ'this Prelimrir�rr OJficia/ Statemeirt /t is onli� a hr'ref efescri�tion oJ cotd gui�le to, and is q�a�lr/iecl br, more com�lele nn�i �fete�ilee� naJa�malron contciine�i in the entii�e Pi�eliminnn O/Jicial Stcdement, incler�fi�ag dae corer pcige� cm�l a�pendices he��eto, and Ore cloc�oncnt.c smrm�ro�i_ed or e/arrrrbe�! herei�i. A ji�ll rei�ieic .cho�drl he mcirle uf the eiitire Preln�ii�icn�� Officird Sir�tement. The offering of ihe Bunrls to F�otentrril �nrectoi.s i.s niucle onh' br n�ecros uf d�e eniire Pr�elimir�u�� O/)icird Sfrrfenierit. The purpose of this Preliminary Official Statement, which mcludes the cover page, the table of contents and the attached appendices �collectively, the "Preliminary Official Statemenf'), is to provide certain information concerning the issuance by City of Palm Deser[ Community Facilities Distric[ No. 3021-1 (Universi[y Park) (the "Districf') of its Special Tax Bonds, Series 2021 in the aggregate principal amount of $15,�00,000� (the `Bonds"). The proceeds of [he Bonds will be used to: (i) pay and defease a pro rata portion of uutstanding Series 2006A Special Tax Bonds (the "CFD 2005-1 Pro Rata Bonds") issued by, and secured by the special taxes of, existing City uf Palm Desert Community Facilities DisU'ict No. 2005-1 (Umversity Park) ("CFD No. 2005-1"); (ii) pay and defease the CFD 2005-1 Pro Rata Bonds; �iii� finance the acquisition of certain public improvements needed with respect to the development of property located withm the District, including public improvements to be owned by the City and water and sewer facilities to be owned and operated by the Coachella Valley Water District ("CVWD"); (iv) fund a reserve account for [he Bonds; and (v) pay costs of issuance for the Bonds. Thc Bonds arc authorizcd to bc issucd pursuant to thc Mcllo-Roos Community Facilitics Act of 1982, as amcndcd (Scction 53311 et sec�. of thc Govcrnmcnt Codc of thc Statc of California) �thc "Act"�, and a Bond Indcnturc, datcd as of [July 1, 2021] (thc "Indcnturc"), by and bctwccn thc District and U.S. Bank Nalional Association, as lrustee (the `Truslee"). The Bonds are secured under lhe Indenture by a pledge oC and lien upon Nel Taxes (as such lerm is deGned herein) and all moneys in lhe Special Tax Fund (other than the Administrative Expenses Account therein) as described in the Indenture. All capitalizcd tcrms uscd in this Prcliminary Official Statcmcnt and not dcfincd havc thc meanings set forlh in Appendix E. The District Geireral. Thc City of Palm Dcscrt (thc "Citv') is locatcd in thc County of Rivcrsidc (thc "County") within the area known as the Coachella Valley. The City is siluated approximately mid��ay behveen the cities of Indio and Palm Springs, approximately 117 miles east of Los Angeles, approsimately 118 miles northeast of San Diego and approximately 515 miles southeast of San Francisco. The City covers an area of approximately 24 square miles and lias a current population of approximately 52,575. The City was incorporated in 1973 and is a charter city operating under a council-manager form of govcrnmcnt. ' Pi�elmunai_r. auhject m ch�uge 1 The District is located north of Frank Sinatra Drive, south of Gerald Ford Drive, west of Cook Street and east of Portola Avenue. Tl�e area is locally known as "University Park," due to the location immcdiatcly wcst of thc facilitics and fu[urc facility cxpansion arca of thc satcllitc campus of California Statc Univcrsity, San Bcrnnrdino and Univcrsity of California at Rivcrsidc, at thc northcast corncr of Frank Sinatra Drive and Cook Street. The District encumpasses a portion of the property within CFD No. 2005-1; however, the special tax obligation for CFD 2005-I will be extinguished upon issuance uf the Bonds, as described herein. Thc Dis[rict consists of approximatcly 174 acres and includcs 10 parccls that are subjcct to thc Spccial Tas (as dcfincd hcrcin) all of which arc currcntly o�vncd by Univcrsity Park Invcstor, LLP ("UPI"). See "SPECIAL RISK FACTORS — Concentration of Ownership" herein. The development within the District (the "Projecf') is made up of five separate pruject areas ("Area No. I," "Area No. 3," "Area No. 3," "Area No. 4" and "Area No. 5") which are planned to included 1,069 imits at buildout consisting of eight product types of for-sale single-family detached l�omes, for-sale attached townhomes and for-rent multifamily apartments and single-family homes. Area No. 1, consisting of 236 single-family lots, is curren[ly under development, with grading complete and horizontal infrastruc[ure under construction. The Pro�ect is bemg developed by UPI, the master developer within the District. UPI is managed by MVP Development California, LLC ("MVP"), who manages the day-to-day operations and development of the Project. Relntionship to CFD Na Z005-I. CFD Nu. 200g-I was formed on Janua�y 12, 2006 and issued its Special Tax Bonds, Series 2006A (the "3006 Bonds") and its Special Tax Bonds, Series 2007 (the "2007 Bonds") in a combined ag�negate principal amount of $67,91 �,000. The 2007 Bonds were redeemed with funds on hand on March 1, 2016 and only the 2006 Bonds remam outstanding in a principal amount of $36,350,000. At formation, it was anticipated that the properties within CFD No. 2005-1 would be developed with a mix of residen[ial, commercial, office and open space. Due to timing, markel conditions and subsequenl markel downturn, only aboul 20'io oC the land within CFD No. 2005-1 has been developed to date. Of the remaining land within CFD No. 2005-1, approximately 78°r� is nuw owned by UPI and approximately 22% is uwned by other parties, based on acreage. UPI reyuested that the City refund the 2006 Bonds and form the District to facilitate the tinancing of new facilities and costs rcquircd for UPI's property without advcrscly affcetmg thc spccial taxcs far thc othcr propertics within CFD No. 2005-1. Procccds of thc Bonds will primarily bc uscd to pay and dcfcasc thc CFD 2005-1 Pm Rala Bonds, as well as fund a portion oC the public capital improvemenls required for development oC the property wilhin the Dislrict. The CFD Z005-1 Pro Rata Bonds will be paid and defeased concurrenlly wilh lhe delivery of lhe Bonds, and upon such defeasance, lhe pmperty within lhe Dislricl will nol be subject to the special tax lien of CFD No. 200i-I. Scc thc captions "THE DISTRICT" and "PROPERTY OWNERSHIP AND THE DEVELOPMENT" Cor further inCormalion with respect to the District, UPI, and developmenl within the District. Im�estor Suitability 1NVESTMENT IN THE BONDS 1NVOLVES A H1GH DEGREE OF SPECULATIVE R1SK AND R1SKS THAT MA1' NOT BE APPROPRIATE FOR SON1E INVESTORS. EACH PROSPECTIVE INVESTOR SHOULD CONSIDER ITS FINANCIAL CONDITION AND THE RISKS INVOL�'ED TO DETER�IINE THE SUITABILITY OF INVESTING IN THE BONDS. The property subject to the lien of Special Tases within the District consists of appro�imately 167 acres that is currently undereloped and owned by one property owner, with a long anticipated � absorption period of approximatelp ten years for the 1,069 residential dwelling units currently proposed to be de��eloped. See "SPECIAL RISIi FACTORS — Concentration of Ownership, - Construction Risks, and - Propert� Values" and "THE DISTRICT - Market Absorption Stud�" for a discussion of certain risk factors that should be considered,in addition to the other matters set forth hcrcin, in evaluating thc im•estment quality of thc Bonds. This covcr pagc contains information for gencral refcrencc onl��. It is not a completc summary of thc Bonds. Investors should rcad thc entirc Official Statement to obtain information essential to making an informed im�estment decision. Sources of Payment for the Bonds Specia! Taxes. As used in this Preliminary Official Statement, the tenn "Special Tax" means the annual special tax which has been authorized pursuant to the Act and the Rate and Method (as defined herein) to be levied upon tasable property within tl�e District. See tl�e caption "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes," "THE DISTRICT — Formation Proceedings," and "APPEND[,� A— RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." See the caption "THE DiSTRICT." Under the Indenture, the District has pledged to repay the Bonds and any Parity Bonds (as defined herein) from the Special Tax revenue, remaining after the paymen[ of certain annual Administra[ive Expenses of the District (the "Net Taxes") and from other amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) established under the Indenture. The Special Taxes are the primary source of security for the repayment of the Bonds and any Parity Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds and any Parity Bonds are amounts held by the Trustee m the Special Ta� Fund, including amounts held in the Reserve Account therein, to the limited extent described m the Indenture. See the captian "SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tas Fund." Foreclosure Piroceeds. The District will cuvenant in the Indenture for the benetit uf the owners of thc Bonds and any Parity Bonds that it will �i) will commcncc judicial forcclosurc procccdmgs against any parccl with cithcr (A) at lcast four (4) consccuhvc installmcnts of dclinqucnt Spccial Taxcs or (B) dclinqucnt Spccial Taxcs in cxccss of $10,000 on any onc parccl, in cach instancc by thc Dcecmbcr 1 Collowing the close of each Fiscal Year in which such Special Taxes �vere due; and (ii) will commence judicial foreclosure pmceedings againsl all parcels wilh delinquenl Special Taxes by lhe December 1 fullowing the close of each Fiscal Year in which it receives Special Taxes in an amount �vhich is less than 959% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinyuent Special Taxes are paid; provided, however, that the District may elect to dcfcr forcclosurc procccdings on any parcd so long as thc amount on dcposit in thc Rcscrvc Account is at lcast cqual to thc Rcscrvc Rcquircmcnt, and such dclmqucncics will not causc moncys in thc Rcscrvc Account lo be wilhdrawn on lhe nexl succeeding Interest Payment Dale. The Districl will covenant lhat it will deposil lhe net proceeds of any foreclosure in the Special Tax Fund. See lhe caption "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foredosure Sales." There is no assurance tliat the property within the District can be sold for tlie appraised or assessed values described herein, or fur a price sufficient to pay the principal of and interest on the Bonds in the event of a default in paymcnt of Spccial Taxcs by thc currcnt or futurc landowncrs within thc District. Sce thc caption "SPECIAL RISK FACTORS—Property Valucs." EXCEPT FOR THE NET TA�ES, NO OTHER TAXES ARE PLEDGED TO THE PAl'MENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE 3 LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE, AS MORE FULLF DESCRiBED HEREIN. Market Absorption Stud�� In connection with the formation of the District and in preparation for the issuance of tl�e Bonds, thc City hircd Empirc Economics, Inc., Capis[rano Bcach, California (thc "Markct Absorption AnalysP') to dctcrminc thc projcctcd absorption of thc planncd residcntial property �vithin [hc District. Thc Mnrkct Absorption Analyst performcd a comprchcnsivc analysis of thc produc[ mix charactcristics, macroeconomic factors, and microeconomic factors as �vell as the potential risk factors that are ezpected to influence the absorption of the planned products within the District. The Market Absorption Analyst delivered its Market Absorption Study titled "Convnunity Facilities District No. 2021-1 (University Park) City of Palm Desert Riverside County, California Market Absorption Study" on March 11, �021 and revised it on Apnl 15, 2021 to make grainmatical revisions and disclose an additional potential risk factor (as revised, the "Marke[ Absorp[ion Study"). A copy of the Market Absorption Study is a[tached hereto as APPENDIX C See "THE D[STRICT — Market Absorption Study" for a summary of the Market Absorption Study's conclusions. Appraisal Report The District has obtained an appraisal of the land and existing improvements within the District (the "Appraised Property") dated May 15, 3021 with a date of value as of May 15, 3021 (the "Appraisal Reporf'). The Appraisal was prepared by Capital Realty Analysts, La Quinta, California (the "Appraiser"�. The Appraiser is of the opinion that, based upon the assumptions and conditions contained in the Appraisal Report, the market value of the Appraised Property, as of May 1�, 2031 (the "Date of Value"), �vas not less than $47,710,000. See "APPENDIX D— APPRA[SAL REPORT." Based on such appraised value of the Appraised Property and the estimated amount of land secured debt allocated to parcels within the District, the overall value-to-lien ratiu of the property within the Districl is approximately 3.14`-to-l. See `THE D[STRICT — Appraisal Report, "APPENDIX D— APPRAISAL REPORT" and `SPECIAL R[SIi FACTORS — Direct and Overlapping Indebtedness." Description of the Bonds The Bonds will be issued and delivered as Cully registered Bonds, regi.tered in the name of Cede & Co., as nominee of The Depository Trusl Company, New York, New York ("DTC"), and will be available to actual purchasers uf the Bonds (the "Beneficial O�vners") in Authorized Denominatiuns, defined in the Indenture to mean, initially and prior to the occurrence of a Minimum Denomination Rcduction Evcnt (as dcfincd hcrcin), thc dcnominations of $100,000 and any mtcgral multiplc of $5,000 in cxccss thcrcof, undcr thc book-cntry systcm maintamcd by DTC, only through brokcrs and dcalcrs who arc or act through DTC Participants as dcscribcd hcrcin. Scc "THE BONDS - Gcncral Provisions" and "- Notice of Occurrence of Minimum Denomination Reduclion EvenL" Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system described herein is nu longer used witli respect to tlie Bonds the Bunds will be registered and transYerred in accordance with the Indenture. Principal of, prcmium, if any, and intcrest on thc Bonds is payablc by thc Trustcc to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. ' Pi�elmunai_r. auhject m ch�uge 4 See "APPENDIX G— BOOK-ENTRY ONLY SYSTEM." Thc Bonds are subjcct to optional rcdcmption, cxtraordinary rcdcmptian nnd mandatory sinking fimd redemption priur to maturity as described herein. See the caption "THE BONDS — Redemption." For a more complete description of the Bonds and the basic documentation pursuant to �vhich they are being sold and delivered, see the caption "THE BONDS" and "APPENDIX E— SUMMARY OF THE INDENTURE." Tas Exemption In the opinion of Ricl�ards, Watson & Gershon, A Professional Corporation, ("Bond Counsel"), under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certam rcprescntations, intcres[ on thc Bonds is cxcludcd from gross incomc for fcdcral incomc tax purposcs and is not an i[cm of tax prcfcrcncc for purposcs of thc fcdcral altcrnativc minimum tax, and (ii) intcrest on the Bonds is esempt from State of California personal income taxes. Interest on the Bonds may be subjec[ to ce�tain federal income taxes imposed only on certain corporations. Bond Counsel expresses no opinion as to any other tax consequences regarding the Bunds. See the caption "TAX EXEMPTION." Set forth in Appendix B is the form of opinion of Bond Counsel expected to be delivered in connection �vith [he issuance of the Bonds. For a more complete discussion of such opinion and certain tax consequences incident to the ownership of the Bonds, see the caption "TAX EXEMPTION." Professionals invohed in the Offering U.S. Bank National Association, Lo. Angeles, California, �vill act as Tnistee under the Indenture. Piper Sandler & Co. (the "Unde�writer") is the Underwriter of the Bonds. Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel to the District in conncction with thc issuancc of thc Bonds. Ccrtain lcgal mattcrs will bc passcd on for thc City and thc District by Bcst Bcst & Kncgcr LLP, Indian Wclls, City Attorncy, and Bcst Bcst & Kricgcr LLP, Riverside, California, Disclosure Coimsel, for the Underwriler by Kutak Rock LLP, Irvine, Calil'ornia, and Cor lhe Truslee by its counsel. Other proCessional services have been performed by Willdan Financial Services, Temecula, California, as Special Tax Consultant (the "Special Tax Consultanf'), by Empire Ecunomics, Inc., Capistrano Beach, California, as Market Absorption Analyst, and by Capital Realty Analysts, La Quinta, California, as Appraiser. For informalion concerning circumslances in which certain of the above-mentioned proCessionals, advisors, counsel and consullants may have a Gnancial or olher interesl in lhe ofCering of the Bonds, see the caption "FINANCIAL INTERESTS." Continuing Disclosure Pursuant to a District Continuing Disclosure Agreement to be executed by the District and Willdan Financial Services, as dissemination agent (tlie "District Continuing Disclusure Agreemenf'), tlie District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Buard's Elcctronic Municipal Markct Acccss systcm ("EMMA"), maintaincd on thc Intcrnct at http://cmma.msrb.org, ccrtain annual financial information and operating data and noticcs of ccrtain cnumcratcd cvcnts. Thcsc covcnants arc bcing madc in ordcr to assist thc Undcrwritcr in complying with subsection (b)(5) of Ruk 15c2-1 Z adopted by the Securities and Exchange Commission ("Rule 15c2-12"). Pursuant to a Developer Continuing Disclosure Certiticate (the `Developer Continuing Disclosure Certiticate") to be executed by UPI, UPI will agree tu provide, or cause tu be provided, to EMMA certain � infonnation relating to the development of the Project on a semi-annual basis and notices of certain enumerated events. In connection with UPI's purchase of its property witl�in the District in 2017, UPI was assigncd thc continuing disclosurc obligations of thc prior dcvcloper with respcct to thc 2006 Bonds and has bccn making con[inuing disclosurc filings thcrcundcr.. See "CONTINUING DISCLOSURE" and "APPENDIX F— FORMS OF DISTRICT CONTINUING DISCLOSURE AGREEMENT AND DEVELOPER CONTINUING DISCLOSURE CERTIFICATE." Paritv Bonds The District may issue additional indebtedness secured by the Net Tases on a parity with the Bonds ("Parity Bonds"). Scc thc cap[ion "SOURCES OF PAYMENT FOR THE BONDS — Parity Bonds." Othcr taxcs and/or spccial asscssmcnts with licns cqual in priority to thc continuing licn of thc Special Taxes may also be levied in the future on the property within the District, which could adversely affect the willingness of the landuwners to pay the Special Taxes when due. See the captions "THE DiSTRICT — Direct and Overlapping Debf' and "SPECiAL RISK FACTORS — Direct and Overlapping Indebtedness." The District expects to issue a one or more additiona] series of bonds up to the remaining balance of bond authorization, which bonds are expected to be secured by Net Taxes on a parity with the Bonds. Such Parity Bonds are expected to be issued unce property values within the District meet the minimum value-to-lien requirements required under the Parity Bonds test in the Indenture. Currently, UPI expects to request the District to issue the second series of bands as Parity Bonds within the next two �2) years. See "SPECIAL RISK FACTORS — Effect of Parity Bonds on Credit Quality." Bond Owners' Risks Ccrtain cvcnts could affcct thc ability of thc Distnct to pay thc principal of and intcrest on thc Bonds whcn duc. Scc thc caption "SPECIAL RISK FACTORS" far a discussion of ccrtain factors which should be considered, in addition lo other mallers set Corlh herein, in e�aluating an invesimenl in lhe Bonds. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investmenis for some types of investors. Other information This Preliminary OfGcial Slatement .peaks only as of its dale, and the inCormation contained herein is subject to change. Bricf dcscriptions of thc Bonds and thc Indcnturc arc includcd m this Prcliminary Official StatemenL Such descriptions and information do not purpori to be comprehensive or deGnitive. All references herein to the [ndenture, lhe Bonds and the Conslilution and laws of lhe Slale, as well as lhe proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to sucli documents, laws and proceedings, and with respect to tlie Bonds, by reference to the Indenture. Capitalized terms not otherwise defined in this Preliminary OY�cial Statement havc thc mcanings sct forth in Appcndix E. Copies of the Indenture and other documents and information are available for inspection and copies may be obtained from the City, 73510 Fred Waring Drive, Palm Desert, California, 93�60, Attention: City Clerk. 6 ESTiMATED SOURCES AND USES OF FUNDS Thc following [ablc scts forth thc cxpcctcd sourccs and uscs of Bond procccds. Sources of Funds Principal Amount of Bonds $ Plus/Lcss [Nct] Original Issuc Prcmium/Discount Lcss: Undcrwritcr's Discoimt Total Sources Uses of Funds: Escrow Fund Iinprovement Fund Costs of Issuance Fund" � Reserve Account of the Special Tax Fund Total Uses $ $ $ '�' To pay costs of iormmg thc District and issuancc of thc I3onds, including Icgal fccs, printing costs, Nlumcipal Ad��isor, [3ond Counscl, Disclosttre CounscL Spccial Tac Consultant and Trustcc fccs. PLAN OF F[NANCE A portion of the proceeds of Bonds, together with certain other funds and momes relatmg to the CFD �005-1 Pro Rata Bonds, will be used to pay and defease the CFD 2005-1 Pro Rata Bonds on the delivery date of the Bonds, pursuant an Escrow Agreement, dated as of [July 1, 20�1], by and among CFD No. 2005-1, the District, and U.S. Bank National Association, as escrow agent, relating to the �006 Bonds (the "Escrow Agreemenf'). The moneys U'ansferred to and held in the escrow fund (the "2006 Escrow Fund") established by the Escrow Agreement, including a portion of the proceeds of the Bonds and a portion of thc procccds of rcfundmg bonds to bc issucd by CFD No. 2005-1 concurrcntly with issuancc of thc Bonds to rcfund thc balancc of thc outstanding 2006 Bonds, will bc invcstcd m non- callablc dircct obligations of thc Unitcd Statcs Trcasury �thc "Sccuritics") and will bc plcdgcd solcly for the redemption of the 2006 Bonds on September l, �021. Upon delivery of the Bonds, Robert Thomas CPA, LLC, Minneapolis, Minnesota, will deliver a reporl on lhe mathematical accuracy of cerlain computatiuns, contained in schedules provided and prepared by the Undenvriter, relating to the sufticiency of cash and securities deposited into the 2006 Escrow Fund to pay, when due, the principal, whether at maturity or upon prior redemption, and interest requirements of the 2006 Bonds. Such report will includc thc statcmcnt that thc scopc of its cngagcmcnt is limitcd to vcrifying thc mathcmatical accuracy of thc computations containcd in such schcdulcs providcd to it, and that it has no obligation to updale its reporl because of evenls occurring, or dala or information coming to its atlention, subsequenl lo the date of ils reporL Cash and Securilies deposiled in lhe 2006 Escrow Fund will not be available for the payment of the Bonds, nor will any interest ur other earnings thereon be available for such payment. A portion of thc procccds of thc Bonds will uscd to financc ccrtain public improvcmcnts ncccssary to mcct thc incrcascd dcmands placcd upan thc public infrastructurc, thc City, and thc Coachella Valley Water District (`CVWD") as a result of the development of the property within the District. The following table lists the facilities espected to be financed wrth tl�e proceeds of the Bonds and the estimated costs: Descriution of Facilitics Developer contributions to reservoir facilities constructed by CVWD Faci(ities catsh ucte�f hr UP/: On-site water pipelines for Area/Phase 1 Well site improvements for Area/Phase 1 On-site sewer pipelmes for Area/Pl�ase 1 Storm drainagc facilitics for Arca/Phasc 1 Strcct improvcmcnts for Arca/Phasc 1 Total Source: University Park Investor, LLC Estimated Costs S 1,376,022 1,? 39,477 400,000 880,497, SR6,964 �, i �s,vt� i $6,6gg,921 UPI presently expects to complete construction of the facilities listed above for Area/Phase 1 of its development withm the District by September 2021. Pursuant to a Special Domestic Water System Installation Agreement beriveen UPI and CVWD, UPI is required to contribute to the costs of CVWD's construction of certain reservoir facilities, and invoicing for the resernoir facilities commenced in April 3021. UPI is invoiced monthly by CVWD for 14S`io of the cost of the reservoir facilitie. based on monthly invoices received by CVWD from its contractor, with construction uf the reservoir facilities projected to be completed by the end of calendar year 2031. � THE BONDS Authority for Issuance The Act �vas adopted by tl�e State Legislature to provide an alternate method of financmg certain public capital facilities and services, especially in developing areas of the State. Once duly established by a local govcrnmcntal agcncy, a community facilitics district such as thc District is itsclf a lcgally constitutcd govcrnmcntal cntity, with thc govcrning board or lcgislativc body of thc local agcncy that cstablishcd it constituting thc lcgislativc body of such commimity facilitics district Subjcet to approval by a two-thirds vote uf a commimity facilities district's qualified electors and compliance with the provisions of the Act, the legislative body may authorize the issuance of bonds far the community facilities district in order to finance certain public improvements, and the legislative body may levy and collect a special tas within sucl� community facilihes district to repay such indebtedness. The specific actions taken by the City Council to form the District, authorize the levy of the Special Tax on the Taxable Prupe�ty within the District and authorize the issuance of the Bunds are described under the caption "THE DISTRICT — Formatiun Proceedings." General Provisions The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the mside cover page hereof, payable semiannually on each March 1 and September 1, commencing March 1, 3022 �each, an "Interest Payment Date"), and �vill �nature in the amounts and on the dates set forth on the inside cover page of this Preliminary Official Statement The Bonds will be issued in fully registered form in Authorized Denomination,. Under the [ndenture, "Authorized Denominations" is defined to mean, (i) initially, denominations of $100,000 and any integra] mul[iple of $5,000 in excess thereof, and (ii) follo�ving the occurrence of a Minimum Denomination Reduction Event, $5,000 or any integral multiple thereof. "Miniinum Dcnaminatian Rcduction Evcnt" mcans thc occurrcncc of cithcr of thc following evenls, whichever is earlier: (i) April 1 nexl succeeding lhe beginning of the Fiscal Year in which Developed Property (each as defined in the Rate and Method) is responsible for at least 25% of the annual Special Tax levy for the District, or (ii) the issuance by the District of Parity Bonds in accordance with the Indenture, which reyuires, among other things, that the Value uf District Property is not less than fuur (4) times the sum of Direct Debt for District Property plus Overlapping Debt allucable to all property in the District subjcet to thc Spceial Tax (as such tcrms arc dcfincd in thc Indcnturc). Scc "SOURCES OF PAYMENT FOR THE BONDS - Parity Bonds" and "THE BONDS - Naticc of Occurrcncc of Minimum Denomination Reduclion Event" herein. Interest will be calculated on the basis of a 360-day year cumprised of hvelve 30-day months. Interest on any Bond will be payable frum the Interest Payment Date next preceding the date of authcntication of that Bond, unlcss: (i) such datc of authcntication is an Intcrest Paymcnt Datc, in which cvcnt intcrest will bc payablc from such datc of authcntication; (ii) thc datc of authcntication is aftcr thc fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (each, a"Record Date") but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date, in which event interest will be payable froin tlie dated date of the Bonds; provided, however, that if at the timc of authcntication of a Bond, intcrest is in dcfault, intcrest on such Bond will bc payablc from thc last Intcrest Paymcnt Datc to which thc intcrest has bccn paid or madc availablc for paymcnt, or, if no intcrest � has been paid or made available for payment on such Bond, interest on sucl� Bond will be payable from its dated date. Interest on any Bund will be paid to the persun whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Principal of, premium, if any, due upon redemption is payable upon presentation and surrender of the Bonds at tl�e principal corporate trust office of tl�e Trustee in Los Angeles, California. Thc Bonds will bc issucd as fully rcgis[crcd bonds and will bc rcgistcrcd in thc namc of Ccdc & Co., as nominee of DTC DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form unly in Authorized Denominations, as described more particularly above m tlus section until the occurrence of a Minimum Denomination Reduction Event. So long as DTC is the securrties depository all payments of principal and interest on the Bonds will be made to DTC and will be paid to the Beneficial Owners in accordance with DTC's procedures and tl�e procedures of DTC's Participants. See "APPEND[X G— BOOI�-ENTRY-ONLY SYSTEM." In the event the Bonds are nut held in book-entry form, interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Bondowner at rts address on the registration books kept by the Trustee. Pursuant to a �vritten request pnor to the Record Date of a Bondowner of at least 51,000,000 in aggregate principal amount of Bonds, paymen[ will be made by wire transfer in immediately available fimds to a designated account in the United States. The Bonds are not general or special obligations of the City but are special ubligations of the District payable solely from Net TaYes and the other ainounts held under the Indenture in the Special Tax Fund (other than the Administratn•e Espenses Account therem), mcluding the Reserve Account therein. Neither the faith and credit nor [he taxing power of the City, [he District (except to the limited extent set forth in the Indenture), the State or any political subdivision thereof is pledged to the payment of the Bonds. See the caption "SPEC[AL RISK FACTORS — Limited Obligations." Notice of Occurrence of nlinimum Denomination Reduction Event Under lhe Indenture, lhe Districl covenants thal, promplly Collowing lhe occurrence oC a Minimum Denomination Reduction Event and in any event within ten (10) Business Days thereafter, the District will file, or cause to be filed, with the Information Services a notice of the occurrence of such Minimum Denomination Reduction Event and stating that, as a result of and commencing from and after such cvcnt, thc minimum authorizcd dcnoininations far thc Bonds havc bccn rcduccd pursuant to thc tcrms of this Indcnturc to $5,000 ar any intcgral multiplc thcrcof. 10 Debt Service Schedule Thc following tablc prescnts thc annualizcd dcbt scrvicc on [hc Bonds (including sinking fimd redemptions), assuming that there are no optional or eatraordinary redemptions. See the caption "— Redemption" below. Year Ending Septen:ber 1 �p?� ZO?3 ZO?4 �025 �026 �027 20�8 20�9 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 Z04Z Z043 Z044 304i 3046 2047 2048 2049 ZO50 Total $ $ Principal $ � Interest Tota! Debt Se�vice $ $ 11 Redemption` Optional Redemptioe. The Bonds maturing on or befure September l, 3028 are not subject to optional redemption prior to maturity. Tl�e Bonds maturing on or after September 1, 2029 shall be sub�ect to call and redemption pnor to maturity and may be redeemed, at the option of the District, from any sourcc of funds on any da[c an or aftcr Scptcmbcr 1, 202R in wholc, or in part, from such maturitics as arc scicctcd by [hc District and by lot wi[hin a maturity, at thc following rcdcmption priccs, cxpresscd as a perccntagc of thc principal amount [o bc rcdccmcd, togcthcr �vith accrucd intcrest to [hc rcdcmption datc. Redemption Dates September l, 2028 through August 31, 2029 September 1, 2029 through August 31, 2030 Scptcmbcr 1, 2030 through August 31, 2031 September 1, 2031 and any date tl�ereafter Redemption Price 103% 102 101 100 In the event that the District elects to redeem Bunds as provided above, the District will give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee will be groen at least 30 but no more than 60 days prior to the redemption date, or by such later date as is acceptable to the Trustee. Mun�luto�y Si��king F��n�l Rede�nptioii. The Bonds maturing on September l, 20_ ([he "20_ Term Bonds") �vill be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Accuunt established by the Indenture, on September l, 20 , and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20 Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20_ Tenn Bond equal to the prmcipal amount thereof, plus accnied interes[ to the redemp[ion date, without premium, as follo�vs: Term Bonds Maturing September 1, 20_ Sinking Fund Redeneptiox Date (Septeniber 1) Si�rking Pavnients ` Matunh ' Pi�elmunai_r. auhject m ch�uge 1? The Bonds maturing on September 1, 20 (the "20_ Tenn Bonds" and together with the 20 Tenn Bonds, the "Term Bonds") will be called before maturity and redeemed, from the Smking Fund Paymcnts that havc bccn dcpositcd into thc Rcdcmption Account cstablishcd by thc Indcnturc, on Scptcmbcr 1, 20 , and on cach Scptcmbcr 1 thcrcafrcr prior to mahirity, in accordancc with thc schcdulc of Sinking Fund Payments set forth below. The ZO_ Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20 Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds 1VZaturing September 1, 20_ SiiTking Fiur�! Rerleinption Date (Septen+ber 1) ' Watur�tv Srnking Pa}•�ieents $ If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking fund redemption dates specified above, the District will notify the Trustee at least 45 days pnor to the redemption date a, to the principal amount purchased, and the amount purchased will be credited at the time of purcha,e to the nes[ Sinking Fund Payment for the Term Bond so purchased, to the extent of the fiil] principal amount of the purchase. All Term Bonds purchased will be cancelled pursuant to the Indenture. In thc cvcnt of a partial optional rcdcmption or cxtraordinary rcdcmption of thc Tcrm Bonds, cach of lhe remaining Sinking Fund Paymenls for such Term Bonds, as applicable, will be reduced, as nearly as praclicable, on a pro rala basis, in integral multiples of $5,000. E.Ytraordinarp Re�lemption frora Speeia! Tax Prepayntents. The Bonds are subject to cxtraordinary rcdcmption as a wholc, or in part, and on a pro rata basis among maturitics in intcgral multiplcs of 55,000, as ncarly as possiblc, on any Intcrest Paymcnt Datc, and will bc rcdccmcd by thc Trustee, from any amounls paid by lhe District to the Truslee and designated by the Districl as a prepaymenl of Special Taxes Cor one or more parcels in lhe Districl made in accordance wilh the Rale and Method (the "Prepayments") depusited to the Redemption Account pursuant tu the Indenture, plus amounts authorized to be transferred from the Reserve Account pursuant to the Indenture, at the follo�ving redemption prices, expressed as a percentage of the principal amuunt tu be redeemed, together with accrucd intcrest to thc rcdcmption datc: Redemption Date Any Interest Date through March l, 2029 September l, 30?9 and March l, 2030 September l, 3030 and March l, 2031 September 1, 2031 and any Interest Payment Date tliereafter Redeniption Price 103`% 10� 101 100 13 The District will give written notice to the Trustee of its intention to redeem Bonds pursuant to extraordinary redemphon, the redemption date, and the principal amount of the Bonds and of each maturity to bc rcdccmcd at lcast 45 but no morc than 90 days prior to thc rcdcmption da[c, or by such latcr datc as is acccptablc to [hc Trustcc, in its solc discrction. Notice of Redenrptio�r. So long as the Bonds are held in book-entry form, notice of redemption will be sent by the Trustee to DTC and not to the Beneficial Owners of the Bonds under the DTC book- entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who arc to bc notificd in accordancc with [hc proccdures in cffcct for thc DTC book-cntry systcm. Scc "APPENDIX G — BOOK-ENTRY ONLY SYSTEM." The Tnxstee will give notice, in the name of the District, of the redemption of Bonds or Parity Bonds. Such notice of redemption will: (a) specify the CUSIP numbers (if anyl, the bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redeinption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemp[ion, or all of the Bonds or Parity Bonds of one ma[urity, are to be redeemed, [he bond numbers of such issue need not be specified; (b) s[a[e the date fixed for redemption and surrender of the Bonds ur Parity Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds or Parity Bonds are to be redeemed; (e) in the case uf Bonds or Parity Bonds to be redeemed only m part, state the portion of such Bond or Parity Bond which is to be redeemed; (� state the date of issue of the Bonds or Parity Bonds as originally issued; (g) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (h) state any other descriptive informa[ion needed to identify accurately the Bonds or Parity Bonds being redeemed as specified by the Trustee. Such notice will further state that on the date fixed for redemption, there will become due and payable on each Bond or Parity Bond, ur portion thereof called for redemption, the principal thereof, together �vith any premium, and interest accrued w the redemption date, and that from and after such date, interest thereon will cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Trustee will mail a copy of such notice of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearmg on the Bond Register; provided, however, so long as lhe Bonds are registered in lhe name of the Nominee, such nolice shall be given in such manner as complies wilh the requirements of lhe Deposilory. The actual receipl by the Owner of any Bond or Parity Bond of nolice of such redemption is nol a condition precedent to redemplion, and neilher the failure to receive nur any defect in such nutice will affect the validity of the proceedings for the redemption of such Bonds or Parity Bonds, or the cessation of interest on the redemption date. A ccrtificatc by thc Trustcc that nohcc of such rcdcmption has bccn grocn as providcd in thc lndcnturc will bc conclusivc as against all partics and thc Owncr is not cntiticd to show that hc or shc failcd to rcccivc noticc of such rcdcmption. In addition to the foregoing nutice, further notice will be given by the Trustee as set out below, but nu defect in said further notice nor any failure to give all or any portion uf such further nutice will in any manncr dcfcat thc cffcctivcncss of a call for rcdcmption if notice thcrcof is givcn as abovc prescribcd. Each Curlher notice oCredemption will be sent (i) not laler lhan two (Z) Business Days bel'ore lhe date that notice of redemption is mailed to the Bondowners pursuant to the Indenture, to the Depository in such electronic format and manner as specified by the Depusitory and to any other registered securities depusitories (in such electronic format and manner as specified thereby) tlien in the business of holding substantial amounts of obligations of typcs comprising thc Bonds and Parity Bonds as dctcrmincd by Trustcc, and (ii) not latcr than thc datc that noticc of rcdcmption is mailcd to thc Bondowncrs pursuant to the Indenture, to the Information Services in such electronic format and manner as specified by the Information Services. 14 The District will have the right to rescmd any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption will bc canccllcd and annullcd if for any rcason funds will not bc or arc not availablc on thc datc fixcd for rcdcmption for thc paymcnt in full of thc Bonds or Parity Bonds thcn callcd for rcdcmption, and such cancellation shall not constitute an Event of Default imder the Indenture. The District and the Trustee shall have no liability to the Owners or any other pa�Yy related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. Upon thc paymcn[ of thc rcdcmption pricc of any Bonds and Parity Bonds bcing rcdccmcd, cach check or other transfer of funds issued for such purpuse will to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds and Parity Bonds being redeemed with the proceeds of such check or other transfer. Selecti��e of B��uls for Redemption. [f less than all of [he Bonds or Parity Bonds Outstanding are to be redeemed, the Trustee will select the Bonds or Parity Bonds to be redeemed from all Outstanding Bonds or Parity Bonds of such Series or such given purtion thereof not previously called for redemption, on a pro rata basis among the maturities (unless the maturity or maturities are otherwise specitied in the Indenture or in writing by the District) and by lot within a�natunty in any manner which the Trustee in its discretion deems appropriate. For purposes of such selechon, all Bonds or Parity Bonds of a denomination of more than $5,000 will be deemed to be comprised of separate $�,000 portions, and such portions will be treated as separate Bonds or Parity Bonds, as applicable, which may be separa[ely redeemed. The procedure for the selection of Parity Bonds for redemption may be modified as se[ forth in the Supplemental indenture for such Parity Bonds. The Trustee shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption. Partial Redeneption of Ba:ds or Paritp Bonds. Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District �vil] execu[e and the Trustee will authenticate and deliver to the Bondowner, at lhe expense of lhe Dislrict, a new Bond or Bonds or a new Parity Bond or Parity Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, �vith the same interest rate and the same maturity or, in the case uf surrender of a Parity Bund, a ne�v Parity Bond or Parity Bonds subject to the foreguing limitations; provided, if such partial rcdcmption occurs prior to thc occurrcncc of a Minimum Dcnomination Rcduction Evcnt, and duc to such partial rcdcmption of a Bond, thc Bond is Outstanding in a pnncipal amount of lcss than $100,000, thcn a new Bond or Parity Bond may be issued pursuant to the Indenlure in an integral mulliple of $5,000 of less than $100,000. Effect of Notice and A��ailability of Redemption Monep. Notice of redemption having been duly givcn, as providcd in thc Indcnturc, and thc amount ncecssary for thc rcdcmption having bccn madc availablc for that purposc and bcing availablc thcrcfor on thc datc fixcd for such rcdcmption: �a) thc Bonds and Parity Bonds, or porlions thereof, designated for redemption will, on the dale Gxed for redemplion, become due and payable at ihe redemption price lhereof as provided in the Indenlure or in any Supplemental Indenture with respect to Parity Bonds, anything in the Indenture or in the Bonds or the Parity Bonds to the contrary norivithstanding; (b) upon presentation and surrender thereof at the Principal OfYIce of the Trustee, the redemption price of such Bonds and Parity Bonds will be paid to the Owners thcrcof; (c) as of thc rcdcmption datc thc Bonds ar thc Parity Bonds, ar portions thcrcof sa dcsignatcd for rcdcmption �vill bc dccmcd to bc no longcr Outstanding and such Bonds ar Parity Bonds, ar portions thereof, will cease to bear further interest; and (d) as of the date fixed for redemption no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture or any Supplemental Indenture, or to any other rights, except with respect to 15 payment of the redemption price and interest accrued to the redemption date from the amounts so made available. Registration, Transfcr and Exchangc Registraiion. The Trustee will keep or cause to be kept, at the Principal Office of the Trustee, sufficicnt books for thc rcgistration and transfcr of thc Bonds and any Parity Bonds which �vill upon rcasonablc prior noticc bc opcn to inspcction by thc District during all rcgular busincss hours, and, subjcct to thc limi[a[ions sct forth in thc Indcn[urc, upon prescntation for such purposc, thc Trustcc will, undcr such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as provided in the Indentw'e. Thc Dis[rict and thc Trustcc may [rcat thc Owncr of any Bond or Parity Bond whosc namc appcars on thc Bond Rcgistcr as thc absolutc Owncr of tha[ Bond or Parity Bond for any and all purposcs, and the Distric[ and the Tnistee �vill not be affected by any notice to the conhary. The District and the Trustee may rely un the address of the Bunduwner as it appears in the Bund Register for any and all purposes. It will be the duty of the Bondo�vner to give written notice to the Trustee uf any change in the Bondowner's address so that the Bond Register may be revised accordingly. Tr�nesfer m• E.rchu�:ge. Any Bond, or any portion [hereof, may only be transferred in principal amounts equal to Authorized Denominations (unless, prior tu the occurrence of a Minimum Denomination Reduction Event and due to prior redemptiun in pa�t thereof, the Bond is Outstanding in a principal amount of less than $100,000, then in an integral multiple of $5,000 of less than $100,000). No transfers of Bonds shall be required to be made (a) during a period of fifteen (1 �) days next preceding any selection of the Bonds or Parity Bonds to be redeemed, or (b) with respect to Bonds or Parity Bonds which have been selected for redemption. Subject to the limitations set forth in the fullowing paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whosc namc it is rcgistcrcd, m person or by his on c�r duly authorizcd attomcy, upon surrcndcr of such Bond or Parity Bond for canccllation at thc Principal Officc of thc Tnxstcc, accompanicd by ddivcry of wrilten inslrument of lransCer in a form acceptable to the Truslee and didy esecuted by the Bondowner or his or her duly aulhorized atlorney. Bunds or Parity Bonds may be exchanged at the Principal Oftice of the Trustee for a like aggrcgatc principal amount of Bonds or Parity Bonds for othcr authorizcd dcnominations of thc samc maturity and issuc. Thc Trustcc inay not collcct from thc Owncr any chargc for any ncw Bond or Parity Bond issued upon any exchange or transfer, but will require the Bondowner requesting such eschange or transfer lo pay any lax or other governmenlal charge required lo be paid wilh respecl to such exchange or transfer. Whenever any Bonds or Parily Bonds are surrendered for registration of lransfer or eachange, the District will execute and the Trustee will authenticate and deliver a new Bond or Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; providcd that thc Trustcc is not rcquircd to mgistcr transfcrs or makc cxchangcs of: (i) Bonds or Parity Bonds for a period of 15 days ncxt prcccding any scicction of thc Bonds or Parity Bonds to bc rcdccmcd; or (ii) any Bonds or Parity Bonds chascn for rcdcmption. 16 SOURCES OF PAFMENT FOR THE BONDS Limited Obligations The Bonds are special, linuted obligations of the District payable only from amounts pledged under the Indenture and from no otl�er sources. The Net Taxes are the primary source of security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Espenses in an amount not to exceed the Administrative Expenses Priority Amount �as defined in tl�e Indenture)) and from amounts held in the Special Tax Fund (other than amounts held in the Administrative Expenses Account therein). Net Tases consis[ of a por[ion of thc Spccial Taxcs lcvicd on thc Taxablc Property in thc District pursuan[ to [hc Ratc and Mcthod. Thc Indcnturc dcfincs "Nct Tnxcs" as Gross Taxcs minus amounts sct asidc to pay Administra[ive Expenses not to exceed the Administrative Expenses Priority Amount. The term "Gross Taxes' means (i) the amount of all Special Taxes received by the District, together with (ii) the proceeds collected from the sale of property pursuant to the foreclosure provisions of the indenture for the delinquency of such Special Taxes remaining after the payxnent of all costs related to such foreclosure actions. The Administrative Espenses Priority Amount is equal to $50,000 per Bond Year, escalating by 3'% each Bond Year commencing July l, 2022. In the event thatthe Special Tax revenues are not received when due,the unly sources of funds available to pay the debt service on the Bonds are the proceeds collected from the sale of property pursuant to the foreclosure provisions of the Indenture for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions, and amounts held by the Trustee in [he Special Tax Fund (other than the Admini.trative Expenses Account therein), including amounts held in the Reserne Account therein, for the exclusive benefit of the Owners of the Bonds. As described in more detail under "— Special Tax Fund" below, the Trustee will transfer the Spccial Taxcs on dcposit in thc Spccial Tax Fund to thc various spccificd accounts and funds cstablishcd and hcld by thc Trustcc undcr thc lndcnturc in a spccificd ordcr of priority, in ccrtam amounts, and at certain specitied times during each Bond Year. Following ihe deposits specified in the [ndenlure to lhe Administralive Expenses Account, the Interest Accounl, lhe Principal Account, lhe Redemption Account, and the Reserve Account of the Special Tax Fund, remaining Special Taxes (if any), are lransCerred to the Rebate Fund and the Surplus Fund. Net Tases deposited in the Rebate Fund and the Surplus Fund will no longer be considered to be pledged to the Bonds or any Parity Bunds, and none of the Rebate Fund, the Surplus Fund, thc Improvcmcnt Fund, thc Costs of Issuancc Fund, or thc Administrativc Expcnscs Account of thc Spccial Tax Fund will bc construcd as a trust fund hcld for thc bcncfit of thc Owncrs af thc Bonds or any Parity Bonds. NEITHER THE FAiTH AND CREDIT NOR THE TA�ING POWER OF THE CITY, THE COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET TAYES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. 17 Furthermore, the obligations of the property owners within the District to pay Special Taaes are nonrecourse and none of such property owners or any of their respective members, partners, managers and officcrs has any personal liability with respcct [o thc Bonds. Scc "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes - Proree dti ofForerlo.c�n�e Sule.c." See "APPENDIX E— SUMMARY OF THE INDENTURE." Special Taxes Autlrori;.ntion and Pledge. In accordance with the provisions of the Act, the City established the District on April 23, ?021 far the purpose of financing of various public improvements required m connection with the proposed development within tl�e District. At a special election held on May 13, 2021, thc qualificd cicctors within thc District authorizcd thc Dis[rict to incur indcbtcdncss in an amount not to cxcccd 550,000,000 for thc District and thc lcvy of thc Spccial Taxcs on property �vithin [hc Dis[rict to repay such bonds and to finance the purchase, construc[ion, moditication, expansion, improvement or rehabilitation uf ce�7ain real or other tangible property, including the prepayment of the CFD No. 2005-1 Pro Rata Bunds described in the Resolution of Formation, which are generally comprised of stonn drainage, water and sewer facilities, roadway, landscapmg and other public facilities of the City and sewer facilities and other public facilities of CVWD. The quahfied electors withm the Dis[rict also voted to approve the Ra[e and Method which authorized the Special Tax to be levied to repay indebtedness of the District, including [he Bonds. The term `Special Tax" means the taxes authorized to be levied by the District on property within the Dis[rict in accordance with [he Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the election in the District, including any scheduled payments and any Prepayments thereof, the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien, and penalties and interest thereon. The Bonds �vill be repaid only from annual Net Taxes derived from the levy and collection of Special Taxes pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an Assessor's Parcel, and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. Thc Nct Taxcs collcetcd from thc annual Spccial Tax lcvy and thc procecds of any Prcpaymcnt havc bccn plcdgcd undcr thc Indcnturc ta thc rcpayxncnt of thc Bonds and Parity Bonds. The Special Taxes levied in any Fiscal Year may not exceed lhe maximum rales authorized pursuant to the Rate and Method. See "— Rate an�/ R/eihod of .4��ortionineitt of Specrnl Ta.c" and "APPENDIX A—RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." There is no assurancc that thc Nct Taxcs will, in all circumstanccs, bc adcquatc to pay thc principal of and mtcrest on thc Bonds whcn duc. Scc thc caption "SPECIAL RISK FACTORS—Insufficicncy of Spccial Tax Rcvcnucs." Rate and Metho�! of.�pportio�vnent of Specia! Tax. The District is legally authorized and will covenant in the Indenture to cause the levy of the Special Taxes in an amount determined according to the Ratc and Mcthod. Thc Ratc and Mcthod apportions thc total amount of Spccial Taxcs to bc collcctcd among thc taxablc parccls in thc District as morc particularly dcscribcd bclow. The following is a synopsis of the provisions of the Rate and Method for the District, which should be read in conjunction with the complete test of tlie Rate and Method which is attached as APPLNDIX A—"RATL AND M�I HOD OF APPORTIONMLNT OF SP�CIAL TAY." The meaning of thc dcfincd tcrms uscd in this scction arc as sct forth in APPENDIX A. This scction providcs only a summary of thc Ratc and Mcthod, and is qualificd by morc complctc and dctailcd information wntaincd in the entire Rate and Method attached as APPENDI� A. 18 .9ssignment to Land L7se Categories. Each Fiscal Year, begmnmg witl� Fiscal Year 2021-22, each Assessor's Parcel within the District will be classified as Taxable Property or Exempt Property. In addition, cach Asscssor's Parccl of Taxablc Property will bc furthcr classificd as Dcvclapcd Property, Approvcd Property, Undcvclopcd Property, Provisional Wclfarc Property, or Provisional Property and as being in Zone 1, Zone 2 or Zone 3. Each Assessor's Parcel of Developed Property will be classified as Single Family PropeRy, Apartment Property, or Nun-Residential Property. Each Assessor's Parcel of Single Family Property will be dassitied according to its applicable Land Use Class based on its Building Square Footage. Esentpt Properry�. Thc CFD Administrator will classify as Exempt Property (i) Asscssor's Parccls of Public PropeRy, (ii) Assessor's Parcels of Prope�rty Owner Association Property, (iii) Assessor's Parcels which are used as places of worship and are exempt firom ad valorem property taxes because they are owned by a religious organization, (iv) Assessor's Parcels with public or utility easements making impractical their utilizahon for other tl�an the purposes set farth in the easement, (v) Lower Income Households Welfare Exemption Property, and (vi� Assessor's Parcels classified as Non-Residential Property, provided tha[ no such dassification would reduce the sum of all Taxable Property in the District to less [han 44.86 Acres in Zone 1, 4K.K4 Acres in Zone 2 or 11.12 Acres in Zone 3. Assessor's Parcels of Lower Income Households Welfare Exemption Prope�ty which cannot be classified as Exempt Prope�ty because such classiticatiun would reduce the sum of all Taxable Prupe�ty in the District to less than 44.86 Acres in Zone I, 4R.34 Acres in Zone 3 or 11.12 Acres in Zone 3 shall be classitied as Provisional Welfare Property and will continue to be subject to the Special Tases accordmgly. Ta�-esempt status will be assigned by the CFD Ad�ninistrator in the chronological order in which property becomes eligible for classification as Esempt Property, except for Non-Residential Property, which will be assigned tax exempt s[atus only after all other eligible property types have been classitied as Eaempt Property. Mariiii�mt Specinl T�u, Assigi�e�! Special Tax a��d Buckup Special Tur. R9c�sirn�m� S��eciul Tu.� The Maximum Special Tax for Developed Property and Provisiona] WelCare Property shall be the greater of the Assigned Special Tax Cor Developed Property and Provisional Welfare Property or the Backup Special Tax for Developed Property and Provisional Welfare Property. Thc Maximum Spccial Tax for Provisional Property, Approvcd Property, and Undcvclopcd Property commcncmg m Fiscal Ycar �021-22 �vill bc $15,419 per Acrc for Zonc 1, $19,322 per Acrc for Zone 2 and $��,663 per Acre for Zone 3. The Maximum Special Tax 1'or Provisional Properly, Approved Pmperly and Undeveloped Property will be increased by lwo percent (2'So) of the amounl in effect in lhe priur Fiscal Year on each July l, beginning July l, 3022. 4ssignecl S�eciul Tc�.r. Thc Assigncd Spccial Tax apphcablc to an Asscssor's Parccl classificd as Dcvdopcd Property or Provisional Wclfarc Property is shown in Tablcs 1-3 of Scction C of thc Ratc and Method atlached as APPENDIX A, which rales increase will increase by lwo percent (29�0) of the amount in efCect in the prior Fiscal Year on each July, beginning ,1uly l, 3023. The Assigned Special Tax applicable to an Assessor's Parcel classified as Developed or Provisiunal Welfare Property ranges from $2,300 to $1,275 per Residential Unit for Zune 1; $3,025 to $2,475 per Residential Unit for Zune 2; and $2,300 tu $750 per Residential Unit for Zone 3. Backiry Sl�ecia( Ta.r. The Backup Special Tax for Developed Property and Provisional Welfare Property will be $15,419 per Acre for Zone l; 519,3�2 per Acre for Zone 2 and $22,662 per Acre for Zone 3, which will increase by rivo percent (2°/�) uf the amount in effect in the Priur Fiscal Year on each July 1, beginning July 1, 2022. 19 1Lfedrod o/Appa�tionment o/ Specinl Ta.c. Each Fiscal Year, beginning with Fiscal Year 3021-2?, the CFD Admmistrator will levy the Special Tas on all Taxable Property in accordance with the following stcps: Step l: The Special Tax shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100°rb of the applicable Assigned Special Tax as needed to satisfy tl�e Special Tax Requirement. Stcn 2: If additional monics arc nccdcd to satisfy thc Spccial Tax Rcquircmcnt aftcr Stcp 1 has been completed,the Special Tax shall be levied Propartionately on each Assessor's Parcel of Approved Property in an amoimt up to 100°i� of the Maximum Special Tax for Approved PropeRy. Stcn 3: If additional monics arc nccdcd to satisfy thc Spccial Tax Rcquircmcnt aftcr Stcp 2 has bccn complctcd, thc Spccial Tas shall bc lcvicd Proportionatcly on cach Asscssor's Parccl of Undeveloped Property in an aniount up to 1004% of the Maximum Special Tax for Undeveloped Property. Steo 4: If additional monies are needed to satisfy the Special Tas Requirement after the first three steps have been completed,then the Special Tas amount determined in Step 1 shall be increased Proportionately on each Assessor's Parcel of Developed Property in an amount up to 100`io of the Maximum Special Tax for Developed Property. Step 5: If additional monies are needed to satisfy the Special Tax Requirement after the first four steps have been completed, then the Special Tas shall be levied Proportionately on each Assessor's Parcel of Provisional Welfare Property in an amount up to 100°i� of the Maximum Special Tax for Provisional Property. Step 6: If additional munies are needed w satisfy the Special Tax Requirement after the tirst four steps have been completed, then the Special Ta� shall be levied Proportionately on each Assessor's Parcel of Provisional Property in an amount up to 10090 of thc Maximum Spccial Tax for Provisional Property. "Special Tax Requirement" is defined in the Rate and Method lo mean that amount required in any Fiscal Year tu: (i) pay regularly scheduled Debt Service on all Outstanding Bunds; (ii) pay periodic costs on the Outstanding Bonds, including but not limited to, credit enhancement and rebate payments on thc Outstandmg Bonds; (iii) pay Administrativc Expcnscs; (iv) pay any amounts rcquircd to cstablish or rcplcnish any rescrvc funds for all Outstanding Bonds; (v) accumulatc funds to pay dircctly for acquisition or construction of facilitics, providcd that thc inclusion of such amount docs not causc an increase in lhe Special Tax to be levied on Appmved Properly, Undeveloped Property, or Provisional Pmperly, until lhe dale thal all Bonds have been issued; and (vi) pay for reasonably anticipaled delinquent Special Taxes based on the delinyuency rate for Special Taxes levied in the previous Fiscal Year; less (vii) a credit for funds available to reduce the Special Tax levy, as determined by the CFD Administratur pursuant to the Indenture. Nohvithstanding the above, under no circumstances will the Special Tax levied in any Fiscal Year on any Assessor's Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased as a result uf a delinquency or deYault in the payment of the Special Tas applicable to any other Assessur's Parcel witliin tlie District by more than ten percent (10°i&) above wliat would have been levied in the absence of sucli delinquencies or deYaults. Prepnpiiient of Special Tae. The Special Tax obligation for an Assessor's Parcel of Developed Property, Approved Property, Undeveloped Property, or Provisional Property that has been included in a Final Map may be prepaid in full, ur in part, and only if there are no delinquent Special Taaes with 20 respect to such Assessor's Parcel at the tmie of prepayment, provided that the terms set forth under Section F of the Rate and Method are satisfied. The Prepayment Amount is calculated based on the Bond Rcdcmption Amount plus Rcdcmption Prcmium plus thc Fuhirc Facilitics Costs plus thc Dcfcasancc Amount plus [hc Administrativc Fccs and Expcnscs, lcss a crcdit for thc resulting rcduction in thc Reserve Requirement for the Bonds, and less a credit for the resulting reduction in capitalized interest (if any), all as specified in APPENDIX A—"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX — Section F." The Bonds are subject to eztraordinary redemption frum any such prepayments. See "THE BONDS — Redemption — E.rD�no��finaJl Re�iernption /��om Specicd Ta.r P��eparmenis" Mandatory redemption of Bonds from Special Tax prepayments may result in the reductiun in the otherwise expected yield on such Bonds if the Bonds were purchased at a price greater than par. See "SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Special Tax Prepayments." Esti�iiute�l Deht Seri�ice Corer�ge. In connection with the issuance of the Bonds, the Special Ta� Consultant �vill certify that the Maxinmm Specia] Tax that may be levied in each Fiscal Year on Assessor's Parcels within the District classified as Taxable Property will be at least equal to the sum of: (i) I 10�� ofMaximum Annual Debt Service on the Bonds; plus (ii) the Administrative Expenses Priority Amount of $50,000 that will escalate by t�vo percent (2%� annually. Actual collections of the Special Tas will depend on the amount of Special Tas delinquencies. Even if the Maximum Specia] Tax, if levied in accordance with the Rate and Method, would produce coverage levels �vhich are higher than 110`% of debt service in certain circumstances, because of the limitations imposed by Sectiun 53331(d) of the Act, investors should assume that the maximum amount that could be levied in any Fiscal Year is the amount that would produce 110% of debt service due on the Bonds in the corresponding Bond Year. Section 533� 1(d) of [he Act provides that the special tax levied against any Assessor's parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the uwner uf any other Assessor's parcel by more than 10°i� abovc thc amount that would havc bccn lcvicd in that fiscal ycar had thcrc ncvcr bccn any such dclinqucncics or dcfaults. Le��, Collection a�ed Application of Speciul Tn�es. The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as a�l rnlorenr property taxes, although it is pussible that the District could elect to provide handbills to property uwners within thc District. The Districl �vill covenanl in lhe Indenture that each year il will levy Special Taxes, subjecl to the maximum rates permitled under lhe Rale and Method, in an amount equal to the Special Tax Requirement (as defined in the Rate and Methud) �vhich includes, but is not limited to, sufficient, together with other amounts on deposit in the Special Tas Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds, to rcplcnish thc Rcscrvc Account to thc Rcscrvc Rcquircmcnt and to pay Administrativc Espcnscs. The District will make certain covenants in the Indenture which are intended to ensure that the current masimum Special Tax rates and method of collectiun of the Special Taxes are not altered in a manner tliat would impair tlie District's ability to collect sufficient Special Taxes to pay debt service on thc Bonds, Parity Bonds and Administrativc Expcnscs whcn duc. 21 First, tl�e District will covenant in the Indenture that it will take no actions that would discontinue or cause tl�e discontmuance of the Special Tas levy or the District's authority to le�y the Special Tax for so long as thc Bonds and any Parity Bands arc Outstanding. Second, the District will covenant in the Indenture, to the maxinmm extent that the law permits it to do so, not to initiate proceedmgs to reduce the maximum Special Tas rates for tl�e District. Third, thc Distric[ will covcnant in thc Indcnturc that, in thc cvcn[ that any ini[iativc is adoptcd by thc qualificd cicctors within thc Distric[ which purports to rcducc thc maximum Spccial Tax bclo�v thc levels specified in the preceding paragraph or to limit the power of the District to le�y the Special Taxes for the purposes set farth in the Indenture, it will cummence and pursue legal action in order to preserve its ability to comply with such covenants. The District can provide no assurance that any such legal action will be successfuL See the caption "SPECIAL RISK FACTORS — Proposition 218." Fourth, the Dis[rict will covenant in the [ndenture that it will not adopt any policy pursuant to the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds and Panty Bonds when due. See Appendis E under the caption "COVENANTS AND WARRANTY." Although the Special Ta�es constitute liens on taxed parcels withm the District, they do not constitute a personal mdebtedness of the owners of property withm the District. Moreover, other liens for taxes and assessments already exist on the proper[y located within the District and others could come into existence in the future in cer[ain situations without the consent or knowledge of the City or the landowners in the District. See the captions "THE DISTRICT—Direct and Overlapping Debf' and "SPECIAL RiSK FACTORS—Direct and Overlapping Indebtedness." There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes cvcn if financially ablc to do so, all as morc fully dcscribcd undcr thc caption "SPECIAL RISK FACTORS." Collection ofSpecia! Ta.res and Florr of Fiu:ds. The Special Taxes will be levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as a�l rnlorenr property taxes, although it is pussible that the District could elect to provide handbills to property uwners within thc District. Whcn thc County apportions Spccial Taxcs to thc District, thc District will transmit thc Spccial Taxcs to thc Trustcc far dcpasit in thc Spccial Tax Fund cstablishcd by thc Indcnturc. Covenant for Superior Court Foreclosure Thc nct procccds rcccivcd following a judicial forcclosure salc of property within thc District resulting from a property owncr's failurc to pay thc Spccial Taxcs whcn duc arc includcd within thc Nct Taxes pledged to the payment of principal of and interest on the Bonds imder the Indenture. Pursuant to Section 93396.1 of the Act, the City CounciL as the legislative body of the District, may covcnant for thc bcncfit of thc Owncrs of thc Bonds to commcncc and diligcntly pursuc a Superior Court action to forcclosc thc licn �vithin spccificd timc limits to collcct dclinqucnt installmcnts of Spccial Tascs. In such an action, thc rcal property subjcct to thc unpaid amount may bc sold at a judicial foreclosure sale. Under the Act, the commencement ofjudicial foreclosure follo�ving the nonpayment of a Special Tax is not mandatory. However, the District will covenant in the Indenture for the benefit of the owners of tlie Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings 22 against any parcel with erther (A) at least four (4) consecutive installments of delinquent Special Tases or (B) delmquent Special Tases in excess of 510,000 on any one parcel, in each instance by the December 1 following thc closc of cach Fiscal Ycar in which such Spccial Taxcs wcrc dur, and (ii) will commcncc judicial forcclosurc procccdings against all parccls with dclinqucnt Spccial Tascs by thc Dcccmbcr 1 following the close of each Fiscal Year in which it receives Special Taxes in an amoimt �vhich is less than 95°i� of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings imtil the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount on deposit in tl�e Reserve Account is at least equal to the Reserve Requirement, and such delinquencies will not cause moneys in the Reserve Accoimt to bc withdrawn on [hc ncxt succccding Intcrest Paymcnt Datc.. The District will covenant in the Indentw�e that it will deposit the net proceeds uf any foreclosure in the Special Tax Fund and will apply such pruceeds remaining after the payment of Administrative Espenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit m the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. Nohvithstanding the foregoing, the Indenture provides that, if at any time, the County's Teeter Plan (adopted pursuant to Sections 4701 through 4717 of the California Revenue and Taxation Code) is in effect and is made applicable to the District and the Special Tases being levied in connection with the Bonds, the District may, m its discretion, elect not to commence any judicial foreclosure proceeding pursuant to the foregoing provisions or defer the commencement of such proceedings until .uch time as the District deems appropriate. See "SOURCES OF PAYMENT FOR THE BONDS — District Not Included in Teeter Plan." If foreclosure is necessary and other funds (including amounts in the Reserve Account) have been exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actrons, im•olvement by agencies of the federal government and other factors beyond the control of the City and the District. See the caption "SPECIAL RISK FACTORS — Enforcement Delays - Bankruplcy" and "— FDIC/Federal Government Interests in Properlies." Moreover, no assurances can be given lhal the real property suhject lo foreclosure and sale al a judicial 1'oredosure sale �vill be sold or, iC sold, thal lhe nel proceeds of such sale will be sufticient to pay any delinquent Special Tax installment See the caption "SPECIAL RISK FACTORS — Pruperty Values." Although the Act authori�es the District to cause such an action to bc commcnccd and diligcntly pursucd to complctian, thc Act docs not imposc on thc District or thc City any obligation to purchasc or acquirc any lot or parccl of property sold at a forcclosure salc if thcrc is no othcr purchascr at such salc. Thc Act providcs that, in thc casc of a dclinqucncy, thc Spccial Tax �vill have lhe same lien priority as is provided Cor a�l ralorenr laxes. The mere commencement of foreclusure proceedings �vill not assure a prompt and favorable resolution of Spccial Tax dclinqucncics. Thc ability of thc District to forcclosc thc hcn of dclinqucnt unpaid Spccial Taxcs may bc limitcd. Scc "SPECIAL RISK FACTORS — Enforccmcnt Dclays - Bankruptcy" and "— FDIC/Fcdcral Govcmmcnt lntcrests in Propertics." Morcovcr, cvcn if a �udgmcnt of foreclosure and order of sale is obtained, the District must cause a notice of levy to be issued. Under current law, the property owner has 130 days from the date of service of the notice of levy in which to redeem the subject property. If the property owner fails tu redeem the property and it is sold, tlie property owner's only remedy is an action to set aside the sale, whicli action must be brought within 90 days of tlie datc of salc. If such an action results in thc sctting asidc of thc forcclosure salc, thc judgmcnt is rcvivcd, and thc District would bc cntiticd to rcccivc intcrest on thc rcvivcd judgmcnt as if thc salc had not bccn madc. Undcr formcr law a property owncr had a period of onc ycar within which to rcdccin property to bc sold, and the constitutionality of the legislation that eliminated the one year redemption period has not been tested. 23 There can be no assurance that, even if the sub�ect property is sold, the proceeds from such sale will be sufficient to pay the delinquent mstallments of the Special Taa. The Act does not require the Dis[rict or any othcr govcrnmcntal agcncy to purchasc or othcr�visc acquirc nny Asscssor's Parccl bcing sold if thcrc is no othcr purchascr at such salc. Thc Act docs rcquirc that property bcing sold pursuant to foreclosure imder the Act must be sold for not less than the judgment amount �which must include reasonable attorneys' fees, together with interest, penalties, and uther authorized charges and costs) plus postjudgment interest and authorized costs, unless a lower bid price is authorized by the Owners of not less than 75�„ by value of the Bonds Outstandmg. Special Tax Fund Except for Prepayments, which will be deposited with the Trustee, together witl� a Certificate of Authorized Representative designating sucl� Special Tases as Prepayments and specifying tl�e respective amounts to be deposited in the vanous funds and accounts held under the Indenture. The Trustee �vill, on or promptly after each date on which the Special Taxes are received from the Dis[rict, deposit the Specia] Taxes in [he Special Tax Fund to be held in tnist for the Owners. In general, the Indenture provides that the Trustee shall transfer the Special Taxes on deposit in the Special Tax Fund on the dates, in the amounts and in the following order of priority, to: First: To the Administrative Expenses Account in an amount up [o the Administrative Expenses Priority Amoun[. Second: To the Interest Accuunt, an amount such that the balance in the Interest Accuunt three (3) Business Days prior to each Interest Pay�nent Date is equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Da[e and any installment of interest due on a previous [n[erest Payment Date �vhich remains unpaid. Moneys in the Interest Account will be used for the payment of interes[ on the Bonds and any Parity Bonds as the same become due. Third: To thc Principal Account, an amount such that thc balancc in thc Principal Account thrcc (3) Busincss Days prior to Scptcmbcr 1 of cach ycar, commcncing September l, 2022, i. equal to the principal paymenl due on the Bonds and any Parity Bonds maluring on such September 1 and any principal paymenl due on a previous Seplember 1 which remains unpaid. Moneys in lhe Principal Accoimi shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity. Fourlh: To lhe Redemption Account, the amount needed lo make the balance in the Redemplion Accounl lhree (3) Business Days prior to each Seplember 1 on which a Sinking Fund Paymenl is due equal lo lhe Sinking Fund Paymenl due on any Outstanding Bonds and Parity Bonds on such September 1 and thereafter, to pay the principal and premium, if any, due in connection with an optional redemption of Bonds or Parity Bonds; urovidcd, in thc cvcnt of a shortfall of amounts on dcposit in thc Spccial Tax Fund (such shartfall bcing dctcrmincd cxcluding amounts an dcposit in, and prior to drawing upon, thc Rcscrvc Account) to makc thc transfcrs to thc Principal Account and to the Redemption Accoimt (pursuant to the paragraph immediately above and this paragraph) necessary to pay in full both (x) the principal payment due on tlie Bonds and any Parity Bond� maturing on the applicable September 1 and (y) tlie Sinking Fund Payment due on any Outstanding Bonds and any Parity Bonds on such Scptcmbcr 1, thc Trustce shall transfcr thc availablc amount from thc Spccial Tax Fund to thc Principal Account and thc Rcdcmption 24 Account on a pro rata basis �calculated with reference to the respective pnncipal payment and Sinking Fund Payment coming due and payable on sucl� September 1) at lcast thrcc � 3) Busincss Days prior to such Scptcmbcr 1. Fitth: To the Reserve Account of the Special Tax Fimd to the extent necessary to replenish the Reserve Account to the Reserve Requirement. Si�th: To thc Rcbatc Fund cstablishcd by thc Indcnturc [o thc cxtcnt dircetcd by thc City pursuantto thc Indcnturc. Seventh: To the Surplus Fund established by the Indenture such remaining amounts in the Special Tax Fund after makmg the foregoing transfers as soon as practicable after cach Scptcmbcr 1, and in any cvcnt prior to cach Octobcr 1. Unlcss on or prior to such da[c, [hc Trustcc has rcccivcd a Ccrtifica[c af Authorizcd Rcprescntativc directing tha[ certain amounts be retained in the Special Tax Fund because the District has induded such amounts as being available in the Special Tax Fund in calculating the amount of the le�y of Special Taxes in such Fiscal Year. Reserve Account of the Special Tas Fund In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement The Reserve Requirement may be satisfied by creditmg to the Reserve Account moneys or one or more Reserve Policies or any combination thereof, which in [he aggregate make fimds available equal to the Reserve Requirement. "Reserne Requiremenf' with respect to the Bonds is defined in [he Indenture to mean, as of the date of calculation an amount equal to the least of: (i) Maximum Annual Debt Service on the then Outstanding Bonds of such Series; (ii) 10°i� of the original amuunt uf the Bonds ("amounf' meaning the principal amount of the Bunds, unless the Bonds were issued with original issue discount greater than hvo percent of the principal amount, or original issuc prcmium grcatcr than thc sum of t�vo perccnt of thc principal amount plus original issuc prcmium attributablc cxclusivcly to rcasonablc undcrwritcrs' compcnsation, in which casc "amounC' means issue price); or (iii) 125�/0 of average Annual Debt Service on the then Oulslanding Bonds of such Series. Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in thc Indcnturc, thc District will covcnant in thc Indcnturc to lc�y Spccial Taxcs in an amount sufficicnt, in light of thc othcr mtcndcd uscs of thc Spccial Tas procccds, to maintain thc balancc m thc Reserve Accounl at the Reserve Requirement. Amounts in lhe Reserve Account are to be applied: (i) lo pay debt service on lhe Bonds, or any Parity Bonds, including Sinking Fund Paymenls, lo the extenl thal other monies are nol available lherefor; (ii) to redeem Bonds or Parity Bonds in lhe event oCprepaymenl of Special Taxes, to uptionally redeem Bonds or Parity Bonds or in connection with a partial defeasance of Bonds or Parity Bonds, su long as the amount on deposit in the Reserve Account following such rcdcmption or partial dcfcasancc cquals thc Rcscrvc Rcquircmcnt (taking into account Outstanding Bonds and Parity Bonds aftcr such rcdcmption or partial dcfcasancc) and in accordancc with thc Indcnturc; and �iii� to pay any rcbatc rcquircmcnts, to thc cxtcnt of Nct Taxcs rcmaining following thc dcposits rcquircd by the Indenture each Bond Year to the Interest Accoimt, the Principal Account, the Redemption Account, and to the Reserve Account if needed to replenish the Reserve Requirement. See "- Special Tax Fund" above. See, also Appendia � under the caption "CR�ATION OF FUIVDS AND APPLICATION OF PROCL�DS — Reserve Accuunt uf tlie Special Tax Fund." 2$ District Not Included In Teeter Plan Although thc Rivcrsidc County Board of Supervisors has adoptcd thc Al[crnativc Mcthod of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plaii') which allows each entity levying secured property taxes in the Coimty to draw on the amount uf property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the Califomia Revenue and Tasation Code. While the City's ad valorem taxes are included in the Teeter Plan, the District will not be included in the Teeter Plan. Consequently, tl�e District may not draw on the County Tax Loss Rcscrvc Fund in thc cvcnt of dclinqucncics in Spccial Tax paymcnt. Paritv Bonds Thc District may at any [imc aftcr thc issuancc and dclivcry of [hc Bonds imdcr thc Indcnturc issuc Parity Bonds payablc from thc Nct Ta�cs and o[hcr amounts dcpositcd in thc Spccial Tax Fund (other than in the Administra[ive Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bunds and any other Parity Bonds issued under the Indenture or under any Supplemental Indenture, pruvided, however, Parity Bonds may only be issued far the purposes of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding or for financmg the Project Costs or other purposes of the District m an original principal amount not to exceed, toge[her with the original principal amount of the Bonds and any new money Parity Bonds, $50 million. Parity Bonds issued are subject to certain specific conditions, which are made conditions precedent [o the issuance of any such Parity Bonds, induding but not limited to the following: �a) The Distnct is m compliance with all covenants set forth in the Indenture and any Supplemental Indenture then m effect and a certificate of the District to that effect has been filed with the Trustee; provided, however, that Parity Bonds may be issued if the District is not in compliance with all covenants so long a, immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. �b� Thc issuancc of such Parity Bonds has bccn duly authorizcd pursuant to thc Act and all applicablc laws, and thc issuancc of such Parity Bonds has bccn providcd for by a Supplcmcntal Indenture duly adopted by the Dislrict conlaining the specificalions set forlh in lhe Indenlure. (c) The District has received the following documents or money or securities, all uf such ducuments dated or certitied, as the case may be, as of the date of delivery of such Parity Bonds by the Trustcc (unlcss thc Trustcc shall acccpt any of such documcnts bcarmg a prior datc): (1) a cerlified copy of the Supplemental Indenlure aulhorizing the i.suance of such Parity Bonds; �2 � a writtcn rcqucst of thc District as to thc dclivcry of such Parity Bonds; (3) an opinion of Bond Counsel and/or general counsel to the District to the effect that (a) the District has the riglit and power under the Act to adupt tlie Indenture and the Supplemental Indentures relating to such Parity Bonds, and the Indenture and all such Supplcmcntal Indcntures havc bccn duly and lawfully adoptcd by thc District, arc in full forcc and cffcct and arc valid and binding upon thc District and cnforccablc in accordancc with thcir tcrxns (cxccpt as cnforccmcnt may bc limitcd by bankruptcy, insolvcncy, rcorganization and othcr similar laws relating to the enforcement of creditors' rights); (b) the Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in the Indenture, subject to the application thereof to tlie purposes and un tlie conditions permitted by 26 the Indenture; and (c) such Parity Bonds are valid and bmdmg limited obligations of the District, enforceable in accordance with their tenns (escept as enforcement may be limited by bankruptcy, insolvcncy, rcorgnnization and othcr similar laws rclating to thc cnforccmcnt of crcditors' rights) and thc [crms of thc Indcnturc and all Supplcmcntal Indcntures thcrcto and cntiticd to thc bcncfits of the Indenture and all such Supplemental Indentures, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act lor other applicable laws) and the Indenture and all such Supplemental Indentures; and a further opinion of Bond Counsel to the effect that, assuming compliance by the Distnct with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the esclusion from gross income for federal income tax purposcs of intcrest on thc Bonds and any Parity Bonds [hcrctoforc issucd on a Tax-cxcmpt bnsis, or thc cxcmption fram S[atc of Cnlifornia personal incomc taxation of intcrest on any Ou[standing Bonds and Parity Bonds thcrctoforc issucd; (4) a certificate of tl�e District containmg such statements as may be reasonably necessary to show compliance with the requirements of the Indenture (5) where the entire principal amuunt of the Parity Bonds is issued to refund the Bonds or other Parity Bonds, a certificate of an Independent Financial Consultant ce�rtifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding follo�ving the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; (6) where the Parity Bonds are being issued other than to refund the Bonds or other Parity Bonds, a Certificate of the Special Tax Admmistrator certifying that (i) the maximwn Special Taxes that may be levied in each Fiscal Year is not less than Administrative Expenses plus ll0°io of the Annual Debt Service in the Bond Year that begins m such Fiscal Year; and (ii) the Value of District Property is not less than four (4) times [he sum of Direct Debt for District Pmperty plus Overlapping Debt allocable to all properly in lhe Dislrict suhject lo lhe Special Tax. For purposes of the foregoing Certiticate of Special Tax Administrator, all calculations shall consider the Parity Bunds proposed to be issued to be Outstanding. if all or any purtion uf the Parity Bonds are issued as Escro�v Bunds, each time that amounts are to be released from thc cscrow account cstablishcd undcr a Supplcmcntal Indcnturc, as a condition of such rcicasc, thc Trustce shall havc rcccivcd a Ccrtificatc of thc Spccial Tax Administrator ccrtifying ihat (x) following such release, the requirements of (i) and (ii) above will be salisfied, and (y) the amount of Special Taxes levied in such Fiscal Year and lo be levied in the Collowing Fiscal Year, togelher wilh amounls on deposit in lhe Interesl Account, will be sufficienl lo pay lhe principal of and interest on all Outstanding Bonds and Parity Bunds (uther than the remaining Escrow Bonds). For purposes of any Escruw Bunds release test, there will be allocated to the property in the District thc largcst principal amount of Bonds that results in a Valuc of District Property at lcast four (4� timcs thc sum of Dircct Dcbt for District Property plus Ovcrlapping Dcbt allocablc to all property in thc Distnct subjcct to thc Spccial Tax; and (7) such furtlier documents, money and securities as are required by the provisions of the Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds. See "APPENDIX E— SUMMARY OF THE INDENTURE" for summary of other conditions precedent to issuance of such Parity Bonds. 27 THE DISTRICT General Description of the District The District is located north of Frank Sinatra Drive, south of Gerald Ford Drive, west of Cook Street and east of Portola Avenue. Tl�e area is locally known as "University Park," due to the location immcdiatcly wcst of thc facilitics and fu[urc facility cxpansion arca of thc satcllitc campus of California Statc Univcrsity, San Bcrnnrdino and Univcrsity of California at Rivcrsidc, at thc northcast corncr of Frank Sinatra Drivc and Cook Strcct. Thc District cncompasscs a portion of thc property within CFD No. 2005-1, however once the CFD 2005-1 Pro Rata Bonds are prepaid and defeased, the prope�ty within the District �vill not be subject to the special tax lien of CFD No. 3005-1. Thc Dis[rict consists of approximatcly 174 acres and includcs 10 parccls tha[ are subjcet to thc Spccial Tas all of which arc currcntly owncd by UPI. Scc "SPECIAL RISK FACTORS — Conccntration of Ownership" herein. The Project is made up of five separa[e project areas which are planned to included 1,069 units at buildout consisting of eight product types of fur-sale single-family detached homes, for-sale attached to�vnhomes and for-rent multifamily apartments and single-family homes. Area No. 1, consisting of 236 single-family lots, is currently under development, with grading complete and horizontal infrastructure under construction. The Project is being developed by UPI, the master develuper within the District. UPI is managed by MVP, who manages the day-to-day operatiuns and development of the Project. See the captions "THE DISTRICT" and "PROPERTY OWNERSHIP AND THE DEVELOPMENT" for further information �vith respect [o the District, UP[, MVP and development within the District. imestment in the Bonds imolves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption "SPECiAL RISK FACTORS" for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds. A Map showing thc location of thc District appcars following thc Tablc of Contcnts. Relationship to CFD No. 2005-1 CFD No. 2005-1 was formed on January 12, 2006 and issued its Special Tax Bonds, Series 2006A (thc "2006 Bonds"� and its Spccial Tas Bonds, Scrics 2007 �thc "2007 Bands") in a combmcd aggrcgatc prmcipal amount of $67,915,000. Thc 2007 Bonds wcrc rcdccmcd with funds on hand on March l, �016 and only the 2006 Bonds remain outslanding in a principal amount oC $26,250,000. Al Cormalion il was anticipated lhat the pmperties within CFD No. Z005-1 would be developed with a mix of residential, commercial, office and open space. Due to timing, market conditions and subsequent market downturn, only about 20°4� uf the land within CFD No. 2005-1 within CFD No 2005-1 lias been develuped to date. Of tlie remaining land within CFD No. 2005-1, approximately 78°/„ is now o�vned by UPl and approsimatcly 22°o is owncd by othcr partics, bascd on acrcagc. UPI rcqucstcd that thc City rcfund thc 2006 Bonds and form thc District to facilitatc thc financing of ncw facilitics and costs rcquircd for UPI's property without advcrscly affccting thc spccial taxcs for thc othcr propertics within CFD No. 3005-1. Proceeds of the Bonds will primarily be used to pay and defease the CFD 3005-1 Pro Rata Bonds, as well as fimd a partion of the public capital improvements required for development of the property within the District The CFD 2005-1 Pro Rata Bunds will be paid and defeased concurrently 28 with the delivery of tl�e Bonds, and upon such defeasance, the property within the Distnct will not be subject to the special tax lien of CFD No. 3005-1. Formation Proccedings The District was formed on April ?2, 2021 pursuant to the Act Tl�e Act was enacted to provide an altcrnativc mcthod of financing ccrtain public capital facilitics and scrviccs, cspccially in dcvcloping arcas of thc S[a[c. Any local agcncy (as dcfincd in thc Act) may cstablish a community facilitics district to providc for and financc thc cost af cligiblc public facilitics and scrviccs. Gcncrally, thc lcgislativc body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to appruval by two-thirds of the votes cast at an election and compliance with the other provisions of tl�e Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. Pursuant to [he Act, on March 11, 20�1, the City Council adopted Resolution No. 2021-OS (the "Resolution of Intention"), stating its intention to form the District and to authorize the levy uf a special tax on the taxable prupe�7y within the District, and Resolution No. 2021-06, stating its intention to incur bonded indebtedness in an ag�negate prmcipal amount not to exceed $�0,000,000 for the purpose of financmg the purchase, construction, expansion or rehabilitation of certain public facilities to serve the area within the Dis[rict. Subseyuent to a noticed public hearing on April 22, 2021, the City Cuuncil adopted certain resolutions (collectively, the "Resolution of Formatioii'). The Resolution of Formation: (i) established the District; (ii� authorized the levy of a special tas �the "Special Tax") �vithin the District; (iii) determined the necessity to incur bonded indebtedness in an amount not to exceed $50,000,000 within the District; and (iv) called an ekction within the Di,trict on the proposition of incurring bonded indebtedness, levying the Special Tax and set[ing an appropriations limit. On May 13, 2021, an election was held within the District in which the property uwners within thc District approvcd thc proposition authorizing thc issuancc af bonds in an amount not to cxcccd $50,000,000 to financc thc purchasc, construction, modification, cspansion, improvcmcnt or rehabilitalion of cerlain real or olher tangible properly described in the Resolution of Formalion, induding the paymenl and defeasance oCthe CFD Z005-1 Pro Rata Bonds, which are generally comprised of storm drainage, street improvemenls, landscaping and irrigation, public open space and recrealional facilities and other public facilities of the City and water, sewer and other public facilities of CVWD. A Notice of Special Tax Lien for the District was recorded in the oftice of the County Recorder on May 2i, 2021, as Documcnt No 2021-0320187. On May 27, 2027, thc City Council adoptcd Ordinancc No. 1365 �thc "Ordinancc"� which authorizcs thc lc�y of a spccial tax pursuant to thc Ratc and Mcthod of Apportionmcnt approvcd at thc May 13, 2021, cicetion (thc "Ratc and Mcthod"), a copy of which is altached herelo as Appendix A. The Ordinance will become eCfeclive 30 days Cmm the date of adoplion. Any successful challenge of lhe Ordinance, if nol cured, may have an adverse impacl on the ability of lhe District to levy the Special Taxes necessary to pay debt service un the Bonds. Thc City, thc District and UPl havc cntcrcd into that ccrtain Acquisition Agrccmcnt pursuant to which thc City will acquirc from UPl ccrtain storm drainagc, strcct improvcmcnts, landscaping and irrigation, public open space and recreational facilities and other public facilities. It is anticipated that proceeds of a future bond issue will be used to pay for such acquisition. Thc City, thc Coachclla Vallcy Municipal Watcr District ("CVWD") and UPI havc also cntcrcd into that ccrtain Joint Community Facilitics Agrccmcnt, datcd Junc 8, 2021, pursuant to which CVWD 29 will acquire from UPI certain water and sewer improvements to be owned by CVWD. It is anticipated that proceeds of a future bond issue will be used to pay for such acquisition. The District expects to issue a one or more additional series of bonds up to the remaining balance of bond authorizatiun, which bonds are expected to be secured by Net Taxes on a parity with the Bonds. Such Parity Bonds are espected to be issued once property values within the Distnct meet the minimum value-to-lien requirements required under the Parity Bonds test in the Indenture. Currently, UPI espects to request tl�e District to issue the second series of bonds as Parity Bonds wrtl�in the next hvo (2 � years. See "SPECIAL RISK FACTORS — Effcct of Parity Bonds on Crcdit Quality." Description of Authorized Facilities Thc City, [hc District and UPI havc cn[crcd into that ccrtain Acquisi[ion Agrccmcnt pursuant to which thc Ci[y will acquirc from UPI ccr[ain strcct improvcmcnts, storm drainagc, landscaping and irrigation, public open space and recreational facili[ies, and other improvements to be owned by the City. Proceeds of a future bond issue are expected to be used tu pay for a portion of such acquisition. The City, CVWD and UPI have also entered into that certain Joint Community Facilities Agreement pursuant to which CVWD �vill acquire from UPI cer[ain water and sewer system improvements to be owned by CVWD. Proceeds of a fiiture bond issue are e�pected [o be used to pay for a portion of such acyuisition. The expected total cost of the facilities eligible to be financed with the proceeds of bonds to be issued by the District �the "Facilities"), based on the current estimated cost of the Facilities, is approxima[ely 534,385,015, not including the amount required to pay and defease the CFD 2005-1 Pro Rata Bonds. The Facili[ies consist of street and bridge improvemen[s, curbs and gutters, sidewalks, trails, medians, traffic signalization and signage, street lights, utilities, storm water drainage, on and off-site detention and treatment facilities, and landscaping and irrigatiun related thereto, sewer collection and conveyance facilities, land and facilities for parks and recreational uses, fire facilities and eyuipment, library facilitics and cquipmcnt, transit facilitics, fibcr optic tciccommunication facilitics, gcncral govcrnmcnt officc, admmistrativc and mccting facilitics, bus and rapid transit facilitics and land, rights of way and easemenls necessary 1'or any of such facilities. The cost of the Facilities necessary to serve the property �vithin the District, based on current estimates, is expected to exceed the amount of proceeds uf the Bonds and future Parity Bonds available to financc such Facilitics. Thc costs of thc Facilitics in cxccss of availablc procccds from thc salc of thc Bonds and futurc Parity Bonds that may bc issucd by thc Distnct havc bccn and arc cxpcctcd to contmuc to be paid for by UPI. See "PROPERTY OWNERSHIP AND THE DEVELOPMENT" below. Direct and Overlapping Debt Thc ability of an owncr of land within thc District to pay thc Spccial Taxcs could bc affcctcd by the existence of other taxes and assessments imposed upon the pmperty. These other taxes and assessments which secure direct and overlapping debt outstanding as of April l, 2021 in the District are set forth in Table 1 below (tlie "Debt Repurt"). Tlie Debt Report sets forth those entities wliich liave issued debt and does not include entities whicli only levy or assess fees, charges, nd ralorenr taxes or special taaes. See "—�spected Tax Burden" below for information regarding other entities levying taxes, asscssmcnts or othcr chargcs on property in thc District. Thc Dcbt Rcport includcs thc principal amount of thc Bonds. Thc Dcbt Rcport has bccn dcrivcd from data asscmblcd and reportcd to thc District by thc County as of April l, 2021. None of the District, the City, or the Underwriter has independently verified the information in the Debt Report and do not guarantee its completeness or accuracy. 30 As discussed under "SPECIAL RISK FACTORS — Parity Taxes and Special Assessments," the property witl�in the District may be subject to additional taxes and assessments imposed by other public agcncics in thc futurc. Tablc 1 bclow docs not includc any authorizcd and unissucd dcbt of othcr agcncics. TABLE 1 CiTY" OF PALM DESERT COM117UNITY F.aCILITIES DiSTRICT NO. 2021-1 (UNiVERSITY PARK) DIRECT AND OVERLAPPING DEBT Appraised Value as of Mav 15. 3021: $47,710,000 DIRECT AND OVERL.4PPING TAX AND ASSESSMENT DEBT: "io Auulicable Debt 3/1/21 Desert Community College District General Obligntion Bonds 0.053",� S207,373 Palm Springs Unified School District Genernl Obligation Bonds 0.140 494,334 Cih� of Palm Dcscrt Communih� Facilitics District No. 2UZl-1 IUU. 15,20U,ODU TOTAL DiRECT AND OVERLAPPING TAX AND ASSF.SSMENT DEI3T $15,901,706 OVERLAPPING GENERAL FUND DEBT: Rivcrsidc County Gcncral Fund Obligstions Rivcrsidc County Pcnsion Obligation Bonds TOTAL OVERLAPPINU UENERAL FUND DEBT OVERLAPPING TA� INCRE�4ENT DEBT (SUCCESSOR AGENCY): COh1BIN�:D TOTAL D�.BT Ratios to Annra�sed Value as of Mav I5, 3031: Direct Debt Total D�rcet and O��cdappmg Tax and As�cssmcnt Dcbt Combincd Total Dcbt 0.015°ia 5107.R15 p.p� 5 131,333 S_'39,14R $1.062.532 517.'03,3A6 ��' 31.86%' 3333°i�, 36.06°%' '�� Excludcs tax and re��cnuc anticipation notcs, cntcrpnsc rcccnuc, mortgagc rcvcnuc and non-bondcd caprtal Ica�c obhgations Sourcc CaLforma h7umcipal Stan�tics, Inc., Spccial Tax Consultant. Expected Tax Burden Tablc 2 bclow scts forth hypothctical total cffcctivc tas ratcs for an avcragc for-salc dctachcd residential unit in Zones 1 and 3 based on base sales prices provided by UPI, Fiscal Year �030-21 overlapping tax rales and the hypothelical Fiscal Year 2021-22 Special Tax levy assuming such parcels were taxed at the Assigned Special Tax necessary upon buildout, the effective tax rates range from approximately 1 JS°i� to 1.30°ib. The especled lax burden oC ihe Special Taxes and olher taxes and assessmenls on indi�idual parcels located within the District will vary among parcels. Actual amounts charged and the effective tax rates may vary and may increase or decrease in future years. 31 TABLE 2 CiTY" OF PALI�I DESERT COMIVZUNITY FACILITIES DISTRICT NO. 2021-1 (UNI�'ERSITY PARIi) HYPOTHETICAL FISCAL �'EAR 2021-22 EFFECTIVE TAX RATES Percentof Total Assessed Estimated Valuation and Properh Taxes �'aluation Zone 1 Zone 2 Plan 40x90 2-Pac Plan 2 SOx100 Conv Plan 1 Square fuotage VALUE Land plus improvements � � � Homcowncr's cxcmption Subtotal basis for tax AD �'ALOREn1''-� Basc Property Tax Ratc Palm Desert Uvified School District Coachella Vallev Water District SWP Desert Springs Community College Subtotal ad valorem tases SPECIAL TAXES AND ASSESSbIENTS�Z� FC Coachclla Vallcy Mosquito & RiFA Coachella Valley RC/PK TP 97-1 Palm Dcscrt Emcrgcncy Scrviccs C V WD Sewer Service Cliarge Refiise & Recycle Service Billing Subtotal Spccial Asscssmcnts CFD NO. 2021-1 SPECIAL TAXjz� Total Taxes Totxl Tax Rxte I .00000°io O.103349b 0.10000°ru 0.03947°'� 1.34�81 °rb "' Estimated sales prices proridzd by UPI °1 I3ascd on Fiscal Ycar 20302021 ad ��alorcm and dircct chargc ratcs. Sourcc: Spccial Tax Consultant. Market Absorption Study �,075 $480,000.00 ( $7,000.00 ) $473,000.00 $4,730.00 $488.80 $473.00 $186.69 $S,H78.-19 $14.38 $52.36 $60.00 $295.44 $176.00 $59RJ 8 $1,92g.00 �s,aoi.6� 1Jg% 2A6-1 $550,000.00 IS7,000.001 $543,000.00 $5.430.00 �s6i.ia $543.00 $214.32 $6.74R.46 514.38 g5?.36 560.00 ��9s.aa $176.00 $598.1 £ �a,s�s.no $9,921.64 1.80% Generul. In order to determine the projected absorption of the planned residential property within the District, the City engaged tlie Market Absorptiun Analyst to perYorm a comprehensive analysis of the product mis characteristics, macroeconumic and microeconomic factors as well as the potential risk factors that arc cxpcctcd to influcncc thc absorption of thc planncd products �vithin thc District Thc Markct Absorption Analyst dclivcrcd thc Markct Absorption Study in April 2021. Thc Markct Absorption Study includcs an cstiinatcd absorption schcdulc forthc cxpcctcd 1,069 dctachcd/attachcd for-salc homcs and apartmenthental products (733 for-sale homes - 623 detached�110 attached and 336 for-rent 32 apartments) in the District currently being developed by UPI. As of the time the Market Absorption Study was prepared, the properties withm tl�e District were not developed and there were no escrow closings. The Market Absorption Analyst notes that actual absorption rates will differ from projections in the Market Absorption Study. Such differences could be material. Factors which may influence the pace of absorption of tl�e residential products witl�in the District mclude COVID-19, economic downturn, a substantial increase m mortgage rates, and competition from developments withm the vicinity of the District See "SPECIAL RISK FACTORS — Risks of Real Estate Secured Investments Generally." The Markct Absorption Study is attachcd hcrcto as APPENDIX C. Favorable Factors. The Market Absurption Study states that the District has a favorable location in the City adjacent to Interstate 10, tl�e Property has been mass graded and for the parcels in Phase 1, there is additional site development activity ongoing. Tl�e Market Absorption Study states that University Park has an amenity package tl�at includes a 3.4 acre private park for residents of the community only, and six pocket parks as �vel] as walking trails for usage by the general publia The residential product types feature a broad diversity of single-family detached homes in various price ranges. The Market Absorption Study observes that the competitive market analysis revealed that based on UPI's proposed prices as well as the special taxes, the Project is regarded as being competitive in the marketplace. The Market Absorption Analyst observes that �nortgage rates have declmed sigmficantly, reducing housing payments while housing prices have nsen sigmficantly, increasmg the housing payments due to higher principal component as well as higher property ta�es. The combmed impacts of these factors have counter-balanced each other, resulting in stable monthly payments. Challenging Factors. The Market Absorption Study states that COVID-19 put the Coachella Valley econoiny m a deep recession m Apnl 2020, with employment losses of approxi�nately 27,OOO�obs. Since then, the economy has had a moderate recovery, but as of December 2020, employment losses were still approximately 10?50 jobs. The Market Absorption Study states that the composition of Coachella Valley's economy has been more impacted by COVID-19 due to the relatively higher concentration of employmenl in accommodation and Cood services oC approximalely 22'io Cor lhe Coachella Valley as compared tu about 10°i� for the State and the Cuachella Valley has lo�ver shares of empluyment in the sectors that are showing signiticant improvement, such as essential industries and thuse that can accommudate telecommuting. Therefure, the Market Absorption Study observes that the Coachella Vallcy cconomy is cxpcctcd to takc a longcr amount of timc to fully rccovcr from thc downturn causcd by COVID-19, as comparcd to thc Statc, as a wholc, duc to its conccntration of cmploymcnt and scctors that are socially challenged. Ho�vever, COVID-19 did have a posilive impact on suburban single-family home ownership. The Market Absorption Study observes that since 200R there has only been a moderate increase in thc dcvclopmcnt of ncw singlc-family dctachcd homcs in thc Coachclla Vallcy and thc City's sharc of thc Coachclla Vallcy's activity has dcclincd from 20°i� during 2010-2014 to lcss than 5°i� in rcccnt ycars. The Markel Absor�xion Analysl identified five currenlly aclive comparable pmjecls situated in lhe City and ils vicinity. The Market Absorption Sludy observes thal lhe comparable projects have sales rales thal range from six to 20 homes per year for an overall average of 13 homes per year �vhich is well below what is typically observed in the marketplace. The demand for residential products in the District was originally conceived as supporting the development of tlie "Campus Long-terni Planning Area" wliich anticipatcd highcr cducational facilitics; howcvcr, this has not yct matcrializcd in a significant manncr. Conscqucntly, thc dcmand for thc hamcs in thc District is cspcctcd ta bc drivcn primarily by local households employed in the City and other nearby cities. 33 Additionally, the Market Absorption Consultant was recently notified that a nearby forthcoming competitive pro�ect by Lennar Homes is contractually obligated to prepay 100% of their special taxes for CFD No. 2005-1. Thc Lcnnar Homcs prcpaymcnt is likcly to incrcasc its compc[itivcncss/salcs in thc markctplacc rclativc to somc gcncrally similar forthcoming products to bc offcrcd by UPI. Sincc thc Lennar prepayment had not yet been made and the timing of the market enUy for each its homes has not been identitied, The Market Absurption Analyst was not able to quantify the specific impact on UPPs absorption schedule. From a cunceptual/qualitative perspective, the absorption of the comparable UPI products may have lower absorption in the near term but then recoup such declines, thereby completing its absorption during the eapected time period. Esti�nater! .abso�ptio�T Sched�eles — Most Probable Scenaria Based on the assumptions and limiting conditiuns set forth in the Market Absorption Study, the Market Absorption Analyst has estimated absorption representing escrow closings to homeowners by calendar year for the residential products expected to be developed within the District as set forth in the table below. Tl�e table below represents escrow closings. As shown in the table belo�v, the Market Absorption Analyst estimates that all 1,069 residential products will be fully absorbed in 2031. The Market Absorption Study states that the estima[ed absorption schedule, are based upon the mos[ probable economic ,cenario regarding economic/market housing conditions, however, there are potential risk factors that may adversely impact the absorption rates. PROJECTED ABSORPTION 1'ear �p�� Z0�2 20?3 20�4 20?5 20�6 20?7 2025 20?9 2030 2031 Totals 60'r100's 50'r100's g5'x90's 0 0 0 0 0 9 s o ia 13 11 16 ia is i� IS 17 18 15 17 18 15 17 1S 15 17 16 15 4 0 10 0 0 120 98 126 Sourcc: Thc Markct Absorption Analyst. Appraisal Report Product Types q5'x90' 40's80' 2-Pac A��e�, 0 0 10 Il i� » 17 18 is �o 20 21 ?0 10 9 0 0 0 0 0 0 0 110 97 50'i60' 4-Pac 0 0 0 8 �o 21 21 � 0 0 0 72 Multi- To�vnhomes Fami1V 0 0 0 0 0 0 11 65 �s �o 30 75 30 75 11 �l 0 0 0 0 0 0 110 336 Total 0 30 $5 �aa 446 663 869 992 1,040 1.059 1,069 1,069 The assessed value of the properly �vilhin lhe District, a. .hown on the Counly's secured properly roll for Fiscal Year 3020-31, is approximately $37,A33,663. However, as a result of the requirements of Article XIIIA of the California Constitution, a property's assessed value is not necessarily indicative of its market value. In order to provide informatiun with respect to the market value of the fee simple estate by parcd of taxablc property within thc District, thc City cngagcd thc Appraiscr, to prcparc thc Appraisal Rcport. Thc Appraiscr has an "MAI" dcsignation from thc Appraisal Institutc and has prcparcd numcrous appraisals for thc salc of land-sccurcd municipal bonds. Thc Appraiscr was scicctcd by thc City and has no material relationships with the City, the Undenvriter or the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal Report. The Appraisal Repurt is intended to comply with the appraisal guidelines of Title XI of the Financial Institutiuns 34 Reform, Recovery and Enforcement Act of 1989 and the Uniform Standards of Appraisal Practice, adopted by the Appraisal Standards Board of the Appraisal Foundation. The City instructed the Appraiser to prcparc its analysis and report in conformity with City-npprovcd guidclincs and thc Appraisal Standards for Land Sceurcd Financings publishcd in 1994 and reviscd in 2004 by thc California Dcb[ and Investment Advisory Commission. A copy of the Appraisal Report is included as "APPENDIX D— APPRAISAL REPORT" to this Preliminary Oft3cial Statement. The purpose of tl�e Appraisal Report �vas to estmiate tl�e market value of the fee simple estate by parccl of property �vithin thc District. All of thc parccls arc vacant land parccls, with significant offsitc infrastructurc complctcd with funds from CFD No. 2005-1. Thc cstimatc of markct vnluc assumcs that eligible fees proposed for the District have been paid. Subject to the assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser concluded that, as of the Date of Value May 1 g, 3p21, the market value of property �vithin the District was $47,710.000. In valuing the property within the District, the Appraiser used a sales comparison approach for each of the parcels of Taxable Properiy within the District. The chart belo�v sho�vs the appraised value of the various parcels owned by UPI within the District as set furth in the Appraisal Report as uf the Date of Value. See "PROPERTY OWNERSHIP AND THE DEVELOPMENT" below. SUMDIARY OF APPRAISED �'ALUES B�' PARCEL (as of the Date of �'alue) Assessor's Pareel Nwnber 694-190-010 694-190-031 694-190-037 694-190-053 694-190-Og5 694-190-070 694-190-072 694-190-079 694-200-013 694-200-014 Orvner UPI UPI UPI UPI UPI UPI UPl UPl UPl UPI Total Appraised �'alue Aereage 5.06 7.15 9.Fi7 4032 I 3J6 7.53 13.96 25.09 33.46 11.46 167A6 Appraised I'alue $1,535,p00 $1.665,000 $1.975,000 $6.395,000 $2,915,000 $2,055,000 $4,665,p00 $9,865,p00 $11,095,000 $ 5,545,000 �47.710.000 Sourcc: Thc Appraiscr. Reference is made to APPENDIX D for a complete list of the Appraiser's assumptiuns and limiting conditions and a full discussion of thc appraisal mcthodology and thc basis for thc Appraiscr's opinions. In thc cvcnt that any of thc assumptions and limitmg conditions arc not actually rcalizcd, thc value of lhe pmperty within the District may be less than the amount reporled in the Appraisal Report. In any case, there can be no assurance that any parcels of Taxable Property within the District would actually sell for the amount indicated by the Appraisal Report. Thc Appraisal Rcport is a statcmcnt of thc Appraiscr's apinion as to thc markct valuc of thc taxablc property in thc District as of thc datc and undcr thc conditions spccificd thcrcin. Thc Appraiscr's opinion reflects rnnditions prevailing in the applicable market as of the Date of Value. The Appraiser's opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future. See `SPECIAL RISK FACTORS — Property Values." 35 It is a condition precedent to the issuance of tl�e Bonds that tl�e Appraiser deliver to the District a certification to the effect that, nothing has come to the attention of the Appraiser subsequent to the date of thc Appraisal Rcport that would causc thc Appraiscr to bclicvc that thc vahic of thc property in thc District is lcss [han thc valuc rcportcd in thc Appraisal Rcport Howcvcr, thc Appraiscr notcs that acts and events may have occurred since the date of the Appraisal Report which could result in both positive and negative effects on market value within the District. Neither the City nor the Underwriter makes any representation as to the accuracy of the Appraisal RepoR. See "APPENDIX D— APPRAISAL REPORT." There is no assurance that the property within the District can be sold for the pnces set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parccl in thc cvcnt of a dcfault in pnymcnt of Spccial Taxcs by thc landowncr. Scc `SPECIAL RISK FACTORS — Property Valucs" and "APPENDI,� D— APPRAISAL REPORT." Estimated Appraised Value-to-Lien Ratios' Table 3 below sets forth the estimated appraised value-to-lien ratio for the 10 parcels of Taxable Prope�ty within the District based on the appraised value of each parcel as of the Date of Value as set forth in the Appraisal Repart, the principal amount of the Bonds and the Fiscal Year 2021-22 Masimu�n Special Tax. Based on the principal amount of the Bonds, the estimated appraised value-to-lien ratio of the Taxable Property within the District is 3.14�-to-1. This ratio does not mclude overlapping debt within the Dis[rict. See "— Direc[ and Overlapping Indebtedness" above. Taking the overlapping debt into account, induding overlapping general obliga[ion debt, [he ratio of the aggregate appraised value of the Taxable Property within the District to the total principal amount of the Bonds is approximately [3.00-to- 1 *]. In the reports to be provided pursuant to the District Continuing Disclosure A�neement, Table 3 wil] not be updated based on appraised value, but similar information will be provided based on current assessed value. Based on [he Fiscal Year ?020-21 assessed value of $37,Ri43,663, the assessed value-[o- lien ratio, taking the Bonds and the overlapping debt in Table 3 into account, is approximately 2.3R'-to-1. Such assessed value does not accuunt for the development and sales activity that has uccurred since the January I, 20201ien date. ' Pi�elmunai_r. auhject m ch�uge 36 TABLE 3 CiTY" OF PALM DESERT COMIVZUNITY FACILITIES DISTRICT NO. 2021-1 (UNI�'ERSITY PARIi) APPRAISED VALUE-TO-LIEN RATIOS B1' PARCEL APN �'� 69a-i9o-oio 6y4-1y0-031 694-190-037 69a-i9o-os� 694-190-055 ��a-i�o-o�o (,94-190-073 694-190-079 694-300-013 694-?00-014 All Appraised Value jz� $1,535,000 $1.665,000 $1,975.000 $6,399,000 $3,915,000 $2,055,000 $4,665 I)00 $9,R65,000 $11.095.000 �ssas.000 $47,710,000 Bonded Indebtedness� $538,702 $761,209 $1, 029,495 $3,140, 983 $1,464,928 $586,597 $1,087,503 $1,954,545 $2,606,580 $2,029,459 $15,200,000 Fiscal 1'ear 2U21/2022 Ma�imum Special Taz �31 $66,891 $y4.520 $1 �7,833 $390,019 $181.903 $72,835 $135.036 $232.69R $3�3.662 ��sz.000 $1,887,400 �� Assc�sor's Parccl Numbcr accordmg to thc County of Rrv�cnidc. �'� Bascd on Appra�ti�l Rcport pmparcd by thc Appraiscr with a datc of valuc of May I5, 2021. "' Based on estmmtzd Maaunum Unde�elopzd Tat with�n zach �one groupmg Sourcr. Spccial Tax Consultant. Percentage of Projected Special Ta� 3.54° �� 5 Ol% 6.77". o zo.��,,, 9.6�1"'� 3.R6°� 7 15'io I 2. R6"'� 17 15"/0 13.? 5"'� 100.00"/� Appraised Value to Lien Ratio ` 2.85:1 2.19:1 1.92:1 2.04:1 1.99:1 3.50:1 4.29:1 5.05:1 4.26:1 2.73:1 3.14:1 Table 4 belo�v sets forth the estimated appraised value-to-lien ratio for Taxable Property within the District based on the property [ype. TABLE 4 COMMUNiTY FACiLiTiES DiSTRICT NO. 2021-1 (UNiVERSITY PARIK) APPRAISED VALUE-TO-LIEN RAT10S BY PROPERTY TYPE Fiscal Y"ear Percentage Appraised Appraised Bonded 2021/2022 Maximum of Pro.jected Value to Properh� Tvqe �'aluc �� Indebtedness Sqecial Tav �'-� Special Ta� Lien Ratio{ For-S�Ic Rcsidcntial S4?.16�,000 $13.170,5�1 $1,635.qp0 A6 65"ro 3 20:1 For-Rent Residential S5.545.000 $2,029 459 $252.000 13.35"i� 2.73:1 All $47,710,000 $15,200,000 $1,887,400 100.00% 3.14:1 "' Based on Appra�sal Report przpared by �he Appraiser with a dalz ol' ealue ol May 15, ZOZ l. �=' Actual Fiscal Year 2021/�U22 blxx�mum Special Ts� Sourcz: Special Taz Consultant. ' Pi�elmunai_r. auhject m ch�uge 37 Table 5 below sets forth the estimated appraised value-to-lien ratio for Taxable Property within the District based on the zone. Zune Grouoine �� Zonc 1 /Zonc ? Zone 2 Onlv Zone 3 All TABLE 5 COMMUNIT�' FACILITIES DISTRICT NO. 2021-1 (UNiVERSITY PARK) APPRAISED �'ALUE-TO-LIEN RATiOS BY ZONE .4ppraised Value �Z� $34.075.000 $2i,090.000 $5,545,000 $47,710,ODU Bonded Indebtedness $9.376.�OR $3,79a,333 $2,0?9,459 $15,20Q000 Fiscal 1'ear 2021/2022 Maximum Saecial Tax �'� $1,16-M1,25� ��i,ia� $? 5?,000 $i.sx�,aaa Percentage of Prujected Special Tax 61.6y°/a 23.96", � 1335�� 100A0% ,�ppraised �'alue to Lien Ratio� 3 63:1 2.13:1 2.73:1 3.14:1 � Prcliminary, subjcct to changc. "' Fiee parczls haaz terr�tory in both Zones I and 2. "' I3ascd on Apprmsal Rcport prcparcd b}� thc Appraiscr ��ith a datc of caluc of M11ay 15, 2U21. �'� Bascd on cstimatcd Max�mum Undc��clopcd Ta� ��athm cach zonc grouping. Sourcc Spcc�al Taz Comultant. Largest Taxpayer Based on ownership status as of , 2021, UPI will be responsible far 100% of the projected Fiscal Year 2021-22 Special Tax levy. See the caption "SPECIAL RISK FACTORS— Concentration of Ownership." Fisca] Year 2021-22 will be the first year the Special Tas is levied on properly wilhin lhe District. 38 PROPERTY OWNERSHIP AND THE DE�'ELOPMENT Tlre ir�jbrnuRian crhout the fn�oj�er9r uirnershi�� cuntume�l �n d7is .cechorr uf the Preliminru� OJficin! St�tement has I�ee�� n�ori�fe�� 1�r UPI and has not I�ee�t i�t�fe�e�r�lentlr cat/'u me�f or re��ifiect hr the Uncterirriter, tl�e Citr or the District. No asstazi��ce cnn be gire�� tbat �he proyosed cterelo�ment iri(( occ�m ns descrihe�i in this P��elimirm�-t� OJ/icicil Stnlemen! or that it mill be cornpleted in n lirnelt' rnco7nei�, iJ nt nll, or Ihcil L7PI mill continere lo oura dre pro�erlt�. Neilhe�� the Bon�fs na� �Jre S�ecicil Ta.res nre �eisonnl ohlrgations o/ UPI or arn a/Jilinle Orereo% nn�f, in dre erent lha� ci �ropertr omner de/ntdts in the jnn merrt of its S��ecrcd Tuses. d�e Disti icf nun' j�roceed irith �udicicr/ forerlusin�c hut hu.c no clireci r�ecam�se tu the rrssefs of.cuch ��ru��crtr uirr�er or� enn' uffihute d�ereuf. Nerfker� dre Urrde�lrriter, fke Crh nor the District mnke a»r re�rese�ttntion as to dte accmacr or a�fequacr of this in%ormatio��. Fru7/rer, there mm be mnterral nrhr�se ch��tges in dtis infornt�tio�r a%ter the �/ate oj this Prelimrnm:r OJ/icial Stnte�neirt. Property Ownership The table belo�v shows the o�vnership of taxable for-sale residential pruperty within the District as of .2021. PROPERTY OWNERSHIP (Bv For-Sale Residential Unit) Individual Homeowners 0 Suurce� UPI Unirersity Park im estor, LLC Total 733 733 As of [ , 2021] UPI has compleled grading aclivities and has commenced installalion of horizonlal infraslructure Cor Area No. 1. UPI expecis construclion of homes to begin in Augusl 2021 wilh the firsl sales lo individual homeowners to close escrow in the first quarter of 2033. The Developer Acyuisition of tl:e Project UPI purchased lhe vacanl land constiluling the Pmjecl on Augusl 4, 2017 for 520,000,000. The prior sale of the pruperty along �vith an additional 3136 acres that is not included in the District occurred in August 2005 for $120,000,000. Lennar Humes purchased 21.36 acres adjacent to the District that is entitled for 196 residential units on December 23, 2020 for S 14,577,000. Orvue�sGip Structure a��d E.Yperience. UPI is the owner of all of the taxable property within lhe District. UP[ is a single pur��ose entity Cormed to develop lhe Property. UPI is managed by MVP pursuant to that certain Amended and Restated Limited Liability Company Agreement uf University Park investor. UPI is wholly owned by University Park Aggregator, LLC ("UPA"), which in turn is owned by various invcstors. UPA is managcd by B1ackRock Financial Managcmcnt, Inc. ("B1ackRock"). MVP is managing thc day-to-day operations and dcvclapmcnt af thc Property. Thc kcy individuals of MVP wha arc responsiblc for thc dcvclopmcnt of thc Property are scasoncd real cstatc profcssionals with significant experience in master planned community development, having worked at KB Home and Trumark Companies. The principals of MVP developed Jordan Ranch, a partnership behveen MVP and its investurs, and a different BlackRoch managed entity, which acquired, entitled, developed, and sold 933 finished lots in Dublin, CaliYornia. From 2008 through 3019, Jordan Ranch produced over $283 million in revenues, $147.5 million in profits, with a 27.9°ib intemal rate of retum and a 3.4 multiple. 39 Proposed De��elopment and Current Development Status No ussm�r�nccs ccm he nu��le thr�t UPl or ron' /iihn�e auner afEn�ojierfi n•rilrin fke Di.sh icf u rl! hcn e the resaures, uilli�rgness, a�rd �hilitr jo successjarllr conry(ete �/ere/opnreirt ��ctirities at the �ropertr u ithin t/�e Disb rct. No reyresent�tion rs marle as to the al�ilitr (/i�tancia! or otheririse/ oj UP/ or �nr /i�tm�e oicner ojproperh u ithin dre Disu�ic� to cornplete derelo�menl us ctu��entlr �lcinne�l. Rforeorer, the eferelo�mern and /irrcmcing �Ieu7s �fescriheel beloir nre ns o( the dates in�ficuled; UPI irill continue lo ernlunte the real estate mcu•ket nnc� make nrljustrnents to the �ferelopmenl co��/ /innracing �lmas cis cleternnned necessro�� h�' UPI. Backgrotuzd an�! EntiHe�nent Statr�s. There is an approved precise plan and a tentative subdivision map for 1A69 homes, public parks, private recreation center, and a final subdroision map for an initial phase of 236 homes ("Phase 1"). Tl�e tentative map for Phase 1(Tract 37506-1) has been approved by the City, and the recordation of the final map for Pl�ase 1 occurred on March _, 2021. An environmental impact report �vas prepared and approved in 2016 and an addendum was completed in 301 R, a Phase I Environmental Site Assessment was prepared by Sladden Engineering (`Sladderi') dated May 9, 2016 and a suils report was prepared by Sladden dated August 1Q 2005 and updated May 10, 2018. Infi•ush�uchn�e Develnprae�et UPI has completed grading activities and commenced horizon[al improvements for Area No. 1 and intends to constnic[ the horizontal improvements, inclusive of grading to finished or blue top lot (dependent on product/phase), public ,torm drain sys[em, retaining wall sub drain system, public water system, sanitary sewer system, curb, gutter, sidewalk, drive approaches, joint and/or separate gas/electric/phone/CATV utilities, and street pavement (asphalt pavement placed on aggregate base as desi�med constructed in place with final asphalt cap) for pubhc access and project frontage improvements constructed and installed, �valls, parkway landscape, parks, retaining walls, utilities (water service installed and stubbed to each lot (or alternate locahon for alley lots), sewer service installed and stubbed [o each lo[, gas, electricity, telephone, and cable conduits stubbed to each lot). Once improvements have been completed tu serve each lot and fees have been paid the City will issuc building permits. A spccial scrviccs agrccmcnt with CVWD lists thc watcr systcm backup facility fcc paymcnt rcquircmcnts and thc timing of construction of an offsitc wcll for thc Projcct ncccssary for watcr scrvicc. CV WD typically chargcs this fcc pnor to cach watcr mctcr/scrvicc and it will crcdit UPI's lump sum payments againsl lhese fees, and lhere is currenlly no debl financing encumbering lhe Project. UPPs total costs for eligible and non-eligible horizontal improvements for all five phases, including thc fccs, is cxpcctcd to bc approximatcly $�6,800,000. It is anticipatcd that thc infrastructurc improvcmcnts will all bc fixndcd from invcstor contributions. Thc Projcct is not cxpcctcd to bc financcd with dcbt financmg and thcrc is currcntly no dcbt financmg cncumbcring thc Projcct. Perimeter public streets have been installed. The Project will tie into the utility mains in these streets and complete all onsite grading and public/private street improvements in a phased fashion. The currcnt schcdulc anticipatcs all work by UPl on thc Projcct to bc complctcd by January 202�. Sct forth bclow is an cstimatc of thc infrastructurc dcvclopmcnt costs, thc approximatc perccntagc complctc and thc approximatc rcmaining cost to complctc that will bc undcrtakcn by UPI. Thc cstimatc docs not indude any work that will be done by merchant builders. 40 STATUS OF INFRASTRUCTURE IMPRO�'EMENTS (As of , 2021) Approsimate Percentage Approximate Apprurimate Actual/Estimated Complete Percentage Remaining Cost Imuruvement Total Costs (Area Nu. 11� Complete to Complete Demoli[ion Mobilizarion/Site Preparahon Grnding to "Blue Top" Retnining Walls Erosion Control Stonn Drainage Sanitary Sewer Domestic Water Strcct Improvcmcnts Dry Utilitics Land�c3ping and Irrigation Sitc Amcnitics Walls and Fcncing Subtotal Construction Costs Conhngenc}' Total Construction Costs $ �35,000 ]90,f)1 � �.217J 36 2,050.31 S 393,3a5 870,42ia 2.21 1.309 4, I 55,793 6,615 9it0 3.39?.6-11 3,A3A,3?5 A (150.703 �.aai.�v� 4�, �?5,092 6.O1i�,764 $ 76,1 �43,555 o� $ $ $ S[ ] Consulhng Services Subdivision I3onds Entitlement Fees Permit, Plan Check, and inspection Fees Development Impact Fees Subtotal Services & Fees Con[ingency Tot:�l Scrviccs & Fccs Total Sourcc UpI 3.R35,971 56?,139 39,031 I ,3 I 3,-}?0 4,6R0,457 10,421,019 208,420 $10.639,�139 $56,773,294 � �°�� Honie Derelop�i+e»t and Sales. The Projecl is made up of five separale project areas being developed in differenl phases which are planned lo include 1,069 units al buildoul consisting oC eighl product types of for-sale single-family detached homes, for-sale attached townhomes and for-rent multifamily apartments. Belo�v is a map of the Project. � To he ut�da�ed clnsei� m/n�inting. as �tm�A is mlgoii�,Q. 41 [INSERT MAP] 42 Area No. 1 consisting of 236 home sites is under construction. The estimated cost to complete the horizontal improvements for Area No. 1 is approaimately $13,600,000 (or $16,800,000 including soft costs and fccs) and thc cstimatcd cost to build [hc 236 homcs (cxchiding thc cost of [hc land) is an additional approximatcly $72,000,000 (or $97,950,000 inclusivc of soft costs). Phnsc 1 is cxpcctcd to bc complete in March 3023. Future phases are anticipated to begin construction in April 2032 (Area 3, 4, and 5) and April 2023 IArea Z). Area 4 will be delivered in blue top condition �vith onsite backbone streets, and no private in-tract �vork. Area g �vill be delivered as a super pad. Thc anticipatcd phasing plan as af f Arca 1 � 3 qiii 5 Product Villagc E Village D (portion) Villagc F (portion) Vilinge D (Portion) v�ua�� Villagc C Village F (portion) Village H Villagc A Apartmcnts l, 2021 is sct forth bclow. PHASING PLAN Quantity I10 7S 48 236 as 9s 146 I?0 49 l69 7? I10 182 Construction Start January 2021 April 20�3�'-' Apri120'2"' April 20�2�'-' 336 April 2022�'-' '�' Arca No. � will bc mass gradcd with Arca 3 to balancc Ihc grading in Arca l and Arca 4, but in-tract and homc construction by mcrchant bwldcrs m thusc Ama� �� anticipatcd to bcgin in thc third quartcr of 2U23. "' Espected, Sourcc: UPI. 43 below. As of [ ], 2021, the current estimated product mia far the homes for sale within tl�e District and their anticipated base prices is set forth Villaee Village A Village C Villagc D Village G Villagc F Village G Villagc H SF Total/Weighted Avg: Sourcc: UPI. Unit TVPe Townhome Single-Family (60x100) Singlc-Family (55x90) Single-Family 1?-�'ac) Singlc-Family (Allcy) Single-Family ISOs100) Singlc-Family (4-Pac) No. Arailable 110 120 126 110 97 yS 72 PROPOSED UNIT MIX Average Average Homc Avcragc Basc Size Lot Size Price 1,742 1,800 $4�6,790 2,954 6,000 708,960 �,5$9 a 950 685,?95 ? 134 4,050 616,510 ?,132 3,200 5g5,635 2,730 5,000 655.200 z,>>a 3,�so 553,500 733 �,375 4,171 $609,941 Average Basc Price/SF $zas 240 265 �H9 275 ?75 240 $250 Options $29,619 49,202 47,559 42.507 40,643 45,471 �s,a i � $4?,330 Premiums $6.18i3 10,280 9 93 7 R,944 3.49? 9,5p0 s.o�6 Total Price $a�z.sys �6s,aaz 74?.791 66R.�60 634.770 710,171 599,939 $3.344 $661.115 Pricc ep r SF S?66 z6o ?37 313 ?98 260 ?71 S?30 44 An agreement between UPI and Woodbridge Homes ("WPG") (Woodbridge Pacific Group https://woodbridgepacifiacom) to develop the ?36 homes in Area No. 1 was signed on March 30, 20? 1. Thc contract providcs for UPI to issuc a liccnsc to WPG to build homcs per thc City-approvcd architcctural plans. Upon salc [o nn individual homcbuycr, UPI will initially convcy thc parccl [o WPG, and WPG will convey the hume to the individual homebuyer. WPG provided a deposit of over $1 million that was released to UPI upon expiration of the final due diligence period. The deposit will be applied ($g,000/lot) to the base lot price paid to UPI. UPI will provide the capital necessary for WPG to construct the homes and earn a market return on this capital. Additionally, there is a profit sharing arrangement whereby UPI will receive 75% of tl�e net sales proceeds after WPG pays UPI for: (i) costs to build the homc plus a rcturn on thosc costs; (ii) thc basc pricc of thc lot; and thcn WPG rcccivcs a: (a) rcturn of thcir ovcnc�ad, and (b) agrccd upon profit margin. For Areas 2 through 4, UPI intends to perform the horizontal development and sell t3nished ur blue top lots to builders as soon as practically feasible. Area 5 is planned for an apartment project and UPI intends to sell the site to an apartment developer that will be responsible for a majority of the land development costs. Area 5 could be sold and developed at any time. The anticipated schedule as uf � , 2021] of lot sales to builders, construction uf homes and is set forth belaw. ESTIMATED CONSTRUCTION AND SALES SCHEDULE Horizontal Area Improvements Beain Lot Sales BeEin Home Sales BeEin Area 2A & 2B April 2023 September 3023 March 2034 Area 3A R 3B April 3023 September 2022 March 2023 Area 4A R 4B August 3023 January 2024 July 2024 Sourcc UpI. Finairciirg Plan. UPI has committcd to imcst up to $70 million toward thc dcvclopmcnt of thc property wilhin lhe Dislrict. Thal investment amount included the land purchase price of $ZO million, as well as additional investment of up lo $50 million to complele UPI's porlion of lhe improvemenls lo lhe property. BlackRock on behalf oC certain of ils imeslmenl managemenl clienls formed UPI for ihe purpuse of investing in the Project. The Project is not expected to be tinanced with debt financing nor is there existing debt tinancing on the Property. Notirith.rtunrling d�e beli�,f of UPI that it ui!! hui,e .ci�ffrcient finxLs to comj�lete its ��/mme�( �Ierelo�nnent in tlre Disti�ict, no ussm�unce cun he giren d�«t somre.c of friumcing rn�ailuhle to L�P/ iril! be su{Jicient to complete dae pro�ertr �/erelo�nrent, tlmt UPI irill he nfile to sell to hedlrlers a�t�l that home corrsbzrctro�r uill ve conr�lete�i as ci�rrentlt� antrer�aierl. If an�� to tlre eYte�at thnt jiir�nciirg rs rnarleqi�nte �o pnr dre costs to complete UP/'s planned rlerelo�me�tt in the Drsn�ict anrl otlrer _rrrnncrirg rs not�ut rnto �lcice, tltere cotd�l be u short/id! in the fimds reyun�ed to cum�lete the �ropused clerelopment hr L/Pl, UP! mcn' �toi uhle ta sell to ht�ilcle�rtr rmcl �ortions ojthe Project ntcn not he dei ela�e�l. The development and financing plans discussed above are solely projections as of tlie dates indicated in this Preliminary Of�cial Statement. Sucli plans are subject to change. No assurance can be given that such plans will remain in tlieir current state ur that tlie plans will ultimately be carried out according to thc discussions sct forth abovc. 45 SPECiAL RiSIi FACTORS Thc Bonds havc no[ bccn ratcd by any rating agcncy, and thc purchasc of thc Bonds invoh�cs signiticant risks that are not appropriate for certain investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of tl�e Bonds. The Bonds have not been rated by a rating agency. Tlus discussion does not purpart to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluatmg the credit quality of the Bonds. The occurrence of onc or morc of thc cvcnts discusscd hcrcin could advcrscly affcet thc nbility or �villingncss of property o�vncrs in thc Dis[rict to pay thcir Spccial Taxcs whcn duc. Such failures to pay Spccial Taxcs could result in the inability of the District to make full and pimctual payments of debt service on the Bonds. In addition,the occurrence of one or more ofthe events discussed herein could adversely affectthe value of the property in the District. See "— Property Values" and "— Limited Secondary Markef' below. The principal source of payment of debt service on the Bonds will be payments of [he Special Tax made with re.pect to the Tasable Proper[y. A, discussed under `SECUR[TY AND SOURCES OF PAYMENT FOR THE BONDS — Special Taxes" the Special Tax is to be levied annually against all such Taxable Property either at the maximum rate authorized by the Rate and Method or at such luwer rates as are detennined by the District Admmistrator to raise sufficient funds to comply with the agreements, conditions, covenants and terms contained m the Indenture, and in accordance �vith the Act. The Special Tax is to be collected on the tax roll of the District at the sa�ne time and in the same manner as general ar1 rcrlorem real proper[y taxes are collected. The Special Tax cannot be levied at a tas ra[e higher than the maximum taa rate even if the maximum tax rate will not produce sufficient Net Taxes to pay the principal and interest then payable with respect to the Bonds. See discussions below under "— Levy of the Special Tax" and "— Collection of the Special Tax." Payment of the Special Ta� levied on a parcel is secured by a continuing lien against such parcel. In the event an installment of the Special Tax included in the tax bill for a parcel of Taxable Property is nol paid when due, lhe District has covenanted lo institule foredosure proceedings in court to cause the parcel to be sold in order to attempt to recover the delinquent amount from the sale proceeds. Foreclosure and sale may not ahvays result in the recovery uf the full amount of delinyuent installments uf the Special Tax. See "— Cullection of the Special Tax." The sufticiency of the fureclosure sale proceeds tu cover thc dclinqucnt amount dcpcnds in part upon thc markct for and thc valuc of thc parccl at thc timc of thc salc. Sufficicncy of thc forcclosure salc procccds to covcr a dclinqucncy may also dcpcnd upon thc valuc of prior or parity liens and similar daims. Furlher, olher governmental claims, such as hazardous substance claims, may affect the realizable value even though such claims may not rise lo ihe slalus of liens. See "— Hazardous Substances." Timcly forcclosurc and salc procccdings with respcct to a parccl of Taxablc Property may bc forestallcd or dclaycd by a stay in thc cvcnt thc owncr of thc parccl bccomcs thc subjcct of bankruptcy proceedings. Nol only may foreclosure and sale proceedings be Coreslalled or delayed, bulthe sale of a parcel may also be similarly afl'ected by a bankruplcy slay. Furlher, should lhe stay nol be lifled, paymenl of the Special Tax may be subordinated to bankruptcy law priorities. See `— Enforcement Delays - Bankruptcy." 46 Although bankruptcy proceedings may forestall or delay a foreclosure and sale or a tax sale of a delinquent parcel of Taaable Property, the Special Tas is secured by a lien which, assuming proper proccdures arc follawcd, may bc cnforccd against thc parccl. Thcrc may not bc any rccoursc agains[ a bankrupt property owncr sincc thc o�vncr is not personally obligatcd to pay thc Spccial Tax. Furthcr, if proper disclosure of the authorization of the Special Tax is not made to the owner, the willingness or ability of an uwner to pay the Special Tax may be adversely affected. See "— Payment of the Special Tax is Not a Personal Obligation of the Owners." Thc Dis[rict is not obligatcd to advancc funds to pay such dcb[ scrvicc cxccpt from moncys on dcposit in thc Rcscrvc Fund. Scc "— Limitcd Obligations." Even if debt service is timely paid, interest on tl�e Bonds may have to be included m tl�e gross income of the owner of the Bonds by reason of some circumstance occurring subsequent to issuance of the Bonds, thereby reducing the after-tax yield. See "— Loss of Tas Exemption." Concentration of Ownership UPI will be responsible for the payment of 100% of the Special Tases levied on Taxable Property within [he District in Fiscal Year 2021-22. A number of factors, many of which are beyond [he control of UPI could have an adverse impact on the development of the Projec[, value of the Project and UPI's willingness or ability to pay Special Taxes, including adverse changes in the national economy, failure of the development to proceed as planned, competition from other residential development in the vicinity of the District. energy costs, governmental rules and policies (including changes in zoning and land use), potential environmental and other liabilities, and tax laws affecting real estate. There may be an adverse impact on the development of the Project and UPI's willingness or ability to pay Special Taxes. The timely paymen[ of the principa] of and interest on [he Bonds depends upon the willingness and ability of UPI and future landowners in the District to pay the Special Taxes when due. The willingness and ability of the owners of UPI, as well as other property owners, to pay property [axes and the Special Taxes could be adversely affected by changes in general or local econumic cunditions, fluctuations in the real estate market and other factors. A description of the Project and UPI is set forth under the captiun "PROPERTY OWNERSHIP AND THE DEVELOPMENT." Thc City, thc District, thc Municipal Advisor, and thc Undcrwritcr inakc no rcprescntation as to thc accuracy or complctcncss of such information. Failurc of UPl (or any futurc o�vncr of a significant amount of taxablc property within thc District) to pay Spccial Taxes when due could cause the deplelion of the Reserve Account held under the Indenlure prior lo reimbursemenl 1'rom the resale of foreclosed properly and repayment of the delinquenl Special Taxes. In such an event, there may be insufticient revenues from Special Taxes to meet the District's obligations under the Indenture. In that event, there could be a delay or failure in payments uf the principal of and interest on the Bonds. UPI has paid current all special taxes for CFD No. 2005-I during UPI's period of owncrship of thc Property. Risks of Real Estate Secured lnvestments Generally Thc Bond Owncrs will bc subjcct to thc risks gcncrally incidcnt to an invcshncnt sccurcd by rcal cstatc, including, without limitation: (i) advcrsc changcs in local markct conditions, such as changcs in thc markct valuc of rcal property in thc vicinity of thc District, thc supply of or dcmand for compctitivc properties in such area, and the market value of buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (induding, �vithout limitation, zoning laws and laws relating to endangered species and hazarduus materials) and fiscal policies; (iii) natural disasters (including, without limitatiun, eartliquakes, wildfires and fluods), which may result in uninsurcd losscs; (iv� advcrsc changcs in local markct conditions; and (v) incrcascd dclinqucncics duc to rising mortgagc costs and othcr factors. 47 No assurance can be grven that the property owners witl�m the District will pay Special Taxes in the future or that they will be able to pay sucl� Special Taxes on a timely basis. See the caption "— Enforccmcnt Dclays — Bankruptcy" for a discussion of ccrtain limitations on thc District's ability to pursucjudicial procccdings with respcctto dclinqucn[ parccls. Construction Risks UPI anticipatcs horizontal construction on all 1A69 for-salc homcs and for-rcnt apartmcnts to havc commcnccd by April 2023 with complction of horizontal construction by January 2025. Howcvcr, there can be no assurance that the development, cunstruction and completion will be accomplished on schedule and within budget. The failure of any or all of these measures or the realization of other development, construction or completion risks, including, but not limited to, delays m the issuance of required permits or other necessary approvals, stnkes, shortages of materials, fire, adverse sub-surface conditions and adverse weather conditions, could result in a failure to complete or a delay in tl�e completion; or an increase in the cos[ of the completion, or both. No assurance can be made [hat UPI would have sufficien[ funds to complete construction in the event of a significant cost overrun. Any such failure or cost increase may adversely affect the UPI's ability or willingness to pay the Special Taxes as they become due and payable. Insufficiency of Special Tax Revenues As discussed below, the Special Tases may not produce revenues sufticient to pay the debt service on the Bonds either due tu nonpayment uf the amounts levied or because acreage within the District becomes exempt from ta�ation due to the transfer of title to a pubhc agency. In order to pay debt service on the Bonds, it is generally necessary [hat the Special Taxes be paid in a timely manner. Should the Special Taxes not be paid on time, the District has established a Reserve Account under the Indenture to be maintained in an amount equal to the Reserve Requirement tu pay debt service on the Bonds tu the extent other funds are not available. See "SOURCES OF PAYMENT FOR THE BONDS — Rcscrvc Account of thc Spccial Tax Fund." Thc District will covcnant in thc Indcnturc to maintain m thc Rcscrvc Account an amount cqual to thc Rcscrvc Rcquircmcnt, subjcct, howcvcr, to thc availability of Net Taxes in amounls sufficient lo do so and to the limilalion thal the Districl may not levy the Special Tas in any Fiscal Year al a rate in excess of the maximum amounts permilted under lhe Rate and Melhod. See Appendix E hereto. As a resull, if a signilicanl number oC Special Tax delinquencies occurs within the District, the District could be unable tu replenish the Reserve Account tu the Reserve Requirement due to the limitations un the amuunt of the Special Tax that may be levied. If such defaults wcrc to contmuc ro succcssivc ycars, thc Rcscrvc Accaunt could bc dcplctcd and a dcfault on thc Bonds could occur. The Acl pmvides that, if any property within lhe Dislricl not otherwise exempl fmm the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. in addition, thc Act pravidcs that, if property subjcct to thc Spccial Tas is acquircd by a public cntity through cinincnt doinain procccdings, thc obligation to pay thc Spccial Tax with respcct to that property is to bc trcatcd as if it wcrc a spccial asscssmcnt and bc paid from thc cinincnt domain a�vard. Thc constitutionality and operation of these provisions of the Act have not been tested in the courts, but it is doubtful that they would be upheld as to, for example, property owned by the federal governmenL If for any reason property within the District becomes esempt from taaation by reason of ownership by a non- taaable entity such as the Yederal government or another public agency, subject to the limitatiun of the Maximum Spccial Tax, thc Spccial Tax will bc rcallocatcd to thc rcmaining taxablc parcels within thc District. This would result in thc o�vncrs of such property paying a grcatcr amount of thc Spccial Tax and 48 could have an adverse impact upon their willingness and/or ability to pay the Special Tas. Moreover, if a substantial portion of addrtional land within the District became exempt from the Special Tax because of public owncrship, ar othcrnisc, thc Maximum Spccial Tax which could bc lcvicd upon [hc rcmnining acrcagc migh[ not bc sufficicnt to pay principal of and intcrest on thc Bonds whcn duc and a dcfaiilt will occur with respect to the payment of such principal and interest. The District will covenant in the Indenture that, under certain circumstances, it will institute foreclosure proceedings to sell any property with delmquent Special Taxes in order to obtam funds to pay dcbt scrvicc on thc Bonds. If forcclosurc procccdings wcrc cvcr institutcd, any mortgagc or dccd of trust holdcr could, but would not bc rcquircd to, advancc thc nmount of thc dclinqucnt Spccial Tas to protcct its security interest. See "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Procee�fs q/ Forec(osure S�zles" for pruvisions which apply in the event of such foreclosure and which the District is required to folluw in the event of delinquencies in the payment of the Special Tax. In the event [hat sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Bonds (if the Reserve Accoimt has been deple[ed) pending such sales or the prosecution of such fureclosure proceedings and receipt by the City on behalf uf the District of the proceeds of sale. The District may adjust the future Special Tax levied on taxable parcels in the District, subject to limitations described above under the caption "THE DISTRICT—Rate and Method of Appartionment," to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to replenish the Reseroe Account to an amount equal to the Reserve Requirement, and [o pay all current expenses. There is, however, no assurance that the total amount of the Special Tax that could be levied and collected against taxable parcels in the District will be at all times sufticient to pay the amounts required to be paid by the Indenture, even if the Special Tax is levied at the Maximum Special Tax rates. See "— Enfurcement Delays — Bankruptcy." No assurance can be given that the real property subject to sale or foreclosure will be sold, or if sold, that the proceeds of sale will be sufficient to pay any delinquent in,tallments of the Special Tax. The Acl does nol require the Cily lo purchase or olherwise acquire any lol or parcel of properly lo be sold al fureclosure if there is no uther purchaser at such sale. The Act and the Indenture do specify that the Special Tax will have the same lien priority as for n�i ralorem property taxes in the case of delinyuency. Sectiun i3356.6 of the Act reyuires that pruperty sold pursuant to foreclosure under the Act be sold for not lcss than thc amount of judgmcnt in thc forcclosurc action, plus post judgmcnt intcrest and authorizcd costs, unlcss thc conscnt of thc owncrs af 75% of thc Outstanding Bonds is obtaincd. Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date uf sale. Under legislation effective July I, 19R3, the statutory right of redemptiun from such foreclosure sales has been repealed. However, a periud of 20 days must elapse atter the date on which thc noticc of lcvy of thc intcrest in rcal property was scrvcd on thc judgmcnt dcbtor bcforc thc salc of such lot or parccl can bc madc. Furthcrmorc, if thc purchascr at thc salc is thc judgmcnt crcditor (c.g., the Dislricl), an aclion may be commenced by the delinquent pmperty owner wilhin 90 days after lhe dale of sale lo set aside such sale. The constitutionality of lhe aforementioned legislalion, which repeals the one year redemption period, has not been tested and there can be no assurance that, if tested, such legislation �vill be upheld. (Section 701.680 of the Code of Civil Procedure of the State. ) Property �'alues The value of tlie property within the District is a critical factor in determining tlie imestment quality uf the Bonds. If a property owner is delinquent in the payment of Special Iaxes, tlie District's only rcincdy is to coinmcncc forcclosurc procccdings against thc dclinqucnt parccl in an attcmpt to obtain funds to pay thc Spccial Taxcs. Land dcvclopmcnt and land valucs could bc advcrscly affcctcd by 49 economic and other factors beyond the District and the City's control, such as a general economic downturn, adverse judgments in future litigation that could affect the scope, timmg or viability of dcvclopmcnt, rclocn[ion of cmploycrs out of [hc arca, strictcr land usc rcgulations, shortngcs of watcr, cicctricity, natural gas or o[hcr u[ilitics, dcstruction of property causcd by carthqimkc, flood or othcr natural disasters, environmental pollution ur contamination, or unfavorable economic conditions which will adversely impact the security underlying the Special Taxes. The Appraisal Repart indicates tl�e Appraiser's opinion as to the market value of the properhes rcfcrrcd to thcrcin as of thc datc and undcr [hc conditions spccificd thcrcin. Thc Appraiscr's opinion rcflccts conditions prcvailing in thc applicablc markct as of thc Datc of Valuc. Thc Appraiscr's opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future. See "THE DISTRICT — Appraisal Reporf' and "APPENDIX D — APPRAISAL REPORT." Prospective purchasers of the Bonds should not assume that the taxable land within the District could be sold for the appraised amount or for the assessed values at a foreclosure sale for delinquent Special Taxes. In arriving at the estimate of market value of the Appraised Property, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See Appendis D for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser's assumptions to be untrue could result in a reduction of the value of the taxable ]and and improvements within the District from the market value estima[ed by the Appraiser. No assurance can be given that any bid will be received for a parcel wrth delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Tases. See "SOURCES OF PAYMENT FOR THE BONDS — Special Tases — Proceecf.r uf Foreclosm�e Sules.•, Neither the Distrrct na� the Crtr Iras ernlunte�i e�erelo�nrent risks. SiJrce these are I��gelr husiness risk.e of'the tt'�e thut ilte letndoicner cusionactrilr eniltiutes irtdiriduulh'. und inct.emuclt et.e cltcntges irr Icmd oirner.ehip mc�r ic�ll rnecm chc�nges in dre eruli�uliora iri�h r•eapect to urtt� �cir7ici�lcir �urcel, �he Disb�ict is i.eauing the BoncLr irithout regurd to ciirr such erciluufiori. Thus, the crecuion o/ d�e Disn•ic� cmcl tlie issurince af tlre Banr(s in na irur imj�lier thut ritlr� r the Cit�' or the District h«s eru(uutecl tlre.ce riskc or tlie reasonuhlene.rs of these risk.c. On thc conb�ar�', dre Cifi unc/ the Dish�ict hare ma�le no such c ru6rution an�/ are unrlertaking ac9uisitioir n��i coitstruction oJ dre Jncilities fieing /inance�i Ur the Bonets eren droi�glr these risks mar fie serroi�s an�f inen tdtrmnteh halt or slou� tlre ��•ogress o/ Inne� derelo�nreirt arrrl /orestall the reali�ation oj TacnUle Pro�ertr rah�es rn dre erent o/ delin9uencr an� %oreclosure. Esempt Properties Certain properties are esempt from the Special Tax in accordance with the Rate and Methud. In addition, thc Act providcs that prapertics ar cntitics of thc Statc, fcdcral or local govcrnmcnt arc cxcmpt from thc Spccial Tax; providcd, howcvcr, that property in thc District acquircd by a public cntity through a ncgotiatcd transaction or by gift or dcvisc, which is not othcnvisc cxcmpt from thc Spccial Tax, will continue to be subject to the Special Tax. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Taa with respect to that property is to be treated as if it were a special assessment The constitutionality and operation uf tliese provisions of tlie Act have not been tested. 50 In particular, insofar as the Act requires payment of the Special Tas by a federal entity acquiring property in the District, it may be unconstitutional. If for any reason property in tl�e District becomes cxcmpt from taxation by rcason of owncrship by a nontaxnblc cntity such as [hc fcdcrnl govcrnmcnt or anothcr public agcncy, subjcct to thc limitatian of thc maximum authorizcd ratcs, thc Spccial Ta� will bc reallocated tu the remaining Taxable Prope�rties in the District. This would result in the uwners of such property paying a greater amoimt of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax. Moreover, if a substantial portion of pruperty in the District becumes exempt from the Special Tax because of public ownership, or otherwise, the Masimum Annual Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and intcrest on [hc Bonds whcn duc and a dcfault would occur with respcct to thc paymcnt of such principal and intcrest. COVID-19 (Coronavirus) Pandemic The spread of the nove] shain of coronavirus called COVID-19 ("COVID-19") is causing significan[ negative impacts throughout [he world, including in the City. Since mid-March 2020, based on guidance and directives from the State and public health agencies, the County and the City have undergone varying degrees of closure and limited reopening of public buildings and businesses. The City initially do,ed certain non-essentia] functions of the City, while City Hall remained opened, by appointment only, and commimity services and public safety functions remained open to the public to service City residents and businesses. The City's Building & Safety Department remained opened and continued to issue building permits and inspect unoccupied dwellings for the lots within the City. Other City Departments that serve businesses and residents within the District telecummuted and/or continued in-person work schedules to meet the needs of the community. Other public agencies serving the property and residents within the District may have taken similar actions in response to tbe COVID-19 pandemic, though the District and the City can provide no assurance regarding the actions of any other public agencies. Such ac[ions may affect the landowners ability ro complete their planned developmen[ wilhin lhe District as described in the Official SlalemenL See "PROPERTY OWNERSHIP AND THE DEVELOPMENT." Thc COVID-19 pandcinic is ongomg, and thc ultimatc gcographic sprcad of thc vinxs, thc duration and scvcrity of thc outbrcak, and thc cconomic and othcr actions that may bc takcn by governmental aulhorities lo conlain the oulbreak or to treal its impacts are uncerlain. However, lhe impacl of the COVID-19 oulbreak could adversely impact developmenl within the Dislrict, induding, but nol limited to, one or more of the follo�ving ways: (i) potential supply chain slo�vdowns or shutdowns resulting from the unavailability of workers in locations producing construction materials; (ii) slowdowns or shutdowns by local governmental agencies in providing governmental permits, inspections, title and documcnt rccordation, and othcr scrviccs and activitics associatcd with rcal cstatc dcvclopmcnt; (iii) dclays in construction whcrc anc or morc mcmbcrs of thc workforcc bccomcs mfcctcd with COVID-19; (iv) continued extreme fluctuation. in financial markets and contraction in available liquidity; (v) exlensive job losses and dedines in business activily across importanl seclors of lhe econonry; (vi) dedines in business and consumer confidence that negatively impact economic conditions or cause an ecunomic recession; (vii) the failure of govemment measures to stabilize the financial sector and introduce fiscal stimulus to counteract tlie economic impact of the pandemic; (viii) delays in sales or fcwcr salcs duc to lowcr traffic at modcl homc complcxcs and real cstatc officcs; and (ix) dclays in salcs, or canccllations, duc to mortgagc lcnding issucs. Any advcrsc impact of COV1D-19 on thc District, landowners operations, tinances and ability to complete development within the District as planned, homebuyers' willingness and ability to pay the Special Taxes when due, and the real estate market in general cannot be predicted. 51 Geologic, Topographic and Climatic Conditions Thc Dis[rict, likc all California communitics, may bc subjcct to unprcdictablc scismic activity, t3res, tluud, or other natw'al disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District In addition, land susceptible to seismic activity may be subject to liquefaction during tl�e occurrence of such event The District is not located within a designated fault zone and located in an area of minimal flood hazard. Palm Desert shares many of the hazards associated with earthquakes faults in Southern California. There are three major faidts and several minor faults that could impact the City of Palm Desert The major faults include the San Andreas Fault near San Gorgonio Pass, the Palm Desert Fault, and the Elsinore Fault. In recen[ years, portions of Southern California have experienced �vildfires that have burned thousands of acres and destroyed thousands of homes and structures, even in areas not previously thought to be prone to wildtires. While the District is not aware of any particular risk of wildtire within the District, there can be no assurances that wildfires won't occur within the District. Property da�nage due to wildfire could result m a significant decrease m the market value of property in District and m the ability or �villingness of property owners to pay Special Taxes when due. The District is in Basin No. 1. In the event of a severe earthquake, fire, flood or uther natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion uf the property owners may be unable or umvilling to pay the Special Tases when due. In addition, the value of land in the District could be diminished in the aftennath of such a natural disaster, reducing the resultmg proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Ta�es. Flood Zone Thc City of Palm Dcscrt has cxpericnccd numcrous wintcr storm flood and high wmd damagcs m the pasL Flood control improvements enacted aCter the deva.tating (loods caused by Tropical Slorm Kalhleen in 1976 have mitigated any fulure occurrences lhus far. However, heavy rains can lead lo problems with storm drainage and create lucali�ed flood problems. The District is not located within a Special Flood Hazard Area. Drought California has been subject to droughts from time-to-time in the past. The State of California is currently in a statewide drought with regiuns ranging from severe drought to exceptional drought. Rivcrsidc County is cxpericncmg scvcrc to cxtrcmc drought conditions. Watcr scrvice to thc City and thc District is providcd by thc Coachclla Vallcy Watcr District ("CV WD"). CVWD faccs various challcngcs in thc continucd supply of watcr to thc City. A dcscription of thcsc challcngcs as wdl as a vancty of other operating information with respect to CVWD is included in certain disdosure documents prepared by CVWD. CVWD periodically prepares official statements and other disdosure documents in connection witli its bonds and other ubligations. CVWD has also entered into certain continuing disclosure agreements pursuant to whicli CVWD is contractually obligated fur the benefit of owners of certain of its outstanding obligations to file certain annual reports, including audited financial statements and noticc of ccrtain cvcnts, pursuant to Rulc 1 ic2-12 promulgatcd undcr thc Sccuritics Eschangc Act of 1934, as amcndcd ("Rulc 15c2-12"). Such official statcmcnts, othcr disclosurc documcnts, annual rcports and notices (collectively, the "CVWD Information") are filed with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system (`EMMA") at htqi cmm:i.m,rh urc. The CVWD 52 Information is not incorporated l�erein by reference tl�ereto, and the City makes no representation as to the accuracy or completeness of such information. CVWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE CV WD INFORMATION TO THE CITY OR THE OWNERS OF THE BONDS. Although the City does not believe any future drought would impact development in the District, no assurances can be given in this regard and no assurance can be given that a future drought affecting homes in the District would not result in decreased values. In the event that the CVWD's water supply is scvcrcly limitcd or cut off by virtuc of futurc actions bcyond its control resulting from ongoing or futurc drought conditions, dcvclopmcnt within thc District may bc dclaycd or cvcn stoppcd. Should thc City need to restrict development, it nuist do so Citywide and cannot single out the District prope�7y in restricting development activity. In turn, the anticipated diversity of ownership of land within the District could also be reduced. Furthermore, such an increased periud of concentrated o�vnership of imdeveloped land increases the potential negative impact of any bankruptcy or other financial difficulties experienced by the owners of undeveloped land in the District. Hazardous Substances While government tases, assessments and charges are a common claim against the value of a parcel, other less common claims may also be relevant. One of the mos[ serious in terms of the potential reduction in [he value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions relating [o releases or threatened releases of hazardous substances. The federal Comprehensive Em�ironmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Super Fund Act" is the must well-known and widely apphcable of these laws, but California laws with regard to hazardous substances are also stringent and similar in effect. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condrtion of a parcel whether or not the owner (or operator) had anything to do with crea[ing or handling the hazardous subs[ance. The effect, therefore, should any of [he parcels wilhin ihe Dislrict be aCfected by a hazardous substance, is to reduce the marketability and value by lhe costs of remedying the condition. Thc District is not awarc of thc prescncc of any fcdcrally or statc classificd hazardous substanccs in violation of any cnvironmcntal laws, locatcd on thc property within thc District. Howcvcr, it is possiblc that such materials do currenlly exist and lhat lhe Districl is not aware of them. It is possible that property in the District may be liable for hazardous substances in the future as a result of thc cxistcncc, currcntly, of a substancc prescntly classificd as hazardous but which has not bccn rcicascd or thc rcicasc of which is not prescntly thrcatcncd, or thc cxistcncc, currcntly, on thc property of a substancc not prescntly classificd as hazardous but which may in thc futurc bc so classificd. Additionally, such liabililies may arise not simply fmm the exislence of a hazardous substance bul fmm the melhod of handling such substance. All of lhese possibilities could have the effecl of reducing the value of the applicable property. Cybersecurity The City, like many other public and private entities, relies on a large and complex technology enviromnent to conduct its operations. As a recipient and provider of personal private or sensitive infumiation, the City is subject to multiple cyber threats including, but not limited to, hacking, viruses, malwarc and othcr attacks on computcr and othcr scnsitivc digital ncrivorks and systcins. Entitics or individuals may attcmpt to gain unauthorizcd acccss to thc City's digital systcros for thc purposcs of misappropriating assets or information or causing operational disruption and damage. To date, the City 53 has not expenenced an attack on its computer operating systems which resulted in a breach of its cybersecurity system that are in place. However, no assurances can be given that the Crty's effort to managc cybcr thrcats and attacks will bc succcssful or that any such attack will no[ matcrinlly impact thc operations or financcs of [hc City. Depletion of Reserve Account Thc Rcscrvc Account is to bc mnintaincd at an amoimt cqual to thc Rcscrvc Rcquircmcnt. Moncy in said fund may bc uscd to pay dcbt scrvicc on thc Bonds in thc cvcnt thc procccds of thc lcvy and collection of the Special Tax against property in the District are insufficient If funds in the Reserve Account are used to pay debt service on the Bonds, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are m excess of the amount required to pay all amounts to be paid pursuant to the Indenture. However, no replemsl�ment from the proceeds of a le�y of the Special Tax can occur as long as the proceeds tl�at are collected from the levy of the Special Tax at the maximum tax rates, toge[her with other available funds, remain insufficient to pay all such amounts. Thus it is possible that [he Reserve Account will be depleted by its use to pay .uch amounts and will not be replenished by the le�ry of the Special Tax. There is no assurance that the amount in the Reserve Accuunt will, at any particular time, be sufticient to pay all such amounts or that any amounts of the Reserve Requirement used far debt service on the Bonds will be fully replenished fram the proceeds of the le�y and collection of the Special Tas. Enforcement Delays — Bankruptc� The payment of the Special Tax and the ability of the District to foreclose the lien of a delmquent unpaid tax, as discussed in "SOURCES OF PAYMENT FOR THE BONDS," may be limited by bankniptcy, insolvency or other ]aws generally affecting creditors' rights or by the la�vs of the State of California relating to judicia] foreclosura [n addition, the pro,ecution of a foreclosure action could be delayed due to cro�vded local court calendars or delays in the legal process. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be yualified as to the enfurceability of the variuus legal instruments by bankruptcy, insoh cncy, rcorganization, moratorium and othcr similar laws affccting crcditors' rights, by thc application of cquitablc principlcs and by thc cscrcisc ofjudicial discrction in appropriatc cascs. Allhough bankruptcy proceedings would not cause lhe obligalion lo pay lhe Special Tax lo become extinguished, the bankruptcy of a property o�vner cuuld result in a delay in prosecuting superior court fureclosure proceedings because federal bankruptcy laws may provide fur an automatic stay of forcclosurc and salc of tas salc procccdings. Any such dclays could incrcasc thc likclihood of a dclay or dcfault in paymcnt of thc principal of and intcrest on thc Bonds and thc possibility of dclinqucnt tax installmcnts not bcmg paid in fulL Morcovcr, if thc valuc of thc subjcct property is ]css than thc licn of the Special Tax, such excess could be lrealed as an unsecured daim by the bankruptcy court. Furiher, should remedies be exercised under lhe Cederal bankrupicy laws againsl Taxable Property, payment oC the Special Tax may be subordinated to bankruptcy la�v priorities. Thus, certain claims may have priority over the Special Tax in a bankruptcy proceeding even though tliey would not outside uf a bankruptcy proceeding. FD1C/Federal Government lnterests in Properties The ability of tlie District to collect interest and penalties speci8ed by the Act and to foreclose the licn of dclinqucnt Spccial Taxcs may bc limitcd in ccrtain respccts �vith rcgard to parccls in which thc Fcdcral Dcposit Insurancc Corporation �thc "FDIC"), or othcr fcdcral govcrnmcnt cntitics such as Fannic Mae or Freddie Mac, has or obtains an interest. 54 In the case of the FDIC, in the event that any financial institution makmg a loan which is secured by parcels is tahen over by the FDIC and the applicable Special Tax is not paid, the remedies available to thc District may bc conshnincd. Thc FDIC's policy statcmcnt rcgarding thc paymcnt of statc and local rcal property taxcs (thc "Policy Statcmcnt") providcs that [axcs othcr than rrc/ rrdoren� taxcs which nrc secw�ed by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ar! r��lorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to Dcccmbcr 31, 1995. Morcovcr, thc Policy Statcmcnt providcs thnt, with respcct [a parcels on which thc FDIC holds a mor[gagc licn, thc FDIC �vill not permit its licn to bc forccloscd ou[ by a taxing authority without its spccific conscnt, nor will thc FDIC pay or rccognizc licns for any pcnaltics, fincs or similnr claims imposed for the nonpayment of taxes. The FDIC has taken a position similar to that expressed in the Policy Statement m legal proceedings brought against Orange County, California, in United States Bankrup[cy Court and in Federal Dis[rict Court. The Bankniptcy Court issued a ruling in favor of the FDIC on certain of such daims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except �vith respect to the payment of pre- receivership liens based upon delinquent prupe�7y tax. The Distric[ is unable to predict �vhat effec[ the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foredosed uut at a judicial foreclosure sale �vould prevent or delay the foreclosure sale. In the case of Fanme Mae and Freddie Mac, m the event a parcel of Taxable Property is owned by a federal government entity or federa] governmen[ sponsored entity, such as Fannie Mae or Freddie Mac, or in the event a private deed of trust secured by a parcel of Taxable Property is o�vned by a federal government entity or federal government sponsured entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or tu collect delinyuent Special Taxes may be limited. Federal cuurts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intcnt to thc contrary, a statc or local agcncy cannot forcclosc to collcct dclinqucnt taxcs or asscssmcnts if forcclosurc would impair thc fcdcral govcrnmcnt intcrest. This mcans that, unlcss Congress has olherwise provided, if a federal governmenl enlily owns a parcel oC Taxable Property bul does nol pay laxes and assessments levied on lhe parcel (including Special Taxes), lhe applicable state and local governmenls cannot foreclose on the parcel to collecl lhe delinquent taaes and assessmenls. Morcovcr, unlcss Congress has othcrwisc providcd, if thc fcdcral govcrnmcnt has a martgagc intcrest in thc parccl and thc District wishcs to forcclosc on thc parccl as a result of dclmqucnt Spccial Taxes, lhe pmperty cannol be sold al a foreclosure sale unless it can be sold for an amounl sufficient lo pay delinquent taxes and assessmenls on a parity wilh the Special Taxes and preserve lhe federal government's mortgage interest. Thc District's rcmcdics may also bc limitcd in thc casc of dclinqucnt Spccial Tascs with respcct to parcds in which othcr fcdcral agcncics (such as thc Intcrnal Rcvcnuc Scrvicc and thc Drug Enforcement Administration) have or obtain an interest. 55 Direct and Overlapping Indebtedness Thc ability of nn owncr of property within thc District to pay thc applicablc Spccial Tascs could be affected by the existence of other taxes and assessments imposed upon taxable parcels. See "THE DISTRICT — Direct and Overlapping DebY' herein. The City and other public agencies whose boundaries overlap those of tl�e District could impose additional taxes or assessment liens on the property within the District in order to finance public improvements or services to be located or provided inside of or outside of such area. Tl�e lien created on the property within the District through the levy of such additional taxcs may bc on n pnrity with thc licn of thc Spccinl Taxcs applicablc to thc property within [hc Dis[rict. The imposition of additional liens on a parity �vith the Special Taxes may reduce the ability or willingness of property owners to pay the Special Taxes and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taaes. Effect of Parity Bonds on Credit Quality The Distnct may at any time after the issuance and delivery of the Bonds issue Parity Bonds to finance addi[ional facilitie. in an aggregate amount not to exceed $50,000,000 (including the Bonds) payable from [he Net Taxes and secured by a lien and charge upon such amounts equal to the lien and charge securing the Bonds and any other Parity Bunds theretofore issued pursuant to the Indenture. Parity Bonds may only be issued subject tu specific conditions, which are set forth in the indenture and with which the District must be in compliance. See "SOURCES OF PAYMENT FOR THE BONDS — Parity Bonds." If Parity Bonds are issued, the value-to-lien ratio of cer[ain parcels subject to [he levy of Special Taxes may be lo�ver than the ratios set forth in this Prelimina�y Ofticial Statement. Furthermore, if Parity Bonds are issued, the owners of the Bonds �vill not have any prior claim on the Special Taxes levied on the property within the District but will have an eyual claim with the o�vner of the Parity Bonds on the Nct Taxcs. The Districl expecls to issue a one or more additional series of bonds up to the remaining balance of bond authorization, which bonds are expected to be secured by Net Taxes un a parity with the Bonds. Such Parity Bonds are expected to be issued once property values �vithin the District meet the minimum value-to-lien requirements required under the Parity Bonds test in the Indenture. Currently, UPi expects tu rcqucst thc District to issuc thc sccond scrics of bonds as Parity Bonds within thc ncxt two �2) ycars. Scc "SPECIAL RISK FACTORS — Effcct of Parity Bonds on Crcdit Quality." Payment of' Special Taxes is not a Personal Obligation of the Propert�� Owners An owncr of a taxablc parccl is not personally obligatcd to pay Spccial Taxcs. Rathcr, Spccial Taxcs arc an obligation which is sccurcd only by a licn against thc tasablc parccl. If thc valuc of a tasablc parcel is not sufticient, taking into account other liens imposed by public agencies, to secure fully Special Taxes, the District has no recourse against the property owner. No Acceleration Provision The Indenture does not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture. 56 Limited Obligations Thc Bonds and in[crest thcrcon arc not payablc from thc gcncral funds of thc City. Exccpt with respect to the Net Taaes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any tasing power by tl�e District or the City or force the forfeiture of any City or District property. Tl�e principal of, premium, if any, and mterest on the Bonds are not a debt of tl�e City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City's or the Dis[rict's property or upon nny of thc City's or thc Dis[rict's incomc, rcccipts or rcvcnucs, cxccpt thc Nct Taxcs and othcr amounts plcdgcd undcr [hc Indcnturc. The District's legal obligations with respect to any delinquent Special Taxes are limited to: (i) pa}nnents from the Reserve Account to the estent of fixnds on deposit therein; and (ii� the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for whicl� Special Taxes are delinquent. See the caption "SOURCES OF PAYMENT FOR THE BONDS—Special Taxes— Proceect.r ufForeclosm�e Sules." The Bonds cannot be accelerated in the event of anv default. The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption "—Payment of the Special Tax is Not a Personal Obligation of the Property Owners." Enforcement of Special Tax payment obliga[ions by the District is limi[ed to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any curren[ or subsequent o�vner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so. Failure by owners of the parcels to pay Special Ta� installments when due, delay in foredo,ure proceedings, or the inability of the District to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Special Ta�es levied against such parcels may result in the inability of the District tu make full or timely payments of debt service on the Bunds, which may in turn result in the depletion of the Reserve Account. See the caption "— Enforccmcnt Dclays — Bankruptcy." Ballot lnitiatives Articles XIII A, XIII B, XIII C, and XIII D of the California Constitutiun were adupted pursuant to mcasures qualificd for thc ballot pursuant to thc Statc's constitutional initiativc proccss. From timc to timc, othcr mitiativc mcasures could bc adoptcd by California votcrs. Thc adoption of any such mitiativc mighl place limitations on lhe abilily of lhe State, the City, or other local agencies lo increase revenues or to increase appropriations. Proposition 218 An initiative measure entitled "The Right to Vote on Taxes Act" ("Proposition 318") was approved by the voters at the November 5, 1996 statewide general election. Among other things, Proposition 218 added a new Article XIII C to the Califurnia Constitution which states that ". .. tlie initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing airy local taa, assessment, fee or charge." The Act provides for a procedure which includes notice, hearing, protest and voting rcquircmcnts to altcr thc ratc and incthad of apportionmcnt of an cxisting spccial tax. Ho�vcvcr, thc Act prohibits a lcgislativc body from adopting any resolution to rcducc thc ratc of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not 57 interfere with the timely retirement of that debt. While the application of Proposition 21 R in this context has not yet been interpreted by the courts and the matter is not completely free from doubt, rt is not likely that Proposition 21R has confcrrcd on thc votcrs thc powcr to cffcct a rcpcal or rcduc[ion of thc Spccial Tax if thc result thcrcof would bc to impair thc sccurity of thc Bonds. It may be possible, however, for voters or the Crty Council, achng as the legislative body of the District, to reduce the Special Tases m a manner which does not mterfere with tl�e timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year bclow thc cxisting lcvcls. Thcrcforc, no assurnncc can bc givcn wi[h respcet to thc fiiturc lcvy of Spccial Taxcs in amoun[s grcn[cr than thc amount ncccssary for thc [imcly rctircmcnt of thc Bonds. Ncvcr[hcicss, to the maximum extent that the law permits it to do so, the District will covenant that it will not initiate proceedings imder the Act to reduce the maximum Special Tax rates for the District. The District also will covenant that, in the event an initiative is adopted which purports to reduce or otherwise alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant However, no assurance can be given as to the enforceability of the foregoing covenants. Litigation with Respect to Community Facilities Districts SLupir�. The California Court of Appeal, Fourth Appellate District, Division One, issued i[s opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.AppAth 75F (the `San Diego Decision"). The case involved a Convention Center Facilities District (the "CCFD") e.tablished by the City of San Diego ("San Diego"). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tas to be levied within the CCFD was to be levied only on hotel properties located within the CCFD. The election authorizing the specia] tax was limited to owners of hotel properties and le,sees of real property owned by a governmental entity on �vhich a hotel is located. Thus, the electiun was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modcicd aftcr Scetion �3326(c) of thc Act, �vhich gcncrally providcs that, if a spccial tax will not bc apportioncd in any tax ycar on residcntial property, thc ]cgislativc body inay providc that thc votc shall bc by thc landowncrs of thc proposcd district whosc property would bc subjcct to thc spccial tax. The Courl held that the CCFD special tas eleclion was invalid under lhe CaliCornia Constitulion because Article XIIIA, Section 4 thereof and Ariicle X[[[C, Seclion 2 lhereof require lhal lhe eleclors in such an electiun be the registered voters within the district. Horizo�r. Thc Sacramcnto County Superior Court issucd a tcntativc ruling in Horizon Capital Invcstmcnts, LLC v. City of Sacramcnto ct aL (Casc No. 34-2017-80002661). That nxlmg subscqucntly became the courl's Gnal order. As described below, this case invohed an election to approve lhe le�y of a special lax wilhin a community facilities district (`CFD") Cormed under lhe AcL In 2017, the City of Sacramentu initiated proceedings to furm a CFD to tinance certain costs to operate and maintain a streetcar line. As permitted by the Act, the proposed district included non-contiguous parcels uf non- residential property. Because there were fewer than 12 registered voters residing within the territory of the proposcd CFD, thc City Council submittcd thc spccial tax proposcd to bc ]cvicd within thc proposcd CFD to thc owncrs of land within thc proposcd CFD, as rcquircd by thc Act Thc proposcd spccial tax rcecivcd the requisite two-thirds vote in the landowner election. Petitioners Horizon Capital Investments, LLC et al. filed a writ of mandate and complaint for reverse validation and declaratory relief. Petitioners argued, and the superior court agreed in its Yinal ruling, that under section 4(a) of article XIII A of the California Cunstitution (which provides that "Cities, Counties and special districts, by a two-thirds vote of the qualitied electors of sucli district [sic], inay impose special taaes on such district...") the phrase "qualified 58 electors" means the registered voters of the entire City of Sacramento and not just tl�e owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, tl�e tentative rulmg statcs that thc phrasc "qualificd cicetors of thc dis[rict" rcfcrs to thc rcgistcrcd votcrs of thc cntity imposing [hc spccial tax, which in this casc was thc City of Sacramcnto. Bccausc thc votc within thc proposed CFD �vas by landowners only and not by all registered voters in the City of Sacramento, the t3nal ruling states that the special tax is invalid. The superior court's tinal ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Tax, or the Bonds. The City of Sacrainento did not appeal the decision. The Specia/ Tas Electiou i�: tlre District. With respcet to [hc San Dicgo Decision, the facts of such case show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in San Diego). The election held in the District had less than 12 registered voters at the time of the elections to authorize the Special Tax In the San Diego Decision, the court expressly stated that it was not addressmg the validrty of landowner voting to impose special tases pursuant to the Act in situations where there are fe�ver than 12 registered voters. Thus, by its terms, the court's holding in the San Diego Decision does not apply to the Special Tax election in the District. Moreover, Section 53341 of the Act provides tha[ any "action or proceeding to attack, review, set aside, void or annu] [he levy of a special tax..shall be commenced within 30 days after the special tax is approved by the voters." Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters appruving the issuance of such bonds. The petitiuners in Horizon filed the writ of mandate within 30 days of the landowner election. Landowners in the District approved the levy of Special Tax m accordance with the Rate and Method on May 13, 2021. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, nilings, and cour[ decisions, [he City believes that no successfiil challenge to the Special Tax being levied in accordance with [he Rate and Method may now be brought [n connection with the issuance of the Bonds, Bond Counsel expects to deliver its opinion in the proposed form attached hereto as Appendis B. Loss of Tat Etemption As discussed under the heading "TAX EXEMPTION;' interest on the Bonds could cease tu be excluded from gross income for purposes uf federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the District. In addition, it is possible that future changcs in apphcablc fcdcral tax laws could causc intcrest on thc Bonds to bc includcd m gross incomc for fcdcral incomc taxation or could othcrwisc rcducc thc cquivalcnt taxablc yicld of such intcrest and thereby reduce the value of the Bonds. No Ratings — Limited Secondary Market Thc District has not applicd to havc thc Bonds ratcd by any nationally rccognizcd bond rating company, and il does nol expecl lo do so in the fulure. There can be no guarantee that there will be a secondary market for the Bunds or, if a secondary markct cxists, that such Bonds can bc sold for any particular pricc. Thc Bonds and bcncficial intcrest thcrcin may bc transfcrrcd, only in authorizcd dcnominations. Such restrictions may limit thc markctability of thc Bonds in thc sccondary markct. Although thc District has committcd to providc certain financial and operating information, there can be no assurance that such information will be available to Bond owners on a timely basis. The failure to provide the required annual financial infunnation does not give rise to monetary damages but merely an actiun for specific perYormance. Occasiunally, because of general market conditions, lach of current inYormation, the absence of a credit rating for thc Bonds or bccausc of advcrsc history or ccanomic prospccts conncctcd with a particular issuc, sccondary markcting practiccs in conncction with a particular issuc are suspcndcd or tcrminatcd. 59 Additionally, prices of issues for wl�ich a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Limitations on Remedies Remedies available to the Owners of the Bonds may be limited by a vanety of factors and may be inadcquatc to assurc thc timcly paymcnt of principal of and intcres[ on thc Bonds or to prescrvc thc tax- cxcmpt s[atus of intcres[ on thc Bands. Bond Coimsel has limited its opinion as to the enforceability of the Bonds and of the indenture to the estent tl�at enforceability may be limited by banhruptcy, insoh•ency reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affectmg generally the enforcement of creditor's rights, by cquitablc principlcs and by thc cxcrcisc ofjudicial discrction and by limitatians on rcmcdics against public agcncics in thc Statc of California. Thc lack of availability of ccrtain rcmcdics or thc limitation of remedie, may entail risks of delay, limitation or modification of the rights of the Owners. Potential Early Redemption of Bonds from Prepayments Property o�vners within the District are permitted to prepay their Special Taxes at any time. Such prepayments will result in an extraordinary redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of the prepayment. The resulting redemption of Bonds purchased at a price greater than par could reduce the otherwise e�pected yield on such Bonds. See "THE BONDS — Redemption — ExU�c�orclincol� Redernplion /rom S�ecicd Te�x P7'Pj)[7l'J17P71/S �� District Not Included in Teeter Plan Although the Riverside County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tas Sale Proceeds (the "Teeler Plan") which allows each entity levying secured property laxes in the Counly to draw on lhe amounl of pmperty laxes levied ralher lhan lhe amount actually collecled, as provided for in Seclion 4701 et seq. oC lhe California Revenue and Taxation Code, and the City's ad valorem taxes are included in the Teeter Plan, the District will not be included in the Teeter Plan. Consequently, the District may not draw on the County Tas Loss Rcscrvc Fund in thc cvcnt of dclinqucncics in Spccial Tax paymcnts. CONTINUING DISCLOSURE Pursuant to the District Continuing Disclusure Agreement, the District will covenant for the bcncfit of thc holdcrs and Bcncficial Owncrs of thc Bonds to providc ccrtain financial information and operating data rclating to thc District by April 1 of cach ycar �thc "Annual Rcport"), commcncmg with the reporl for April 1, 2022, and to provide the nolices of enumerated events will be filed wilh EMMA. The specific nature of the informalion lo be contained in the Annual Report and ihe notice of enumeraled events is set forth in "APPENDI� F— FORM OF DISTRICT CONTINUING DISCLOSURE AGRL�MLNT." These covenants liave been made in order to assist the Underwriter in complying with subsection (b)(i) of Rule 15c2-12 (the "Rule"). The District, which is the obligated party under the Disclosure Agreement, has not previously entered into an undertaking pursuant to the Rule. The former redevelopment agency of the City, the Successor Agency to the City's former redevelopment agency, CFD No. ?005-1 and the City, which are related entities to tlie District througli the City, have previously entered into continuing disclosure undertakings under the Rule in connection with the issuance of municipal obligations. In tlie past five 60 years, certain annual report filings of the related enhties [UPDATE ON CONTINUING DISCLOSURE COMPLIANCE BY RELATED ENiITIES]. Pursuant to a Develuper Cuntinuing Disdosure Ce�Yiticate to be executed by UPI, as dissemination agent, UPI will agree to provide, or cause to be provided, to EMMA certain information relating to tl�e development of the Project on a semi-annual basis and notices of certam enumerated events. Furthermore, UPI intends to request the assistance of Development, Planning & Finance Group in the preparation of the semi-annual filings. The specific nature of the information to be contained in the Anmial Rcport and thc na[icc of cnumcratcd cvcnts is sct forth in "APPENDIX F— FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE." UPI has filcd all continuing disdosurc repa-ts for CFD No. 2005-1 on a timely basis during UPI's period of ownership of the Property. TAX EXEI�IPTION The Internal Revenue Code of 19R6, as amended (the "Code"), e.tablishes certain requirements which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from gross income for federal income tax purposes. Nuncumpliance with such requirements could cause interest on the Bonds to be mcluded in gross mcome far federal mcome tax purposes retroachve to their date of issue. These requirements include, but are not limited to, provisions which limit how the proceeds of the Bonds may be spent and invested, and generally require that certain investmen[ earnings be rebated on a periodic ba.is to the United S[ates of America. The City and the Authority have made certifications and representations and have covenanted to maintain the exclusion of the interest on the Bunds from gross income for federal income tax purposes pursuant to Section 103 of the Code. In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under existing law and assuming the accuracy of such certifications and representations by, and compliance with such covenants of, the City and the Authority, (i) interest on the Bonds is exduded from gross income for federal income tax purposes under Sectiun 103 of the Code, and (ii) the Bonds are not "specitied private activity bonds" within the meaning of Section 57�a)(5) of the Code and, therefore, intcrest on thc Bonds is not a prcfcrcncc itcm for purposcs of computmg thc altcrnativc minimum tax imposcd by Scction 55 of thc Cadc. Bond Counsd is also af thc opinion that, undcr cxisting law, intcrest on thc Bonds is cxcmpt from Statc of Califomia personal mcomc taxcs. Bond counscl cxpresscs no opinion as to any olher lax consequences regarding lhe Bonds. Under the Code, interest on the Bunds may be subject tu a federal branch protits tax impused on ccrtam forcign corporahons domg busincss in thc Unitcd Statcs and to a fcdcral tax imposcd on cxccss nct passivc incomc of ccrtain S corporahons. Undcr thc Codc, thc cxclusion of intcrest from gross incomc for fcdcral mcomc tax purposcs may havc ccrtam advcrsc fcdcral incomc tax conscqucnccs on itcros of income, deduclion or credit 1'or cerlain laxpayers, induding Gnancial institulions, certain insurance companies, recipienls of Social Securily and Railmad Reliremenl benefits, those deemed lo incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals othenvise eligible for the earned income tas credit The applicability and extent of these and other taa consequences will depend upon tlie particular tax status or utlier tax items of tlie owner of the Bonds. Bond Counsel will cspress no opinion rcgarding thcsc and othcr such conscqucnccs. Bond Counsel has not undertaken to advise in the future whether any circumstances or events occurring after the date of issue of tlie Bonds may affect the tax status of interest on tlie Bonds. Legislatiun affecting tax-exempt ubligations is regularly cunsidered by the United States Congress and may also bc considcrcd by thc California lcgislaturc. Court procccdings may also bc filcd, thc outcomc of which could modify thc tax trcatmcnt of obligations such as thc Bonds. No assurancc can bc givcn that 61 legislation enacted or proposed, or actions by a court, after the date of issue of the Bonds, will not eliminate, or directly or indirectly reduce the benefit of the esclusion of interest on tl�e Bonds from gross incomc for fcdcral incomc tax purposcs, or havc an advcrsc cffcct on thc markct valuc or markctability of thc Bonds. For esample, federal tax legislation enacted on December 22, 2017, reduced corporate tax rates, modified mdroidual tax rates, eliminated many deductions, repealed the corporate alternative minimum tax, and generally eliminated the tas-exempt advance refunding of tax-esempt bonds and other tas advantagcd bonds, among o[hcr things. In addition, invcstors in [hc Bonds should bc a�varc that futurc lcgislativc actions might incrcasc, rcducc, or othcrwisc changc (including rctroactivcly) thc financial benetits and the treatment of all or a purtion of the interest on the Bonds for federal income tax purpuses for all or ce�rtain taxpayers. In all such events, the market value of the Bunds may be adversely affected and the ability of holders to sell their Bonds in the secondary market may be reduced. The Bonds are not subject to estraordinary redemption, and the interest rates on the Bonds are not subject to adjustment, in the event of any such change. risks. Investors should consult their uwn financial and tax advisors to analyze the impurtance of these Certain requirements and procedures contained or referred to in relevant documen[s may be changed and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. Bond Counsel expresses nu opinion as to any Bond, or the interestthereon,if any such change occurs or action is taken upon the advice or approval of bond counsel other than Richards, Watson & Gershon, A Professional Corporation. If the issue price of a Bond (the first price a[ which a sub,tantial amount of the bonds of a maturity are sold to the public) is less than the s[ated redemption price a[ maturity of such Bond, the difference constitutes original issue discuunt, the accrual uf which is excluded from gross income for federal income tax purposes to the same extent as interest un the Bonds. Further, such original issue discount accrucs actuarially on a constant yicld mcthod ovcr thc tcrm of cach such Bond and thc basis of cach Bond acquircd at such initial offcring pricc by an initial purchascr thcrcof will bc incrcascd by thc amount of such accrucd original issuc discount. Thc accrual of original issuc discount may bc takcn into accounl as an increase in the amount of tax-exempt income Cor purposes of determining various olher lax consequences of owning such Bonds. Purchasers who acquire Bonds with original issue discount are advised that they should consult with their o�vn independent tax advisors with respect to the state and local tas consequences of owning such Bonds. If thc issuc pricc of a Bond is grcatcr than thc statcd redcmption pncc at maturity of such Bond, the difference conslilules ariginal issue premium, the amortization of which is not deductible from gross income Cor federal income lax purposes. Original issue premium is amortized over lhe period lo maturity of such Bond based on the yield to maturity of that Bond (or, in the case uf a Bund callable prior to its stated maturity, tlie amartization periud and yield may be required to be determined un the basis of an earlier call date tliat results in the lowest yield on that Bond), compounded semiamivally. Fur purposes of dctcrmining gain or loss on thc salc or othcr disposition of such Bond, thc purchascr is rcquircd to dccrcasc such purchascr's adjustcd basis in such Bond by thc amount of prcmium that has amortizcd to the date of such sale or other disposition. As a result, a purchaser may realize taxable gain for federal income tax purposes from the sale or other disposition of such Bond for an amount equal to or less than the amuunt paid by the purchaser Yor that Bond. A purchaser of that Bond in the initial public offering at the issue price for that Bond who hulds it to maturity (or, in the case of a callable Bond, to its earlier call date that results in the lowest yield on that Bond) will realize no gain or loss upon its retirement. 62 Payments of interest on tas-exempt obligations, including the Bonds, are generally subject to IRS Fonn 1099-INT information reporting requirements. If an owner of a Bond is subject to backup withholding undcr [hosc rcquircmcnts, thcn paymcnts of intcrest will also bc subjcct to backup withholding. Thosc rcquircmcnts do not nffcct thc cxdusion of such intcrest from gross incomc for federal income tax purposes. Prospective purcl�asers of the Bonds should consult their own independent tax advisers regarding pending or proposed federal and state tax legislation and court proceedings, and prospective purchasers of thc Bonds at othcr than thcir original issuancc nt thc respcctivc priccs indicatcd on thc insidc covcr of this Official Statcmcnt should also consult thcir own tax adviscrs rcgarding o[hcr tax considcrations such as the consequences of market discuunt, as to all of which Bond Counsel eapresses no opinion. Bond Counsel's engagement with respect to the Bonds ends witl� the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Autl�ority or the owners of the Bonds regarding the tax status of interest thereon in [he event of an audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the iRS does audit the Bunds, under current IRS procedures, the IRS will U�eat the Authority as the taxpayer and the beneticial owners uf the Bonds �vill have only limited nghts, if any, to obtain and participate m judicial review of such audit. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of other obligations presenhng similar tax issues, may affect the market value of the Bonds. A copy of the proposed form of opiniun uf Bond Counsel is attached hereto as Appendix B. LEGAL OPiNiON The legal opinion of Bond Cuunsel approving the validity of the Bonds, in substantially the form set forth as Appendix B hereto, will be made available to purchasers of the Bunds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the District by Best Best & Kricgcr LLP, lndian Wclls, California, City Attomcy, and for thc District by Bcst Bcst & Kricgcr LLP, Rivcrsidc, California, Disclosurc Counscl, for thc Undcrwritcr by Kutak Rock LLP, Irvinc, California, and for lhe Truslee by its counsel. Bond Counsel imderlakes no responsibility to the purchasers of lhe Bonds for the accuracy, completeness or Cairness of lhis OCfcial Stalemenl. ABSENCE OF LITIGATION In conneclion wilh the issuance of the Bonds, the City Attorney will deliver an opinion lo lhe efCect lhal, lo lheir aclual knowledge, afler due inquiry and investigation, there is no action, suil, proceeding or investigation at law ur in equity before ur by any court, public board or body, pending or threatened, or any unfavorable decision, ruling or finding, against or affecting the District, which would adversely impact the DistricYs ability tu complete the transactions described in, or contemplated by, the Indcnturc ar this Official Statcmcnt, restrain or cnjoin thc collcction of thc Spccial Taxcs, or in any �vay contcst or affcet thc validity of thc Bonds, thc Indcnturc, thc Spccial Taxcs, or thc transactions dcscribcd herein. NO RATING Thc District has not madc, and docs not contcmplatc making, an application to any rating organization far the assignment of a rating on the Bonds. 63 UNDERWRITING Thc Bonds arc bcing purchascd by Piper Sandlcr B Co. (thc "Undcnvritcr"). Thc Undcrwritcr has agreed to purchase the Bonds at a price of $ �being the $ aggregate principal amoimt of the Bonds, less an Undenvriter's discount of $ and plus/less [net] original issue premium/discount of $ ). The bond purchase agreement relahng to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purcl�ase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of ccrtain lcgal mattcrs by coimscl and ccrtain othcr conditions. Thc Undcr�vritcr's compcnsation is contingcn[ upon thc succcssful issuancc of thc Bonds. Under certam circumstances, the Underwriter may offer and sell the Bonds to certain dealers and others at prices lower or yields higher tl�an those stated on the page immediately following the cover page of this Official Statement The offering prices may be changed from time to time by the Underwriter. F[NANC[AL [NTERESTS The fees bemg paid to the Underwriter and its counsel and the Trustee are contingent upon the issuance and delicery of the Bonds. From time to time Be.t Best & Krieger LLP represents the Undenvriter on matters unrelated to the Bonds. MUNICIPAL ADVISOR The District has retained Del Rio Advisors, LLC, Modestu, Califurnia, as Municipal Advisor for the sale of the Bonds. The Municipal Advisur is nut obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Preliminary Official Statement. Del Rio Advisors, LLC is an independent advisory tirm and is not engaged in the business uf undenvriting, trading or distributing municipal or other public securities. MISCELLANEOUS So far as any statements made in this Official Statement involve matters uf opinion, assumptions, projections, anticipated events or estimates, whether or not expressly stated, they are set forth as such and not as prescntations of fact, and actual results may diffcr substantially from thosc sct forth thcrcin. Ncithcr this Official Statcmcnt nor any statcmcnt that may havc bccn madc vcrbally or in �vriting is to bc construcd as a contract with thc Owncrs of thc Bonds. The summaries of certain provisiuns of the Bonds, statutes and other documents or agreements referred tu in this Ofticial Statement do not purpurt to be complete, and reference is made tu each of them for a complctc statcmcnt of thcir provisions. Copics arc availablc for rcvic�v by making rcqucsts to thc City. 64 The execution and delivery of this Official Statement by the City Treasurer has been duly authorized by the Crty Council of the City of Palm Desert acting in its capacity as the legislatrve body of thc Dis[rict. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 20? 1-1 (iJNIVERSITY PARK) � Janet Moore, City Treasurer 65 APPENDiX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAR 1:61 APPENDiX B FORAZ OF OPINION OF BOND COUNSEL U�on issu�i�tce of the Bo�rr(s, Richarrls, �bi�tso�� & Gershon. ,4 Professronal Co��oraiion. Bo�tr! Cowrsel, yro�oses ta render its fnnl a��n oring o��rnion iit suhst�niia(lr tlre jolloiri�tg form: [Closing Datc] [TO COME FROM BOND COUNSEL] f:IIl APPENDiR C MARKET ABSORPTION STUDY C-1 APPENDiX D APPRAISAL REPORT D-1 APPENDiX E SUMMARY OF THE INDENTURE Tlre fbllauiny r.c rr simm�en.r of certerin jnorrsio�is uf the /nderrtm�e ul�ich rn�e riof dcscrihecl elseichere Thi.c .cummru r does nut �nnF�ort tu be cumF�rehensire uncl reference .cho�drl he niucle tu die In�/e��nme for n fi�U and can�lete stn�ement q/ tlre yroi isions thereoj: E-1 F\» �1►11] Av 71 FORMS OF DISTRICT CONTINUING DISCLOSURE AGREEDiENT AND DEVELOPER CONTINUINC DISCLOSURE CERTIFICATE F-1 FORI�I OF DiSTRICT CONTINUING DISCLOSURE AGREEMENT THIS CONTINUINC DISCLOSURE AGREEMENT datcd as of [__ 1, 2021] (thc "Disdosure AgreemenY') is executed and delivered by and behveen the City of Palm Dese�7 Cummunity Facilities District No. 2021-1 (University Park) �the "Districf') and Willdan Financial Services as Dissemination Agent in connection with the issuance of $ City of Palm Desert Commumty Facilities District No. 2021-1 (University Park� Special Tax Bonds, Series 2021 (the "Bonds"). The Bonds are issued pursuant to a Bond Indenture, dated as of , 2021 (the "Indenture"), beriveen the City and U.S. Bank National Association, as trustcc (thc "Trustcc"). Thc District covcnants and agrccs as follows: SECTION 1. Purqose of the Disclosure Aereement. This Disclosure Agreement is bemg executed and delivered by tl�e District for the benefit of the Owners and Beneficial O�vners of the Bonds and in order to assist the Participatmg Underwriter in complying with tl�e Rule (defined below). SECTION 2. Definitions. In addition to the definitions set fo�rth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless othenvise detined in this Section, the following capitalized terms shall have the follo�vmg meanings: "Annua] Reporf' shall mean any Annual Report provided by the District pur,uant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial O�vner' shall mean any person, which has or shares the power, directly or indirectly, to make investment decisions concerning oumership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). "City" means the City of Palm Desert, Cuunty of Riverside, Califurnia. "Disclosure Representative" shall mean lhe City Manager, Direclor oC Finance of the Cily or lhe designee of any one of such officers, or such other officer or employee as the Cily Manager .hall designale in writing from time lo time. "Disscmination Agcnf' shall mcan thc Willdan Financial Scrviccs, or any succcssor Disscinination Agcnt dcsignatcd in writing by thc District and which has filcd with thc District a �vrittcn acceplance of such designalion. "EMMA" shall mean the Electronic Municipal Market Access system of the MSRB. "Financial Obligation" mcans a(i) dcbt obligation; (ii) dcrivativc instrumcnt cntcrcd into in conneclion wilh, or pledged as security or a source of paymenl for, an existing or planned debl obligalion; or (iii) guaranlee oC(i) or (ii). The term Financial Obligation shall not include municipal securilies as lo which a tinal ofticial statement has been provided to the MSRB consistent �vith the Rule. "Listcd Evcnts" shall mcan any of thc cvcnts listcd in Scction 5(a) or (b) of this Disclosurc Agrccmcnt and any othcr cvcnt lcgally rcquircd to bc rcportcd pursuant to thc Rulc. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successur entity designated under the Rule as the repository far Yllings made pursuant to tlie Rule. "Official Statemenf' means the Preliminary Official Statement, dated , 3021, relating to the Bonds. F-2 "Participating Undernriter" shall mean Piper Sandler & Co. "Rcpository" shall mcan thc MSRB or any othcr cntity dcsigna[cd or nuthorizcd by thc Sccuritics and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, tilings �vith the MSRB are to be made through the EMMA website of the MSRB, currently located at l�ttp://emma.msrb.org. "Rulc" shall mcan Rulc 15c2-12 adoptcd by [hc Sccuri[ics and Exchangc Commission undcr thc Sccuritics Exchangc Act of 1934, as [hc samc may bc amcndcd from timc to timc.. "State" shall mean the State of California. SECTION 3. Provision of Annual Reports. �a) The District shall, or shall cause the Dissemination Agent to, not later than March 31 of each year, commencmg April 1, 2022, provide to the Repository an Annual Repart which is consistent with the requirements of Section 4 of this Disclosure Agreement The Annual Report may be submitted as a single document or a, separate documents comprising a package, and may cross-reference other informa[ion as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the District, if any are prepared, 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 District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section S�d). The District shall provide a written certification with each Annual Report furnished to the Dissemmation Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Distric[ and shall have no duty or obligation [o review such Annual Report. �b� Not latcr than fivc ��) days prior to thc datc for thc filmg of an Annual Rcpart, thc District shall providc thc Annual Rcport to thc Disscmination Agcnt (if othcr than thc District). If by fivc (5) days prior lo such date, lhe Dissemination Agent has not received a copy of lhe Annual Report, lhe Disseminalion Agenl shall contact the Disiricl to inquire if the Dislrict is in compliance with subseclion �iA�. �c) If thc Distnct is unablc to providc to thc Rcpository an Annual Rcport by thc datc rcquircd m subscction �a�, thc Disscmination Agcnt, in a timcly manncr, shall scnd a noticc to thc Repository in the form required by the Repository stating thal the Annual Reporl has not been liled and, if provided by lhe Districl, lhe date lhe Districl anlicipales the filing to be made. �d� Thc Disscminahon Agcnt shall: (i) delermine each year prior lo dale for providing lhe Annual Report lhe name and address of the Repository if other than the MSRB; and � ii) filc a rcport with thc District ccrtifying that thc Annual Rcport has bccn providcd to thc Rcpasitory pursuant ta this Disclosurc Agrccmcnt and stating thc datc it �vas providcd to the Repository. SECTION 4. Content of Annual Reqorts. The District's Annual Repart shall contain or include by reference the following: F-3 (a) Financial Statements. The audited financial statements of the District for the prior fiscal year, if any have been prepared and which, if prepared, shall be prepared in accordance wrtl� generally acccp[cd accaunting principlcs as promulgatcd to apply to govcrnmcntal cntitics from timc to timc by thc Govcrnmcntal Accounting Standards Board; providcd, howcvcr, that thc District may, from timc to timc, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the District shall modify the basis upon which its financial statements are prepared, the District shall provide the information referenced in Section 8(b) below regarding such modification. If the District is preparing audited financial statements and such audited financial statements are not available by tl�e time the Annual Report is required to be filed pursuant to Section 3(a�, thc Annual Rcpor[ shall contain unauditcd financial statcmcnts, and thc auditcd financial statcmcnts shall bc filcd in thc samc manncr as [hc Annual Rcport whcn thcy bccomc availablc. (b) Financial and Oaeratine Data. To the extent not induded in the audited financial statements of the District, the Annual Report shall also include the following additional items: principal amoun[ of Bonds outstanding as of the September 2 preceding the filing of the Annual Report; 2. the balance m each fund under the Indenture and the Reserve Requirement as of the September 2 preceding the filing of the Annual Report; 3. an update uf the estimated assessed value-to-lien ratiu for the District substantially in the form of Table [_] in the Official Statement based upon the most recent Special Tax levy precedmg the date of the Annual Report and on the assessed values of property for the current fiscal year; 4. a statement regarding the amount of Special Tax prepayments, if any, in the Fiscal Year for which the Annual Report is prepared; 5, thc status af any forcclosurc actions bcing pursucd by thc District with respcct ta delinquenl Special Taxes; 6. a table showing the total Special Taxes levied and the total Special Taxes collcctcd for thc prior fiscal ycar and thc total Spccial Taxcs that, as of Dcccmbcr 31, rcmain unpaid for cach prior fiscal ycar in which Spccial Taxcs wcrc lcvicd and thc numbcr of dclinqucnt parccls in thc District; 7. a list of the property uwners within the District responsible fur i�,;, �r more of the Special Tax levy for the current Fiscal Year, if any, the percentage of the Special Tax levy for which each such property owncr is responsiblc, and whcthcr any of such owncrs, as of Dcccmbcr 31 prcccding thc Annual Rcport, was dclmqucnt in thc paymcnt of Spccial Taxcs; R. with respect to the Special Tax levy for the Fiscal Year beginning on the ,Tuly 1 immediately preceding the March 31 due date by wliicli the Annual Repart is required to be filed with LMMA, a statement of tlie percentage of the annual Special Taa levy for which Developed Property is responsiblc; and 9. any information not already induded under 1 through H above that the District is required to file in its annual repart pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, with the California Debt and Investment Advisory Commission. F-4 Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which havc bccn submi[tcd to cach of EMMA or thc Sccuritics and Exchangc Commission. If thc documcnt includcd by rcfcrcncc is a final official statcmcnt, it must bc availablc from thc MSRB. Thc District shall clearly identify each such other document so induded by reference. In the event that tl�e District shall modify the basis upon which its financial statements are prepared, the Dissemination Agent shall provide a notice of such modification to the Repository, including thc informa[ion sct forth in Scction 8(b) bclow. SECTION 5. Rcoortine of Sianificant Evcnts. (a) Pursuant to thc provisions of this Scction 5, thc District shall givc, or causc thc Disscmination Agcnt to givc, noticc to thc Rcposi[ory of thc occurrcncc of any of thc following cvcnts with respect to the Bonds in a timely manner not more than ten (10) business days after the occurrence of the event: principal and interest payment delmquencies; 2. unscheduled dra�vs on debt service reserves reflecting tinancial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity pruviders, or their failure to perform; 5, adverse tas opimons or the issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 57p1 TEB); 6. tender uffers; 7. deCeasances; 8. rating changes; 9. bankruptcy, insohcncy, rcccivcrship or similar cvcnt of thc City; or 10. default, event of acceleration, termination event, modification of terms, or other similar events under the terms uf a Financial Obligation of the obligated person, any of which rcflcct financial difficultics. Note: Cor the purposes of the event idenlified in subparagraph (9), the event is considered lo occur when any of the following occur: the appointment of a receiver, Trustee or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of thc asscts or busincss of thc obligatcd person, or if such jurisdiction has bccn assumcd by lcaving thc csisting govcrnmcntal body and officials or officcrs in passcssion but subjcct to thc supervision and ordcrs of a court or govcrnmcntal authority, or thc cntry of an ordcr confirxning a plan of rcorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. F-5 (b) Pursuant to the provisions of this Section 5, tl�e District shall groe, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a tmiely manncr not morc [han [cn (10) busincss days aftcr thc oceurrcncc of such cvcnt: 1. unless described in paragraph g(a)(5), material notices or determinations by the Internal Revenue Service with respect to the tas status of the Bonds or other material events affecting the tax status of the Bonds; 2. modifica[ions to rights of Bond holdcrs; 3. Bond calls; 4. rcicasc, substi[utian, ar salc of property sccuring rcpaymcn[ of thc Bonds; 5, non-payment related defaults; 6. the consummation of a merger, consolidation or acquisition involving an obliga[ed person or the sale of al] or subs[antially all of the assets of the obligated person, other [han in the ordinary course of business, the entry into a detinitive agreement to undertake such an action or the termination of a detinitive agreement relating to any such actions, other than pursuant to its terms; Trustee; or appointment of a successor or additional Trustee or the change of name of a 3. incurrence of a Financial Obligation of the obligated person, or agreement to covenants, events of default, remedies, priority nghts, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event under g(b) above, the District shall as soon as possible determine if such event wuuld be material under applicable fcdcral sccuritics laws. (d) If a Listed Event under Section 5(a) has occurred, or if lhe Districl delermines lhat knowledge oC lhe occurrence of a Listed Evenl under 5(h) above would be material under applicable federal securities laws, the District shall file a notice of such Listed Event with the Repository in a timely manner not more than 10 business days after the event. Notwithstanding the furegoing, notice of the Listcd Evcnt dcscribcd in subscetian �b)(6) nccd not bc givcn undcr this scetion any carlicr than thc noticc � if any� of thc undcrlying cvcnt is givcn to O�vncrs of affcctcd Bonds pursuant to thc Indcnturc. (e) The District hereby agrees lhat lhe undertaking set forlh in this Disclosure Agreement is the respunsibility of the District and that the Dissemination Agent shall nut be responsible for determining whether the DistricYs instructions to the Dissemination Agent under this Section 5 comply with the rcquircmcnts of thc Rulc. SECTION 6. Termination of Reoortina Oblieation. The obligations of the District under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all uf tlie Bonds. SECTION 7. Dissemination Aacnt. Thc District may, from timc to timc, appoint or cngagc a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. F-6 The Dissemination Agent may resign by providmg thirty days written notice to tl�e District and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by thc Dis[rict and shall havc no duty to rcvicw any information providcd to it by [hc District Thc Disscmination Agcnt shall hnvc no duty to prcparc any information rcport nor shall thc Disscminntion Agent be responsible for tiling any repo�7 not provided to it by the District in a timely manner and in a form suitable for filing. SECTION 8. Amendment: Waiver. (a) Nohvithstanding any uther provision of this Disclosure Agreement, the District may amend this Disclusure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the followmg conditions are satisfied: (1) If [hc amcndmcnt or waivcr rclatcd to thc provisions of Scctions 3(a), 4, or 5, 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, ar the type of business conducted; (�) The undertaking hereunder, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original execution and delivery of the Bonds, after taking into account any amendments or interpretations of the Rule, as �vell as any change in circumstances; and (3) The amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the [ndenture for amendments to the Indenture with the consent of O�vners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial O�vners of the Bonds. �b� In thc cvcnt of any amcndmcnt or waivcr of a provision of this Disclosurc Agrccmcnt, thc District shall describe such amendmenl in lhe nexl Annual Report, and shall include, as applicable, a narralive esplanalion of the reason for ihe amendment or �vaiver and ils impact on lhe lype (or, in lhe case of a change of accounting principles, un the presentation) of financial information or uperating data being presented by the District. In addition, if the amendment is related to the accounting principles to be fullowed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listcd Evcnt undcr Scction 5(a�, and (ii� thc Annual Rcport for thc ycar in which thc changc is madc should prescnt a comparison (m narrativc forxn and also, if fcasiblc, in quantitativc form) bchvccn thc financial statemenls as prepared on lhe basis of lhe ne�v accounting principles and those prepared on lhe basis of lhe former accounting principles. SECTION 9. Format of Filin�s with Reqositorv. Any report or tiling with the Repository pursuant to this Disclosurc Agrccmcnt must bc submittcd in cicctronic format, accompanicd by such idcntifying inforination as is prescribcd by thc Rcpository. SECTION 10. Additional Information. Notliing in this Disclosure Agreement shall be deemed to prevent the District Yrom disseminating any other infonnation, using the means of dissemination set furth in tliis Disclusure Agreement or any other means of communication, or including any other inforxnation in any Annual Rcport or noticc of occurrcncc of a Listcd Evcnt, in addition to that which is rcquircd by this Disclosurc Agrccmcnt If thc District chooscs to includc any infarmatian in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this F-7 Disclosure A�neement the District shall have no obligation under tl�is Disclosure Agreement to update such information or mclude it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 1l. Default. In the event of a failure of the District to comply with any provision of this Disclosure Agreement, any O�vner or Beneticial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under tl�is Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy undcr this Disclosurc Agrccmcnt in thc cvcnt of any failurc of thc District to comply wi[h this Disclosurc Agrccmcnt shall bc an action to compcl performancc and thc District shall havc no monctary liability to any person as a result of any failure to comply with the terms of this Disdosure Agreement. SECTION 12. Duties, Immunities and Liabilities of Dissemination AaenL Tl�e Dissemination Agent sl�all have only sucl� duties as are specifically set fortl� m this Disclosure Agreement, and tl�e Dis[rict agrees, to the extent permit[ed by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless agains[ any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its po�vers and duties hereunder, including the costs and expenses (induding attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemmation Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all espenses, legal fees and advances made or mcurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed [o be acting in any fiduciary capacity for the District, the Owners, or any other party. The ubligatiuns of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 13. Notiees. Any notices or commumcations to or among any of the parties to this Disdosure Agreement may be given as follows: To the District City uf Palm Desert Community Facilitics District No. 2021-1 ( Univcrsity Park) 73510 Frcd Waring Drivc Palm Dcscrt, CA 992260 Atlention: Director oC Finance To the Dissemination Agent: Willdan Financial Services 27368 Via lndustria #200 Tcmccula, CA 92590 SECTION 14. Beneticiaries. This Disdosure Agreemenl shall inure solely lo the benelit of lhe District, the Dissemination Agent, the Participating Underwriter and Owners and Beneticial Owners from time to time of the Bonds, and shall create no rights in any other persun or entity. SECTION 15. Counternarts. This Disclosure 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 instrument. F-8 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 3021-1 �UNIVERSITY PARIi� I� Kathleen Kelly, Mayor WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Officer F-9 i�.ti:ii:�r�� FORb1 OF NOTICE TO THE NIUNICIPAL SECURITIES RULEDZAHING BOARD OF FAILURE TO FILE ANNUAL REPORT Namc of Issucr. City of Palm Dcscrt Community Facilitics District No. 2021-1 (Univcrsity Park) Namc of Bond Issuc: $ City of Palm Dcscr[ Commimity Facilitics District No. �021-1 (University Park) Special Tax Bonds, Series 2021 Datc of Issuancc: , 2021 NOTICE IS HEREBY GNEN tl�at the City of Palm Desert Convnumty Facilities District No. 2021-1 (Univcrsity Park) (thc "Districf') has not providcd an Annual Rcport �vith respcet to thc abovc- nanied Bonds as required by Section 3 of the Disclosure Agreement of the District, dated the Date of Issuance. The District anticipates tha[ the Annual Report will be filed by Dated: WILLDAN FINANCIAL SERVICES, as Dissemination Agen[ � Authorized Officer F-10 FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFIC.aTE $ CITY OF PALM DESERT COMMUNIT�' FACILITIES DISTRICT NO. 2U21-1 (UNiVERSITY PARK) SPECIAL TAR BONDS, SERiES 2021 This Continuing Disclosure Ccrtificatc (Univcrsity Park Invcstor, LLC) (this "Disclosurc Certificate") is executed and delivered by the imdersigned (the "Property Owner") and Development Planning & Financing Group, Inc. as dissemination agent (the "Dissemination Agenf') in connection with the issuance of the bonds captioned above (the "Bonds") by the City of Palm Desert Coirunumty Facilities Distnct No. 2021-1 (University Park) �the "Districf'). The Bonds are being issued pursuant to a resolution adopted by the City Council of the City, acting as legislative body of tl�e District on [June 24, 3021], and a Bond Indenture, dated as of l, 2031, (the "Indenture"), by and behveen the District and U.S. Bank National Associa[ion, a. Tnistee (the "Tnistee"). The Property Owner covenants and agrees as follows: Section 1. Puroose of the Disclosure CertiGcate. This Disdosure Certificate is being executed and delivered by the Property O�vner for the benefit of the holders and beneficial owners uf the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shal] have [he following meanings: "Affiliate" means any person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Property Owner, and abaut whom mformation could be material to potcntial mvcstors in thcir invcstmcnt dccision rcgardmg thc Bonds �including without limitation inforxnation rcicvant to thc proposcd dcvclopmcnt of thc Property or thc Property O�vncr's ability to pay the Special Taxes relaled lo the Properly prior to delinquency). "Assumption Agreemenf' means an undertaking of an Obligated Owner, ur an Affiliate thereuf, for thc bcncfit of thc holdcrs and bcncficial owncrs of thc Bonds containing tcrms substantially similar to this Disclosurc Ccrhficatc (as modificd for such Obligatcd Owncr's dcvclopmcnt and financing plans with respcct to thc Property), whcrcby such Obligatcd Owncr or Affiliatc agrces to providc Pcriodic Reporis and notices of significant evenls, setling forlh lhe inCormalion described in sections 4 and 5 hereoC, respeclively, wilh respect lo lhe porlion of the Properly owned by such Obligated Owner and ils Affiliates and, at the uption of the Property Owner ur such Obligated Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the furm of Section I 1 hereof. "Disscmination Agcnf' mcans thc Dcvdopmcnt Planning & Financmg Group, lnc., or any successor Dissemination Agent designated in writing by the Property Owner, and which has filed with the Property Owner, the District and the Trustee a�vritten acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under tliis Disclosure CertiYicate. Park ). "District" mcans City of Pahn Dcscrt Community Facilitics District No. 2021-1 (Univcrsity "Listed Events" means any uf the events listed in Section 5(a) of this Disclosure Certificate. F-11 "MSRB" means the Municipal Securities Rulemaking Board, whicl� has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rulc, or any othcr rcpository of disclosurc information that may bc dcsignatcd by [hc Sccuritics and Exchangc Commission as such for purposcs of thc Rulc in thc firturc. "Obligated Owner" means, as of any Repart Date, an owner of all or a portion of the Property that represents more tl�an 504i� of the for-sale residential homes in tl�e Planned Development. "Official Stntcmcnt" mcans thc final prcliminary official statcmcnt cxccutcd by thc Distric[ in connection with the issuance of the Bonds. "Participating Undernriter" means Piper Sandler & Co., the origmal Underwnter of the Bonds. "Periodic Reparf' means any Periodic Report provided by the Prope�rty Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certiticate. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or poli[ical subdivision [hereof. "Planned Developmenf' means the development plan far the Property described in the Official Statement under "PROPERTY OWNERSHIP AND THE DEVELOPMENT" as such information has been updated, if any, in a prior Periodic Report. "Property" means Assessor's Parcel Numbers f "Report Date" means April 1 of any fiscal year. "Rule" means Rule I Sc2-12(b)(i) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended frum time to time. District. "Special Taxes" means lhe special laxes of the Districl levied on laxable properly wilhin the Section 3. Provision of Periodic Reuorts. (a) The Pmperty Owner .hall, or, upon writlen direclion of the Pmperty Owner lhe Disseminalion Agenl shall, not later than lhe Reporl Dale, commencing April l, 2022, tile wilh the MSRB a Periodic Report �vhich is consistent with the requirements of Sectiun 4 of this Disclosure Certificate. Not later than I 5 calendar days prior to the Report Date, the Property Owner shall provide the Periodic Report to the Disseminatiun Agent (if different from the Property Owner). The Property Owner shall providc a writtcn ccrtification with (or includcd as a part ofl cach Pcriodic Rcport furnishcd to thc Disscinination Agcnt �if diffcrcnt from thc Property Owncr) to thc cffcct that such Pcriodic Rcport constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference otlier infunnation as provided in Section 4 of this Disclosure CertiYicate. (b) If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the F-1? Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have tcrminatcd (pursuant to Scction 6 bclow) and, if so, to providc thc Disscmination Agcnt with a naticc of such tcrmination in thc samc manncr as for a Listcd Evcnt (pursuant to Scction � bclow). If thc Property Owner does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Repart Date as required in subsection (a) above, the Dissemination Agent shall, in a timely manner, send a notice to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the Trustee (if other than the Dissemination Agent), the Distnct, the Panc�ipating Undernriter and the Property Owner. (c) With respect tu the Periodic Report, the Dissemination Agent shalL to the extent the Periodic Repo�rt has been furnished to it, tile the Periodic Report with the MSRB and file a report with the Prope�rty Owner (if the Dissemination Agent is other than the Property O�vner), the District and the Participating Undenvriter certifying that the Penodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB. Section 4. Content of Periodic Reqorts. The Property Owner's Periodic Report shall contain or incorporate by reference the infurmation set forth in Exhibit B, any or all uf which may be included by specific reference to other documents, including official statements of debt issues of the Praperty Owner or related public entities, which have been submitted to the MSRB or the Secunties and Exchange Commission. If the document mcluded bv reference is a final official statement, it must be available from the MSRB. The Property O�vner shall clearly identify each such other document so included by reference. In addition to any of the infurmation expressly required to be provided in Eshibit B, the Property Owner's Periodic Report shall include such further mformation, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Renortine of Si�niticant Events. �a) Thc Property Owncr shall givc, or causc to bc givcn, noticc of thc occurrcncc of any of the Collowing Lisled Events wilh respect to itself or lhe Properly, if material: (i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliatc of thc Property Owncr �vhich is rcasonably hkcly to havc a sigmficant impact on thc Property Owncr's ability to pay Spccial Taxcs or to scll or dcvclop thc Property; (ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property un or prior to the delinquency date to the extent that such failure is not promptly cured by the Property Owner upun discovery thereof; (iii) filing of a lawsuit of �vhich the Property Owner is aware against the Property Owner or an Aftiliate of the Property Owner seeking damages, which is reasonably likely to have a significant impact on tlie Property Owner's ability to pay Special Taxes or to sell or develop the Property; and �iv) matcrial dainagc to or dcstruction of any of thc improvcmcnts on thc Property; F-13 (v) any payment default or other material default by the Property O�vner on any loan with respect to the construchon of improvements on the Property. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material imder applicable Federal securities law. (c) If thc Property Owncr dctcrmincs tha[ knowlcdgc of thc occurrcncc of a Listcd Evcnt would bc matcrial imdcr applicablc Fcdcrnl sceuritics law, thc Property Owncr shall, or shall causc [hc Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the Trustee, the District and the Participating Underwriter. Section 6. Duration of Reportine Oblisation. (a) All of the Property O�vner's ubligations hereunder shall commence un the date hereof and shall terminate (except as provided in Sectiun I 1) on the earliest to occur of the following: (i) upon the legal defea.ance, prior redemption or payment in full of all the Bonds, or �ii) if on any date Property O�vner owns less than thirty-three percent (33%) of the property withm the District, or (iii) the date on which the Prope�ty O�vner prepays in full all of the Special Taxes attributable to 50"r6 or more of the Pruperty. The Property Owner shall give notice of the tennination of its obligations under this Disclosure Certificate in [he same manner as for a Listed Even[ under Section 5. Nothing herein shall require any person (including, withoul limitalion, lhe Dislrict and the Participating Underwriler) to confirm lhe satisfaction of any condition for termination of the Property Owner's obligations hereunder pursuant to this Sectiun 6. � b � If a portion of thc Property owncd by thc Property Owncr, or any Affiliatc of thc Property Owner, is comeyed to a Person lhat, upon such conveyance, will be an Obligated Owner, lhe obligalions of lhe Properly Owner hereunder with respecl lo lhe properly in the District owned by such Obligaled Owner and its Aftiliates may be assumed by such Obligated Owner ur by an Affiliate thereof, and the Property Owner's ubligations hereunder with respect to such property will be terminated. in order to effect such assumption, such Obligated O�vner or Affiliate shall enter into an Assumption Agreement in form and substancc rcasonably satisfactory to thc District and thc Participating Undcrwritcr. Section 7. Dissemination A�ent. The Property Owner may, from lime to time, appoint or engage a Dissemination Agent tu assist the Property O�vner in carrying out its obligations under this Disclosure CertiYicate, and may discharge any such Dissemination Agent, with or witliout appointing a successor Disseminatiun Agent. The initial Dissemination Agent sliall be Willdan Financial Services. Ihe Disscinination Agcnt may resign by providing thirty days' writtcn noticc to thc District, thc Property Owncr and thc Trustcc. Section 8. Amendment: Waiver. Norivithstanding any other provisiun of this Disclosure CertiYicate, the Property Owner may amend this Disclosure CertiYlcate, and any provision of this Disclosure Certificate may be waived, provided tliat tlie following cunditions are satisfied (provided, F-14 however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations l�ereunder without its written consent thereto�: (a) if the amendment ur waiver relates to the provisions of sections 3(a), 4 ur g(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change m law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; and (b) thc proposcd amcndmcnt or waivcr ci[hcr (i) is approvcd by holdcrs of thc Bonds in thc manner provided in the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneticial owners of the Bonds. Section 9. Additional Information. Nothing in this Disclosum Ccrtificatc shall bc dccmcd to prcvcnt thc Property Owncr from disscminating any othcr information, using [hc mcans of disscmina[ion set forth in [his Disclosure Certificate or any other means of communication, or including any other information in any Periodic Report or notice of occurrence of a Listed Event, in additiun to that which is required by this Disclosure Ce�Yiticate. If the Pruperty Owner chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or indude it in any firture Periodic Report or notice of occurrence of a Lis[ed Event. Section 10. Default In the event of a failure uf the Prope�Yy Owner to comply with any provisiun of this Disclosure Cerhficate, the Trustee shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwri[er and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owner to comply with its obligations under this Disclosure Cer[ificate. A defaiilt under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole and exclusive remedy under this Disclusure Certificate in the event of any failure of the Property Owner to comply with this Disclosurc Ccrtificatc shall bc an achon to compcl performancc. Section 11. Duties. Immunities and Liabilities of Dissemination A�ent. The Disseminalion Agenl shall have only such duties as are specifically sel forth in this Disclosure Cerlificate, and lhe Property Owner agrees to indemnify and save the Dissemination Agent, its ofticers, directors, employees and agents (each, an "Indemnified Party"), harmless against any loss, expense and liability which it may incur arising out of or in thc cxcrcisc or performancc of its powcrs and dutics hcrcundcr, including thc rcasonablc costs and cxpcnscs (mcluding attorncys' fccs) of dcfcnding against any claim of liability, but cxcluding losscs, liabilitics, costs and cxpcnscs duc to an Indcmnificd Party's ncgligcncc or willful misconducl or failure to perform its dulies hereunder. The Dissemination Agenl shall be paid compensation Cor ils services pmvided hereunder from lhe Adminislralive Espense Fund established under the Indenture in accordance with the Dissemination Agent's schedule uf fees as amended from time to time, wliich scliedule, as amended, sliall be reasonably acceptable, and all reasonable espenses, reasunable legal fees and advances made or incurred by the Dissemination Agent in the performance of its dutics hcrcundcr. Thc Disscinination Agcnt shall havc no duty or obligation to rcvic�v any information providcd to it hcrcundcr and shall not bc dccmcd to bc acting in any fiduciary capacity for thc District, thc Property Owner, the Trustee, the Bond owners, or any other party. The obligations of the Property O�vner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. F-1� Section 12. Notices. Any notice or commumcations to be among any of the parties to tl�is Disclosure Certificate may be given as follows: To the Issuer: City of Palm Desert Community Facilities District No. 2021-1(University Park) 73510 Fred Waring Drive Palm Desert, California 92260 Attention: Director of Finance To the Trustee: U.S. Bank National Association 633 West 5`h Street, 24"' Floor Los Angeles, California 90071 Attn: Global Corporate Trust Services LM-CA-T24T To the Participating Underwri[er: To the Dissemina[ion Agent: To the Property Owner: Piper Sandler & Co. 120 Vantis, Suite 330 Aliso Viejo, California 92656 Attention: Public Finance Willdan Financia] Services 27368 Via lndusU'ia, Suite 200 Temecula, California 92590 Attention: Federal Compliance G'oup University Park Investor, LLC ROl San Ramon Valley Blvd., Suite F Danville, California 94526 Attention: Ravi Nandwana providcd, howcvcr, that all such noticcs, rcqucsts or commumcation may bc madc by tcicphonc and promptly confirmed by writing. Any person may, by notice given as aCoresaid lo the other persons lisled above, designale a different address or telephone number(s) lo which subsequenl notices or communications should be sent. Section 13. Benefciaries. This Disclosurc Ccrtificatc shall mure solcly to the benefit of thc District, thc Property Owncr (its succcssors and assigns), thc Tnxstcc, thc Disscmination Agcnt, thc Participaling Underwriter and holders and beneficial o�vners from time lo lime of lhe Bonds, and shall create no righls in any other person or enlity. All obligation. of the Pmperty Owner hereunder shall be assumed by any legal successur tu the obligations of the Property O�vner as a result uf a sale, merger, consulidation or other reorganization. F-16 Seetion 14. Counterqarts. Tl�is Disclosure Certificate may be esecuted in several counterparts, each of which sl�all be regarded as an origmal, and all of which shall constitute one and the same instrumcnt. Date: , �021 ACCEPTED AND AGREED TO: DEVELOPMENT PLANNING & FINANC[NG GROUP, INC. as Dissemination Agent By: Authorized Signatory UNIVERSITY PARIi INVESTOR, LLC By: Name: Title: F-17 i�.ti:ii:�r�� NOTICE OF FAILURE TO FILE PERIODIC REPORT Name of Issuer: City of Palm Desert Community Facilities Distnct No. 2021-1 (Umversity Park) NameofBondlssue: City of Palm Dese�rt Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2021 Date of Issuance: . 2021 NOTICE IS HEREBY GNEN that University Park Investor, LLC (the "Obligated Owner") has not provided a Periodic Report with respect to the above-named bonds as reyuired by that ce�7ain Continuing Disclosure Certificate, dated , 2021. The Obligated Owner anticipates that the Periodic Report will be filed by . Dated: DevelopmentPlanning & Financing Group,Inc. By: IIS: CC: TYUSYZ2 District Participating Undcrwntcr Property Owncr/Obligatcd Owncr F-18 181r.ti:11 H Y 1�:? PERIODIC REPORT CiTY" OF PALI�I DESERT COMIVZUNITY FACILITIES DISTRICT NO. 2021-1 (UNI�'ERSITY PARK) SPECIAL TAX BONDS, SERIES 2021 This Periodic Report is hereby submitted under Section 4 of tl�e Continuing Disclosure Certificate (the "Disclosure Certificate") dated 2021, executed by the undersigned (the "Property Owncr") in canncctian with thc issuancc of thc abovo-captioncd bonds by City of Palm Dcscr[ Commimity Facilitics District No. 2021-1 (Univcrsity Park) (thc "Districf'). Capitalized terms used in this Periudic Report but not otherwise detined have the meanings given to them in the Disclosure Certificate. I. Property Ownership and Development The informatian in this section is pravided as af (this date must be not more than 30 days before the date of this Periodic Report). A. Prope�Yy currently owned by the Property Owner (the "Property") in the District (the "Di stricf' ): Development name: Number of lots (acreage): B. Status of land dcvclopmcnt, mtract improvcmcnts, or conshuction activitics with respcet to lhe Property: C Status of building permits and any signiticant amendments ur material changes to the description of land use ur development entitlements for the Property described in the Official Statement or thc Pcriodic Rcport last filcd in accordancc with thc Disclosurc Ccrtificatc: D. Status of Special Tax payments on all parcels of Property owned by the Pmperty Owner or its Affiliates: F-19 E. Aggregate property in tl�e District sold (closed escrows) by the Property Owner to end users: Since the Date of Issuance uf the Since the Last Periodic Report Bonds Acres* Acres* For-sale homes For-sale l�omes * For bulk land salcs only (cxcluding salcs of finishcd lots or complc[cd buildings). F. Status of any land purchase contracts with other merchant builders or owners other than end users, �vith regard to tl�e Property. G. Updates, if any, to tables in "PROPERTY OWNERSHIP AND THE DEVELOPMENT" IN Official Statement. ii. Legal and Financial Status of Property Owner Unless such informatiun has previously been induded or incorporated by reference in a Periodic Repurt, describe any change in the legal structure of the Property O�vner or its Aftiliates or the financial condition and financing plan of the Property Owner or its Aftiliates that would materially and adversely intcrfcrc with its ability to complctc its dcvclopmcnt plan dcscribcd in thc Official Statcmcnt. 111. Change in Development or Financing Plans Unless such informatiun has previuusly been included orincorpurated by reference in a Periodic Rcport, and othcr than as providcd in Scction 1, dcscribc any dcvclopmcnt plans or financing plans rclating to thc Properry that arc matcrially diffcrcnt from thc proposcd dcvclopmcnt and financing plan described in the Official Statement. F-20 iV. Other Material Information In additian [a any of thc information cxpressly rcquircd abavc, providc such furthcr informa[ion, if any, as may be necessary to make the specitically required statements, in the light of the circumstances under �vhich they are made, not misleading. Ccrtification Thc undcrsigncd Property Owncn c�rcby ccrtifics tha[ this Pcriodic Rcport constitutcs thc Pcriodic Rcport rcquircd ta bc fiirnishcd by thc Property Owncr undcr thc Disclosurc Ccrtificatc. ANY STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER'S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFIC[AL RELEASE, OR F[LED WITH THE MUNICIPAL SECUR[TIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER [S NOT RESPONSiBLE FOR THE ACCURACY, COMPLETENESS OR FAiRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBL[GAT[ON TO UPDATE THIS PER[ODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED [N THE D[SCLOSURE CERT[FICATE. Dated: UNIVERS[TY PARK INVESTOR, LLC By: Namc: Titic: F-21 APPENDIX G BOOK-ENTRY ONLY SYSTEM The in%ormation ira dris .dppen�fi.r D conce�wrng UTC nnd DTC's hook-enh1� onit' ststem Ims been ohtninecl /rom soiures tlrat the DisD�ict and tlae Un�len� ��iter beliere lo be i�eliable, bul raeidaer dte Dish�rct nor the Un�le��rriter fc�ke.s mir resF�orisib�hh fin� d7e complefenctis or urc�nric.r thereof. The fo(loirirrg cle.ccri��tian o/'the F�roccdm�es rine! recun! keef�ing irith resj�ect ta heneficrcd uunershi�� interert.c in the Borrds. Eumment of �n�rnci�uil, jnemim�i. i}' untt uccr�ete�! irdue rinc! nrieres9 uri the Bun�lc to DTC Partici��nts or Be�tejicin! Ou�iters. confinnation and bans%ers of 1�enefci�! oiritershr� interests rn tbe Boirds ��nr/ otlrer related bairs�ciions hr and hehceen DTC, the DTC Participants and the Benefcia! On �ae�s rs basecl soleh ora rn/orntation prori�lerl hr DTC. Thc Dcpository Trust Campany ("DTC"), Ncw York, NY, �vill act as sccuritics dcpository for thc Bonds. The Bonds will be issued as fiilly-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 for each annual maturity of the Bunds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world's ]argest securitie, depository, is a limited-purpose tnist 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"dearing corporatio�i' within the meaning of the New York Uniform Commercial Code, and a"clearing agency" registered pursuant to the pruvisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instniments (from over 100 countries) tha[ DTC's participants ("Direct Participants") deposit with DTC DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities hansactions in deposited securities, through electronic computerized book-entry transfers and pledges behveen Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include buth U.S. and nun-U.S. securities brokers and dealers, banks, trust compamcs, cicaring corporations, and certam othcr organizations. DTC is a wholly-owncd subsidiary of Thc Dcpository Trust & Clcaring Corporation �"DTCC"). DTCC is thc holding company for DTC, National Sccuritics Clcaring Corporation and Fixcd lncomc Clcaring Corporation, all of which arc regislered clearing agencies. DTCC is o�vned by lhe users of its regulaled subsidiaries. Access to the DTC syslem is also available lo others such as bolh U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing curpuratiuns that clear thruugh or maintain a custodial relatiunship with a Direct Participant, either directly or indirectly ("Indirect Participants'). DTC has a Standard & Puor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. Morc information about DTC can bc found at www.dtcc.com. Purchases of Bonds under lhe DTC system musl be made by or through Direcl Parlicipanls, which will receive a credit for the Bunds un DTC's records. The uwnership interest of each actual purchaser of each Bond ("Beneflcial O�vner") is in turn to be recorded on the Direct and Indirect Participants' recurds. BeneYlcial Owners will not receive written confinnation from DTC uf their purchasc. Bcncficial Owncrs arc, howcvcr, cxpcctcd to rcccivc writtcn confirmations providing dctails of thc transaction, as wcll as periodic statcmcnts of thcir holdings, from thc Dircct or Indircct Participant through which the Beneficial O�vner entered into the transaction. Transfers of ownership interests in the Bonds are to be acrnmplished by entries made on the books of Direct and Indirect Participants acting on behalf uf Beneficial Owners. BeneYlcial Owners will not receive certificates representing tlieir ownership interests in the Bonds, escept in tlie event that use of the bouk-entry system for the Bonds is discontinued. G-1 To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnerslup nominee, Cede & Co., or such other name as may be rcqucstcd by an autharizcd represcntativc of DTC Thc dcposit of Bonds with DTC and thcir rcgistratian in thc namc of Ccdc & Co. or such othcr DTC nomincc do not affcct any changc in bcncficial owncrship. DTC has no knuwledge of the actual Beneticial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Benet3cial Owners. The Direct and indirect Participants will remain responsible far keeping account of their holdings on behalf of their customers. Convcyancc of no[iccs and othcr commimications by DTC to Dircct Participants, by Dircct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be guverned by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time tu time. Beneticial Owners of Bonds may wish to take certain steps to augment the transmission to tl�em of notices of significant events wrth respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Band documents. For esample, Beneficial Owners of Bonds may wish to ascer[ain that the nominee holding the Bonds for their benefi[ has agreed [o 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 cupies uf notices be provided directly to them. Redemption notices shall be sent to DTC If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by ]ot the amoun[ of the interest of each Direc[ Participant in such maturi[y to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nommee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounls Bonds are credited on lhe record dale (identified in a lisling altached lo the Omnibus Proxy). Rcdcmption procccds, distributions, and dividcnd payxncnts on thc Bonds will bc madc to Ccdc & Co., or such othcr nomincc as may bc rcqucstcd by an authorizcd represcntativc of DTC. DTC's practicc is lo credit Direct Parlicipants' accounts upon DTC's receipt of funds and corresponding delail inCormalion fmm the Di.tricl or lhe Truslee, on payable dale in accordance with lheir respective holdings sho�vn 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 far the accounts of customers in bearer form or registered in "street name," and will be the responsibility uf such Participant and not uf DTC, thc Trustcc, or thc District, subjcet to any statutory or rcgulatory rcquircmcnts as may bc in cffcct from timc to timc. Paymcnt of rcdcmption procccds, distributions, and dividcnd paymcnts to Ccdc R Co. (or such olher nominee as may be requesled by an aulhorized representative oC DTC) is the responsibility of the District or the Trustee, disbursemenl of such payment. lo Direcl Parlicipanls will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the respunsibility of Direct and Indirect Participants. A Bond Owncr shall givc noticc to cicct to havc its Bonds purchascd or tcndcrcd, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purcliase will be deemed satisfied wlien the ownership rights in tlie Bonds are transferred by Direct Participants on DTC's records and fulluwed by a bouk-entry credit of tendered Bonds to the Trustee's DTC account. G-2 DTC may discontinue providing its services as deposrtory with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in tl�e event that a succcssor dcpository is not ob[aincd, physical certificatcs arc rcquircd to bc printcd and dclivcrcd. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securrties depository). In that event, bonds �vill be prmted and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOIL-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. G-3 APPENDIX H CITY OF PALNi DESERT INFORDiATION GENERAL ECONOMIC DATA CONCERNING THE CITY OF PALM DESERT AND THE COUNTY OF RI�'ERSIDE Tlre fi�lluicing infin�rnrition concerilirrg ilre C�fi uf PuLn Derert. the Cu�mh af' Rirer.sicle rind c�n�ra�aiding ro�er�.c i.s inc(uc/ed unlr fin the pmE�ose of'.cuj�E�h�iny generrr/ irrfin�mcdion regrozling ihe cumm�mih. The Bur�ds ro�e nut rin ahligriiiun uf the Crh�. The following mfonnation concerning the City and surrounding areas are included only for the purpose of supplymg general infonnation regarding the community. The Local Obligations and the Bonds arc not a dcbt of thc City, thc Statc, or any of its political subdivisions nnd ncithcr said City, said S[atc, nor any of its political subdivisians is linblc thcrcfor. Overview The City of Palm Desert (the "City"), incorporated in November 26, 1973 as a general law city, became a charter ci[y through the adoption of Ordinance fiSR by the City Council on January 8, 199R. The City is located in the Coachella Valley and is approximately mid-way between the cities of Indio and Palm Springs, I 17 miles east of Los Angeles, I I 8 miles northeast of San Diego and g 15 miles southeast of San Francisco. The City occupies an area of approximately 36 square miles. Elevation of the City is �43 feet and the mean tempera[ure is 73.1 degrees. Except in summer, the weather is mild and annual average rainfall is 3.38 inches. According tu the State Department of Finance, the City population as of January 1, 2020 was approximately 52,986. Government The City Council is cumprised of tive members, elected to four-year terms every hvo years. In 2030, changes were made tu the City's elections as a result of a legal settlement related tu the California Voting Rights Act. A ncw downtawn district, comprising about 20% of thc City's population was crcatcd which is rcprescntcd by onc (1) cicctcd City Council mcmbcr and a largcr surrounding distnct, comprising about 804% of the City's population was created, which is represented by four (4� elecled City Council members. The City will implement ranked choice voling in bolh districts beginning in 20�2. The general municipal election is conducled in No� ember of even-numbered years, and councilmembers are sworn in and take uftice at the tirst meeting in December fulluwing each election. Thc City Council scicets onc of its mcmbcrs to scrvc as Mayor for a onc-ycar tcnn and appoints a City Manager lo conducl the day to day business of lhe City and the Cily Clerk. The City Atlorney is appointed by Cily Council. The City operales as `Conlracl Cily" utilizing, primarily, agreements with other governmental entities, private companies and individuals to provide services. Contracted services include pulice and fire protection provided through the County, animal control, health services, legal services and landscape maintenance. H-1 TABLE H-1 CiTl' OF PALM DESERT CITY COUNCIL DiE1V7BERS Namc Kathleen Kelly Jan Harnik Sabby Jonathan Gina Nestande Karina Quintamlla Labor Forcc and Employment Officc Mayor Mayor Pro Tcm Council Mcmbcr Council Member Council Member Thc main sourccs of rcvcnuc in thc City arc dcrivcd from tourism and salcs tax. His[orically, thc unemployment rate in the City has been lower than that far the Coimty and the State. Table H-2 represents the labor patterns in the City, the County, the State, and the United States from 2016 through 2020. TABLE H-2 CITY OF PALM DESERT, RIYERSIDE COUNTY, STATE OF CALiFORNiA AND UNiTED STATES CIViLIAN LABOR FORCE, EMPLOYMENT, AND UNEI�IPLOYMENT (2016through 2020) Fear and Area 2016 Citv County State Unitcd Statcs 2017 Ctty County State United States 2oix c;ry Cuunty State United States 2019 City County Statc United States 2020 City County State United States Labor Force 23 900 1,05 L600 19,012A00 159,190,000 24,300 1,071,600 19,173,800 160,320,0000 za,�oo 1,090,100 19,�f,3,900 162,070,000 24,800 1,105,700 19,393,700 163,540,000 25,100 1,107.700 18,8? 1.300 160,74Q000 Emplovment Unemqlovment Unemqlovment Rate 2�,400 957,300 i �,9�s,aoo 151,440,000 33,000 1,014,900 �a,?a�,aoo 153,340,000 33,500 1,041,500 18,443,400 155,760,000 23,700 1,OSR,700 18,550.500 157,5q0,000 22,400 997.700 16,913,100 147,790,000 1,400 64,400 i,oae,eoo 7,750,000 1,200 56,700 927.000 �,yso.000 1,100 aa,600 821,500 6,310,000 1,100 �7,000 803 ' 00 6,000,000 �,700 1 10,000 1,908,100 1?,950,000 6.09b 6.1 5,5 4.9 5,1 5,3 a.s a.a 4.4 a.s 4.3 3.9 4.3 4.2 a.z 3.7 10.8 9.9 10.1 S.l Sourccc: State of Cahforma Employmcnt Dcvclopmcnt Dcpartmcnt and U.S Dcpart�ncnt of Labor, Burcau oiLabor Statistics H-2 TABLE H-3 CiTl' OF PALM DESERT TARABLE RETAIL SALES DATA (in the thousands) (2015through 2U19) Retail and Food Ser�ices M1lutor \'ehicle and Purn Dealera Homc Furnishings and Appliance Sroms Bldg. Ma[rl and Gardcn Equip. and Food and Bc�cragc Slores Gasolinc Stations Clothing and Clothing Acccssorics Srorcs General Nlerchandroe Storea Fuod Serv�cee and Dnnkmg Placec Other Retail Group Total Retail and Food Services AI I U[her Ou[leta '1 otal All Outlets zotv�'� $ 65.(�y7.55(1 12_',04G,533 N4.�176.-'yy FI ?13.�104 (,9,95.1.Otl9 '_Si.045,�06 i5N.i73.011 � 5?.h 2(,.I fi5 IUI.SO_'.$$0 $1.d79,131,836 .4, 3?�1.a70.ISa $1,R03,602,020 2018 4 N?.725.y�1`S 133,7G8,970 S',OId,590 77.5( 9.395 b7.7ii.651 _'S0.503.3-1�1 3�1.5(i.319 23S,R90,591 165a17151 $1q39AS3A61 5 313 i�r qii $1.75?,711.9R3 �� Lastycara��ailablc Sourccs Cahforma Dcpartmcn[ of Tas and Fcc Adm�mstration. Utl11tICS 2017 � aa.4yl.(,Ky I"_'a,455,N1�1 R9.170.77¢ 75,3sv, � 74 6� 91 S.,q51 '_-t3.�133,i66 3'_9.?51,1�0 229 _a(.725 I �7.Sf1a.64? $1.358.839.389 .4, 3(12,fi7i,93S $l,fifil G15,3?7 zn�e $ �19,5�y.y7F I?9.452i.711 R4,0�7,Rh? 70.7?6.30fi �l.FC9.�7h 351,417,7fi_' 3?0.�37.1 J3 ''''0.352,R(R I 5�1 7? I I H4 $1.377.IJ2,28S S 273 09'_' 7�1I $1,651,235,029 21115 $ ?S.S�?,749 l l_'.753.395 SS.15�l.C�lO 71 5?6,119 72.51? CR7 25Q"_'06.480 777.171 9?i '_ I 1.335,3'S INS:"_1.170 $1.352,SSS,d91 $ �63,319,995 $1,fi16,175,JRfi Water, sewage treatment and �vastewater disposal are provided by the Coachella Valley Water District Southern California Gas Company supplies natural gas to the City and electric power is provided by the Southern California Edison Company. Waste Disposal is provided by Burrtec Waste & Recycling Services. Telephone/Internet service is available through Frontier Communications. Cable television/Internet service is provided by Time Warner Cable/Spectrum. Transportation Inter-Cily transporlalion is provided by SunLine Transil Agency which provides service throughoul lhe entire Coachella Valley. The Cily's cenlral highways are California Highway 111 and 74 which connect to US Interstate 10 and to California Highway 6? and 86. Shipping is providcd by numcrous huck carricrs which havc ovcrnight scrvicc to Los Angcics, San Francisco, San Dicgo and Phocnis. Rail transportation is providcd by thc Southcrn Pacific Railroad located in Indio, 10 miles easl oC the City, and by Amtrak, which has two slations localed in Coachella V al ley. A full scrvicc airport is locatcd m Palm Springs, 12 milcs northwcst of thc City, with approximatcly scvcn carricrs providing scrvicc. Thc airport has an 8,�00 foot runway and gcncral aviation facilitics. Thcrc is also a privatc airport in Bcrxnuda Duncs, cight inilcs northcast of thc City. Communitv Ser��ices Thc City of Palm Dcscrt providcs both policc and firc protcction through contracts with thc County of Riverside. H-3 The Riverside County Public Library System provides library services to the City. Ihe City/County also operates a 43,000 square foot public library on the College of the Desert campus which is jointly uscd by thc public and thc Collcgc of thc Dcscrt. The Desert Willow Golf Resort, hvo championship 1 R-hole, public golf course, is located on approximately i40 acres in the northern area of tl�e City. This golf course also features a 33,000 square foot clubhouse with restaurant, dining and banquet facilihes. The City also is home to five other public golf courses and resarts and 30 private or semi-private golf clubs and resorts. Population The following sets fortl� the City, the County and tl�e State population estimates as of January 1 for thc ycars 2016 ?020: TABLE H-4 C[TY OF PALM DESERT, RIVERSiDE COUNTY AND STATE OF CALiFORNiA Year (January I) 2017 2018 2019 2020 2021 Estimated Population (2017-2021) Citp of Riverside Palm Desert County 53334 �,374,555 53,554 2,397,662 g3,69g 2,419,057 53,828 z.aao,�i9 g3,g92 2,454,453 State of California 39,352,395 39,519,535 39,605,361 39,648,938 39,466,8g5 Sourcz� Slalz of Cald'urnia Dzpartment ul Financz, Demugraphs Research Unil Employment and industry The City is induded in the Riverside-San Bernardino labor market area. The unemployment rate in the Riverside-San Bernardino-Ontario MSA �vas R.I°/„ in February 2021. This compares with an unadjusted unemployment rate of 8.4°i� fur Califurnia and 6.6°r� for the nation during the same period. Thc uncmploymcnt ratc was S.0% for Rivcrsidc County and 8.1°i� in San Bcrnardmo County. The Collowing lable summarizes the civilian labor force, employmenl and unemploymenl in lhe Cuunty for calendar years 2015 through 2019. H-4 TABLE H-5 RIVERSIDE-SAN BERNARDINO METROPOLITAN STATISTICAL AREA (RIVERSIDE COUNTP CI�'ILIAN LABOR FORCE, ED1PL0�'NIENT AND UNEMPLOYMENT (Annual Avcrages) TITLE Civilian Labor Force"' Crvilian F.mplo}'mcnt Cn�ih:in Unemployment Civilian Unzmployment Rate TotaL Al] Industries"' Total Farm Total Nonfarm Gouds Producmg Minmg and Loggmg Construction htanufac[unng Durablz Guods Nondurable Goods Scrv�icc Providmg Tradc, Transportat�un & Uhhncs Wholesalz Trade Retail Trade Transportation, Warchottsmg & Unhncs Information Financml Act�rities Finance & InSurance Rcal Estatc 3 Rcntal & Lcasmg Profcs�innal & Busmcs� Scrviccs ProRss�onal, Scientific fi Techmcal Szn�ces Dlanagemznt uCCompames & Enterpr�ses Administratn'c & Support S Was[c Scr��iccs Educational & Hcalth Scn�iccs Educaltunal Ser� �czs Ilcalth Carc � Social Assistancc Lcisurc & Ilospitalitv Art�, Entcrtainmcnt & Rccrcat�on Accummudation & Foud Ser� ices Othcr Scr��iccs Go��crnnsnt Fcdcral Govcrnmcnt Slate Guvzrnmenl Local Go��crnmcnt ?UIS 1,033,500 9C�3.if(1() 59.600 6.7°� 657,900 12.6U0 645,300 9 F,500 300 5'_ 9U0 41.300 3R,600 I?,700 550.800 146.100 33,300 SRJ00 33.1 UO F.aoo _'0,900 I 1,600 9.�00 b_'.6()0 19,100 3,000 40.500 95?00 7,600 57.600 53.300 I U 90p 72.500 '_ 1.700 I 14.500 (� 900 16,300 91.300 2U16 1,051,600 987.2UU 64,�100 6.1" 638,a00 12,80U 675,500 101,600 300 SS.600 42,700 29.300 13.F00 574AU0 I 52,R00 z3,soo 91,C+00 ; 7.400 c,.3no Z I . F00 1 I .700 9JU0 65,�00 19.000 3,000 41,200 ioo.�ou S,?00 9'_,000 itS,200 I 1,30U 7ti.900 ",300 1 17,600 7.IOU 17.000 91,600 ?U17 1,071,600 t,uta,vuo 56.700 S.i°S 71 R, 300 12.3U0 70h, l00 105,500 100 62,2U0 d2 900 39,100 I 3,300 6U0.60p 15A,900 �:,eoo 92J00 42,3U0 6,100 _'1,300 I 1,900 4 900 fi6.F()0 19,300 Z. 300 aa,�oo 107AU0 S,Z00 9\,H00 91,'-00 I 1.600 79,600 � �,600 1'6.400 7, I UO U.500 101.800 2U18 1,090,100 t.uat,sou as.noo 3.5" 748,500 12,30U 735,200 1 L,300 F00 67.400 4.1,500 30,?00 1 1.300 62 {,9U0 163.600 24.900 93,900 45.500 6.200 Z',100 1 I .900 1 U?p0 70,5p0 Z0,500 �,500 47,500 I I d �)OU 8.300 106,700 91J00 I 2,UOU S1J00 '�,�00 130,100 7.200 17.500 105,400 2019� �' 1,105,700 1,U58,7U0 d7.000 4.2",�� s.aoo I 2,9U0 755,40p 1 13.200 500 67,600 15, I 00 30,100 14J00 6d2,200 I 6R,500 zs,�oo 93,�00 ay,�oo 6.500 21,600 I1,100 1 U,SpQ 72A00 21,000 3,100 �y,000 120.700 5,�00 113.'00 97,-100 12.-100 R4 900 23,10p 1 l 1.600 7.200 U,700 1O6J00 '�� Latcstycaravailablc "' Cirilian labor 1'urcz dala are by place ol rzs�dencz; includz szlf-zmployed mdrvidimis, uupa�d lam�ly workers, huusehold domcstic �corkcrs, 3 workcrs on strikc. Data may not add dttc to rounding. Thc uncmploynunt ratc is calctJatcd using unrounded data. �'� Industry employ�nent is by place of worA; excludes self-employed indn'iduals unpaid family �vorkerc, houcehold domestic workers, Fc worhers on strike. Data may nut add due ro romidmg Sow�ce: Stace of Calitomia Lmployment Development Department 1:�1 TABLE H-6 COUNTY OF Ri�'ERSIDE Major Employers (2021) Emplover Name Abbott Vascular Inc. Abbott Vascular Inc. Agua Caliente Casino Resurt Spa Amazon Fiilfillmcnt Ch Collins Acrospacc Corona City Hall Corona Regional Medical Ctr Depa rt ment-Co rrect i on s-Reh ab Desert Regional Medical Ctr Eisenho�ver Health Fantasy Springs Resort Casmo J Ginger Masonry LP Kleinfelder Construction Svc La Quinta Golf Course Parkview Comnumity Hosp Med Pcchanga Rcsart Casino Rivcrsidc Community Hospital Riverside County Public Health Riverside University Heallh South�vesl Healthcare Syslem Spa Rcsort Casmo Starcrest of Califomia Starcrest Products Sun World Intl LLC Time Rack Location Teme�ula Temecula Rancho Mirage Nlorcno Vallcy Ri� crsidc Corona Corona Norco Palm S�irings Rancho Miragc liidio Ri� crsidc Ri�eraide La Quinla Ri�crsidc Tcmccula Ri� crsidc Ri�eraide �4orcno Vallcy Murricla Palm Sprin�s Pcrris Perris Coachdla Corona Industr� Hospital Lquipment R Supphes-1�1frs 1lozpital Equipment & Supplies-nlfrs Casin�s hlail Ordcr Fulfillmcnt Scr� icc Aircraft C'omponcnis-�1anulacturcr, Go� crmncnt Officcs-City/�'illagc R T�vp Hospitals Government Oftices-State Hospital, Hospital, Casmos �lasonry Contractors Engineers-Shucttual Gol f Courscs Hospital, Casinos Hospitals Government Offices-Cuttnty Hospital, Hcalth Care Managcmcnt Casinos Intcrnct & Catalog Shoppi�ig Internet & Catalog Shopping Fruit, 3c Vegetahles-Whole,alc Computer Sufl�vare Sourcc: Statc of Califomia Employmcnt Dc��elopmcnt Dcpartmcnt H-6 RWG DRAFT 6/8/21 P6401-1052\2517808v6.doc BOND INDENTURE By and Between CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) and U.S. BANK NATIONAL ASSOCIATION, as Trustee with reference to $__________ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS SERIES 2021 Dated as of [July 1, 2021] TABLE OF CONTENTS Page -i- P6401-1052\2517808v6.doc ARTICLE I DEFINITIONS .......................................................................................... 2 Section 1.1 Definitions......................................................................... 2 ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS ........................ 16 Section 2.1 Amount, Issuance, Purpose and Nature of Bonds .............................................................................. 16 Section 2.2 Type and Nature of Bonds and Parity Bonds.................. 16 Section 2.3 Equality of Bonds and Parity Bonds; Pledge of Net Taxes .................................................................... 17 Section 2.4 Description of Bonds; Interest Rates .............................. 17 Section 2.5 Place and Form of Payment ............................................ 18 Section 2.6 Form of Bonds and Parity Bonds .................................... 19 Section 2.7 Execution and Authentication ......................................... 19 Section 2.8 Bond Register.................................................................. 20 Section 2.9 Registration of Exchange or Transfer ............................. 20 Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds ................... 21 Section 2.11 Validity of Bonds and Parity Bonds ............................... 21 Section 2.12 Book-Entry System ......................................................... 21 Section 2.13 Representation Letter ...................................................... 22 Section 2.14 Transfers Outside Book-Entry System ........................... 22 Section 2.15 Payments to the Nominee ............................................... 23 Section 2.16 Initial Depository and Nominee ...................................... 23 ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS ............................................................................................ 23 Section 3.1 Creation of Funds; Application of Proceeds ................... 23 Section 3.2 Deposits to and Disbursements from Special Tax Fund ......................................................................... 24 Section 3.3 Administrative Expenses Account of the Special Tax Fund ............................................................ 25 Section 3.4 Interest Account and Principal Account of the Special Tax Fund ...................................................... 26 Section 3.5 Redemption Account of the Special Tax Fund ................................................................................ 26 Section 3.6 Reserve Account of the Special Tax Fund ...................... 28 Section 3.7 Rebate Fund .................................................................... 29 Section 3.8 Surplus Fund ................................................................... 30 Section 3.9 Costs of Issuance Fund ................................................... 31 Section 3.10 Improvement Fund .......................................................... 31 Section 3.11 Investments ..................................................................... 31 ARTICLE IV REDEMPTION OF BONDS .................................................................. 34 Section 4.1 Redemption of Bonds ..................................................... 34 Section 4.2 Selection of Bonds and Parity Bonds for Redemption ..................................................................... 36 Section 4.3 Notice of Redemption ..................................................... 36 TABLE OF CONTENTS (cont.) Page -ii- P6401-1052\2517808v6.doc Section 4.4 Partial Redemption of Bonds or Parity Bonds .............................................................................. 38 Section 4.5 Effect of Notice and Availability of Redemption Money ......................................................... 38 ARTICLE V COVENANTS AND WARRANTY....................................................... 39 Section 5.1 Warranty ......................................................................... 39 Section 5.2 Covenants ........................................................................ 39 ARTICLE VI AMENDMENTS TO INDENTURE ...................................................... 42 Section 6.1 Supplemental Indentures or Orders Not Requiring Bondowner Consent ....................................... 42 Section 6.2 Supplemental Indentures or Orders Requiring Bondowner Consent ....................................... 43 Section 6.3 Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds ............................... 44 ARTICLE VII TRUSTEE ............................................................................................... 44 Section 7.1 Trustee............................................................................. 44 Section 7.2 Removal of Trustee ......................................................... 45 Section 7.3 Resignation of Trustee .................................................... 46 Section 7.4 Liability of Trustee ......................................................... 46 Section 7.5 Merger or Consolidation ................................................. 47 ARTICLE VIII EVENTS OF DEFAULT; REMEDIES .................................................. 47 Section 8.1 Events of Default ............................................................ 47 Section 8.2 Remedies of Owners ....................................................... 48 Section 8.3 Application of Revenues and Other Funds After Default ................................................................... 49 Section 8.4 Power of Trustee to Control Proceedings ....................... 49 Section 8.5 Appointment of Receivers .............................................. 50 Section 8.6 Non-Waiver..................................................................... 50 Section 8.7 Limitation on Rights and Remedies of Owners ............................................................................ 50 Section 8.8 Termination of Proceedings ............................................ 51 ARTICLE IX DEFEASANCE AND PARITY BONDS ............................................... 51 Section 9.1 Defeasance ...................................................................... 51 Section 9.2 Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness ................................. 53 ARTICLE X MISCELLANEOUS ............................................................................... 55 Section 10.1 Cancellation of Bonds and Parity Bonds ........................ 55 Section 10.2 Execution of Documents and Proof of Ownership ....................................................................... 55 Section 10.3 Unclaimed Moneys ......................................................... 56 Section 10.4 Provisions Constitute Contract ....................................... 57 Section 10.5 Future Contracts .............................................................. 57 Section 10.6 Further Assurances.......................................................... 57 Section 10.7 Severability ..................................................................... 57 TABLE OF CONTENTS (cont.) Page -iii- P6401-1052\2517808v6.doc Section 10.8 Notices ............................................................................ 57 EXHIBITS: EXHIBIT A FORM OF SPECIAL TAX BOND, SERIES 2021 ............................................ A-1 EXHIBIT B ADMINISTRATIVE EXPENSE PAYMENT REQUEST FORM .....................B-1 EXHIBIT C FORM OF REQUISITION FOR DISBURSEMENT OF PROJECT COSTS ....C-1 -1- P6401-1052\2517808v6.doc BOND INDENTURE THIS BOND INDENTURE dated as of [July 1, 2021] (this “Indenture”), by and between CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) (the “District”) and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as trustee (the “Trustee”), governs the terms of the Special Tax Bonds, Series 2021, of the District and any Parity Bonds issued in accordance herewith from time to time. R E C I T A L S : WHEREAS, the City Council (hereinafter sometimes referred to as the “legislative body of the District”) of the City of Palm Desert (the “City”), located in Riverside County, California, has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the District pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the “Act”); and WHEREAS, based upon Resolution Nos. 2021-10 (the “Resolution of Formation”) and 2021-11 adopted by the legislative body of the District on April 22, 2021 and an election held on May 13, 2021 authorizing the levy of a special tax and the issuance of bonds by the District, the District is authorized to issue bonds for one or more series, pursuant to the Act, in an aggregate principal amount not to exceed $50,000,000; and WHEREAS, the legislative body of the District intends to finance certain public facilities identified in the Resolution of Formation (including but not limited to the payment and defeasance of a pro rata portion of outstanding Series 2006A Special Tax Bonds (the “CFD 2005-1 Pro Rata Bonds”) issued by, and secured by the special taxes of, existing City of Palm Desert Community Facilities District No. 2005-1 (University Park) (“CFD 2005-1”)) through the issuance of bonds in an aggregate principal amount of $__________, designated as the “City of Palm Desert Community Facilities District No. 2021-1 (University Park), Special Tax Bonds, Series 2021” (the “Series 2021 Bonds”); and WHEREAS, the District has determined that all requirements of the Act for the issuance of the Series 2021 Bonds have been satisfied; NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Series 2021 Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Series 2021 Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree, for the benefit of the Owners of the Series 2021 Bonds and any Parity Bonds (as defined herein) which may be issued hereunder from time to time, as follows: -2- P6401-1052\2517808v6.doc ARTICLE I DEFINITIONS Section 1.1 Definitions. Unless the context otherwise requires, the following terms shall have the following meanings: “Account” means any account created pursuant to this Indenture. “Acquisition Agreement” means that certain Acquisition Agreement, dated as of [June 24, 2021], by and among the City, the District, and University Park Investor, LLC, a Delaware limited liability company, as developer. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311 et seq. of the California Government Code. “Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees and expenses of the Trustee, any fees and related costs for credit enhancement for the Bonds or any Parity Bonds which are not otherwise paid as Costs of Issuance, any costs related to the District’s compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District hereunder. “Administrative Expenses Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Administrative Expenses Priority Amount” means an amount equal to $50,000 per Bond Year, escalating by 2% each Bond Year commencing July 1, 2022. “Annual Debt Service” means the principal amount of any Outstanding Bonds or Parity Bonds, as applicable, payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds or Parity Bonds, as applicable, in such Bond Year, if the Bonds and any Parity Bonds, as applicable, are retired as scheduled. “Authorized Denominations” means, (i) initially, $100,000 and any integral multiple of $5,000 in excess thereof, and (ii) following the occurrence of a Minimum Denomination Reduction Event, $5,000 or any integral multiple thereof. “Authorized Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein (the Trustee authorized to rely upon investment direction of the District as a determination that an investment is a legal investment under the laws of the State): (1) (A) Direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America (“United States Treasury Obligations”); (B) obligations fully and unconditionally guaranteed as to timely payment -3- P6401-1052\2517808v6.doc of principal and interest by the United States of America; (C) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America; or (D) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. (2) Federal Housing Administration debentures. (3) The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America: - Federal Home Loan Mortgage Corporation (FHLMC) Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) Senior Debt obligations - Farm Credit Banks (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) Consolidated system-wide bonds and notes - Federal Home Loan Banks (FHL Banks) Consolidated debt obligations - Federal National Mortgage Association (FNMA) Senior debt obligations Mortgage-backed securities (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) - Financing Corporation (FICO) Debt obligations - Resolution Funding Corporation (REFCORP) Debt obligations -4- P6401-1052\2517808v6.doc (4) Unsecured certificates of deposit, time deposits, money-market deposits, and bankers’ acceptances of any bank (including the Trustee and any affiliate) the short- term obligations of which are rated “A-1” or better by S&P. (5) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (FDIC) or fully collateralized by Permitted Investments described in clauses (1), (2), or (3), in banks (including the Trustee and any affiliate) which have capital and surplus of at least $5 million. (6) Commercial paper (having original maturities of not more than 270 days rated, at the time of investment, “A-1+” or better by S&P and “Prime-1” or better by Moody’s and issued by an entity meeting the criteria in either clause (A) or (B): (A) the entity (i) is organized and operating in the United States as a general corporation, (ii) has total assets in excess of $500,000,000, and (iii) has debt other than commercial paper, if any, that is rated “A” or higher by S&P or Moody’s; or (B) the entity (i) is organized within the United States as a special purpose corporation, trust, or limited liability company, (ii) has programwide credit enhancements including, but not limited to, overcollateralization, letters of credit, or surety bond, and (ii) has commercial paper rated “A-1” or higher by S&P or “A1” by Moody’s. (7) Money market funds rated “AAm” or “AAm-G” by S&P, or better (including funds for which the Trustee or its affiliates provide investment advisory or other management services), but excluding such funds with a floating net asset value. (8) “State Obligations,” which means: (A) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated “A3” by Moody’s and “A” by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (B) Direct general short-term obligations of any state agency or subdivision or agency thereof described in (A) above and rated “A-1+” by S&P and “Prime-l” (“MIG-1”) by Moody’s, or better. (C) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state, state agency or subdivision described in (A) above and rated “AA” or better by S&P and “Aa” or better by Moody’s. -5- P6401-1052\2517808v6.doc (9) Pre-refunded municipal obligations rated “AAA” by S&P and “Aaa” by Moody’s meeting the following requirements: (A) the municipal obligations are (1) not subject to redemption prior to maturity or (2) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (B) the municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; (C) the principal of and interest on the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations (“Verification”); (D) the cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; (E) no substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury Obligation and upon delivery of a new Verification; and (F) the cash or United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent. (10) Repurchase agreements: (A) With (1) any domestic bank, or domestic branch of a foreign bank, the long term debt of which is rated at least “A” by S&P and Moody’s; or (2) any broker-dealer with “retail customers” or a related affiliate thereof which broker- dealer has, or the parent company (which guarantees the provider) of which has, long-term debt rated at least “A” by S&P and Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated “A” or better by S&P and Moody’s, provided that: (a) The market value of the collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated structured financing (with a market value approach); (b) The Trustee or a third party acting solely as agent therefor or for the District (the “Holder of the Collateral”) has possession of the collateral or the collateral has been transferred to the Holder of the -6- P6401-1052\2517808v6.doc Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books); (c) The repurchase agreement shall state and an opinion of counsel shall be rendered, addressed to the District and the Trustee, at the time such collateral is delivered that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); (d) All other requirements of S&P in respect of repurchase agreements shall be met; and (e) The repurchase agreement shall provide that if during its term the provider’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “A-“ by S&P or “A3” by Moody’s, as appropriate, the provider must, at the direction of the District or the Trustee, within 10 days of receipt of such direction, repurchase all collateral and terminate the agreement, with no penalty or premium to the District or Trustee. (B) Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no evergreen provision), collateral levels need not be as specified in (a) above, so long as such collateral levels are 103% or better and the provider is rated at least “A” by S&P and Moody’s, respectively. (11) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long-term debt of which or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated at least “AA-” by S&P or “Aa3” by Moody’s; provided that, by the terms of the investment agreement: (A) interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service on the Bonds; (B) the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days’ prior notice; the District and the Trustee hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; (C) the investment agreement shall state that is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof, or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors; -7- P6401-1052\2517808v6.doc (D) the District and the Trustee receives the opinion of domestic counsel (which opinion shall be addressed to the District and the Trustee) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in form and substance acceptable to the District, and addressed to, the District and the Trustee; (E) the investment agreement shall provide that if during its term. (1) the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3”, respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider’s books) to the District, the Trustee or a third party acting solely as agent therefor (the “Holder of the Collateral”) collateral free and clear of any third-party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated structured financing (with a market value approach); or (ii) repay the principal of and accrued but unpaid interest on the investment; and (2) the provider’s rating by either S&P or Moody’s is withdrawn or suspended or falls below “A-” or “A3”, respectively, the provider must, at the direction of the District or the Trustee, within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the District or Trustee; and (F) The investment agreement shall state and an opinion of counsel shall be rendered, addressed to the District and the Trustee, in the event collateral is required to be pledged by the provider under the terms of the investment agreement at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); and (G) the investment agreement must provide that if during its term: (1) the provider shall default in its payment obligations, the provider’s obligations under the investment agreement shall, at the direction of the District or the Trustee, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or Trustee, as appropriate, and -8- P6401-1052\2517808v6.doc (2) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or Trustee, as appropriate. (12) The State of California Local Agency Investment Fund; provided that the Trustee may restrict investments in such Fund to the extent necessary to keep moneys available for the purposes of this Indenture. (13) Certificates of deposit, savings accounts, deposit accounts or money market deposits (including those of the Trustee and its affiliates) which are fully insured by the Federal Deposit Insurance Corporation, including certificates of deposit placed through the CDARS program. “Authorized Representative of the City” means the City Manager of the City, the Assistant City Manager of the City, the Director of Finance of the City, or any other person or persons designated by the City Manager or the Director of Finance by a written certificate signed by the City Manager or the Director of Finance and containing the specimen signature of each such person. “Authorized Representative of the District” means the City Manager of the City, the Assistant City Manager of the City, the Director of Finance of the City, or any other person or persons designated by the City Manager or the Director of Finance by a written certificate signed by the City Manager or the Director of Finance and containing the specimen signature of each such person. “Bond Counsel” means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the Tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law in any state of the United States of America or the District of Columbia. “Bond Register” means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds and any Parity Bonds shall be recorded. “Bondowner” or “Owner” means the person or persons in whose name or names any Bond or Parity Bond is registered. “Bonds” means the Series 2021 Bonds. “Bond Year” means the twelve-month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds or an issue of Parity Bonds shall begin on the Delivery Date and end on the first September 1 which is not more than 12 months after the Delivery Date. -9- P6401-1052\2517808v6.doc “Business Day” means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Trustee is located, are not required or authorized to remain closed. “Certificate of an Authorized Representative” means a written certificate executed by an Authorized Representative of the City or District, as applicable. “Certificate of the Special Tax Administrator” means a written certificate of an Authorized Representative of the District, Willdan Financial Services, or any successor entity appointed by the City, to administer the calculation and collection of the Special Taxes. “CFD 2005-1” means the City of Palm Desert Community Facilities District No. 2005-1 (University Park). “CFD 2005-1 Bonds Trustee” means the U.S. Bank National Association, in its capacity as trustee for the CFD 2005-1 Prior Bonds. “CFD 2005-1 Prior Bonds” means the Special Tax Bonds, Series 2006A, issued by CFD 2005-1 on May 9, 2006, in the aggregate initial principal amount of $50,000,000. “CFD 2005-1 Pro Rata Bonds” means a pro rata portion allocable to the District, in the aggregate principal amount of $_____________, of outstanding CFD 2005-1 Prior Bonds. “City” means the City of Palm Desert, California. “Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. “Continuing Disclosure Agreement” means that certain Continuing Disclosure Agreement dated as of [July ___, 2021], by and between the District and Willdan Financial Services, as dissemination agent, together with any amendments thereto. “Costs of Issuance” means the costs and expenses incurred in connection with the formation of the District and the issuance and sale of the Bonds or any Parity Bonds, including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses, costs of printing the Bonds and any Parity Bonds and the preliminary and final official statements for the Bonds and any Parity Bonds, fees of financial consultants, and all other related fees and expenses, as set forth in a Certificate of an Authorized Representative of the City. “Costs of Issuance Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. “Delivery Date” means, with respect to the Bonds and each issue of Parity Bonds, the date on which the bonds of such Series were issued and delivered to the initial purchasers thereof. -10- P6401-1052\2517808v6.doc “Depository” means The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Bonds, or any other securities depository acting as Depository under Article II hereof. “Developed Property” shall have the meaning ascribed to such term in the Rate and Method. “Direct Debt for District Property” means that portion or the entirety, as applicable, of the aggregate principal amount of the Outstanding Bonds and Parity Bonds (exclusive of any Escrow Bonds) which is allocable to the property in the District. “District” means City of Palm Desert Community Facilities District No. 2021-1 (University Park), established pursuant to the Act and the Resolution of Formation. “Escrow Bonds” means the principal amount of any Parity Bonds deposited in an escrow account established by a Supplemental Indenture which are not secured by a pledge of the Net Taxes while on deposit therein. “Escrow Agreement” means the Escrow Agreement, dated as of even date herewith, by and among the District, CFD 2005-1, and U.S. Bank National Association, a national banking association, as escrow agent, relating to the refunding of the CFD 2005-1 Prior Bonds, including but not limited to the CFD 2005-1 Pro Rata Bonds, scheduled to mature on September 1, 2021 and thereafter through September 1, 2036. “Escrow Fund” means the fund by that name established under the Escrow Agreement. “Event of Default” means an “event of default” described in Section 8.1 hereof. “Federal Securities” means any of the following: (a) non-callable direct obligations of the United States of America (“Treasuries”), (b) evidence of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, and (c) pre-refunded municipal obligations rated “AAA” and “Aaa” by S&P and Moody’s, respectively, (d) securities eligible for “AAA” defeasance under then existing criteria of S&P, or (e) any combination of the foregoing. “Fiscal Year” means the period beginning on July 1 of each year and ending on the next following June 30. “Gross Taxes” means the amount of all Special Taxes received by the District, together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of this Indenture for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions. “Improvement Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. -11- P6401-1052\2517808v6.doc “Indenture” means this Bond Indenture, together with any Supplemental Indenture approved and entered into pursuant to Article VI hereof. “Independent Financial Consultant” means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District, who, or each of whom: (1) is in fact independent and not under the domination of the District or the City; (2) does not have any substantial interest, direct or indirect, in the District or the City; and (3) is not connected with the District or the City as a member, officer or employee of the District or the City, but who may be regularly retained to make annual or other reports to the District or the City. “Information Services” means the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board, at www.emma.msrb.org; provided, however, in accordance with then current guidelines of the Securities and Exchange Commission, Information Services shall mean such other organizations providing information with respect to called bonds as the District may designate to the Trustee in writing. “Interest Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Interest Payment Date” means each March 1 and September 1, commencing March 1, 2022; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date. “Investment Agreement” means one or more agreements for the investment of funds of the District complying with the criteria therefor as set forth in subsection (11) of the definition of Authorized Investments herein. “Maximum Annual Debt Service” means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds and any Parity Bonds, as applicable, by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds and Parity Bonds, as applicable, payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds and Parity Bonds, as applicable, Outstanding in such Bond Year if the Bonds and Parity Bonds, as applicable, are retired as scheduled. -12- P6401-1052\2517808v6.doc “Minimum Denomination Reduction Event” means the occurrence of either of the following events, whichever is earlier: (i) April 1 next succeeding the beginning of the Fiscal Year in which Developed Property (each as defined in the Rate and Method) is responsible for at least 25% of the annual Special Tax levy for the District, or (ii) the issuance by the District of Parity Bonds in accordance with Section 9.2 of this Indenture. “Moody’s” means Moody’s Investors Service, its successors and assigns. “Net Taxes” means Gross Taxes minus amounts set aside to pay Administrative Expenses not to exceed the Administrative Expenses Priority Amount. “Nominee” shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.16 hereof. “Ordinance” means Ordinance No. 1365 adopted by the legislative body of the District on May 27, 2021, providing for the levying of the Special Tax. “Outstanding Bonds” or “Outstanding Bonds and Parity Bonds” means all Bonds and/or Parity Bonds, as applicable, theretofore issued by the District, except: (1) Bonds and Parity Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 10.1 hereof; (2) Bonds and Parity Bonds for payment or redemption of which moneys shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds or Parity Bonds), provided that, if such Bonds or Parity Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Indenture or any applicable Supplemental Indenture for Parity Bonds; and (3) Bonds and Parity Bonds which have been surrendered to the Trustee for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof. “Overlapping Debt” means with respect to any property within the District, the sum of (a) the aggregate amount of all unpaid assessments which are a lien on such property and which are pledged to secure the repayment of bonds, plus (b) a portion of the principal amount of any outstanding bonds of other community facilities districts which are payable at least partially from special taxes to be levied on such property (the “Other CFD Bonds”) determined by multiplying the aggregate principal amount of the Other CFD Bonds by a fraction, the numerator of which is the amount of special taxes levied for the Other CFD Bonds on such property and the denominator of which is the total amount of special taxes levied for the Other CFD Bonds on all parcels of property which are subject to the levy of such special taxes, based upon information which is available for the then current Fiscal Year. “Parity Bonds” means all bonds, notes, or other similar evidences of indebtedness hereafter issued, payable out of the Net Taxes and which, as provided in this Indenture or any Supplemental Indenture, rank on a parity with the Bonds. -13- P6401-1052\2517808v6.doc “Participants” shall mean those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds or Parity Bonds as securities depository. “Person” means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. “Prepayments” means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method. “Principal Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Principal Office of the Trustee” means the corporate trust office of the Trustee located in Los Angeles, California, or such other office or offices as the Trustee may designate from time to time, or the office of any successor Trustee where it principally conducts its business of serving as trustee under indentures pursuant to which municipal or governmental obligations are issued, provided, for registration, transfer, exchange, surrender and payment of the Bonds, shall be the corporate trust operations office of the Trustee located in Saint Paul, Minnesota, or such other office designated by the Trustee. “Project” means those public facilities described in the Resolution of Formation which are to be acquired or constructed within and outside of the District, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within the District from time to time. “Project Costs” means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds or any Parity Bonds, including, but not limited to, remarketing, credit enhancement, Trustee and other fees and expenses relating to the issuance of the Bonds or any Parity Bonds and the formation of the District, and to pay any other “incidental expenses” of the District, as such term is defined in the Act. “Rate and Method” means the rate and method of apportionment of Special Taxes for the District approved by the Resolution of Formation and appended as Exhibit “B” to the Notice of Special Tax Lien for the District, recorded in the Official Records of the County of Riverside Recorder as Document No. 2021-0320187 on May 25, 2021, as it may be amended or modified from time to time. “Rating Agency” means Moody’s and S&P, or both, as the context requires. “Rebate Fund” means the fund by that name established pursuant to Section 3.1 hereof in which there are established the Accounts described in Section 3.7 hereof. “Record Date” means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. -14- P6401-1052\2517808v6.doc “Redemption Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Regulations” means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. “Representation Letter” shall mean the Blanket Letter of Representations from the District to the Depository as described in Section 2.13 hereof. “Reserve Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Reserve Policy” means an irrevocable standby or direct-pay letter of credit, insurance policy, or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to Section 3.6, provided that all of the following requirements are met at the time of acceptance thereof by the Trustee: (a) the long-term credit rating of such bank or insurance company is A+ or better from S&P or A1 or better from Moody’s; (b) such letter of credit, insurance policy, or surety bond has a term of at least twelve (12) months; (c) such letter of credit, insurance policy, or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released; and (d) the Trustee is authorized pursuant to the terms of such letter of credit, insurance policy, or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Interest Account and the Principal Account for the purpose of making payments required pursuant to this Indenture. “Reserve Requirement” shall mean with respect to the Series 2021 Bonds, as of the date of calculation, an amount equal to the least of (i) Maximum Annual Debt Service on the then Outstanding Bonds of such Series; (ii) 10% of the original amount of the Bonds of such Series (“amount” meaning the principal amount of the Series 2021 Bonds, unless such Series was issued with original issue discount greater than two percent of the principal amount, or original issue premium greater than the sum of two percent of the principal amount plus original issue premium attributable exclusively to reasonable underwriters’ compensation, in which case “amount” means issue price); or (iii) 125% of average Annual Debt Service on the then Outstanding Bonds of such Series. “Resolution of Formation” means Resolution No. 2021-10 adopted by the City Council of the City on April 22, 2021, pursuant to which the City formed the District. “S&P” means S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC, its successors and assigns. “Series” means, when used with reference to the Bonds, all of the Bonds authenticated and delivered on original issuance and identified pursuant to this Indenture or a Supplemental Indenture authorizing such Bonds as a separate series or issue of Bonds, and any Bonds thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to this Indenture. -15- P6401-1052\2517808v6.doc “Series 2021 Bonds” means the District’s Special Tax Bonds, Series 2021, issued on their Delivery Date in the aggregate principal amount of $__________. “Series 2021 Term Bonds” means, collectively, the Series 2021 Bonds maturing on September 1, 20__ and September 1, 20__. “Sinking Fund Payment” means the annual payment to be deposited in the Redemption Account to redeem a portion of the Series 2021 Term Bonds in accordance with the schedules set forth in Section 4.1(b) hereof and any annual sinking fund payment schedule to retire any Parity Bonds which are designated as Term Bonds. “Special Tax Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. “Special Taxes” means the taxes authorized to be levied by the District on property within the District in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the May 13, 2021 election in the District, including any scheduled payments and any Prepayments thereof, the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien, and penalties and interest thereon. “Subaccount” means any subaccount created pursuant to this Indenture. “Supplemental Indenture” means any supplemental indenture amending or supplementing this Indenture. “Surplus Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. “Tax Certificate” means the Certificate Regarding Compliance with Certain Tax Matters (or similar document) pertaining to the use and investment of proceeds of a Series of Bonds, executed and delivered by a duly authorized officer of the District and of the City on the related Delivery Date, including any and all exhibits and attachments thereto. “Tax-exempt” means, with respect to interest on any obligations of a state or local government, including the interest on the Series 2021 Bonds, that such interest is excluded from gross income for federal income tax purposes whether or not such interest is an item of tax preference for purposes of the alternative minimum tax under the Code or otherwise taken into account in calculating tax liabilities under the Code. “Term Bonds” means the Series 2021 Term Bonds and any Parity Bonds which are designated as Term Bonds in the Supplemental Indenture providing for the issuance of such Parity Bonds. “Trustee” means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, at its corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust -16- P6401-1052\2517808v6.doc company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3 and any successor thereto. “Underwriter” means Piper Sandler & Co. with respect to the Series 2021 Bonds. “Value of District Property” means for all parcels of property in the District which are subject to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes then due and owing, either (i) the fair market value, as of the date of the appraisal provided for below of such parcels, including with respect to such parcels the value of the then existing improvements thereon, as estimated by an appraiser, who shall be a State of California certified general real estate appraiser selected and employed by the District, in an appraisal performed within ninety (90) days preceding the date of such determination based upon a methodology of valuation consistent with the City’s policy for appraisals, provided that a mass appraisal methodology may be applied when valuing Developed Property; or (ii) the full cash value of any or all of such parcels, including with respect to such parcels the value of the improvements thereon, as set forth on the last equalized assessment roll of the County Assessor of the County of Riverside; or (iii) any combination of clauses (i) and (ii). ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1 Amount, Issuance, Purpose and Nature of Bonds. Under and pursuant to the Act, the Series 2021 Bonds in the aggregate principal amount of $__________ (___________________ Dollars) shall be issued for the purpose of financing the Project, funding the Reserve Account at the initial Reserve Requirement, and paying Costs of Issuance; provided that the aggregate principal amount of the Bonds and any Parity Bonds authorized by the legislative body in accordance with Section 9.2 hereof shall not exceed the total indebtedness presently authorized or subsequently authorized by the qualified electors of the District in accordance with the Act. The Bonds and any Parity Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the Special Tax Fund (other than amounts in the Administrative Expenses Account of the Special Tax Fund). Section 2.2 Type and Nature of Bonds and Parity Bonds. Neither the faith and credit nor the taxing power of the City, the State of California or any political subdivision thereof other than the District is pledged to the payment of the Bonds or any Parity Bonds. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds or any Parity Bonds. The Bonds and any Parity Bonds are not general or special obligations of the City nor general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund (exclusive of the Administrative Expenses Account), as more fully described herein. The District’s limited obligation to pay the principal of, premium, if any, and interest on the Bonds and any Parity Bonds from amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds or any Parity Bonds may compel the exercise of the -17- P6401-1052\2517808v6.doc taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and any Parity Bonds and premiums upon the redemption thereof, if any, are not a debt of the City, the State of California or any of its political subdivisions in contravention of any constitutional or statutory limitation or restriction. The Bonds and any Parity Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any of the District’s property, or upon any of its income, receipts or revenues, except the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) which are, under the terms of this Indenture and the Act, set aside for the payment of the Bonds and any Parity Bonds, and interest thereon, and neither the members of the legislative body of the District or the City Council of the City nor any persons executing the Bonds or any Parity Bonds, are liable personally on the Bonds or any Parity Bonds by reason of their issuance. Notwithstanding anything to the contrary contained in this Indenture, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds or any Parity Bonds, or for the performance of any covenants contained herein. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.3 Equality of Bonds and Parity Bonds; Pledge of Net Taxes. Pursuant to the Act and this Indenture, the Bonds and any Parity Bonds shall be equally payable from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account), without priority for number, date of the Bonds or Parity Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any Parity Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account), which are hereby pledged and set aside for the payment of the Bonds and any Parity Bonds. Amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and any Parity Bonds and so long as any of the Bonds and any Parity Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture. Notwithstanding any provision contained in this Indenture to the contrary, Net Taxes deposited in the Rebate Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds or any Parity Bonds, and none of the Rebate Fund, the Surplus Fund, the Improvement Fund, the Costs of Issuance Fund, or the Administrative Expenses Account of the Special Tax Fund shall be construed as a trust fund held for the benefit of the Owners. Section 2.4 Description of Bonds; Interest Rates. The Bonds and any Parity Bonds shall be issued in fully registered form in Authorized Denominations. As provided in Section 5.2(j), promptly following the occurrence of a Minimum Denomination Reduction Event and in any event within ten (10) Business Days thereafter, the District shall file, or cause to be filed, with the Information Services a notice of the occurrence of such Minimum Denomination Reduction Event and stating that, as a result of and commencing from and after such event, the minimum authorized denominations for the Bonds have been reduced pursuant to the terms of -18- P6401-1052\2517808v6.doc this Indenture to $5,000 or any integral multiple thereof. The Bonds and any Parity Bonds of each issue shall be numbered as desired by the Trustee. The Series 2021 Bonds shall be designated “CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK), SPECIAL TAX BONDS, SERIES 2021.” The Series 2021 Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on March 1, 2022 and each Interest Payment Date thereafter: Maturity Date (September 1) Principal Amount Interest Rate $ % Interest shall be payable on each Bond and Parity Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of that Bond or Parity Bond has been paid; provided, however, that if at the maturity date of any Bond or Parity Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds and Parity Bonds shall then cease to bear interest. Interest due on the Bonds and Parity Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. Section 2.5 Place and Form of Payment. The Bonds and Parity Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and Parity Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal Office of the Trustee, or at the designated office of any successor Trustee. Interest on any Bond or Parity Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond or Parity Bond, unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond or Parity Bond, in which event interest shall be payable from the dated date of such Bond or Parity Bond, as applicable; provided, however, that if at the time of authentication of such Bond or Parity Bond, interest is in default, interest on that Bond or Parity Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that Bond or Parity Bond, interest on that Bond or Parity Bond shall be payable from its dated date. Interest on any Bond or Parity Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond or Parity Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed on the Interest Payment -19- P6401-1052\2517808v6.doc Date by first class mail, postage prepaid, to such Bondowner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the Bonds or of any issue of Parity Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account designated by such Owner. Section 2.6 Form of Bonds and Parity Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which form is hereby approved and adopted as the form of such Bonds and of the certificate of authentication. Each issue of Parity Bonds and the certificate of authentication therefor shall be in the form provided in the Supplemental Indenture for such issue of Parity Bonds. Until definitive Bonds or Parity Bonds, as applicable, shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds or Parity Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds or Parity Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds or Parity Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds or Parity Bonds. If the District issues temporary Bonds or Parity Bonds, it shall execute and furnish definitive Bonds or Parity Bonds, as applicable, without unnecessary delay and thereupon any temporary Bond or Parity Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond or Parity Bond of the same issue, maturity, interest rate and principal amount in any Authorized Denomination. All temporary Bonds or Parity Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued. Section 2.7 Execution and Authentication. The Bonds and Parity Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Clerk of the City, or any duly appointed deputy City Clerk, in their capacity as officers of the District, and the seal of the District (or a facsimile thereof) may be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the City Clerk of the City Council. In case any one or more of the officers who shall have signed or sealed any of the Bonds or Parity Bonds shall cease to be such officer before the Bonds or Parity Bonds so signed and sealed have been authenticated and delivered by the Trustee (including new Bonds or Parity Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or Parity Bonds or to lost, stolen, destroyed or mutilated Bonds or Parity Bonds), such Bonds or Parity Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds or Parity Bonds had not ceased to hold such office. Also, any Bond or Parity Bond may be signed on behalf of the District by any individual who on the actual date of the execution of such Bond or Parity Bond shall be the proper officer although on the nominal date of such Bond such individual shall not have been such officer. Only the Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A attached hereto shall be entitled to any right or benefit under this Indenture, -20- P6401-1052\2517808v6.doc and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Section 2.8 Bond Register. The Trustee will keep or cause to be kept, at the Principal Office of the Trustee, sufficient books for the registration and transfer of the Bonds and any Parity Bonds which shall upon reasonable prior notice be open to inspection by the District during all regular business hours, and, subject to the limitations set forth in Section 2.9 below, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as herein provided. The District and the Trustee may treat the Owner of any Bond or Parity Bond whose name appears on the Bond Register as the absolute Owner of that Bond or Parity Bond for any and all purposes, and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner’s address so that the Bond Register may be revised accordingly. Section 2.9 Registration of Exchange or Transfer. Any Bond, or any portion thereof, may only be transferred in principal amounts equal to Authorized Denominations (unless, prior to the occurrence of a Minimum Denomination Reduction Event and due to prior redemption in part thereof, the Bond is Outstanding in a principal amount of less than $100,000, then in an integral multiple of $5,000 of less than $100,000). No transfers of Bonds shall be required to be made (a) during a period of fifteen (15) days next preceding any selection of the Bonds or Parity Bonds to be redeemed, or (b) with respect to Bonds or Parity Bonds which have been selected for redemption. Subject to the limitations set forth in the following paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the Principal Office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Bondowner or his or her duly authorized attorney. Bonds or Parity Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount of Bonds or Parity Bonds for other Authorized Denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond or Parity Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds or Parity Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of (i) Bonds or Parity -21- P6401-1052\2517808v6.doc Bonds for a period of fifteen (15) days next preceding any selection of the Bonds or Parity Bonds to be redeemed; or (ii) any Bonds or Parity Bonds which have been selected for redemption. Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond or Parity Bond shall become mutilated, the District shall execute, and the Trustee shall authenticate and deliver, a new Bond or Parity Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond or Parity Bond so mutilated, but only upon surrender to the Trustee of the Bond or Parity Bond so mutilated. Every mutilated Bond or Parity Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond or Parity Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District shall execute and the Trustee shall authenticate and deliver, a new Bond or Parity Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond or Parity Bond so lost, destroyed or stolen. Any Bond or Parity Bond issued in lieu of any Bond or Parity Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds and Parity Bonds issued hereunder. The Trustee shall not treat both the original Bond or Parity Bond and any replacement Bond or Parity Bond as being Outstanding for the purpose of determining the principal amount of Bonds or Parity Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds or Parity Bonds Outstanding hereunder, but both the original and replacement Bond or Parity Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond or Parity Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds or Parity Bonds. Section 2.11 Validity of Bonds and Parity Bonds. The validity of the authorization and issuance of the Bonds and any Parity Bonds shall not be affected in any way by any defect in any proceedings taken by the District for the financing of the Project, or by the invalidity, in whole or in part, of any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the financing of the Project or upon the performance by any Person of his obligation with respect to the Project, and the recital contained in the Bonds or any Parity Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. Section 2.12 Book-Entry System. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each of the maturities of the Bonds. Upon initial delivery, the ownership of each such Bond shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository. Except as provided in Section 2.14 hereof, all of the Outstanding Bonds shall be registered in the registration books kept by the Trustee in the name of the Nominee. At the election of the District, any Parity Bonds may also be issued as book-entry bonds registered in the name of the Nominee as provided herein, in which case the references in Sections 2.12 through 2.15 to “Bonds” shall be applicable to such Parity Bonds. With respect to Bonds registered in the registration books kept by the Trustee in the name of the Nominee, the District and the Trustee shall have no responsibility or obligation to any -22- P6401-1052\2517808v6.doc such Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds are redeemed in part, or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest due with respect to the Bonds. The District and the Trustee may treat and consider the Person in whose name each Bond is registered in the registration books kept by the Trustee as the holder and absolute owner of such Bond for the purpose of payment of the principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest due on the Bonds only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the District’s obligations with respect to payment of the principal, premium, if any, and interest due on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Trustee, shall receive a Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant to this Indenture. Upon delivery by the Depository to the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Indenture shall refer to such new nominee of the Depository. Section 2.13 Representation Letter. In order to qualify the Bonds and any Parity Bonds which the District elects to register in the name of the Nominee for the Depository’s book-entry system, an authorized representative of the District is hereby authorized to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way limit the provisions of Section 5.1 or in any other way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners, as shown on the registration books kept by the Trustee. The District agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Authorized Representatives of the District are hereby authorized to take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository’s book-entry program. Section 2.14 Transfers Outside Book-Entry System. In the event (i) the Depository determines not to continue to act as securities depository for the Bonds, or (ii) the District determines that the Depository shall no longer so act, then the District will discontinue the book-entry system with the Depository. If the District fails to identify another qualified securities depository to replace the Depository then the Bonds so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the -23- P6401-1052\2517808v6.doc Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 hereof. Section 2.15 Payments to the Nominee. Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, premium, if any, and interest due with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. Section 2.16 Initial Depository and Nominee. The initial Depository under this Article shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS Section 3.1 Creation of Funds; Application of Proceeds. (a) There is hereby created and established and shall be maintained by the Trustee the following funds and accounts: (1) The City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Fund (the “Special Tax Fund”) (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account (in which there shall be established and created a separate Subaccount with respect to each Series of Bonds and Parity Bonds, if any, designated as the “Series ______ Reserve Subaccount”), and an Administrative Expenses Account). (2) The City of Palm Desert Community Facilities District No. 2021-1 (University Park) Improvement Fund (the “Improvement Fund”) (in which there shall be established and created a separate Account with respect to each Series of Bonds and Parity Bonds, if any, designated as the “Series ______ Improvement Account”). (3) The City of Palm Desert Community Facilities District No. 2021-1 (University Park) Costs of Issuance Fund (the “Costs of Issuance Fund”) (in which there shall be established and created a separate Account with respect to each Series of Bonds and Parity Bonds, if any, designated as the “Series ______ Costs of Issuance Account”). (4) The City of Palm Desert Community Facilities District No. 2021-1 (University Park) Rebate Fund (the “Rebate Fund”). (5) The City of Palm Desert Community Facilities District No. 2021-1 (University Park) Surplus Fund (the “Surplus Fund”). The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Trustee, and the Trustee shall invest and disburse the amounts in such funds, accounts and -24- P6401-1052\2517808v6.doc subaccounts in accordance with the provisions of this Article III and shall deposit investment earnings thereon in accordance with the provisions of Section 3.11 hereof. In connection with the issuance of any Parity Bonds, the Trustee, at the written direction of an Authorized Representative of the District, may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds. (b) A portion of the proceeds of the sale of the Series 2021 Bonds in the amount of $_____________ (such amount being equal to the principal amount of the Series 2021 Bonds, [plus/less] original issue [premium/discount] of $_____________, less an Underwriter’s discount of $_____________) shall be received by the Trustee on behalf of the District and deposited as follows: (1) $_____________ shall be transferred to the escrow agent under the Escrow Agreement and deposited in the Escrow Fund established thereunder (which together with (a) $_____________ transferred by the CFD 2005-1 Bonds Trustee from the funds and accounts held in connection with the CFD 2005-1 Pro Rata Bonds, and (b) $_________ of CFD 2005-1 monies transferred by the City equals a total amount of $_____________ transferred to the escrow agent under the Escrow Agreement for deposit into the Escrow Fund established thereunder); (2) $_____________ shall be deposited in the Series 2021 Account of the Improvement Fund; (3) $_____________ shall be deposited in the Series 2021 Account of the Costs of Issuance Fund to pay the Costs of Issuance of the Series 2021 Bonds; and (4) $_____________ shall be deposited in the Reserve Account of the Special Tax Fund, which is equal to the initial Reserve Requirement for the Series 2021 Bonds. The Trustee may, in its discretion, establish a temporary fund or account in its books and records to facilitate such deposits. Section 3.2 Deposits to and Disbursements from Special Tax Fund. (a) To the extent the District receives any Prepayments, the District shall deposit such Prepayments with the Trustee, together with a Certificate of an Authorized Representative designating such Special Taxes as Prepayments and specifying the respective amounts to be deposited in the various funds and accounts hereunder, and the Trustee shall make such deposits as specified in such certificate promptly after its receipt thereof. Except for any Prepayments to be deposited pursuant to the foregoing, the Trustee shall, on or promptly after each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee shall transfer the Special Taxes on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections 3.3 through 3.8, in the following order of priority, to: -25- P6401-1052\2517808v6.doc (1) the Administrative Expenses Account of the Special Tax Fund; (2) the Interest Account of the Special Tax Fund; (3) the Principal Account of the Special Tax Fund; (4) the Redemption Account of the Special Tax Fund; (5) the Reserve Account of the Special Tax Fund; (6) the Rebate Fund; and (7) the Surplus Fund. Notwithstanding the foregoing and any other provision of this Indenture to the contrary, in the event of a shortfall of amounts on deposit in the Special Tax Fund (such shortfall being determined excluding amounts on deposit in, and prior to drawing upon, the Reserve Account) to make the transfers, pursuant to Sections 3.4 and 3.5 herein, to the Principal Account of the Special Tax Fund and to the Redemption Account of the Special Tax Fund necessary to pay in full both (x) the principal payment due on the Bonds and any Parity Bonds maturing on the applicable September 1 and (y) the Sinking Fund Payment due on any Outstanding Bonds and any Parity Bonds on such September 1, the Trustee shall transfer the available amount from the Special Tax Fund to the Principal Account and the Redemption Account on a pro rata basis (calculated with reference to the respective principal payment and Sinking Fund Payment coming due and payable on such September 1) at least three (3) Business Days prior to such September 1. (b) At maturity of all of the Bonds and any Parity Bonds and, after all principal and interest then due on the Bonds and any Parity Bonds then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose. Section 3.3 Administrative Expenses Account of the Special Tax Fund. From time to time, the District may provide the Trustee with a Certificate of an Authorized Representative of the District in substantially the form provided as Exhibit B hereto, requesting the payment of Administrative Expenses as set forth therein. Upon its receipt of any such certificate, the Trustee shall transfer from the Special Tax Fund and deposit in the Administrative Expenses Account of the Special Tax Fund amounts necessary to make timely payment of any such Administrative Expenses as set forth in the Certificate of an Authorized Representative of the District; provided, however, that, except as set forth in the following sentence, the total amount transferred in a Bond Year shall not exceed the Administrative Expenses Priority Amount until such time as there has been deposited (a) to the Interest Account and the Principal Account an amount, together with any amounts already on deposit therein, that is sufficient to pay the interest and principal on all Bonds and any Parity Bonds due in such Bond Year, (b) to the Redemption Account an amount, together with any amounts already on deposit therein, that is sufficient to call and redeem Series 2021 Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedule in the Supplemental Indenture for such Parity Bonds, and (c) to -26- P6401-1052\2517808v6.doc the Reserve Account an amount, together with any amounts already on deposit therein, that is sufficient to restore the Reserve Account to the Reserve Requirement. Notwithstanding the foregoing, amounts in excess of the Administrative Expenses Priority Amount may be transferred to the Administrative Expenses Account to the extent necessary to collect delinquent Special Taxes. Moneys in the Administrative Expenses Account of the Special Tax Fund may be invested in any Authorized Investments as directed in writing by an Authorized Representative of the District and shall be disbursed as directed in a Certificate of an Authorized Representative. The Trustee shall have no obligation to transfer any amount from the Special Tax Fund for deposit in the Administrative Expenses Account of the Special Tax Fund except upon its receipt of a Certificate of an Authorized Representative of the District pursuant to this section. Section 3.4 Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon redemption, shall be paid by the Trustee from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds and any Parity Bonds will be made when due and after making the transfer required by Section 3.3, if any, at least three (3) Business Days prior to each March 1 and September 1, the Trustee shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds or any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund (exclusive of the Reserve Account) are inadequate to make the foregoing transfers, then any deficiency shall be made up by transfers from the Reserve Account: (a) To the Interest Account, an amount such that the balance in the Interest Account three (3) Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. (b) To the Principal Account, an amount such that the balance in the Principal Account three (3) Business Days prior to September 1 of each year, commencing September 1, 2022, shall equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity. Section 3.5 Redemption Account of the Special Tax Fund. (a) With respect to each September 1 on which a Sinking Fund Payment is due and after the deposits have been made to the Administrative Expenses Account, the Interest Account, and the Principal Account of the Special Tax Fund as required by Sections 3.3 and 3.4 hereof, the Trustee shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account three (3) -27- P6401-1052\2517808v6.doc Business Days prior to each September 1 equal to the Sinking Fund Payment due on any Outstanding Bonds and any Parity Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account, if funded, pursuant to Section 3.6 below. Moneys so deposited in the Redemption Account shall be used and applied by the Trustee to call and redeem Series 2021 Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof, and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedules in the Supplemental Indenture for such Parity Bonds. (b) After making the deposits to the Administrative Expenses Account, the Interest Account and the Principal Account of the Special Tax Fund pursuant to Sections 3.3 and 3.4 above and to the Redemption Account for Sinking Fund Payments then due pursuant to subparagraph (a) of this Section, and in accordance with the District’s election to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, or to call Parity Bonds for optional redemption as set forth in any Supplemental Indenture for Parity Bonds, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) may be applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (c) Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to Section 4.1(c) hereof for the use of such Prepayments to the payment of the principal of, premium, and interest on the Bonds and Parity Bonds to be redeemed with such Prepayments. (d) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and Parity Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds or Parity Bonds to be redeemed upon presentation and surrender of such Bonds or Parity Bonds and in the case of an optional redemption or an extraordinary redemption from Prepayments to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account, other than Prepayments, may be used to purchase Outstanding Bonds or Parity Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds or Parity Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or an extraordinary redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.1(a) or 4.1(c) hereof, as applicable, or in the case of Parity Bonds the premium established in any Supplemental Indenture. Any accrued interest payable upon the purchase of Bonds or Parity Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. -28- P6401-1052\2517808v6.doc Section 3.6 Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The Reserve Requirement may be satisfied by crediting to the Reserve Account moneys or one or more Reserve Policies or any combination thereof, which in the aggregate make funds available in the Reserve Account in an amount equal to the Reserve Requirement. Upon the deposit with the Trustee of any such Reserve Policy, the Trustee shall release moneys from the Reserve Account to the Interest Account of the Special Tax Fund, in an amount equal to the face amount of such Reserve Policy. If funded, the amounts in the Reserve Account shall be applied as follows: (a) Transfers from Reserve Account in the Event of Insufficiency for Interest, Principal, and Sinking Fund Payments. Except as otherwise provided in this Section 3.6, moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.7 hereof upon written direction from the District. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds and Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve Account for deposit (in order of priority) in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund (subject to the pro rata allocation between the Principal Account and the Redemption Account described in the following sentence), or the Rebate Fund, as applicable, moneys necessary for such purposes. Any such withdrawal from the Reserve Account for the principal of, including Sinking Fund Payments, then due shall be deposited on a pro rata basis (calculated with reference to the respective principal payment and Sinking Fund Payment coming due and payable on such September 1) into the Principal Account and the Redemption Account, respectively. (b) Replenishment of Reserve Account to Reserve Requirement. On or after March 2 and September 2 of each year, after making the required transfers referred to in Sections 3.3, 3.4 and 3.5 above, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Administrative Expenses Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund on or before the next September 1. If amounts available in the Special Tax Fund together with any other amounts transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the District shall include the amount necessary fully to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates. -29- P6401-1052\2517808v6.doc (c) Application of Moneys in Reserve Account to Optional or Extraordinary Redemption or Defeasance. In connection with a redemption of Bonds pursuant to Section 4.1(a) or (c), or Parity Bonds in accordance with any Supplemental Indenture, or a partial defeasance of Bonds or Parity Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement (taking into account Outstanding Bonds and Parity Bonds after such redemption or partial defeasance). The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to Section 9.1(b) or (c), as applicable, to partially defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. (d) Application of Moneys in Reserve Account to Debt Service Payments in Final Bond Year. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds in accordance herewith or, if applicable, with any Supplemental Indenture for a Series of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds and Parity Bonds, as applicable, in the final Bond Year for such Series. (e) Moneys in Reserve Account in Excess of Reserve Requirement. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this section shall be withdrawn from the Reserve Account on the fifth (5th) Business Day before each March 1 and September 1, and such moneys shall be transferred and deposited into the Interest Account of the Special Tax Fund; provided, however, to the extent that, as of a date ninety (90) days prior to the next occurring Interest Payment Date, the amount on deposit in the Reserve Account is equal to or greater than the aggregate remaining principal payments to be paid on the Bonds and any Parity Bonds, any and all amounts in the Reserve Account may be applied to effect a redemption of all Outstanding Bonds pursuant to Section 4.1(a) and any Outstanding Parity Bonds in accordance with any Supplemental Indenture. The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to Section 9.1(b) or (c), as applicable, to defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date. Section 3.7 Rebate Fund. (a) To the extent and at such time necessary to accommodate rebate amounts pursuant to the Tax Certificate, the Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund. Upon establishing the Rebate Fund, the Trustee shall establish a separate Account within the Rebate Fund with respect to the Series 2021 Bonds and each Series of Tax-exempt Parity Bonds. All amounts on deposit in the Rebate Fund with respect to the Series 2021 Bonds or a Series of Tax- exempt Parity Bonds shall be governed by this Section 3.7 and the Tax Certificate for such Series, unless the District obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest payments on the Bonds and Parity Bonds, as applicable, will not be adversely affected if such requirements are not satisfied. The District -30- P6401-1052\2517808v6.doc shall calculate and make, or cause to be calculated and made, the rebate amount in accordance with the Tax Certificate. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund (including the Accounts therein) with respect to the Series 2021 Bonds or a Series of Tax-exempt Parity Bonds after redemption and payment of such Series and after making the payments required under the Tax Certificate, shall be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District for any lawful purpose. (c) Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Series 2021 Bonds and any Tax- exempt Parity Bonds with respect to which an Account has been created in the Rebate Fund. (d) Amendment Without Consent of Owners. This Section 3.7 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2021 Bonds and any Series of Parity Bonds issued on a Tax- exempt basis. The Trustee shall not be responsible for calculating rebatable arbitrage or for the adequacy or correctness or any rebate report or rebate calculations. The Trustee shall be deemed conclusively to have complied with the provisions of this Indenture regarding calculation and payment of rebatable arbitrage if it follows the directions of the District, and it shall have no independent duty to review such calculations or enforce the compliance by the District with such rebate requirements. Section 3.8 Surplus Fund. After making the transfers required by Sections 3.3, 3.4, 3.5, 3.6 and 3.7 hereof, as soon as practicable after each September 1, and in any event prior to each October 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received a Certificate of an Authorized Representative directing that certain amounts be retained in the Special Tax Fund because the District has included such amounts as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(b) hereof. Moneys deposited in the Surplus Fund will be transferred by the Trustee at the direction of an Authorized Representative of the District (i) to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, premium, if any, and interest on the Bonds and any Parity Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor, (ii) to the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement, (iii) to the Administrative Expenses Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expenses Account of the Special Tax Fund are insufficient to pay Administrative Expenses, or (iv) for any other lawful purpose of the District. -31- P6401-1052\2517808v6.doc The amounts in the Surplus Fund are not pledged to the repayment of the Bonds or any Parity Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds or Parity Bonds, the District will notify the Trustee in a Certificate of an Authorized Representative, and the Trustee will segregate such amount into a separate account of the Surplus Fund. The moneys on deposit in such account of the Surplus Fund shall be invested at the written direction of the District in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the Series of Bonds or Parity Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a Tax-exempt basis for federal income tax purposes. Section 3.9 Costs of Issuance Fund. The moneys in the Accounts of the Costs of Issuance Fund shall be disbursed by the Trustee pursuant to a Certificate of an Authorized Representative of the District. Any balance therein shall be transferred by the Trustee to the corresponding Account of the Improvement Fund 180 days after the Delivery Date of the Bonds or Parity Bonds, as applicable, and the Trustee shall thereafter close the Costs of Issuance Fund and the Accounts therein. Section 3.10 Improvement Fund. (a) Requisition for Disbursement of Project Costs. Subject to the limitations and provisions set forth in this Section 3.10, the moneys in the Improvement Fund and any Accounts established therein shall be applied exclusively to pay the Project Costs. Amounts for Project Costs shall be disbursed by the Trustee from such accounts of the Improvement Fund as specified in a Requisition for Disbursement of Project Costs, substantially in the form of Exhibit C attached hereto, which must be submitted in connection with each requested disbursement. (b) Improvement Fund Surplus. Upon receipt of a Certificate of an Authorized Representative of the District stating that all or a specified portion of the amount remaining in an Account of the Improvement Fund is no longer needed to pay Project Costs, the Trustee shall transfer all or such specified portion, as applicable, of the moneys remaining on deposit in such Account of the Improvement Fund to the Principal Account or Redemption Account of the Special Tax Fund for application to the next principal payment coming due on the corresponding Series of Bonds or to the Surplus Fund, as directed in the Certificate, provided that in connection with any direction to transfer amounts to the Surplus Fund there shall have been delivered to the Trustee with such Certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a Tax-exempt basis for federal income tax purposes. Section 3.11 Investments. Moneys held in any of the Funds, Accounts, and Subaccounts under this Indenture shall be invested at the written direction of the District in -32- P6401-1052\2517808v6.doc accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds, Accounts and Subaccounts. Any loss resulting from such Authorized Investments shall be credited or charged to the Fund, Account or Subaccount from which such investment was made, and any investment earnings on a Fund, Account or Subaccount shall be applied as follows: (i) investment earnings on all amounts deposited in the Costs of Issuance Fund, the Improvement Fund, the Special Tax Fund, the Surplus Fund and the Rebate Fund and each Account and Subaccount therein shall be deposited in those respective Funds, Accounts, and Subaccounts, and (ii) investment earnings on all amounts deposited in the Reserve Account shall be deposited therein to be applied as set forth in Section 3.6. Moneys in the Funds, Accounts, and Subaccounts held under this Indenture may be invested by the Trustee as directed in writing by the District, from time to time, in Authorized Investments subject to the following restrictions: (a) Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Costs of Issuance Fund. (b) Moneys in the Improvement Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Improvement Fund. Notwithstanding anything herein to the contrary, amounts in the Improvement Fund three (3) years after the Delivery Date for the Bonds and the proceeds of each issue of Parity Bonds issued on a Tax-exempt basis which are remaining on deposit in the Improvement Fund on the date which is three (3) years following the date of issuance of such issue of Parity Bonds shall be invested only in Authorized Investments the interest on which is excluded from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds from which such proceeds were derived, unless in the opinion of Bond Counsel such restriction is not necessary to prevent interest on the Bonds or any Parity Bonds which were issued on a Tax-exempt basis for federal income tax purposes from being included in gross income for federal income tax purposes. (c) Moneys in the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same become due. (d) Moneys in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which, taken together, have a weighted average maturity not in excess of five (5) years; provided that such amounts may be invested in an Investment Agreement to the later of the final maturity of the Bonds or any Parity Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.6 hereof; -33- P6401-1052\2517808v6.doc and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds or an issue of Parity Bonds shall mature later than the respective final maturity date of the Bonds or the issue of Parity Bonds, as applicable. (e) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (1) of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.7 hereof or in Authorized Investments of the type described in clause (7) of the definition thereof. (f) In the absence of written investment directions from the District, the Trustee shall hold all monies uninvested. The Trustee shall sell, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the market value thereof at least semiannually on or before each Interest Payment Date. In making any valuations hereunder, the Trustee may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything herein to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Indenture. The Trustee or an affiliate may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for such investment. The Trustee or its affiliate, as applicable, may sell at the best market price reasonably obtainable at the time by the Trustee or its affiliate, as applicable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Authorized Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. The Trustee shall furnish the District periodic cash transaction statements which shall include detail for all investment transactions effected by the Trustee or brokers selected by the District. The District waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The District further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost, and other trade confirmations may be obtained from the applicable broker. -34- P6401-1052\2517808v6.doc ARTICLE IV REDEMPTION OF BONDS Section 4.1 Redemption of Bonds. (a) Optional Redemption. The Series 2021 Bonds maturing on or before September 1, 2028 are not subject to optional redemption prior to maturity. The Series 2021 Bonds maturing on or after September 1, 2029 shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District, from any source of funds on any date on or after September 1, 2028 in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price September 1, 2028 through August 31, 2029 103% September 1, 2029 through August 31, 2030 102 September 1, 2030 through August 31, 2031 101 September 1, 2031 and any date thereafter 100 In the event the District elects to redeem Series 2021 Bonds as provided above, the District shall give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Series 2021 Bonds of each maturity to be redeemed. The notice to the Trustee shall be given at least forty-five (45) but no more than ninety (90) days prior to the redemption date, or by such later date as is acceptable to the Trustee, in its sole discretion. (b) Mandatory Sinking Fund Redemption. (i) The Series 2021 Bonds maturing on September 1, 20__ and September 1, 20__ (collectively, the “Series 2021 Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter prior to maturity, in accordance with the respective schedules of Sinking Fund Payments set forth below. The Series 2021 Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Series 2021 Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: -35- P6401-1052\2517808v6.doc SERIES 2021 TERM BONDS MATURING SEPTEMBER 1, 20__ Redemption Date (September 1) Principal Amount $ (maturity) SERIES 2021 TERM BONDS MATURING SEPTEMBER 1, 20__ Redemption Date (September 1) Principal Amount $ (maturity) In the event of a partial optional redemption or extraordinary redemption of the Series 2021 Term Bonds, each of the remaining Sinking Fund Payments for such Series 2021 Term Bonds, as applicable, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000. (ii) Purchase of Series 2021 Term Bonds in Lieu of Redemption. If during the Fiscal Year immediately preceding one of the redemption dates specified above the District purchases Series 2021 Term Bonds pursuant to Section 4.1(d), at least forty-five (45) days prior to the redemption date, the District shall notify the Trustee as to the principal amount purchased and the amount of Series 2021 Term Bonds so purchased, as applicable, shall be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce such upcoming Sinking Fund Payment for the applicable maturity of the Series 2021 Term Bonds so purchased. All Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof. (c) Extraordinary Redemption. The Series 2021 Bonds are subject to extraordinary redemption as a whole, or in part, and on a pro rata basis among maturities of such Series in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account pursuant to Section 3.2, plus any amounts authorized to be transferred from the Reserve Account pursuant to Section 3.6(c), at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: -36- P6401-1052\2517808v6.doc Redemption Dates Redemption Price Any Interest Payment Date through March 1, 2029 103% September 1, 2029 and March 1, 2030 102 September 1, 2030 and March 1, 2031 101 September 1, 2031 and any Interest Payment Date thereafter 100 The District shall give written notice to the Trustee of its intention to redeem Series 2021 Bonds pursuant to this subsection, the redemption date, and the principal amount of the Series 2021 Bonds and of each maturity to be redeemed within such Series at least forty-five (45) but no more than ninety (90) days prior to the redemption date, or by such later date as is acceptable to the Trustee, in its sole discretion. (d) Purchase In Lieu of Redemption. As provided in Section 3.5(d) and Section 4.1(b)(ii), as applicable, in lieu or partially in lieu of any optional redemption, extraordinary redemption or mandatory sinking fund redemption as described above, moneys deposited in the Redemption Account, other than Prepayments, may be used to purchase Outstanding Series 2021 Bonds. Such purchases of Series 2021 Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or an extraordinary redemption, the premium applicable at the next following call date. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. All Series 2021 Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof. (e) The redemption provisions for Parity Bonds shall be set forth in a Supplemental Indenture. Section 4.2 Selection of Bonds and Parity Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of any Series of Bonds or Parity Bonds Outstanding, the Trustee shall select the Bonds or Parity Bonds to be redeemed from all Outstanding Bonds or Parity Bonds of such Series or such given portion thereof not previously called for redemption, on a pro rata basis among the maturities (unless the maturity or maturities are otherwise specified in this Indenture or in writing by the District) and by lot within a maturity in any manner which the Trustee in its discretion shall deem appropriate. For purposes of such selection, all Bonds or Parity Bonds of a denomination of more than $5,000 shall be deemed to be comprised of separate $5,000 portions, and such portions shall be treated as separate Bonds or Parity Bonds, as applicable, which may be separately redeemed. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption. Section 4.3 Notice of Redemption. When Bonds or Parity Bonds are due for redemption under Section 4.1 above or under another redemption provision set forth in a Supplemental Indenture relating to any Parity Bonds, the Trustee shall give notice, in the name -37- P6401-1052\2517808v6.doc of the District, of the redemption of such Bonds or Parity Bonds. Such notice of redemption shall (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redemption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemption, or all the Bonds or Parity Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the Bonds or Parity Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds or Parity Bonds are to be redeemed; (e) in the case of Bonds or Parity Bonds to be redeemed only in part, state the portion of such Bond or Parity Bond which is to be redeemed; (f) state the date of issue of the Bonds or Parity Bonds as originally issued; (g) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (h) state any other descriptive information needed to identify accurately the Bonds or Parity Bonds being redeemed as shall be specified by the Trustee. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond or Parity Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least thirty (30) days but no more than forty-five (45) days prior to the redemption date, the Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond or Parity Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds or Parity Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption shall be sent (i) not later than two (2) Business Days before the date that notice of redemption is mailed to the Bondowners pursuant to the first paragraph of this Section, to the Depository in such electronic format and manner as specified by the Depository and to any other registered securities depositories (in such electronic format and manner as specified thereby) then in the business of holding substantial amounts of obligations of types comprising the Bonds and Parity Bonds as determined by Trustee, and (ii) not later than the date that notice of redemption is mailed to the Bondowners pursuant to the first paragraph of this Section, to the Information Services in such electronic format and manner as specified by the Information Services. The District shall have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under this Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or -38- P6401-1052\2517808v6.doc arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. Upon the payment of the redemption price of any Bonds and Parity Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds and Parity Bonds being redeemed with the proceeds of such check or other transfer. Section 4.4 Partial Redemption of Bonds or Parity Bonds. Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Bondowner, at the expense of the District, a new Bond or Bonds or a new Parity Bond or Parity Bonds of Authorized Denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity or, in the case of surrender of a Parity Bond, a new Parity Bond or Parity Bonds subject to the foregoing limitations; provided, if such partial redemption occurs prior to the occurrence of a Minimum Denomination Reduction Event, and due to such partial redemption of a Bond, the Bond is Outstanding in a principal amount of less than $100,000, then a new Bond or Parity Bond may be issued pursuant to this Section 4.4 in an integral multiple of $5,000 of less than $100,000. Section 4.5 Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3 hereof, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (a) the Bonds and Parity Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture or in any Supplemental Indenture with respect to any Parity Bonds, anything in this Indenture or in the Bonds or the Parity Bonds to the contrary notwithstanding; (b) upon presentation and surrender thereof at the Principal Office of the Trustee, the redemption price of such Bonds and Parity Bonds shall be paid to the Owners thereof; (c) as of the redemption date the Bonds or the Parity Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or Parity Bonds, or portions thereof, shall cease to bear further interest; and (d) as of the date fixed for redemption no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture or any Supplemental Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. -39- P6401-1052\2517808v6.doc ARTICLE V COVENANTS AND WARRANTY Section 5.1 Warranty. The District shall preserve and protect the security pledged hereunder to the Bonds and any Parity Bonds against all claims and demands of all persons. Section 5.2 Covenants. So long as any of the Bonds or Parity Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: (a) Punctual Payment; Against Encumbrances. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond and Parity Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds and in accordance with this Indenture to the extent that Net Taxes and other amounts pledged hereunder are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, and this Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Supplemental Indentures and of the Bonds and any Parity Bonds issued hereunder. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in this Indenture, and will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, other than Parity Bonds issued in accordance with Section 9.2 hereof. Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds and the Parity Bonds. (b) Levy of Special Tax. Beginning in Fiscal Year 2021-22 and so long as any Bonds or Parity Bonds issued under this Indenture are Outstanding, but subject to the Rate and Method, the legislative body of the District covenants to levy the Special Tax in an amount equal to the Special Tax Requirement (as defined in the Rate and Method), which includes, but is not limited to, amounts sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay (1) the principal of and interest on the Bonds and any Parity Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. -40- P6401-1052\2517808v6.doc (c) Commence Foreclosure Proceedings. The District covenants for the benefit of the Owners of the Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings against any parcel with either (A) at least four (4) consecutive installments of delinquent Special Taxes or (B) delinquent Special Taxes in excess of $10,000 on any one parcel, in each instance by the December 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the December 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount on deposit in the Reserve Account is at least equal to the Reserve Requirement, and such delinquencies will not cause moneys in the Reserve Account to be withdrawn on the next succeeding Interest Payment Date. In no event shall such foreclosure actions exceed the time periods specified in Section 53356.1 of the Act. The District covenants that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. Notwithstanding the foregoing, the District may elect (but is not obligated) to advance the amount of any particular delinquency (excluding penalties and interest) and deposit such amount to the Special Tax Fund. Upon a deposit of such money in the Special Tax Fund, the District will not need to initiate a foreclosure action as provided above; provided, however, the District may reimburse itself for such advance when the Special Tax on such property is paid in the amount of such advance plus interest on such amount at a rate equal to the yield on the Outstanding Bonds. Interest and penalties paid in excess of the amount advanced by the District shall be deposited in the Special Tax Fund. Notwithstanding the foregoing, if at any time, the County’s Teeter Plan (adopted pursuant to Sections 4701 through 4717 of the California Revenue and Taxation Code) is in effect and is made applicable to the District and the Special Taxes being levied in connection with the Bonds, the District may, in its discretion, elect not to commence any judicial foreclosure proceeding pursuant to this Section 5.2(c) or defer the commencement of such proceedings until such time as the District deems appropriate. (d) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Trustee (who shall have no duty or obligation to inspect) or of the Owners of not less than 10% of the principal amount of the Bonds or the Owners of not less than 10% of any issue of Parity Bonds then Outstanding or their representatives authorized in writing. -41- P6401-1052\2517808v6.doc (e) Federal Tax Covenants. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and any Parity Bonds issued on a Tax-exempt basis for federal income tax purposes will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (1) The District shall not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the Tax-exempt status of interest on the Bonds or any Parity Bonds under Section 103(a) of the Code or cause interest on the Bonds or any Parity Bonds to be an item of tax preference for purposes of the alternative minimum tax under the Code. (2) In furtherance of the foregoing tax covenant, the District shall comply with the provisions of the Tax Certificate, which is incorporated herein as if fully set forth herein. These covenants shall survive payment in full or defeasance of the Bonds and any Parity Bonds. (f) Against Reduction of Maximum Special Taxes. The District hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the District hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the District below the levels provided in this Section 5.2(f) would interfere with the timely retirement of the Bonds and Parity Bonds. The District determines it to be necessary in order to preserve the security for the Bonds and Parity Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District hereby does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the District. (g) Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(f) above or to limit the power of the District to levy the Special Taxes for the purposes set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (h) Limitation on Right to Tender Bonds. The District hereby covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District shall have first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds and Parity Bonds when due. (i) Continuing Disclosure. The District covenants to comply with the terms of the Continuing Disclosure Agreement and with the terms of any certificate or agreement executed by the District with respect to any Parity Bonds, which assist the Underwriter in complying with -42- P6401-1052\2517808v6.doc Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Trustee hereby agrees to inform the District within three (3) Business Days after obtaining knowledge that any of the events listed in Section 5(a) of the Continuing Disclosure Agreement has occurred, or as soon as reasonably practicable thereafter. (j) Notice of Occurrence of Minimum Denomination Reduction Event. Promptly following the occurrence of a Minimum Denomination Reduction Event and in any event within ten (10) Business Days thereafter, the District shall file, or cause to be filed, with the Information Services a notice of the occurrence of such Minimum Denomination Reduction Event and stating that, as a result of and commencing from and after such event, the minimum authorized denominations for the Bonds have been reduced pursuant to the terms of this Indenture to $5,000 or any integral multiple thereof. (k) Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in this Indenture. ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1 Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District may from time to time, without notice to or consent of any of the Bondowners, adopt Supplemental Indentures for any of the following purposes (provided that no such Supplemental Indenture shall modify any of the rights or obligations of the Trustee without its written consent thereto): (a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Indenture or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond or Parity Bond payments; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this Indenture, including without limitation Section 9.2 hereof; (d) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to -43- P6401-1052\2517808v6.doc add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity Bonds then Outstanding; (e) to modify, alter or amend the Rate and Method in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is below the levels provided in Section 5.2(f) of this Indenture, and in any event not less than the sum of the estimated Administrative Expenses and 110% of the principal and interest due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment; or (f) to the extent necessary to obtain a municipal bond insurance policy or to obtain a rating on the Bonds, or in connection with satisfying all or a portion of the Reserve Requirement by crediting a Reserve Policy to the Reserve Account; provided that such amendments which shall not materially adversely affect the interests of the Owners of the then Outstanding Bonds; or (g) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Bondowners. Section 6.2 Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Indentures described in Section 6.1, the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however, that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity Bond, (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond or the rate of interest thereon, (c) a preference or priority of any Bond or Parity Bond over any other Bond or Parity Bond, or (d) a reduction in the aggregate principal amount of the Bonds and Parity Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds and Parity Bonds then Outstanding; provided, further, that no such Supplemental Indenture shall modify any of the rights or obligations of the Trustee without its written consent thereto. If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Bondowners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the Principal Office of the Trustee for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding as required by this Section. Whenever at -44- P6401-1052\2517808v6.doc any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds and any Parity Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental Indenture, Bonds or Parity Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds in instances where such consent is required pursuant to the provisions of this section, this Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds and Parity Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. Section 6.3 Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date and presentation of his Bond or Parity Bond for the purpose at the Principal Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity Bonds. If the District shall so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity Bonds shall be exchanged at the Principal Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds or Parity Bonds, upon surrender of such Outstanding Bonds or Parity Bonds. ARTICLE VII TRUSTEE Section 7.1 Trustee. U.S. Bank National Association, a national banking association, shall be the Trustee for the Bonds and any Parity Bonds unless and until another Trustee is appointed by the District hereunder. The District may, at any time, appoint a successor Trustee satisfying the requirements of Section 7.2 below for the purpose of receiving all money which -45- P6401-1052\2517808v6.doc the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5 above, interest payments to the Bondowners, to select Bonds and Parity Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation of Bonds and Parity Bonds all as provided in this Indenture, and to provide for the authentication of Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds and Parity Bonds paid, discharged and cancelled by it. The Trustee is hereby authorized to pay the Bonds and Parity Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds and Parity Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof. The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless from and against costs, claims, expenses and liabilities, including, without limitation, fees and expenses of its attorneys, not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder. The foregoing obligation of the District to indemnify the Trustee shall survive the removal or resignation of the Trustee or the discharge of the Bonds. Section 7.2 Removal of Trustee. The District may at any time in its sole discretion remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a bank, national banking association, or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least $100,000,000, and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank, national banking association, or trust company appointed as a successor publishes a report 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 section the combined capital and surplus of such bank, national banking association, or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee and notice being sent by the successor Trustee to the Bondowners of the successor Trustee’s identity and address. -46- P6401-1052\2517808v6.doc Section 7.3 Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the Principal Office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying the criteria in Section 7.2 above by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed and have accepted appointment within forty-five (45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bondholder (on behalf of itself and all other Owners of the Bonds) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Section 7.4 Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any Parity Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Indenture, the Bonds or any Parity Bonds, and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein, in the Bonds and any Parity Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds or any Parity Bonds for value. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee shall be responsible for the performance of the duties of the Trustee expressly set forth in this Indenture, and no implied duties or obligations shall be read into this Indenture against the Trustee. The Trustee shall have no responsibility for, and makes no representations with respect to, any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. Before taking any action under Article VIII hereof or this Article the Trustee may require indemnity satisfactory to the Trustee be furnished from any expenses and to protect it against any liability it may incur hereunder. The Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of the Owners of at least twenty-five percent (25%) (or other percentage provided for herein) in aggregate principal amount of Outstanding Bonds relating to the exercise of any right, power or remedy available to the Trustee. The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty. The Trustee may become the owner or pledgee of Bonds with the same rights it would have if it were not Trustee. -47- P6401-1052\2517808v6.doc The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond, Parity Bond, facsimile transmission, electronic mail or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond or Parity Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties 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 bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Trustee shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it shall actually receive. No provision in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers. The Trustee shall not be deemed to have knowledge of any default or Event of Default until an officer at the Trustee’s corporate trust office responsible for the administration of its duties hereunder shall have actual knowledge thereof or the Trustee shall have received written notice thereof at its corporate trust office. Section 7.5 Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.1 Events of Default. Any one or more of the following events shall constitute an “event of default” (each, an “Event of Default”): -48- P6401-1052\2517808v6.doc (a) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond or Parity Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) default in the due and punctual payment of the interest on any Bond or Parity Bond when and as the same shall become due and payable; or (c) except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds or any Parity Bonds, and such default shall have continued for a period of sixty (60) days after the District shall have been given notice in writing of such default by the Trustee or the Owners of twenty-five percent (25%), in aggregate principal amount of the Outstanding Bonds and Parity Bonds; provided, that if such default (other than a default arising from nonpayment of the Trustee’s fees and expenses) be such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if corrective action is instituted by the District within the applicable period and diligently pursued until the default is corrected. The Trustee agrees to give notice to the Owners as soon as practicable upon the occurrence of an Event of Default under (a) or (b) above and within sixty (60) days of the Trustee’s knowledge of an Event of Default under (c) above. Section 8.2 Remedies of Owners. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds and Parity Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture, including: (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) By a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and Parity Bonds and if indemnified to its satisfaction, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners of the Bonds and Parity Bonds. No remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy. Every such 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 or otherwise, and may be exercised without exhausting and without regard to any -49- P6401-1052\2517808v6.doc other remedy conferred by the Act or any other law; provided, under no circumstance shall the Bonds, or the obligation of the District to pay installments of principal thereof and interest thereon, be accelerated. Section 8.3 Application of Revenues and Other Funds After Default. Following the declaration by the Trustee of an Event of Default, all amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of this Indenture relating to the Bonds and Parity Bonds shall be applied by the Trustee in the following order upon presentation of the several Bonds and Parity Bonds: First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, advisors, attorneys and counsel, and to the payment of all other outstanding fees and expenses of the Trustee; and Second, to the payment of the whole amount of interest on and principal of the Bonds and Parity Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds and Parity Bonds; provided, however, that in the event such amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts shall be applied in the following order of priority: (a) first to the payment of all installments of interest on the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing, (b) second, to the payment of all installments of principal, including Sinking Fund Payments, of the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing, and (c) third, to the payment of interest on overdue installments of principal and interest on the Bonds and Parity Bonds on a pro rata basis based on the total amount then due and owing. Third, to deposit such amounts in the Reserve Account to restore the balance therein to the Reserve Requirement. After payment or deposit of such amounts, the Trustee may apply any remaining amounts received toward the payment of any rebate amounts pursuant to Section 3.7 or to the payment of the fees, costs and expenses of the District in connection with such Event of Default. Section 8.4 Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of twenty-five percent (25%) in aggregate principal amount of the Bonds and Parity Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds and Parity Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, -50- P6401-1052\2517808v6.doc however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other such litigation. Any suit, action or proceeding which any Owner of Bonds or Parity Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds and Parity Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds and Parity Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney in fact of the respective Owners of the Bonds and Parity Bonds for the purposes of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds and Parity Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact. Section 8.5 Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Owners of the Bonds and Parity Bonds under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Net Taxes and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment(s) shall confer. Section 8.6 Non-Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the Bonds or the Parity Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds and Parity Bonds to the respective Owners of the Bonds and Parity Bonds at the respective dates of maturity, as herein provided, out of the Net Taxes and other moneys herein pledged for such payment. A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds or Parity Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or the Owners by the Act or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Owners, as the case may be. Section 8.7 Limitation on Rights and Remedies of Owners. No Owner of any Bond or Parity Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds and Parity Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee -51- P6401-1052\2517808v6.doc against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds and Parity Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds and Parity Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds and Parity Bonds. The right of any Owner of any Bond and Parity Bond to receive payment of the principal of and interest and premium (if any) on such Bond and Parity Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture. Section 8.8 Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the District, the Trustee and the Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. ARTICLE IX DEFEASANCE AND PARITY BONDS Section 9.1 Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond or Parity Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond or Parity Bond under this Indenture and any Supplemental Indenture relating to such Parity Bond shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds and Parity Bonds pursuant to this Section, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds and Parity Bonds. -52- P6401-1052\2517808v6.doc Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond or Parity Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable; or (c) by depositing with the Trustee or an escrow agent appointed by the District, in trust, Federal Securities, in which the District may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable. If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligations of the District under this Indenture and any Supplemental Indenture with respect to such Bond or Parity Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond or Parity Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in Section 5.2(e) or any covenants in a Supplemental Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than ten (10) days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Trustee in the sole discretion of the Trustee. In connection with a defeasance under (c) above, there shall be provided to the District and the Trustee a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds and Parity Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable. In connection with a defeasance under (b) or (c) above, there also shall be provided to the District and the Trustee an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds or Parity Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds and Parity Bonds which have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds and Parity Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the -53- P6401-1052\2517808v6.doc purpose of paying and discharging the principal of or interest on the Bonds and Parity Bonds when due. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds or Parity Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred. Section 9.2 Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness. The District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued hereunder or under any Supplemental Indenture; provided, however, Parity Bonds may only be issued for the purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding, or for financing the Project Costs or other purposes of the District in an original principal amount not to exceed, together with the original principal amount of the Series 2021 Bonds and any new money Parity Bonds, $50 million. Parity Bonds issued are subject to the following additional specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds: (a) The District shall be in compliance with all covenants set forth in this Indenture and any Supplemental Indenture then in effect and a certificate of the District to that effect shall have been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. (b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Indenture duly adopted by the District which shall specify the following: (1) the purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited, including, if applicable, a provision requiring the proceeds of such Parity Bonds to be applied solely for the purpose of refunding any Outstanding Bonds or Parity Bonds, including payment of all costs and the funding of all reserves incidental to or connected with such refunding; (2) the authorized principal amount of such Parity Bonds; (3) the date and the maturity date or dates of such Parity Bonds; provided that (i) each maturity date shall fall on a September 1, (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number, and (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; (4) the description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication; (5) the denominations and method of numbering of such Parity Bonds; -54- P6401-1052\2517808v6.doc (6) the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds; (7) the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement; (8) the form of such Parity Bonds; and (9) such other provisions as are necessary or appropriate and not inconsistent with this Indenture. (c) The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Trustee (unless the Trustee shall accept any of such documents bearing a prior date): (1) a certified copy of the Supplemental Indenture authorizing the issuance of such Parity Bonds; (2) a written request of the District as to the delivery of such Parity Bonds; (3) an opinion of Bond Counsel and/or general counsel to the District to the effect that (a) the District has the right and power under the Act to adopt this Indenture and the Supplemental Indentures relating to such Parity Bonds, and this Indenture and all such Supplemental Indentures have been duly and lawfully adopted by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (b) this Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in this Indenture, subject to the application thereof to the purposes and on the conditions permitted by this Indenture; and (c) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of this Indenture and all Supplemental Indentures thereto and entitled to the benefits of this Indenture and all such Supplemental Indentures, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and this Indenture and all such Supplemental Indentures; and a further opinion of Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a Tax-exempt basis, or the exemption from State of California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued; (4) a certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of this Indenture; -55- P6401-1052\2517808v6.doc (5) where the entire principal amount of the Parity Bonds is issued to refund the Bonds or other Parity Bonds, a certificate of an Independent Financial Consultant certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; (6) where the Parity Bonds are being issued other than to refund the Bonds or other Parity Bonds, a Certificate of the Special Tax Administrator certifying that (i) the maximum Special Taxes that may be levied in each Fiscal Year is not less than Administrative Expenses plus 110% of the Annual Debt Service in the Bond Year that begins in such Fiscal Year; and (ii) the Value of District Property is not less than four (4) times the sum of Direct Debt for District Property plus Overlapping Debt allocable to all property in the District subject to the Special Tax. For purposes of the foregoing Certificate of Special Tax Administrator, all calculations shall consider the Parity Bonds proposed to be issued to be Outstanding. If all or any portion of the Parity Bonds are issued as Escrow Bonds, each time that amounts are to be released from the escrow account established under a Supplemental Indenture, as a condition of such release, the Trustee shall have received a Certificate of the Special Tax Administrator certifying that (x) following such release, the requirements of (i) and (ii) above will be satisfied, and (y) the amount of Special Taxes levied in such Fiscal Year and to be levied in the following Fiscal Year, together with amounts on deposit in the Interest Account, will be sufficient to pay the principal of and interest on all Outstanding Bonds and Parity Bonds (other than the remaining Escrow Bonds). For purposes of any Escrow Bonds release test, there will be allocated to the property in the District the largest principal amount of Bonds that results in a Value of District Property at least four (4) times the sum of Direct Debt for District Property plus Overlapping Debt allocable to all property in the District subject to the Special Tax; and (7) such further documents, money and securities as are required by the provisions of this Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds. ARTICLE X MISCELLANEOUS Section 10.1 Cancellation of Bonds and Parity Bonds. All Bonds and Parity Bonds surrendered to the Trustee for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or Parity Bond purchased by the District as authorized herein and delivered to the Trustee for such purpose shall be, cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds and Parity Bonds, as provided by law, and furnish to the District a certificate of such destruction. Section 10.2 Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Bondowners may be in any number of concurrent -56- P6401-1052\2517808v6.doc instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds or Parity Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority. (b) As to any Bond or Parity Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary. Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or Parity Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent. Section 10.3 Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds and Parity Bonds which remain unclaimed for two (2) years after the date when such Outstanding Bonds or Parity Bonds have become due and payable, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such payment to the District, the Trustee, at the expense of the District, shall cause to be mailed by first class mail, postage prepaid, to the registered Owners of such Outstanding Bonds or Parity Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. -57- P6401-1052\2517808v6.doc Section 10.4 Provisions Constitute Contract. The provisions of this Indenture shall constitute a contract between the District and the Bondowners, and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Trustee, then the District, the Trustee and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner. Section 10.5 Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which is subordinate to the pledge hereunder, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes and other amounts pledged hereunder. Section 10.6 Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds or any Parity Bonds the rights and benefits provided in this Indenture. Section 10.7 Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds and any Parity Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8 Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, by overnight mail, or by facsimile or other form of telecommunication, confirmed by telephone at its number set forth below. Notice shall be effective either (i) upon transmission by facsimile or other form of telecommunication (provided that receipt is confirmed), (ii) 48 hours after deposit in the United States first class mail, postage prepaid, (iii) in the case of overnight mail, upon delivery to the addressed destination, or (iv) in the case of personal delivery to any person, upon actual receipt. The District or the Trustee may, by written notice to the other party, from time to time modify the address or number to which communications are to be given hereunder. -58- P6401-1052\2517808v6.doc If to the District: City of Palm Desert 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: City Manager Facsimile: (760) 340-0574 Telephone: (760) 346-0611 If to the Trustee: U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Global Corporate Trust Facsimile: (213) 615-6199 Telephone: (213) 615-6062 The District and the Trustee may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. [Remainder of page intentionally left blank.] -59- P6401-1052\2517808v6.doc IN WITNESS WHEREOF, CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK), has caused this Bond Indenture to be signed by the Mayor of the City of Palm Desert, as authorized by the City Council of the City of Palm Desert acting as the legislative body of the District, and attested thereto by the City Clerk of the City of Palm Desert, and U.S. BANK NATIONAL ASSOCIATION, in token of its acceptance of the trust created hereunder, has caused this Bond Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) By: Mayor of the City of Palm Desert, California ATTEST: City Clerk of the City of Palm Desert, California U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Its: Authorized Officer A-1 P6401-1052\2517808v6.doc EXHIBIT A FORM OF SPECIAL TAX BOND, SERIES 2021 Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the District or the Trustee for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. R-__ $___________ UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BOND SERIES 2021 INTEREST RATE MATURITY DATE DATED DATE CUSIP ____% September 1, 20__ __________, 20__ 696627 ___ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ________________________________ DOLLARS CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) (the “District”), which was formed by the City of Palm Desert (the “City”) and is situated in the County of Riverside, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof, unless (i) the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above. A-2 P6401-1052\2517808v6.doc Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 (each, an “Interest Payment Date”), commencing March 1, 2022, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such term is defined in the Indenture (as defined below)), initially U.S. Bank National Association (the “Trustee”). Interest on this Bond shall be paid by check of the Trustee mailed on the Interest Payment Date by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Registered Owner hereof as of the close of business on the fifteenth day of the month preceding the Interest Payment Date (the “Record Date”) at such Registered Owner’s address as it appears on the registration books maintained by the Trustee. This Bond is one of a duly authorized issue of “City of Palm Desert Community Facilities District No. 2021-1 (University Park), Special Tax Bonds, Series 2021” (the “Bonds”) issued in the aggregate principal amount of $__________ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the “Act”) for the purpose of financing certain public facilities, funding a reserve account, and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City acting in its capacity as the legislative body of the District (the “Legislative Body”) on ________________, 2021 and a Bond Indenture dated as of [July 1, 2021], by and between the District and the Trustee executed in connection therewith (the “Indenture”), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Pursuant to the Act and the Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District (the “Special Taxes”) and certain other amounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund (other than the Administrative Expenses Account therein) established under the Indenture, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Indenture it will commence and diligently pursue to completion judicial foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. A-3 P6401-1052\2517808v6.doc The Bonds are limited obligations of the District and are payable from, and are secured by, a first pledge of and lien on the Net Taxes (as that term is defined in the Indenture). The Bonds maturing on or before September 1, 2028 are not subject to optional redemption prior to maturity. The Bonds maturing on or after September 1, 2029 shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District, from any source of funds on any date on or after September 1, 2028 in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price September 1, 2028 through August 31, 2029 103% September 1, 2029 through August 31, 2030 102 September 1, 2030 through August 31, 2031 101 September 1, 2031 and any date thereafter 100 . The Bonds maturing on September 1, 20__ and September 1, 20__ are subject to mandatory sinking fund redemption, in whole or in part by lot, on September 1 each year commencing September 1, 20__ and September 1, 20__, respectively, as provided in the Indenture. The Bonds are subject to extraordinary redemption as a whole, or in part, and on a pro rata basis among maturities of such Series in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments of Special Taxes deposited to the Redemption Account, plus any amounts authorized to be transferred from the Reserve Account pursuant to the Indenture in connection with such transfers, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Price Any Interest Payment Date through March 1, 2029 103% September 1, 2029 and March 1, 2030 102 September 1, 2030 and March 1, 2031 101 September 1, 2031 and any Interest Payment Date thereafter 100 Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than thirty (30) nor more than forty-five (45) days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date, provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. A-4 P6401-1052\2517808v6.doc The District shall have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully registered form in the Authorized Denominations (as defined in the Indenture) and may be exchanged for a like aggregate principal amount of Bonds of other Authorized Denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of Authorized Denomination or Authorized Denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor; provided, if such transfer occurs prior to the occurrence of a Minimum Denomination Reduction Event (as defined in the Indenture) and due to prior redemption in part of the Bond, the Bond is Outstanding in a principal amount of less than $100,000, then the new registered Bond issued pursuant to the foregoing may be issued in an integral multiple of $5,000 of less than $100,000. The Trustee shall not be required to register transfers or make exchanges of (i) any Bonds for a period of fifteen (15) days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF PALM DESERT OR OF THE DISTRICT FOR WHICH THE CITY OF PALM DESERT OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY OF PALM DESERT, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. A-5 P6401-1052\2517808v6.doc This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, City of Palm Desert Community Facilities District No. 2021- 1 (University Park), has caused this Bond to be dated as of __________________, 2021, to be signed on behalf of the District by the Mayor of the City by her [manual]/[facsimile] signature and attested by the [manual]/[facsimile] signature of the City Clerk of the City. CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) Mayor of the City of Palm Desert, California ATTEST: City Clerk of the City of Palm Desert, California A-6 P6401-1052\2517808v6.doc ===================================================================== [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within-mentioned Indenture which has been registered on the Bond registration books. Dated: ___________, 20__ U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Its: Authorized Signatory ===================================================================== [FORM OF ASSIGNMENT] For value received the undersigned hereby sell(s), assign(s) and transfer(s) unto (Name, Address, and Tax Identification or Social Security Number of Assignee) the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) _____________________________________________________________________ attorney, to transfer the same on the Registration Books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature must be guaranteed by a member of an institution which is a participant in the Securities Transfer Agent Medallion Program (STAMP) or other similar program. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. ===================================================================== B-1 P6401-1052\2517808v6.doc EXHIBIT B ADMINISTRATIVE EXPENSE PAYMENT REQUEST FORM U.S. Bank National Association Global Corporate Trust 633 West Fifth Street, 24th Floor Los Angeles, California 90071 CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS PAYMENT REQUEST NO. ____ The Trustee is hereby requested to pay from the Administrative Expenses Account of the Special Tax Fund established pursuant to the Bond Indenture, dated as of [July 1, 2021], by and between City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”) and you, as Trustee, to the person, corporation, or other entity designated below as Payee, the sum set forth below such designation, in payment of the Administrative Expense(s) described below. The amount shown below is due and payable under a purchase order, contract, or other authorization with respect to the Administrative Expense described below and has not formed the basis of any prior request for payment. Payee: Address: Amount: $ Description: The Administrative Expense(s) described above are accepted by the District and authorized to be paid to the Payee. For the current Bond Year (September 2 through September 1), the total amount of Administrative Expenses requested by the District for payment from the Administrative Expenses Account (including this Payment Request) is $______________, and includes Payment Requests Nos. _____________. All payments shall be made by check or wire transfer in accordance with the payment instructions set forth herein, and the Trustee shall rely on such payment instructions with no duty to investigate or inquire as to the authenticity of the payment instructions or the authority under which they were given. Executed by the Authorized Representative of City of Palm Desert Community Facilities District No. 2021-1 (University Park) Signature: Name: Title: C-1 P6401-1052\2517808v6.doc EXHIBIT C FORM OF REQUISITION FOR DISBURSEMENT OF PROJECT COSTS CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS Requisition No. _____ U.S. Bank National Association, as Trustee, is hereby requested to pay from the City of Palm Desert Community Facilities District No. 2021-1 (University Park) Improvement Fund (the “Improvement Fund”), established by the Bond Indenture, dated as of [July 1, 2021] (the “Indenture”), by and between the Trustee and City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”), the amount specified and to the payee named below for payment of the Project Costs set forth in Attachment No. 2 hereto: Payee: Address: Purpose: Amount: $ The amount is due and payable under purchase order, contract or other authorization and has not formed the basis of any prior request for payment. The conditions for the release of this amount from the Improvement Fund, including those conditions in Section 3.10 of the Indenture to the extent applicable, have been satisfied. There has not been filed with nor served upon the District notice of any lien, right to lien or attachment upon, or stop notice or claim affecting the right to receive payment of the amount specified above which has not been released or will not be released simultaneously with the payment of such amount, other than materialmen’s or mechanic’s liens accruing by mere operation of law. Dated: CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) By: Authorized Representative C-A-1 P6401-1052\2517808v6.doc ATTACHMENT NO. 1 (IMPROVEMENT FUND) [Insert Description of Project Costs & Attach Completed Acquisition Agreement Payment/Disbursement Request with supporting documentation, if payment is requested by Developer] $______ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS, SERIES 2021 BOND PURCHASE AGREEMENT ________, 2021 City of Palm Desert Community Facilities District No. 2021-1 (University Park) 73510 Fred Waring Drive Palm Desert, CA 92260 Ladies and Gentlemen: Piper Sandler & Co., as underwriter (the “Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this “Purchase Agreement”) with the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “Community Facilities District”), which upon acceptance will be binding upon the Underwriter and the Community Facilities District. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the Community Facilities District satisfying all of the obligations imposed upon them under this Purchase Agreement. This offer is made subject to the Community Facilities District’s acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 P.M., local time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Community Facilities District at any time prior to the acceptance hereof by the Community Facilities District. All capitalized terms used herein, which are not otherwise defined, shall have the meaning provided for such terms in the Bond Indenture, dated as of July 1, 2021 (the “Indenture”), between the Community Facilities District and U.S. Bank National Association, as trustee (the “Trustee”). 1. Purchase, Sale and Delivery of the Bonds. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein: the Underwriter hereby agrees to purchase from the Community Facilities District and the Community Facilities District hereby agrees to sell to the Underwriter all (but not less than all) of the $______ aggregate principal amount of the City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2021 (the “Bonds”), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit A hereto. The Bonds shall be subject to redemption as set forth in the Indenture and Official Statement. The purchase price for the Bonds shall be $_______ (being 100% of the aggregate principal amount thereof, plus an original issue premium of $_______ and less an Underwriter’s discount of $_______). 2 The Underwriter agrees to make a bona fide public offering of all of the Bonds initially at the public offering prices (or yields) set forth in Exhibit A attached hereto and incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds, provided that the Underwriter shall not change the interest rates set forth in Exhibit A. The Bonds may be offered and sold to certain dealers at prices lower than such initial offering prices. The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Net Taxes as provided in the Indenture, the Preliminary Official Statement (as hereinafter defined), and the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Community Facilities District Act”). The issuance of the Bonds has been duly authorized by the City Council of the City of Palm Desert (the “City”), as the legislative body for the Community Facilities District pursuant to a resolution (the “Community Facilities District Resolution of Issuance”) adopted on _______, 2021. The proceeds of the Bonds will be used to: (i) pay and defease a pro rata portion of outstanding Series 2006A Special Tax Bonds (the “CFD No. 2005-1 Pro Rata Bonds”) issued by, and secured by the special taxes of existing City of Palm Desert Community Facilities District No. 2005-1 (University Park) (“CFD No. 2005-1”); (ii) [finance the acquisition of certain public improvements needed with respect to the development of property located within the Community Facilities District, including public improvements to be owned by the City and water and sewer facilities to be owned and operated by the Coachella Valley Water District]; (iii) fund a reserve account for the Bonds; and (iv) pay costs of issuance for the Bonds. The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from special taxes pledged thereto as provided in the Indenture. (a) The Community Facilities District hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the Community Facilities District herein. The Community Facilities District acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction between the Community Facilities District and the Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as principal and not as the agent or fiduciary of the Community Facilities District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Community Facilities District with respect to (a) the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Community Facilities District on other matters) or (b) any other obligations to the Community Facilities District with respect to the offering contemplated hereby, except the obligations expressly set forth in this Purchase Agreement or otherwise imposed by law, (iv) the Underwriter has financial interests that differ from those of the Community Facilities District and (v) the Community Facilities District has consulted their own legal, financial and other advisors to the extent they have deemed appropriate in connection with this transaction. The Community Facilities District acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule 3 G-17 of the Municipal Securities Rulemaking Board (“MSRB”). The Community Facilities District acknowledges and represents that it has engaged Del Rio Advisors, LLC (the “Municipal Advisor”), as its municipal advisor (as defined in Securities and Exchange Commission Rule 15Ba1) and will rely solely on the financial advice of the Municipal Advisor with respect to the Bonds. (b) Pursuant to the authorization of the Community Facilities District, the Underwriter has distributed copies of the Preliminary Official Statement dated _______, 2021, relating to the Bonds, which, together with the cover page, inside cover page and appendices thereto is herein called the “Preliminary Official Statement.” By its acceptance of this Purchase Agreement, the Community Facilities District hereby consents to the use by the Underwriter of the Preliminary Official Statement, and the Community Facilities District agrees to execute a final Official Statement relating to the Bonds (the “Official Statement”) which will consist of the Preliminary Official Statement with such changes as may be made thereto, with the approval of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel (“Bond Counsel”), Best Best & Krieger LLP, Disclosure Counsel (“Disclosure Counsel”), and the Underwriter, and to provide copies thereof to the Underwriter as set forth herein. The Community Facilities District hereby authorizes and requires the Underwriter to use and promptly distribute, in connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official Statement and any supplement or amendment thereto. The Community Facilities District further authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Indenture, the Continuing Disclosure Agreement executed by the Community Facilities District in connection with the Bonds (the “Continuing Disclosure Agreement”), the Escrow Agreement, dated as of July 1, 2021 (the “Escrow Agreement”) by and among the Community Facilities District, CFD No. 2005-1, and U.S. Bank National Association, as escrow agent (the “Escrow Agent”), this Purchase Agreement and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. (c) To assist the Underwriter in complying with subsection (b)(5) of Securities and Exchange Commission Rule 15c2-12 (the “Rule”), the Community Facilities District will undertake pursuant to the Continuing Disclosure Agreement, in the form attached to the Official Statement as an appendix, to provide annual reports and notices of certain enumerated events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. (d) Except as the Underwriter and the Community Facilities District may otherwise agree, the Community Facilities District will deliver to the Underwriter, at the offices of Bond Counsel in Los Angeles, California, or at such other location as may be mutually agreed upon by the Underwriter and the Community Facilities District, the documents hereinafter mentioned; and the Community Facilities District will deliver to the Underwriter through the facilities of The Depository Trust Company (“DTC”), the Bonds, in definitive form (all Bonds bearing CUSIP numbers), duly executed by the Community Facilities District and authenticated by the Trustee in the manner provided for in the Indenture and the Community Facilities District Act at 8:30 a.m. California time, on _______, 2021 (the “Closing Date”), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in the second paragraph of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein referred to as the “Closing”). The Bonds shall be in fully registered book-entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC. 4 2. Representations, Warranties and Covenants of the Community Facilities District. The Community Facilities District represents, warrants and covenants to the Underwriter: (a) The Community Facilities District is duly organized and validly existing as a community facilities district under the laws of the State of California (the “State”), and has the full legal right, power and authority, among other things, (i) upon satisfaction of the conditions in this Purchase Agreement and the Indenture, to issue the Bonds as provided herein, and (ii) to secure the Bonds in the manner set forth in the Indenture. (b) The City Council has the full legal right, power and authority to adopt the resolutions in connection with the initial formation of the Community Facilities District and the levy of the Special Taxes (the “Community Facilities District Resolutions”) and has caused to be recorded in the real property of records of the County of Riverside, a notice of special tax lien (the “Notice of Special Tax Lien” and together, with the Community Facilities District Resolutions, and the Community Facilities District Resolution of Issuance, the “Resolutions and Formation Documents”), and the Community Facilities District has the full legal right, power and authority (i) to enter into this Purchase Agreement, the Indenture, the Escrow Agreement, the Continuing Disclosure Agreement, and the Acquisition Agreement dated as of ______, 2021 (the “Acquisition Agreement”), by and among the City, University Park Investor, LLC(the “Developer”) and the Community Facilities District (collectively, the “Community Facilities District Documents”), (ii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate all other transactions on its part contemplated by the Official Statement and each of the Community Facilities District Documents, and the Community Facilities District and the City Council have complied with all provisions of applicable law, including the Community Facilities District Act, in all matters relating to such transactions. (c) The Community Facilities District has duly authorized (i) the execution and delivery by the Community Facilities District of the Bonds and the execution, delivery and due performance by the Community Facilities District of its obligations under the Community Facilities District Documents, (ii) the distribution and use of the Preliminary Official Statement and execution, delivery and distribution of the Official Statement, and (iii) the taking of any and all such action as may be required on the part of the Community Facilities District to carry out, give effect to and consummate the transactions on its part contemplated by such instruments. All consents or approvals necessary to be obtained by the Community Facilities District in connection with the foregoing have been received, and the consents or approvals so received are still in full force and effect. (d) The Resolutions and Formation Documents have been duly adopted by the City Council and are in full force and effect; and the Community Facilities District Documents, when executed and delivered by the Community Facilities District and the other party thereto, will constitute a legal, valid and binding obligation of the Community Facilities District enforceable against the Community Facilities District in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally. (e) When delivered to the Underwriter, the Bonds will have been duly authorized by the City Council and duly executed, issued and delivered by the Community Facilities District and will constitute legal, valid and binding special obligations of the Community Facilities District enforceable against the Community Facilities District in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally, and will be entitled to the benefit and security of the Indenture. 5 (f) The information (excluding information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and information relating to The Depository Trust Company (“DTC”) and its book-entry system) contained in the Preliminary Official Statement is, and as of the Closing Date such information (excluding information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and information relating to DTC and its book-entry system)” in the Official Statement will be true and correct in all material respects, and the Preliminary Official Statement does not as of its date and the Official Statement will not as of the Closing Date contain any untrue or misleading statement of a material fact or omit to state any material fact (excluding in each case information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and information relating to DTC and its book-entry system) necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) If, at any time prior to the earlier of (i) receipt of notice from the Underwriter that the Official Statement is no longer required to be delivered under Rule 15c2-12 or (ii) the Closing (as described in Section 1(d) above), any event known to the officers of the Community Facilities District participating in the issuance of the Bonds occurs with respect to the Community Facilities District or the City as a result of which the Official Statement as then amended or supplemented might include an untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Community Facilities District shall promptly notify the Underwriter in writing of such event. Any information supplied by the Community Facilities District for inclusion in any amendments or supplements to the Official Statement will not contain any untrue or misleading statement of a material fact relating to the Community Facilities District or the City or omit to state any material fact relating to the Community Facilities District or the City necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) Neither the adoption of the Resolutions and Formation Documents, the execution and delivery of the Community Facilities District Documents, nor the consummation of the transactions on the part of the Community Facilities District contemplated herein or therein or the compliance by the Community Facilities District with the provisions hereof or thereof will conflict with, or constitute on the part of the Community Facilities District, a violation of, or a breach of or default under, (i) any material indenture, mortgage, commitment, note or other agreement or instrument to which the Community Facilities District is a party or by which it is bound, (ii) any provision of the State Constitution or (iii) any existing law, rule, regulation, ordinance, judgment, order or decree to which the Community Facilities District or the City (or the members of the City Council or any of its officers in their respective capacities as such) is subject, in each instance that would have a material adverse effect on the ability of the Community Facilities District to perform its obligations under the Community Facilities District Documents. (i) The Community Facilities District has never been in default at any time, as to principal of or interest on any obligation which it has issued, which default may have an adverse effect on the ability of the Community Facilities District to consummate the transactions on its part under the Community Facilities District Documents, except as specifically disclosed in the Official Statement; and except as provided in the Indenture, the Community Facilities District has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Special Taxes. 6 (j) Except as is specifically disclosed in the Official Statement, to the best knowledge of the Community Facilities District, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the Community Facilities District or the City has been served with process or threatened against the Community Facilities District or the City, which in any way questions the powers of the City Council, the City or the Community Facilities District, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the Community Facilities District Documents, or which, in any way, could adversely affect the validity or enforceability of the Resolutions and Formation Documents, the Bonds or the Community Facilities District Documents or, to the knowledge of the Community Facilities District, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes or in any other way questions the status of the Bonds under State tax laws or regulations. (k) Any certificate signed by an official of the Community Facilities District authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Community Facilities District Documents shall be deemed a representation and warranty by the Community Facilities District to the Underwriter as to the truth of the statements therein contained. (l) The Community Facilities District has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a Community Facilities District whose arbitrage certifications may not be relied upon. (m) The Bonds will be paid from Net Taxes (as defined in the Indenture) received by the Community Facilities District and amounts held in certain funds and accounts established and pledged under the Indenture. (n) The Special Taxes may lawfully be levied in accordance with the rate and method of apportionment of the Special Tax relating to the Community Facilities District (the “Rate and Method”), the Resolutions and Formation Documents as described in the Preliminary Official Statement and the Official Statement, and, when levied, will be secured by a lien on the property on which they are levied. (o) The Indenture creates a valid pledge of, and first lien upon the Net Taxes deposited thereunder, and the amounts held in certain funds and accounts established and pledged under the Indenture, subject in all cases to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. (p) Except as disclosed in the Official Statement, in the last five years, neither the City, nor the Community Facilities District, nor any other entity for which the City Council is the legislative body, has failed to comply with any undertaking under Rule 15c2-12 in any material respect. The Community Facilities District hereby consents to the preparation and distribution of the Official Statement, consisting of the Preliminary Official Statement with such changes as are noted thereon and as may be made thereto, with the approval of Bond Counsel, Disclosure Counsel and the Underwriter, from time to time prior to the Closing Date. 7 The Community Facilities District hereby consents to any prior use of and authorizes the future use by the Underwriter, in connection with the offering and sale of the Bonds, of the Preliminary Official Statement, the Official Statement, the Joint Community Facilities Agreement dated as of June 8, 2021 (the “CVWD JCFA”), by and among the City, the Coachella Valley Water District, and the Developer with respect to the Bonds, this Purchase Agreement, and the other Community Facilities District Documents in connection with the transactions contemplated by this Purchase Agreement. The Community Facilities District covenants with the Underwriter that the Community Facilities District will cooperate with the Underwriter (at the cost of the Underwriter), in qualifying the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as the Underwriter may reasonably request; provided, however, that the Community Facilities District shall not be required to consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The Community Facilities District consents to the use by the Underwriter of the Community Facilities District Documents in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions. The execution and delivery of this Purchase Agreement by the Community Facilities District shall constitute a representation by the Community Facilities District to the Underwriter that the representations and warranties contained in this Section 2 with respect to the Community Facilities District are true as of the date hereof. 3. Conditions to the Obligations of the Underwriter. The obligation of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the Community Facilities District contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) At the Closing Date, the Community Facilities District Resolutions and the Community Facilities District Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds, and with the transactions contemplated thereby, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate. (b) At the Closing Date, except as described in the Preliminary Official Statement, the Community Facilities District shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, and the performance by the Community Facilities District of its obligations under the Bonds, the Community Facilities District Resolutions, the Indenture, the other Community Facilities District Documents, and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed hereunder, will not 8 conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Indenture, the other Community Facilities District Documents, the Bonds or the performance of the conditions precedent to be performed by the Community Facilities District hereunder. (c) The information contained in the Official Statement is, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant hereto, true and correct in all material respects and does not, as of the Closing Date or as of the date of any supplement or amendment thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the cover page of the Official Statement, of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the Community Facilities District terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: 1. Legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department of the United States of America or the Internal Revenue Service, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such interest as would be received by any owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; or 2. Legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission (the “SEC”), or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended (the “Securities Act”), or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), or that the issuance, offering or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws as amended and then in effect; or 9 3. A general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; or 4. The introduction, proposal or enactment of any amendment to the federal or State Constitution or any action by any federal or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Community Facilities District, its property, income, securities (or interest thereon), the validity or enforceability of Special Taxes, or the ability of the Community Facilities District to issue the Bonds as contemplated by the Indenture and the Official Statement; or 5. Any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement, or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or 6. Any national securities exchange, the Comptroller of the Currency, or any other governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, 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, the Underwriter; or 7. There shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or 8. Any event or circumstance shall exist that either makes untrue or incorrect in any material respect any statement or information in the Official Statement (other than any statement provided by the Underwriter) or is not reflected in the Official Statement but should be reflected therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and, in either such event, the Community Facilities District refuses to permit the Official Statement to be supplemented to supply such statement or information, or the effect of the Official Statement as so supplemented is to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriters to enforce contracts for the sale of the Bonds; or 9. A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force; or 10. A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or 10 11. Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or 12. A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Securities Exchange Act of 1934, as amended and the Trust Indenture Act; or 13. Any proceeding shall have been commenced or be threatened in writing by the SEC against the City or the Community Facilities District; or (e) At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter and Bond Counsel: 1. The Official Statement, executed on behalf of the Community Facilities District by an authorized officer; 2. The Indenture, duly executed and delivered by the Community Facilities District and the Trustee; 3. The Resolutions and Formation Documents, together with a certificate dated as of the Closing Date of the City Clerk to the effect that the Community Facilities District Resolutions are true, correct and complete copies of the ones duly adopted by the City Council; 4. The Escrow Agreement executed and delivered by the Community Facilities District, CFD No. 2005-1, and the Escrow Agent; 5. The Continuing Disclosure Agreement executed and delivered by the Community Facilities District and Willdan Financial Services, as dissemination agent; 6. An unqualified approving opinion of Bond Counsel for the Bonds in the form attached to the Official Statement; 7. A supplemental opinion or opinions of Bond Counsel, dated the Closing Date and addressed to the Community Facilities District and the Underwriter, to the effect that: (i) The Community Facilities District is duly organized and validly existing as a community facilities district under and by virtue of the Constitution and laws of the State (including the Act); 11 (ii) The City Council of the City, acting as legislative body of the Community Facilities District, has the full legal right, power and authority to adopt the Resolutions and Formation Documents; (iii) the statements contained in the Official Statement under the captions “INTRODUCTION – Sources of Payment for the Bonds,” “INTRODUCTION – Description of the Bonds,” “THE BONDS” (other than information relating to DTC and its book- entry only system and information in the section entitled “Debt Service Schedule”, as to which no opinion is expressed), “SOURCES OF PAYMENT FOR THE BONDS,” ” “TAX EXEMPTION,” and in Appendices B and E thereto, excluding any material that may be treated as included under such captions by reference to other documents, insofar as such statements expressly summarize certain provisions of the Indenture and Bond Counsel’s final opinion are accurate in all material respects; (iv) this Purchase Agreement and the Continuing Disclosure Agreement have been duly executed and delivered by, and constitute valid and binding obligations of, the Community Facilities District, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors’ rights in general and to the application of equitable principles if equitable remedies are sought; (v) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended; and (vi) All approvals, consents, authorization, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the ability of the Community Facilities District, to perform its obligations under the Bonds or the Community Facilities District Documents, have been obtained or made, as the case may be, and are in full force and effect. 8. The letter of Disclosure Counsel, dated the Closing Date and addressed to the Community Facilities District and to the Underwriter, to the effect that, without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Community Facilities District, the Special Tax Consultant and others, and their examination of certain documents, nothing has come to their attention which has led them to believe that the Preliminary Official Statement as of its date and the date of this Purchase Agreement and the Official Statement as of its date and as of the Closing Date contained or contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial statements or other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archeological or environmental matters, or any information with respect to the City, or about DTC or the book-entry-only system); 9. A certificate dated the Closing Date and signed by an authorized representative of the Community Facilities District or an authorized designee, on behalf of the 12 Community Facilities District substantially in the form attached hereto as Exhibit F; 10. An opinion of the City Attorney of the City, dated the date of Closing and addressed to the Underwriter and the City, to the effect that: (i) The City is duly organized and validly existing as a municipal corporation and charter city under and by virtue of the Constitution and laws of the State; (ii) The Resolutions and Formation Documents were duly adopted at meetings of the City Council, acting as legislative body of the Community Facilities District which were called and held under law and with all public notice required by law and at which a quorum was present and acting throughout, and the Resolutions and Formation Documents are in full force and effect and have not been amended or repealed; (iii) To their best knowledge, based on reasonable due diligence, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with respect to which the Community Facilities District has been served with process or threatened, in any way affecting the existence of the City, the Community Facilities District or the titles of the Community Facilities District’s officials to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Indenture, or the collection or application of the Special Taxes to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Community Facilities District Documents or any action of the Community Facilities District contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Preliminary Official Statement or of the Official Statement or the powers of the Community Facilities District or its authority with respect to the Bonds, the Community Facilities District Documents or any action on the part of the Community Facilities District contemplated by any of said documents, wherein an unfavorable decision, ruling, or finding could materially adversely affect the validity or enforceability of the Bonds or the Community Facilities District Documents; and (iv) The execution and delivery of the Bonds and the Community Facilities District Documents, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument of which the Community Facilities District is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Community Facilities District to perform its obligations under the Bonds or the Community Facilities District Documents. 11. A certificate dated the Closing Date from Willdan Financial Services (the “Special Tax Consultant” or the “Dissemination Agent”) addressed to the Community Facilities District and the Underwriter to the effect that: (i) the Special Tax if collected in the maximum amounts permitted pursuant to the Rate and Method of Apportionment of Special Taxes of the Community Facilities District as of the Closing Date would generate at least budgeted administrative expenses plus 110% of the annual debt service payable with respect to the Bonds in each year, based on such assumptions and qualifications as shall be acceptable to the Underwriter; (ii) the statements in the Official Statement provided by the Special Tax Consultant concerning Special Taxes in the Community Facilities District and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true 13 and correct, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (iii) the Dissemination Agent has the full power to enter into and deliver the Continuing Disclosure Agreement and to perform its duties as Dissemination Agent thereunder; (iv) as of the Closing Date, the Dissemination Agent has executed and delivered the Continuing Disclosure Agreement and, assuming due authorization, execution and delivery by the Community Facilities District, the Continuing Disclosure Agreement is a valid, legal and binding agreement of the Dissemination Agent, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights in general and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and (v) to the best knowledge of the Dissemination Agent, after due inquiry, no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Dissemination Agent that has not been obtained by the Dissemination Agent is or will be required for the execution and delivery of the Continuing Disclosure Agreement or the performance by the Dissemination Agent of its duties and obligations thereunder; 12. A certificate dated the Closing Date from Empire Economics, Inc. (the “Market Absorption Consultant”) addressed to the Community Facilities District and the Underwriter to the effect that: (i) to the best of the Market Absorption Consultant’s knowledge and belief, all information with respect to the Market Absorption Study in the Preliminary Official Statement and in the Official Statement was true and correct as of the date of the Market Absorption Study and that the Market Absorption Consultant is aware that acts and events may have occurred since the date of the Market Absorption Study which could result in both positive and negative effects on estimated residential absorption (escrow closing by homeowners) schedules; however, an updated Market Absorption Study has not been completed as of the Closing Date and (ii) the Market Absorption Consultant consents to the use of the Market Absorption Study in connection with the distribution and use of the Preliminary Official Statement and Official Statement. 13. Certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution of the Indenture and the Escrow Agreement and the authentication of the Bonds; 14. A certificate of the Trustee, addressed to the Underwriter, and the Community Facilities District dated the Closing Date, to the effect that: (i) the Trustee is authorized to carry out corporate trust powers, and have full power and authority to perform its duties under the Indenture and the Escrow Agreement; (ii) the Trustee is duly authorized to execute and deliver the Indenture and the Escrow Agreement, to accept the obligations created by the Indenture and the Escrow Agreement and to authenticate the Bonds pursuant to the terms of the Indenture; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication of the Bonds or the consummation by the Trustee of the other transactions contemplated to be performed by the Trustee in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Indenture and the Escrow Agreement; (iv) to the best of its knowledge, compliance with the terms of the Indenture and Escrow Agreement will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Trustee is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or 14 governmental agency or body having jurisdiction over the Trustee or any of its activities or properties; and (v) there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Trustee or threatened against the Trustee which in the reasonable judgment of the Trustee would affect the existence of the Trustee or in any way contest the validity or enforceability of the Indenture and the Escrow Agreement or contesting the powers of the Trustee or its authority to enter into and perform its obligations under the Indenture and the Escrow Agreement; 15. An opinion of counsel to the Trustee dated the Closing Date, addressed to the Underwriter, and the Community Facilities District to the effect that the Trustee is a national banking association duly organized and validly existing under the laws of the United States having full power and being qualified to enter into, accept and agree to the provisions of the Indenture and the Escrow Agreement, and that such documents have been duly authorized, executed and delivered by the Trustee, and, assuming due execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by the application of equitable principles if equitable remedies are sought, and that the Bonds have been duly authenticated; 16. A certificate of the Community Facilities District dated the Closing Date, in a form acceptable to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; 17. A Letter of Representations of Developer in connection with the printing of the Preliminary Official Statement dated the date of the Preliminary Official Statement, substantially in the form attached as part of Exhibit D hereto or as such Letter of Representations may be modified with the approval of the Underwriter and Bond Counsel, and a Bring-Down Certificate of the Developer dated the Closing Date, substantially in the form attached as part of Exhibit E hereto; 18. The Continuing Disclosure Certificate of the Developer, substantially in the form attached as an appendix to the Official Statement; 19. An opinion or opinions of counsel to the Developer, dated the date of the Closing addressed to the Community Facilities District and the Underwriter, in form and substance acceptable to the Underwriter and Bond Counsel; 20. An opinion of Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”), dated the date of Closing and addressed to the Underwriter in form and substance acceptable to the Underwriter; 21. A certificate or certificates of the Escrow Agent, dated the Closing Date, in form and substance acceptable to the Underwriter and Bond Counsel; 22. A certificate in form and substance as set forth in Exhibit C hereto of Capital Realty Analysts, La Quinta, California, the appraiser of the property within the Community Facilities District, dated as of the Closing Date; 15 23. An opinion of Bond Counsel, addressed to the Community Facilities District, the Escrow Agent, and the Underwriter, dated the date of Closing, as to the effective defeasance of the CFD 2005-1 Pro Rata Bonds in form and substance acceptable to the Underwriter; 24. The report of Robert Thomas CPA, LLC , (the “Verification Agent”), on the mathematical accuracy of certain computations, contained in schedules provided to them which were prepared for the Community Facilities District, relating to the sufficiency of cash deposited into the Escrow Fund to redeem on September 1, 2021, the CFD 2005-1 Pro Rata Bonds, maturing on September 1, 2022 and thereafter through September 1, 2036; and 25. Such additional legal opinions, certificates, instruments and other documents as the Underwriter and Bond Counsel may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the material representations and warranties of the Community Facilities District contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Community Facilities District at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Community Facilities District in connection with the transactions contemplated hereby and by the Indenture and the Official Statement. If the Community Facilities District shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Community Facilities District nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the Community Facilities District set forth in Section 5 hereof shall continue in full force and effect. 4. Establishment of Issue Price. (a) The Underwriter agrees to assist the Community Facilities District in establishing the issue price of the Bonds and shall execute and deliver to the Community Facilities District at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit B, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Community Facilities District and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) Except as otherwise set forth in Exhibit A attached hereto, the Community Facilities District will treat the first price at which 10% of each maturity of the Bonds (the “10% test”), identified under the column “10% Test Satisfied” in Exhibit A, is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Community Facilities District the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Community Facilities District the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that maturity have been sold to the public, provided that, the Underwriter’s reporting obligation after the Closing 16 Date may be at reasonable periodic intervals or otherwise upon request of the Community Facilities District or Bond Counsel. (c) The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, identified under the column “Hold the Offering Price Rule Used,” as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Community Facilities District and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Community Facilities District to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering- price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: 1. the close of the fifth (5th) business day after the sale date; or 2. the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. The Underwriter shall promptly advise the Community Facilities District when it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date. (d) The Underwriter confirms that: (i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable: (A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter, (B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and 17 (C) to acknowledge that, unless otherwise advised by the dealer or broker- dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public. (ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Community Facilities District acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering- price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party distribution agreement and the related pricing wires. (f) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: (i) “public” means any person other than an underwriter or a related party; (ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the Community Facilities District (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public); (iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct 18 ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and (iv) “sale date” means the date of execution of this Purchase Agreement by all parties. 5. Expenses. Whether or not the transactions contemplated by this Purchase Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Community Facilities District shall pay all expenses and costs of the Community Facilities District incident to the performance of its obligations in connection with the authorization, execution, sale and delivery of the Bonds to the Underwriter, including, without limitation, printing costs, initial fees of the Trustee and Escrow Agent, including fees and disbursements of their counsel, if any, fees and disbursements of Bond Counsel, Disclosure Counsel and other professional advisors employed by the City, costs of preparation, printing, signing, transportation, delivery and safekeeping of the Bonds. The Underwriter shall pay all out-of-pocket expenses of the Underwriter, including, without limitation, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP Services Bureau charges, regulatory fees imposed on new securities issuers and any and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds, including fees and disbursements of Underwriter’s Counsel. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction-related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount. 6. Notices. Any notice of other communication to be given to the Community Facilities District under this Purchase Agreement may be given by delivering the same in writing to the City of Palm Desert, 73510 Fred Waring Drive, Palm Desert, CA 92260, Attention: City Manager; any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Piper Sandler & Co., 120 Vantis Drive, Suite 330, Aliso Viejo, California 92656, Attention: Public Finance. 7. Parties In Interest. This Purchase Agreement is made solely for the benefit of the Community Facilities District and Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. 8. Survival of Representations and Warranties. The representations and warranties of the Community Facilities District under this Purchase Agreement shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter and shall survive the delivery and payment for the Bonds and the Closing. 9. Execution in Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 10. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. 19 11. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding among the parties hereto in relation to the sale of the Bonds by the Community Facilities District. 12. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS] S-1 13. Effective Date. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. Very truly yours, PIPER SANDLER & CO., as Underwriter By: Managing Director The foregoing is hereby agreed to and accepted as of the date first above written: CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) By: Authorized Officer Time of Execution: _____________ p.m. California time [EXECUTION PAGE OF BOND PURCHASE AGREEMENT] A-1 EXHIBIT A $______ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS, SERIES 2021 Maturity (September 1) Principal Amount Interest Rate Yield Price 10% Test Satisfied* 10% Test Not Satisfied Subject to Hold-The- Offering- Price Rule (marked if used) 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 20__(T) 20__T) _________________ (T) Term Bond. (C) Priced to optional call at [par] on September 1, 20__. *At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement. B-1 EXHIBIT B $_______ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS, SERIES 2021 FORM OF ISSUE PRICE CERTIFICATE The undersigned, as underwriter of the above-referenced bonds (the “Bonds”) pursuant to that certain Bond Purchase Agreement, dated ___________, 2021, by and between Community Facilities District No. 2021-1 (University Park) (the “Issuer”) and the undersigned, acting through its authorized representative, hereby certifies as set forth below with respect to the sale and issuance of the Bonds. 1. Sale of the Bonds. As of the date of this certificate, at least 10% of each Maturity of the Bonds was sold to the Public at the respective price (“Sale Price”) listed in Schedule A. 2. [Initial Offering Price of the Hold-the-Offering-Price Maturities. (a) Underwriter offered the Hold-the-Offering-Price Maturity to the Public for purchase at the respective initial offering price listed in Schedule A (the “Initial Offering Price”) on or before the Sale Date. (b) As set forth in the Bond Purchase Agreement, the undersigned has agreed in writing that, (i) for the Hold-the-Offering-Price Maturity, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the-offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) will offer or sell any Hold-the- Offering-Price Maturity at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.] 3. The aggregate of the Sale Prices of the Bonds is $___________ (the “Issue Price”). 4. Based upon our experience in marketing and maintaining a market for obligations having terms and credit arrangements similar to those underlying the Bonds, the Reserve Requirement contemplated under the Bond Indenture, dated as of July 1, 2021, by and between the Issuer and U.S. Bank National Association, pursuant to which the Bonds are being issued, was a vital and necessary factor in marketing the Bonds to the public and is both reasonably required and necessary to the maintenance of an orderly market for the Bonds. 5. The weighted average maturity of the Bonds is _____ years. [The weighted average maturity of the 2021 New Money Portion is _____ years.] The weighted average maturity of the 2021 Refunding Portion is _____ years. B-2 6. The remaining Weighted Average Maturity of the CFD No. 2005-1 Pro Rata Bonds being refunded by the Bonds is _____ years. 7. The Yield on the Bonds is _____________%, being the discount rate which, when used in computing the present worth of all payments of principal and interest to be paid on the Bonds, computed on the basis of a 360-day year and semi-annual compounding produces an amount equal to the Issue Price of the Bonds[, computed with the following adjustment. The Bonds maturing (i) on May 1, 20__, and (ii) on May 1, 20__ are the only Bonds that are subject to optional redemption before maturity and have an Initial Offering Price that exceeds their stated redemption price at maturity by more than one-fourth of one percent multiplied by the product of their stated redemption price at maturity and the number of complete years to their first optional redemption date. Accordingly, in computing the Yield on the Bonds, such Bonds were treated as retired on their optional redemption date or at maturity to result in the lowest Yield on the Bonds.]. 8. [None of the Bonds subject to mandatory early redemption has a stated redemption price that exceeds the initial offering price of such bond by more than one-fourth of one percent multiplied by the product of its stated redemption price at maturity and the number of years to its weighted average maturity date.] 9. [None of the Bonds is subject to optional redemption within five years of the Issue Date of the Bonds, and none of the Bonds subject to optional redemption has an initial offering price that exceeds its stated redemption price at maturity by more than one-fourth of one percent multiplied by the product of its stated redemption price at maturity and the number of complete years to its first optional redemption date.] 10. Defined Terms. (a) Issuer means City of Palm Desert Community Facilities District No. 2021-1 (University Park). (b) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (c) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (d) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). Other capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Certificate Regarding Compliance with Certain Tax Matters (the “Tax B-3 Certificate”) executed by the Issuer and the City of Palm Desert (the “City”) with respect to the Bonds. The representations set forth in this Certificate are limited to factual matters only. Nothing in this Certificate represents the undersigned’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer and the City with respect to certain of the representations set forth in the Tax Certificate relating to the Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by Richards, Watson & Gershon, A Professional Corporation, in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer and the City from time to time relating to the Bonds. IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed on the date first written above. PIPER SANDLER & CO., By:_______________________________________ Name:_____________________________________ Title:______________________________________ C-1 EXHIBIT C CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS, SERIES 2021 CERTIFICATE OF APPRAISER The undersigned hereby states and certifies: 1. That he or she is an authorized principal of Capital Realty Analysts, La Quinta, California (the “Appraiser”) and as such is familiar with the facts herein certified and is authorized and qualified to certify the same. 2. That the Appraiser has prepared an appraisal report dated ______, 2021, with a date of value as of May 15, 2021 (the “Appraisal Report”), on behalf the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “Community Facilities District”) and in connection with the Official Statement dated [LOM Date] (“Official Statement”), concerning the City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2021 (the “Bonds”). 3. That the Appraiser hereby consents to the reproduction and use of the Appraisal Report appended to the Preliminary Official Statement and the Official Statement. The Appraiser also consents to the references to the Appraiser and the Appraisal made in the Preliminary Official Statement and the Official Statement. 4. In the opinion of the Appraiser the assumptions made in the Appraisal Report are reasonable. 5. That the Official Statement has been reviewed on behalf of the Appraiser and to the best knowledge of the Appraiser the statements concerning the Appraisal Report and the value of the property contained under the captions “INTRODUCTION – Appraisal Report,” “THE DISTRICT – Appraisal Report,” and “APPENDIX D – APPRAISAL REPORT” are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 6. Each of the parcels appraised by the Appraiser is encompassed within the Community Facilities District as set forth in the boundary map of the Community Facilities District and the Appraisal Report fairly and accurately described, as of the stated date of value, the market values of the properties in the Community Facilities District that are subject to the special taxes. 7. That, as of the date of the Official Statement and as of the date hereof, the Appraisal Report appended to the Official Statement, to the best of my knowledge and belief, and subject to all of the Limiting Conditions and Major Assumptions set forth in the Appraisal Report, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, C-2 not misleading, and no events or occurrences have been ascertained by us or have come to our attention that would materially and adversely affect the conclusions as to the market value of the appraised property stated in the Appraisal Report. However, we have not performed any procedures since the date of the Appraisal Report to obtain knowledge of such events or occurrences nor are we obligated to do so in the future. 8. The Appraisal Report complies with the Appraisal Standards for Land-Secured Financings issued by the California Debt and Investment Advisory Commission dated July, 2004. The Community Facilities District and Piper Sandler & Co., as underwriter, are entitled to rely on the Certificate. Dated: [Closing Date] CAPITAL REALTY ANALYSTS By: D-1 EXHIBIT D FORM OF LETTER OF REPRESENTATIONS OF DEVELOPER CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS, SERIES 2021 LETTER OF REPRESENTATIONS OF UNIVERSITY PARK INVESTOR, LLC [POS Date] City of Palm Desert Community Facilities District No. 2021-1 (University Park) 73510 Fred Waring Drive Palm Desert, CA 92260 Piper Sandler & Co. 120 Vantis Drive, Suite 330 Aliso Viejo, CA 92656 Ladies and Gentlemen: Reference is made to the City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2021 (the “Bonds”) and to the Bond Purchase Agreement to be entered into in connection therewith (the “Purchase Agreement”). This Letter of Representations of University Park Investor, LLC (the “Letter of Representations”) is delivered pursuant to and in satisfaction of Section 3(E)(15) of the Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Agreement. The undersigned certifies and represents that he is duly authorized on behalf of University Park Investor, LLC, a Delaware limited liability company (the “Developer”), to execute and deliver this Letter of Representations in connection with the issuance, sale and delivery by the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “Community Facilities District”) of the Bonds. The Bonds are described in the Preliminary Official Statement dated ______, 2021 relating to the Bonds (the “Preliminary Official Statement”). Except as otherwise described in the Preliminary Official Statement, the Developer’s current expectations are that the Developer shall remain the party responsible for the construction and sale of homes within the Property. Except as disclosed in the Preliminary Official Statement, the Developer has not entered into an agreement for development or management of the Property by any other D-2 entity, except such subcontracts, consultant agreements and similar agreements for land development activities associated with the Developer’s development plan as are entered into in the ordinary course of business. As used in this Letter of Representations, the term “Actual Knowledge of the Undersigned” means the actual knowledge that the undersigned currently has as of the date of this Letter of Representations or has obtained through (i) interviews with such officers and responsible employees of the Developer as the undersigned has reasonably determined are likely, in the ordinary course of his or her respective duties, to have knowledge of the matters set forth in this Letter of Representations, and (ii) reviews of documents reasonably available to the undersigned and which the undersigned reasonably deemed necessary for the undersigned to execute this Letter of Representations. The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Developer’s current business and operations. The undersigned has not contacted any individuals who are no longer employed by, or associated with, the Developer. As used in this Letter of Representations, the term “Relevant Entity” of the Developer means any entity presently directly or indirectly through one or more intermediaries controlling, controlled by or under common control with the Developer, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the property owned by the Developer in the Community Facilities District, or to the Developer’s ability to pay the special taxes levied by the Community Facilities District on property owned by the Developer (“Special Taxes”) prior to delinquency). As used in this Letter of Representations, the term “Property” means the property currently owned by the Developer within the Community Facilities District as described in the Preliminary Official Statement. The undersigned certifies that he or she is familiar with the facts set forth in this Letter of Representations, and further hereby certifies to the Actual Knowledge of the Undersigned as follows on behalf of the Developer: (1) The Developer has been duly organized in the State of Delaware and validly exists in good standing under the laws of the State of California and has or will have prior to the Closing, as required, all requisite corporate right, power and authority: (i) to execute and deliver this Letter of Representations and to execute and deliver the Acquisition Agreement and the CVWD JCFA, and, at Closing, the Continuing Disclosure Agreement of the Developer substantially in the form attached as Appendix F to the Preliminary Official Statement, with such additional changes as may be agreed to by the Developer (the “Developer Continuing Disclosure Agreement”), (ii) to own, develop and sell the Property, as described in the Preliminary Official Statement, (iii) to carry on its business as described in the Preliminary Official Statement, and D-3 (iv) to perform its obligations under the Acquisition Agreement, the CVWD JCFA, and the Developer Continuing Disclosure Agreement. (2) The Developer agrees to execute at Closing the Developer Continuing Disclosure Agreement. (3) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer is not aware of any material failures by it to comply in all material respects with previous continuing disclosure undertakings in a written certificate or agreement executed by it to provide periodic continuing disclosure reports or notices of material events respecting securities offerings in California during Developer's period of ownership of the Property. (4) To the Actual Knowledge of the Undersigned, the execution and delivery of the Acquisition Agreement, the CVWD JCFA, or the Developer Continuing Disclosure Agreement, and the performance by the Developer of its obligations under the Acquisition Agreement, the CVWD JCFA, or the Developer Continuing Disclosure Agreement, will not conflict with or constitute a breach of or default under any loans, lines of credit, agreements, or other contractual or financial obligations of the Developer, or any applicable law, regulation, judgment or decree. (5) To the Actual Knowledge of the Undersigned, neither the Developer nor any of its Relevant Entities is currently in material default on any loans, lines of credit, agreements, or other contractual or financial obligations, or in breach of any applicable law, regulation, judgment or decree, and no event has occurred and is continuing that would constitute such a default or breach, the result of which could materially adversely affect the ability of the Developer: (i) to own, develop and sell the Property, as described in the Preliminary Official Statement, (ii) to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, (iii) to carry on its business as described in the Preliminary Official Statement, or (iv) to perform its obligations under the Acquisition Agreement, the CVWD JCFA, or the Developer Continuing Disclosure Agreement. (6) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer has not assumed any obligations under any loans, lines of credit, agreements, or other contractual or financial arrangements, or any applicable judgment or decree, which could materially adversely affect the ability of the Developer: (i) to own, develop and sell the Property, as described in the Preliminary Official Statement, D-4 (ii) to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, (iii) to carry on its business as described in the Preliminary Official Statement, or (iv) to perform its obligations under the Acquisition Agreement, the CVWD JCFA, or the Developer Continuing Disclosure Agreement. (7) Except as described in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer has no loans outstanding and unpaid and no lines of credit that are secured by the Property. (8) To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation (9) To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation which could have a materially adverse impact on the ability of the Developer to develop its Property as described in the Preliminary Official Statement, or to pay the Special Taxes or ad valorem tax obligations with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency. (10) The Developer is not currently in default in, or, during its period of ownership of the Property, has ever defaulted to any material extent in, the payment of special taxes or assessments in connection with the Community Facilities District or any other community facilities districts or assessment districts in California that was not cured prior to the institution of any enforcement action with a court of law. (11) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there is no litigation, inquiry, investigation or administrative proceeding of any nature pending against the Developer (with service of process to the Developer having been accomplished), or to the Actual Knowledge of the Undersigned, overtly threatened in writing against the Developer, or to the Actual Knowledge of the Undersigned, pending or overtly threatened in writing against any Relevant Entity of the Developer, in each case which, if successful, could: (i) materially adversely affect the ability of the Developer to own, develop and sell the Property, as described in the Preliminary Official Statement, D-5 (ii) materially adversely affect the ability of the Developer to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, (iii) materially adversely affect the ability of the Developer to carry on its business as described in the Preliminary Official Statement, (iv) materially adversely affect the ability of the Developer to perform its obligations under the Acquisition Agreement, the CVWD JCFA, or the Developer Continuing Disclosure Agreement, (v) challenge, question the validity or enforceability of, or restrain or enjoin the performance of, the Special Taxes, the Bonds, the Community Facilities District Resolution of Issuance, the Indenture, the Developer Continuing Disclosure Agreement or the Bond Purchase Agreement, or (vi) restrain or enjoin collection of Special Taxes or other sums to be pledged to pay the principal of and interest on the Bonds. (12) Except as disclosed in the Preliminary Official Statement: (i) to the Actual Knowledge of the Undersigned, the Developer and its Relevant Entities are solvent; (ii) except as set forth in this paragraph, neither the Developer nor, to the Actual Knowledge of the Undersigned, any of its Relevant Entities, has filed for bankruptcy or been declared bankrupt in the last 10 years; and (iii) to the Actual Knowledge of the Undersigned, there are no proceedings pending (with service of process to the Developer having been accomplished) or overtly threatened in writing in which the Developer or any of its Relevant Entities may be adjudicated as bankrupt, become the debtor in a bankruptcy proceeding, be discharged from any or all of its respective debts or obligations, be granted an extension of time to pay its respective debts or obligations, or be granted a reorganization or readjustment of its respective debts or obligations. (13) As of the date hereof, the information in the sections of the Preliminary Official Statement entitled “INTRODUCTION – The District” (paragraphs four and five only) “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and “CONTINUING DISCLOSURE – UPI” (paragraph three only) concerning the Developer and its Relevant Entities, the Property, the Developer’s development and financing plans, and the Developer’s contractual arrangements (but, under all captions, excluding any information cited as coming from a source other than the Developer, and excluding any information regarding any appraisal, any absorption study, and market value ratio and annual special tax ratio, and except that no belief or view is expressed as to (a) any financial statements and other financial, statistical, economic, demographic, or engineering data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions, or expressions of opinion, or (b) any information about valuation, appraisals, market absorption, archaeological, or environmental matters) is true and correct in all material respects, and contains no untrue D-6 statement of a material fact and does not omit any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (14) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer has not submitted an application for, nor received actual notice of, (i) the formation or authorization of any other assessment district or community facilities district that would include any portion of the property within the Community Facilities District, or (ii) the authorization or issuance of any debt secured by an assessment or another special tax to be levied on any portion of the property within the Community Facilities District, other than the Special Tax. (15) Except as set forth in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there are no claims, disputes, lawsuits, actions or contingent liabilities of or against the Developer or its Relevant Entities, or among, by or between the Developer and any contractors working on the development of the Property in the Community Facilities District, which may materially and adversely affect: (i) the ability of the Developer to own, develop and sell the Property, as described in the Preliminary Official Statement, (ii) the ability of the Developer to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, (iii) the ability of the Developer to carry on its business as described in the Preliminary Official Statement, or (iv) the ability of the Developer to perform its obligations under the Acquisition Agreement, the CVWD JCFA, or the Developer Continuing Disclosure Agreement. (16) The Developer covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Developer and the Relevant Entities which it controls will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way: (i) seeks to challenge or overturn the formation of the Community Facilities District, (ii) seeks to challenge the adoption of the ordinance levying Special Taxes within the Community Facilities District, (iii) seeks to invalidate the Community Facilities District or any of the Bonds or any refunding obligations, or D-7 (iv) seeks to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Developer in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity before any court, regulatory agency, public board or body relating to the following: (a) a claim that the Special Tax has not been levied in accordance with the Rate and Method of Apportionment, (b) the application or use of the Special Taxes levied and collected, or (c) the enforcement of the obligations of the Community Facilities District under the Indenture or any agreements between the Developer or a Relevant Entity and the City or the Community Facilities District or under which the Developer or Relevant Entity is a party or beneficiary. (17) The Developer has received a copy of the Rate and Method of Apportionment containing the prepayment formula. The Developer acknowledges that any prepayment of the Special Taxes may only be made in accordance with the Rate and Method of Apportionment. (18) The Developer shall comply with the provision of the Mello-Roos Community Facilities Act of 1982, as amended, relating to the Notice of Special Tax described in California Government Code Section 53341.5 in connection with the sale of any part of the Property. (19) Based upon its current development plans, including, without limitation, its current budget and subject to economic conditions and risks generally inherent in the development of real property, to the Actual Knowledge of the Undersigned, the Developer anticipates that it will have sufficient funds to (i) carry on its business as described in the Preliminary Official Statement, (ii) own, develop and sell the Property as described in the Preliminary Official Statement, and (iii) pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency and does not anticipate that the City or the Community Facilities District will be required to resort to a draw on the Reserve Fund for payment of principal of or interest on the Bonds due to the Developer’s nonpayment of Special Taxes. However, no assurance can be given that sources of financing available to the Developer will be sufficient to complete the property development and home construction as currently anticipated and as described in the Preliminary Official Statement. While the Developer has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither the Developer nor any of its Relevant Entities has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of the Developer to provide internal financing in the past, the Developer has not represented in any way that it will do so in the future. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete the Developer’s planned development in the Community Facilities District and other financing by the Developer is not put into place, D-8 there could be a shortfall in the funds required to complete the proposed development by the Developer and portions of the Property may not be developed. (20) The Developer consents to the issuance of the Bonds. The Developer acknowledges and agrees that the proceeds of such Bonds will be used for the acquisition and construction of the improvements described in the Preliminary Official Statement. The Developer acknowledges that the costs to acquire and construct such improvements are estimates, and that any increase in costs in excess of the estimated costs relating to improvements will reduce the improvements which may be financed by the Community Facilities District, and neither the City nor the Community Facilities District has any obligation to provide moneys to pay for any such costs. (21) During the period between the date of this Letter of Representations and the Closing Date, if the Developer has actual knowledge of any event relating to or affecting the Developer and its Relevant Entities, the Property, the Developer’s development and financing plans, and the Developer’s contractual arrangements (but excluding any information cited as coming from a source other than the Developer) which could cause the information under the captions of the Preliminary Official Statement indicated in Section 13 of this Letter of Representations (and subject to the limitations and exclusions contained in Section 13 of this Letter of Representations) to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the City, the Community Facilities District and the Underwriter and if, in the opinion of counsel to the City or the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Preliminary Official Statement, the Developer shall reasonably cooperate with the Community Facilities District in the preparation of an amendment or supplement to the Preliminary Official Statement in form and substance satisfactory to counsel to the City, the Community Facilities District and to the Underwriter. (22) As a condition to the issuance of the Bonds, the Developer agrees to deliver a bring-down certificate, dated the Closing Date, in substantially the form attached as Exhibit E to the Purchase Agreement, to affirm and restate the Developer’s certifications, representations and covenants made in this Letter of Representations. If any event related to or affecting the Developer, its Relevant Entities or the ownership, development or sale of the Property occurs, as a result of which it is necessary to modify the bring-down certificate, the Developer agrees to deliver a new bring-down certificate revised to reflect such event. (23) The Developer acknowledges and agrees that: (i) in connection with the purchase and sale of the Bonds under the Purchase Agreement, and with the discussions, undertakings and procedures leading up to the consummation of the purchase and sale of the Bonds under the Purchase Agreement, the Underwriter is and has been acting solely as principal and is not acting as the agent or fiduciary of the Developer, (ii) the Underwriter has not assumed a fiduciary responsibility in favor of the Developer with respect to (a) the offering of the Bonds contemplated hereby or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Developer on other matters), or D-9 (b) any other obligation to the Developer with respect to the offering contemplated by the Purchase Agreement, and (iii) the Developer has consulted its own legal, financial and other advisors to the extent it has deemed appropriate in connection with the offering contemplated by the Purchase Agreement. On behalf of the Developer, the undersigned has reviewed the contents of this Letter of Representations and the Developer has consulted with counsel regarding the meaning of its contents. The Developer acknowledges and understands that a variety of state and federal laws, including but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, may apply to the Developer, and that under some circumstances certification as to the matters set forth in this Letter of Representations, without additional disclosures or other action, may not fully discharge all duties and obligations of the Developer under such laws. D-10 The undersigned has executed this Letter of Representations solely in his or her capacity as an authorized representative of Developer and he or she will have no personal liability arising from or relating to this Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Developer. UNIVERSITY PARK INVESTOR, LLC, a Delaware limited liability company By: Name: Title: [EXECUTION PAGE OF LETTER OF REPRESENTATIONS – UNIVERSITY PARK INVESTOR, LLC] E-1 EXHIBIT E FORM OF BRING-DOWN CERTIFICATE OF THE DEVELOPER $_______ CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS, SERIES 2021 BRING-DOWN CERTIFICATE OF UNIVERSITY PARK INVESTOR, LLC The undersigned certifies and represents that he or she is duly authorized on behalf of University Park Investor, LLC, a Delaware limited liability company (the “Developer”), to execute and deliver this Bring-Down Certificate of University Park Investor, LLC (this “Bring-Down Certificate”) in connection with the issuance, sale and delivery by the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “Community Facilities District”) of the bonds captioned above (the “Bonds”). This Bring-Down Certificate is delivered pursuant to the Bond Purchase Agreement with respect to the Bonds dated [BPA Date], between Piper Sandler & Co., as underwriter, and the Community Facilities District (the “Purchase Agreement”). In connection with the distribution of the Preliminary Official Statement relating to the Bonds, the Developer executed a Letter of Representations of University Park Investor, LLC, dated ________, 2021 (the “Letter of Representations”). Capitalized terms used but not defined in this Bring-Down Certificate have the same meanings as set forth in the Letter of Representations. The undersigned, on behalf of the Developer, further certifies as follows: (1) The undersigned is familiar with the facts certified in the Letter of Representations and this Bring-Down Certificate and is authorized and qualified to certify the same as an authorized representative of the Developer. (2) Each statement made in the Letter of Representations is affirmed and restated as if made on the date hereof; provided that each statement made in the Letter of Representations referring to the Preliminary Official Statement is affirmed as it relates to the Official Statement dated [LOM Date] relating to the Bonds (the “Final Official Statement”). (3) To the Actual Knowledge of the Undersigned (as defined in the Letter of Representations), no event has occurred since the date of the Preliminary Official Statement that has, in any material way, adversely affected the statements and information described in Paragraph 13 of the Letter of Representations (subject to the limitations and exclusions contained in Paragraph 13 of the Letter of Representations) relating to: (i) the business, properties, operations, prospects or financial condition of the Developer, or any Relevant Entities, E-2 (ii) the Developer’s ability to own, develop and sell the Property, or (iii) the Developer’s ability to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, which should be disclosed in the Final Official Statement for purposes for which it is to be used in order to make such statements and information contained in the Final Official Statement not misleading in any material respect. (4) The Developer has duly executed and delivered the Acquisition Agreement, the CVWD JCFA, and the Developer Continuing Disclosure Agreement, and each of the Acquisition Agreement, the CVWD JCFA, and the Developer Continuing Disclosure Agreement constitutes the legal, valid and binding obligation of the Developer, enforceable against the Developer in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance, and other similar laws relating to or affecting the rights of creditors and certain equitable, legal, or statutory principles affecting the enforcement of contractual rights generally, regardless of whether such enforcement is considered in a proceeding in equity or at law. (5) For a period of 90 days after the Closing Date, if the Developer has actual knowledge of any event relating to or affecting the Developer, its Relevant Entities, or the acquisition, ownership development or sale of the Property which could cause the information under the captions of the Final Official Statement indicated in Section 13 of the Letter of Representations (and subject to the limitations and exclusions contained in Section 13 of the Letter of Representations) to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the Community Facilities District and the Underwriter and if, in the opinion of counsel to the Community Facilities District or the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Final Official Statement, the Developer shall reasonably cooperate with the City and the Community Facilities District in the preparation of an amendment or supplement to the Final Official Statement in form and substance satisfactory to counsel to the City, the Community Facilities District and to the Underwriter. The undersigned has executed this Bring-Down Certificate solely in his or her capacity as an authorized representative of Developer and he or she will have no personal liability arising from or relating to this Bring-Down Certificate. Any liability arising from or relating to this Bring-Down Certificate may only be asserted against the Developer. Dated: [Closing Date] UNIVERSITY PARK INVESTOR, LLC, a Delaware limited liability company By: Name: Title: F-1 EXHIBIT F CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS, SERIES 2021 COMMUNITY FACILITIES DISTRICT CLOSING CERTIFICATE I, the undersigned, hereby certify that I am the ___________________ of the City of Palm Desert (the “City”), the City Council of which is the legislative body for City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “Community Facilities District”), a community facilities district duly organized and existing under the laws of the State of California (the “State”) and that as such, I am authorized to execute this Certificate on behalf of the Community Facilities District in connection with the issuance of the above-referenced bonds (the “Bonds”). I hereby further certify on behalf of the Community Facilities District that: (A) to my best knowledge, after reasonable inquiry, no litigation is pending with respect to which the Community Facilities District or the City has been served with process or threatened against the Community Facilities District or the City (1) to restrain or enjoin the issuance of any of the Bonds or the collection of Net Taxes pledged under the Indenture; (2) in any way contesting or affecting the authority for the issuance of the Bonds or the validity or enforceability of the Bonds or the Community Facilities District Documents; or (3) in any way contesting the existence or powers of the Community Facilities District; (B) the representations and warranties made by the Community Facilities District in the Bond Purchase Agreement dated [BPA Date], between the Community Facilities District and Piper Sandler & Co. (the “Agreement”) are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date; (C) no event affecting the Community Facilities District has occurred since the date of the Final Official Statement that, as of the Closing Date, would cause any statement or information contained in the Final Official Statement under the caption “ABSENCE OF LITIGATION” to be incorrect or incomplete in any material respect or would cause the information contained under such caption in the Final Official Statement to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein, in the light of the circumstances under which they were made, not misleading; (D) as of the date hereof, the Community Facilities District Documents are in full force and effect in accordance with their terms and have not been amended, modified or supplemented except in such case as may have been agreed to by the Underwriter; and (E) the Community Facilities District has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Community Facilities District Documents prior to issuance of the Bonds. F-2 Capitalized terms not defined herein shall have the same meaning set forth in the Agreement. IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date herein below set forth. Dated: [Closing Date] CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) By: __________________________________ Name: Title: P6401-1052\2495063v5.doc RWG DRAFT 6/10/2021 ===================================================================== ACQUISITION AGREEMENT by and among the CITY OF PALM DESERT, CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK), and UNIVERSITY PARK INVESTOR, LLC Dated as of [June 24, 2021] ===================================================================== TABLE OF CONTENTS Page P6401-1052\2495063v5.doc -i- ARTICLE I DEFINITIONS .......................................................................................... 1 Section 1.1 Definitions......................................................................... 1 ARTICLE II RECITALS ............................................................................................... 5 Section 2.1 The District ....................................................................... 5 Section 2.2 The Development .............................................................. 5 Section 2.3 The Facilities ..................................................................... 5 Section 2.4 The Financing ................................................................... 5 Section 2.5 The Bonds ......................................................................... 5 Section 2.6 No Advantage to City Construction .................................. 5 Section 2.7 Agreements ....................................................................... 6 ARTICLE III FUNDING................................................................................................. 6 Section 3.1 City Proceedings ............................................................... 6 Section 3.2 Bonds ................................................................................ 6 Section 3.3 Bond Proceeds .................................................................. 6 Section 3.4 Developer Acknowledgments ........................................... 6 ARTICLE IV CONSTRUCTION OF FACILITIES ....................................................... 7 Section 4.1 Scope of Article ................................................................ 7 Section 4.2 Plans .................................................................................. 7 Section 4.3 Duty of Developer to Construct ........................................ 7 Section 4.4 Labor Code Provisions ...................................................... 8 Section 4.5 Relationship to Public Works; Bidding Requirements .................................................................... 8 Section 4.6 Independent Contractor ................................................... 10 Section 4.7 Performance and Payment Bonds ................................... 10 Section 4.8 Contracts and Change Orders ......................................... 11 Section 4.9 No Gift or Waiver by Developer .................................... 11 ARTICLE V ACQUISITION AND PAYMENT ......................................................... 12 Section 5.1 Inspection ........................................................................ 12 Section 5.2 Agreement to Sell and Purchase Facilities and Discrete Components ............................................... 12 Section 5.3 Payment Requests ........................................................... 13 Section 5.4 Processing Payment Requests ......................................... 14 Section 5.5 Payment........................................................................... 15 Section 5.6 Restrictions on Payments ................................................ 15 Section 5.7 Acquisition of Additional Facilities ................................ 17 Section 5.8 Defective or Nonconforming Work ................................ 17 ARTICLE VI OWNERSHIP AND TRANSFER OF FACILITIES .............................. 17 Section 6.1 Facilities to be Owned by the City – Conveyance of Land and Easements to City .................. 17 Section 6.2 Facilities to be Owned by the City – Title Evidence .......................................................................... 18 Section 6.3 Facilities Constructed on Private Lands ......................... 18 Section 6.4 Facilities Constructed on City Land ............................... 18 TABLE OF CONTENTS (cont.) Page -ii- P6401-1052\2495063v5.doc Section 6.5 Facilities to be Acquired by Other Public Agencies .......................................................................... 18 Section 6.6 Maintenance and Warranties........................................... 18 ARTICLE VII INSURANCE; RESPONSIBILITY FOR DAMAGE ............................ 19 Section 7.1 Liability Insurance Requirements ................................... 19 Section 7.2 Responsibility for Damage and Claims under Acquisition Agreement or CVWD JCFA ....................... 23 ARTICLE VIII REPRESENTATIONS, WARRANTIES AND COVENANTS ........................................................................................ 24 Section 8.1 Representations, Covenants and Warranties of the Developer .............................................................. 24 ARTICLE IX TERMINATION ..................................................................................... 26 Section 9.1 No Bonds ........................................................................ 26 Section 9.2 Mutual Consent ............................................................... 26 Section 9.3 City Election for Cause ................................................... 27 Section 9.4 Force Majeure ................................................................. 28 ARTICLE X MISCELLANEOUS ............................................................................... 28 Section 10.1 Limited Liability of City ................................................. 28 Section 10.2 Excess Costs.................................................................... 28 Section 10.3 Audit ............................................................................... 28 Section 10.4 Attorneys’ Fees ............................................................... 28 Section 10.5 Notices ............................................................................ 28 Section 10.6 Severability ..................................................................... 29 Section 10.7 Successors and Assigns................................................... 29 Section 10.8 Other Agreements ........................................................... 30 Section 10.9 Waiver ............................................................................. 30 Section 10.10 Merger; Entire Agreement .............................................. 30 Section 10.11 Parties in Interest............................................................. 30 Section 10.12 Amendment ..................................................................... 30 Section 10.13 Counterparts .................................................................... 30 EXHIBIT A DESCRIPTION OF AUTHORIZED FACILITIES ELIGIBLE FOR ACQUISITION FROM THE DEVELOPER EXHIBIT B DESCRIPTION OF DISCRETE COMPONENTS OF FACILITIES EXHIBIT C FORM OF PAYMENT REQUEST – Facilities and Discrete Components EXHIBIT D FORM OF PAYMENT REQUEST – Authorized City Fees EXHIBIT E DEVELOPER TAX CERTIFICATE (CITY FACILITIES) P6401-1052\2495063v5.doc -1- THIS ACQUISITION AGREEMENT (the “Acquisition Agreement”), dated as of [June 24, 2021], is by and among the CITY OF PALM DESERT, a municipal corporation existing under the laws of the State of California (the “City”), CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK), a community facilities district established under the Mello-Roos Community Facilities Act of 1982 (the “District”), and UNIVERSITY PARK INVESTOR, LLC, a Delaware limited liability company (the “Developer”). ARTICLE I DEFINITIONS Section 1.1 Definitions. The following terms shall have the meanings ascribed to them in this Section 1.1 for purposes of this Acquisition Agreement. Unless otherwise indicated, any other terms, capitalized or not, when used herein shall have the meanings ascribed to them in the Indenture (as hereinafter defined). “Acceptable Title” means title to a Facility or land, in form acceptable to the Director of Public Works, free and clear of all liens, taxes, assessments, leases, easements and encumbrances, whether or not recorded, and, with respect to land, as evidenced by such title guaranty or title insurance as the Director of Public Works may require, but subject to any exceptions determined by the Director of Public Works as not interfering with the actual or intended use of the land. Notwithstanding the foregoing, an irrevocable offer of dedication may constitute land with an “Acceptable Title” if: (i) such offer is necessary to satisfy a condition to a tentative or final parcel map, (ii) such offer is in a form acceptable to the Director of Public Works, (iii) the Director of Public Works has no reason to believe that such offer of dedication will not be accepted by the applicable governmental entity or utility, and (iv) the Developer commits in writing not to allow any liens or other encumbrances to be imposed on such property prior to its acceptance and to indemnify the City against the imposition of any such lien or encumbrance. “Acceptance Date” means the date the City Council, or other governmental entity or utility which is to own a Facility, takes final action to accept dedication of or transfer of title to a Facility. “Acquisition Agreement” means this Acquisition Agreement, together with any Supplement hereto. “Act” means the Mello-Roos Community Facilities Act of 1982, Sections 53311 et seq. of the State Government Code, as amended. “Actual Cost” means the substantiated cost of a Facility or a Discrete Component, which costs may include: (i) the costs incurred by the Developer for the construction of such Facility or Discrete Component (evidenced by payments to parties unrelated to the Developer), (ii) the documented costs incurred by the Developer in preparing the Plans for such Facility or Discrete Component and the related costs of design, engineering and environmental evaluations of the Facility or Discrete Component, (iii) the fees paid to governmental agencies for obtaining permits, licenses or other governmental approvals for such Facility or a Discrete Component, (iv) documented professional costs incurred by the Developer associated with such Facility or Discrete Component, such as engineering, legal, accounting, inspection, construction staking, materials testing and similar professional services; and (v) costs directly related to the construction -2- P6401-1052\2495063v5.doc and/or acquisition of a Facility or Discrete Component, such as costs of payment, performance and/or maintenance bonds, and insurance costs (including costs of any title insurance required hereunder). Actual Cost may include (a) an amount not in excess of 12.5% of the cost described in clause (i) of the preceding sentence in respect of any construction management or project management or other similar fee payable to the Developer or any party related thereto, and (b) any financing fees, costs or charges, or any interest, cost of carry or other similar charges not exceeding 3.5% of the cost described in clauses (i) through (v) of the preceding sentence. “Affiliate” means any entity with respect to which fifty percent (50%) or more of the ownership or voting power is held individually or collectively by any of the Developer and any other entity owned, controlled or under common ownership or control by or with, the Developer or its managing member(s), general partner(s), or majority shareholder, as applicable, and includes all general partners of any entity which is a partnership. Control shall mean ownership of fifty percent (50%) or more of the voting power of or ownership interest in the respective entity. “Authorized City Fees” means, collectively or individually, as the context may require, connection, capacity, park, or other development impact fees (including without limitation Traffic Signal Fees, Drainage Fees, Parks Fees, Art-in-Public Places Fees, and Fire Facilities Fees) imposed by the City, as set forth in Exhibits A and B, which fees have been authorized by the qualified electors within the District pursuant to the Act. “Authorized CVWD Fees” means, collectively or individually, as the context may require, CVWD Charges (as defined in the CVWD JCFA), which shall also be governed by the CVWD JCFA, and are as set forth in Exhibits A and B, which fees have been authorized by the qualified electors within the District pursuant to the Act. “Authorized Fees” means, collectively or individually, as the context may require, the Authorized City Fees and the Authorized CVWD Fees. “Bonds” means the bonds to be issued, in one or more series, by the District. “City” means the City of Palm Desert, California. “City Facility” means, collectively, the Facilities, other than the CVWD Facilities, as such are designated on Exhibits A and B hereto. “Civil Code” means the Civil Code of the State of California. “Conditions of Approval” means, with respect to any portion of the property within the District, the conditions of approval of all land use entitlements approved by the City (including, but not limited to, the conditions set forth in Resolution No. 2745 adopted by the Planning Commission of the City on November 20, 2018) or any other governmental agency and the conditions of any development agreement, subdivision improvement agreement or other agreement between the Developer and the City or any other governmental agency relating to such property which conditions must be satisfied in order to develop such property. “County” means the County of Riverside, California. -3- P6401-1052\2495063v5.doc “CVWD” means the Coachella Valley Water District. “CVWD Facility” means, collectively, those sewer and water facilities subject to acquisition by the CVWD pursuant to the CVWD JCFA, the Developer Contributions to Creditable Facilities (as defined in the CVWD JCFA), and the CVWD Charges (as defined in the CVWD JCFA). The CVWD Facilities are as designated on Exhibits A and B hereto. “CVWD JCFA” means that certain Joint Community Facilities Agreement dated as of June 8, 2021, by and among the City, the CVWD, and the Developer. “Developer” means University Park Investor, LLC, a Delaware limited liability company, and its successors and assigns to the extent permitted under Section 10.7 hereof. “Director of Public Works” means the Director of Public Works of the City, or the written designee of such officer acting as such under this Acquisition Agreement. “Discrete Component” means a segment or component of a Facility which the Director of Public Works, pursuant to Section 53313.51 of the Act, has heretofore agreed can be separately identified, inspected and completed, and be the subject of a Payment Request hereunder, as listed in Exhibit B hereto, which may be amended or supplemented by any Supplement; provided in no event shall any payment be made for any Discrete Component unless, as required by Section 5.2.B hereof, such Discrete Component, as determined by the Director of Public Works in its sole discretion, (i) has been completed in accordance with the Plans therefor and (ii) as required by Section 53313.51 (without the City’s implementation of subdivision (b) thereof), is functional and capable of serviceable use for its intended purpose. “District” means the City of Palm Desert Community Facilities District No. 2021-1 (University Park), created by the City Council of the City under the Act. “Facilities” means the public facilities which have been authorized by the qualified electors within the District and are eligible to be financed by the District, including without limitation Authorized Fees, and are described in Exhibits A and B hereto, as such exhibits may be amended or supplemented by any Supplement. “Final Discrete Component” means the final Discrete Component of a Facility, the completion of which renders the Facility complete in accordance with the approved Plans by the City or ot her applicable governmental entity or utility. “Finance Director” means the Finance Director of the City, or the written designee of such officer acting as such under this Acquisition Agreement. “Government Code” means the Government Code of the State of California. “Improvement Fund” means the Improvement Fund, and/or the accounts and subaccounts therein, established by the Indenture. “Indenture” means the Bond Indenture, dated as of [July 1,] 2021, between the City and the Trustee with respect to the issuance of the Bonds and providing for, among other matters, the -4- P6401-1052\2495063v5.doc issuance of the Bonds and the establishment of the Improvement Fund, as it may be amended from time to time. “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. “Labor Code” means the Labor Code of the State of California. “Payment Request” means a document, substantially in the forms of (i) Exhibit C hereto (with respect to City Facilities or Discrete Components listed as Items 1.A through 1.D on Table 1 in Exhibit B hereto), (ii) Exhibit D hereto (with respect to Authorized City Fees, listed as Items 3.A through 3.E on Table 1 in Exhibit B hereto), (iii) Exhibit C to the CVWD JCFA (with respect to Authorized CVWD Fees or Developer Contributions to Creditable Facilities, listed as Items 1.A, 2.B, and 4.A through 4.D on Table 2 in Exhibit B hereto), and (iv) Exhibit D to the CVWD JCFA (with respect to CVWD Facilities or Discrete Components listed as Items 2.A, 2.B, and 3 on Table 2 in Exhibit B of this Acquisition Agreement), as applicable, to be used by the Developer in requesting payment of a Purchase Price. “Plans” means the plans, specifications, schedules and related construction contracts and any supplemental agreements, commonly referred to as change orders,” for the design and construction of any Facility (or any Discrete Component thereof) approved by the City or other entity that will own, operate or maintain such Facility when completed and acquired. “Pre-Formation Facility” shall mean any Facility or Discrete Component thereof designated as a Pre-Formation Facility on Exhibit B hereto, which pursuant to Section 53313.5 of the Act, was completed, as determined by and at the sole discretion of the Director of Public Works, before the City Council’s adoption on April 22, 2021 of Resolution No. 2021-10 to establish the District. Based on the April 22, 2021 adoption date of Resolution No. 2021-10, there are no Pre-Formation Facilities. “Public Contract Code” means the Public Contract Code of the State of California. “Purchase Price” means the amount paid by the City for a Facility or any Discrete Component thereof determined in accordance with Article V hereof, being an amount equal to the Actual Cost of such Facility or Discrete Component, but subject to any applicable limitations and reductions provided for in Article V. “Risk Manager” shall mean the person acting in the capacity of Risk Manager for the City. “State” means the State of California. “Supplement” means a written document amending, supplementing or otherwise modifying this Acquisition Agreement or any exhibit hereto. “Tax-exempt” means, with respect to interest on any Bonds, that such interest is excluded from gross income for federal income tax purposes whether or not such interest is an item of tax -5- P6401-1052\2495063v5.doc preference for purposes of the alternative minimum tax under the Internal Revenue Code or otherwise taken into account in calculating tax liabilities under the Internal Revenue Code. “Trustee” means U.S. Bank National Association, in its capacity as Trustee under the Indenture, or any successor thereto acting as trustee under the Indenture. ARTICLE II RECITALS Section 2.1 The District. The City Council has established the District under the Act for the financing of, among other things, the acquisition, construction and installation of public facilities identified in the proceedings to form the District, which include the Facilities listed in Exhibits A and B hereto. Section 2.2 The Development. The Developer is developing land located within the District. Section 2.3 The Facilities. The Facilities are required as Conditions of Approval, and the City, the District, and the Developer will benefit from a coordinated plan of design, engineering, and construction of the Facilities and the development of the land owned by the Developer that is located within the District. The Developer acknowledges that the inclusion of Facilities in Exhibit A hereto in no way, in itself, obligates the District to issue, or the City to cause the District to issue, any Bonds to acquire the Facilities from the Developer or implies that the City or District have in any way engaged the Developer to construct the Facilities, except as specifically provided in this Acquisition Agreement. The Facilities and the Discrete Components thereof, which are the subject of acquisition by the City from the Developer under this Acquisition Agreement are only the Facilities and Discrete Components listed in Exhibits A and B hereto. Section 2.4 The Financing. The Developer, the District, and the City wish to finance, in part, the acquisition of the Facilities and the payment therefor by entering into this Acquisition Agreement for the acquisition of the Facilities and payment for Discrete Components thereof as shown in Exhibits A and B hereto (as they may be amended and supplemented by any Supplement) with the portion of the proceeds of the Bonds on deposit in the Improvement Fund. Section 2.5 The Bonds. The City, on behalf of the District, is proceeding to consider the authorization and issuance of the Bonds under the Act and the Indenture, the proceeds of which Bonds shall be used, in part, to finance the acquisition of a portion of the Facilities. The execution by the City and the District of this Acquisition Agreement in no way obligates the District to issue, or the City to cause the District to issue, any Bonds, or to acquire any facilities with proceeds of any Bonds issued, except the Facilities listed in Exhibit A hereto, the Discrete Components of which are listed in Exhibit B hereto, and which are to be acquired subject to the terms and conditions set forth in this Acquisition Agreement. Section 2.6 No Advantage to City Construction. The City, by its approval of this Acquisition Agreement, has determined that it will obtain no advantage from undertaking the construction by the City directly of the Facilities. The City, the District, and the Developer agree the provisions of this Acquisition Agreement require that the Facilities and Discrete Components thereof be constructed by the Developer as if they had been constructed under the direction and -6- P6401-1052\2495063v5.doc supervision of the City, except for Pre-Formation Facilities. The Developer hereby represents that it has experience in the supervision of the construction of public facilities of the character of the Facilities. Section 2.7 Agreements. In consideration of the mutual promises and covenants set forth herein, and for other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the City, the District, and the Developer agree that the foregoing recitals, as applicable to each, are true and correct and further make the agreements set forth herein. ARTICLE III FUNDING Section 3.1 City Proceedings. The City, on behalf of the District, shall conduct all necessary proceedings under the Act for the issuance, sale and delivery of the Bonds; provided, however, that nothing herein shall be construed as requiring the District to issue, or the City to cause the District to issue, the Bonds or any portion thereof. Upon the written request of the Developer, the Developer and the City staff shall meet regarding the amount, timing and other material aspects of the Bonds, but the legal proceedings and the principal amount, interest rates, terms and conditions and timing of the sale of the Bonds shall be in all respects subject to the absolute discretion and approval of the City Council or such City officers to whom the City Council has delegated the authority for such absolute discretion and approval. Section 3.2 Bonds. The City, in connection with this Acquisition Agreement, is proceeding to consider the issuance and delivery of the Bonds on behalf of the District. Neither the City nor the District shall be obligated to pay the Purchase Prices of the Facilities or any Discrete Components thereof except from amounts on deposit in the Improvement Fund on or after the closing date of the Bonds. The Developer acknowledges that the proceeds of the Bonds deposited and held in the Improvement Fund may not be sufficient for payment of the Purchase Price of all of the Facilities authorized to be paid from the Improvement Fund. Section 3.3 Bond Proceeds. The proceeds of the Bonds shall be deposited, held, invested, reinvested, and disbursed as provided in the Indenture. A portion of the proceeds of the Bonds will be set aside under the Indenture in the Improvement Fund. Moneys in the Improvement Fund shall be withdrawn therefrom in accordance with the provisions of the Indenture and the applicable provisions hereof for payment of all or a portion of the costs of construction and/or acquisition of the Facilities, including payment of the Purchase Price of Discrete Components thereof. Section 3.4 Developer Acknowledgments. The Developer acknowledges that the obligation of any owner of real property in the District, including the Developer to the extent it owns any real property in the District, to pay special taxes levied in the District is not in any way dependent on: (i) the availability of amounts in the Improvement Fund to pay for all or any portion of the Facilities or Discrete Components thereof hereunder, or (ii) the alleged misconduct of the City in the performance of its obligations under this Acquisition Agreement, the Indenture, any developer agreement or amendment thereto or any other agreement to which the Developer and the City or the District are signatories. -7- P6401-1052\2495063v5.doc The Developer acknowledges that any lack of availability of amounts in the Improvement Fund to pay the Purchase Price of Facilities or any Discrete Components thereof shall in no way diminish any obligation of the Developer with respect to the construction of or contributions for public facilities required by any development or other agreement to which the Developer is a party, or any governmental approval to which the Developer or any land within the District is subject. ARTICLE IV CONSTRUCTION OF FACILITIES Section 4.1 Scope of Article. This Article IV shall not apply to Authorized Fees. Section 4.2 Plans. The Developer shall cause, or represents and warrants that it has caused, Plans to be prepared for the Facilities and any Discrete Component thereof and shall obtain, or represents and warrants that it has obtained, the written approval of the Plans in accordance with applicable ordinances and regulations of the City or the governmental entity or utility that will own and operate the Facilities. Copies of all Plans shall be provided by the Developer to the Director of Public Works upon request therefor, and, in any event, as built drawings and, to the extent assignable, a written assignment of the Plans for any Facility shall be provided to the City prior to its acceptance of the Facility. Section 4.3 Duty of Developer to Construct. All Facilities and Discrete Components thereof to be acquired hereunder shall be constructed by or at the direction of the Developer in accordance with the approved Plans. The Developer hereby represents it has performed, and shall continue to perform, all of its obligations hereunder and has conducted, and shall continue to conduct, all operations with respect to the construction of Facilities and any Discrete Components thereof in a good, workmanlike and commercially reasonable manner, with the standard of diligence and care normally employed by duly qualified persons utilizing their best efforts in the performance of comparable work and in accordance with generally accepted practices appropriate to the activities undertaken. The Developer has employed, and shall continue to employ, at all times adequate staff or consultants with the requisite experience necessary to administer and coordinate all work related to the design, engineering, acquisition, construction and installation of the Facilities and Discrete Components thereof to be acquired by the City from the Developer hereunder. The Developer shall be obligated: (i) to construct and cause to be conveyed to the City, or other applicable governmental entity or utility, all Facilities and Discrete Components thereof as a condition of and pursuant to the terms of any applicable development agreement, improvement agreement, subdivision map, or regulatory approval (or as to Authorized Fees, to pay or cause to be paid all such Authorized Fees), and (ii) to use its own funds to pay all costs thereof in excess of the Purchase Prices thereof to be paid therefor hereunder. The Developer shall not be relieved of its obligation to construct each Facility and Discrete Component thereof and convey each such Facility to the City in accordance with the terms hereof, even if (i) because of the limitations imposed by Section 5.6 hereof, the Purchase Price for such Discrete Component or Facility is less than the Actual Cost, or cost to the Developer, of such Discrete Component or Facility, or (ii) there are insufficient funds in the Improvement Fund to pay the Purchase Prices thereof, and, in any event, this Acquisition Agreement shall not affect any -8- P6401-1052\2495063v5.doc obligation of any owner of land in the District under any other agreement or any governmental approval to which any land within the District is subject, with respect to the public improvements required in connection with the development of the land within the District. Such obligation of the Developer to construct and convey such Facilities, and pay the costs thereof in excess of available monies in the Improvement Fund, shall be an obligation of the Developer as a party to this Acquisition Agreement without regard to any governmental conditions to development of the land in the District that may otherwise apply to the land owners in the District. Nothing in this Section 4.3 requires the Developer to commence or complete any Facility any sooner than required under the related City land use approvals for the Developer’s project within the District. Section 4.4 Labor Code Provisions. Pursuant to Section 1781 of the Labor Code, the City and the District hereby state, and the Developer hereby acknowledges, that the construction of the Facilities and any Discrete Components thereof by the Developer, which will be paid in part out of public funds, is “public work” (as defined in Section 1720 of the Labor Code) to which Section 1771 of the Labor Code applies, and the Developer hereby agrees that it shall cause the construction of the Facilities and any Discrete Components thereof (excluding Authorized Fees), and any other public improvements required by the Conditions of Approval, to be performed as “public works”. Without limiting the foregoing, the Developer agrees to comply with the provisions of Sections 1720 et seq. of the Labor Code with respect to prevailing wages and agrees that all contracts for “public works” shall call for payment of prevailing wages as required thereby. Section 4.5 Relationship to Public Works; Bidding Requirements. The following shall apply to all contracts applicable to the Facilities and any Discrete Components thereof which will be the subject of a Payment Request hereunder: A. General. This Acquisition Agreement is for the acquisition by the City of the Facilities and payment thereof (including payment for Discrete Components thereof) from moneys in the Improvement Fund and is not intended to be a public works contract. The City, the District, and the Developer agree that the Facilities are of local, and not state-wide concern, and that the provisions of the Public Contract Code shall not apply to the construction of the Facilities or Discrete Components thereof. The City, the District, and the Developer agree that (i) the Developer shall award, or has awarded, all contracts for the construction of the Facilities and the Discrete Components thereof, (ii) this Acquisition Agreement is necessary to assure the timely and satisfactory completion of the Facilities, and (iii) compliance with the Public Contract Code with respect to the Facilities or Discrete Components thereof would work an incongruity and would not produce an advantage to the City or the District. B. Bidding Procedures. Notwithstanding Section 4.5.A hereof, the Developer represents and warrants it shall competitively bid and award, or has competitively bid and awarded, all contracts for construction of the Facilities and any Discrete Components thereof to be owned by the City, and materials related thereto, by means of a competitive bid process acceptable to the City Manager or its designee to be consistent with the City’s Municipal Code, Chapter 3.30 (or successor provisions) relating to purchasing and public contracts, and as to the Facilities and any Discrete Components thereof to be owned by CVWD, by means of a competitive bid process acceptable to CVWD; provided, however, pursuant to Section 53313.5 of the Act, the Developer -9- P6401-1052\2495063v5.doc excepts from such representation and warranty any Pre-Formation Facility. In furtherance of, and without limiting the foregoing, the Developer shall endeavor to obtain at least three bids for such Facility or Discrete Component thereof by means of such competitive bidding process acceptable to the City Manager or its designee. Upon written request of the City Manager or its designee, the Developer shall provide an analysis of bids for construction and materials for the Facilities constructed or to be constructed by the Developer. The Developer shall award each bid to the lowest responsible and responsive bidder. The Developer represents and warrants it shall evaluate, or has evaluated, criteria such as experience, ability to perform on schedule, financial ability, and such other criteria as required by the City Manager or its designee to determine qualified contractors for any contract. Such contractors shall comply with any applicable City regulations. The City hereby acknowledges and agrees that (i) it has reviewed the competitive bid process by which the Developer has awarded contracts, prior to the date of this Acquisition Agreement, for the construction of Facilities required by the Conditions of Approval with respect to the first phase final map (designated Tract Map No. 37506-1) and to be owned by the City, and (ii) the City Manager or its designee has determined that such competitive bid process for such Facilities is in substantial compliance with the criteria set forth in the foregoing paragraph. Notwithstanding the foregoing, the Developer agrees to meet and confer with the City Manager or its designee, promptly following the date of this Acquisition Agreement and prior to undertaking a competitive bid process or awarding any contracts for the construction of any other Facilities and any Discrete Components thereof to be owned by the City, to discuss and implement such adjustments to the Developer’s competitive bid and award process as the City Manager or its designee may deem appropriate or desirable. At the reasonable request of the Developer, the City Manager or its designee or the Director of Public Works shall meet with the qualified general contractors to discuss the requirements of the particular contract to be bid. Upon written request of the City Manager or its designee or the Director of Public Works, the Developer shall provide an analysis of bids for construction and materials for the Facilities or applicable Discrete Components, indicating how the winning bid was determined and how it was consistent with the applicable bid package. C. Scheduling. At the request of the Director of Public Works, the Developer shall develop, or cause to be developed, and shall maintain a project schedule, providing for all major project elements included in the construction of the Facilities to be acquired hereunder, so that the whole project is scheduled in an efficient manner. If a schedule is requested, the Developer shall provide the Director of Public Works with complete copies of the schedule and each update to the schedule for the Director’s review. D. Periodic Meetings. From time to time at the request of the City Manager or its designee or the Director of Public Works, representatives of the Developer shall meet and confer with City staff, consultants and contractors regarding matters arising hereunder with respect to the Facilities, Discrete Components and the progress in constructing and acquiring the same, and as to any other matter related to the Facilities or this Acquisition Agreement. The Developer shall advise the Director of Public Works in advance of any coordination and scheduling meetings to be held with contractors relating to the Facilities or any Discrete Components thereof, in the ordinary course of performance of an individual contract. The Director of Public Works or the Director of Public Works’ designated representative shall have the right to be present at such meetings, and to -10- P6401-1052\2495063v5.doc meet and confer with individual contractors if deemed advisable by the Director of Public Works to resolve disputes or ensure the proper completion of the Facilities and any Discrete Components thereof. Section 4.6 Independent Contractor. In performing its obligations under this Acquisition Agreement, the Developer is an independent contractor and not the agent or employee of the City or the District. Neither the City nor the District shall be responsible for making any payments directly or otherwise to any contractor, subcontractor, agent, consultant, employee or supplier of the Developer. Section 4.7 Performance and Payment Bonds. The Developer agrees to comply with all performance and payment bonding requirements of the City and other applicable public entities and public utilities with respect to the construction of the Facilities, any Discrete Component thereof, and any other public improvements required by the Conditions of Approval, as described in Section 4.4 above. As to the City, the Developer shall provide payment bonds and performance bonds, which bonds shall meet the following requirements: A. Payment Bonds. Each payment bond shall be provided to the City and the District prior to commencement of construction under the corresponding construction contract and shall (1) secure with respect to such contract the payment of claims of laborers (including but not limited to the payment of prevailing wages as required by Section 4.4 hereof), material suppliers, and other persons as provided by law, in an amount not less than 100% of the total amount payable pursuant to the subject construction contract, (2) be in conformity with the requirements of the State Civil Code, Section 9554 (to the extent that a subject contract involves an expenditure in an amount subject to, and a contractor deemed to be a direct contractor under, Section 9550 of the State Civil Code), and (3) name the City and the District as an obligee unto which the Developer, as principal, and the surety are bound. Any payment bond provided hereunder shall be in form and substance satisfactory to the City Attorney. Provided that (a) fifteen (15) days have passed after the later of (i) the expiration of the applicable statutory period in which any person may bring suit against the surety(ies) on a payment bond as set forth in Sections 8609 or 9558 of the Civil Code or (ii) the expiration of the applicable statutory period in which any person may record a lien pursuant to Sections 8412 or 8414 of the Civil Code and (b) no such suit or lien has been filed at such time, at the applicable Developer’s written request submitted to the Risk Manager, the City shall provide such Developer with a letter confirming that the City no longer requires the applicable payment bond to be maintained in full force and effect. In the event a contractor to whom a Developer awards a contract for the construction of a Facility or Discrete Component thereof provides a payment bond meeting the requirements hereof, such contractor’s payment bond shall be deemed as the provision by such Developer of a payment bond hereunder. B. Performance Bonds. Prior to the commencement of construction on a Facility, the Developer shall require any contractor to whom a contract is awarded for the construction of such Facility (or each Discrete Component thereof that is separately bid) to provide a performance bond for the benefit of the City and the District, to assure faithful performance of the construction -11- P6401-1052\2495063v5.doc contract in regard to the applicable improvements (1) in an amount not less than 100% of the total amount payable pursuant to the subject construction contract and securing such contractor’s obligations under such contract, and (2) naming the City and the District as an obligee unto which the Developer, as principal, and the surety are bound. Any performance bond provided hereunder shall be in form and substance satisfactory to the City Attorney. Section 4.8 Contracts and Change Orders. The Developer shall be responsible for entering into all contracts and any supplemental agreements, commonly referred to as “change orders,” required for the construction of the Facilities or any Discrete Components thereof. All such contracts and supplemental agreements shall be submitted to the Director of Public Works or, as to any such contracts and supplemental agreements entered into prior to the date of this Acquisition Agreement, the Developer represents and warrants they have been submitted to the Director of Public Works. Prior approval of supplemental agreements by the Director of Public Works shall only be required for such change orders that in any way materially alter the quality or character of the subject Facilities or Discrete Components thereof, or which involve an amount equal to the greater of ten percent (10%) of the amount of the bid for the Facility or applicable Discrete Components thereof involved; provided, as to any such change orders meeting the thresholds set forth in the foregoing and entered into prior to the date of this Acquisition Agreement, the Developer represents and warrants it has obtained the prior approval of the Director of Public Works. The City expects that such contracts and supplemental agreements needing prior approval by the Director of Public Works will be approved or denied (any such denial to be in writing, stating the reasons for denial and the actions, if any, that can be taken to obtain later approval) within thirty (30) business days of receipt by the Director of Public Works thereof. Any approval by the Director of Public Works of a supplemental agreement shall in no way affect the estimated costs listed in Exhibits A and B for any related Facility or Discrete Component, but to the extent that it increases the Actual Cost of a Facility or Discrete Component, such increased cost may be payable as part of the Purchase Price of the related Facility or Discrete Component as provided in Section 5.6.A. hereof. The amount of each payment bond and performance bond relating to the construction contract subject to any change order described above shall be increased automatically by the Developer upon an increase in the cost of construction of the improvements or any of them, such that the payment bonds and performance bonds at all times shall be in an amount not less than 100% of the sum of the total amount payable pursuant to the construction contract, and if the Developer fails to so increase the amount of the payment bond or performance bond in connection with such a change order, the Developer shall provide the additional security within thirty (30) days after receiving demand from the Director of Public Works or the City Engineer therefor. Section 4.9 No Gift or Waiver by Developer. The City, the District, and the Developer understand and agree that (i) in some instances, the Developer will be constructing the Facilities or paying the Authorized Fees prior to the issuance of Bonds, a portion of the proceeds of which will be used to pay the Purchase Prices to the Developer for those Facilities or the Authorized Fees, (ii) the Developer will be submitting Payment Requests with knowledge that there may be insufficient funds available in the Improvement Fund for reimbursement for Actual Costs of such Facilities or Discrete Components thereof, (iii) the Facilities and/or Authorized Fees that are the subject of the Payment Requests submitted when there are insufficient proceeds will be inspected and reviewed as set forth in this Acquisition Agreement, and the Payment Requests submitted -12- P6401-1052\2495063v5.doc when there are insufficient proceeds will be reviewed and approved in manner set forth herein, and (iv) the payment for any Payment Requests approved in the preceding manner will be deferred until there are sufficient proceeds in the Improvement Fund to make such payment, at which time the District will make payment on the approved Payment Requests in the manner set forth herein; provided, if (x) there are insufficient proceeds available in the Improvement Fund for reimbursement of any Payment Request at any time after the issuance of all Bonds authorized to be issued by the qualified electors on May 13, 2021 (which are authorized to be issued in the maximum aggregate principal amount of $50 million), (y) there are no monies available in the Improvement Fund upon which to accrue investment earnings, and (z) there are no monies remaining in any account under the Indenture to be transferred to the Improvement Fund pursuant to the terms of the Indenture, the foregoing clauses (iii) and (iv) shall not apply. At all times, the construction of the Facilities is made with the expectation that such Facilities will be purchased by the City or CVWD (but solely from moneys in the Improvement Fund, as authorized and limited pursuant to terms and conditions of the Indenture, the CVWD JCFA, and this Acquisition Agreement), and that the conveyance of such Facilities to the City or CVWD prior to receipt of the Purchase Price for such Facilities shall not be construed as a dedication or gift, or a waiver of the Purchase Price for such Facilities as set forth in, and limited by the terms of, this Acquisition Agreement. ARTICLE V ACQUISITION AND PAYMENT Section 5.1 Inspection. No payment hereunder shall be made by the City or District to the Developer for a Facility or Discrete Component thereof until the Facility or Discrete Component thereof has been inspected and found to be completed in accordance with the approved Plans by the City or other applicable governmental entity or utility. The City shall make periodic site inspections of the Facilities and any Discrete Components thereof to be acquired by the City hereunder; provided that in no event shall the City incur any liability for any delay in the inspection of any Facilities or Discrete Components thereof. For Facilities or any Discrete Components thereof to be acquired by other public entities or utilities, the Developer shall be responsible for obtaining such inspections and providing written evidence thereof to the Director of Public Works. The Developer agrees to pay all inspection, permit and other similar fees of the City applicable to construction of the Facilities and any Discrete Components thereof, subject to reimbursement therefor as an Actual Cost of the related Facility or Discrete Component thereof. Section 5.2 Agreement to Sell and Purchase Facilities and Discrete Components. A. The Developer hereby agrees to sell the Facilities to the City or other applicable governmental entity or utility that will own a Facility, and the District hereby agrees to use amounts in the Improvement Fund to pay the Purchase Price thereof to the applicable Developer, subject to the terms and conditions hereof. Except for payment for Discrete Components as provided in paragraph B. below, neither the City nor the District shall be obligated to finance the purchase of any Facility until the Facility is completed in accordance with the Plans, as determined by the Director of Public Works in its sole discretion, and the Acceptance Date for such Facility has occurred. -13- P6401-1052\2495063v5.doc B. Pursuant to Section 53313.51(a) of the Act and at the request of the Developer, the City has identified Discrete Components of Facilities which may be the subject of a Payment Request prior to completion of the entire Facility of which it is a part, and paid pursuant to the terms of this Acquisition Agreement prior to completion of such entire Facility. The Discrete Components are expressly shown in Exhibit B hereto, as it may be supplemented by any Supplement, and any payment for a Discrete Component shall not be made until such Discrete Component, as determined by the Director of Public Works in its sole discretion, (i) has been completed in accordance with the Plans therefor and (ii) as required by Section 53313.51 of the Act, is functional and capable of serviceable use for its intended purpose. For example, “curbs and gutters” of a street are not capable of serviceable use, even if completed pursuant to the Plans therefor, if functional catch basins (which, in turn, may require functional related retention basins) associated with such curbs and gutters have not been installed prior to, or concurrently with, the curbs and gutters. The parties hereto acknowledge the Discrete Components do not have to be accepted by the City, or other applicable governmental entity or utility that will own a Facility, as a condition precedent to the payment of the Purchase Price therefor, but in no event shall any such payment be made until the requirements of the first paragraph of this Section 5.2.B. have been met. The Developer acknowledges that the Discrete Components have been identified for payment purposes only, and that the City, or other applicable governmental entity or utility that will own a Facility, is not obligated to accept a Facility of which a Discrete Component is a part until the entire Facility has been completed in accordance with the Plans, as determined by the Director of Public Works in its sole discretion, although at the sole discretion of the Director of Public Works, the City may accept a Discrete Component of a Facility prior to completion of the entire Facility, and any governmental entity or utility that will own a Facility may at its sole discretion determine to accept a Discrete Component of a Facility prior to completion of the entire Facility. The status of construction of a Facility or Discrete Component and the determination of whether a Facility or Discrete Component is complete is not dependent upon, or contingent upon, the status or completion of construction of any homes on the property within the District. C. In any event, the City shall not be obligated to pay the Purchase Price for any Facility or Discrete Component except from the moneys in the Improvement Fund. Section 5.3 Payment Requests. A. Payment Requests for Facilities or Discrete Components. In order to receive the Purchase Price for a Facility or Discrete Component that has been completed in accordance with the Plans, as determined by the Director of Public Works in its sole discretion, other than Authorized Fees, inspection thereof under Section 5.1 shall have been made, and the Developer shall deliver to the Director of Public Works: 1. a Payment Request in the form of Exhibit C attached hereto or Exhibit D to the CVWD JCFA, as applicable, for such Facility or Discrete Component, together with all attachments and exhibits required by the applicable Payment Request form and this Section 5.3 to -14- P6401-1052\2495063v5.doc be included therewith (including, but not limited to Attachments 1 and 2 to said Payment Request forms), and 2. if payment is requested for a completed Facility (as opposed to any Discrete Component other than the Final Discrete Component), (a) if the property on which the Facility is located is not owned by the City (or other applicable governmental entity or utility that will own the Facility) at the time of the request, a copy of the recorded documents conveying to the City (or other applicable governmental entity or utility that will own the Facility) Acceptable Title to the real property on, in or over which such Facility is located, as described in Section 6.1 hereof, (b) a copy of the recorded notice of completion of such Facility (meeting the requirements specified in Section 5.6), (c) to the extent paid for with the proceeds of the Bonds, an assignment to the District of any reimbursements that may be payable with respect to the Facility, such as public or private utility reimbursements, and (d) an assignment of the warranties and guaranties for such Facility, as described in Section 6.6 hereof, in a form acceptable to the City. B. Payment Requests for Authorized City Fees. In order to receive the Purchase Price for Authorized City Fees, the Developer shall deliver to the Director of Public Works a Payment Request in the form of Exhibit D hereto for such Authorized City Fees (including, but not limited to, Attachment 1 to Exhibit D). C. Payment Requests for Authorized CVWD Fees. In order to receive the Purchase Price for Authorized CVWD Fees, the Developer shall deliver to the Finance Director a Payment Request in the form of Exhibit C to the CVWD JCFA for such Authorized CVWD Fees. Section 5.4 Processing Payment Requests. Upon receipt of a Payment Request and all accompanying documentation, the Director of Public Works shall conduct a review in order to confirm that such request is complete, that such Facility or Discrete Component identified therein was constructed in accordance with the Plans therefor, and to verify and approve the Actual Cost of such Facility or Discrete Component specified in such Payment Request. The Director of Public Works shall also conduct such review as is required in the Director of Public Works’ discretion to confirm the matters certified in the Payment Request. The Developer agrees to cooperate with the Director of Public Works in conducting each such review and to provide the Director of Public Works with such additional information and documentation as is reasonably necessary for the Director of Public Works to conclude each such review. For any Facilities or Discrete Components thereof to be acquired by CVWD, the Developer shall provide a fully executed Payment Request in the form and with such attachments and documentation prescribed by the CVWD JCFA and Section 5.3.A above, to demonstrate that such Facilities or Discrete Components thereof are acceptable to CVWD, together with such other information as the Director of Public Works may reasonably request (if any) to confirm such matters. Within ten (10) business days of receipt of any P ayment Request, the Director of Public Works expects to review the request for completeness and notify the Developer whether such Payment Request is complete, and, if not, what additional documentation must be provided. If such Payment Request is complete, the Director of Public Works expects to provide a written approval, or denial specifying the reason for any denial, of the request within thirty (30) days of its submittal. If a Payment Request seeking reimbursement for more than one Facility or Discrete Component is denied, the Director of Public Works shall state whether the Payment Request is nevertheless approved and complete for any one or more Facilities -15- P6401-1052\2495063v5.doc or Discrete Components and any such Facilities or Discrete Component shall be processed for payment under Section 5.5 notwithstanding such partial denial. Section 5.5 Payment. Upon approval of the Payment Request by the Director of Public Works, the Director of Public Works shall sign the Payment Request and forward the same to the City’s Finance Director. Upon receipt of the reviewed and fully signed Payment Request, the City’s Finance Director shall, within the then current City financial accounting payment cycle but in any event within thirty (30) business days of receipt of the approved Payment Request, cause the same to be paid by the Trustee under the applicable provisions of the Indenture, to the extent of funds then on deposit in the Improvement Fund. Any approved Payment Request not paid due to an insufficiency of funds in the Improvement Fund shall be paid promptly following the deposit into the Improvement Fund of proceeds of any investment earnings or other amounts transferred to the Improvement Fund under the terms of the Indenture. The Purchase Price paid hereunder for any Facility or Discrete Component shall constitute payment in full for such Facility or Discrete Component, including, without limitation, payment for all labor, materials, equipment, tools and services used or incorporated in the work, supervision, administration, overhead, expenses and any and all other things required, furnished or incurred for completion of such Facility or Discrete Component, as specified in the Plans. Section 5.6 Restrictions on Payments. Notwithstanding any other provisions of this Acquisition Agreement, the following restrictions shall apply to any payments made to the Developer under Sections 5.2 and 5.5 hereof: A. Amounts of Payments. Subject to the following paragraphs of this Section 5.6, payments for each Facility or Discrete Component will be made only in the amount of the Purchase Price for the respective Facility or Discrete Component, which Purchase Price shall equal the Actual Cost of the Facility or Discrete Component. Further, the Purchase Price of any CVWD Facility shall be subject to the limitations set forth in Section 3.6 of the CVWD JCFA. Nothing herein shall require the City or the District in any event (i) to pay more than the Actual Cost of a Facility or Discrete Component, or (ii) to make any payment beyond the available funds in the Improvement Fund. The parties hereto acknowledge and agree that all payments to the Developer for the Purchase Prices of Facilities or Discrete Components are intended to be reimbursements to the Developer for monies already expended or, if made pursuant to Section 5.6.B. or 5.6.C. hereof, for immediate payment by the Developer (or directly by the City) to third parties in respect of such Facilities or Discrete Components thereof. B. Joint or Third Party Payments. The City may make any payment jointly to the Developer and any mortgagee or trust deed beneficiary, contractor or supplier of materials, as their interests may appear, or solely to any such third party, if the Developer so requests the same in writing or as the City otherwise determines such joint or third party payment is necessary to obtain lien releases. C. Withholding Payments. The City and the District shall be entitled, but shall not be required, to withhold any payment hereunder for a Facility or a Discrete Component if the Developer or any Affiliate is delinquent in the payment of ad valorem real property taxes, special -16- P6401-1052\2495063v5.doc assessments or taxes, or Special Taxes levied in the District. In the event of any such delinquency, the City or the District shall only make payments hereunder, should any be made at such parties’ discretion, directly to contractors or other third parties employed in connection with the construction of the Facilities or Discrete Component thereof or to any assignee of the Developer’s interests in this Acquisition Agreement (and not to the Developer or any Affiliate), until such time as the Developer provides the Director of Public Works with evidence that all such delinquent taxes and assessments have been paid. The City and the District shall withhold payment for any Facility or Discrete Component constructed on land, until Acceptable Title to such land, if required or not otherwise dedicated to the City, is conveyed to the City, as described in Article VI hereof. The City and the District shall be entitled to withhold any payment hereunder for a Facility or Discrete Component that is the subject of a Payment Request until the City and District are satisfied that any and all claims for labor and materials have been paid by the Developer for the Facility or Discrete Component that is the subject of a Payment Request, or conditional lien releases in accordance with Section 8122 et seq. of the Civil Code have been provided by the Developer for such Facility or Discrete Component. The City and the District may waive this limitation upon the provision by the Developer of sureties, undertakings, securities and/or bonds of the Developer or appropriate contractors or subcontractors and deemed satisfactory by the Director of Public Works to assure payment of such claims. The City and the District shall be entitled to withhold payment for any Facility or the Final Discrete Component of any such Facility hereunder to be owned by the City until: (i) the Director of Public Works determines that the Facility is ready for its intended use, (ii) the Acceptance Date for the Facility has occurred and the requirements of Section 6.1, if applicable to such Facility, have been satisfied, (iii) a notice of completion executed by the Developer as an owner pursuant to Section 8182 of the Civil Code, reciting the name and address of the City as an owner of an interest as a vendee under a contract of purchase pursuant to Section 8182 of the Civil Code, and in a form acceptable to the Director or Public Works, has been recorded for the Facility and (iv) general lien releases in accordance with Section 8122 et seq. of the Civil Code, conditioned solely upon payment from the proceeds of the Bonds to be used to acquire such Facility or Final Discrete Component, have been submitted to the Director of Public Works for the Facility. The City shall be entitled to withhold payment for any Facility, or Final Discrete Component thereof, to be owned by other governmental entities until the Developer provides the Director of Public Works with evidence that the governmental entity or utility has accepted dedication of, or title to, the Facility. If the Director of Public Works determines that a Facility is not ready for intended use under (i) above, the Director of Public Works shall so notify the Developer as soon as reasonably practicable in writing specifying the reason(s) therefor. Nothing in this Acquisition Agreement shall be deemed to prohibit the Developer from contesting in good faith the validity or amount of any mechanics or materialmans lien nor limit the remedies available to the Developer with respect thereto so long as such delay in performance shall not subject the Facilities or any Discrete Component thereof to foreclosure, forfeiture or sale. D. Retention. Unless the Developer elects to post a maintenance or warranty bond pursuant to the paragraph below, the District shall withhold in the Improvement Fund an amount -17- P6401-1052\2495063v5.doc equal to ten percent (10%) of the Purchase Price of each Facility or Discrete Component to be paid hereunder. Any such retention will be released to the Developer upon final completion and acceptance of the related Facility and the expiration thereafter of a maintenance/warranty period consistent with applicable City policy (currently, a one-year maintenance period for landscaping improvements, and as to other Facilities, a warranty period of one (1) year after the Acceptance Date of such Facility or the posting of a warranty bond to remain in effect for one (1) year after the Acceptance Date thereof). Notwithstanding the foregoing, the Developer shall be entitled to payment of any such retention upon the completion and acceptance of a Facility or Discrete Component, if a maintenance or warranty bond is posted in lieu thereof in accordance with Section 6.6 hereof. Payment of any retention shall also be contingent upon the availability of monies in the Improvement Fund therefor. No retention shall apply if the Developer proves to the Director of Public Works’ satisfaction that the Developer’s contracts for the Facilities or Discrete Components provide for the same retention as herein provided, so that the Purchase Price paid for the Facility or Discrete Component is at all times net of the required retention. E. Frequency. [Intentionally deleted.] F. Right-of-Way. Payments for any right-of-way described in Exhibits A or B hereto shall be based upon appraisals of the respective land to be acquired in a form acceptable to the Director of Public Works, or upon such other basis as the Director of Public Works shall determine is appropriate in the circumstances. Section 5.7 Acquisition of Additional Facilities. If the construction and acquisition of all the Facilities theretofore listed in Exhibit A have been completed and the Purchase Prices, including any retentions described in Section 5.6.D. above, with respect thereto have been paid, and funds remain on deposit in the Improvement Fund, the City and the Developer may designate in a Supplement hereto additional Facilities and Discrete Components thereof to be constructed and acquired with such remaining funds. Section 5.8 Defective or Nonconforming Work. If any of the work done or materials furnished for a Facility or Discrete Component are found by the Director of Public Works to be defective or not in accordance with the applicable Plans: (i) and such finding is made prior to payment for the Purchase Price of such Facility or Discrete Component hereunder, the City and the District may withhold payment therefor until such defect or nonconformance is corrected to the satisfaction of the Director of Public Works, or (ii) and such finding is made after payment of the Purchase Price of such Facility or Discrete Component, but prior to the expiration of the applicable warranty period, the City and the Developer shall act in accordance with Section 6.6 hereof. ARTICLE VI OWNERSHIP AND TRANSFER OF FACILITIES Section 6.1 Facilities to be Owned by the City – Conveyance of Land and Easements to City. Acceptable Title to all property on, in or over which each Facility to be acquired by the City will be located, shall be deeded over to the City by way of grant deed, -18- P6401-1052\2495063v5.doc quitclaim, or dedication of such property. The Developer agrees to assist the City in obtaining such documents as are required to obtain Acceptable Title with respect to such property on, in, or over which each Facility will be located. Completion of the transfer of title to land shall be accomplished prior to the payment of the Purchase Price for a Facility or Final Discrete Component thereof and shall be evidenced by recordation of the acceptance thereof by the City Council or the designee thereof. Section 6.2 Facilities to be Owned by the City – Title Evidence. Upon the request of the City, the Developer shall furnish to the City a preliminary title report for land with respect to Facilities to be acquired by the City and not previously dedicated or otherwise conveyed to the City, for review and approval at least fifteen (15) calendar days prior to the transfer of Acceptable Title to a Facility to the City. The Director of Public Works shall approve the preliminary title report unless it reveals a matter which, in the judgment of the City, could materially affect the City’s use and enjoyment of any part of the property or easement covered by the preliminary title report. In the event the City does not approve the preliminary title report, the City shall not be obligated to accept title to such Facility and the City shall not be obligated to pay the Purchase Price for such Facility or Final Discrete Component thereof until the Developer has cured such objections to title to the satisfaction of the City. Section 6.3 Facilities Constructed on Private Lands. If any Facilities to be acquired are located on privately-owned land, the owner thereof shall retain title to the land and the completed Facilities until acquisition of the Facilities under Article V hereof. Pending the completion of such transfer of title to land, the Developer shall not be entitled to receive any payment for any such Facility or Final Discrete Component thereof. The Developer shall, however, be entitled to receive payment for Discrete Components, other than the Final Discrete Component, upon making an irrevocable offer of dedication of such land in form and substance acceptable to the Director of Public Works. Notwithstanding the foregoing, upon written request of the Director of Public Works before payment for any Discrete Component of such a Facility, the Developer shall convey or cause to be conveyed Acceptable Title thereto in the manner described in Sections 6.1 and 6.2 hereof. Section 6.4 Facilities Constructed on City Land. If the Facilities to be acquired are on land owned by the City, the City shall grant to the Developer a license to enter upon such land for purposes related to the construction, and maintenance pending acquisition, of the Facilities. The provisions for inspection and acceptance of such Facilities otherwise provided herein shall apply. Section 6.5 Facilities to be Acquired by Other Public Agencies. With respect to any Facility to be acquired by a governmental entity other than the City, the Developer shall comply with such entity’s rules and regulations regarding title and conveyance of property and provide the Director of Public Works with evidence of such compliance, prior to the payment of the Purchase Price for any such Facility or Final Discrete Component thereof. Section 6.6 Maintenance and Warranties. The Developer shall maintain each Discrete Component in good and safe condition until the Acceptance Date of the Facility of which such Discrete Component is a part. Prior to the Acceptance Date, the Developer shall be responsible for performing any required maintenance on any completed Discrete Component or -19- P6401-1052\2495063v5.doc Facility. On or before the Acceptance Date of the Facility, the Developer shall assign to the City all of the Developer’s rights in any warranties, guarantees, maintenance obligations or other evidence of contingent obligations of third persons with respect to such Facility. The Developer shall maintain or cause to be maintained each Facility to be owned by the City, including the repair or replacement thereof, for a period of one (1) year from the Acceptance Date thereof, or, alternatively, shall provide a bond reasonably acceptable in form and substance to the Director of Public Works for such period and for such purpose (specifically, a one-year maintenance period for landscaping improvements, and as to other Facilities, the posting of a warranty bond to remain in effect for one (1) year after the Acceptance Date thereof), to insure that defects, which appear within said period will be repaired, replaced, or corrected by the Developer, at its own cost and expense, to the satisfaction of the Director of Public Works. The Developer shall commence to repair, replace or correct any such defects within thirty (30) days after written notice thereof by the City to the Developer, and shall complete such repairs, replacement or correction as soon as practicable. After such one-year period, the City shall be responsible for maintaining such Facility. Any warranties, guarantees or other evidences of contingent obligations of third persons with respect to the Facilities to be acquired by the City shall be delivered to the Director of Public Works as part of the transfer of title. ARTICLE VII INSURANCE; RESPONSIBILITY FOR DAMAGE Section 7.1 Liability Insurance Requirements. The Developer shall procure and maintain insurance policies and provide to the Director of Public Works evidence of insurance and endorsements thereto on forms acceptable to the Risk Manager as provided below. A. Time for Compliance. The Developer shall not commence any physical work on the Facilities until it has provided evidence satisfactory to the Risk Manager that it has secured all insurance required under this Section 7.1. In addition, the Developer shall not allow any contractor or subcontractor to commence work on any contract or subcontract until it has provided evidence satisfactory to the City that the subcontractor has secured all insurance required under this Section 7.1. B. Minimum Requirements. At its expense (but subject to reimbursement to the extent permitted as an Actual Cost), the Developer shall procure and maintain, until acceptance pursuant to the terms of this Acquisition Agreement of all Facilities, insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work covered by this Acquisition Agreement, its agents, representatives, employees or subcontractors. The Developer shall also require all of its contractors and subcontractors to procure and maintain the same insurance until acceptance (pursuant to the terms of this Acquisition Agreement) of all Facilities. Such insurance shall meet at least the following minimum levels of coverage: 1. Minimum Scope of Insurance. Coverage shall be at least as broad as the latest version of the following: (a) General Liability: Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001); -20- P6401-1052\2495063v5.doc (b) Automobile Liability: Insurance Services Office Business Auto Coverage form number CA 0001, code 1 (any auto); (c) Workers’ Compensation and Employers’ Liability: Workers’ Compensation insurance as required by the State of California and Employer’s Liability Insurance; and (d) Builders’/All Risk: Builders’/All Risk insurance covering for all risks of loss, including explosion, collapse, underground excavation and removal of lateral support (and including earthquakes and floods if requested by the City). 2. Minimum Limits of Insurance. Developer shall maintain limits no less than: (a) General Liability: $1,000,000 per occurrence for bodily injury, personal injury and property damage. The general aggregate limit shall apply separately to each construction contract for a Facility or Discrete Component thereof that is separately bid and shall be $2,000,000. If multiple Facilities are aggregated under one construction contract, the Risk Manager may in its sole discretion require a higher general aggregate limit; (b) Automobile Liability: $1,000,000 per accident for bodily injury and property damage; (c) Workers’ Compensation and Employer’s Liability: Workers’ compensation limits as required by the Labor Code of the State of California. Employers Liability limits of $1,000,000 per accident for bodily injury or disease; and (d) Builders’/All Risk: Completed value of the project. If the Developer, its general contractor, or its subcontractor(s) maintain higher limits than the minimums shown above, the City and the District require and shall be entitled to coverage for the higher limits maintained by the Developer, its general contractor, or its subcontractor(s). Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City and the District. C. Insurance Endorsements. The insurance policies shall contain the following provisions, or the Developer shall provide endorsements on forms supplied or approved by the Risk Manager to add the following provisions to its insurance policies: 1. General Liability. (a) The City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents shall be covered as additional insureds with respect to the construction of the Facilities or operations performed by or on behalf of the Developer, including materials, parts or equipment furnished in connection with such work; (b) the insurance coverage shall be primary and non-contributing insurance as respects the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents, or if excess, shall stand in an unbroken chain of coverage excess of the Developer’s scheduled underlying coverage; and (c) any failure to comply with reporting provisions of the policy shall not affect coverage provided to the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents. -21- P6401-1052\2495063v5.doc Any insurance or self-insurance maintained by the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents shall be excess of the Developer’s insurance and shall not be called upon to contribute with it. The insurer shall agree to waive all rights of subrogation against the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents for losses paid under the terms of the insurance policy which arise from work performed by the Developer. 2. Automobile Liability. (a) The City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents shall be covered as additional insureds with respect to the ownership, operation, maintenance, use, loading or unloading of any auto owned, leased, hired or borrowed by the Developer or for which the Developer is responsible; (b) the insurance coverage shall be primary insurance as respects the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents, or if excess, shall stand in an unbroken chain of coverage excess of the Developer’s scheduled underlying coverage; and (c) any failure to comply with reporting provisions of the policy shall not affect coverage provided to the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents. Any insurance or self-insurance maintained by the City, its directors, officials, officers, employees, consultants, and agents shall be excess of the Developer’s insurance and shall not be called upon to contribute with it in any way. The insurer shall agree to waive all rights of subrogation against the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents for losses paid under the terms of the insurance policy which arise from work performed by the Developer. 3. Workers’ Compensation and Employer’s Liability Coverage. The insurer shall agree to waive all rights of subrogation against the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents for losses paid under the terms of the insurance policy which arise from work performed by the Developer. 4. All Coverages. Each insurance policy required by this Acquisition Agreement shall be endorsed to state that: (a) coverage shall not be suspended, voided, reduced (in coverage or in limits) or canceled except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to the Risk Manager; and (b) any failure to comply with reporting or other provisions of the policies, including breaches of warranties, shall not affect coverage provided to the City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents. Liability coverage shall not be limited to the vicarious liability or supervising role of any additional insured nor shall there be any limitation with the severability clause. Coverage shall contain no limitation endorsements and there shall be no endorsement or modification limiting the scope of coverage for liability arising from pollution, explosion, collapse, underground property damage or employment related practices. All liability insurance shall be on an occurrence basis. Insurance on a claims made basis will be rejected. There shall be no cross policy exclusion. D. Separation of Insureds; No Special Limitations. All insurance required by this Section 7.1 shall contain standard separation of insureds provisions. In addition, such insurance shall not contain any special limitations on the scope of protection afforded to the City, the District, -22- P6401-1052\2495063v5.doc and their respective Councilmembers, directors, officials, officers, employees, consultants, and agents. E. Professional Liability Insurance. All architects, engineers, consultants or design professionals retained by any Developer shall also procure and maintain, for a period of five (5) years following acceptance (pursuant to the terms of this Acquisition Agreement) of all Facilities for which such Developer is responsible, errors and omissions liability insurance with a limit of not less than $1,000,000 per occurrence. F. Deductibles and Self-Insurance Retentions. Any deductibles or self-insured retentions must be declared to and approved by the Risk Manager. The Developer shall guarantee that, at the option of the City, either: (1) the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, the District, and their respective Councilmembers, officers, directors, officials, employees, consultants, agents, and agents; or (2) the Developer shall procure a bond guaranteeing payment of losses and related investigation costs, claims and administrative and defense expenses. G. Acceptability of Insurers. Insurance is to be placed with insurers authorized to do business in the State of California and with a minimum “Best’s” Insurance Guide rating of “A+:VII.” Self-insurance will not be considered to comply with these insurance specifications. H. Verification of Coverage. The Developer shall furnish the City with certificates of insurance and endorsements, duly authenticated, evidencing coverage required by this Acquisition Agreement on forms satisfactory to the Risk Manager and with other evidence of coverage as may be reasonably required by the Risk Manager. The certificates and endorsements for each insurance policy shall be signed by a person authorized by that insurer to bind coverage on its behalf, and shall be on forms supplied or approved by the Risk Manager. All certificates and endorsements must be received and approved by the Risk Manager before work commences. The Risk Manager reserves the right to require complete, certified copies of all required insurance policies, at any time. I. Reduction, Cancellation, Void or Suspended Policy. In the event that any required insurance is reduced in coverage, canceled for any reason, voided or suspended, the Developer agrees that the City may arrange for insurance coverage as specified, and the Developer further agrees that administrative and premium costs may be deducted from any deposits or bonds the City may have, or from the Improvement Fund. A reduction or cancellation will be grounds for termination of this Acquisition Agreement and will cause a halt to payment for any Facilities or Discrete Components until the insurance is reestablished. J. Subcontractors. All subcontractors shall meet the requirements of this Section 7.1 before commencing any physical work on the Facilities. In addition, the Developer shall include all subcontractors as insureds under its policies or shall furnish separate certificates and endorsements for each subcontractor, in form and substance acceptable to the Risk Manager, prior to the subcontractor entering the job site. All coverages for subcontractors shall be subject to all of the requirements stated herein. The Developer may furnish insurance that meets all the specifications of this Section 7.1 to all of its subcontractors though use of a “Developer Controlled Insurance Program” or “Wrap-up” program, subject to approval by the Risk Manager. -23- P6401-1052\2495063v5.doc Section 7.2 Responsibility for Damage and Claims under Acquisition Agreement or CVWD JCFA. The Developer shall take and assume all responsibility for the work performed as part of the Facilities constructed pursuant to this Acquisition Agreement or the CVWD JCFA. The Developer shall bear all losses and damages directly or indirectly resulting to it, to the City, the District, and their respective consultants, Councilmembers, directors, officials, officers, employees, consultants, and agents, or to others on account of the performance or character of the work, unforeseen difficulties, accidents or any other causes whatsoever, in each instance with respect to the work performed as part of the Facilities constructed pursuant to this Acquisition Agreement or the CVWD JCFA. The Developer acknowledges the indemnification provisions set forth in this Section 7.2 constitute the indemnification, defense, and hold harmless provisions by Developer for the benefit of the City and the District referred to in Section 2.4(f) of the CVWD JCFA. Developer and its successors and assigns shall assume the defense of, indemnify, protect and save harmless the City, the District, and each of their respective consultants, Councilmembers, directors, officials, officers, employees, consultants, and agents (each an “Indemnified Party”), and each and every one of them (including independent contractors who serve as the City’s or District’s officers or officials), from and against all actions, demands, damages, injuries, claims, losses, causes of action, liabilities or expenses of every type and description to which they may be subjected or put, whether known or unknown, existing or potential, anticipated or unanticipated, in law or equity, to property or persons, including wrongful death, by reason of, or resulting or in any manner arising from or incident to, the performance by Developer (or any of its officers, agents, servants, employees, subcontractors, materialmen, or suppliers) of its obligations under this Acquisition Agreement or the CVWD JCFA, the construction of the Facilities (excepting therefrom any Facilities constructed directly by CVWD, but including, without limitation, failure of the Developer to pay any amount due to any contractor hired by the Developer for the construction of any Facility and any fines or penalties arising therefrom, and all damages to property or personal injury received by reason of, or in the course of, performing work, which may be caused by any willful or negligent act or omission by the Developer or any of the Developer’s employees, or any subcontractor), the nature or physical condition of the Facilities, the presence of any hazardous materials on or in any land conveyed to the City hereunder or to the CVWD hereunder or under the CVWD JCFA (but excluding hazardous materials which are introduced in or on such land by an Indemnified Party or after the expiration of the period for which the Developer is responsible for maintenance of the related Facility pursuant to Section 6.6. hereof), or an alleged misstatement or omission of fact relating to Developer or its development of the property within the District in any official statement for the District or the Bonds (excluding any statement or information therein identified as deriving from information prepared by another party, such as an appraisal or an absorption study unless that information was provided by the Developer to such other party, but including, without limitation, any statements regarding the presence of any hazardous materials or endangered species thereon or therein), including without limitation the payment of all consequential damages and attorneys’ fees and other related costs and expenses. No provision of this Acquisition Agreement or the CVWD JCFA shall in any way limit the extent of the Developer’s responsibility for payment of damages resulting from the operations of the Developer and its contractors; provided, however, that the Developer shall not be required to indemnify an Indemnified Party as to damages resulting from the gross negligence or willful misconduct of an Indemnified Party in performing its obligations under this Acquisition Agreement or the CVWD JCFA. -24- P6401-1052\2495063v5.doc The Developer shall defend, at the Developer’s own cost, expense and risk, any and all such aforesaid suits, actions or other legal proceedings of every kind that may be brought or instituted against the City or the District, or their respective directors, officials, officers, employees, consultants, and agents. The Developer shall pay and satisfy any judgment, award or decree that may be rendered against City or the District, or their Councilmembers, directors, officials, officers, employees, consultants, or agents, in any such suit, action or other legal proceeding. The Developer shall reimburse City, the District, and their respective Councilmembers, directors, officials, officers, employees, consultants, and/or agents, for any and all legal expenses and costs incurred by each of them in connection therewith or in enforcing the indemnity herein provided. The City and District do not, and shall not, waive any rights against the Developer which either may have by reason of the aforesaid hold harmless agreements because of the acceptance by the City, or deposit with the City by the Developer of any insurance policies described in Section 7.1. The aforesaid hold harmless agreement by the Developer shall apply to all damages and claims for damages of every kind suffered, or alleged to have been suffered by reasons of any of the aforesaid operations of the Developer, or any subcontractor, regardless of whether or not such insurance policies are determined to be applicable to any of such damages or claims for damages. No act by the City, the District, or their respective representatives in processing or accepting any plans, in releasing any bond, in inspecting or accepting any work, or of any other nature, shall in any respect relieve the Developer or anyone else from any legal responsibility, obligation or liability it might otherwise have. The indemnification and hold harmless provisions of this Section 7.2 shall survive the termination of this Acquisition Agreement or the CVWD JCFA, the completion of construction of the Facilities, and the conveyance of title thereto to the City. ARTICLE VIII REPRESENTATIONS, WARRANTIES AND COVENANTS Section 8.1 Representations, Covenants and Warranties of the Developer. The Developer represents and warrants for the benefit of the City and the District as follows: A. Organization. The Developer is a limited liability company duly organized and validly existing under the laws of the State of Delaware, is qualified to do business in and is in compliance with all applicable laws of the State of California, and has the power and authority to own its properties and assets and to carry on its business as now being conducted and as now contemplated. B. Authority. The Developer has the power and authority to enter into this Acquisition Agreement, and has taken all action necessary to cause this Acquisition Agreement to be executed and delivered, and this Acquisition Agreement has been duly and validly executed and delivered by the Developer. -25- P6401-1052\2495063v5.doc C. Binding Obligation. This Acquisition Agreement is a legal, valid and binding obligation of the Developer, enforceable against the Developer in accordance with its terms, subject to bankruptcy and other equitable principles. D. Compliance with Laws. The Developer shall not with knowledge commit, suffer or permit any act to be done in, upon or to the lands of the Developer in the District or the Facilities in violation of any law, ordinance, rule, regulation or order of any governmental authority or any covenant, condition or restriction now or hereafter affecting the lands in the District or the Facilities. E. Requests for Payment. The Developer represents and warrants that (i) it will not request payment from the City or the District for the acquisition of any improvements that are not part of the Facilities, and (ii) it will diligently follow all procedures set forth in this Acquisition Agreement with respect to the Payment Requests. F. Financial Records. Until the date which is one (1) year following the final acceptance of the Facilities, the Developer covenants to maintain proper books of record and account for the construction of the Facilities and all costs related thereto. Such accounting books shall be maintained in accordance with generally accepted accounting principles, and shall be available for inspection by the City or its agent at any reasonable time during regular business hours on reasonable notice. G. Prevailing Wages. The Developer covenants that, with respect to any contracts or subcontracts for the construction of the Facilities to be acquired from the Developer hereunder, it will assure compliance with any applicable law or regulation for the payment of prevailing wages, as described in Section 4.4. H. Plans. The Developer represents that it has obtained or will obtain approval of the Plans for the Facilities to be acquired from the Developer hereunder from all appropriate departments of the City and from any other governmental entity or utility from which such approval must be obtained. The Developer further agrees that the Facilities to be acquired from the Developer hereunder have been or will be constructed in full compliance with such approved plans and specifications and any supplemental agreements (change orders) thereto, as approved in the same manner. I. Land Owners. The Developer agrees that in the event that it sells any land owned by it within the boundaries of the District, the Developer will (i) notify the City within thirty (30) days of the sale, in writing, identifying the legal name of and mailing address for the purchaser, the applicable County Assessor’s Parcel Number or Numbers for the land sold and the acreage of the land sold, (ii) notify the purchaser in writing prior to the closing of any such sale of the existence of this Acquisition Agreement and, in general, the Developer’s rights and obligations hereunder with respect to the construction of and payment for the Facilities, unless any such closing has occurred prior to the execution of this Acquisition Agreement, in which case the Developer shall provide such notification to the purchaser within thirty (30) days of the date hereof, and (iii) notify the purchaser in writing of the existence of the District and the special tax lien in connection therewith, and otherwise comply with any applicable provision of Section 53341.5 of the Act. -26- P6401-1052\2495063v5.doc J. Additional Information. The Developer agrees to cooperate with all reasonable written requests for nonproprietary information by the original purchasers of the Bonds or the City related to the status of construction of improvements within the District, the anticipated completion dates for future improvements, and any other matter material to the investment quality of the Bonds. K. Continuing Disclosure. The Developer agrees to comply with all of its obligations under any continuing disclosure agreement executed by it in connection with the offering and sale of any of the Bonds. L. Ownership By Affiliates. The Developer agrees to provide to the City’s Finance Director (i) prior to the date of issuance of any series of the Bonds, (ii) on (or within five (5) business days of) July 1 of each year so long as the Bonds are outstanding, and (iii) promptly upon request of the Finance Director in connection with any Payment Request submitted by the Developer (but only to the extent deemed necessary or desirable in the reasonable discretion of the Finance Director to confirm the certification on the Payment Request regarding tax or assessment delinquencies) a written list of all Affiliates of the Developer which own or control the ownership of land located within the District, or which have options on land within the District, indicating the parcels of land by County Assessor’s Parcel number of all such land so owned or optioned; provided, if the Developer or any Affiliate no longer owns property in the District or has any option on land within the District, the foregoing obligation shall terminate upon the Developer notifying the City’s Finance Director in writing of such absence of ownership or option. M. Tax-Exempt Bonds – Developer Tax Certificate. With respect to any Tax-Exempt Bonds issued to finance the Facilities, the Developer agrees to provide to the City, at the time of, and in connection with, the issuance of such Bonds, a Developer Tax Certificate substantially in the form of Exhibit E of this Acquisition Agreement and/or a Developer Tax Certificate substantially in the form of Exhibit E of the CVWD JCFA, as applicable, and completed with such information as may be acceptable to the District’s Bond Counsel to confirm compliance with provisions of the Internal Revenue Code applicable to Tax-Exempt Bonds. ARTICLE IX TERMINATION Section 9.1 No Bonds. If, for any reason, the City does not cause the District to issue any of the Bonds by three (3) years after the date of this Acquisition Agreement, this Acquisition Agreement shall terminate and be null and void and of no further effect. Section 9.2 Mutual Consent. This Acquisition Agreement may be terminated by the mutual, written consent of the City, the District, and the Developer, in which event the City may let contracts for any remaining work related to the Facilities not theretofore acquired from the Developer hereunder, and use all or any portion of the monies in the Improvement Fund to pay for same, and the Developer shall have no claim or right to any further payments for the Purchase Price of Facilities or Discrete Components hereunder, except as otherwise may be provided in such written consent. -27- P6401-1052\2495063v5.doc Section 9.3 City Election for Cause. The following events shall constitute grounds for the City or the District, at the option of such party, to terminate this Acquisition Agreement, without the consent of the Developer: A. The Developer shall voluntarily file for reorganization or other relief under any Federal or state bankruptcy or insolvency law. B. The Developer shall have any involuntary bankruptcy or insolvency action filed against it, or shall suffer a trustee in bankruptcy or insolvency or receiver to take possession of the assets of the Developer, or shall suffer an attachment or levy of execution to be made against the property it owns within the District unless, in any of such cases, such circumstance shall have been terminated or released within thirty (30) days thereafter. C. The Developer shall abandon construction of the Facilities. Failure for a period of ninety (90) consecutive days to undertake substantial work related to the construction of the Facilities, other than for a reason specified in Section 9.4 hereof, shall constitute such abandonment. D. The Developer shall breach any material covenant or default in the performance of any material obligation hereunder. E. The Developer shall transfer any of its rights or obligations under this Acquisition Agreement in violation of the terms and conditions of this Acquisition Agreement. F. The Developer shall have made any material misrepresentation or omission in any written materials furnished in connection with any preliminary official statement, official statement, continuing disclosure agreement, or bond purchase contract used in connection with the sale of the Bonds. G. The Developer or any of its Affiliates shall at any time challenge the validity of the District or any of the Bonds, or the levy of Special Taxes within the District, other than on the grounds that such levy was not made in accordance with the terms of the Rate and Method of Apportionment of the Special Taxes for the District. If any such event occurs, the City or District shall give written notice of its knowledge thereof to the Developer, and the Developer agrees to meet and confer with the Director of Public Works and other appropriate City staff and consultants within ten (10) business days of receipt of such notice as to options available to assure timely completion of the Facilities. Such options may include, but not be limited to the termination of this Acquisition Agreement by the City or District. If the City or the District elects to terminate this Acquisition Agreement, such party shall first notify the Developer (and any mortgagee or trust deed beneficiary specified in writing by the Developer to the City and/or District to receive such notice) of the grounds for such termination and allow the Developer a minimum of ninety (90) days to eliminate or mitigate to the satisfaction of the Director of Public Works the grounds for such termination. Such period may be extended, at the sole discretion of the City, if the Developer, to the satisfaction of the City or District, is proceeding with diligence to eliminate or mitigate such grounds for termination. If at the end of such period (and any extension thereof), as determined solely by the City or District, the Developer -28- P6401-1052\2495063v5.doc has not eliminated or completely mitigated such grounds, to the satisfaction of the City or District, the City or the District may then terminate this Acquisition Agreement. Notwithstanding the foregoing, so long as any event listed in any of clauses A. through and including G. above has occurred, notice of which has been given by the City and the District to the Developer, and such event has not been cured or otherwise eliminated by the Developer, the City or the District may in its respective discretion cease making payments for the Purchase Price of Facilities or Discrete Components under Article III or Article V hereof. Section 9.4 Force Majeure. Whenever performance is required of a party hereunder, that party shall use all due diligence and take all necessary measures in good faith to perform, but if completion of performance is delayed by reasons of floods, earthquakes or other acts of God, war, civil commotion, riots, strikes, picketing, or other labor disputes, damage to work in progress by casualty, epidemics, quarantine restrictions, or by other cause beyond the reasonable control of the party (financial inability excepted), then the specified time for performance shall be extended by the amount of the delay actually so caused. ARTICLE X MISCELLANEOUS Section 10.1 Limited Liability of City. The Developer agrees that any and all obligations of the City or the District arising out of or related to this Acquisition Agreement are special and limited obligations of the City or the District, as applicable, and the City’s and District’s respective obligations to make any payments hereunder are restricted entirely to the moneys, if any, in the Improvement Fund, and from no other source. No member of the City Council or City or District staff member, employee or agent shall incur any liability hereunder to the Developer or any other party in their individual capacities by reason of their actions hereunder or execution hereof. Section 10.2 Excess Costs. The Developer agrees to pay all costs of the Facilities that it is obligated to construct (pursuant to Section 4.3 or otherwise) in excess of the moneys available therefor in the Improvement Fund. Section 10.3 Audit. The Director of Public Works and/or the City’s Finance Director shall have the right, during normal business hours and upon the giving of two (2) business days prior written notice to the Developer, to review all books and records of the Developer pertaining to costs and expenses incurred by the Developer in to any of the Facilities, and any bids taken or received for the construction thereof or materials therefor. Section 10.4 Attorneys’ Fees. In the event that any action or suit is instituted by either party against the other arising out of this Acquisition Agreement, the party in whose favor final judgment shall be entered shall be entitled to recover from the other party all costs and expenses of suit, including reasonable attorneys’ fees. Section 10.5 Notices. Any notice, payment or instrument required or permitted by this Acquisition Agreement to be given or delivered to either party shall be deemed to have been received when personally delivered, or transmitted by email transmission (provided that the email provides the sender a notice that indicates that the transmission was successful and that a copy is -29- P6401-1052\2495063v5.doc mailed by first class mail within twenty-four (24) hours after such transmission), or seventy-two (72) hours following deposit of the same in any United States Post Office, registered or certified mail, postage prepaid, addressed as follows: City or District: City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 Attention: City Manager Email: thileman@cityofpalmdesert.org with a copy to info@cityofpalmdesert.org Developer: University Park Investor, LLC 801 San Ramon Valley Blvd., Suite F Danville, CA 94526 Attention: Ravi Nandwana Email: ravi@missionvalleyhomes.com with a copy to: University Park Investor, LLC 4400 MacArthur Boulevard, Suite 700 Newport Beach, CA 92660 Attention: Rory Ingels Email: rory.ingels@blackrock.com Each party may change its address or addresses for delivery of notice by delivering ten (10) calendar days’ prior written notice of such change of address to the other party. Section 10.6 Severability. If any part of this Acquisition Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Acquisition Agreement shall be given effect to the fullest extent possible. Section 10.7 Successors and Assigns. This Acquisition Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. This Acquisition Agreement shall not be assigned by the Developer without the prior written consent of the City and the District, which consent shall not be unreasonably withheld. In connection with any such consent of the City or the District, the City or the District, as applicable, may condition its consent upon the acceptability of the relevant experience and financial condition of the proposed assignee, the assignee’s express assumption of all obligations of the Developer hereunder, and/or upon any other factor which the City or District, as applicable, deems relevant in the circumstances. If any such factors may adversely affect the security for the Bonds, as determined by the City and the District, in their sole discretion after consultation with the City’s and/or District’s financial advisor, bond counsel, and underwriters, the City’s withholding or conditions of such consent shall be deemed to be reasonable. In any event, any such assignment shall be in writing, shall clearly identify the scope of the rights and/or obligations assigned, and shall not be effective until approved in writing by the City and the District. No assignment, whether or not consented to by the City and the District, shall release the Developer from its obligations and liabilities under this -30- P6401-1052\2495063v5.doc Acquisition Agreement unless such release is expressly agreed to by the City and the District in writing, which shall not be unreasonably withheld. Section 10.8 Other Agreements. The obligations of the Developer hereunder shall be those of a party hereto and not as an owner of property in the District. Nothing herein shall be construed as affecting the City’s or the Developer’s rights, or duties to perform their respective obligations, under other agreements, use regulations or subdivision requirements relating to the development of the lands in the District. This Acquisition Agreement shall not confer any additional rights, or waive any rights given, by either party hereto under any development or other agreement to which they are a party. Section 10.9 Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Acquisition Agreement by the other party, or the failure by a party to exercise its rights upon the default of the other party, shall not constitute a waiver of such party’s right to insist and demand strict compliance by the other party with the terms of this Acquisition Agreement thereafter. Section 10.10 Merger; Entire Agreement. No other agreement, statement or promise made by any party or any employee, officer or agent of any party with respect to any matters covered hereby that is not in writing and signed by all the parties to this Acquisition Agreement shall be binding. Section 10.11 Parties in Interest. Nothing in this Acquisition Agreement, expressed or implied, is intended to or shall be construed to confer upon or to give to any person or entity other than the City, the District, and the Developer any rights, remedies or claims under or by reason of this Acquisition Agreement or any covenants, conditions or stipulations hereof; and all covenants, conditions, promises, and agreements in this Acquisition Agreement contained by or on behalf of the City, the District, or the Developer shall be for the sole and exclusive benefit of the City, the District, and the Developer. Section 10.12 Amendment. This Acquisition Amendment may be amended, from time to time, by written Supplement hereto and executed by each of the City, the District, and the Developer. Section 10.13 Counterparts. This Acquisition Agreement may be executed in counterparts, each of which shall be deemed an original. [Remainder of page intentionally left blank; signature page follows.] -31- P6401-1052\2495063v5.doc IN WITNESS WHEREOF, the parties have executed this Acquisition Agreement as of the day and year first-above written. CITY OF PALM DESERT, a municipal corporation By: Mayor CITY OF PALM DESERT COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK), a community facilities district By: Mayor of the City of Palm Desert UNIVERSITY PARK INVESTOR, LLC, a Delaware limited liability company By: Name: Title: P6401-1052\2495063v5.doc A-1 ACQUISITION AGREEMENT EXHIBIT A DESCRIPTION OF AUTHORIZED FACILITIES ELIGIBLE FOR ACQUISITION FROM THE DEVELOPER The public facilities (the “Facilities”) described below are proposed to be financed by City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District’) and include storm drainage facilities, street improvements, landscaping and irrigation facilities, public open space and recreational facilities, water facilities, and sewer improvements, together with all appurtenances and appurtenant work, such as related clearing and grubbing, grading, and any removal or temporary signage or markings related thereto. The cost of the Facilities shall include incidental expenses, including costs associated with forming the District, issuance of bonds, determination of the amount of the Special Tax, collection of the Special Tax, payment of the Special Tax, costs incurred in order to carry out the authorized purposes of the District, and the costs of engineering, inspecting, coordinating, completing, planning and designing the Facilities, including the costs of environmental evaluations. Any o f the Facilities to be constructed shall be constructed, whether or not acquired in their completed states, pursuant to plans and specifications approved by the City of Palm Desert (or the Coachella Valley Water District, as applicable) and the officials thereof, including the City Engineer. In addition, inasmuch as the District is proposed to pay and defease a pro rata portion of outstanding Series 2006A Special Tax Bonds issued by, and secured by the special taxes of, existing City of Palm Desert Community Facilities District No. 2005-1 (University Park) (“CFD 2005-1”) to finance facilities authorized thereby, the Facilities include such payment and defeasance and the resulting refinance of such facilities. The Facilities are necessary to meet the increased demands placed upon the public infrastructure, the City of Palm Desert, and the Coachella Valley Water District as a result of the development of the property within the boundaries of the District, including development impact fees therefor (including, but not limited to, City of Palm Desert development impact fees for traffic signals, drainage, parks, Art in Public Places, and fire facilities, and Coachella Valley Water District development impact fees for water and sewer facilities). The final nature and location of the Facilities will be determined upon the preparation of final plans and specifications for such Facilities. P6401-1052\2495063v5.doc B-1 ACQUISITION AGREEMENT EXHIBIT B DESCRIPTION OF DISCRETE COMPONENTS OF FACILITIES TABLE 1: CITY FACILITIES Eligible Facilities, Discrete Components, and Estimated Costs (1) Description (Area) Phase 1 (2) (236 units) (Area) Phase 2 (2) (146 units) (Area) Phase 3 (2) (169 units) (Area) Phase 4 (2) (182 units) (Area) Phase 5 (2) (336 units) Total Cost Estimate (2) (1,069 units) 1. City Facilities to be constructed by Developer A. Storm Drainage $ 586,964 $ 236,276 $ 679,000 $ 205,995 $477,335 $ 2,185,570 B. Street Improvements $2,175,961 $1,639,744 $1,926,311 $ 295,854 - $ 6,037,870 C. Landscaping & Irrigation $1,713,160 $1,170,685 $1,306,637 $ 398,423 - $ 4,588,905 D. Public Open Space and Recreational Facilities $1,163,613 $ 927,383 $ 614,133 - - $ 2,705,129 2. City Development Impact Fees (3)(4) A. Traffic Signals $ 11,800 $ 7,300 $ 8,450 $ 9,100 - $ 36,650 B. Drainage $ 48,600 $ 39,600 $ 48,590 $ 30,360 - $ 167,150 C. Parks $ 117,505 $ 91,254 - $ 113,755 - $ 322,513 D. Art in Public Places $ 151,757 $ 110,207 $ 129,251 $ 98,858 $ 80,432 $ 570,505 E. Fire Facilities $ 72,216 $ 103,514 $ 119,821 $ 84,708 $ 61,152 $ 441,411 TOTAL ELIGIBLE CITY FACILITIES: $6,041,576 $4,325,962 $4,832,193 $1,237,053 $618,919 $17,055,703 (1) Estimated Costs based on Murrow CM budget dated 8/30/2018. Rows or columns may not total due to rounding. (2) Number of units and product type for each development area/phase are estimated and subject to change. (3) Estimated fees only; fees will be imposed at the rate in effect at the time such fee is paid. (4) Authorized City Fees shall only be eligible to be financed by proceeds of Tax-Exempt Bonds if the City has a reasonable expectation to spend the fees within the earlier of (i) 3 years from when the fees were paid, or (ii) the date the Bonds were issued. Otherwise, Authorized City Fees must be paid from proceeds of taxable Bonds. [See attached Phasing Plan for location of Areas/Phases] B-2 P6401-1052\2495063v5.doc TABLE 2: CVWD FACILITIES Eligible Facilities, Discrete Components, and Estimated Costs (1) Description (Area) Phase 1 (2) (236 units) (Area) Phase 2 (2) (146 units) (Area) Phase 3 (2) (169 units) (Area) Phase 4 (2) (182 units) (Area) Phase 5 (2) (336 units) Total Cost Estimate (2) (1,069 units) 1. Developer Contributions to Creditable Facilities (7) A. Well Site Facilities - defined in Section 2(c)(i) of Installation Agreement (Special Water) (3) ** Due before service is initiated to Unit 372 $2,500,000(5) $ 2,500,000 B. Reservoir Facilities - defined in Section 2(c)(iv) of Installation Agreement (Special Water) (3) $1,376,022 $ 1,376,022 2. Water Facilities A. On-Site water pipelines $1,239,477 $ 680,681 $ 936,958 $1,126,192 $ 666,607 $ 4,649,915 B. Well Site Improvements (constructed by UPI) $ 400,000 $ 400,000 $ 800,000 $ 1,600,000 3. Sewer Facilities - On-Site sewer pipelines $ 880,497 $ 454,588 $ 646,518 $ 857,327 $ 359,883 $ 3,198,813 4. CVWD Development Impact Fees (4)(7) A. Water System Backup Facilities Charges (WSBFC) ($3,707 x 1,069 units) (2)(3) $ 874,852 $ 541,222 $ 626,483 $ 674,674 $1,245,552 $ 3,962,783 B. Supplemental Water Supply Charges (SWSC) (6) $ 611,389 $ 487,009 $ 563,005 $ 368,251 $ 134,563 $ 2,164,217 C. Meter Charges $ 92,040 $ 56,940 $ 65,910 $ 70,980 $ 131,040 $ 416,910 D. Sewer ($4,851 x 1,609 units) (2) $1,144,836 $ 708,246 $ 819,819 $ 882,882 $1,629,936 $ 5,185,719 TOTAL ELIGIBLE CVWD FACILITIES (excludes 1A&B): $5,243,091 $3,328,686 $3,658,693 $4,780,306 $4,167,581 $21,178,357 (1) Estimated Costs based on Murrow CM budget dated 8/30/2018, with SWSC updated by CVWD. Rows or columns may not total due to rounding. (2) Number of units and product type for each development area/phase are estimated and subject to change. (3) The Installation Agreement (Special Water) provides for credit toward Water System Backup Facilities Charges (“WSBFC”) to be given by CVWD to the Property Owner for Developer Contributions to Creditable Facilities in accordance with the terms and conditions described there in. A Disbursement Request may be submitted for a Developer Contribution to Creditable Facilities, but not for the WSBFC credit provided to the Property Owner therefor. WSBFC charges in excess of the amount of credits provided for Developer Contributions to Creditable Facilities may be subject to a Disbursement Request. (4) Pursuant to Section 5.22 of the CVWD JCFA, the CVWD Charges listed in the table above (as such term is defined in the CVWD JCFA) reflect current rates, but they will be imposed at the rate in effect at the time such CVWD Charge is paid. As such, the figures set forth above for CVWD Charges are illustrative and subject to change pursuant to a future rate increase adopted by CVWD. (5) Estimated timing shown in the table for Item 1.A. payment is based on Property Owner’s current development plans to develop Area/Phase 3 before Area/Phase 2. (6) Charge based on 50.04 acres for Phase 1, 39.86 acres for Phase 2, 46.08 acres for Phase 3 and 30.14 acres for Phase 4 at $12,218 per acre and 11.46 acres for Phase 5 at $11,742 per acre based on the assessor parcel acreage for a total of 177.58 acres. The acreage set forth is subject to administrative amendment to reflect any changes to the legal descriptions in the Standard and Special Installation Agreements by and between CVWD and Developer, as amended by CVWD and Developer in accordance with their terms. (7) Developer Contributions to Creditable Facilities and Authorized CVWD Fees shall only be eligible to be financed by proceeds of Tax-Exempt Bonds if accompanied, as provided by Section 2.2 of the CVWD JCFA, by a CVWD Tax Certificate in the form of Exhibit F to the CVWD JCFA and a Developer Tax Certificate in the form of Exhibit E to the CVWD JCFA. Otherwise, these items must be paid from proceeds of taxable Bonds. P6401-1052\2495063v5.doc C-2-1 ACQUISITION AGREEMENT EXHIBIT C FORM OF PAYMENT REQUEST - Facilities and Discrete Components PAYMENT REQUEST NO. _____ The undersigned (the “Developer”), hereby requests payment in the total amount of $____________ for the Facilities (as defined in the Acquisition Agreement, dated as of [June 24, 2021], among the City of Palm Desert (the “City”), the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”), and the Developer, as more fully described in Attachment 1 hereto. In connection with this Payment Request, the undersigned hereby represents and warrants to the City and the District as follows: 1. The Undersigned is a duly authorized officer of the Developer, qualified to execute this Payment Request for payment on behalf of the Developer and is knowledgeable as to the matters set forth herein. 2. To the extent that this payment request is with respect to a completed Facility, the Developer has submitted or submits herewith to the City as-built drawings or similar plans and specifications for the items to be paid for as listed in Attachment 1 hereto with respect to any such completed Facility, and such drawings or plans and specifications, as applicable, are true, correct and complete. To the extent that this payment request is for a Discrete Component, the Developer has in the Developer’s construction office a marked set of drawings or similar plans and specifications for the Discrete Components to be acquired as listed in Attachment 1 hereto, which drawings or plans and specifications, as applicable, are current and show all changes or modifications which have been made to date. 3. All costs of the Facilities or Discrete Components thereof for which payment is requested hereby are Actual Costs (as defined in the Agreement referenced above) and have not been inflated in any respect. The items for which payment is requested have not been the subject of any prior payment request submitted to the City or District. 4. Supporting documentation (such as third party invoices) is attached with respect to each cost for which payment is requested. 5. There has been compliance with applicable laws relating to prevailing wages for the work to construct the Facilities or Discrete Components thereof for which payment is requested. 6. The Facilities or Discrete Components thereof for which payment is requested were constructed in accordance with all applicable City or other governmental standards, and in accordance with the as-built drawings or plans and specifications, as applicable, referenced in paragraph 2 above. 7. The Developer is in compliance with the terms and provisions of the Acquisition Agreement and no portion of the amount being requested to be paid was previously paid. C-2 P6401-1052\2495063v5.doc 8. The Purchase Price for each Facility or Discrete Component thereof (a detailed calculation of which is shown in an Attachment 2 hereto for each such Facility or Discrete Component thereof), has been calculated in conformance with the terms of Section 5.6 of the Acquisition Agreement. 9. Neither the Developer nor any Affiliate (as defined in the Acquisition Agreement) is in default in the payment of ad valorem real property taxes or special taxes or special assessments levied in the District (as defined in the Acquisition Agreement), except as follows: _______________________________________________________________. I hereby declare and certify that the above representations and warranties are true and correct. DEVELOPER: UNIVERSITY PARK INVESTOR, LLC, a Delaware limited liability company By: Name: Title: Date: CITY: Payment Request Approved for Submission to the Finance Director of the City of Palm Desert By: Director of Public Works Date: P6401-1052\2495063v5.doc C-2-1 ATTACHMENT 1 EXHIBIT C [list here all Facilities or Discrete Components thereof for which payment is requested, and attach support documentation] P6401-1052\2495063v5.doc C-2-1 ATTACHMENT 2 EXHIBIT C CALCULATION OF PURCHASE PRICE. [Use a separate sheet for each Facility or Discrete Component for which payment is being requested] 1. Description (by reference to Exhibit B to the Acquisition Agreement) of the Facility or Discrete Component 2. Actual Cost (list here total of supporting invoices and/or other documentation supporting determination of Actual Cost): $ 3. Subtractions from Purchase Price: A. Holdback for Lien releases (see Section 5.6.C. of the Acquisition Agreement) B. Retention (see Section 5.6.D. of the Acquisition Agreement) $ $ 4. Total disbursement requested (amount listed in 2, less amounts, if any, listed in 3) $ P6401-1052\2495063v5.doc D-1 ACQUISITION AGREEMENT EXHIBIT D FORM OF PAYMENT REQUEST - Authorized City Fees PAYMENT REQUEST NO. _____ The undersigned (the “Developer”), hereby requests payment in the total amount of $____________ for Authorized City Fees (as defined in the Acquisition Agreement, dated as of [June 24, 2021], among the City of Palm Desert (the “City”), the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”), and the Developer, as more fully described in Attachment 1 hereto. In connection with this Payment Request, the undersigned hereby represents and warrants to the City and the District as follows: 1. The Undersigned is a duly authorized officer of the Developer, qualified to execute this Payment Request for payment on behalf of the Developer and is knowledgeable as to the matters set forth herein. 2. All costs of the Authorized City Fees thereof for which payment is requested hereby are Actual Costs (as defined in the Agreement referenced above) and have not been inflated in any respect. The items for which payment is requested have not been the subject of any prior payment request submitted to the City or District. 3. Supporting documentation (such as third party invoices) is attached with respect to each cost for which payment is requested. 4. The Developer is in compliance with the terms and provisions of the Acquisition Agreement and no portion of the amount being requested to be paid was previously paid. 5. Neither the Developer nor any Affiliate (as defined in the Acquisition Agreement) is in default in the payment of ad valorem real property taxes or special taxes or special assessments levied in the District (as defined in the Acquisition Agreement), except as follows: . 6. The City is requested to cause the District to make payment with respect to such Authorized City Fees to: [circle one] • [the undersigned Developer (as reimbursement for Authorized City Fees already paid – receipt(s) of payment are attached)] • [directly to the City of Palm Desert] P6401-1052\2495063v5.doc D-2 I hereby declare that the above representations and warranties are true and correct. DEVELOPER: UNIVERSITY PARK INVESTOR, LLC, a Delaware limited liability company By: Name: Title: Date: CITY: Payment Request Approved for Submission to the Finance Director-Treasurer of the City of Palm Desert By: Director of Public Works Date: D-1-1 P6401-1052\2495063v5.doc ATTACHMENT 1 EXHIBIT D [list here all Authorized City Fees for which payment is requested, and attach support documentation] E-1 P6401-1052\2495063v5.doc ACQUISITION AGREEMENT EXHIBIT E FORM OF DEVELOPER TAX CERTIFICATE (CITY FACILITIES) Bonds Closing Date: _______________, 20__ In connection with the proposed issuance of the $_________ aggregate principal amount Special Tax Bonds, Series 20__ (the “Bonds”) of the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”), University Park Investor, LLC (“Developer”), a limited liability company duly organized and operating under the laws of the State of Delaware, acting through its undersigned authorized representative, hereby states and certifies as follows: (i) The Developer has received final bond pricing terms of ___________, underwriter to the District, which set forth the aggregate amount of proceeds of the Bonds to be deposited to the Series 20__ Account of the Improvement Fund (the “Available 20__ Improvement Monies”). (ii) Pursuant to the terms of the Acquisition Agreement, the Developer intends and expects to submit Payment Requests for amounts equivalent to the Available 20__ Improvement Monies within three years of the date of issuance of the 20__ Bonds (currently projected issue date: ____________, 2021) for the following items: (mark and complete all that apply) ____ Actual Costs of Facilities or Discrete Components (please refer to Exhibit B of the Acquisition Agreement) Description(s) and estimated amount(s):__________________________________ __________________________________________________________________ __________________________________________________________________ ____ Authorized City Fees (please refer to Exhibit B of the Acquisition Agreement) Description(s) and estimated amount(s):__________________________________ __________________________________________________________________ __________________________________________________________________ (iii) Based on the following, the Developer believes its expectation described in paragraph (ii) above to be reasonable: [state supporting facts]_____________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Acquisition Agreement dated as of [June 24, 2021] (the “Acquisition Agreement”), by and among the City of Palm Desert, the City of Palm Desert Community Facilities District No. 2021-1 (University Park), and the Developer, and if not defined therein, then in the Bond Indenture by and between the District and U.S. Bank National Association, as Trustee, dated as of July 1, 2021. E-2 P6401-1052\2495063v5.doc IN WITNESS WHEREOF, Developer has caused this Certificate to be executed by its authorized representative on the date first written above. DEVELOPER: UNIVERSITY PARK INVESTOR, LLC, a Delaware limited liability company By: Name: Title: