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Home My WebLink About2009-06-25 FA Regular Meeting Agenda POSTED AGENDA PALM DESERT FINANCING AUTHORITY MEETING THURSDAY, JUNE 25, 2009 CIVIC CENTER COUNCIL CHAMBER I. CALL TO ORDER II. ROLL CALL III. CONSENT CALENDAR ALL MATTERS LISTED ON THE CONSENT CALENDAR ARE CONSIDERED TO BE ROUTINE AND WILL BE ENACTED BY ONE ROLL CALL VOTE. THERE WILL BE NO SEPARATE DISCUSSION OF THESE ITEMS UNLESS MEMBERS OF THE CITY COUNCIL OR AUDIENCE REQUEST SPECIFIC ITEMS BE REMOVED FROM THE CONSENT CALENDAR FOR SEPARATE DISCUSSION AND ACTION UNDER SECTION XI, CONSENT ITEMS HELD OVER, OF THE AGENDA. A. MINUTES of the Financing Authority Meeting of February 12, 2009. Rec: Approve as presented. IV. CONSENT ITEMS HELD OVER V. RESOLUTIONS None VI. NEW BUSINESS None VII. CONTINUED BUSINESS None VIII. OLD BUSINESS None IX. PUBLIC HEARINGS POSTED AGENDA PALM DESERT HOUSING AUTHORITY MEETING JUNE 25, 2009 A. CONSIDERATION OF THE AUTHORIZATION OF ISSUANCE OF THE PALM DESERT FINANCING AUTHORITY'S ENERGY INDEPENDENCE PROGRAM, VARIABLE RATE DEMAND LEASE REVENUE BONDS, SERIES 2009 (FEDERALLY TAXABLE), AND APPROVAL OF RELATED DOCUMENTS (JOINT CONSIDERATION WITH THE PALM DESERT CITY COUNCIL). Rec: Waive further reading and adopt. 1) Financing Authority Resolution No. FA-63, authorizing the issuance, sale, and delivery of the Authority's Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable); approving as to form and authorizing the execution and delivery of certain documents in connection therewith; and authorizing certain other matters relating thereto. 2) City Council Resolution No. 09-53, making a finding of significant public benefit, approving as to form and authorizing the execution and delivery of certain documents in connection with the sale and issuance of the Palm Desert Financing Authority's Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable), and authorizing certain other matters relating thereto. Action: X. REPORTS, REMARKS, AND AGENCY BOARD ITEMS REQUIRING ACTION A. CHIEF ADMINISTRATIVE OFFICER B. AUTHORITY COUNSEL C. PRESIDENT AND MEMBERS OF THE AUTHORITY XI. ADJOURNMENT I hereby certify, under penalty of perjury under the laws of the State of California, that the foregoing agenda for the Palm Desert City Council was posted on the City Hall bulletin board not less than th 72 hours prior to the meeting. Dated this 19 day of June, 2009. RACHELLE D. KLASSEN, CITY CLERK 2 �' „ � ;� PRELIMINARY MINUTES �� l PALM DESERT FINANCING AUTHORITY MEETING THURSDAY, FEBRUARY 12, 2009 CIVIC CENTER COUNCIL CHAMBER 73510 FRED WARING DRIVE, PALM DESERT, CA 92260 L� CALL TO ORDER President Spiegel convened the meeting at 3:01 p.m. II. ROLL CALL Present: Commissioner Jim Ferguson Vice President Cindy Finerty Commissioner Richard S. Kelly President Robert A. Spiegel Excused Absence: Commissioner Jean M. Benson Also Present: Justin McCarthy, Interim City Manager/RDA Executive Director David J. Erwin, City Attorney Homer Croy, ACM for Development Services Stephen Y. Aryan, Assistant to the City Manager Rachelle D. Klassen, City Clerk Bo Chen, City Engineer Russell Grance, Director of Building & Safety Lauri Aylaian, Director of Community Development Patrick Conlon, Director of the Office of Energy Management Paul S. Gibson, Director of Finance/City Treasurer Janet M. Moore, Director of Housing Mark Greenwood, Director of Public Works David Yrigoyen, Director of Redevelopment & Housing Dennis Dawson, Battalion Chief, Palm Desert Fire/Riverside Co. Andrew Shouse, Asst. Chief, Palm Desert Police/Riverside Co. Grace L. Mendoza, Deputy City Clerk Fire Dept./Cal Fire Sheriff's Dept. With Authority Board concurrence, President Spiegel adjourned the meeting to Closed Session of the City Council and Redevelopment Agency at 3:02 p.m. He reconvened the meeting at 4:00 p.m. � ,� k �� : PRELIMINARY MINUTES PALM DESERT FINANCING AUTHORITY MEETING FEBRUARY 12, 2009 III. CONSENT CALENDAR A. MINUTES of the Financing Authority Meeting of December 13, 2007. Rec: Approve as presented. Upon a motion by Ferguson, second by Kelly, and 3-Q-1 vote of the Authority Board, with FinertyABSTAINING and Benson ABSENT, the Consent Calenderwas approved as presented. IV. CONSENT ITEMS HELD OVER None V. RESOLUTIONS A. RESOLUTION NO. FA-62 - A RESOLUTION OF THE PALM DESERT FINANCING AUTHORITY, 73-510 FRED WARING DRIVE, PALM DESERT, CALIFORNIA 92260-2578, TELEPHONE: (760) 346-0611, AUTHORIZING THE INVESTMENT OF MONIES IN THE LOCAL AGENCY INVESTMENT FUND OF THE STATE OF CALIFORNIA {LAIF). Vice President Finerty moved to waive further reading and adopt Resolution No. FA-62. Motion was seconded by Kelly and carried by a 4-0 vote, with Benson ABSENT. VI. NEW BUSINESS None VII. CONTINUED BUSINESS None VIII. OLD BUSINESS None IX. PUBLIC HEARINGS None 2 r 4� n�. PRELIMINARY MINUTES PALM DESERT FINANCING AUTHORITY MEETING FEBRUARY 12, 2009 X. REPORTS, REMARKS, AND AGENCY BOARD ITEMS REQUIRING ACTION A. CHIEF ADMINISTRATIVE OFFICER None B. AUTHORITY COUNSEL None C. PRESIDENT AND MEMBERS OF THE AUTHORiTY None XI. ORAL COMMUNICATIONS None XII. ADJOURNMENT Upon a motion by Finerty, second by Spiegel, and 4-0 vote of the Authority Board, with Benson ABSENT, President Spiegel adjourned the meeting at 8:12 p.m. ROBERT A. SPIEGEL, PRESIDENT ATTEST: RACHELLE D. KLASSEN, SECRETARY PALM DESERT FINANCING AUTHORITY 3 -r..42()r-roorl BY FIN AUtN ON JG ne c;COQ VERIFIED BY: !UK /cgi0'1 , Original on file with City Clerk`s OffictiTY OF PALM DESERT STAFF REPORT Resolution No. FA-63 Resolution No. 09-53 REQUEST: CONSIDERATION OF THE AUTHORIZATION OF ISSUANCE OF THE PALM DESERT FINANCING AUTHORITY'S ENERGY INDEPENDENCE PROGRAM, VARIABLE RATE DEMAND LEASE REVENUE BONDS, SERIES 2009 (FEDERALLY TAXABLE) AND APPROVAL OF RELATED DOCUMENTS SUBMITTED BY: DATE: CONTENTS: Recommendation: PAUL S. GIBSON, FINANCE DIRECTOR JUNE 25, 2009 RESOLUTION NO. FA- 63 RESOLUTION NO. 09-53 FORM OF INDENTURE FORM OF SITE LEASE FORM OF LEASE AGREEMENT FORM OF ASSIGNMENT AGREEMENT FORM OF REMARKETING AGREEMENT FORM OF REIMBURSEMENT AGREEMENT E e C� FORM OF INTEREST RATE COLLAR DOCUMENTS FORM OF BOND PURCHASE CONTRACT t) a �- FORM OF PRELIMINARY OFFICIAL STATEMENT a That the Palm Desert Financing Authority adopt the following resolution: • Resolution No. FA- 63 , a resolution of the Palm Desert Financing Authority authorizing the issuance, sale and delivery of the Authority's Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable); approving as to form and authorizing the execution and delivery of certain documents in connection therewith; and authorizing certain other matters relating thereto. That the City Council adopt the following resolution: • Resolution No. 09-53 a resolution of the City Council of the City of Palm Desert making a finding of significant public benefit, approving as to form and authorizing the execution and delivery of certain documents in connection with the sale and issuance of the Palm Desert Financing P6401.1039\1144244.2 EIP Loan Funding Staff Report June 25, 2009 Page 2 of 5 Authority's Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable), and authorizing certain other matters relating thereto. Executive Summary: Approval of the attached documents in substantially the form presented is required in order for the Palm Desert Financing Authority to issue a series of variable rate demand lease revenue bonds (the "Bonds") in aggregate principal amount not to exceed $5,500,000, in order to (i) reimburse the City for the entire amount of its $2.5 million advance, authorized by Resolution No. 08-89, to initially fund the Energy Independence Fund and the Phase 1 improvement loans with respect to the City's Energy Independence Program (EIP); and (ii) provide approximately $2.5 million in new money from third party investors for deposit in the Energy Independence Fund and the City's financing of additional Phase 2 EIP improvement loans. Background: The Palm Desert EIP was established pursuant to Resolution No. 08-89, adopted on August 28, 2008, for the financing of distributed generation renewable energy sources and energy efficiency improvements through the use of contractual assessments pursuant to Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code. In Resolution No. 08-89, the City Council also established a special trust fund held by the City called the "Energy Independence Fund," to be used and disbursed for the purpose of funding the EIP, and in accordance with Resolution No. 08-89, the City initially funded the Energy Independence Fund (and Phase 1 of the EIP) with an advance from the City's General Fund in the amount of $2.5 million. Phase 2 of the EIP is planned for $5 million of additional funding for eligible property owner improvements, which together with $2.5 million of Phase 1 funding, will total $7.5 million combined EIP funding to property owners. On January 29, 2009, in accordance with Resolution No. 09-3 of the City Council, adopted on January 22, 2009, the City issued, and the Palm Desert Redevelopment Agency purchased from the City, the City of Palm Desert's Energy Independence Program, Limited Obligation Improvement Bond, Series 2009A (Taxable), which provides for funding of the first available Phase 2 EIP loans in an amount up to $2.5 million (or the maximum amount actually funded under pledged Phase 1 loan agreements, whichever is less). Approximately $1.9 million of Phase 2 EIP Loans is anticipated to be funded as of the date of this meeting, with proceeds of the Series 2009A Bond issued in January. The City issued a "Request for Proposals — Energy Program Financing" in February 2009 (the "RFP"), seeking proposals from qualified firms as to additional financing for P6401.1039\1144244.2 EIP Loan Funding Staff Report June 25, 2009 Page 3 of 5 the EIP, including possible reimbursement to the City's General Fund for its original advance to the Energy Independence Fund in the amount of $2.5 million. A committee comprised of nine members was formed to review the proposals, and on May 21, 2009, at the recommendation of the committee, the City Council authorized staff to select Wells Fargo Bank to assist the City with proceedings for a variable rate bond issue to provide financing for the EIP and to enter into formal negotiations with Wells Fargo Bank to finalize the business deal, subject to formal approval, at a later date, by the City Council of the financing and all related bond documents. The documents presented at this meeting represent the required documents to accomplish the financing selected by the City Council as a result of the RFP. As noted in the staff report for the May 21 meeting, the Bonds will be issued as lease revenue bonds, which are a common market -accepted way for public agencies to finance projects, or in our case, energy efficiency program loans. The Riverside County Palm Desert Financing Authority recently closed a series of lease revenue bonds to finance various County facilities including the Palm Desert Sheriff Station. The leased assets were various County facilities. For the City's proposed EIP lease revenue bonds, the City would use the Parkview Office Complex as the leased assets that provide additional security for the bonds. As lease revenue bonds, the Bonds are secured by base rental payments from the City to the Palm Desert Financing Authority, equal to the principal and interest coming due on the Bonds. The City's base rental payments, in turn, are a general fund obligation as to each year's base rental, equivalent to annual debt service requirements under the bond documents. There is no lien upon or pledge of any particular revenues received by the City for the payment of this debt service. The investors are expected to be institutional investors (such as mutual funds), and the underwriter, Wells Fargo Institutional Securities, LLC, will sell the Bonds in a public offering to such investors. While the Parkview Office Complex will be subject to a lease and sublease arrangement between the Palm Desert Financing Authority and the City (pursuant to the Site Lease and Lease Agreement attached), to facilitate the issuance by the Authority of the Bonds, no mortgage or deed of trust is required under the bond documents for the financing, and therefore, there is no remedy of foreclosure on the Parkview Office Complex in the event of default under the bond documents. There is also no remedy of acceleration. In the unlikely event of a default under the bond documents, the bond documents provide for the remedy of an assignment of rents received by the City from tenants of the Parkview Office Complex, to the trustee for the Bonds for the benefit of the bondowners, but only to the extent such tenant rents do not exceed the City's unpaid rental (debt service) payments under the bond documents which have been earned for P6401.1039\1144244.2 EIP Loan Funding Staff Report June 25, 2009 Page 4 of 5 the immediately preceding calendar year. Debt service on the Bonds is projected to be approximately $500,000 per year. The rents received from the Parkview Office Complex are approximately $900,000 per year. To the extent commercially feasible in the current economic market, the City's debt service payments with respect to the Bonds are being modeled to be an amount Tess than the amounts of projected contractual assessments to be received by the City, pursuant to the loan agreements entered into by the participants. Each EIP loan earns interest at a rate of 7%, which is included in the amounts levied for the assessments. The Bonds will be issued at a weekly variable interest rate, on account of the fixed interest rate market currently being too high for an economically desirable bond issuance. The bond documents provide for the Palm Desert Financing Authority's ability to convert the Bonds to a fixed interest rate at any time, upon the provision of 60 days prior notice, to take advantage of an improved fixed interest rate market when available. To mitigate interest rate risk typically associated with variable rate interest rates and to preserve a spread between the anticipated contractual assessment revenues and the City's debt service payments on the Bonds, Wells Fargo will provide an interest rate collar ("Interest Rate Collar"), which is a minimum and maximum interest rate, as part of the financing structure. The Interest Rate Collar, pursuant to the attached Interest Rate Collar Documents, essentially allocates to Wells Fargo Bank the obligation to pay the actual variable interest rate on the Bonds, determined in accordance with the attached Indenture, while during the 5-year term of the proposed Interest Rate Collar, the City will pay to Wells Fargo Bank an interest rate on the Bonds ranging from a low interest rate (to be established at the time of the sale of the Bonds) of approximately 2.25% to a maximum interest rate of 5.25% per annum. Including regular letter of credit and remarketing fees of Wells Fargo Bank (see next paragraph), these collared rates are estimated to range from a minimum of 3.875% to a maximum of 6.875% per annum. Any difference between the actual rate paid by the City and the City's collections on EIP contractual assessments will be deposited by the City in a reserve account of the Energy Independence Fund to cover potential property owner loan defaults, administration costs, or any other bond costs. As contemplated in its proposal with respect to the RFP, Wells Fargo Bank, National Association, will provide credit enhancement and liquidity for the Bonds in the form of an irrevocable letter of credit, pursuant to which Wells Fargo Bank, as remarketing agent under the attached Remarketing Agreement, will purchase any variable rate bonds in the event no investors purchase the Bonds in a remarketing, and will pay debt service with respect to the Bonds in weekly variable mode in the event the City is not able to. The letter of credit is available for an initial 3-year term, with possible renewal at the P6401.1039\1144244.2 EIP Loan Funding Staff Report June 25, 2009 Page 5 of 5 discretion of the bank. The City would repay Wells Fargo for any draws on the letter of credit pursuant to the terms of the Reimbursement Agreement attached. Such a letter of credit is typically required by investors as a component of the financing structure for variable interest rate bonds. On account of the structuring components described above to address credit, liquidity, and risk mitigation, the reserve fund held by the trustee for the Bonds will be funded at $0 while Bonds are in variable rate mode, as no reserve fund is expected to be required by investors of the variable rate bonds, according to Wells Fargo Institutional Securities, LLC, underwriter for the Bonds. Wells Fargo will use the attached Preliminary Official Statement, which discloses the sources of repayment and risks attendant to bond ownership, to market the Bonds to potential investors. At the time this report was prepared, — Phase 2 loan applications totaling over $__ million have been submitted. The issuance of the Bonds will allow contracts for approximately $2.5 million of unfunded Phase 2 loan applications to be entered into and funded with proceeds of the Bonds. In addition, the issuance of the Bonds will raise $2.5 million for deposit in the City's General Fund, as reimbursement for the initial General Fund advance to fund the EIP and the Energy Independence Program, which repayment is desirable during the current economic times. The Indenture provides for the bond funds to be invested by the trustee in investments authorized for the investment of bond proceeds by the Authority and the City under Government Code Section 53601. The authorized types of investments will be disclosed to investors in the offering document. Future Actions: The Council may be asked at a later date to adopt one additional resolution for the issuance of an additional bond to be purchased by the Palm Desert Redevelopment Agency in order to provide the balance of funds required for the $5 million total planned for Phase 2 of the EIP. Submitted by: Paul S. Gibson City Treasurer / Director of Finance P6401.1039\1144244.2 Approval: M. Wohlmuth y Manager RESOLUTION NO. FA-63 A RESOLUTION OF THE PALM DESERT FINANCING AUTHORITY AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF THE AUTHORITY'S ENERGY INDEPENDENCE PROGRAM, VARIABLE RATE DEMAND LEASE REVENUE BONDS, SERIES 2009 (FEDERALLY TAXABLE); APPROVING AS TO FORM AND AUTHORIZING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH; AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO RECITALS: WHEREAS, the Palm Desert Financing Authority (the "Authority") is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of January 26, 1989, by and between the City of Palm Desert (the "City") and the Palm Desert Redevelopment Agency, and under the provisions of Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the "Act"), and is authorized pursuant to Article 4 of the Act to issue bonds for the purpose of financing and refinancing public capital improvements (as defined in the Act, including but not limited to paragraph (v) of Government Code Section 6546); and WHEREAS, the City has requested that the Authority issue, and the Authority desires to issue, its Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds") in order to (i) reimburse the City for the entire amount of its $2.5 million advance, authorized by Resolution No. 08-89 of the City Council of the City, adopted on August 28, 2008, to initially fund the Energy Independence Fund; (ii) finance the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City pursuant to the City's Energy Independence Program; and (iii) pay certain costs related to the issuance of the Bonds; and WHEREAS, in connection with the issuance of the Bonds and to provide security therefore, it is proposed that the Authority will enter into (i) a Site Lease (as defined herein), under which the Authority will lease the Parkview Office Complex, also known as 73710 and 73720 Fred Waring Drive, Palm Desert, California, including the land and the improvements thereon (the "Leased Property"), from the City, and (ii) a Lease Agreement, under which the City will sublease the Leased Property from the Authority and make rental payments, calculated to be sufficient to allow the Authority to pay debt service on the Bonds; and WHEREAS, pursuant to the City's "Request for Proposals — Energy Program Financing," dated February 2009 (the "RFP"), and the authorization provided by the City Council of the City on May 21, 2009, to select Wells Fargo Bank, National Association, to assist the City with proceedings for a variable rate bond issue to provide financing for the City's Energy Independence Program, the Bonds will be issued as variable rate bonds and, from time to time, be subject to tender by bondholders pursuant to the terms of the Indenture, and the Authority P6401.1039\1142492.2 RESOLUTION NO. FA-63, desires to appoint Wells Fargo Bank, National Association, to act as the tender agent (the "Tender Agent") under the Indenture with respect to the Bonds; and WHEREAS, there has been presented to the Authority the form of a Remarketing Agreement (the "Remarketing Agreement") with Wells Fargo Brokerage Services, LLC, as the remarketing agent (the "Remarketing Agent") pursuant to which the Remarketing Agent will perform certain duties, including the remarketing of any Bonds tendered or deemed tendered for purchase; and WHEREAS, in order to provide for additional liquidity for the payment of debt service on the Bonds and to enhance the credit quality of the Bonds, as contemplated by the submission of Wells Fargo Bank, National Association, in response to the RFP, Wells Fargo Bank, National Association, has agreed to provide an irrevocable letter of credit (the "Letter of Credit") with respect to the Bonds, on such terms as set forth in a term sheet, dated June 2, 2009, with respect to the Bonds; and WHEREAS, pursuant to Government Code Section 5922, in order to reduce the amount of interest rate risk or lower the cost of borrowing in connection with the issuance of the Bonds, the Authority desires to enter into an ISDA Master Agreement, as supplemented by a Schedule, a Credit Support Annex, and a Confirmation, each by and between the Authority and Wells Fargo Bank, National Association (collectively, the "Interest Rate Collar Documents"); and WHEREAS, the City Council has made a finding, after a duly noticed public hearing pursuant to Section 6586.5 of the California Government Code held on the date hereof, that the issuance of the Bonds will result in significant public benefit; and WHEREAS, in order to effect the issuance of the Bonds, the Authority Commission desires to approve the form of a Preliminary Official Statement for the Bonds, and to approve the forms of, and authorize the execution and delivery of, an Indenture, a Site Lease, a Lease Agreement, an Assignment Agreement, a Remarketing Agreement, the Interest Rate Collar Documents, and a Bond Purchase Contract for the Bonds, the forms of which are on file with the Secretary of the Authority. NOW, THEREFORE, THE PALM DESERT FINANCING AUTHORITY DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Recitals; Acknowledgment of City Council Findings. The above recitals, and each of them, are true and correct. The Authority hereby acknowledges and concurs with the City Council's finding of significant public benefit and hereby approves and authorizes the issuance and sale of the Bonds. Section 2. Issuance of Bonds: Indenture. The Indenture (the "Indenture"), proposed to be entered into by and between the Authority and the Trustee (defined in Section 3 below), in the form presented and on file with the Secretary of the Authority (the "Authority Secretary"), is hereby approved. Subject to the parameters set forth in Section 4 below, the issuance of the Bonds is hereby approved and authorized. Subject to Section 4, each of the President, the Vice - President, and the Chief Administrative Officer, and any deputy of such officers (each, an "Authorized Officer"), acting singly, is hereby authorized and directed, for and in the name and P6401.1039\ 1142492.2 2 RESOLUTION NO. FA-63 on behalf of the Authority, to execute and deliver the Indenture in substantially said form, with such additions or changes as the Authorized Officer executing the same may approve (such approval to be conclusively evidenced by such Authorized Officer's execution and delivery thereof). Section 3. Abuointment of Trustee and Tender Agent. The appointment of Wells Fargo Bank, National Association, as trustee (the "Trustee") and Tender Agent under the Indenture is hereby approved. Section 4. Terms of Sale of Bonds. The authorization set forth in this Resolution regarding the issuance and sale of Bonds are subject to the following parameters: (i) the aggregate principal amount of the Bonds shall not exceed $5,500,000; (ii) the initial interest rate on the Bonds during the term of the Interest Rate Collar Documents approved pursuant to Section 10 below shall not exceed 5.25% (excluding the fee of the Remarketing Agent and fee for the Letter of Credit to be issued by Wells Fargo Bank, National Association); and (iii) the underwriter's discount with respect to the Bonds shall be 1.00 percent of the principal amount thereof. Section 5. Site Lease. The Site Lease (the "Site Lease"), proposed to be entered into by and between the City and the Authority, in the form presented and on file in the office of the Secretary of the Authority, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Site Lease 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 Authorized Officer's execution and delivery thereof). Section 6. Lease Agreement. The Lease Agreement (the "Lease Agreement"), proposed to be entered into by and between the Authority and the City, in the form presented and on file in the office of the Secretary of the Authority, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Lease 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 Authorized Officer's execution and delivery thereof). Section 7. Assignment Agreement. The Assignment Agreement (the "Assignment Agreement"), proposed to be entered into by and between the Authority and the Trustee, in the form presented and on file in the office of the Secretary of the Authority, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Assignment 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 Authorized Officer's execution and delivery thereof). Section 8. Bond Purchase Contract. The form of the Bond Purchase Contract by and among the City, the Authority, and Wells Fargo Institutional Securities, LLC (the "Underwriter") presented at this meeting, on file in the office of the Secretary of the Authority and incorporated hcrcin by reference (the "Bond Purchase Contract"), is hereby approved, and any one of the P6401.1039\ 1142492.2 3 RESOLUTION NO. FA-5181 Authorized Officers, acting singly, 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 the terms of the agreement meet the parameters set forth in Section 4. Each of the Authorized Officers is authorized to determine the day on which the Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the Authority and may reject any terms presented by the Underwriter if determined not to be in the best interest of the Authority. Section 9. Remarketing Agreement. The Remarketing Agreement, proposed to be entered into by and between the Authority and Wells Fargo Brokerage Services, LLC, as the Remarketing Agent, in the form presented and on file in the office of the Secretary of the Authority, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute and deliver the Remarketing Agreement in substantially said form, with such changes therein as the Authorized Officer executing the document may approve (such approval to be conclusively evidenced by such Authorized Officer's execution and delivery thereof); provided, that the Remarketing Agent's fees payable by the Authority under the Remarketing Agreement while the Bonds bear interest at a Weekly Rate shall be an annual fee equal to the greater of (i) $3,500, or (ii) one - eighth of one percent (0.125%) of the weighted average daily principal amount of the Bonds outstanding on the date of payment. Section 10. Interest Rate Collar Documents. The forms of the Interest Rate Collar Documents, as presented at this meeting and on file with the Secretary of the Authority, are hereby approved. Each Authorized Officer, acting singly, is hereby further authorized to execute and deliver, for and in the name of and on behalf of the Authority, the Interest Rate Collar Documents in substantially said forms, with such changes therein as the Authorized Officer executing the documents may approve (such approval to be conclusively evidenced by such Authorized Officer's execution and delivery thereof); provided. that the maximum interest rate under the Interest Rate Collar Documents shall not exceed 5.25%. Section 11. Preliminary Official Statement. The Preliminary Official Statement relating to the Bonds (the "Preliminary Official Statement"), in the form presented and on file with the Authority Secretary, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to cause the Preliminary Official Statement in substantially said form, with such additions or changes therein as such Authorized Officer may approve, to be deemed final for the purposes of Rule 15c2-12 of the Securities and Exchange Act of 1934 ("Rule 15c2-12"). The Underwriter is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the 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 to make the Preliminary Official Statement final as of its date for purposes of Rule 15c2-12, including, but not limited to, such additions and changes as are necessary to make all information set forth therein accurate and not misleading P6401.1039\ 1142492.2 4 RESOLUTION NO. FA-63 Section 12. Official Statement. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to cause the Preliminary Official Statement to be brought into the form of a final Official Statement (the "Official Statement"), and to execute the same for and in the name and on behalf of the Authority, with such additions or changes therein as such Authorized Officer may approve (such approval to be conclusively evidenced by such Authorized Officer's execution and delivery thereof). The Underwriter is further authorized to distribute the final Official Statement for the Bonds and any supplement thereto to the purchasers thereof upon its execution on behalf of the Authority as described above. Section 13. Government Code Section 5922 Findin2s. In accordance with California Government Code Section 5922, the Authority hereby finds and determines that Interest Rate Collar Documents entered into in accordance with this Resolution and consistent with the requirements set forth herein are designed to reduce the amount or duration of payment, interest rate, spread or similar risk or result in a lower cost of borrowing to the Authority when used in combination with the issuance of the Bonds. Section 14. .Atrnointments of Financial Advisor, Bond Counsel, Disclosure Counsel. and Underwriter. In connection to the issuance of the Bonds, the appointments of Del Rio Advisors, LLC, as financial advisor, Richards, Watson & Gershon, A Professional Corporation, as Bond Counsel, Fulbright & Jaworski L.L.P., as Disclosure Counsel, and Wells Fargo Institutional Securities, LLC, as underwriter, are hereby approved and affirmed. Section 15. Other Acts. The Authorized Officers and all other officers of the Authority are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents that they may deem necessary or advisable in order to consummate the sale, issuance and delivery of the Bonds, or otherwise to effectuate the purposes of this Resolution, the Indenture, the Site Lease, the Lease Agreement, the Assignment Agreement, the Remarketing Agreement, the Official Statement, the Bond Purchase Contract, and the Interest Rate Collar Documents and any such actions previously taken by such officers are hereby ratified and confirmed. Section 16. Effective Date. This Resolution shall take effect immediately upon adoption. P6401.1039\ 1142492.2 5 RESOLUTION NO. FA-63 PASSED AND ADOPTED by the Palm Desert Financing Authority Commission at a meeting held on the 25h day of June, 2009, by the following vote: AYES: NOES: ABSENT: ABSTAIN: ROBERT A. SPIEGEL, PRESIDENT ATTEST: RACHELLE D. KLASSEN, SECRETARY P6401.1039\1142492.2 6 RESOLUTION NO. 09-53 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT MAKING A FINDING OF SIGNIFICANT PUBLIC BENEFIT, APPROVING AS TO FORM AND AUTHORIZING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION WITH THE SALE AND ISSUANCE OF THE PALM DESERT FINANCING AUTHORITY'S ENERGY INDEPENDENCE PROGRAM, VARIABLE RATE DEMAND LEASE REVENUE BONDS, SERIES 2009 (FEDERALLY TAXABLE), AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO RECITALS: WHEREAS, the Palm Desert Financing Authority (the "Authority") is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of January 26, 1989, by and between the City of Palm Desert (the "City") and the Palm Desert Redevelopment Agency, and under the provisions of Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the "Act"), and is authorized pursuant to Article 4 of the Act to issue bonds for the purpose of financing and refinancing public capital improvements (as defined in the Act, including but not limited to paragraph (v) of Government Code Section 6546); and WHEREAS, the City desires that the Authority issue, and the Authority desires to issue, its Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds") in order to (i) reimburse the City for the entire amount of its $2.5 million advance, authorized by Resolution No. 08-89 of the City Council of the City, adopted on August 28, 2008, to initially fund the Energy Independence Fund; (ii) finance the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City pursuant to the City's Energy Independence Program; and (iii) pay certain costs related to the issuance of the Bonds; and WHEREAS, after notice duly published in accordance with law, this City Council held a public hearing on this date with respect to the issuance of the proposed Bonds and received evidence concerning the public benefits therefrom; and WHEREAS, in connection with the issuance of the Bonds and to provide security therefore, it is proposed that the Authority will enter into (i) a Site Lease (as defined herein), under which the Authority will lease the Parkview Office Complex, also known as 73710 and 73720 Fred Waring Drive, Palm Desert, California, including the land and the improvements thereon (the "Leased Property"), from the City, and (ii) a Lease Agreement, under which the City will sublease the Leased Property from the Authority and make rental payments, calculated to be sufficient to allow the Authority to pay debt service on the Bonds; and WHEREAS, pursuant to the City's "Request for Proposals — Energy Program Financing," dated February 2009 (the "RFP"), and the authorization provided by the City Council of the City P6401.1039\1142493.3 RESOLUTION NO. 09-53 on May 21, 2009, to select Wells Fargo Bank, National Association (the "Bank"), to assist the City with proceedings for a variable rate bond issue to provide financing for the City's Energy Independence Program, the Bonds will be issued as variable rate bonds; and WHEREAS, in order to provide for additional liquidity for the payment of debt service on the Bonds and to enhance the credit quality of the Bonds, as contemplated by the submission of the Bank, in response to the RFP, the Bank has agreed to provide an irrevocable letter of credit (the "Letter of Credit") with respect to the Bonds, on such terms as set forth in a term sheet, dated June 2, 2009, with respect to the Bonds; and WHEREAS, as part of the documentation for the Letter of Credit, a reimbursement agreement, by and between the City and the Bank is required (the "Reimbursement Agreement"); and WHEREAS, pursuant to Government Code Section 5922, in order to reduce the amount of interest rate risk or lower the cost of borrowing in connection with the issuance of the Bonds, and in a lower cost of lease financing to the City in connection therewith, the City (or the Authority, as the case may be) desires to enter into an ISDA Master Agreement, as supplemented by a Schedule and a Confirmation, each by and between the City (or the Authority, as the case may be) and Wells Fargo Bank, National Association (collectively, the "Interest Rate Collar Documents"); and WHEREAS, in order to effect the issuance of the Bonds, the City Council desires to approve the forms of, and authorize the execution and delivery of, the Site Lease, the Lease Agreement, the Reimbursement Agreement, the Interest Rate Collar Documents, and a Bond Purchase Contract for the Bonds, the forms of which are on file with the City Clerk. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Recitals; Findings. The above recitals, and each of them, are true and correct. The City Council hereby finds that the financing of public capital improvements described above through the issuance by the Authority of the Bonds will result in significant public benefits to the constituents of the City, including demonstrable savings in effective interest rate and more efficient delivery of the City's Energy Independence Program to residential and commercial development within the City. Section 2. Site Lease. The Site Lease (the "Site Lease"), proposed to be entered into by and between the City and the Authority, in the form presented and on file in the office of the City Clerk, is hereby approved. Each of the Mayor (or in his absence, the Mayor Pro Tem) and the City Manager of the City (each an "Authorized Officer"), acting singly, is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Site Lease 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 Authorized Officer's execution and delivery thereof). Section 3. Lease Agreement. The Lease Agreement (the "Lease Agreement"), proposed to be entered into by and between the Authority and the City, in the form presented and P6401.1039\1142493.3 2 RESOLUTION NO. 09-53 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 City, to execute and deliver the Lease 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 Authorized Officer's execution and delivery thereof). Section 4. Reimbursement Agreement. The Reimbursement Agreement, proposed to be entered into by and between the City and the Bank, 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 City, to execute and deliver the Reimbursement 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 Authorized Officer's execution and delivery thereof). Section 5. Bond Purchase Contract. The Bond Purchase Contract (the "Bond Purchase Contract"), proposed to be entered into by and among the City, the Authority, and Wells Fargo Institutional Securities, LLC, as underwriter (the "Underwriter"), in the form presented and on file in the office of the City Clerk, is hereby approved. Subject to the parameters specified in the Authority's resolution approving the issuance of the Bonds, each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Bond Purchase Contract 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 Authorized Officer's execution and delivery thereof). Section 6. Interest Rate Collar Documents. The forms of the Interest Rate Collar Documents, as presented at this meeting and on file with the City Clerk, are hereby approved. Each Authorized Officer, acting singly, is hereby further authorized to execute and deliver, for and in the name of and on behalf of the City, the Interest Rate Collar Documents in substantially said forms, with such changes therein as the Authorized Officer executing the documents may approve (such approval to be conclusively evidenced by such Authorized Officer's execution and delivery thereof); provided, that the maximum interest rate under the Interest Rate Collar Documents shall not exceed 5.25%. Section 7. Government Code Section 5922 Findings. In accordance with California Government Code Section 5922, the City hereby finds and determines that Interest Rate Collar Documents entered into in accordance with this Resolution and consistent with the requirements set forth herein are designed to reduce the amount or duration of payment, interest rate, spread or similar risk or result in a lower cost of borrowing to the Authority, and in a lower cost of lease financing to the City, when used in combination with the issuance of the Bonds. Section 8. Other Acts. The Authorized Officers and all other officers of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents that they may deem necessary or advisable in order to consummate the sale, issuance and delivery of the Bonds, or otherwise to effectuate the purposes of this Resolution, the Site Lease, the Lease Agreement, the Reimbursement Agreement, the Interest Rate Collar Documents, and the Bond Purchase Contract, and any such actions previously taken by such officers, are hereby ratified and confirmed. P6401.1039\1142493.3 3 RESOLUTION NO. 09-53 Section 9. Effective Date. This Resolution shall take effect immediately upon adoption. PASSED AND ADOPTED by the City Council of the City of Palm Desert at a meeting held on the 25th day of June, 2009, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: ROBERT A. SPIEGEL, MAYOR ATTEST: RACHELLE D. KLASSEN, CITY CLERK CITY OF PALM DESERT, CALIFORNIA P6401.1039\1142493.3 4 RESOLUTION NO. 09-53 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PAL DESERT MAKING A FINDING OF SIGNIFICANT PUBLIC BENE ^ T, APPROVING AS TO FORM AND AUTHORIZING THE EXECU ION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTIO WITH THE SALE AND ISSUANCE OF THE PALM DESERT FI * NCING AUTHORITY'S ENERGY INDEPENDENCE PROGRAM, ARIABLE RATE DEMAND LEASE REVENUE BONDS, SERIES 2009 ' DERALLY TAXABLE), AND AUTHORIZING CERTAIN OTH ' MATTERS RELATING THERETO RECITALS: WHEREAS, the Palm Desert Financing A thority ( e "Authority") is a joint powers authority duly organized and existing under and pur► . t at certain Joint Exercise of Powers Agreement, dated as of January 26, 1989, by and be the City of Palm Desert (the "City") and the Palm Desert Redevelopment Agency, and • - the provisions of Articles 1 through 4 (commencing with Section 6500), Chapter 5, Divi .. 7, Title 1 of the Government Code of the State of California (the "Act"), and is authorized suant to Article 4 of the Act to issue bonds for the purpose of financing and refinancing . . c capital improvements (as defined in the Act, including but not limited to paragra.h (v) of . ernment Code Section 6546); and op WHEREAS, the City desires‘ esires at - Authority issue, and the Authority desires to issue, its Energy Independence Program V . .le. Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds" 41)/ der to (i) reimburse the City for the entire amount of its $2.5 million advance, authorized : ' Resolution No. 08-89 of the City Council of the City, adopted on August 2: `008, %�i�, lly fund the Energy Independence Fund; (ii) finance the acquisition and >ton§ on o nstallation of distributed generation renewable energy sources and energy efficiency i \• . : ents on or in properties in the City pursuant to the City's Energy Independence Progr.Tan: iii) pay certain costs related to the issuance of the Bonds; and WHEREAS, aft notice duly published in accordance with law, this City Council held a public hearing on th': date with respect to the issuance of the proposed Bonds and received evidence concemin : the public benefits therefrom; and WHE S, in connection with the issuance of the Bonds and to provide security therefore, it is proposed that the Authority will enter into (i) a Site Lease (as defined herein), under whit the Authority will lease the Parkview Office Complex, also known as 73710 and 73720 F d Waring Drive, Palm Desert, California, including the land and the improvements thereo the "Leased Property"), from the City, and (ii) a Lease Agreement, under which the City will sublease the Leased Property from the Authority and make rental payments, calculated to be sufficient to allow the Authority to pay debt service on the Bonds; and / WHEREAS, pursuant to the City's "Requestfor Proposals - Energy Program Financing," / dated February 2009 (the "RFP"), and the authorization provided by the City Council of the P6401.1039\ 1 142493.2 RESOLUTION NO. 09-53 City on May 21, 2009, to select Wells Fargo Bank, National Association (the "Bank"), to assist the City with proceedings for a variable rate bond issue to provide financing for the City's Energy Independence Program, the Bonds will be issued as variable rate bonds; an - WHEREAS, in order to provide for additional liquidity for the payme t of debt service on the Bonds and to enhance the credit quality of the Bonds, as contemplate by the submission of the Bank, in response to the RFP, the Bank has agreed to provide an irre •cable letter of credit (the "Letter of Credit") with respect to the Bonds, on such terms as s - forth in a term sheet, dated June 2, 2009, with respect to the Bonds; and WHEREAS, as part of the documentation for the Letter of Credit, a reimbursement agreement, by and between the City and the Bank is required (the ` ' eimbursement Agreement"); and WHEREAS, in order to effect the issuance of the : onds, the City Council desires to approve the forms of, and authorize the execution and , elivery of, the Site Lease, the Lease Agreement, the Reimbursement Agreement, and a Bo : Purchase Contract for the Bonds, the forms of which are on file with the City Clerk. NOW, THEREFORE, THE CITY CO DOES HEREBY RESOLVE, DETERMINE AN CIL OF THE CITY OF PALM DESERT ORDER AS FOLLOWS: Section 1. Recitals: Findings. T above recitals, and each of them, are true and correct. The City Council hereby finds that the financing of public capital improvements described above through the issuance b, the Authority of the Bonds will result in significant public benefits to the constituents o the City, including demonstrable savings in effective interest rate and more efficient d; ivery of the City's Energy Independence Program to residential and commercial develo • ent within the City. Section 2. Site Lease The Site Lease (the "Site Lease"), proposed to be entered into by and between the City and e Authority, in the form presented and on file in the office of the City Clerk, is hereby appro ed. Each of the Mayor (or in his absence, the Mayor Pro Tem) and the City Manager of the t ty (each an "Authorized Officer"), acting singly, is hereby authorized and directed, for and in e name and on behalf of the City, to execute and deliver the Site Lease in substantially said •rm, with such changes therein as the Authorized Officer executing the same may approve such approval to be conclusively evidenced by such Authorized Officer's execution and delery thereof). Sectio ' 3. Lease Agreement. The Lease Agreement (the "Lease Agreement"), proposed to .e entered into by and between the Authority and the City, in the form presented and on file in he office of the City Clerk, is hereby approved. Each Authorized Officer, acting singly, hereby authorized and directed, for and in the name and on behalf of the City, to execu and deliver the Lease Agreement in substantially said form, with such changes therein as the • uthorized Officer executing the same may approve (such approval to be conclusively ev • enced by such Authorized Officer's execution and delivery thereof). Section 4. Reimbursement Agreement. The Reimbursement Agreement, proposed to be entered into by and between the City and the Bank, in the form presented and on file in the P6401.1039\ 1142493.2 2 RESOLUTION NO. 09-51er office of the City Clerk, is hereby approved. Each Authorized Officer, acting singly, 's hereby authorized and directed, for and in the name and on behalf of the City, to execute and eliver the Reimbursement Agreement in substantially said form, with such changes the ein as the Authorized Officer executing the same may approve (such approval to be conclusi ly evidenced by such Authorized Officer's execution and delivery thereof). Section 5. Bond Purchase Contract. The Bond Purchase Contract ( "Bond Purchase Contract"), proposed to be entered into by and among the City, the Autho ' y, and Wells Fargo Institutional Securities, LLC, as underwriter (the "Underwriter"), in the • rm presented and on file in the office of the City Clerk, is hereby approved. Subject to the pa eters specified in the Authority's resolution approving the issuance of the Bonds, each thorized Officer, acting singly, is hereby authorized and directed, for and in the name an• on behalf of the City, to execute and deliver the Bond Purchase Contract in substantially s • id form, with such changes therein as the Authorized Officer executing the same may a.prove (such approval to be conclusively evidenced by such Authorized Officer's execution •, d delivery thereof). Section 6. Other Acts. The Authorized Officers . • all other officers of the City are hereby authorized and directed, jointly and severa ly, to • • any and all things, to execute and deliver any and all documents that they may :. e • necessary or advisable in order to consummate the sale, issuance and delivery of the Bo d•, or otherwise to effectuate the purposes of this Resolution, the Site Lease, the Lease Agree , the Reimbursement Agreement, and the Bond Purchase Contract, and any such actions pr iously taken by such officers, are hereby ratified and confirmed. Section 7. Effective Date. Thy h : olution shall take effect immediately upon adoption. PASSED AND ADOP ► b th ty Council of the City of Palm Desert at a meeting held on the 25th day of June, 2 of . ing vote: AYES: NOES: ABSENT: ABSTAIN: ATTEST: RACHELVE D. KLASSEN, CITY CLERK ROBERT A. SPIEGEL, MAYOR P6401.1039\ 1142493.2 3 INDENTURE by and between the PALM DESERT FINANCING AUTHORITY and WELLS FARGO BANK,NATIONAL ASSOCIATION, Trustee Dated as of July 1, 2009 PALM DESERT FINANCING AUTHORITY ENERGY INDEPENDENCE PROGRAM VARIABLE RATE DEMAND LEASE REVENUE BONDS, SERIES 2009 (FEDERALLY TAXABLE) P6401.1039\1 139624.4 RWG DRAFT 6/14/09 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS 2 SECTION 1.01. Definitions 2 SECTION 1.02. Content of Certificates and Opinions 12 SECTION 1.03. Article and Section Headings and References. 13 ARTICLE II THE BONDS 13 SECTION 2.01. Authorization of Bonds. 13 SECTION 2.02. Terms of the Bonds. 14 SECTION 2.02.A. Interest Rates 15 SECTION 2.03. Transfer of Bonds. 19 SECTION 2.04. Use of Securities Depository. 19 SECTION 2.05. Exchange of Bonds. 21 SECTION 2.06. Bond Register 21 SECTION 2.07. Form and Execution of Bonds. 21 SECTION 2.08. Temporary Bonds 22 SECTION 2.09. Bonds Mutilated, Lost, Destroyed or Stolen 22 SECTION 2.10. CUSIP Numbers 22 SECTION 2.11. Certain Contracts and Swaps. 23 ARTICLE III APPLICATION OF PROCEEDS 23 SECTION 3.01. Application of Proceeds of the Bonds. 23 SECTION 3.02. Costs of Issuance Fund. 23 SECTION 3.03. Energy Independence Fund 24 SECTION 3.04. Reserve Fund 24 ARTICLE IV REDEMPTION AND TENDER OF BONDS 25 SECTION 4.01. Establishment of Redemption Fund. 25 SECTION 4.02. Mandatory Redemption From Net Proceeds 25 SECTION 4.03. Optional Redemption of the Bonds 26 SECTION 4.04. Sinking Fund Redemption. 26 SECTION 4.05. Selection of Bonds for Redemption. 27 SECTION 4.06. Notice of Redemption. 27 SECTION 4.07. Partial Redemption of Bonds. 28 SECTION 4.08. Effect of Notice of Redemption. 28 SECTION 4.09. Surplus. 29 SECTION 4.10. Establishment of Tender Fund. 29 SECTION 4.11. Mandatory Tender on Fixed Rate Conversion Date. 29 SECTION 4.12. Mandatory Tenders Other Than on Fixed Rate Conversion Date. 29 SECTION 4.13. Mechanics of Mandatory Tender. 30 SECTION 4.14. Option to Tender Prior to Fixed Rate Conversion Date. 30 SECTION 4.15. Purchase of Bonds Delivered On a Tender Date. 31 SECTION 4.16. Remarketing of Bonds by Remarketing Agent. 32 SECTION 4.17. Delivery of Bonds. 33 SECTION 4.18. Alternate Credit Facility. 33 P6401.1039\1139624.4 SECTION 4.19. Restriction on Remarketing of Bonds to City. 34 SECTION 4.20. Book-Entry Tenders: Duties of Tender Agent with Respect to Purchase of Bonds. 34 ARTICLE V REVENUES AND FUNDS 35 SECTION 5.01. Establishment of Funds 35 SECTION 5.02. Pledge and Assignment; Equal Security. 35 SECTION 5.03. Deposit of Revenues. 36 SECTION 5.04. Application of Moneys. 36 SECTION 5.05. Draws Under Credit Facility. 37 SECTION 5.06. Application of Reserve Fund in Event of Deficiency in Lease Payment Fund. 38 SECTION 5.07. Surplus. 38 SECTION 5.08. Investment of Moneys in Funds and Accounts 38 ARTICLE VI PARTICULAR COVENANTS 40 SECTION 6.01. Punctual Payment 40 SECTION 6.02. Extension of Payment of Bonds 40 SECTION 6.03. Against Encumbrances 40 SECTION 6.04. Against Additional Indebtedness. 40 SECTION 6.05. Power to Issue Bonds and Make Pledge and Assignment. 40 SECTION 6.06. Accounting Records and Financial Statements 41 SECTION 6.07. Waiver of Laws. 41 SECTION 6.08. Further Assurances 41 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS 42 SECTION 7.01. Events of Default. 42 SECTION 7.02. Remedies on Default 42 SECTION 7.03. Application of Revenues and Other Funds After Default 42 SECTION 7.04. Trustee to Represent Bondowners. 43 SECTION 7.05. Bondowners' Direction of Proceedings. 44 SECTION 7.06. Limitation on Bondowners' Right to Sue. 44 SECTION 7.07. Absolute Obligation of Authority. 45 SECTION 7.08. Termination of Proceeding. 45 SECTION 7.09. Remedies Not Exclusive. 45 SECTION 7.10. No Waiver of Default 45 SECTION 7.11. Rights of Credit Entity. 46 ARTICLE VIII THE TRUSTEE 46 SECTION 8.01. Appointment, Duties and Immunities of Trustee 46 SECTION 8.02. Merger or Consolidation. 47 SECTION 8.03. Liability of Trustee. 48 SECTION 8.04. Right of Trustee to Rely on Documents. 49 SECTION 8.05. Preservation and Inspection of Documents 50 SECTION 8.06. Compensation and Indemnification. 50 SECTION 8.07. Remarketing Agent. 50 SECTION 8.08. Qualifications of Remarketing Agent. 51 SECTION 8.09. Tender Agent. 51 SECTION 8.10. Qualifications of Tender Agent. 52 P6401.1039\1139624.4 2 SECTION 8.11. Co-Trustees. 52 ARTICLE IX MODIFICATION OR AMENDMENT OF INDENTURE AND LEASE 53 SECTION 9.01. Amendments Permitted 53 SECTION 9.02. Procedure for Amendment with Written Consent of Bond Owners. 54 SECTION 9.03. Disqualified Bonds 54 SECTION 9.04. Effect of Supplemental Agreement 55 SECTION 9.05. Endorsement or Replacement of Bonds Delivered After Amendments. 55 SECTION 9.06. Amendatory Endorsement of Bonds. 55 SECTION 9.07. Consent of Credit Entity Required 55 ARTICLE X DEFEASANCE 55 SECTION 10.01. Discharge of Indenture 55 SECTION 10.02. Payment of Bonds After Discharge of Indenture 56 ARTICLE XI MISCELLANEOUS 57 SECTION 11.01. Continuing Disclosure. 57 SECTION 11.02. Liability of Authority Limited to Revenues 57 SECTION 11.03. Successor Is Deemed Included in All References to Predecessor. 57 SECTION 11.04. Limitation of Rights to Parties and Bondowners. 58 SECTION 11.05. Waiver of Notice. 58 SECTION 11.06. Destruction of Bonds. 58 SECTION 11.07. Severability of Invalid Provisions 58 SECTION 11.08. Notices. 58 SECTION 11.09. Evidence of Rights of Bondowners. 60 SECTION 11.10. Disqualified Bonds 60 SECTION 11.11. Money Held for Particular Bonds. 61 SECTION 11.12. Funds and Accounts. 61 SECTION 11.13. Waiver of Personal Liability 61 SECTION 11.14. CUSIP Numbers 61 SECTION 11.15. Business Days. 61 SECTION 11.16. Execution in Several Counterparts 61 SECTION 11.17. Governing Law. 61 EXHIBIT A—(FORM OF WEEKLY RATE BOND) A-1 EXHIBIT B—(FORM OF ANNUAL RATE BOND) B-1 EXHIBIT C —(FORM OF FIXED RATE BOND) C-1 P6401.1039\1139624.4 3 THIS INDENTURE, made and entered into as of the 1st day of July, 2009 by and between the PALM DESERT FINANCING AUTHORITY, a public body, corporate and politic, duly organized and existing under the laws of the State of California (the "Authority"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as trustee, a national banking association organized and existing under the laws of the United States and qualified to accept and administer the trusts hereby created(the "Trustee"); WITNESSETH: WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, as of January 26, 1989, by and between the City of Palm Desert (the "City") and the Palm Desert Redevelopment Agency (the "Agency"); and WHEREAS, under Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Law"), the Authority is authorized to borrow money for the purpose of financing and refinancing public capital improvements (as defined in the Act, including but not limited to paragraph(v) of Government Code Section 6546); and WHEREAS, the City has requested that the Authority issue its Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds") in order to (i) reimburse the City for the entire amount of its $2.5 million advance, authorized by Resolution No. 08-89 of the City Council of the City, adopted on August 28, 2008, to initially fund the Energy Independence Fund; (ii) finance of the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City pursuant to the City's Energy Independence Program (collectively, the "Project"); and (iii) pay certain costs related to the issuance of the Bonds; and WHEREAS, the City will lease to the Authority its fee or leasehold interest in certain real property and improvements thereon ( the "Leased Property"), pursuant to a Site Lease, dated as of July 1, 2009 (the"Site Lease"); and WHEREAS, the Authority, concurrently with the execution of the Site Lease, will lease the Leased Property back to the City pursuant to a Lease Agreement, dated as of July 1, 2009 (the "Lease"), in consideration for Base Rental payments equal to the principal and interest coming due on the Bonds; and WHEREAS, to provide liquidity for any Bonds tendered for purchase in accordance with this Indenture and to support further the payment of principal of and interest on the Bonds, the City will enter into that certain Reimbursement Agreement, dated as July 1, 2009 (the "Reimbursement Agreement"), by and between the City and Wells Fargo Bank, National Association(the "Credit Entity"), with respect to the Credit Facility; and WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof and interest and premium (if any) P6401.l 039\1139624.4 thereon, the Authority and the Trustee have duly authorized the execution and delivery of this Indenture; and WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the legally valid and binding limited obligations of the Authority, and to constitute this indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken; NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal of and the interest and premium, if any, on all the Bonds at any time issued and Outstanding under this Indenture, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to secure the obligations of the City set forth in the Reimbursement Agreement, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the Authority does hereby covenant and agree with the Trustee, for the benefit of the respective Owners from time to time of the Bonds and the Credit Entity, as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01 shall, for all purposes of this Indenture, and of any indenture supplemental hereto, and of any certificate, opinion or other document herein mentioned, have the meanings herein specified: "Additional Rental" means the amounts specified as such in Section 5.01(b) of the Lease, as such amounts may be adjusted from time to time in accordance with the terms thereof. "Agency" means the Palm Desert Redevelopment Agency, a public body, corporate and public. "Alternate Credit Facility" means a credit facility delivered to the Trustee pursuant to Section 4.18 hereof, including, but not limited to, an irrevocable letter of credit, an investment contract, a guaranty, a bond insurance policy, a surety bond or other financial arrangement which secures the payment of the principal of and interest on the Bonds when due, or such an instrument, together with a separate instrument such as an irrevocable letter of credit, a guaranty, a committed line of credit or an investment contract, issued by a financial institution pursuant to Section 4.18 hereof which provides a method of purchasing Bonds tendered for purchase on a Tender Date. "Annual Conversion Date" means the date on which the rate of interest borne by the Bonds is converted to the Annual Rate. P6401.1039\1139624.4 2 "Annual Rate"means the interest rate with respect to the Annual Rate Period. "Annual Rate Period" means the period commencing on the Annual Conversion Date to and including the day occurring immediately prior to the first anniversary of the Annual Conversation Date. "Assignment Agreement" means that certain Assignment Agreement dated as of July 1, 2009 by and between the Authority and the Trustee, as described in Section 5.02(d), as the same may be amended, supplemented or otherwise modified from time to time. "Authority" means the Palm Desert Financing Authority, established pursuant to the laws of the State of California, organized and created pursuant to the terms and conditions of the Joint Powers Agreement. "Authorized Denominations" shall mean (i) with respect to the Bonds bearing interest at the Weekly Rate, $100,000 or any integral multiple of $5,000 in excess thereof and (ii) with respect to the Bonds bearing interest at the Annual Rate or Fixed Rate, $5,000 or any integral m u.;ltiple of$5,000. "Authorized Investments"means, if and to the extent permitted by law: (1) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America, including instruments evidencing a direct ownership interest in securities described in this clause such as Stripped Treasury Coupons rated or assessed in the highest Rating Category by S&P and Moody's and held by a custodian for safekeeping on behalf of holders of such securities. (2) Bonds or notes which are exempt from federal income taxes and for the payment of which cash or obligations described in clause (1) of this definition in an amount sufficient to pay the principal of, premium, if any, and interest on when due have been irrevocably deposited with a trustee or other fiscal depositary and which are rated in the highest Rating Category by S&P and Moody's. (3) Obligations, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following: Federal Home Loan Bank System, Government National Mortgage Association, Farmer's Home Administration, Federal Home Loan Mortgage Corporation or Federal Housing Administration; provided that with respect to the funds and accounts established under this Indenture, such obligations shall at no time exceed an amount equal to ten percent (10%) of the aggregate principal amount of the Bonds Outstanding. (4) Deposit accounts, certificates of deposit or savings accounts (i) fully insured by the Federal Deposit Insurance Corporation or(ii) with banks whose short term obligations are rated no lower than A-1 by S&P and P-1 by Moody's including those of the Trustee and its affiliates. P6401.1039\1139624.4 3 (5) Federal funds or banker's acceptances with a maximum term of one year of any bank that has an unsecured, uninsured and unguaranteed obligation rating of "Prime-1" or "A3" by Moody's and "A-1" or "A" or better by S&P (including the Trustee). (6) Repurchase obligations with a term not exceeding 30 days pursuant to a written agreement between the Trustee and either a primary dealer on the Federal Reserve reporting dealer list which falls under the jurisdiction of the SIPC or a federally chartered commercial bank whose long-term debt obligations are rated A or better by S&P and Moody's, with respect to any security described in clause (1); provided that the securities which are the subject of such repurchase obligation (i) must be free and clear of all liens, (ii) in the case of a SIPC dealer, were not acquired pursuant to a repurchase or reverse repurchase agreement, (iii) must be deposited with the Trustee and maintained through weekly market valuations in an amount equal to 104% of the invested funds plus accrued interest; and further provided that the Trustee must have a valid first perfected security interest in such securities. (7) Taxable government money market portfolios that have a rating by S&P of Am-G or Am or better and rated in one of the three highest rating categories of Moody's consisting of securities issued or guaranteed as to payment of principal and interest by the full faith and credit of the United States, subject to a maximum permissible limit equal to six months of principal and interest on the Bonds including portfolios of the Trustee and its affiliates. (8) Tax-exempt government money market portfolios that have a rating by S&P of Am-G or Am or better and rated in one of the three highest rating categories of Moody's consisting of securities which are rated in the highest Rating Categories of S&P and Moody's subject to a maximum permissible limit equal to six months of principal and interest on the Bonds. (9) Money market funds registered under the Investment Company Act of 1940, the shares in which are registered under the Securities Act of 1933 and that have a rating by S&P of AAAm-G or AAAm and rated in one of the two highest Rating Categories of Moody's, including those managed or advised by the Trustee or its affiliates. (10) The Local Agency Investment Fund of the State, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name. (11) Investment agreements, including guaranteed investment contracts ("GICs") forward purchase agreements and reserve fund put agreements with banks or other financial institutions rated, or guaranteed by institutions rated, or with senior unsecured debt rated, by S&P and Moody's, in one of the two highest rating categories assigned by such agencies and approved by the Credit Entity. P6401.1039\1139624.4 4 (12) Any other investments for which each rating agency then rating the Bonds confirms that such investment will not adversely affect its ratings of the Bonds and approved by the Credit Entity. "Authorized Representative" means the Chief Administrative Officer, Treasurer, or any other person designated as an Authorized Representative by a Written Certificate of the Authority signed as its President and filed with the Authority and the Trustee. "Available Moneys" means (a) with respect to any Bond Payment Date occurring during the term of a Credit Facility, moneys (other than moneys received from draws under the Credit Facility or remarketing proceeds) which have been on deposit with and pursuant to written direction of the Authority and segregated by the Trustee, during or prior to which no Event of Bankruptcy shall have occurred, as evidenced by a certificate of the Authority to the Trustee, upon which the Trustee may conclusively rely, (b) moneys received from draws under the Credit Facility and remarketing proceeds and (c) proceeds with respect to the refunding of any of the Bonds. "Base Rental" means the amounts specified as such in Section 5.01(a) of the Lease, as such amounts may be adjusted from time to time in accordance with the terms thereof. "Bond Counsel" means an attorney or firm of attorneys of recognized national standing in the field of municipal finance selected by the Authority. "Bond Payment Date" means (a) with respect to Bonds bearing interest at the Weekly Rate, the first Business Day of each month commencing [August 1], 2009 to and including the Fixed Rate Conversion Date, (b) with respect to Bonds bearing interest at the Annual Rate or after the Fixed Rate Conversion Date, each March 1 and September 1 commencing on the first March 1 or September 1 which is at least 75 days after the Fixed Rate Conversion Date, and (c) with respect to Credit Facility Bonds, the dates set for payment of principal of and interest on Credit Facility Bonds under the Reimbursement Agreement. "Bond Year" means each twelve-month period extending from September 2 in one calendar year to September 1 of the succeeding calendar year, both dates inclusive, except that the first Bond Year shall extend from the Closing Date to September 1, 2009. "Bonds" means the Palm Desert Financing Authority Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable), authorized by, and at any time Outstanding pursuant to this Indenture. "Business Day"means any day other than a Saturday, Sunday, or a day on which banking institutions or governmental offices in the State or the office of the Credit Entity where draws on the Credit Facility are to be presented are authorized or required to close, or a day on which the Federal Reserve System is closed. "Certificate," "Statement," "Request," "Requisition" or "Order" means, respectively, a written certificate, statement, request, requisition or order in its name by, with respect to the City, the City Manager, or by any other officer of the City duly authorized by the City for that purpose, and, with respect to the Authority, the Authorized Representative. Any such instrument P6401.1039\1139624.4 5 and supporting opinions or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section 1.02 hereof, each such instrument shall be the statement provided for in Section 1.02 hereof. "City"means the City of Palm Desert, California. "Closing Date" means [July 23, 2009], the date on which the Bonds are delivered by the Authority to the original purchaser thereof. "Continuing Disclosure Agreement" means any continuing disclosure agreement or continuing disclosure certificate by the City relating to the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Conversion" means a conversion of the Bonds from one Interest Rate Period to another Interest Rate Period. "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the Authority or the City, relating to the authorization, issuance, sale and delivery of the Bonds, including, but not limited to, printing expenses, title insurance policy premiums with respect to the Leased Property, rating agency fees, any premium or other fees with respect to insurance provided in connection with the issuance of the Bonds, including but not limited to, municipal bond insurance, rental interruption insurance and other types of insurance as may be required by the Lease, filing and recording fees, initial fees and charges and the first annual administrative fee of the Trustee, fees and costs associated with obtaining any Credit Facility obtained in connection with the issuance of the Bonds (including, without limitation, legal fees and other costs and expenses), fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other professionals, fees and charges for preparation, execution and safekeeping of the Bonds, and any other costs, charges or fees in connection with the original issuance of the Bonds. "Costs of Issuance Fund" means the fund so designated and established pursuant to Section 3.02 hereof. "Credit Entity" means Wells Fargo Bank, National Association, as the issuer of the Credit Facility being delivered on the Closing Date with respect to the Bonds and thereafter, the issuer of any Alternate Credit Facility delivered hereunder in effect from time to time. All references and requirements herein with respect to notices or other communications to, or consents from,the Credit Entity shall include the providers of the Credit Facility. "Credit Facility" means an irrevocable letter of credit, an investment contract, a guaranty, a bond insurance policy, a surety bond or other financial arrangement which secures the payment of the principal and interest on the Bonds when due, or such an instrument, together with a separate instrument, such as an irrevocable letter of credit, a guaranty, a committed line of credit, an investment contract or a standby purchase agreement, issued by a financial institution, which provides a method of purchasing Bonds tendered for purchase on a Tender Date, including an Alternate Credit Facility, together with all amendments or extensions of the foregoing. P6401.1039\1139624.4 6 "Credit Facility Account" means the account by that name in the Debt Service Fund established in accordance with Section 5.01(a) hereof. "Credit Facility Bond" means any [Bank Bond], as defined in the Reimbursement Agreement. "Credit Facility Prepayment Account" means the account by that name in the Redemption Fund established in accordance with Section 4.01 hereof. "Debt Service Fund" means the fund so designated and established pursuant to Section 5.01 hereof. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Energy Independence Fund" means the special trust fund designated as the "Energy Independence Fund" heretofore established by the City Council of the City pursuant to Resolution No. 08-89, adopted on August 28, 2008, and held and maintained by the City for the purpose of funding the City's Energy Independence Program. "Energy Independence Program" means the City of Palm Desert Energy Independence Program heretofore established pursuant to Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code, commencing with Section 5898.10, to finance the Project through contractual assessments. "Event of Default"means any of the events specified in Section 7.01 hereof. "Financial Newspaper or Journal" means The Wall Street Journal or The Bond Buyer or any other newspaper or journal containing financial news, printed in the English language, customarily published on each Business Day and circulated in California, and selected by the Trustee. "Fiscal Year" means the year beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve-month period hereinafter selected and designated as the official fiscal year period of the Authority. "Fixed Rate" means the fixed interest rate or rates applicable to the Bonds established in accordance with this Indenture. "Fixed Rate Conversion Date" means the date on which the rate of interest borne by the Bonds is converted to the Fixed Rate. "Indenture" means this Indenture, dated as of July 1, 2009, by and between the Authority and the Trustee. "Information Services" means Financial Information, Inc.'s "Daily Called Special Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Mergent/FIS, Inc., 5250 77 Center Drive, Suite 150, Charlotte, North Carolina 28217, Attention: P6401.1 039\1139624.4 7 Municipal News Reports; and Kenny S&P, 55 Water Street, 45th Floor, New York, New York 10041, Attention: Notification Department; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other information services providing information with respect to called bonds as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. "Interest Rate Period" means a Weekly Rate Period or an Annual Rate Period. "Interest Rate Conversion Date" means any date (which must be a Business Day) on which the interest rate borne by the Bonds is established at a new rate for a corresponding Interest Rate Period as set forth in Section 2.02.A herein, other than a Fixed Rate Conversion Date. "Joint Powers Agreement" means that certain Joint Exercise of Powers Agreement, dated as of January 26, 1989, by and between the City and the Agency creating the Authority for the purposes, among other things, of assisting in the financing of Public Capital Improvements, as such term is defined in Section 6585(g) of the California Government Code, together with any amendments thereof and supplements thereto. "Law" means Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code. "Lease" means that certain Lease Agreement dated as of July 1, 2009 by and between the Authority, as lessor, and the City, as lessee. "Lease Payment Account" means the account by that name in the Debt Service Fund established in accordance with Section 5.01(a)hereof. "Lease Payment Date" means the 25th day of the month preceding each Bond Payment Date (or if the 25th day of the month is not a Business Day, on the next succeeding Business Day). "Lease Prepayment Account" means the account by that name in the Redemption Fund established and held by the Trustee pursuant to Sections 4.01 and 5.01(b)hereof. "Leased Property" means the Real Property and the commercial office complex and all other improvements constructed on the Real Property. "Liquidity Account" means the account by that name in the Tender Fund established in accordance with Section 4.10 hereof. "Mandatory Tender Date" means (1) the Bond Payment Date on or prior to the date at least five days prior to the date on which the Credit Facility is scheduled to expire or terminate in accordance with its respective terms and the Trustee has not received notice at least 40 days prior to such Bond Payment Date that the term of such Credit Facility has been extended or an Alternate Credit Facility will be provided, (2) on any Interest Rate Conversion Date for which a notice can be given, (3) the first Business Day to occur on or after the seventh day following receipt by the Trustee of notice from the Credit Entity of the occurrence of an event of default P6401.1039\1139624.4 8 under the Reimbursement Agreement, or that the Credit Entity will not reinstate the interest portion of the Credit Facility as provided in Section 4.12(c) hereof, and in each case directing the mandatory tender of the Bonds, (4) the Fixed Rate Conversion Date, or (5) the effective date of any Alternate Credit Facility. "Maximum Rate"means with respect to the Bonds other than Credit Facility Bonds, 12% per annum calculated on the basis of a 365-day year or 366-day year, as applicable, for actual days elapsed, during the Weekly Rate Period and 12% per annum calculated on the basis of a 360-day year of twelve 30-day months during the Annual Rate Period and on and after the Fixed Rate Conversion Date, and with respect to Credit Facility Bonds, the maximum rate of interest permitted by law. "Moody's"means Moody's Investors Service or any successor corporation thereto. "Net Proceeds" means any insurance proceeds or condemnation award paid with respect to the Leased Property remaining after payment therefrom of all expenses incurred in the collection thereof. "Nominee" means the nominee of the Depository, which may be the Depository, or any nominee substituted by the Depository pursuant to Section 2.04 hereof. "Optional Tender Date" means the date designated by an Owner to the Tender Agent on which such Owner will tender its Bond in accordance with Section 4.14 hereof. "Outstanding," when used as of any particular time with reference to the Bonds, means (subject to the provisions of Section 11.10 hereof) all Bonds theretofore issued by the Authority except: (1) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (2) Bonds for the payment or redemption of which moneys or securities in the necessary amount (as provided in Section 10.01 hereof) shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Indenture; (3) Untendered Bonds; and (4) Bonds in lieu of, or in substitution for, other Bonds which shall have been authorized, executed, issued and delivered by the Authority pursuant to this Indenture. "Owner" or "Bondowner" means the Person or Persons whose name appears on the registration books maintained by the Trustee as the registered owner of a Bond or Bonds. "Participant"means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds as a securities depository. P6401.1039\1139624.4 9 "Person" means an individual, corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. "Prepayment" means any payment made by the City pursuant to Section 5.05 of the Lease as a prepayment of Base Rental payments. "Principal Office" means the principal corporate trust office of the Trustee in Los Angeles, California, or the principal office of the Tender Agent in Los Angeles, California, or the principal corporate trust office of any successor Trustee or Tender Agent. "Qualified Reserve Fund Credit Instrument" means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to Section 3.04(b), provided that all of the following requirements are met: (i) at all times during the term of such letter of credit or surety bond, the long-term credit rating of such bank is within the highest rating category of Moody's and S&P, or the claims paying ability of such insurance company is rated within the highest rating category of A.M. Best & Company and S&P; (ii) such letter of credit or surety bond has a term which ends no earlier than the last Bond Payment Date of the series of Bonds to which the Reserve Requirement applies; (iii) such letter of credit 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 pursuant to Section 3.04(b); and (iv) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder amounts necessary to carry out the purposes specified in Section 5.06, including the replenishment of the Lease Payment Account. "Rating Category" means one of the general rating categories of S&P or Moody's, as the case may be, without regard to any refinement or graduation of such rating category by numerical modifier or otherwise. "Real Property" means that certain real property more particularly described in Exhibit A to the Lease. "Record Date" means, during the period during which the Bonds accrue interest at the Fixed Rate or the Annual Rate, the close of business on the fifteenth day of the month immediately preceding each Bond Payment Date, and, during a Weekly Rate Period, the close of business on the Business Day immediately preceding the Bond Payment Date. "Redemption Fund" means the fund so designated and established pursuant to Section 5.01 hereof. "Reimbursement Agreement" means the agreement or agreements entered into between the City and the Credit Entity setting forth the terms and conditions relating to the issuance of the Credit Facility and the City's obligations to repay the Credit Entity in the event moneys are drawn under the Credit Facility. "Remarketing Agent" means Wells Fargo Brokerage Services, LLC, or any successor entity or entities appointed by the Authority to perform the duties of the Remarketing Agent hereunder. P6401.1039\1139624.4 10 "Remarketing Agreement" means the Remarketing Agreement, dated as of July 1, 2009, between the Authority and the Remarketing Agent, and any other agreement relating to the services of the Remarketing Agent in effect at any time. "Remarketing Proceeds Account" means the account by that name in the Tender Fund established in accordance with Section 4.10 hereof. "Reserve Fund" means the fund so designated and established pursuant to Section 3.04 hereof. "Reserve Requirement" means, as of the date of calculation thereof, (a) $0, during any period when the Bonds bear interest at a Weekly Rate or Fixed Rate, and (b) during any period when the Bonds bear interest at an Annual Rate, the least of(i)the maximum aggregate annual Base Rental payments payable during the then-current or any remaining Bond Year during which the Bonds are to remain Outstanding by their terms, or (ii) 125% of the average annual aggregate Base Rental payments payable for the then-current and any remaining Bond Years during which the Bonds are to remain Outstanding by their terms. Following the Fixed Rate Conversion Date and at the instruction of the Authority, the Trustee shall recalculate the Reserve Requirement under clauses (i) or (ii) above, whichever is less, and shall transfer any amounts in excess of the Reserve Requirement in accordance with Section 5.06 hereof. "Revenues" means all amounts received by the Authority as lessor under the Lease, including, without limiting the generality of the foregoing, scheduled Base Rental payments, prepayments, and insurance and condemnation proceeds, and all interest, profits or other income derived from the investment of amounts in any fund or account established under this Indenture. "Securities Depositories" means The Depository Trust Company, 55 Water Street, 50th Floor, New York, N.Y. 10041-0099 Attn. Call Notification Department, Fax (212) 855-7232, and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. "Serial Bonds" means the Bonds falling due by their terms in specified years, for which no mandatory sinking account payments are provided. "Special Record Date"means the date established by the Trustee pursuant to Section 2.02 hereof. "Supplemental Indenture"means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending this Indenture; but only if and to the extent that such supplemental indenture is specifically authorized hereunder. "S&P"means Standard & Poor's or any successor corporation thereto. "State"means the State of California. P6401.1039\1139624.4 11 "Tender Agent" means Wells Fargo Bank, National Association, or any successor entity appointed by the Authority to perform the duties of the Tender Agent hereunder, which duties shall include those of acting as a co-transfer agent, co-paying agent for payment of principal and co-registrar hereunder. "Tender Date" means a Mandatory Tender Date or an Optional Tender Date. "Tender Fund" means the fund by that name established and held by the Tender Agent pursuant to Section 4.10 hereof. "Term Bonds" means the Bonds payable at or before their specified maturity date or dates from mandatory sinking account payments established for that purpose and calculated to retire such Bonds on or before their specified maturity date or dates. "Trustee" means Wells Fargo Bank, National Association, or any successor trustee appointed pursuant to the provisions of Section 8.01 hereof. "Untendered Bonds" means Bonds for which a Tender Date has become effective and for which the purchase price thereof has been irrevocably deposited in trust with the Tender Agent but for which the Tender Agent has not yet received the Bonds. "Weekly Rate" means the interest rate with respect to the Weekly Rate Period. "Weekly Rate Period" means the period from each Thursday to and including the following Wednesday during which Bonds bear interest at a Weekly Rate. "Written Certificate," "Written Request" and "Written Requisition" of the Authority means, respectively, a written certificate, request or requisition signed in the name or the Authority by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, may , but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. SECTION 1.02. Content of Certificates and Opinions. Every certificate or opinion provided for in this Indenture with respect to compliance with any provision hereof, excluding the certificate of destruction pursuant to Section 11.06 hereof, shall include (1) a statement that the individual making or giving such certificate or opinion has read such provisions and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the certificate or opinion is based; (3) a statement that, in the opinion of such individual, such individual has made or caused to be made such examination or investigation as is necessary to enable such individual to express an informed opinion with respect to the subject matter referred to in the instrument to which such individual's signature is affixed; and (4) a statement as to whether, in the opinion of such individual, such provision has been complied with. Any such certificate or opinion made or given by an officer of the Authority or the City may be based, insofar as it relates to a legal or accounting matter, upon a certificate or opinion of or representation by Bond Counsel or a consultant, unless such officer knows, or in the exercise P6401.1039\1139624.4 12 of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such certificate or statement may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by Bond Counsel or a consultant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Authority or the City) upon a certificate or opinion of or representation by an officer of the Authority or the City, as the case may be, unless such Bond Counsel or consultant knows, or in the exercise of reasonable care, should have known, that the certificate or opinion or representation with respect to the matters upon which such individual's certificate of said opinion or representation may be based is erroneous. The same officer of the Authority or the City, or the same Bond Counsel or consultant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Indenture, but different officers, Bond Counsel or consultants may certify to different matters. SECTION 1.03. Article and Section Headings and References. The headings or titles of the several articles and sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Indenture. All references herein to "Articles," "Sections" and other subdivisions are to the corresponding articles, sections or subdivisions of this Indenture; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular article, section or subdivision hereof; and words of the masculine gender shall mean and include words of the feminine and neuter genders. ARTICLE II THE BONDS SECTION 2.01. Authorization of Bonds. The Authority has determined that all acts, conditions and things required by law to exist, happen or be performed precedent to and in connection with the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and the Authority is duly authorized, pursuant to each and every requirement of law, to issue the Bonds in the manner and form provided in this Indenture. The Bonds will be issued initially in the aggregate principal amount of $ and will be designated the "Palm Desert Financing Authority Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable)." P6401.1039\1139624.4 13 SECTION 2.02. Terms of the Bonds. The Bonds shall be issued in fully registered form without coupons in Authorized Denominations. The Bonds shall be initially registered in the name of Cede & Co., as nominee of DTC, and shall be evidenced by one Bond for each of the maturities in the principal amounts set forth below, and DTC is hereby appointed depository for the Bonds, and registered ownership may not thereafter be transferred except as set forth in Section 2.03. The Bonds shall be dated the date of their initial delivery, and shall bear interest as set forth in Section 2.02A hereof until their maturity payable on each Bond Payment Date and shall mature on September 1, 20_. Each Bond shall bear interest from the Bond Payment Date next preceding the date on which it is authenticated unless it is (a) authenticated after a Record Date and on or before the next Bond Payment Date, in which event it shall bear interest from such Bond Payment Date, or (b) authenticated on or before the first Record Date, in which event it shall bear interest from the date of its initial delivery; provided, however, that if at the time of authentication of any Bond interest is in default, such Bond shall bear interest from the date to which interest has been paid. The Bonds shall bear interest at the Weekly Rate or Annual Rate determined in accordance with Section 2.02A until the Fixed Rate Conversion Date, and on and after the Fixed Rate Conversion Date, at the Fixed Rate. The Bonds shall be numbered as the Trustee shall determine. Payment of interest with respect to any Bond on any Bond Payment Date or redemption date shall be made to the person appearing on the Registration Books of the Trustee as the Owner thereof as of the Record Date immediately preceding such Bond Payment Date or redemption date, as the case may be, such interest to be paid by check mailed by first class mail on the Bond Payment Date to such Owner at his address as it appears on such registration books. Payments of defaulted interest shall be paid by check of the Trustee mailed to the registered Owners as of a special record date (the "Special Record Date") to be fixed by the Trustee in its sole discretion, notice of which shall be given to the Owners not less than 10 days prior to such Special Record Date. Payment of interest represented by the Bonds may, at the option of any Owner of at least $1,000,000 principal amount of Bonds (such option to be exercised by written request of such Owner to the Trustee), be transmitted by wire transfer to such Owner to the bank account number in the United States filed with the Trustee prior to the Record Date for a Bond Payment Date. The principal payable upon maturity or prior redemption with respect to the Bonds shall be payable upon surrender prior to the Fixed Rate Conversion Date at the Principal Office of the Trustee or Tender Agent and thereafter at the Principal Office of the Trustee, with such principal to be paid by check mailed by the Trustee on the Bond Payment Date or redemption date by first class mail to each Owner at his address as it appears on the registration books; provided, however, that prior to the Fixed Rate Conversion Date, payment of such principal shall be made by wire transfer to an Owner of Bonds who has exercised its option for payment by wire transfer pursuant to this Section 2.02. Said amounts shall be payable in lawful money of the United States of America. The Trustee is hereby authorized to pay or redeem the Bonds when duly presented for payment at maturity or on redemption and to cancel all Bonds upon payment thereof; provided, however, that no such cancellation of Bonds shall affect the obligations of the Credit Entity arising under the Credit Facility; provided that the Credit Facility is subject to reduction in accordance with its terms in connection with the payment at maturity or earlier redemption of the Bonds. P6401.1039\1139624.4 14 Credit Facility Bonds shall bear interest and be payable as set forth in the Reimbursement Agreement. SECTION 2.02.A. Interest Rates. (a) Interest Rate Determination Methods. (1) Weekly Rate. The rate of interest on the Bonds may, at the option of the City, be established at a Weekly Rate on any Bond Payment Date during an Annual Rate Period. So long as the Bonds bear interest at a Weekly Rate, the Remarketing Agent will set the Weekly Rate on Wednesday of each calendar week. The Remarketing Agent will give notice in writing to the Trustee and the Credit Entity of each Weekly Rate as soon as possible following the determination of such rate. Each Weekly Rate will be the rate per annum equal to the minimum rate necessary (as determined by the Remarketing Agent) for the Remarketing Agent to sell the Bonds on the date the Weekly Rate is set at 100% of the principal amount thereof plus accrued interest; provided, however, that in no event shall the interest rate borne by the Bonds (other than Credit Facility Bonds) exceed the Maximum Rate. Each Weekly Rate will be effective Thursday through the next succeeding Wednesday (or through the end of the period in which the Bonds bear interest at a Weekly Rate, whichever first occurs). The City shall deliver a written notice to the Trustee, the Tender Agent, the Remarketing Agent and the Credit Entity specifying the Interest Rate Conversion Date upon which the interest rate borne by the Bonds shall be converted to a Weekly Rate, which shall be not less than thirty (30) days after notice is received by the parties. The Trustee shall give notice to the registered owners of the bonds, in the same manner that notices of redemption are given, not less than fifteen (15) days before the Interest Rate Conversion Date specifying the Interest Rate Conversion Date, and that the interest rate on the Bonds will be established at a Weekly Rate on the Interest Rate Conversion Date, that all outstanding Bonds not tendered for purchase at least seven (7) days before the Interest Rate Conversion Date will be deemed to have been so tendered and shall, unless remarketed, be purchased on the Interest Rate Conversion Date at a price equal to the principal amount thereof plus interest accrued on such date and that all Bonds must be surrendered to the Tender Agent for purchase not later than 11:00 a.m., New York time, on the Interest Rate Conversion Date. If for any reason the Remarketing Agent does not set a Weekly Rate on the Wednesday of a calendar week, then the Weekly Rate for that period will be the Weekly Rate set for the immediately preceding Thursday through Wednesday period. (2) Annual Rate. The Remarketing Agent shall set the Annual Rate on a Business Day (the "Determination Date") occurring no fewer than two nor more than 15 Business Days before the Annual Rate Conversion Date. The Annual Rate shall be the rate determined by the Remarketing Agent to be the rate per annum equal to the minimum interest rate which would be necessary for the Remarketing Agent to sell the Bonds on the Determination Date at 100% of the principal amount thereof plus accrued P6401.1039\1 139624.4 15 interest; provided, however, that in no event shall the interest rate borne by the Bonds on and after the Annual Rate Conversion Date exceed the Maximum Rate. The City shall deliver a written notice to the Trustee, the Tender Agent, the Remarketing Agent and the Credit Entity specifying the Interest Rate Conversion Date upon which the interest rate borne by the Bonds shall be converted to an Annual Rate, which shall be not less than thirty (30) days after notice is received by the parties. The Trustee shall give notice to the registered owners of the bonds, in the same manner that notices of redemption are given, not less than fifteen (15) days before the Interest Rate Conversion Date specifying the Interest Rate Conversion Date, and that the interest rate on the Bonds will be established at an Annual Rate on the Interest Rate Conversion Date, that all outstanding Bonds not tendered for purchase at least seven (7) days before the Interest Rate Conversion Date will be deemed to have been so tendered and shall, unless remarketed, be purchased on the Interest Rate Conversion Date at a price equal to the principal amount thereof plus interest accrued on such date and that all Bonds must be surrendered to the Tender Agent for purchase not later than 11:00 a.m., New York time, on the Interest Rate Conversion Date. (3) Fixed Rate. The Remarketing Agent shall set the Fixed Rate on a date (the "Determination Date") no fewer than two nor more than 15 Business Days before the Fixed Rate Conversion Date. The Fixed Rate shall be the rate determined by the Remarketing Agent to be the rate per annum equal to the minimum interest rate which would be necessary for the Remarketing Agent to sell the Bonds on the Determination Date at 100% of the principal amount thereof plus accrued interest; provided, however, that in no event shall the interest rate borne by the Bonds on and after the Fixed Rate Conversion Date exceed the Maximum Rate. A conversion of all or any sinking fund redemption to serial maturity dates shall be required to the extent, in the opinion of the Remarketing Agent delivered in writing to the Authority and the City prior to the Fixed Rate Conversion Date, such a conversion will reduce the total interest to be paid by the City as Base Rental and the Authority and the City may specify optional redemption provisions to be applicable to the Bonds (and prepayments under the Lease) different from that set forth in Section 4.03(c) hereof and as set forth in a Supplemental Indenture. In such case, all references to a Fixed Rate shall refer to the interest rates applicable to each maturity. (b) Change in Interest Rate Determination Method. (1) Notice and Opinion of Bond Counsel. The City may initiate action to convert the interest borne by all of the Bonds from the Weekly Rate or the Annual Rate to the Fixed Rate by notifying the Authority, the Trustee, the Tender Agent, the Credit Entity and the Remarketing Agent of the proposed Fixed Rate Conversion Date at least 60 days prior to such proposed date. The notice shall be accompanied by (i) an opinion of Bond Counsel stating that the conversion is not prohibited by the law of the State or this Indenture, and (ii)written evidence of satisfaction of the limitations specified in subsection 2.02.A(b)(2) hereof. The Trustee shall have no obligation to provide notice to the Owners pursuant to Section 2.02.A(c) hereof of a change to a Fixed Rate unless the Trustee has received the notice from the City and the opinion of Bond Counsel and the P6401.1039\1139624.4 16 written evidence of satisfaction in accordance with this Section. The City may not request a conversion from the Weekly Rate or Annual Rate to the Fixed Rate during the existence of an Event of Default and the notice from the City shall certify as to the absence thereof. If the City's notice complies with this paragraph, and subject to the provisions of Sections 2.02A(e) and 4.13 hereof, the Fixed Rate shall be applicable from the effective date specified in the notice until maturity of the Bonds. Upon conversion from the Weekly Rate or Annual Rate to the Fixed Rate, the Trustee promptly shall surrender the Credit Facility to the Credit Entity pursuant to the terms of the Credit Facility. (2) Limitations. A conversion from the Weekly Rate or Annual Rate to the Fixed Rate pursuant to subsection 2.02.A(b)(1) shall comply with the following: (i) the effective date of the conversion shall be a Bond Payment Date; and (ii) the Remarketing Agent shall have agreed to remarket the Bonds on the Fixed Rate Conversion Date. (c) Notice to Owners of Change to Fixed Rate. When a conversion from the Weekly Rate or Annual Rate to the Fixed Rate is to be made, the Trustee shall notify the Owners and the Credit Entity by first class mail at least 30 but not more than 60 days prior to the proposed Fixed Rate Conversion Date. The notice shall be prepared and furnished by the City to the Trustee for mailing at least 60 days prior to the proposed Fixed Rate Conversion Date and shall state: (1) that the interest rate payable with respect to the Bonds will be converted to the Fixed Rate; (2) the effective date of the Fixed Rate; (3) the Bond Payment Dates and Record Dates following the Fixed Rate Conversion Date; (4) that following the Fixed Rate Conversion Date there will be no option to tender Bonds for purchase; (5) that all Bonds are subject to mandatory tender for purchase on the Fixed Rate Conversion Date and will be deemed to have been so tendered and shall be purchased on the Fixed Rate Conversion Date at the principal amount thereof plus interest accrued to such date; and (6) that if the opinion of Bond Counsel required pursuant to subsection 2.02.A(b) is rescinded,the interest rate will not be converted to the Fixed Rate. (d) Calculation of Interest. During the Weekly Rate Period, interest with respect to the Bonds shall be computed on the basis of the actual number of days elapsed in a year of 365 days (366 days in leap years) and will be payable on each Bond Payment Date. P6401.1039\1139624.4 17 During the Annual Rate Period or on and after the Fixed Rate Conversion Date, interest with respect to the Bonds shall be computed on the basis of a 360-day year comprised of twelve 30- day months and will be payable on each Bond Payment Date. Interest on overdue principal and, to the extent lawful, on overdue premium and interest with respect to any Bond shall be payable at the rate applicable to such Bond until paid. The Trustee shall compute the amount of interest payable with respect to the Bonds using the rates supplied to the Trustee by the Remarketing Agent. The Remarketing Agent shall send notice in writing to the Trustee and the Tender Agent, of the following: (1) on Wednesday of each week in which interest on the Bonds is payable at a Weekly Rate, of the Weekly Rate for the applicable Thursday through Wednesday period; (2) on the first Business Day after the Determination Date, the Annual Rate or Fixed Rate set on such Determination Date. Using the rates supplied by such notices, the Trustee shall calculate the interest payable with respect to the Bonds for the applicable period. During the Weekly Rate Period, the Trustee shall send the City at least five (5) days prior to each Bond Payment Date written notice of the interest that will have accrued with respect to the Bonds for the period from the preceding Bond Payment Date to the upcoming Bond Payment Date. In the event that the Weekly Rate will be reset between the date such notice is sent and the upcoming Bond Payment Date, the Trustee shall make such calculation assuming that the Weekly Rate will be set at the Maximum Rate on such reset date. The Remarketing Agent shall inform the Trustee, the City, the Tender Agent and the Credit Entity orally at the oral request of any of them of any interest rate set by the Remarketing Agent. The Trustee shall confirm the effective interest rate by telephone or in writing to any Owner (at such Owner's cost) who requests it in any manner. The setting of the rates and the calculation of interest payable with respect to the Bonds as provided in this Indenture shall be conclusive and binding on all parties. (e) Rescission of Opinion of Bond Counsel. Notwithstanding any provision herein to the contrary, no conversion shall be made from the Weekly Rate or Annual Rate to the Fixed Rate if the Trustee and the Tender Agent shall receive written notice from Bond Counsel prior to such conversion that the opinion of Bond Counsel required pursuant to subsection 2.02.A(b)(1) hereof has been rescinded. If the Trustee shall have sent any notice to the Owners and the Credit Entity regarding the conversion to the Fixed Rate pursuant to subsection 2.02.A(c) hereof, then in the event of rescission of the opinion of Bond Counsel, the Trustee shall promptly notify all Owners and the Credit Entity of such rescission and that the rate will not be converted to the Fixed Rate. (f) Interest on the Bonds shall be payable on each Bond Payment Date to, but not including, the date of maturity or redemption, whichever is earlier. The proportionate share of the portion of Base Rental designated as interest with respect to any Bond shall be computed by multiplying the portion of Base Rental designated as principal with respect to such Bond by the interest rate applicable to such Bond. P6401.1039\1139624.4 18 SECTION 2.03. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the registration books kept by the Trustee for such purpose, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form approved by the Trustee or the Tender Agent; provided, however, that neither the Trustee nor the Tender Agent shall be required to register the transfer of any Bond during the period five (5) days prior to any date established by the Trustee for the selection of Bonds for redemption nor any Bond actually selected by the Trustee for redemption. Whenever any Bond or Bonds shall be surrendered for registration of transfer, the Authority shall execute and the Trustee shall deliver a new Bond or Bonds of the same maturity and interest rate and for a like aggregate principal amount. The Trustee or the Tender Agent shall require the Owner requesting such registration of transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The cost of printing any Bonds and any services rendered or any expenses incurred in connection with any transfer shall be paid by the Authority solely from Revenues. The Authority, the Trustee and the Tender Agent may treat the registered owner of any Bond as the absolute owner thereof for all purposes whatsoever in accordance with this Indenture, and the Authority and the Trustee shall not be affected by any notice to the contrary. SECTION 2.04. Use of Securities Depository. (a) The Bonds shall be initially registered as provided in Section 2.02. Registered ownership of the Bonds, or any portion thereof, may not thereafter be transferred except: (1) to any successor of Cede & Co., as nominee of DTC, or its nominee, or to any substitute depository designated pursuant to clause (2) of this Section(a "substitute depository"); provided, that any successor of Cede & Co., as nominee of DTC or a substitute depository, shall be qualified under any applicable laws to provide the services proposed to be provided by it; (2) to any substitute depository, upon (1) the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository, or (2) a determination by the Authority to substitute another depository for DTC (or its successor) because DTC or its successor (or any substitute depository or its successor) is no longer able to carry out its functions as depository; provided, that any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or (3) to any person as provided below, upon (1) the resignation of DTC or its successor(or substitute depository or its successor) from its functions as depository, or (2) a determination by the Authority to remove DTC or its successor (or any substitute depository or its successor) from its functions as depository. (b) In the case of any transfer pursuant to clause (1) or clause (2) of subsection (a) hereof, upon receipt of the Outstanding Bonds by the Trustee, together with a Written Request of the Authority to the Trustee, a new Bond for each maturity shall be P6401.1039\1139624.4 19 authenticated and delivered in the aggregate principal mount of the Bonds then Outstanding, registered in the name of such successor or such substitute depository, or their nominees, as the case may be, all as specified in such Written Request of the Authority. (c) In the case of any transfer pursuant to clause (3) of subsection (a) hereof, upon receipt of the Outstanding Bonds by the Trustee, together with a Written Request of the Authority to the Trustee, new Bonds shall be authenticated and delivered in such denominations numbered in the manner determined by the Trustee and registered in the names of such persons as are requested in such a Written Request of the Authority, subject to the limitations of Section 2.02 hereof; provided, the Trustee shall not be required to deliver such Bonds within a period less than sixty (60) days from the date of receipt of such a Written Request of the Authority. After any transfer pursuant to this subsection, the Bonds shall be transferred pursuant to Section 2.03. (d) The Authority and the Trustee shall be entitled to treat the person in whose name any Bond is registered as the Owner thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the Authority; and the Authority and the Trustee shall have no responsibility for transmitting payments to, communication with, notifying, or otherwise dealing with any beneficial owners of the Bonds, and neither the Authority nor the Trustee will have any responsibility or obligations, legal or otherwise, to the beneficial owners or to any other party, including DTC or its successor (or substitute depository or its successor), except for the Owner of any Bonds. (e) So long as the Outstanding Bonds are registered in the name of Cede & Co. or its registered assigns, the Authority and the Trustee shall cooperate with Cede & Co., as sole registered Owner, or its registered assigns, in effecting payment of the principal of and interest on the Bonds by arranging for payment in such manner that funds for such payments are properly identified and are made immediately available on the date they are due. (f) Notwithstanding anything to the contrary contained herein, so long as the Bonds are registered as provided in this Section 2.04, payment of principal of and interest on the Bonds shall be made in accordance with the Letter of Representations delivered to DTC with respect to the Bonds. (g) Notwithstanding the foregoing, in the event any Bond is tendered but not remarketed, with the result that such Bond becomes a Credit Facility Bond, the Trustee and the Authority shall take all such actions as shall be necessary to remove the Bonds from the full book-entry system of DTC and to (i) register such tendered but not remarketed Bonds in the name of the Credit Entity and (ii) register tendered but remarketed Bonds in the name of the purchaser thereof, or their nominee. Credit Facility Bonds shall be held by the Tender Agent on behalf, and for the benefit, of the Credit Entity,pursuant to the Custody Agreement(as such term is defined in the Reimbursement Agreement). The Trustee and the Tender Agent will use their best efforts to have a separate CUSIP number assigned to the Credit Facility Bonds. At such time as all Credit Facility Bonds have been remarketed such that no Credit Facility Bonds remain Outstanding and the Credit Facility has been reinstated to the amount of its Commitment (as such term is defined in the Reimbursement Agreement), the Trustee and the Authority shall take P6401.1039\1139624.4 20 all such actions as shall be necessary to return the Bonds to the full book-entry system of the DTC. SECTION 2.05. Exchange of Bonds. Bonds may be exchanged at the corporate office of the Trustee or the Tender Agent for a like aggregate principal amount of Bonds of the same maturity in other authorized denominations. The Trustee or the Tender Agent shall require the Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. The Trustee or the Tender Agent may also require the Owner requesting such exchange to pay a reasonable charge as may be necessary to cover customary expenses incurred and fees charged by the Trustee, the Tender Agent or the Authority with respect to such exchange. The Trustee or the Tender Agent may refuse to register the exchange of any Bond during the period five (5) days prior to the date established by the Trustee for the selection of Bonds for redemption or any Bond actually selected by the Trustee for redemption pursuant to the terms hereof. The cost of printing any Bonds and any services rendered or any expenses incurred in connection with any exchange shall be paid by the Authority solely from Revenues. SECTION 2.06. Bond Register. The Trustee shall keep or cause to be kept, at the corporate office of the Trustee sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the Authority with reasonable notice during regular business hours; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such books, Bonds as hereinbefore provided. SECTION 2.07. Form and Execution of Bonds. Prior to the Fixed Rate Conversion Date, the Bonds shall be substantially in the forms attached hereto as Exhibit A and Exhibit B, as applicable, and hereby made a part hereof. After the Fixed Rate Conversion Date, the Bonds shall be substantially in the forms attached hereto as Exhibit C. The Bonds shall be signed in the name and on behalf of the Authority with the manual or facsimile signatures of its President and attested with the manual or facsimile signature of its Secretary or any assistant duly appointed by the Board, and shall be delivered to the Trustee for authentication by it. In case any officer of the Authority who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed shall have been authenticated or delivered by the Trustee or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though the individual who signed the same had continued to be such officer of the Authority. Also, any Bond may be signed on behalf of the Authority by any individual who on the actual date of the execution of such Bond shall be the proper officer although on the nominal date of such Bond such individual shall not have been such officer. Only such of the Bonds as shall bear thereon a certificate of authentication in substantially the forms set forth in Exhibit A, Exhibit B, or Exhibit C, as applicable, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. P6401.1039\1139624.4 21 SECTION 2.08. Temporary Bonds. The Bonds may be issued in temporary form exchangeable for definitive Bonds when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Authority, shall be in fully registered form without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the Authority and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds it will execute and deliver definitive Bonds as promptly thereafter as practicable, and thereupon the temporary Bonds may be surrendered, for cancellation, at the Principal Office and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds authenticated and delivered hereunder. SECTION 2.09. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee or the Tender Agent shall thereupon authenticate and deliver, a new Bond of like tenor and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee or the Tender Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee or the Tender Agent shall be canceled by it and delivered to, or upon the order of, the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such destruction or theft may be submitted to the Authority, the Trustee or the Tender Agent and, if such evidence be satisfactory to the Trustee and an indemnity satisfactory to it shall be given, the Authority, at the expense of the Owner, shall execute, and the Trustee or the Tender Agent shall thereupon authenticate and deliver, a new Bond of like tenor and maturity in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured, or shall be about to mature or has been selected for redemption, instead of issuing a substitute bond, the Trustee may pay the same without surrender thereof). The Authority may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under this Section 2.09 and of the expenses that may be incurred by the Authority or the Trustee. Any Bond issued under the provisions of this Section 2.09 in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by anyone, and shall be entitled to the benefits of the Indenture with all other Bonds secured by this Indenture. SECTION 2.10. CUSIP Numbers. The Trustee and the Authority shall not be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Owners and that neither the Trustee nor the Authority shall be liable for any inaccuracies in such numbers. P6401.1039\1139624.4 22 SECTION 2.11. Certain Contracts and Swaps. Without entering into a supplement to this Indenture, any Authorized Representative of the Authority may, with the prior consent of the Credit Entity, at any time that the Bonds are Outstanding enter into one or more additional contracts (each a "Swap Agreement") in order to place the Bonds, or any portion thereof, on the interest rate, currency, cash-flow, or other basis desired by the City and the Authority, including, without limitation, interest rate swap agreements, currency swap agreements, forward payment conversion agreements, futures contracts, contracts providing for payments based on levels of or changes in interest rates, currency exchange rates, stock or other indices, or contracts to exchange cash flows or a series of payments, and contracts including, without limitation, interest rate floors or caps, options, puts or calls to hedge payments, currency rate, spread or similar exposure; provided, however, the Authority will enter into such a contract only if either (i) the counterpart to any such contract or the guarantor of the obligations of such counterpart has an unsecured, uninsured and unguaranteed long-term obligation rated by Moody's or S&P in one of its two highest long-term rating categories (without reference to gradations such as "plus" or "minus") or, (ii) each rating agency which then has a rating assigned by any Bond that would be secured on a parity with the Authority's obligation under said contract confirms in writing to the Trustee that the City's execution and delivery of such Swap Agreement will not result in a reduction or withdrawal of such rating. ARTICLE III APPLICATION OF PROCEEDS SECTION 3.01. Application of Proceeds of the Bonds. There shall be deposited in trust with the Trustee the sum of$ , representing the proceeds received from the sale of the Bonds. The Trustee shall immediately set aside such proceeds as follows: (a) The Trustee shall deposit the amount of $ in the Costs of Issuance Fund; (b) The Trustee shall transfer the amount of$2,500,000 to the City for deposit in its General Fund, as reimbursement to the City for the entire amount of its advance to initially fund the Energy Independence Fund; and (c) The remaining amount of the net proceeds of the Bonds, namely the amount of$ , shall be transferred by the Trustee to the City for deposit in the Energy Independence Fund. The Trustee may, in its discretion, establish a temporary fund or account to facilitate or properly account for the foregoing deposits. SECTION 3.02. Costs of Issuance Fund. The Trustee shall establish and maintain a fund designated as the "Costs of Issuance Fund." Moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance of the Bonds for which such fund was established upon submission to the Trustee of a Request of the Authority stating (i) the Person to whom payment is to be made, (ii) the amount to be paid, (iii)the purpose for which the obligation was incurred and (iv) that such payment is a proper P6401.1039\1 139624.4 23 charge against said fund. Upon receipt of a Certificate of the Authority stating that amounts in such fund are no longer required for the payment of such Costs of Issuance or 180 days from the Closing Date, whichever is earlier, such account shall be terminated and any amounts then remaining in such account shall be withdrawn therefrom by the Trustee and transferred to the Lease Payment Account of the Debt Service Fund upon such transfer,the Costs of Issuance Fund shall be closed. SECTION 3.03. Energy Independence Fund. The City has heretofore established a special trust fund designated as the "Energy Independence Fund" (the "Energy Independence Fund"), which is being held and maintained by the City for the purpose of funding the City's Energy Independence Program. The Trustee shall transfer such amount of the net proceeds of the Bonds to the City as provided in Section 3.01 for deposit in the Energy Independence Fund to be used for the City's Energy Independence Program. SECTION 3.04. Reserve Fund (a) There is hereby created and established and shall be maintained by the Trustee in trust as separate fund to be known as the "Reserve Fund." Prior to the Fixed Rate Conversion Date, the Reserve Requirement shall be $0. In connection with, and on or prior to, a Fixed Rate Conversion Date, the Authority shall deposit, or shall cause the City to deposit, with the Trustee from any available moneys (other than proceeds of the Bonds) an amount equal to the Reserve Requirement calculated as of the Fixed Rate Conversion Date, and upon its receipt thereof, the Trustee shall deposit such amount in the Reserve Fund. On or before each Bond Payment Date, the Trustee shall deposit in the Reserve Fund such amount as may be necessary to maintain a balance therein equal to the Reserve Requirement. No deposit shall be made in the Reserve Fund so long as there shall be on deposit an amount equal to the Reserve Requirement. All money in the Reserve Fund (or available to be drawn from a Qualified Reserve Fund Credit Instrument) shall be used and withdrawn by the Trustee solely for the purpose of replenishing the Lease Payment Account of the Debt Service Fund in the event of any deficiency at any time in such account or for the purpose of paying the interest on or principal of or redemption premiums, if any, on the Bonds in the event that no other money of the Authority is lawfully available therefor, reimburse the Credit Entity if money has been drawn on the Credit Facility or for the retirement of all Bonds then Outstanding. (b) Upon prior written notification to Moody's and S&P, the Reserve Requirement may be satisfied by crediting to the Reserve Fund moneys or a Qualified Reserve Fund Credit Instrument or any combination thereof, which in the aggregate make funds available in the Reserve Fund in an amount equal to the Reserve Requirement. Upon the deposit with the Trustee of such Qualified Reserve Fund Credit Instrument, the Trustee shall transfer any excess amounts then on deposit in the Reserve Fund into a segregated account of the Lease Payment Account of the Debt Service Fund to be established by the Trustee, which monies shall be applied at the written direction of the Authority either (i) to the payment within one year of the date of transfer of capital expenditures of the Authority permitted by law, or (ii) to the redemption of Bonds on the earliest succeeding date on which such redemption is permitted hereby. P6401.1039\1139624.4 24 (c) In any case where the Reserve Fund is funded with a combination of cash and a Qualified Reserve Fund Credit Instrument, the Trustee shall deplete all cash balances before drawing on the Qualified Reserve Fund Credit Instrument. With regard to replenishment, any available moneys provided by the Authority or the City shall be used first to reinstate the Qualified Reserve Fund Credit Instrument and second, to replenish the cash in the Reserve Fund. In the event the Qualified Reserve Fund Credit Instrument is drawn upon, the Authority shall make payment of interest on amounts advanced under the Qualified Reserve Fund Credit Instrument after making any payments pursuant to this subsection. ARTICLE IV REDEMPTION AND TENDER OF BONDS SECTION 4.01. Establishment of Redemption Fund. Pursuant to Section 5.01(b) hereof, the Trustee shall establish a special fund designated as the "Redemption Fund" in which the Trustee shall establish two special accounts designated as the "Lease Prepayment Account" and the "Credit Facility Prepayment Account." The Trustee shall keep such fund separate and apart from all other funds and moneys held by it and shall administer such fund and accounts as herein provided. Moneys from Prepayments to be used for redemption of the Bonds shall be deposited into the Lease Prepayment Account of the Redemption Fund and shall be used, to reimburse the Credit Entity if money has been drawn on the Credit Facility, or to redeem the Bonds, all as provided in the following sentence. Moneys drawn under the Credit Facility to be used for redemption of the Bonds shall be deposited in the Credit Facility Prepayment Account for the purpose of redeeming the Bonds in advance of their maturity on the date designated for redemption and upon presentation and surrender of such Bonds; provided, however, that if there shall no longer be available a Credit Facility to secure the payment of principal and interest represented by the Bonds, or the Credit Facility does not permit a draw with respect to Prepayments, moneys from Prepayments to be used for redemption of the Bonds shall be deposited into the Lease Prepayment Account of the Redemption Fund for the purpose of redeeming the Bonds as provided herein. Anything in this Indenture to the contrary notwithstanding, Credit Facility Bonds that are selected for redemption under Section 4.05 hereof shall be redeemed from amounts on deposit in the Lease Prepayment Account and not from amounts drawn on the Credit Facility and deposited to the Credit Facility Prepayment Account. SECTION 4.02. Mandatory Redemption From Net Proceeds. The Bonds are subject to mandatory redemption on any Bond Payment Date, in whole or in part, from moneys drawn under the Credit Facility, which draw shall be reimbursed from Net Proceeds following the deposit by the Trustee in the Lease Prepayment Account of the Redemption Fund of Net Proceeds deposited by the City under this Indenture, at least 45 days prior to a Bond Payment Date which have been credited towards the Prepayment made by the City pursuant to the Lease, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium; provided, however, that if there shall no longer be available a Credit Facility to secure the payment of principal and interest represented by the Bonds or if the Credit Facility does not permit a draw with respect to Prepayments, the Bonds are subject to redemption from Net Proceeds which the Trustee shall P6401.1039\1139624.4 25 deposit in the Lease Prepayment Account of the Redemption Fund, to be used to redeem the Bonds by the Trustee as provided in the Lease and as provided herein. In the event that amounts remain in the Lease Prepayment Account because such amounts did not constitute an Authorized Denomination of a Bond, then such amounts shall be transferred to the Lease Payment Account of the Debt Service Fund. SECTION 4.03. Optional Redemption of the Bonds. The Bonds shall be subject to optional redemption as set forth in this Section 4.03. (a) During the Weekly Rate Period. During the Weekly Rate Period and on the Fixed Rate Conversion Date, the Bonds are subject to optional redemption in whole or in part (in an amount of$100,000 or any integral multiple of$5,000 in excess thereof) on any Business Day, at the option of the Authority at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium. (b) During the Annual Rate Period. During the Annual Rate Period and on the Fixed Rate Conversion Date, the Bonds are subject to optional redemption in whole or in part (in integral multiples of $5,000) on any Business Day, at the option of the Authority at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium. (c) After the Fixed Rate Conversion Date. After the Fixed Rate Conversion Date and subject to modification pursuant to Section 2.02.A(a)(2), the Bonds are subject to optional redemption in whole or in part (in integral multiples of$5,000) on any Business Day, at the option of the Authority at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption and without premium, or with such premium as may be set forth in any Supplemental Indenture executed in connection with such Conversion. (d) During the term of any Credit Facility no notice of any redemption pursuant to this Section shall be sent unless either (1) the Authority has deposited with the Trustee moneys in an amount sufficient to cover the principal of, premium, if any, and interest due on such redemption date (exclusive of anticipated investment earnings thereon), or (2) the Authority delivers to the Trustee the prior written consent of the Credit Entity. SECTION 4.04. Sinking Fund Redemption. The Bonds are subject to mandatory redemption in part on the dates in the following years in the following amounts at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium: P6401.1039\1139624.4 26 Redemption Date Redemption Date (September 1) Principal (September 1) Principal 2011 $ $ * * Maturity At the Fixed Rate Conversion Date, any annual sinking fund redemption which has not yet become due may, pursuant to Section 2.02.A(a)(3) hereof, be treated as a serial maturity of principal bearing interest at the Fixed Rate payable on March 1 and September 1 thereafter to maturity. In the event of a partial redemption of Bonds pursuant to Section 4.02 or 4.03 above, the foregoing annual sinking fund payments shall be reduced in equal percentages, as nearly as practicable, provided that the reductions shall be made in multiples of$5,000. The City shall provide the Trustee with the amended sinking fund payments schedule calculated as set forth above. SECTION 4.05. Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of Bonds and less than all Outstanding Bonds are called for redemption, the Trustee shall select Bonds for redemption, from the Outstanding Bonds not previously called for redemption, in Authorized Denominations, first from Credit Facility Bonds, then with respect to a redemption under Section 4.02 on a pro rata basis among maturities and by lot within a maturity, and in the case of a redemption under Section 4.03 from such maturities as are designated in a City Certificate. The Trustee shall promptly notify the City and the Authority in writing of the Bonds so selected for redemption. SECTION 4.06. Notice of Redemption. When redemption is authorized or required pursuant to this Article IV, the Trustee shall give notice of the redemption of the Bonds. Such notice shall specify: (a) that the Bonds or a designated portion thereof are to be redeemed, (b) the CUSIP numbers and, if less than all of the Bonds of a maturity are to be redeemed, the serial numbers of the Bonds to be redeemed, (c) the date of redemption, (d) the place or places where the redemption will be made, (e) the following descriptive information regarding the Bonds: date, interest rates and stated maturity dates, and (f) that a new Bond in an amount equal to that portion not so redeemed will be executed by the Trustee and delivered to the Owner in the event of a partial redemption. Such notice shall further state that on the specified date there shall P6401.1039\1139624.4 27 become due and payable upon each Bond to be redeemed, the portion of the principal amount of such Bond to be redeemed, together with interest accrued to said date, and that from and after such date, provided that moneys therefore have been deposited with the Trustee, interest with respect thereto shall cease to accrue and be payable. Notice of such redemption shall be mailed by first-class mail, postage prepaid, to the City, to all municipal Securities Depositories and to at least one national Information Service which the City shall designate to the Trustee, and the respective Owners of any Bonds designated for redemption at their addresses appearing on the Bond registration books, at least 30 days, but not more than 60 days, prior to the redemption date; provided that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such Bonds, and provided, further, however, that the Trustee shall, on the day it receives notice of redemption by the City, provide telephonic, telegraphic or telex notice of such notice of redemption to the Remarketing Agent and the Credit Entity. SECTION 4.07. Partial Redemption of Bonds. Upon surrender by the Owner of a Bond for partial redemption at the Principal Office, payment of such partial redemption of the principal amount of a Bond will be made to such Owner by check mailed by first class mail to the Owner at his address as it appears on the registration books of the Trustee, or prior to the Fixed Rate Conversion Date by wire transfer to any Owner who has exercised its option for payment by wire transfer pursuant to Section 2.02 herein. Upon surrender of any Bond redeemed in part only, the Trustee or the Tender Agent shall execute and deliver to the Owner thereof, at the expense of the City, a new Bond or Bonds which shall be of Authorized Denominations equal in aggregate principal amount to the unredeemed portion of the Bond surrendered and the of the same interest rate and the same maturity. Such partial redemption shall be valid upon payment of the amount thereby required to be paid to such Owner, and the City, the Authority and the Trustee shall be released and discharged from all liability to the extent of such payment. SECTION 4.08. Effect of Notice of Redemption. Notice having been given as aforesaid, and the moneys for the redemption (including the interest to the applicable date of redemption), having been set aside in the Redemption Fund, the Bonds shall become due and payable on said date of redemption, and, upon presentation and surrender thereof at the Principal Office, said Bonds shall be paid at the unpaid principal price with respect thereto, plus interest accrued and unpaid to said date of redemption. If, on said date of redemption, moneys for the redemption of all the Bonds to be redeemed, together with interest to said date of redemption, shall be held by the Trustee so as to be available therefor on such date of redemption, and, if notice of redemption thereof shall have been given as aforesaid, then, from and after said date of redemption, interest with respect to the Bonds shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds shall be held in trust for the account of the Owners of the Bonds so to be redeemed. All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions of this Article shall be canceled upon surrender thereof and delivered to or upon the order of the City. P6401.1039\1139624.4 28 SECTION 4.09. Surplus. Any funds remaining in the Redemption Fund after redemption and payment of all Bonds outstanding, or provision made therefor satisfactory to the Trustee, including accrued interest, shall be withdrawn by the Trustee and remitted first to the Credit Entity to the extent that amounts are owed to the Credit Entity pursuant to the Reimbursement Agreement and second to the Trustee for the payment of any applicable fees and expenses to the Trustee (including the Trustee's legal fees and expenses), with the remainder, if any, being remitted to the City. SECTION 4.10. Establishment of Tender Fund. The Tender Agent shall establish a special fund designated as the "Tender Fund," in which the Tender Agent shall establish two special accounts designated as the "Remarketing Proceeds Account" and the "Liquidity Account;" shall keep such fund and accounts separate and apart from all other funds and moneys held by it; and shall administer such fund and accounts as herein provided. Moneys to be used with respect to the tender of Bonds shall be deposited in the Tender Fund as herein provided and used solely for the purpose of purchasing tendered Bonds. SECTION 4.11. Mandatory Tender on Fixed Rate Conversion Date. In the event the City has complied with the requirements of Section 2.02.A hereof to change the interest rate represented by the Bonds to a Fixed Rate, all Bonds shall be subject to mandatory tender and purchase on the Fixed Rate Conversion Date in accordance with the provisions of Section 4.13 hereof. SECTION 4.12. Mandatory Tenders Other Than on Fixed Rate Conversion Date. (a) The Bonds are subject to mandatory tender on the last Bond Payment Date occurring on or prior to the date at least five days prior to the date on which the Credit Facility is scheduled to expire or terminate in accordance with its terms and if the Trustee has not received notice at least 40 days prior to such Bond Payment Date that an extension of such expiration or termination date or that an Alternate Credit Facility, is to be provided. Not less than thirty days before each such Mandatory Tender Date under this Section 4.12(a), the Trustee shall send a notice to all Owners by first class mail, postage prepaid, which notice shall contain the following information: (1) that the Credit Facility is scheduled to expire or terminate and no Alternate Credit Facility will be provided, (2) that each Owner's Bond is subject to mandatory tender as provided in such notice, and (3) if any of the nationally recognized rating agencies which has a credit rating outstanding on the Bonds has indicated to the Trustee in writing that it will lower or withdraw its rating on the Bonds as of such Mandatory Tender Date, notice of such new rating, or if no new rating is available, notice that any of such rating agencies may lower or withdraw such rating as of such Mandatory Tender Date. (b) The Bonds are subject to mandatory tender on an Interest Rate Conversion Date for which a notice can be given. (c) The Bonds are subject to mandatory tender on the first Business Day to occur on or after the seventh day following receipt by the Trustee of notice from the Credit Entity of the occurrence of an event of default under the Reimbursement Agreement or that the Credit Entity will not reinstate the interest portion of the Credit Facility, and in each case directing the mandatory tender of the Bonds. Not later than the third Business Day after receipt P6401.1039\1139624.4 29 by the Trustee of such notice, the Trustee shall send to all Owners by first class mail, postage prepaid, and to the Depository also by facsimile, a notice which shall contain the following information: (1)that the Credit Entity has declared an event of default under the Reimbursement Agreement or that the Credit Entity will not reinstate the interest portion of the Credit Facility, and in each case directing the mandatory tender of the Bonds, and (2) that each Owner's Bond is subject to mandatory tender on the first Business Day to occur on or after the seventh day following the receipt by the Trustee of such notice from the Credit Entity. (d) The Bonds are subject to mandatory tender on the effective date of any Alternate Credit Facility in accordance with the provisions of Section 4.13 hereof. (e) All notices of a Mandatory Tender Date shall also be mailed by the Trustee to the Credit Entity,the Remarketing Agent and the Tender Agent. SECTION 4.13. Mechanics of Mandatory Tender. Owners of Bonds shall be required to tender the Bonds to the Tender Agent by 11:00 a.m., New York time, on the Mandatory Tender Date for purchase at a purchase price equal to the principal amount thereof plus accrued interest thereon to the Mandatory Tender Date. So long as the Bonds are registered in the name of the Nominee, such tenders shall be made through the book-entry system. Any Untendered Bonds shall be deemed to have been tendered. In the event of a failure by Owners of Bonds to tender Bonds on the Mandatory Tender Date, said Owners of Untendered Bonds shall not be entitled to any payment (including any interest to accrue subsequent to the Mandatory Tender Date) other than the purchase price for such Untendered Bonds, and any Untendered Bonds shall no longer be entitled to the benefits of this Indenture, except for the purpose of payment of the purchase price thereof. Such Untendered Bonds shall be deemed purchased, canceled and no longer Outstanding under this Indenture. However, the purchase price will be paid only upon presentation of the Bonds to the Tender Agent. In the case of the Fixed Rate Conversion Date only, if the Remarketing Agent notifies the Trustee not less than fifteen days before the Fixed Rate Conversion Date that it cannot remarket all of the Bonds or if the requirements for the effectiveness of a Fixed Rate Conversion Date are not satisfied before the Fixed Rate Conversion Date, the Trustee shall give notice thereof by first-class mail, postage prepaid, to all Owners, the Remarketing Agent, the Credit Entity and the City and each of such parties shall be restored to their respective positions as if notice of the Fixed Rate Conversion Date had not been given and no mandatory tender shall occur. In addition to the mailed notice required by the preceding sentence, the Trustee shall deliver a duplicate copy of such notice to the Depository and the Credit Entity by telecommunications or overnight delivery. SECTION 4.14. Option to Tender Prior to Fixed Rate Conversion Date. Prior to the Fixed Rate Conversion Date, any Owner of the Bonds may give irrevocable written notice to the Tender Agent at its Principal Office and request that the Tender Agent purchase all or any part (in Authorized Denominations) of the Bonds then outstanding and registered in the name of such Owner at an amount or price equal to the unpaid principal amount thereof plus accrued and unpaid interest thereon to, but not including, the Business Day on which the Bonds are to be tendered to the Tender Agent (the "Optional Tender Date") and without premium. Such notice (the "Optional Tender Notice") shall be substantially in the form set forth in Exhibit A or Exhibit P6401.1039\1139624.4 30 B hereto and shall specify the Optional Tender Date (which, during a Weekly Rate Period or Annual Rate Period, shall not be less than seven (7) days after the date of receipt by the Tender A gent of such Optional Tender Notice, the CUSIP Number, the principal amount being tendered in integral multiples of Authorized Denominations and, so long as the Bonds are registered in the name of the Nominee, such notice shall also specify the Participant number and the contact person of the Participant. Upon receipt of an Optional Tender Notice, the Tender Agent shall, as soon as is practicable but in no event later than the close of business on the Business Day following the day of receipt of such Optional Tender Notice, give notice to the Trustee, the Authority, the Credit Entity and the Remarketing Agent of the Optional Tender Notice, the Optional Tender Date specified therein and the principal amount of Bonds to be purchased on such Optional Tender Date. Owners providing an Optional Tender Notice shall be required to tender the Bonds to the Tender Agent for purchase by 11:00 a.m., New York time, on the Optional Tender Date. In the event of a failure by Owners of Bonds to tender Bonds on the Optional Tender Date, said Owners of Bonds shall not be entitled to any payment (including any interest to accrue subsequent to the Optional Tender Date) other than the purchase price for such Untendered Bonds, and any Untendered Bonds shall no longer be entitled to the benefits of this Indenture, except for the purpose of payment of the purchase price thereof. Such Untendered Bonds shall be deemed purchased, canceled and no longer Outstanding under this Indenture. However, the purchase price will be paid only upon presentment of the Bonds to the Tender Agent. Upon the cancellation of Untendered Bonds, the Trustee shall execute new Bonds in the same aggregate principal amount as, and in substitution for the Bonds not so tendered by such Owner and shall hold, deliver and make available such new Bonds to the new Owner thereof in accordance with the provisions of this Indenture which shall be fully applicable notwithstanding that such new Bonds are executed in substitution for the Bonds not so tendered. From and after the Fixed Rate Conversion Date, the Tender Agent will not be required to purchase such Bonds on demand and optional tender by the Owners thereof in accordance with this Section 4.14. SECTION 4.15. Purchase of Bonds Delivered On a Tender Date. (a) Bonds purchased from Owners on any Tender Date shall be purchased at a price equal to the principal amount thereof plus accrued interest, if any, to the Tender Date in immediately available funds, but solely from the following sources of funds in the following order of priority: (1) moneys deposited into the Remarketing Proceeds Account, other than moneys representing remarketing proceeds from the sale of Bonds to the Authority or the City, in accordance with Section 4.16 hereof; (2) moneys deposited into the Liquidity Account in accordance with Section 5.05(b) hereof; (3) other Available Moneys furnished to the Trustee for such purpose; and P6401.1039\1139624.4 31 (4) other moneys made available to the Trustee for such purpose from the Authority or the City. (b) The Tender Agent or Trustee, as applicable, shall promptly give notice to the Credit Entity, the Remarketing Agent, the Tender Agent, the Trustee and the City of any notice given by or to an Owner pursuant to the provisions of Sections 4.11, 4.12, 4.13 and 4.14 hereof (c) No later than 11:00 a.m., New York time, on the Business Day next preceding each Tender Date, the Remarketing Agent shall give telex or telephonic notice, promptly confirmed in writing, to the Tender Agent and the Trustee and specifying the amount of the proceeds of the sale of such Bonds, if any, sold by the Remarketing Agent pursuant to Section 4.16 hereof and the name, address and tax identification number of the purchasers thereof as well as the denominations of such remarketed Bonds. (d) The purchase price of any Bonds tendered for purchase shall be payable by check mailed to the Owners of record as of the close of business on the day next preceding the Tender Date; provided, however, that the purchase price of such tendered Bonds for purchase may, at the option of any Owner, be transferred to such Owner by wire transfer on the Tender Date if prior to such Tender Date such Owner has delivered to the Tender Agent a request in writing for such wire transfer specifying the bank account number to which such transfer is to be made. On the Business Day next preceding each Tender Date, the Trustee shall draw on the Credit Facility in accordance with Section 5.05(b) hereof and shall deposit the amount of such draw in the Liquidity Account to pay for the purchase price of any Bonds that will not be paid from remarketing proceeds in the Remarketing Proceeds Account. In the event that the Trustee has not received notice from the Remarketing Agent as to the availability of remarketing proceeds prior to the time of its draw on the Credit Facility on the Business Day preceding a Tender Date, the Trustee shall draw on the Credit Facility in accordance with Section 5.05(b) hereof to pay the purchase price of all Bonds tendered for purchase on such Tender Date. The Tender Agent shall pay, to the extent that it has received funds therefor, the purchase price of such tendered Bonds, plus accrued interest, if any, no later than 5:00 p.m., New York time, on any Optional Tender Date or Mandatory Tender Date. SECTION 4.16. Remarketing of Bonds by Remarketing Agent. The Remarketing Agent shall use its best efforts to remarket Bonds subject to purchase on a Tender Date (other than those tendered pursuant to Section 4.12 (a) or (c), which Bonds shall be remarketed as set forth in the following paragraph) and to remarket such Bonds registered in the name of the Credit Entity pursuant to Section 4.17(b) hereof. The proceeds of any sale with respect to a Tender Date shall be delivered to the Tender Agent for deposit in the Remarketing Proceeds Account by no later than 11:00 a.m., New York time, on the Business Day prior to each Tender Date. The proceeds of the sale of any Bonds registered to or on behalf of the Credit Entity shall be delivered to the Tender Agent for deposit in the Remarketing Proceeds Account by 11:00 a.m., New York time, on the date of sale and the Tender Agent shall remit such amounts to the Credit Entity no later than 4:00 p.m.,New York time, on such date. P6401.1039\1139624.4 32 In the event that any Bonds are purchased for the benefit of the Credit Entity pursuant to Section 4.17(b) hereof, the Remarketing Agent shall continue to offer for sale and use its best efforts to sell such Bonds. Prior to the release of any Credit Facility Bonds or the remarketing of any Bonds purchased following the mandatory tender thereof pursuant to Section 4.12(a) or (c), the Tender Agent shall have received written notice from the Bank that the Credit Facility has been reinstated or the event of default under the Reimbursement Agreement has been cured or waived or an Alternate Credit Facility has been delivered in an amount equal to the principal amount of the Credit Facility Bonds to be released and interest thereon in accordance with its terms. SECTION 4.17. Delivery of Bonds. (a) Bonds remarketed by the Remarketing Agent pursuant to Section 4.16 hereof shall be delivered to the Remarketing Agent, and registered in the name, or at the direction of, the respective purchasers. (b) Bonds purchased with moneys drawn under the Credit Facility shall be registered in the name, or at the direction, of the Credit Entity or its nominee and delivered to and held by the Tender Agent for the account of the Credit Entity as secured party, unless the Credit Entity shall make other arrangements with the Tender Agent. The Tender Agent shall notify the Remarketing Agent when Bonds are registered to or on behalf of the Credit Entity or its nominee, and the Remarketing Agent shall remarket such Bonds in accordance with Section 4.16 hereof. (c) Bonds purchased with Available Moneys or other moneys provided by the Authority to the Tender Agent shall be delivered to the Trustee for cancellation. (d) Moneys in the Liquidity Account and the Remarketing Proceeds Account shall be held in trust for the persons who delivered such Bonds for purchase. Following payment to persons who delivered such Bonds for purchase, to the extent that any fees or obligations are owed to the Trustee or the Credit Entity, moneys remaining in the Remarketing Proceeds Account shall be paid by the Tender Agent to the Credit Entity for the repayment of amounts owing under the Reimbursement Agreement as certified to the Tender Agent in writing by the Credit Entity and moneys remaining in the Liquidity Account shall be returned to the Credit Entity. Money remaining in such Accounts following such payments, if any, shall be transferred to the Lease Payment Account of the Debt Service Fund. SECTION 4.18. Alternate Credit Facility. (a) Not less than forty days prior to the Bond Payment Date occurring at least 5 days before the proposed effective date of an Alternate Credit Facility, the City shall notify the Trustee, the Tender Agent, the Remarketing Agent and the Credit Entity of its intention to provide such Alternate Credit Facility. Provided that the Trustee has received the notice required by the previous sentence and the items required by Sections 4.18(b)(ii) and (b)(iii) below, then, not less than fifteen days before the effective date of any Alternate Credit Facility, the Trustee shall send a notice to all Owners by first class mail, postage prepaid, which notice shall contain the following information: (1) that the Credit Facility will expire or terminate and that an P6401.I039\1139624.4 33 Alternate Credit Facility will be provided, (2) the identity of the provider of such Alternate Credit Facility and (3) that all Bonds are subject to mandatory tender on the last Business Day which is at least five days prior to the expiration date of the existing Credit Facility. (b) If at any time there shall have been delivered to the Trustee (i) an Alternate Credit Facility, which shall be for a term of not less than the stated expiration date of the Credit Facility then in effect for which it substitutes, (ii) an opinion of Bond Counsel stating that the delivery of such Alternate Credit Facility to the Trustee is authorized under this Indenture, and complies with the terms of this Indenture and (iii) written confirmation from the Credit Entity that no amounts are then due and unpaid under the Reimbursement Agreement, then the Trustee shall accept such Alternate Credit Facility and promptly surrender the Credit Facility then in effect to the Credit Entity in accordance with its terms for cancellation. If at any time there shall cease to be any Bonds outstanding hereunder, the Trustee shall thereafter surrender the Credit Facility then in effect to the Credit Entity in accordance with the terms thereof for cancellation. SECTION 4.19. Restriction on Remarketing of Bonds to City. So long as the Credit Facility is effective, no Bond tendered pursuant to this Article shall be remarketed to the City. The Tender Agent shall not be required to monitor the actions of the Remarketing Agent to ensure that it will not sell Bonds to the City. SECTION 4.20. Book-Entry Tenders: Duties of Tender Agent with Respect to Purchase of Bonds. (a) Notwithstanding any other provision of this Article to the contrary, all tenders for purchase during any period in which the Bonds are registered in the name of the Nominee (or the nominee of any successor Depository) shall be subject to the terms and conditions set forth in the Representations Letter and any notes and regulations promulgated by The Depository Trust Company, New York, New York. Subject thereto, the Bonds may be tendered by means of a book-entry credit of such Bonds to the account of the Remarketing Agent; provided, however, that under certain circumstances notice of tender shall be given by a Participant on behalf of the beneficial owner of such Bonds; and provided further that, if the Remarketing Agent notifies the Trustee that such Bonds have been remarketed pursuant to this Indenture, such Bonds may be treated as being tendered upon a book-entry transfer of such Bonds from the account of the tendering party to the credit of the account of the purchaser of such Bonds. (b) The Tender Agent agrees, with respect to any optional or mandatory tender of the Bonds: (i) To hold all moneys, other than moneys delivered to it by or on behalf of the City for the purchase of Bonds, delivered to it hereunder for the purchase of Bonds as agent and bailee of, and in escrow for the benefit of, the person or entity which shall have so delivered such moneys until the Bonds purchased with such moneys shall have been delivered to or for the account of such person or entity; P6401.1039\1139624.4 34 (ii) To hold all moneys delivered to it hereunder by or on behalf of the City for the purchase of Bonds as agent and bailee of, and in escrow for the benefit of, the Owners who shall deliver Bonds to it for the purchase until the Bonds purchased with such moneys shall have been delivered to or for the account of the City. ARTICLE V REVENUES AND FUNDS SECTION 5.01. Establishment of Funds. In addition to the funds established herein, the Trustee shall further establish, maintain and hold in trust the following funds and accounts: (a) Debt Service Fund, in which there is further established a Lease Payment Account and a Credit Facility Account. (b) Redemption Fund in which there is further established pursuant to Section 4.01 hereof a Lease Prepayment Account and a Credit Facility Prepayment Account. SECTION 5.02. Pledge and Assignment; Equal Security. (a) The Bonds and the obligations of the City set forth in the Reimbursement Agreement are secured by a pledge of and lien on all of the Revenues (except as otherwise provided in Section 7.03 and Section 8.06) and upon all of the moneys in the funds and accounts established hereunder. Except for the Revenues and such moneys, no funds or properties of the Authority shall be pledged to, or otherwise liable for, the payment of principal of, premium (if any) or interest on the Bonds. (b) The Authority and the City, as their interests may appear, hereby grant to the Credit Entity and to the Trustee, for the benefit of the Owners, a lien on and a security interest in the Lease and the Revenues, including all moneys in the funds held by the Trustee under this Indenture (excepting only the moneys set aside by the Trustee to satisfy the requirements of Section 10.02 hereof and amounts in the Remarketing Proceeds Account to be applied to pay the purchase price of Bonds), including, without limitation, the Debt Service Fund, and all such moneys shall be held by the Trustee in trust and applied to the respective purposes specified herein and in the Lease;provided, however, that no security interest is granted to the Credit Entity or to the Trustee for the purpose of paying its fees or expenses in money drawn by the Trustee under the Credit Facility to the extent such moneys are applied to the payment of the amounts due to the Owners. The Trustee shall be entitled to and shall collect and receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall be entitled to and shall take all steps, actions and proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority that have been assigned to the Trustee and all of the obligations of the City under the Lease. P6401.1039\1139624.4 35 (c) In consideration of the acceptance of the Bonds by those who shall own them from time to time, this Indenture shall be deemed to be and shall constitute a contract between the Authority and the Owners from time to time of the Bonds and the covenants and agreements herein set forth to be performed on behalf of the Authority shall be for the equal and proportionate security and protection of all Owners of the Bonds without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of the number or date thereof, of the time of sale, execution and delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or herein. (d) Pursuant to the Assignment Agreement, the Authority has transferred in trust and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Base Rental payments and all of the right, title and interest of the Authority in the Lease Agreement (other than its rights to indemnification and payment or reimbursement for any costs or expenses), including without limitation all of the Additional Rental under the Lease Agreement and any and all of the other rights of the Authority under the Lease Agreement as may be necessary to enforce payment of such Lease Payments and Additional Rental when due or otherwise to protect the interest of the Owners of the Bonds, including its leasehold title to the Leased Property leased to the City pursuant to the Lease Agreement. The Trustee accepts such assignments. The Trustee shall be entitled to and shall receive all of the Base Rental payments and Additional Rental, and any Base Rental payments and Additional Rental collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. SECTION 5.03. Deposit of Revenues. (a) There shall be deposited in the Lease Payment Account of the Debt Service Fund all Base Rental (other than Prepayments, which shall be deposited in the Lease Prepayment Account of the Redemption Fund pursuant to Section 4.01 hereof) received by the Trustee. (b) There shall be deposited in the Credit Facility Account of the Debt Service Fund all amounts drawn under the Credit Facility, except for amounts drawn thereunder with respect to Prepayments which shall be deposited in the Credit Facility Prepayment Account of the Redemption Fund pursuant to Section 4.01 hereof and amounts drawn thereunder with respect to the payment of the purchase price of tendered Bonds. SECTION 5.04. Application of Moneys. (a) Except as provided in subsection (b) hereof, all amounts in the Lease Payment Account of the Debt Service Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and interest on the Bonds as the same shall become due and payable, in accordance with the provisions of Article II and Article IV. (b) During the term of any Credit Facility, on each Bond Payment Date, following a draw on the Credit Facility, as provided in Section 5.05(a), and receipt of the proceeds of such draw, the Trustee shall withdraw the amounts, if any, on deposit in the Lease P6401.1039\1139624.4 36 Payment Account and, to the extent moneys are owed to the Credit Entity under the Reimbursement Agreement, pay such amounts to the Credit Entity; provided, however, the Trustee shall not be required to pay amounts to the Credit Entity in excess of the amount drawn on the Credit Facility unless the Credit Entity has certified to the Trustee and to the City, in writing, the additional amounts due and owing and specifying the section in the Reimbursement Agreement pursuant to which such additional amounts are due and such additional amounts are on deposit in the Lease Payment Account. (c) Sources of funds for the payment of the Bonds shall be applied in the following order of priority to pay principal and interest with respect to the Bonds: (i) moneys deposited in the Credit Facility Account or the Credit Facility Prepayment Account, as appropriate; (ii) moneys on deposit in the Reserve Fund; (iii) other Available Moneys furnished to the Trustee; and (iv) any other money made available to the Trustee for such purpose. Payment of Bonds registered to or on behalf of the Credit Entity shall be made from amounts on deposit in the Lease Payment Account of the Debt Service Fund, the Reserve Fund and the Lease Prepayment Account of the Redemption Fund, and other Available Moneys furnished to the Trustee and any other money made available to the Trustee for such purpose, as applicable. SECTION 5.05. Draws Under Credit Facility. (a) The Trustee shall draw under the Credit Facility in accordance with the terms thereof not later than 9:00 a.m., California time, on the Business Day prior to the day such funds are required by the Trustee hereunder at the times, in the manner and in an amount equal to the full amount of the installments of principal and interest coming due on each Bond Payment Date and each date that Bonds are to be redeemed hereunder. The Trustee shall deposit the amounts so drawn: (i) in the Credit Facility Account and shall use the amounts therein solely to pay such principal and interest as it comes due and (ii) in the Credit Facility Prepayment Account and shall use the amounts therein solely to pay such redemption of Bonds in advance of their maturity, as appropriate; provided, however, the Trustee shall not draw on the Credit Facility to make payments due with respect to Bonds registered to or on behalf of the Credit Entity. (b) So long as a Credit Facility is available therefor, the Trustee shall draw under the Credit Facility in accordance with the terms thereof not later than 8:30 a.m., California time, on the Business Day next preceding the date such funds are required by the Trustee hereunder to the extent necessary to purchase, together with moneys in the Remarketing Proceeds Account, all Bonds tendered on a Tender Date. The Trustee shall send the amounts so drawn to the Tender Agent for deposit in the Liquidity Account and the Tender Agent shall use the amounts therein solely to accomplish such purchase. P6401.1039\1139624.4 37 (c) The Trustee shall return the Credit Facility to the Credit Entity following the termination or substitution of such Credit Facility. SECTION 5.06. Application of Reserve Fund in Event of Deficiency in Lease Payment Fund. Whether or not Lease Payments are then in abatement, if on any Bond Payment Date, the moneys available in the Lease Payment Account are less than the amount of the principal and interest coming due on such Bond Payment Date on all the Bonds then Outstanding, the Trustee shall withdraw an amount equal to the shortfall from the Reserve Fund and deposit that amount into the Lease Payment Account. In the event that the Reserve Fund is comprised of cash and a Qualified Reserve Fund Credit Instrument, the cash in the Reserve Fund shall be transferred to the Lease Payment Account for payment of the Bonds before any drawing may be made upon the Qualified Reserve Fund Credit Instrument. A drawing upon a Qualified Reserve Fund Credit Instrument under which there is available coverage shall be made after all cash in the Reserve Fund has been applied. Under no circumstances shall moneys in the Reserve Fund be applied for any fees due to the Trustee hereunder, or for the fees or costs of any of its agents, attorneys or counsel incurred with respect to an Event of Default hereunder or otherwise. The Trustee shall then notify the Authority of the amount it has withdrawn from the Reserve Fund. Delinquent Lease Payments received by the Trustee from the Authority following any withdrawal from the Reserve Fund, and not needed to pay principal or interest on the Bonds or to reimburse the Credit Entity for a drawing made under the Credit Facility, shall be deposited in and to the credit of the Reserve Fund until the balance on deposit therein once again represents the Reserve Requirement, or if a drawing has been made on a Qualified Reserve Fund Credit Instrument, such Lease Payments received shall first be used to reimburse the provider of the Qualified Reserve Fund Credit Instrument for amounts drawn thereunder to the extent necessary to reinstate the Qualified Reserve Fund Credit Instrument to its full coverage amount and then to replenish the cash withdrawn from the Reserve Fund. Amounts in the Reserve Fund in excess of the Reserve Requirement shall be transferred to the Lease Payment Account. SECTION 5.07. Surplus. (a) Any funds remaining in the Lease Payment Account after payment of all Bonds Outstanding, or provision made therefor satisfactory to the Trustee, shall be withdrawn by the Trustee and remitted to the Credit Entity to the extent moneys are owed to the Credit Entity under the Reimbursement Agreement, with the remainder, if any, being applied first to the payment of any fees and expenses owed to the Trustee, the Remarketing Agent and the Tender Agent and then being remitted to the City. (b) Any funds remaining in the Credit Facility Account after payment of all Bonds Outstanding, or provision made therefor satisfactory to the Trustee, shall be returned to the Credit Entity. SECTION 5.08. Investment of Moneys in Funds and Accounts. All moneys in any of the funds and accounts established pursuant to this Indenture (other than the Credit Facility Account, Credit Facility Prepayment Account and the Tender Fund, which moneys shall be held uninvested) shall be invested by the Trustee solely in Authorized Investments. Upon written P6401.1039\1139624.4 3 8 request of an Authorized Representative of the Authority, the Trustee shall invest all moneys as directed by such Authorized Representative, provided such moneys are invested solely in Authorized Investments; provided, however, that the Trustee shall have received at least two (2) Business Days prior to the date of any such proposed investment or reinvestment, written directions of the Authority specifying the Authority's request for investment or reinvestment. In the absence of Request from the Authority, the Trustee shall invest such moneys solely in the investments described in subparagraph (9) of the definition of "Authorized Investments." Authorized Investments may be purchased at such prices as the Authority may in its discretion determine. All Authorized Investments shall be acquired subject to the limitations as to maturities hereinafter set forth in this Section and such additional limitations or requirements consistent with the foregoing as may be established by Request of the Authority and are consistent with the fiduciary duties of the Trustee. Moneys in the funds and accounts shall be invested in Authorized Investments maturing not later than the date on which it is estimated that such moneys will be required by the Trustee or the Authority. Authorized Investments purchased under a repurchase agreement may be deemed to mature on the date or dates on which the Trustee may deliver such Authorized Investments for repurchase under such agreement. Authorized Investments acquired as an investment of moneys in any fund or account established under this Indenture shall be credited to such fund or account. Except as otherwise provided in the last paragraph of this Section, all interest, profits and other income received from the investment of moneys in any fund or account shall be deposited therein. For the purpose of determining the amount in any fund, all Authorized Investments credited to such fund shall be valued at the lesser of(i) cost (exclusive of brokerage commissions or accrued interest, if any); (ii) the par amount thereof; or (iii) the market value thereof. Except for moneys held by the Trustee in the Credit Facility Account, the Credit Facility Prepayment Account, the Tender Fund and the Liquidity Account and the Remarketing Proceeds Account therein, the Trustee may commingle moneys on deposit in any of the funds or accounts established pursuant to this Indenture and held by the Trustee into a separate fund or funds for investment purposes only, provided that all funds or accounts held by the Trustee hereunder shall be accounted for separately as required by 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 fees therefor. The Trustee may sell at the best price obtainable, or present for redemption, any Authorized Investments 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 8.03, the Trustee shall not be liable or responsible for any loss on any investment made pursuant to this Section or resulting from any such sale which the Trustee reasonably makes in good faith. Any Authorized Investments that are registerable securities shall be registered in the name of the Trustee. The Trustee shall, using its best efforts, sell or present for redemption, any Authorized Investment so purchased by the Trustee whenever it shall be necessary in order to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Authorized Investment is credited. The Trustee shall conclusively be deemed to P6401.1039\1139624.4 39 have used its best efforts if the Trustee obtains three bids and sells the Authorized Investments to the highest bidder. The Trustee shall furnish to the Authority, not less than monthly, and to the Credit Entity upon request, an accounting of all investments made by the Trustee. The Trustee shall keep accurate records of all funds administered by it and all Bonds paid and discharged. Investment earnings in the Debt Service Fund shall first be applied to the payment of Additional Rental. If no Additional Rental is owing, investment earnings within the Debt Service Fund shall be transferred to the Lease Payment Account. Unless otherwise directed herein, investment earnings in all other funds and accounts established hereunder shall remain in such funds and accounts. ARTICLE VI PARTICULAR COVENANTS SECTION 6.01. Punctual Payment. The Authority covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and interest on each of the Bonds together with the premium thereon, if any, on the date, at the place and in the manner provided in said Bonds, and amounts owing to the Credit Entity under the Reimbursement Agreement solely from the Revenues and other funds as herein provided. SECTION 6.02. Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or to a change in the amount or time of any mandatory sinking account payment or the time of payment of any claims for interest, whether by the purchase or funding of such Bonds or claims of interest or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of, or claims for, interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section 6.02 shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds and such issuance shall not be deemed to constitute an extension of maturity of Bonds. SECTION 6.03. Against Encumbrances. The Authority covenants and agrees that it will not issue any other obligations payable as to either principal or interest from the Revenues which have, or purport to have any lien upon the Revenues superior to or on a parity with the lien of the Bonds. SECTION 6.04. Against Additional Indebtedness. The Authority covenants and agrees that it will not issue any other bonds, notes or other obligations, enter into any agreement or otherwise incur any indebtedness, which is in any case payable, as to either principal or interest, from all or any part of Revenues. SECTION 6.05. Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized to issue the Bonds and to enter into this Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned, respectively, under P6401.1039\1139624.4 40 _........_........ this Indenture and the Assignment Agreement, respectively, in the manner and to the extent provided in this Indenture. The Bonds and the provisions of this Indenture are and will be the legally valid and binding limited obligations of the Authority in accordance with their terms, and the Authority and Trustee shall at all times, to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Bondowners under this Indenture against all claims and demands of all persons whomsoever. The Authority shall preserve and protect the security of the Bonds and the rights of the Owners and the Credit Entity and defend their rights against all claims and demands of all persons. Until such time as an amount has been set aside sufficient to pay at maturity, or to call and redeem prior to maturity, all Outstanding Bonds plus unpaid interest thereon to maturity, and to pay amounts owing to the Credit Entity under the Reimbursement Agreement, the Authority will (through its proper members, officers, agents or employees) faithfully perform and abide by all the covenants, undertakings and provisions contained in this Indenture or in any Bond issued hereunder for the benefit of the Owners and the Credit Entity. SECTION 6.06. Accounting Records and Financial Statements. The Authority covenants and agrees that it will at all times keep, or cause to be kept, proper and current books and accounts (separate from all other records and accounts) in which complete and accurate entries shall be made of all transactions relating to the Revenues and of the funds and accounts herein provided for. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Trustee, the Credit Entity or the Owners of not less than ten percent (10%) of the aggregate principal amount of the Bonds then Outstanding or their representative authorized in writing. The parties hereto acknowledge that any such books, records or accounts will be maintained by the Trustee so long as all Base Rental Payments are made directly from the City to the Trustee and that the Authority shall not be responsible for keeping such books, records or accounts unless Base Rental Payments are received by it. SECTION 6.07. Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim to take the benefit or advantage of, any stay or extension of law now or at any time hereafter in force that may affect the covenants and agreements contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law. SECTION 6.08. Further Assurances. The Authority shall make, execute and deliver any and all such further indentures, 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 the Credit Entity of the rights and benefits provided in this Indenture. P6401.1039\1139624.4 41 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS SECTION 7.01. Events of Default. The following events shall be Events of Default: (a) Default by the Authority in the due and punctual payment of the principal of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise; (b) Default by the Authority in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable; (c) Default by the Authority in the observance of any of the other covenants, agreements or conditions on its part contained in this Indenture or in the Bonds if such default shall have continued for a period of sixty (60) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Authority by the Trustee, or to the Authority and the Trustee by the Credit Entity or the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds at the time Outstanding; provided, however, that such default shall not constitute an Event of Default hereunder if the Authority shall commence to cure such default within said sixty-day period and thereafter diligently and in good faith proceed to cure such default within a reasonable period of time. SECTION 7.02. Remedies on Default. Subject to the rights of the Credit Entity and provided that the Credit Facility is in effect and the Credit Entity is not in default thereunder, upon the occurrence and continuance of any Event of Default specified in Section 7.01 (a) or (b), the Trustee, upon the direction of the Credit Entity, shall proceed, or upon the occurrence and continuance of any Event of Default specified in Section 7.01 (c) hereof, the Trustee may proceed (and upon written request of the Credit Entity or upon written request of the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding and the consent of the Credit Entity so long as the Credit Facility remains in effect and the Credit Entity is not in default thereunder and receipt of indemnity satisfactory to the Trustee, shall proceed), to exercise the remedies set forth in Section 10.01 of the Lease or available to the Trustee hereunder;provided, however, that there shall be no right to accelerate maturities of the Bonds or otherwise to declare any Base Rental not then in default to be immediately due and payable. Upon the occurrence and continuance of any Event of Default, the Trustee shall exercise the rights and remedies invested in it by this Indenture with the same degree of care and skill as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. SECTION 7.03. Application of Revenues and Other Funds After Default. If an Event of Default shall occur and be continuing, all Revenues and any other funds (other than moneys drawn under any Credit Facility which shall be deposited into the Credit Facility Account and moneys in the Credit Facility Prepayment Account, such moneys in both such accounts to be applied only to the payment of principal and interest on the Bonds) then held or P6401.1039\1139624.4 42 thereafter received by the Trustee under any of the provisions of this Indenture shall be applied by the Trustee as follows and in the following order of priority: (1) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and payment of all reasonable fees, charges and expenses of the Trustee incurred in and about the performance of its powers and duties under this Indenture; and (2) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid), subject to the provisions of this Indenture, as follows: First: To the payment to the Persons entitled thereto, including the Credit Entity, of all interest then due and payable, and, if the amount available shall not be sufficient to pay in full all such interest, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto, without any discrimination or preference; Second: To the payment to the Persons entitled thereto, including the Credit Entity, of the unpaid principal of any Bonds which shall have become due and payable, whether at maturity or by call for redemption, in the order of their due dates, with interest on the overdue principal at the rate borne by the respective Bonds from the respective dates upon which such Bonds became due and payable, and, if the amount available shall not be sufficient to pay in full all the principal of the Bonds due on any date, together with such interest, then to the payment first of such interest, ratably, according to the amount of interest due on such date, and then to the payment of such principal, ratably, according to the amounts of principal due on such date to the Persons entitled thereto, without any discrimination or preference; and Third: To the payment of the interest on and the principal of the Bonds, the purchase and retirement of the Bonds and to the redemption of the Bonds, all in accordance with the provisions of this Indenture. (3) To the payment of any obligations due and owing to the Credit Entity under the Reimbursement Agreement. SECTION 7.04. Trustee to Represent Bondowners. The Trustee is hereby irrevocably appointed(and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, this Indenture, and applicable provisions of the Law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bondowners, the Trustee in its discretion may with the consent of the Credit Entity so long as the Credit Facility remains in effect and the Credit Entity is not in default thereunder, P6401.1039\1139624.4 43 and upon the written request of the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding and with the consent of the Credit Entity so long as the Credit Facility remains in effect and the Credit Entity is not in default thereunder, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under this Indenture or any law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Revenues and other assets pledged under this Indenture or the Bonds pending such proceedings. All rights of action under this Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of this Indenture. SECTION 7.05. Bondowners' Direction of Proceedings. Subject to the prior rights of the Credit Entity to direct proceedings, anything in this Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, to direct the method of conducting all remedial proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Bondowners not parties to such direction. SECTION 7.06. Limitation on Bondowners' Right to Sue. No Owner of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under this Indenture or any applicable law with respect to such Bond unless (1) such Owner previously shall have given to the Trustee and the Credit Entity written notice of the occurrence of an Event of Default; (2) the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (3) such Owner or said Owners shall have tendered to the Trustee reasonable indemnity in adequate form against the costs, expenses and liabilities to be incurred in compliance with such request; and (4) 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, and in every case, the Credit Entity shall have approved such request so long as the Credit Facility is in effect and the Credit Entity is not in default thereunder. 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 of any remedy hereunder or under law; it being understood and intended that no one or more Owners of P6401.1039\1139624.4 44 Bonds shall have any right in any manner whatsoever by his or their action to affect, disturb or prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce any right under this Indenture or applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this Indenture. SECTION 7.07. Absolute Obligation of Authority. Nothing in Section 7.06 or in any other provision of this Indenture, or in the Bonds, contained, shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners of the Bonds at their respective dates of maturity or upon call for redemption, as herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. SECTION 7.08. Termination of Proceeding. In case any proceedings taken by the Trustee or any one or more Bondowners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Bondowners, then in every such case the Authority, the Trustee, the Credit Entity and the Bondowners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the Authority, the Trustee, the Credit Entity and the Bondowners shall continue as though no such proceedings had been taken. SECTION 7.09. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners of the Bonds or the Credit Entity is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. SECTION 7.10. No Waiver of Default. No delay or omission of the Trustee, the Credit Entity or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of 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 given by this Indenture to the Trustee, the Credit Entity or to the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient. P6401.1039\1139624.4 45 SECTION 7.11. Rights of Credit Entity. Notwithstanding any other provision of this Indenture, so long as the Credit Facility is in effect and the Credit Entity is not in default thereunder or any amounts remain owing to the Credit Entity, the Credit Entity shall be subrogated to the rights of any Owners to the extent that it has paid the principal or interest represented by the Bonds of such Owners. ARTICLE VIII THE TRUSTEE SECTION 8.01. Appointment,Duties and Immunities of Trustee. (a) The Authority hereby appoints Wells Fargo Bank, National Association, as Trustee and designates the Principal Office as the principal place of payment for the Bonds, such appointment and designation to remain in effect until notice of change is filed with the Trustee. The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in this Indenture. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Authority, with the consent of the City, and subject to the prior written consent of the Credit Entity, may remove the Trustee at any time upon thirty (30) days written notice to the Trustee unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time, to the knowledge of the Authority, the Trustee shall cease to be eligible in accordance with subsection (e) of this Section 8.01 or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or its property or affairs for the purpose of rehabilitation, conservation or liquidation; in each case by giving written notice of such removal to the Trustee, and thereupon shall appoint a successor Trustee by an instrument in writing. (c) The Trustee may at any time resign by giving written notice of such resignation to the Authority, the City, the Credit Entity and by giving the Bondowners notice of such resignation by mail at their addresses appearing on the bond registration books maintained by the Trustee. Upon receiving such notice of resignation, the Authority, with the approval of the City, and subject to the prior written approval of the Credit Entity, shall promptly appoint a successor Trustee by an instrument in writing. (d) Any removal or resignation 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 after the Authority has given a notice of removal or has received a notice of resignation P6401.1039\1139624.4 46 as aforesaid, the resigning Trustee or any Bondowner (on behalf of himself and all other Bondowners) 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. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective upon transfer of the Credit Facility to the successor Trustee in accordance with the provisions of the Credit Facility and the Reimbursement Agreement, and the acceptance of appointment and assumption of the Trustee's duties by the successor Trustee. Upon such acceptance and assumption, the successor Trustee shall mail notice thereof to the Credit Entity, Moody's if the Bonds are rated by Moody's, S&P if the Bonds are rated by S&P, and the Owners at their respective addresses set forth in the Bond registration books maintained pursuant to the Indenture. Any successor Trustee appointed under this Indenture shall signify its acceptance of such appointment by executing and delivering to the Authority and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless, at the Request of the Authority or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. (e) The Trustee, and any Trustee appointed under the provisions of this Section 8.01 in succession to the Trustee, shall be a trust company or bank having the powers of a trust company, having a corporate trust office in California, having (or, in the case of a corporation or trust company included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such bank or trust company 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 purpose of this subsection the combined capital and surplus of such bank 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. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section 8.01. SECTION 8.02. 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 its corporate trust business, provided such company shall be eligible under subsection (e) of Section 8.01, shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to P6401.1039\1139624.4 47 the contrary notwithstanding, except that it shall comply with any terms stated with respect to such an event in the Credit Facility. SECTION 8.03. Liability of Trustee. The recitals of facts herein and in the Bonds shall be taken as statements of the Authority, 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 or of the Bonds, and shall incur no responsibility in respect thereof other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its Certificate of Authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or default. The Trustee may become the owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bondowners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. The Trustee shall not be responsible for monitoring the City's compliance with the insurance requirements set forth in the Lease. (b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding or the Credit Entity relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture. (d) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Bondowners pursuant to the provisions of this Indenture unless such Bondowners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. (e) The Trustee shall have no responsibility, opinion or liability with respect to any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. (f) No provision of this Indenture shall require the Trustee to advance, expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (g) The Trustee's rights to immunities and protection from liability hereunder and its rights to payment of its fees and expenses shall survive its resignation or removal and final payment or defeasance of the Bonds. All indemnifications and releases from liability P6401.1039\1139624.4 48 granted herein to the Trustee shall extend to the directors, officers, employees and agents of the Trustee. (h) The Trustee shall not be deemed to have knowledge of any Event of Default hereunder or under the Lease unless and until it shall have actual knowledge thereof. (i) The Trustee shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced delay ("unavoidable delay") in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the project, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee. SECTION 8.04. Right of Trustee to Rely on Documents. The Trustee shall be protected in acting upon any facsimile transmission, electronic mail, notice, resolution, requisition, request, consent, order, statement, certificate, report, opinion, bond 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 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 by it hereunder in good faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto is satisfactorily established, if disputed. Whenever in the administration of the trusts imposed upon it by 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 be deemed to be conclusively proved and established by a Certificate of the Authority, and such certificate shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such certificate, 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 agrees to accept and act upon facsimile transmission of written instructions and/or directions pursuant to this Indenture provided, however, that: (a) subsequent to such facsimile transmission of written instructions and/or directions the Trustee shall forthwith receive the originally executed instructions and/or directions, (b) such originally executed instructions and/or directions shall be signed by a person as may be designated and authorized to sign for the party signing such instructions and/or directions, and (c) the Trustee shall have P6401.1039\1139624.4 49 received a current incumbency certificate containing the specimen signature of such designated person. SECTION 8.05. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in its possession so long as any Bonds remain Outstanding and shall be subject at all reasonable times to the inspection of the Authority, the Credit Entity and any Bondowner, and their agents and representatives duly authorized in writing, upon reasonable notice and under reasonable conditions. SECTION 8.06. Compensation and Indemnification. The Authority shall pay, but solely out of payments received from the City as Additional Rental, to the Trustee from time to time reasonable compensation for all services rendered under this Indenture in accordance with the letter proposal from the Trustee approved by the Authority and also all reasonable expenses, charges, legal and consulting fees and other disbursements and those of its attorneys, agents and employees, incurred in and about the performance of its powers and duties under this Indenture. Upon the occurrence of an Event of Default, the Trustee shall have a first lien on the Revenues and all funds and accounts held by the Trustee hereunder to secure the payment to the Trustee of all fees, costs and expenses, including reasonable compensation to its experts, attorneys and counsel incurred in declaring such Event of Default and in exercising the rights and remedies set forth in Article VII hereof, except the Trustee shall have no lien on any moneys held on deposit in the Credit Facility Account, the Credit Facility Prepayment Account, any moneys held by the Tender Agent in the Credit Facility Account or the Remarketing Proceeds Account or on any draws under the Credit Facility or any moneys held by the Trustee to satisfy the requirements of Section 10.02 hereof. The Authority shall to the extent permitted by law indemnify and save the Trustee, the Remarketing Agent and the Tender Agent, their its officers, employees, directors and agents harmless from and against all claims, losses, costs, expenses, liability and damages, including legal fees and expenses arising out of the Trustee's, the Remarketing Agent's or the Tender Agent's exercise and performance of their powers and duties hereunder and under the Indenture. Such indemnification shall include the costs and expenses of defending against any claim or liability arising under the Indenture. No indemnification will be made for willful misconduct or negligence by the Trustee, the Remarketing Agent and the Tender Agent, their officers or employees. The Authority's obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Bonds or resignation or removal of the Trustee. SECTION 8.07. Remarketing Agent. The Authority shall appoint the Remarketing Agent for the Bonds, subject to the conditions set forth in Section 8.08 hereof The Remarketing Agent shall designate its principal office to the Trustee, the Credit Entity and the Tender Agent and signify its acceptance of the duties and obligations imposed upon it hereunder and under the Lease by a written instrument of acceptance delivered to the City, the Credit Entity and the Trustee under which the Remarketing Agent will agree, particularly: (a) to keep such books and records as shall be consistent with prudent industry practice and to make such books and records available for inspection by the City, the P6401.1039\1139624.4 50 Trustee, the Credit Entity and the Authority at all reasonable times and upon reasonable notice; and (b) otherwise to perform and observe all duties and obligations herein and in the Remarketing Agreement imposed upon the Remarketing Agent. The Authority shall cooperate with the Trustee, the Tender Agent and the City to cause the necessary arrangements to be made and to be thereafter continued whereby funds from the sources specified herein and in the Lease will be made available for the purchase of Bonds presented to the Trustee or the Tender Agent and whereby Bonds, executed by the Trustee or the Tender Agent, will be remarketed by the Remarketing Agent. SECTION 8.08. Qualifications of Remarketing Agent. Any successor Remarketing Agent shall be (a) a commercial bank or trust company or (b) a member of the National Association of Securities Dealers, Inc., having a capitalization of at least $5,000,000 and authorized by law to perform all the duties imposed upon it by this Indenture. The Remarketing Agent may at any time resign and be discharged of the duties and obligations created by this Indenture by giving notice to the Authority,the Tender Agent, the City, the Credit Entity and the Trustee. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Remarketing Agent subject to the prior written consent of the Credit Entity. Subject to the prior written consent of the Credit Entity, the Remarketing Agent may be removed by an instrument, signed by the Authority, filed with the Remarketing Agent, the Tender Agent, the Credit Entity, the City, Moody's if the Bonds are rated by Moody's, S&P if the Bonds are rated by S&P, and the Trustee. In the event of the resignation or removal of the Remarketing Agent, the Remarketing Agent shall pay over, assign and deliver any moneys and Bonds held by it in such capacity to its successor or, if there be no successor, to the Trustee. Any resignation or removal of the Remarketing Agent shall be effective only upon the appointment of a successor Remarketing Agent, and appointment of a successor Remarketing Agent shall become effective immediately upon delivery of the required notice. SECTION 8.09. Tender Agent. The Authority hereby appoints Wells Fargo Bank, National Association, as the initial Tender Agent and shall appoint any successor Tender Agent, subject to the conditions set forth in Section 8.10 hereof. The Tender Agent shall designate to the Trustee, the Remarketing Agent, the Credit Entity and the Authority its principal office and signify its acceptance of the duties and obligations imposed upon it hereunder by a written instrument of acceptance delivered to the Authority, the Credit Entity and the Trustee under which the Tender Agent will agree, particularly: (a) to keep such books and records as shall be consistent with prudent industry practice and to make such books and records available for inspection by the City, the Trustee, the Credit Entity the Remarketing Agent and the Authority at all reasonable times upon reasonable notice; and (b) otherwise to perform and observe all duties and obligations herein imposed upon the Tender Agent. P6401.1039\1139624.4 51 Whenever in this Indenture, certain rights or duties are conferred upon the Tender Agent, and no Tender Agent is appointed, such rights and duties shall be performed by the Trustee. In the event that the Authority fails to appoint a Tender Agent hereunder, or in the event that the Tender Agent shall resign or be removed, or be dissolved, or if the property or affairs of the Tender Agent shall be taken under the control of any state or federal court or administrative body because of bankruptcy or insolvency, or for any other reason, and the Authority shall not have appointed a successor, the Trustee, notwithstanding the provisions of the first paragraph of this Section, shall be deemed to be the Tender Agent for all purposes of this Indenture until the appointment of a successor Tender Agent, as the case may be, notwithstanding the fact that the Trustee may not meet the qualifications set forth in the first paragraph of this Section 8.08. SECTION 8.10. Qualifications of Tender Agent. The Tender Agent shall be a bank with trust powers or a trust company with an office in San Francisco, California or Los Angeles, California and any successor thereto shall have the same qualifications required of the Trustee pursuant to Section 8.01(e) hereof, except that the Tender Agent need have a combined capital and surplus of only Ten Million Dollars ($10,000,000), and such Tender Agent shall be authorized by law to perform all the duties imposed upon it by this Indenture. The Tender Agent may at any time resign and be discharged of the duties and obligations created by this Indenture by giving at least sixty (60) days prior written notice to the City, the Credit Entity, the Remarketing Agent, the Trustee and the Authority. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Tender Agent subject to the prior written consent of the Credit Entity. In the event the City does not name a successor Tender Agent within 30 days of receipt of notice of the Tender Agent's resignation,then the Tender Agent may petition a court of suitable jurisdiction to seek the immediate appointment of a successor Tender Agent. Subject to the prior written consent of the Credit Entity, the Tender Agent may be removed at any time, with the approval of the Authority by an instrument, signed by the Authority, filed with the Tender Agent, the Remarketing Agent, the Trustee, the Credit Entity and the Authority. Any resignation or removal of the Tender Agent and appointment of a successor Tender Agent shall become effective upon acceptance of appointment and assumption of the Tender Agent's duties by the successor Tender Agent. SECTION 8.11. Co-Trustees. (a) At any time, for the purpose of meeting the legal requirements of any applicable jurisdiction, the Trustee shall have power to appoint one or more persons to act as co- trustee under this Indenture, with such powers as may be provided in the instrument of appointment, and to vest in such person or persons any property, title, right or power deemed necessary or desirable, subject to the remaining provisions of this Section. (b) Each co-trustee shall, to the extent permitted by applicable law, be appointed subject to the following terms: (1) The rights, powers, duties and obligations conferred or imposed upon any such co-trustee shall not be greater than those conferred or imposed upon the Trustee, and such rights and powers shall be exercisable only jointly with the Trustee, except to the extent that, under any law of any jurisdiction in which any particular act or P6401.1039\1139624.4 52 acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights and powers shall be exercised by such co-trustee subject to the provisions of Section 8.11(b)(4)hereof. (2) The Trustee may at any time, by an instrument in writing executed by it, accept the resignation of or remove any co-trustee appointed under this Section 8.11. (3) No co-trustee under this Indenture shall be liable by reason of any act or omission of any other co-trustee appointed under this Indenture. (4) No power given to such co-trustee shall be separately exercised hereunder by such co-trustee except with the consent in writing of the Trustee, anything herein contained to the contrary notwithstanding. (c) The provisions of Section 8.06 hereof shall extend to any co-trustee, its officers, employees, agents, successors and assigns appointed hereunder. ARTICLE IX MODIFICATION OR AMENDMENT OF INDENTURE AND LEASE SECTION 9.01. Amendments Permitted. (a) With Consent. After first requesting and obtaining the prior written approval of the Credit Entity, this Indenture and the rights and obligations of the Owners of the Bonds and the Lease and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplement which shall become effective when the written consents of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 9.03 hereof, shall have been filed with the Trustee and Moody's if the Bonds are rated by Moody's or S&P if the bonds are rated by S&P. No such modification or amendment shall (1) extend or have the effect of extending the fixed maturity of any Bond or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof or reducing any premium payable upon the redemption thereof, without the express consent of the Owner of such Bond, or (2) reduce or have the effect of reducing the percentage of Bonds required for the affirmative vote or written consent to an amendment or modification of this Indenture or the Lease, or (3) modify any of the rights or obligations of the Trustee without its written assent thereto. Any such supplemental agreement shall become effective as provided in Section 9.02 hereof. (b) Without Consent. This Indenture and the rights and obligations of the Owners of the Bonds, and the Lease and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement, without the consent of any such Owners, but with the written consent of the Credit Entity and only to the extent permitted by law and only (1) to cure, correct or supplement any ambiguous or defective provision contained herein or therein, and which shall not adversely affect the interest of the Owners of the Bonds, (2) to reflect the comments of S&P and/or Moody's in order to maintain any applicable rating on the Bonds, or (3) in regard to matters arising hereunder or thereunder, as the parties hereto or P6401.1039\1139624.4 53 thereto may deem necessary or desirable and which shall not adversely affect the interest of the Owners of the Bonds. Any such supplemental agreement shall become effective upon execution and delivery by the parties hereto or thereto as the case may be and shall be provided to Moody's, if the Bonds are rated by Moody's or S&P, if the Bonds are rated by S&P. SECTION 9.02. Procedure for Amendment with Written Consent of Bond Owners. This Indenture or the Lease may be amended by supplemental agreement as provided in this Section 9.02 in the event the consent of the Owners of the Bonds and the Credit Entity is required pursuant to Section 9.01(a) hereof. A copy of such supplemental agreement, together with a request to the Owners of the Bonds for their consent thereto, shall be mailed first class mail by the Trustee to the Credit Entity and to each Owner of a Bond at his address as set forth in the Bond registration books maintained, but failure to receive copies of such supplemental agreement and request so mailed shall not affect the validity of the supplemental agreement when assented to as in this Section provided. Such supplemental agreement shall not become effective unless there shall be filed with the Trustee the written consent of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 9.03 hereof) and of the Credit Entity and notices shall have been mailed as hereinafter in this Section provided. Each such consent by the Owners of the Bonds shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given. Any such consent shall be binding upon the Owner of the Bond giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Trustee prior to the date when the supplemental agreement has become effective. After the Owners of the required percentage of Bonds and the Credit Entity shall have filed their consents to such supplemental agreement, the Trustee shall mail a notice to the Owners of the Bonds in the manner hereinbefore provided in this Section for the mailing of such supplemental agreement, stating in substance that such supplemental agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in this Section(but failure to mail copies of said notice shall not affect the validity of such supplemental agreement or consents thereto). A record, consisting of the papers required by this Section to be filed with the Trustee, shall be proof of the matters therein stated until the contrary is proved. SECTION 9.03. Disqualified Bonds. Bonds owned or held by or for the account of the City or the Authority or by any person directly or indirectly controlled or controlled by, or under direct or indirect common control with the City or the Authority (except any Bonds held in any pension or retirement fund) shall not be deemed Outstanding for the purpose of any vote, consent, waiver or other action or any calculation of Outstanding Bonds provided for in this Indenture, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Agreement except that for purposes of determining whether the Trustee shall be protected in relying on such vote, consent, waiver or other action, only Bonds so owned of which the Trustee has knowledge shall be disqualified. P6401.l 039\1139624.4 54 SECTION 9.04. Effect of Supplemental Agreement. From and after the time any supplemental agreement becomes effective pursuant to this Article IX, this Indenture or the Lease, as the case may be, shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties hereto or thereto and all Owners of Bonds Outstanding and the Credit Entity, as the case may be, shall thereafter be determined, exercised and enforced hereunder and thereunder subject in all respects to such modification and amendment, and all the terms and conditions of any supplemental agreement shall be deemed to be part of the terms and conditions of this Indenture or the Lease, as the case may be, for any and all purposes. The Authority or the Trustee may adopt appropriate regulations to require each Owner, before his consent provided for in this Article IX shall be deemed effective, to reveal if the Bonds as to which such consent is given are disqualified as provided in Section 9.03 hereof SECTION 9.05. Endorsement or Replacement of Bonds Delivered After Amendments. The Trustee may determine that Bonds delivered after the effective date of any action taken as provided in this Article IX shall bear a notation, by endorsement, in form approved by the Trustee, as to such action. In that case, upon demand of the Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the Principal Office, a suitable notation shall be made on such Bond at the cost of the Authority. The Trustee may determine that new Bonds, so modified as in the opinion of the Trustee is necessary to conform to such Bond Owners' action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bond then Outstanding, such new Bond shall be exchanged in the Principal Office, without cost to such Owner, for a Bond of the same character then Outstanding, upon surrender of such Bond at the cost of the Authority. SECTION 9.06. Amendatory Endorsement of Bonds. Subject to Section 9.01 hereof, the provisions of this Article IX shall not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by him, provided that due notification thereof is made on such Bonds. SECTION 9.07. Consent of Credit Entity Required. Notwithstanding anything in this Indenture to the contrary, no amendment or supplement to this Indenture or the Lease shall become effective unless first approved by the Credit Entity, which approval shall not be unreasonably withheld. ARTICLE X DEFEASANCE SECTION 10.01. Discharge of Indenture. The Bonds may be paid, in whole or in part, by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable hereunder by the Authority: (a) by well and truly paying or causing to be paid the principal of and interest and redemption premiums, if any, on such Bond, as and when the same become due and payable; P6401.1039\1139624.4 55 (b) if prior to maturity and having given notice of redemption (which redemption date shall be the first available redemption date) by irrevocably depositing with the Trustee, in trust, at or before maturity, an amount of cash which, together with amounts then on deposit in the Lease Payment Account and available for such purpose, is sufficient to pay in Available Moneys all principal of and interest(which shall be calculated at the Maximum Rate if the Bonds bear interest at a Weekly Rate or Annual Rate) and redemption premiums, if any, on such Bonds; or (c) by irrevocably depositing with the Trustee, in trust, noncallable Authorized Investments described in paragraph(1) or(2) of the definition thereof purchased with Available Moneys, together with cash, if required, in such amount as will in the opinion of an independent certified public accountant,together with interest to accrue thereon and moneys then on deposit in the Lease Payment Account and available for such purpose, together with the interest to accrue thereon, be fully sufficient to pay and discharge in Available Moneys all principal of and interest (which shall be calculated at the Maximum Rate if the Bonds bear interest at a Weekly Rate or Annual Rate) and redemption premiums, if any, on such Bond. If all Outstanding Bonds shall be paid in one or more of the preceding ways, all amounts shall have been paid to the Credit Entity and all Additional Rental shall have been paid or arrangements satisfactory to the Trustee shall have been made for the payment of such Additional Rental, then, notwithstanding that any Bonds shall not have been surrendered for payment, this Indenture and the pledge of Revenues and other assets made under this Indenture with respect to such Bonds and all covenants, agreements and other obligations of the Authority and the Trustee under this Indenture with respect to such Bonds shall cease, terminate, become void and be completely discharged and satisfied, except only the obligation of the Trustee to pay or cause to be paid, from Base Rental paid by or on behalf of the City from funds deposited pursuant to paragraphs (b) and (c) of this Section, to the Owners of the Bonds not so surrendered and paid all sums due with respect thereto. Any funds held by the Trustee, at the time of the defeasance of all Outstanding Bonds, which are not required for payment as required therein, shall be paid over to the Credit Entity to the extent of any amounts owed under the Reimbursement Agreement, then to the Trustee to pay any amounts owed to the Trustee under this Indenture, and the remainder, if any, shall be paid over to the City. During the term of any Credit Facility, prior to or at the time of a deposit pursuant to paragraph (b) or (c) of this Section, there shall be delivered to the Trustee an opinion of nationally recognized bankruptcy counsel to the effect that payments to the Owners of Bonds defeased from such Available Moneys or draws under the Credit Facility on deposit with the Trustee will not constitute avoidable preferences under Title 11 and Title 9 of the United States Bankruptcy Code upon the occurrence of an Event of Bankruptcy. SECTION 10.02. Payment of Bonds After Discharge of Indenture. In any event any Bond shall not be presented for payment when the principal with respect thereof becomes due, either at maturity, or at the date fixed for redemption thereof, if moneys sufficient to pay such Bond shall have been deposited in the Credit Facility Account or if Available Moneys sufficient to pay such Bond shall have been deposited in the Lease Payment Account, all liability of the P6401.1039\1139624.4 5 6 Authority to the Owner thereof for payment of such Bond shall forthwith cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys, without liability for interest thereon, for the benefit of the Owner of such Bond who shall thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his or her part under this Indenture or on, or with respect to, said Bond. Any moneys so deposited with and held by the Trustee not so applied to the payment of Bonds within two (2) years after the date on which the same were deposited with the Trustee due shall be paid by the Trustee to the City. Thereafter, Owners shall be entitled to look only to the City for payment, and then only to the extent of the amount so disbursed by the Trustee. The City shall not be liable for any interest on the sums paid to it pursuant to this section and shall not be regarded as a trustee or trustees of such money. Any moneys held in accordance with this Section 10.02 shall be held uninvested. ARTICLE XI MISCELLANEOUS SECTION 11.01. Continuing Disclosure. The Authority hereby covenants and agrees, whenever an Annual Rate Period or Fixed Rate Period is in effect with respect to the Bonds, or if otherwise required by Rule 15c2- 12, to cause the City to comply the continuing disclosure requirements for the Bonds as promulgated under Rule 15c2-12, as it may from time to time hereafter be amended or supplemented. Notwithstanding any other provision of the Indenture, failure of the Authority and/or the City to comply with the requirements of Rule 15c2- 12 applicable to the Bonds, as it may from time to time hereafter be amended or supplemented, or failure of the City to comply with any Continuing Disclosure Agreement entered into in connection with the Bonds shall not be considered an Event of Default and the Trustee shall have no right to accelerate amounts due hereunder as a result thereof; provided, however, that the Trustee and the Owners of not less than 25% in principal amount of the Outstanding Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority to comply with its obligations in this Section and the City to comply with its obligations in such Continuing Disclosure Agreement. SECTION 11.02. Liability of Authority Limited to Revenues. Notwithstanding anything contained in this Indenture or in the Bonds to the contrary, the Authority shall not be required to advance any moneys derived from any source other than the Revenues and the monies on deposit in the funds and accounts established under this Indenture which are pledged under this Indenture pursuant to Section 5.02 hereof for any of the purposes mentioned in this Indenture, whether for the payment of the principal of, premium (if any) or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. SECTION 11.03. Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture either the Authority or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the Authority or the Trustee shall bind P6401.1039\1139624.4 57 and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. SECTION 11.04. Limitation of Rights to Parties and Bondowners. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the Credit Entity and the Owners of the Bonds any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the Credit Entity and the Owners of the Bonds. SECTION 11.05. Waiver of Notice. Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such v v er. SECTION 11.06. Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee of any Bonds, the Trustee shall destroy such Bond and deliver a certificate of such destruction to the Authority. SECTION 11.07. Severability of Invalid Provisions. If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into this Indenture and each and every other article, section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more articles, sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable. SECTION 11.08. Notices. All written notices to be given under this Indenture shall be given by mail or personal delivery to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice to the Trustee shall be effective upon receipt. Notice to all other parties shall be deemed to have been received upon the earlier of actual receipt or five Business Days after deposit in the United States mail, in first class form, postage prepaid or, in the case of personal delivery, upon delivery to the address set forth below: If to the City: City of Palm Desert 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: City Manager Facsimile: (760) 346-6372 Telephone: (760) 341-0611 P6401.1039\1139624.4 58 If to the Authority: Palm Desert Financing Authority 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: Chief Administrative Officer Facsimile: (760) 346-6372 Telephone: (760) 341-0611 If to the Trustee: Wells Fargo Bank,National Association 707 Wilshire Blvd., 17th Floor MAC E2818-176 Los Angeles, California 90017 Attention: Robert Schneider, Vice President Facsimile: (213) 614-3355 Telephone: (213) 614-3353 If to the Credit Entity: Wells Fargo Bank,National Association 707 Wilshire Blvd., 11th Floor MAC E2818-114 Los Angeles, California 90017 Attention: Lynn Love, Relationship Manager Facsimile: (213) 614-3555 Telephone: (213) 614-2235 If to the Remarketing Agent: Wells Fargo Brokerage Services, LLC 608 Second Avenue, 10th Floor MAC N9303-105 Minneapolis, Minnesota 55402-1916 Attention: Remarketing Agent If to the Tender Agent: Wells Fargo Bank,National Association 707 Wilshire Blvd., 17th Floor MAC E2818-176 Los Angeles, California 90017 Attention: Robert Schneider, Vice President Facsimile: (213) 614-3355 Telephone: (213) 614-3353 If to [rating agency]: [ I Attention: P6401.1039\1 139624.4 59 Notwithstanding any provision contained in this Indenture to the contrary, the Trustee shall notify [S&P], if the Bonds are rated by [S&P], and [Moody's] if the Bonds are rated by [Moody's], but without any liability for any failure to do so of any of the following occurrences of which the Trustee has actual knowledge: (1) renewal, expiration, substitution or termination of the Credit Facility, (2) redemption of any Bonds, (3) modifications or amendments to (i) this Indenture, (ii)the Lease, (iii) the Assignment Agreement, (iv)the Credit Facility or(4) change or replacement of Remarketing Agent, the Trustee or the Tender Agent, (5) defeasance of the Bonds, (6) any conversion of the interest rate borne by the Bonds, and (7) any mandatory tenders of Bonds. The City shall notify the rating agency then maintaining a rating on the Bonds and the Trustee of any modification or amendment to the Reimbursement Agreement to which the City has consented. Notwithstanding any provision in this Indenture to the contrary, the City shall notify the Trustee of any Event of Bankruptcy of which the City has actual knowledge, which shall have occurred with respect to moneys held by the Trustee pursuant to this Indenture. SECTION 11.09. Evidence of Rights of Bondowners. Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Bondowners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bondowners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and of the Authority if made in the manner provided in this Section. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of the Bonds shall be proved by the bond registration books held by the Trustee. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. SECTION 11.10. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are owned by or for the account of the Authority or the City, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Upon request, the Authority shall certify to the Trustee which Bonds are disqualified pursuant to this Section 11.10. P6401.1039\1139624.4 60 SECTION 11.11. Money Held for Particular Bonds. The money held by the Trustee for the payment of the principal, premium (if any) or interest due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books uninvested and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.02. SECTION 11.12. Funds and Accounts. Any fund required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds shall at all times be maintained in accordance with standard corporate trust accounting principles, to the extent practicable, and with due regard for the requirements imposed on the Authority pursuant to Section 6.06 hereof and for the protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may establish such funds and accounts as it deems appropriate to perform its obligations hereunder. SECTION 11.13. Waiver of Personal Liability. No member, officer, agent or employee of the Authority shall be individually or personally liable for the payment of the principal of, premium (if any) or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture. SECTION 11.14. CUSIP Numbers. Neither the Trustee nor the Authority shall be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Owners and that neither the Authority nor the Trustee shall be liable for any inaccuracies in such numbers. SECTION 11.15. Business Days. If any date specified herein shall not be a Business Day, any action required on such date may be made on the next succeeding Business Day with the same effect as if made on such date, and if payment is made on such succeeding Business Day, no additional interest shall accrue for the period after such date. SECTION 11.16. Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. SECTION 11.17. Governing Law. This Indenture shall be construed in accordance with and governed by the Constitution and laws of the State. P6401.1039\1139624.4 61 IN WITNESS WHEREOF, THE PALM DESERT FINANCING AUTHORITY and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee, have caused this Indenture to be executed by their respective officers all as of the day and year first above written. PALM DESERT FINANCING AUTHORITY By: Chief Administrative Officer WELLS FARGO BANK,NATIONAL ASSOCIATION, as Trustee By: Authorized Officer ACKNOWLEDGMENT AND CONSENT OF CITY The City of Palm Desert hereby acknowledges and consents to the terms and provisions of the foregoing Indenture. Date: As of July 1, 2009 CITY OF PALM DESERT By: Mayor Attest: By: City Clerk P6401.1039\1 139624.4 62 EXHIBIT A (FORM OF WEEKLY RATE BOND) UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE OF TRUST) TO 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 THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IF REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), 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 No. R-1 $ PALM DESERT FINANCING AUTHORITY ENERGY INDEPENDENCE PROGRAM VARIABLE RATE DEMAND LEASE REVENUE BOND, SERIES 2009 (FEDERALLY TAXABLE) Principal Interest Rate Payment Date Dated Date CUSIP Weekly rate September 1, 20_ [July 23, 2009] Registered Owner: Cede & Co. Principal Amount: Million and 00/100 Dollars THE PALM DESERT FINANCING AUTHORITY, a public body corporate and politic, duly organized and existing under the laws of the State of California (the "Authority"), for value received, hereby promises to pay (but solely from the funds hereinafter mentioned) to the above-referenced registered owner(the "Owner") or registered assigns subject to the terms of the Indenture, hereinafter mentioned, and any right to redemption, the Principal Amount stated above on the Principal Payment Date stated above upon surrender of this Bond at the corporate office of Wells Fargo Bank, National Association, (the "Trustee") in Los Angeles, California, and to pay the registered owner by check mailed by first class mail, postage prepaid, on each Bond Payment Date to the person whose name appears in the Bond register as the Owner thereof P6401.1039\1139624.4 A-1 as of the Record Date immediately preceding such Bond Payment Date (as each such term is hereinafter defined), interest on the balance of said Principal Amount from time to time remaining unpaid, at the rate per annum determined as hereinafter set forth, from the Bond Payment Date next preceding the date on which this Bond is authenticated unless it is (a) authenticated after a Record Date and on or before the next Bond Payment Date, in which event from such Bond Payment Date, or (b) authenticated on or before the first Record Date, in which event from the dated date set forth above; provided, however, that interest shall be paid by wire transfer of immediately available funds to an account in the United States of America to any registered Owner of at least$1,000,000 in aggregate principal amount of the Bonds, at the option of such Owner, according to wire instructions given in writing to the Trustee in accordance with procedures prescribed by the Trustee. Both principal and interest on this Bond are payable in lawful money of the United States of America, and principal is payable upon presentation of this Bond at the corporate office of the Trustee. The Bonds are secured in part by the Authority's right to receive certain lease payments ("Base Rental") under and pursuant to that certain Lease Agreement dated as of July 1, 2009 (the "Lease"), by and between the City of Palm Desert (the "City"), a municipal corporation duly organized and existing under the laws and constitution of the State of California, as lessee, and the Authority, as lessor, all of which rights to receive such Base Rental have been assigned without recourse pursuant to that certain Assignment Agreement dated as of July 1, 2009, by the Authority to the Trustee under the Indenture dated as of July 1, 2009 (the "Indenture"),by and between the Authority and the Trustee. This Bond is one of a duly authorized issue of Bonds of the Authority designated as the Palm Desert Financing Authority Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds"), all issued pursuant to and in conformity with the Constitution and laws of the State of California and particularly the Marks-Roos Local Bond Pooling Act of 1985 (Article 4 of Chapter 5 of Division 7 of the California Government Code, as amended) and the Indenture. Reference is hereby made to the Indenture for a specific description of the security therein provided for said Bonds, for the nature, extent and manner of enforcement of such security, for the covenants and agreements made for the benefit of the Bondowners, and for a statement of the rights of the Bondowners, and by the acceptance of this Bond the owner hereof assents to all of the terms, conditions and provisions of the Indenture. The principal of this Bond, the interest hereon and any premium payable upon redemption hereof, are secured by an irrevocable pledge of, and are payable solely from, the Revenues (as defined in the Indenture) and the moneys on deposit in certain other funds, all as more particularly set forth in the Indenture. THE OBLIGATION OF THE AUTHORITY TO PAY THE BONDS IS LIMITED TO THE REVENUES, INCLUDING BASE RENTAL PAYABLE BY THE CITY, PLEDGED THEREFOR PURSUANT TO THE INDENTURE AND DOES NOT CONSTITUTE AN OBLIGATION OF THE AUTHORITY FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE AUTHORITY TO PAY THE BONDS DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE STATE OF CALIFORNIA, OR ANY OF ITS POLITICAL P6401.1039\1139624.4 A-2 SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL IS ABATED DURING ANY PERIOD IN WHICH, BY REASON OF MATERIAL DAMAGE, DESTRUCTION OR CONDEMNATION, THERE IS SUBSTANTIAL INTERFERENCE WITH THE USE AND RIGHT OF POSSESSION BY THE CITY OF THE LEASED PROPERTY. FAILURE OF THE CITY TO PAY BASE RENTAL DURING ANY SUCH PERIOD SHALL NOT CONSTITUTE A DEFAULT UNDER THE LEASE, THE INDENTURE OR THIS BOND. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA, OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. The Owner of this Bond is entitled to receive, subject to the terms of the Indenture and any right of payment, redemption or purchase hereinafter provided for, (i) on the Principal Payment Date set forth above, upon surrender of this Bond at the corporate office of the Trustee, the Principal Amount specified above on the Principal Payment Date specified above or upon earlier redemption, and (ii) by check mailed by first class mail, postage prepaid, on each interest payment date to the person whose name appears in the Bond register as the Owner thereof as of the Record Date immediately preceding such Bond Payment Date (as each such term is hereinafter defined), interest on the balance of said Principal Amount from time to time remaining unpaid, at the rate per annum determined as hereinafter set forth, from the Bond Payment Date next preceding the date on which this Bond is authenticated unless it is (a) authenticated after a Record Date and on or before the next Bond Payment Date, in which event from such Bond Payment Date, or (b) authenticated on the first Record Date, in which event from the dated date set forth above; provided, however, that interest shall be paid by wire transfer of immediately available funds to any registered Owner of at least $1,000,000 in aggregate principal amount of the Bonds, at the option of such Owner, according to wire instructions given in writing to the Trustee in accordance with procedures prescribed by the Trustee. Pursuant to that certain Reimbursement Agreement dated as of July 1, 2009 (the "Reimbursement Agreement"), by and between the City and Wells Fargo Bank, National Association (the "Bank"), the Bank has agreed to issue its irrevocable direct-pay letter of credit (the "Credit Facility") to support the payment of principal of and interest on the Bonds and to pay the purchase price of this Bond, if required to be purchased pursuant to the Indenture on or prior to the Fixed Rate Conversion Date. Subject to certain conditions, the Credit Facility may be replaced by an Alternate Credit Facility and, if so, references herein to the Credit Facility or the Bank shall refer to such Alternate Credit Facility or to the issuer thereof, respectively. Until the Interest Rate Conversion Date or Fixed Rate Conversion Date, the Bonds shall bear interest at the Weekly Rate; provided that the interest rate shall never exceed the Maximum P6401.1039\1139624.4 A-3 Rate. Interest due with respect to Bonds bearing a Weekly Rate shall be computed on the basis of actual days elapsed and a 365- or 366-day year, as applicable. Interest on the Bonds will be payable, from the date of execution and delivery of the Bonds to before the Fixed Rate Conversion Date, the first Business Day of each month commencing [August 1, 2009], to and including the Fixed Rate Conversion Date. The method of calculation of interest may, in accordance with and subject to the terms of the Indenture, be changed from calculation at the Weekly Rate then in effect to calculation at a Fixed Rate. The Remarketing Agent shall determine the Weekly Rate from time to time, and such determination by the Remarketing Agent shall be conclusive and binding. The Indenture provides that if the Remarking Agent fails to determine the Weekly Rate, the Weekly Rate will be determined as set forth therein. The Bonds are delivered in fully registered form and shall be in Authorized Denominations. Bonds may be exchanged at the Principal Office of the Trustee, in the manner and subject to the limitations and conditions provided in the Indenture, for an equal aggregate principal amount of Bonds of any Authorized Denominations. The transfer of this Bond is registerable by the Owner hereof in person or by his attorney or legal representative at the corporate office of the Trustee, but only in the manner and subject to the limitations and conditions provided in the Indenture and upon surrender and cancellation of this Bond. Upon any such registration of transfer, the Trustee shall execute and deliver in exchange for this Bond a new Bond or Bonds, registered in the name of the transferee, of Authorized Denominations, in an aggregate principal amount equal to the principal amount of this Bond. In the event the Authority has complied with the requirements of the Indenture to change the interest rate represented by the Bonds to a Fixed Rate or Annual Rate, all Bonds shall be su:,ject to mandatory tender and purchase on the Fixed Rate Conversion Date or Interest Rate Conversion Date, as applicable, in accordance with the provisions of the Indenture. The Bonds are subject to mandatory tender on the last Bond Payment Date occurring on or prior to the date at least five days prior to the date on which the Credit Facility is scheduled to expire or terminate in accordance with its respective terms and if the Trustee has not received notice at least 40 days prior to such Bond Payment Date that an Alternate Credit Facility is to be provided. Not less than thirty days before each such Mandatory Tender Date under this paragraph, the Trustee shall send a notice to all Owners by first class mail, postage prepaid, which notice shall contain the following information: (1) that the Credit Facility is scheduled to expire or terminate and no Alternate Credit Facility will be provided, (2) that each Owner's Bond is subject to mandatory tender as provided in such notice, and (3) if any of the nationally recognized rating agencies which has a credit rating outstanding on the Bonds has indicated to the Trustee in writing that it will lower or withdraw its rating on the Bonds as of such Mandatory Tender Date, notice of such new rating, or if no new rating is available, notice that any of such rating agencies may lower or withdraw such rating as of such Mandatory Tender Date. P6401.1039\1139624.4 A-4 The Bonds are subject to mandatory tender on an Interest Rate Conversion Date for which a notice can be given. The Bonds are subject to mandatory tender under this paragraph on the first Business Day to occur on or after the seventh day following receipt by the Trustee of notice from the Credit Entity of the occurrence of an event of default under the Reimbursement Agreement, or that the Credit Entity will not reinstate the interest portion of the Credit Facility. Not later than the third Business Day after receipt by the Trustee of such notice, the Trustee shall send to all Owners by first class mail, postage prepaid, and to the Depository also by facsimile, a notice which shall contain the following information: (1) that an event of default has been declared under the Reimbursement Agreement, or that the Credit Entity will not reinstate interest portion of the Credit Facility, and (2) that each Owner's Bond is subject to mandatory tender on the first Business Day to occur on after seventh day following the receipt by the Trustee of such notice from the Credit Entity. The Bonds are subject to mandatory tender on the effective date of any Alternate Credit Facility in accordance with the provisions of the Indenture. Owners of Bonds shall be required to tender the Bonds to the Tender Agent by 11:00 a.m., New York time, on any Mandatory Tender Date for purchase at a purchase price equal to the principal amount thereof, plus accrued interest thereon to the Mandatory Tender Date. So long as the Bonds are registered in the name of the Nominee, such tenders shall be made through the book-entry system. Any Untendered Bonds shall be deemed to have been tendered on a Mandatory Tender Date, whether or not the Bonds are in fact surrendered to the Tender Agent. In the event of a failure by Owners of Bonds to tender Bonds on the Mandatory Tender Date, said Owners of Untendered Bonds shall not be entitled to any payment (including any interest to accrue subsequent to the Mandatory Tender Date) other than the purchase price for such Untendered Bonds, and any Untendered Bonds shall no longer be entitled to the benefits of this Indenture, except for the purpose of payment of the purchase price thereof. Such Untendered Bonds shall be deemed purchased, canceled and no longer Outstanding under this Indenture. However, the purchase price will be paid only upon presentation of the Bonds to the Tender Agent. In the case of a Fixed Rate Conversion Date only, if the Remarketing Agent notifies the Trustee not less than fifteen days before the Fixed Rate Conversion Date that it cannot remarket all of the Bonds or if the requirements for the effectiveness of a Fixed Rate Conversion Date are not satisfied before the Fixed Rate Conversion Date, the Trustee shall give notice thereof by first-class mail, postage prepaid, to all Owners, the Remarketing Agent, the Credit Entity and the Authority and each of such parties shall be restored to their respective positions as if notice of the Fixed Rate Conversion Date had not been given and no mandatory tender shall occur. In addition to the mailed notice required by the preceding sentence, the Trustee shall deliver a duplicate copy of such notice to the Depository, the Credit Entity by telecommunications or overnight delivery. Prior to the Fixed Rate Conversion Date with respect to the Bonds, any Owner of the Bonds may give irrevocable written notice to the Tender Agent at its Principal Office and request that the Tender Agent purchase all or any part (in Authorized Denominations) of the Bonds then P6401.1039\1139624.4 A-5 outstanding and registered in the name of such Owner at an amount or price equal to the unpaid principal amount thereof plus accrued and unpaid interest thereon to, but not including, the Business Day on which the Bonds are to be tendered to the Tender Agent (the "Optional Tender Date") and without premium. Such notice (the "Optional Tender Notice") shall be substantially in the form set forth in the Indenture and shall specify the Optional Tender Date (which shall not be less than seven(7) days after the date of receipt by the Tender Agent of such Optional Tender Notice), the CUSIP Number, the principal amount being tendered in integral multiples of Authorized Denominations and, so long as the Bonds are registered in the name of the Nominee, such notice shall also specify the Participant number and the contact person of the Participant. Upon receipt of an Optional Tender Notice, the Tender Agent shall, as soon as is practicable but in no event later than the close of business on the Business Day following the day of receipt of such Optional Tender Notice, give notice to the Trustee, the Authority, the Credit Entity and the Remarketing Agent of the Optional Tender Notice, the Optional Tender Date specified therein and the principal amount of Bonds to be purchased on such Optional Tender Date. Owners providing an Optional Tender Notice shall be required to tender the Bonds to the Tender Agent for purchase by 11:00 a.m., New York time, on the Optional Tender Date. In the event of a failure by Owners of Bonds to tender Bonds on the Optional Tender Date, said Owners of Bonds shall not be entitled to any payment (including any interest to accrue subsequent to the Optional Tender Date) other than the purchase price for such Untendered Bonds, and any Untendered Bonds shall no longer be entitled to the benefits of this Indenture, except for the purpose of payment of the purchase price thereof. Such Untendered Bonds shall be deemed purchased, canceled and no longer Outstanding under this Indenture. However, the purchase price will be paid only upon presentment of the Bonds to the Tender Agent. Upon the cancellation of Untendered Bonds, the Trustee shall execute new Bonds in the same aggregate principal amount as, and in substitution for the Bonds not so tendered by such Owner and shall hold, deliver and make available such new Bonds to the new Owner thereof in accordance with the provisions of this Indenture which shall be fully applicable notwithstanding that such new Bonds are executed in substitution for the Bonds not so tendered. From and after the Fixed Rate Conversion Date, the Tender Agent will not be required to purchase such Bonds on demand and optional tender by the Owners thereof in accordance with the Indenture. During the Weekly Rate Period and on the Fixed Rate Conversion Date, the Bonds are subject to optional redemption in whole or in part (in an amount of $100,000 or any integral multiple of$5,000 in excess thereof) on any Business Day, at the option of the Authority, at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium. The Bonds are subject to mandatory redemption in part on the dates in the following years in the following amounts at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium: P6401.1039\1139624.4 A-6 Redemption Date Redemption Date (September 1) Principal (September 1) Principal 2011 $ $ * * Maturity The Bonds are subject to mandatory redemption on any Bond Payment Date, in whole or in part, from moneys drawn under the Credit Facility which shall be reimbursed from Net Proceeds following the deposit by the Trustee in the Lease Prepayment Account of the Redemption Fund of Net Proceeds deposited by the City under this Indenture, at least 45 days prior to a Bond Payment Date which have been credited towards the Prepayment made by the City pursuant to the Lease, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium; provided, however, that if there shall no longer be available a Credit Facility to secure the payment of principal and interest represented by the Bonds or if the Credit Facility does not permit a draw with respect to Prepayments, the Bonds are subject to redemption from Net Proceeds which the Trustee shall deposit in the Lease Prepayment Account of the Redemption Fund, to be used to redeem the Bonds by the Trustee as provided in the Lease and as provided herein. In the event of a partial redemption of Bonds from Net Proceeds or an optional redemption as described above, the forgoing annual sinking fund payments shall be reduced in equal percentages, as nearly as practicable, provided that the reductions shall be made in multiples of$5,000. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue thereon from and after the date fixed for redemption. The Authority and the Trustee may treat the Owner of this Bond (as evidenced by the Bond register) as its absolute owner for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. In the manner provided in the Indenture, the rights and obligations of the Authority and of the Owners of the Bonds, may (with certain exceptions as stated in the Indenture) be modified P6401.1039\1139624.4 A-7 or amended with the consent of the Bank and the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding. No modification or amendment shall (1) extend the fixed maturity of any Bond, or reduce the amount of principal thereof or the rate of interest thereon, or extend the time of payment of interest thereon, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each Bond so affected, or (2) reduce the percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as otherwise provided therein, or deprive the Owners of the Bonds of the lien created by the Indenture on such Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all the Bonds then Outstanding, or (3) modify any of the rights or obligations of the Trustee without its written consent. It is hereby recited, certified and declared that any and all acts, conditions and things required to exist, to happen and to be performed precedent to and in the issuance of this Bond exist, have happened and have been performed in due time, form and manner as required by the Constitution and the statutes of the State of California. This Bond shall not be valid and the Owner hereof shall not be entitled to any benefit hereunder unless this Bond shall have been authenticated by the Trustee by the signature of a duly authorized signatory. P6401.1039\l 139624.4 A-8 IN WITNESS WHEREOF, THE PALM DESERT FINANCING AUTHORITY has caused this Bond to be executed on its behalf by the signature of the President of the governing board of the Authority and attested by the Secretary of the governing board of the Authority and this Bond to be authenticated manually by the Trustee and dated as of the date first above written. PALM DESERT FINANCING AUTHORITY By: President ATTEST: By: Secretary CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within-mentioned Indenture. Date of Authentication: WELLS FARGO BANK,NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory P6401.1039\1139624.4 A-9 ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto (PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE) the within Bond, and does hereby irrevocably constitute and appoint attorney to transfer said Bond on the books of the bond Registrar with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed NOTICE: The signature(s) on this by an eligible guarantor institution. assignment must correspond with the name(s) as written upon the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever. P6401.1039\1139624.4 A-10 TENDER NOTICE The undersigned (a) hereby certifies that the undersigned is the lawful registered owner (or his duly authorized attorney) of this Bond on the date shown below as the "Date of Exercise of Owner's Option," (b) hereby gives notice to the Tender Agent of the exercise by the undersigned of its option to have this Bond, or a portion of this Bond, purchased on the purchase date in the principal amount (which amount shall be $100,000 or any integral multiple of$5,000 in excess thereof) indicated below plus accrued interest, if any, with respect thereto pursuant to the terms of the Indenture, and (c) in order to exercise said option, hereby tenders and delivers this Bond to the Tender Agent for purchase on the purchase date designated below for a purchase price equal to the sum of the principal amount hereof tendered and accrued but unpaid interest to the date of purchase. Name and Address of Owner: Tax I. D. Date of Exercise of Owner's Option: Aggregate Principal Amount to be purchased and Bond numbers (must be an Authorized Denomination) Bond CUSIP(s): Purchase Date: Signature of Owner: Signature Guaranteed by: If applicable: Participant# Participant Contact Person: P6401.1039\1139624.4 A-11 EXHIBIT B (FORM OF ANNUAL RATE BOND) UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE OF TRUST) TO 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 THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IF REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), 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 No. R-1 $ PALM DESERT FINANCING AUTHORITY ENERGY INDEPENDENCE PROGRAM VARIABLE RATE DEMAND LEASE REVENUE BOND, SERIES 2009 (FEDERALLY TAXABLE) Principal Interest Rate Payment Date Dated Date CUSIP Annual Rate September 1, 20_ [July 23, 2009] Registered Owner: Cede & Co. Principal Amount: THE PALM DESERT FINANCING AUTHORITY, a public body corporate and politic, duly organized and existing under the laws of the State of California (the "Authority"), for value received, hereby promises to pay (but solely from the funds hereinafter mentioned) to the above-referenced registered owner (the "Owner") or registered assigns subject to the terms of the Indenture, hereinafter mentioned, and any right to redemption, the Principal Amount stated above on the Principal Payment Date stated above upon surrender of this Bond at the corporate office of Wells Fargo Bank, National Association, (the "Trustee") in Los Angeles, California, and to pay the registered owner by check mailed by first class mail, postage prepaid, on each Bond Payment Date to the person whose name appears in the Bond register as the Owner thereof P6401.1039\1139624.4 B-1 as of the Record Date immediately preceding such Bond Payment Date (as each such term is hereinafter defined), interest on the balance of said Principal Amount from time to time remaining unpaid, at the rate per annum determined as hereinafter set forth, from the Bond Payment Date next preceding the date on which this Bond is authenticated unless it is (a) authenticated after a Record Date and on or before the next Bond Payment Date, in which event from such Bond Payment Date, or (b) authenticated on or before the first Record Date, in which event from the dated date set forth above; provided, however, that interest shall be paid by wire transfer of immediately available funds to an account in the United States of America to any registered Owner of at least $1,000,000 in aggregate principal amount of the Bonds, at the option of such Owner, according to wire instructions given in writing to the Trustee in accordance with procedures prescribed by the Trustee. Both principal and interest on this Bond are payable in lawful money of the United States of America, and principal is payable upon presentation of this Bond at the corporate office of the Trustee. The Bonds are secured in part by the Authority's right to receive certain lease payments ("Base Rental") under and pursuant to that certain Lease Agreement dated as of July 1, 2009 (the "Lease"), by and between the City of Palm Desert (the "City"), a municipal corporation duly organized and existing under the laws and constitution of the State of California, as lessee, and the Authority, as lessor, all of which rights to receive such Base Rental have been assigned without recourse pursuant to that certain Assignment Agreement dated as of July 1, 2009, by the Authority to the Trustee under the Indenture dated as of July 1, 2009 (the"Indenture"), by and between the Authority and the Trustee. This Bond is one of a duly authorized issue of Bonds of the Authority designated as the Palm Desert Financing Authority Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds"), all issued pursuant to and in conformity with the Constitution and laws of the State of California and particularly the Marks-Roos Local Bond Pooling Act of 1985 (Article 4 of Chapter 5 of Division 7 of the California Government Code, as amended) and the Indenture. Reference is hereby made to the Indenture for a specific description of the security the,coin provided for said Bonds, for the nature, extent and manner of enforcement of such security, for the covenants and agreements made for the benefit of the Bondowners, and for a statement of the rights of the Bondowners, and by the acceptance of this Bond the owner hereof assents to all of the terms, conditions and provisions of the Indenture. The principal of this Bond, the interest hereon and any premium payable upon redemption hereof, are secured by an irrevocable pledge of, and are payable solely from, the Revenues (as defined in the Indenture) and the moneys on deposit in certain other funds, all as more particularly set forth in the Indenture. THE OBLIGATION OF THE AUTHORITY TO PAY THE BONDS IS LIMITED TO THE REVENUES, INCLUDING BASE RENTAL PAYABLE BY THE CITY, PLEDGED THEREFOR PURSUANT TO THE INDENTURE AND DOES NOT CONSTITUTE AN OBLIGATION OF THE AUTHORITY FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE AUTHORITY TO PAY THE BONDS DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE STATE OF CALIFORNIA, OR ANY OF ITS POLITICAL P6401.1039\1139624.4 B-2 SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL IS ABATED DURING ANY PERIOD IN WHICH, BY REASON OF MATERIAL DAMAGE, DESTRUCTION OR CONDEMNATION, THERE IS SUBSTANTIAL INTERFERENCE WITH THE USE AND RIGHT OF POSSESSION BY THE CITY OF THE LEASED PROPERTY. FAILURE OF THE CITY TO PAY BASE RENTAL DURING ANY SUCH PERIOD SHALL NOT CONSTITUTE A DEFAULT UNDER THE LEASE, THE INDENTURE OR THIS BOND. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA, OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. The Owner of this Bond is entitled to receive, subject to the terms of the Indenture and any right of payment, redemption or purchase hereinafter provided for, (i) on the Principal Payment Date set forth above, upon surrender of this Bond at the corporate office of the Trustee, the Principal Amount specified above on the Principal Payment Date specified above or upon earlier redemption, and (ii) by check mailed by first class mail, postage prepaid, on each interest payment date to the person whose name appears in the Bond register as the Owner thereof as of the Record Date immediately preceding such Bond Payment Date (as each such term is hereinafter defined), interest on the balance of said Principal Amount from time to time remaining unpaid, at the rate per annum determined as hereinafter set forth, from the Bond Payment Date next preceding the date on which this Bond is authenticated unless it is (a) authenticated after a Record Date and on or before the next Bond Payment Date, in which event from such Bond Payment Date, or (b) authenticated on the first Record Date, in which event from the dated date set forth above; provided, however, that interest shall be paid by wire transfer of immediately available funds to any registered Owner of at least $1,000,000 in aggregate principal amount of the Bonds, at the option of such Owner, according to wire instructions given in writing to the Trustee in accordance with procedures prescribed by the Trustee. Until the Fixed Rate Conversion Date, the Bonds shall bear interest at the Annual Rate; provided that the interest rate shall never exceed the Maximum Rate. Interest due with respect to the Bonds bearing an Annual Rate or the Fixed Rate or Fixed Rates shall be computed on the basis of a 360-day year consisting of twelve 30-day months and interest due with respect to Bonds bearing a Weekly Rate shall be computed on the basis of actual days elapsed and a 365- or 366-day year, as applicable. Interest on the Bonds will be payable, from the date of execution and delivery of the Bonds to before the Fixed Rate Conversion Date, the first Business Day of each month commencing [August 1, 2009],to and including the Fixed Rate Conversion Date. P6401.1039\1139624.4 B-3 The method of calculation of interest may, in accordance with and subject to the terms of the Indenture, be changed from calculation at the Annual Rate then in effect to calculation at a Fixed Rate. The Remarketing Agent shall determine the Annual Rate as set forth in the Indenture, and such determination by the Remarketing Agent shall be conclusive and binding. The Bonds are delivered in fully registered form and shall be in Authorized Denominations. Bonds may be exchanged at the Principal Office of the Trustee, in the manner and subject to the limitations and conditions provided in the Indenture, for an equal aggregate principal amount of Bonds of any Authorized Denominations. The transfer of this Bond is registerable by the Owner hereof in person or by his attorney or legal representative at the corporate office of the Trustee, but only in the manner and subject to the limitations and conditions provided in the Indenture and upon surrender and cancellation of this Bond. Upon any such registration of transfer, the Trustee shall execute and deliver in exchange for this Bond a new Bond or Bonds, registered in the name of the transferee, of Authorized Denominations, in an aggregate principal amount equal to the principal amount of this Bond. In the event the Authority has complied with the requirements of the Indenture to change the interest rate represented by the Bonds to a Fixed Rate or Weekly Rate, all Bonds shall be subject to mandatory tender and purchase on the-Fixed Rate Conversion Date or Interest Rate Conversion Date, as applicable, in accordance with the provisions of the Indenture. The Bonds are subject to mandatory tender on the last Bond Payment Date occurring on or prior to the date at least five days prior to the date on which the Credit Facility is scheduled to expire or terminate in accordance with its respective terms and if the Trustee has not received notice at least 40 days prior to such Bond Payment Date that an Alternate Credit Facility is to be provided. Not less than thirty days before each such Mandatory Tender Date under this paragraph, the Trustee shall send a notice to all Owners by first class mail, postage prepaid, which notice shall contain the following information: (1) that the Credit Facility is scheduled to expire or terminate and no Alternate Credit Facility will be provided, (2)that each Owner's Bond is subject to mandatory tender as provided in such notice, and (3) if any of the nationally recognized rating agencies which has a credit rating outstanding on the Bonds has indicated to the Trustee in writing that it will lower or withdraw its rating on the Bonds as of such Mandatory Tender Date, notice of such new rating, or if no new rating is available, notice that any of such rating agencies may lower or withdraw such rating as of such Mandatory Tender Date. The Bonds are subject to mandatory tender on an Interest Rate Conversion Date for which a notice can be given. The Bonds are subject to mandatory tender under this paragraph on the first Business Day to occur on or after the seventh day following receipt by the Trustee of notice from the Credit Entity of the occurrence of an event of default under the Reimbursement Agreement, or that the Credit Entity will not reinstate the interest portion of the Credit Facility. Not later than the third Business Day after receipt by the Trustee of such notice, the Trustee shall send to all Owners by first class mail, postage prepaid, and to the Depository also by facsimile, a notice which shall contain the following information: (1) that an event of default has been declared under the P6401.1039\1139624.4 B-4 Reimbursement Agreement, or that the Credit Entity will not reinstate interest portion of the Credit Facility, and (2) that each Owner's Bond is subject to mandatory tender on the first Business Day to occur on after seventh day following the receipt by the Trustee of such notice from the Credit Entity. The Bonds are subject to mandatory tender on the effective date of any Alternate Credit Facility in accordance with the provisions of the Indenture. Owners of Bonds shall be required to tender the Bonds to the Tender Agent by 11:00 a.m., New York time, on any Mandatory Tender Date for purchase at a purchase price equal to the principal amount thereof, plus accrued interest thereon to the Mandatory Tender Date. So long as the Bonds are registered in the name of the Nominee, such tenders shall be made through the book-entry system. Any Untendered Bonds shall be deemed to have been tendered on a Mandatory Tender Date, whether or not the Bonds are in fact surrendered to the Tender Agent. In the event of a failure by Owners of Bonds to tender Bonds on the Mandatory Tender Date, said Owners of Untendered Bonds shall not be entitled to any payment (including any interest to accrue subsequent to the Mandatory Tender Date) other than the purchase price for such Untendered Bonds, and any Untendered Bonds shall no longer be entitled to the benefits of this Indenture, except for the purpose of payment of the purchase price thereof. Such Untendered Bonds shall be deemed purchased, canceled and no longer Outstanding under this Indenture. However, the purchase price will be paid only upon presentation of the Bonds to the Tender Agent. In the case of a Fixed Rate Conversion Date only, if the Remarketing Agent notifies the Trustee not less than fifteen days before the Fixed Rate Conversion Date that it cannot remarket all of the Bonds or if the requirements for the effectiveness of a Fixed Rate Conversion Date are not satisfied before the Fixed Rate Conversion Date, the Trustee shall give notice thereof by first-class mail, postage prepaid, to all Owners, the Remarketing Agent, the Credit Entity and the Authority and each of such parties shall be restored to their respective positions as if notice of the Fixed Rate Conversion Date had not been given and no mandatory tender shall occur. In addition to the mailed notice required by the preceding sentence, the Trustee shall deliver a duplicate copy of such notice to the Depository and the Credit Entity by telecommunications or overnight delivery. Prior to the Fixed Rate Conversion Date with respect to the Bonds, any Owner of the Bonds may give irrevocable written notice to the Tender Agent at its Principal Office and request that the Tender Agent purchase all or any part (in Authorized Denominations) of the Bonds then outstanding and registered in the name of such Owner at an amount or price equal to the unpaid principal amount thereof plus accrued and unpaid interest thereon to, but not including, the Business Day on which the Bonds are to be tendered to the Tender Agent (the "Optional Tender Date") and without premium. Such notice (the "Optional Tender Notice") shall be substantially in the form set forth in the Indenture and shall specify the Optional Tender Date (which shall be the date of receipt of the Optional Tender Notice by the Tender Agency, provided the Optional Tender Notice shall be received by the Tender Agent prior to 9:30 a.m., New York time, on the Optional Tender Date), the CUSIP Number, the principal amount being tendered in integral multiples of Authorized Denominations and, so long as the Bonds are registered in the name of the Nominee, such notice shall also specify the Participant number and the contact person of the P6401.1039\1139624.4 B-5 Participant. Upon receipt of an Optional Tender Notice, the Tender Agent shall, as soon as is practicable but in no event later than the close of business on the Business Day following the day of receipt of such Optional Tender Notice, give notice to the Trustee, the Authority, the Credit Entity and the Remarketing Agent of the Optional Tender Notice, the Optional Tender Date specified therein and the principal amount of Bonds to be purchased on such Optional Tender Date. Owners providing an Optional Tender Notice shall be required to tender the Bonds to the Tender Agent for purchase by 11:00 a.m., New York time,on the Optional Tender Date. In the event of a failure by Owners of Bonds to tender Bonds on the Optional Tender Date, said Owners of Bonds shall not be entitled to any payment (including any interest to accrue subsequent to the Optional Tender Date) other than the purchase price for such Untendered Bonds, and any Untendered Bonds shall no longer be entitled to the benefits of this Indenture, except for the purpose of payment of the purchase price thereof. Such Untendered Bonds shall be deemed purchased, canceled and no longer Outstanding under this Indenture. However, the purchase price will be paid only upon presentment of the Bonds to the Tender Agent. Upon the cancellation of Untendered Bonds, the Trustee shall execute new Bonds in the same aggregate principal amount as, and in substitution for the Bonds not so tendered by such Owner and shall hold, deliver and make available such new Bonds to the new Owner thereof in accordance with the provisions of this Indenture which shall be fully applicable notwithstanding that such new Bonds are executed in substitution for the Bonds not so tendered. From and after the Fixed Rate Conversion Date, the Tender Agent will not be required to purchase such Bonds on demand and optional tender by the Owners thereof in accordance with the Indenture. During the Annual Rate Period and on the Fixed Rate Conversion Date, the Bonds are subject to optional redemption in whole or in part (in integral multiples of $5,000) on any Business Day, at the option of the Authority, at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium. The Bonds are subject to mandatory redemption in part on the dates in the following years in the following amounts at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium: Redemption Date Redemption Date (September 1) Principal (September 1) Principal 2011 $ $ * * Maturity P6401.1039\1139624.4 B-6 The Bonds are subject to mandatory redemption on any Bond Payment Date, in whole or in part, from moneys drawn under the Credit Facility which shall be reimbursed from Net Proceeds following the deposit by the Trustee in the Lease Prepayment Account of the Redemption Fund of Net Proceeds deposited by the City under this Indenture, at least 45 days prior to a Bond Payment Date which have been credited towards the Prepayment made by the City pursuant to the Lease, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium; provided, however, that if there shall no longer be available a Credit Facility to secure the payment of principal and interest represented by the Bonds or if the Credit Facility does not permit a draw with respect to Prepayments, the Bonds are subject to redemption from Net Proceeds which the Trustee shall deposit in the Lease Prepayment Account of the Redemption Fund, to be used to redeem the Bonds by the Trustee as provided in the Lease and as provided herein. In the event of a partial redemption of Bonds from Net Proceeds or an optional redemption as described above, the forgoing annual sinking fund payments shall be reduced in equal percentages, as nearly as practicable, provided that the reductions shall be made in multiples of$5,000. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue thereon from and after the date fixed for redemption. The Authority and the Trustee may treat the Owner of this Bond (as evidenced by the Bond register) as its absolute owner for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. In the manner provided in the Indenture, the rights and obligations of the Authority and of the Owners of the Bonds, may (with certain exceptions as stated in the Indenture) be modified or amended with the consent of the Bank and the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding. No modification or amendment shall (1) extend the fixed maturity of any Bond, or reduce the amount of principal thereof or the rate of interest thereon, or extend the time of payment of interest thereon, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each Bond so affected, or (2) reduce the percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as otherwise provided therein, or deprive the Owners of the Bonds of the lien created by the Indenture on such Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all the Bonds then Outstanding, or (3) modify any of the rights or obligations of the Trustee without its written consent. It is hereby recited, certified and declared that any and all acts, conditions and things required to exist, to happen and to be performed precedent to and in the issuance of this Bond P6401.1039\1139624.4 B-7 exist, have happened and have been performed in due time, form and manner as required by the Constitution and the statutes of the State of California. This Bond shall not be valid and the Owner hereof shall not be entitled to any benefit hereunder unless this Bond shall have been authenticated by the Trustee by the signature of a duly authorized signatory. P6401.1039\1139624.4 B-8 IN WITNESS WHEREOF, THE PALM DESERT FINANCING AUTHORITY has caused this Bond to be executed on its behalf by the signature of the President of the governing board of the Authority and attested by the Secretary of the governing board of the Authority and this Bond to be authenticated manually by the Trustee and dated as of the date first above written. PALM DESERT FINANCING AUTHORITY By: President ATTEST: By: Secretary CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within-mentioned Indenture. Date of Authentication: WELLS FARGO BANK,NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory P6401.1039\1 139624.4 B-9 ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto (PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE) the within Bond, and does hereby irrevocably constitute and appoint attorney to transfer said Bond on the books of the bond Registrar with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed NOTICE: The signature(s) on this by an eligible guarantor institution. assignment must correspond with the name(s) as written upon the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever. P6401.1039\1139624.4 B-10 TENDER NOTICE The undersigned (a) hereby certifies that the undersigned is the lawful registered owner (or his duly authorized attorney) of this Bond on the date shown below as the "Date of Exercise of Owner's Option," (b) hereby gives notice to the Tender Agent of the exercise by the undersigned of its option to have this Bond, or a portion of this Bond, purchased on the purchase date in the principal amount (which amount shall be an integral multiple of $5,000) indicated below plus accrued interest, if any, with respect thereto pursuant to the terms of the Indenture, and (c) in order to exercise said option, hereby tenders and delivers this Bond to the Tender Agent for purchase on the purchase date designated below for a purchase price equal to the sum of the principal amount hereof tendered and accrued but unpaid interest to the date of purchase. Name and Address of Owner: Tax I. D. Date of Exercise of Owner's Option: Aggregate Principal Amount to be purchased and Bond numbers (must be an Authorized Denomination): Bond CUSIP(s): Purchase Date: Signature of Owner: Signature Guaranteed by: If applicable: Participant# Participant Contact Person: P6401.1039\1139624.4 B-11 EXHIBIT C (FORM OF FIXED RATE BOND) UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE OF TRUST) TO 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 THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IF REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), 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 No. R-1 $ PALM DESERT FINANCING AUTHORITY ENERGY INDEPENDENCE PROGRAM FIXED RATE LEASE REVENUE BOND, SERIES 2009 (FEDERALLY TAXABLE) Principal Interest Rate Payment Date Dated Date CUSIP September 1, 20_ [July 23, 2009] Registered Owner: Cede & Co. Principal Amount: THE PALM DESERT FINANCING AUTHORITY, a public body corporate and politic, duly organized and existing under the laws of the State of California (the "Authority"), for value received, hereby promises to pay (but solely from the funds hereinafter mentioned) to the above-referenced registered owner (the "Owner") or registered assigns subject to the terms of the Indenture, hereinafter mentioned, and any right to redemption, the Principal Amount stated above on the Principal Payment Date stated above upon surrender of this Bond at the corporate office of Wells Fargo Bank, National Association, (the "Trustee") in Los Angeles, California, and to pay the registered owner by check mailed by first class mail, postage prepaid, on each Bond Payment Date to the person whose name appears in the Bond register as the Owner thereof P6401.1039\1139624.4 C-1 as of the Record Date immediately preceding such Bond Payment Date (as each such term is hereinafter defined), interest on the balance of said Principal Amount from time to time remaining unpaid, at the rate per annum determined as hereinafter set forth, from the Bond Payment Date next preceding the date on which this Bond is authenticated unless it is (a) authenticated after a Record Date and on or before the next Bond Payment Date, in which event from such Bond Payment Date, or (b) authenticated on or before the first Record Date, in which event from the dated date set forth above; provided, however, that interest shall be paid by wire transfer of immediately available funds to an account in the United States of America to any registered Owner of at least$1,000,000 in aggregate principal amount of the Bonds, at the option of such Owner, according to wire instructions given in writing to the Trustee in accordance with procedures prescribed by the Trustee. Both principal and interest on this Bond are payable in lawful money of the United States of America, and principal is payable upon presentation of this Bond at the corporate office of the Trustee. The Bonds are secured in part by the Authority's right to receive certain lease payments ("Base Rental") under and pursuant to that certain Lease Agreement dated as of July 1, 2009 (the "Lease"), by and between the City of Palm Desert (the "City"), a municipal corporation duly organized and existing under the laws and constitution of the State of California, as lessee, and the Authority, as lessor, all of which rights to receive such Base Rental have been assigned without recourse pursuant to that certain Assignment Agreement dated as of July 1, 2009, by the Authority to the Trustee under the Indenture dated as of July 1, 2009 (the "Indenture"), by and between the Authority and the Trustee. This Bond is one of a duly authorized issue of Bonds of the Authority designated as the Palm Desert Financing Authority Energy Independence Program, Fixed Rate Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds"), all issued pursuant to and in conformity with the Constitution and laws of the State of California and particularly the Marks-Roos Local Bond Pooling Act of 1985 (Article 4 of Chapter 5 of Division 7 of the California Government Code, as amended) and the Indenture. Reference is hereby made to the Indenture for a specific description of the security therein provided for said Bonds, for the nature, extent and manner of enforcement of such security, for the covenants and agreements made for the benefit of the Bondowners, and for a statement of the rights of the Bondowners, and by the acceptance of this Bond the owner hereof assents to all of the terms, conditions and provisions of the Indenture. The principal of this Bond, the interest hereon and any premium payable upon redemption hereof, are secured by an irrevocable pledge of, and are payable solely from, the Revenues (as defined in the Indenture) and the moneys on deposit in certain other funds, all as more particularly set forth in the Indenture. THE OBLIGATION OF THE AUTHORITY TO PAY THE BONDS IS LIMITED TO THE REVENUES, INCLUDING BASE RENTAL PAYABLE BY THE CITY, PLEDGED THEREFOR PURSUANT TO THE INDENTURE AND DOES NOT CONSTITUTE AN OBLIGATION OF THE AUTHORITY FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE AUTHORITY TO PAY THE BONDS DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE STATE OF CALIFORNIA, OR ANY OF ITS POLITICAL P6401.1039\1139624.4 C-2 SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL IS ABATED DURING ANY PERIOD IN WHICH, BY REASON OF MATERIAL DAMAGE, DESTRUCTION OR CONDEMNATION, THERE IS SUBSTANTIAL INTERFERENCE WITH THE USE AND RIGHT OF POSSESSION BY THE CITY OF THE LEASED PROPERTY. FAILURE OF THE CITY TO PAY BASE RENTAL DURING ANY SUCH PERIOD SHALL NOT CONSTITUTE A DEFAULT UNDER THE LEASE, THE INDENTURE OR THIS BOND. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO PAY BASE RENTAL DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA, OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. The Owner of this Bond is entitled to receive, subject to the terms of the Indenture and any right of payment, redemption or purchase hereinafter provided for, (i) on the Principal Payment Date set forth above, upon surrender of this Bond at the corporate office of the Trustee, the Principal Amount specified above on the Principal Payment Date specified above or upon earlier redemption, and (ii) by check mailed by first class mail, postage prepaid, on each interest payment date to the person whose name appears in the Bond register as the Owner thereof as of the Record Date immediately preceding such Bond Payment Date (as each such term is hereinafter defined), interest on the balance of said Principal Amount from time to time remaining unpaid, at the rate per annum determined as hereinafter set forth, from the Bond Payment Date next preceding the date on which this Bond is authenticated unless it is (a) authenticated after a Record Date and on or before the next Bond Payment Date, in which event from such Bond Payment Date, or (b) authenticated on the first Record Date, in which event from the dated date set forth above; provided, however, that interest shall be paid by wire transfer of immediately available funds to any registered Owner of at least $1,000,000 in aggregate principal amount of the Bonds, at the option of such Owner, according to wire instructions given in writing to the Trustee in accordance with procedures prescribed by the Trustee. Interest on the Bonds will be payable each March 1 and September 1 commencing on the first March 1 or September 1 which is at least 75 days after the Fixed Rate Conversion Date. Interest due with respect to Bonds shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The Bonds are delivered in fully registered form and shall be in Authorized Denominations. Bonds may be exchanged at the Principal Office of the Trustee, in the manner and subject to the limitations and conditions provided in the Indenture, for an equal aggregate principal amount of Bonds of any Authorized Denominations. P6401.1039\1139624.4 C-3 The transfer of this Bond is registerable by the Owner hereof in person or by his attorney or legal representative at the corporate office of the Trustee, but only in the manner and subject to the limitations and conditions provided in the Indenture and upon surrender and cancellation of this Bond. Upon any such registration of transfer, the Trustee shall execute and deliver in exchange for this Bond a new Bond or Bonds, registered in the name of the transferee, of Authorized Denominations, in an aggregate principal amount equal to the principal amount of this Bond. [The following optional redemption provisions may be modified as determined by the Remarketing Agent pursuant to the Indenture. Replace the following optional redemption provisions with any modified optional redemption provisions, as appropriate.] The Bonds are subject to optional redemption in whole or in part (in integral multiples of $5,000) on any Business Day, at the option of the Authority at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption and without premium. The Bonds are subject to mandatory redemption in part on the dates in the following years in the following amounts at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium: Redemption Date Redemption Date (September 1) Principal (September 1) Principal 2011 $ $ * * Maturity [At the Fixed Rate Conversion Date, any annual sinking fund redemption which has not yet become due may be treated as a serial maturity of principal bearing interest at the Fixed Rate payable on March 1 and September 1 thereafter to maturity. In such event the mandatory redemption provision above needs to be deleted.] The Bonds are subject to mandatory redemption on any Bond Payment Date, in whole or in part, from moneys from Net Proceeds following the deposit by the Trustee in the Lease Prepayment Account of the Redemption Fund of Net Proceeds deposited by the City under this Indenture, at least 45 days prior to a Bond Payment Date which have been credited towards the P6401.1039\1139624.4 C-4 Prepayment made by the City pursuant to the Lease, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium. In the event of a partial redemption of Bonds from Net Proceeds or an optional redemption as described above, the forgoing annual sinking fund payments shall be reduced in equal percentages, as nearly as practicable, provided that the reductions shall be made in multiples of$5,000. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue thereon from and after the date fixed for redemption. The Authority and the Trustee may treat the Owner of this Bond (as evidenced by the Bond register) as its absolute owner for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. In the manner provided in the Indenture, the rights and obligations of the Authority and of the Owners of the Bonds, may (with certain exceptions as stated in the Indenture) be modified or amended with the consent of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding. No modification or amendment shall (1) extend the fixed maturity of any Bond, or reduce the amount of principal thereof or the rate of interest thereon, or extend the time of payment of interest thereon, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon without the consent of the Owner of each Bond so affected, or (2) reduce the percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as otherwise provided therein, or deprive the Owners of the Bonds of the lien created by the Indenture on such Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all the Bonds then Outstanding, or (3) modify any of the rights or obligations of the Trustee without its written consent. It is hereby recited, certified and declared that any and all acts, conditions and things required to exist, to happen and to be performed precedent to and in the issuance of this Bond exist, have happened and have been performed in due time, form and manner as required by the Constitution and the statutes of the State of California. This Bond shall not be valid and the Owner hereof shall not be entitled to any benefit hereunder unless this Bond shall have been authenticated by the Trustee by the signature of a duly authorized signatory. P6401.1039\1139624.4 C_5 IN WITNESS WHEREOF, THE PALM DESERT FINANCING AUTHORITY has caused this Bond to be executed on its behalf by the signature of the President of the governing board of the Authority and attested by the Secretary of the governing board of the Authority and this Bond to be authenticated manually by the Trustee and dated as of the date first above written. PALM DESERT FINANCING AUTHORITY By: President ATTEST: By: Secretary P6401.1039\1139624.4 C-6 CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within-mentioned Indenture. Date of Authentication: WELLS FARGO BANK,NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory P6401.1039\1139624.4 C-7 ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto (PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE) the within Bond, and does hereby irrevocably constitute and appoint attorney to transfer said Bond on the books of the bond Registrar with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed NOTICE: The signature(s) on this by an eligible guarantor institution. assignment must correspond with the name(s) as written upon the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever. P6401.1039\1139624.4 C-8 Recording requested by and when recorded mail to: Palm Desert Financing Authority c/o Richards, Watson& Gershon, A Professional Corporation 355 South Grand Avenue, 40th Floor Los Angeles, California 90071 Attention: Diana K. Chuang, Esq. SITE LEASE by and between the CITY OF PALM DESERT and the PALM DESERT FINANCING AUTHORITY Dated as of July 1, 2009 This document is exempt from recording fees pursuant to California Government Code Sections 6103 and 27383. This document is exempt from Documentary Transfer Tax pursuant to California Revenue and Taxation Code Section 11901, et seq. P6401.1039\1 139668.2 RWG DRAFT 6/7/09 SITE LEASE This Site Lease, dated as of July 1, 2009 (this "Site Lease"), is made by and between the CITY OF PALM DESERT, a municipal corporation duly formed and existing under the laws of the State of California(the "City"), as lessor, and the PALM DESERT FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California(the "Authority"), as lessee. RECITALS: A. The Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of January 26, 1989, by and between the City of Palm Desert and the Palm Desert Redevelopment Agency, and under the provisions of Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the "Act"), and is authorized pursuant to Article 4 of the Act to borrow money for the purpose of financing public capital improvements (as defined in the Act, including but not limited to paragraph (v) of Government Code Section 6546). B. The Authority is issuing its Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds") pursuant to an Indenture, dated as of even date herewith (the "Indenture"), by and between the Authority and Wells Fargo Bank,National Association, as trustee. C. A portion of the proceeds of the Bonds will be applied to assist the City with the financing of the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City pursuant to the City's Energy Independence Program. E. In connection with the issuance of the Bonds, the City desires to enter into this Site Lease with the Authority, whereby the Authority will lease the Leased Property (as defined below)from the City. F. Pursuant to a Lease Agreement, dated as of even date herewith, by and between the City and the Authority, the Authority will lease the Leased Property back to the City. NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: SECTION 1. DEFINITIONS. Terms used and not otherwise defined herein but which are defined in the Indenture shall have the meanings ascribed to them in the Indenture. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Site Lease, P6401.1039\1139668.2 1 have the meanings specified in this Section (the following definitions to be equally applicable to both the singular and plural forms of such defined terms): "Bonds" means the Authority's Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable). "Commencement Date" means the Closing Date with respect to the Bonds. "Indenture" means the Indenture, dated as of even date herewith, by and between the Authority and the Trustee, relating to the Bonds, as the same may be amended, supplemented or otherwise modified from time to time. "Lease"means the Lease Agreement, dated as of even date herewith, with respect to the Leased Property, by and between the Authority, as lessor, and the City, as lessee, and as the same may be amended, supplemented or otherwise modified from time to time. "Leased Property" means the Real Property and the commercial office complex and all other improvements constructed on the Real Property. "Real Property" means that certain real property more particularly described in Exhibit A attached hereto and is hereby made a part hereof. "Site Lease" means this Site Lease, as the same may be amended or modified from time to time according to the terms hereof. "Trustee" means Wells Fargo Bank, National Association, its successors and assigns, acting as the Trustee under the Indenture. SECTION 2. TERM. In consideration of the Authority issuing the Bonds, the City hereby leases the Leased Property to the Authority and the Authority hereby hires the Leased Property from the City, on the terms and conditions hereinafter set forth. The term of this Site Lease shall commence on the Commencement Date and shall end on the last day of the term of the Lease. SECTION 3. RENTAL. The Authority agrees to pay to the City, on the Commencement Date, the sum of $1.00, as advance rental for the use and right to possession of the Leased Property for the term of this Site Lease. SECTION 4. TITLE. In accordance with the Lease, the City shall obtain a CLTA (or, at the City's sole discretion, an ALTA) title insurance policy at the time of and dated as of the Commencement Date in an amount not less than the aggregate principal amount of the Bonds, payable to the Trustee, insuring the respective interests of the City and the Authority in the Leased Property, and insuring the validity of this Site Lease and the Lease, issued by a title insurance company P6401.1039\1139668.2 2 qualified to do business in the State of California and acceptable to the Trustee. To the extent V-; !rnitted under the Indenture, the costs of obtaining such title insurance policy or policies may be paid out of the sale proceeds of the Bonds. SECTION 5. DEFAULT. If: (a) the Authority shall fail to keep, observe or perform any term, covenant or condition contained herein to be kept or performed by the Authority, (b) (1) the Authority's interest in this Site Lease or any part thereof is assigned or transferred without the written consent of the City, either voluntarily or by operation of law or otherwise, except as provided in Section 9 hereof, or (2) any proceeding under the United States Bankruptcy Code or any federal or state bankruptcy, insolvency or similar law or any law providing for the appointment of a receiver, liquidator, trustee or similar official of the Authority or of all or substantially all of its assets is instituted by or with the consent of the Authority, or is instituted without its consent and is not permanently stayed or dismissed within 30 days, or (3) the Authority offers to the Authority's creditors to effect a composition or extension of time to pay the Authority's debts, or asks, seeks or prays for a reorganization or to effect a plan or reorganization or for readjustment of the Authority's debts, or (e) the Authority shall, in connection with any proceedings related to bankruptcy, insolvency, liquidation, winding up or similar events, make a general assignment or any assignment for the benefit of the Authority's creditors, then the Authority shall be deemed to be in default hereunder and it shall be lawful for the City to exercise any and all rights and remedies available pursuant to law; provided, however, that, so long as any Bonds remain outstanding, the City shall have no power to terminate this Site Lease by reason of any default on the part of the Authority. Neither the City nor the Authority shall in any event be in default in the performance of any of its obligations hereunder or imposed by law unless and until the City or the Authority (as the case may be) shall have failed to perform such obligation within 30 days after notice by the Authority or the City (as the case may be)to the nonperforming party properly specifying wherein such party has failed to perform any such obligation. SECTION 6. EMINENT DOMAIN. If the whole or any part of the Leased Property shall be taken under the power of eminent domain, the interest of the Authority shall be recognized and any condemnation award shall be applied as provided in Section 7.01 of the Lease. SECTION 7. RIGHT OF ENTRY. The City and its assignees shall have the right to enter any part of the Leased Property during reasonable business hours (and in emergencies at all times) (a) to inspect the same, (b) for any purpose connected with the City's or the Authority's rights or obligations under this Site Lease and (c) for all other lawful purposes. P6401.1039\1139668.2 3 SECTION 8. QUIET ENJOYMENT BY THE AUTHORITY. The Authority shall at all times during the term of this Site Lease peaceably and quietly have, hold and enjoy the real property leased hereunder without suit, trouble or hindrance from the City, subject to the rights granted to the City under the Lease, and subject to the Authority's compliance with the terms and provisions hereof. SECTION 9. ASSIGNMENTS AND SUBLEASES. Unless the City shall be in default under this Site Lease, the Authority may not, without the written consent of the City, assign its rights hereunder or sublet the Leased Property, except as provided in the Lease. SECTION 10. WAIVER OF PERSONAL LIABILITY. All liabilities hereunder on the part of the Authority shall be solely liabilities of the Authority as a separate legal entity, and no member, officer or employee of the Authority 4.1 1 at any time or under any circumstances be individually or personally liable hereunder for anything done or omitted to be done by the Authority hereunder. SECTION 11. TAXES. The City shall be responsible for the payment of any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Leased Property. SECTION 12. LAW GOVERNING. This Site Lease shall be governed exclusively by the provisions hereof and by the laws of the State of California. SECTION 13. NOTICES. All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or by facsimile transmission or if mailed by United States registered or certified mail, return receipt requested, postage pre-paid, and, if to the City, addressed to the City Manager, City of Palm Desert, 73-510 Fred Waring Drive, Palm Desert, California 92260 or if to the Authority, addressed to the Chief Administrative Officer, Palm Desert Financing Authority, 73-510 Fred Waring Drive, Palm Desert, California 92260, or to such other addresses as the respective parties may from time to time designate by notice in writing. SECTION 14. VALIDITY AND SEVERABILITY. If for any reason this Site Lease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the City or by the Authority, or if for any reason it is held by such a court that any of the covenants and conditions of the Authority hereunder is P6401.1039\1139668.2 4 unenforceable for the full term hereof, then and in such event this Site Lease is and shall be deemed to be a lease from year to year and all of the rental and other terms, provisions and conditions of this Site Lease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect. SECTION 15. WAIVER OF DEFAULT. Failure of the City to take advantage of any default on the part of the Authority shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up between the parties in the course of administering this Site Lease be construed to waive or to lessen the right of the City to insist upon performance by the Authority of any term, covenant or condition hereof, or to exercise any rights given the City on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any subsequent default. The acceptance of rent hereunder shall not be, nor be construed to be, a waiver of any term, covenant or condition of this Site Lease. SECTION 16. SECTION HEADINGS. All section headings contained are for convenience of reference only and are not intended to define or limit the scope of any provision of this Site Lease. SECTION 17. AMENDMENTS. This Site Lease may not be amended unless such amendment is agreed upon in writing by the parties hereof; provided that, that no such amendment shall materially affect the interests and rights of the Trustee or the Owners of the Bonds under the Indenture or the Lease unless (i) there shall have been delivered to the Trustee an opinion of Bond Counsel that such amendment will not result in any material impairment of the security given to the Owners of the Bonds with respect to the scheduled principal and interest payments thereof, or (ii) the Trustee shall have obtained written consent of the affected Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding to such amendment. A substitution of the Leased Property under this Site Lease and the Lease shall not be considered as materially affecting the interests and rights of the Trustee or the Owners of the Bonds if such substitution complies the provisions of the Lease. SECTION 18. EXECUTION. This Site Lease may be executed in any number of counterparts, each of which shall be deemed to an original, but all together shall constitute but one and the same instrument. P6401.1039\1139668.2 5 IN WITNESS WHEREOF, the City and the Authority have caused this Site Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. CITY OF PALM DESERT By Name: Robert A. Spiegel Title: Mayor PALM DESERT FINANCING AUTHORITY By Name: John M. Wohlmuth Title: Chief Administrative Officer P6401.1039\1139668.2 6 EXHIBIT A Description of the Real Property PARCEL 1: ALL THAT PORTION OF TRACT NO. 19074-1, IN THE CITY OP PALM DESERT, AS SHOWN BY MAP ON FILE IN BOOK 141 PAGES 58 THROUGH 64, INCLUSIVE, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER OF LOT "A" OF SAID TRACT NO. 19074-1; THENCE SOUTH 89° 51' 00" WEST ALONG THE NORTH LINE OF SAID LOT"A", A DISTANCE OF 406.00 FEET; THENCE LEAVING SAID NORTH LINE,NORTH 00° 09' 17" EAST ALONG A LINE PARALLEL WITH THE EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 201.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING NORTH 00° 09' 17" EAST ALONG SAID PARALLEL LINE A DISTANCE OF 181.00 FEET; THENCE SOUTH 89° 50' 43" EAST, A DISTANCE OF 42.00 FEET; THENCE NORTH 00° 09' 17" EAST, ALONG A LINE PARALLEL WITH SAID EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 76.00 FEET; THENCE NORTH 43° 47' 18"EAST, A DISTANCE OF 147.81 FEET; THENCE SOUTH 89° 50' 43" EAST, A DISTANCE OF 228.00 FEET TO A POINT IN A LINE PARALLEL WITH AND DISTANT 34.00 FEET WESTERLY OF MEASURED AT RIGHT ANGLES TO THE EAST LINE OF SAID TRACT NO. 19074-1; THENCE SOUTH 00° 09' 17" WEST ALONG SAID PARALLEL LINE A DISTANCE OF 362.00 FEET TO A POINT IS NORTH 00° 09' 17"EAST, A DISTANCE OF 201.00 FEET FROM SAID NORTH LINE OF SAID LOT"A"; THENCE SOUTH 89° 51' 00" WEST ALONG A LINE PARALLEL WITH AND DISTANT 201.00 FEET NORTHERLY OF, MEASURED AT RIGHT ANGLES TO SAID NORTH LINE OF SAID LOT"A", A DISTANCE OF 372.00 FEET, TO THE TRUE POINT OF BEGINNING. PARCEL 2: ALL THAT PORTION OF TRACT NO. 19074-1, IN THE CITY OF PALM DESERT, AS SHOWN BY MAP ON FILE IN BOOK 141 PAGES 58 THROUGH 64, INCLUSIVE, OF P6401.1039\1139668.2 A-1 MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER OF SAID LOT"A" OF SAID TRACT NO. 19074-1; THENCE SOUTH 89° 51' 00"WEST ALONG THE NORTH LINE OF SAID LOT"A", A DISTANCE OF 34.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 89° 51' 00" WEST ALONG SAID NORTH LINE A DISTANCE OF 372.00 FEET; THENCE LEAVING SAID NORTH LINE,NORTH OP° 09' 17" EAST, ALONG A LINE PARALLEL WITH THE EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 201.00 FEET; THENCE NORTH 89° 51' 00" EAST, ALONG A LINE PARALLEL WITH THE NORTH L THE OF SAID LOT"A", A DISTANCE OF 372.00 FEET TO THE INTERSECTION WITH A LINE PARALLEL WITH AND DISTANT 34.00 FEET WESTERLY OF, MEASURED AT RIGHT ANGLES TO THE EAST LINE OF SAID TRACT NO. 19074-1; THENCE SOUTH 00° 09' 17" WEST ALONG SAID PARALLEL LINE A DISTANCE OF 201.00 FEET TO THE TRUE POINT OF BEGINNING. APN: 622-260-081 and 622-260-083 P6401.1039\1139668.2 A-2 STATE OF CALIFORNIA }ss. COUNTY OF RIVERSIDE } On , before me, , a notary public, personally appeared who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (This area for official notarial seal) P 6401.103 9\113 966 8.2 STATE OF CALIFORNIA }ss. COUNTY OF RIVERSIDE } On before me, , a notary public, personally appeared who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by . his/her signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (This area for official notarial seal) P 6401.103 9\113 966 8.2 LEASE AGREEMENT by and between the PALM DESERT FINANCING AUTHORITY and the CITY OF PALM DESERT RELATING TO PALM DESERT FINANCING AUTHORITY ENERGY INDEPENDENCE PROGRAM VARIABLE RATE DEMAND LEASE REVENUE BONDS, SERIES 2009 (FEDERALLY TAXABLE) Dated as of July 1, 2009 P6401.1039\1139611.7 RWG DRAFT 6/18/09 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS 1 SECTION 1.01. Definitions 1 ARTICLE II THE LEASED PROPERTY 5 SECTION 2.01. Lease of the Leased Property. 5 SECTION 2.02. Quiet Enjoyment. 5 SECTION 2.03. Right of Entry and Inspection. 5 SECTION 2.04. Prohibition Against Encumbrance or Sale. 5 SECTION 2.05. Liens 6 SECTION 2.06. Substitution or Removal of Leased Property. 6 SECTION 2.07. Changes to the Leased Property 8 SECTION 2.08. Title to the Leased Property. 8 SECTION 2.09. Acquisition of Additional Property 8 ARTICLE III TERM OF THE LEASE 8 SECTION 3.01. Commencement of the Lease 8 SECTION 3.02. Termination of the Lease. 8 ARTICLE IV USE OF PROCEEDS; POSSESSION OF THE LEASED PROPERTY; TAX COVENANTS 9 SECTION 4.01. Use of Proceeds 9 SECTION 4.02. Possession of the Leased Property. 9 SECTION 4.03. Continuing Disclosure. 9 ARTICLE V RENTAL PAYMENTS 9 SECTION 5.01. Rental Payments 9 SECTION 5.02. Annual Budgets; Reporting Requirements. 11 SECTION 5.03. Application of Rental Payments. 12 SECTION 5.04. Rental Abatement 12 SECTION 5.05. Prepayment of Rental Payments. 13 SECTION 5.06. Obligation to Make Rental Payments. 13 ARTICLE VI MAINTENANCE; TAXES; INSURANCE AND OTHER CHARGES 14 SECTION 6.01. Maintenance of the Leased Property by the City 14 SECTION 6.02. Taxes, Other Governmental Charges and Utility Charges 14 SECTION 6.03. Insurance. 15 SECTION 6.04. Advances 16 P6401.1039\1139611.7 _i_ TABLE OF CONTENTS (continued) Page ARTICLE VII DAMAGE, DESTRUCTION, TITLE DEFECT AND CONDEMNATION 17 SECTION 7.01. Damage, Destruction, Title Defect and Condemnation; Use of Net Proceeds. 17 ARTICLE VIII DISCLAIMER OF WARRANTIES; VENDOR'S WARRANTIES; USE OF THE LEASED PROPERTY 18 SECTION 8.01. Disclaimer of Warranties. 18 SECTION 8.02. Vendor's Warranties. 18 SECTION 8.03. Use of the Leased Property. 18 ARTICLE IX ASSIGNMENT AND INDEMNIFICATION 19 SECTION 9.01. Assignment by Authority. 19 SECTION 9.02. Assignment by City and Sublease 19 SECTION 9.03. Indemnification. 19 ARTICLE X DEFAULT 20 SECTION 10.01. Default; Assignment of Rents. 20 ARTICLE XI MISCELLANEOUS 23 SECTION 11.01. Notices. 23 SECTION 11.02. Binding Effect. 24 SECTION 11.03. Third Party Beneficiaries. 24 SECTION 11.04. Net-Net-Net Lease. 24 SECTION 11.05. Amendments. 24 SECTION 11.06. Partial Invalidity 25 SECTION 11.07. California Law. 25 SECTION 11.08. Section Headings. 25 SECTION 11.09. Execution; Recordation 26 SECTION 11.10. Consent of Credit Entity Required 26 EXHIBIT A—Legal Description of Real Property A-1 EXHIBIT B—Aggregate Annual Base Rental Payment Schedule B-1 P6401.1039\1139611.7 -ii- LEASE AGREEMENT This Lease Agreement (the "Lease"), is executed and entered into as of July 1, 2009, by and between the Palm Desert Financing Authority, a joint powers authority, duly created and validly existing under the Constitution and laws of the State of California (the "Authority"), as lessor, and the City of Palm Desert, a municipal corporation duly organized and existing under the Constitution and laws of the State of California(the"City"), as lessee; WITNESSETH: WHEREAS, the Authority has determined to issue its Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds") to finance of the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City pursuant to the City's Energy Independence Program(collectively,the "Project"); WHEREAS, the City will lease to the Authority its fee or leasehold interest in certain real property and improvements thereon (the "Leased Property") pursuant to a Site Lease, dated as of July 1, 2009 (the"Site Lease"); and WHEREAS, the Authority, concurrently with the execution of the Site Lease, will lease the Leased Property back to the City pursuant to this Lease, in consideration for Base Rental payments equal to the principal and interest coming due on the Bonds; and WHEREAS, all acts and conditions required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Lease, do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Lease. NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any amendment hereof have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein. All other capitalized terms used herein without definition shall have the meanings as set forth in the Indenture. P6401.1039\1139611.7 1 Additional Rental "Additional Rental" means all amounts payable by the City pursuant to Section 5.01(b). Annual Rent "Annual Rent" shall have the meaning ascribed to such term in Section 5.01(c). Authority "Authority" means the Palm Desert Financing Authority, a joint powers authority duly created and lawfully existing under the Constitution and laws of the State. Base Rental "Base Rental" means all amounts payable by the City as Base Rental pursuant to Section 5.01(a). City "City" means the City of Palm Desert, a municipal corporation duly organized and existing under the Constitution and laws of the State. Credit Entity "Credit Entity" means Wells Fargo Bank, National Association, as the issuer of the Credit Facility being delivered on the Closing Date with respect to the Bonds and thereafter the issuer of any Alternate Credit Facility delivered under the Indenture in effect from time to time. Energy Independence Program "Energy Independence Program" means the City of Palm Desert Energy Independence Program heretofore established pursuant to Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code, commencing with Section 5898.10, to finance the Project through contractual assessments. Earned Excess Amount "Earned Excess Amount" shall have the meaning ascribed to such term in Section 5.01(c). Hazardous Substances "Hazardous Substances" means any substances, wastes, pollutants or contaminants now or hereafter included in such (or any similar) term under any federal, state or local statute, regulation, ordinance or code now existing or hereafter enacted or amended. P6401.1039\1139611.7 2 Indenture "Indenture" means that certain Indenture dated as of July 1, 2009, by and between the Authority and Wells Fargo Bank, National Association, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance therewith. Insurance Consultant "Insurance Consultant" means an individual or firm employed by the City as an independent insurance consultant, experienced in the field of risk management. Lease "Lease"means this Lease Agreement dated as of July 1, 2009,by and between the City and the Authority, as originally executed and as it may from time to time be amended or supplemented in accordance herewith. Lease Payment Date "Lease Payment Date" means the 25th day of the month preceding each Bond Payment Date (or if the 25th day of the month is not a Business Day, on the next succeeding Business Day). Leased Property "Leased Property" means the Real Property and the commercial office complex and all other improvements constructed on the Real Property. Net Proceeds "Net Proceeds" means any insurance proceeds or condemnation award paid with respect to the Leased Property remaining after payment therefrom of all expenses incurred in the collection thereof. Opinion of Counsel "Opinion of Counsel" means a written opinion of counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the City. Permitted Encumbrances "Permitted Encumbrances" means as of any particular time: (i) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to Section 6.02, permit to remain unpaid; (ii) this Lease (and/or the "short form" or "Memorandum of Lease Agreement" pursuant to Section 11.09) and the Site Lease; (iii) the Assignment Agreement; (iv) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed or perfected in the manner prescribed by law after the date of this Lease; (v) easements, P6401.1039\1139611.7 3 rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the date of initial issuance of the Bonds and which the City certifies in writing will not materially impair the beneficial use and occupancy of the Leased Property by the City; and (vi) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of a "short form" or "Memorandum of Lease Agreement" pursuant to Section 11.09 and to which the Authority, the City and the Credit Entity consent in writing and which the City certifies will not materially impair the use of the Leased Project or any Substituted Property, as the case may be. Project "Project" means the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City pursuant to the City's Energy Independence Program. Real Property "Real Property" means that certain real property more particularly described in Exhibit A to this Lease. Removal "Removal" means the release of all or a portion of the Leased Property from the leasehold hereof as provided in Section 2.06. Rental Period "Rental Period" shall have the meaning ascribed to such term in Section 5.01(c). Site Lease "Site Lease" means that certain Site Lease, dated as of July 1, 2009, by and between the City, as lessor, and the Authority, as lessee, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance therewith. Substituted Property "Substituted Property" shall have the meaning given to such term in Section 2.06. Substitution "Substitution" means the release of all or a portion of the Leased Property from the leasehold hereof, and the lease of substituted real property and improvements hereunder as provided in Section 2.06. P6401.1039\1139611.7 4 Tenant Lease Agreement "Tenant Lease Agreements" means, collectively, the lease agreements for office space in the Leased Property, each by and between the City and the respective tenant, from time to time in effect, and as further described in Section 10.01(b)(1). Tenant Rents and Profits "Tenant Rents and Profits" shall have the meaning ascribed to such term in Section 10.01(b)(1). Trustee "Trustee" means Wells Fargo Bank, National Association, a national banking association existing under and by virtue of the laws of the United States of America, the trustee acting in its capacity as such under the Indenture, or any successor as therein provided. ARTICLE II THE LEASED PROPERTY SECTION 2.01. Lease of the Leased Property. The Authority hereby leases to the City, and the City hereby rents and hires from the Authority, the Leased Property on the conditions and terms hereinafter set forth. The City hereby agrees and covenants that during the term hereof, except as hereinafter provided, it will use the Leased Property for public purposes so as to afford the public the benefits contemplated hereby and to permit the Authority to carry out its agreements and covenants contained herein and in the Indenture, and the City hereby further agrees and covenants that during the term hereof that it will not abandon or vacate the Leased Property. SECTION 2.02. Quiet Enjoyment. The parties mutually covenant that the City, so long as it observes and performs the agreements, conditions, covenants and terms required to be observed or performed by it contained herein and is not in default hereunder, shall at all times during the term hereof peaceably and quietly have, hold and enjoy the Leased Property without suit,trouble or hindrance from the Authority. SECTION 2.03. Right of Entry and Inspection. The Authority shall have the right to enter the Leased Property and inspect the Leased Property during reasonable business hours (and in emergencies at all times) for any purpose connected with the Authority's rights or obligations hereunder and for all other lawful purposes. SECTION 2.04. Prohibition Against Encumbrance or Sale. The City and the Authority will not create or suffer to be created any mortgage, pledge, lien, charge or encumbrance upon the Leased Property, except Permitted Encumbrances. The City and the Authority will not sell or otherwise dispose of the Leased Property or any property essential to the proper operation of the Leased Property, except as otherwise provided herein. P6401.1039\1139611.7 5 SECTION 2.05. Liens. In the event the City shall at any time during the term hereof cause any improvements to the Leased Property to be constructed or materials to be supplied in or upon or attached to the Leased Property, the City shall pay or cause to be paid when due all sums of money that may become due or purporting to be due for any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the City in, upon, about or relating to the Leased Property and shall keep the Leased Property free of any and all liens (except for Permitted Encumbrances) against the Leased Property or the Authority's interest therein. In the event any such lien attaches to the Leased Property, the City shall cause such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due. If any such lien shall be reduced to final judgment and such judgment or any process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the City shall forthwith pay and discharge or cause to be paid and discharged such judgment. The City shall, to the maximum extent permitted by law, indemnify and hold the Authority, the Trustee and the Credit Entity and their respective directors, officers and employees harmless from, and defend each of them against, any claim, demand, loss, damage, liability or expense (including attorneys' fees) as a result of any such lien or claim of lien against the Leased Property or the Authority's interest therein. SECTION 2.06. Substitution or Removal of Leased Property. (a) The City may amend this Lease to substitute additional real property and/or improvements (the"Substituted Property") for existing Leased Property, or to remove real property or improvements from the definition of Leased Property, upon compliance with all of the conditions set forth in subsection(b). After a Substitution or Removal, the part of the Leased Property for which the Substitution or Removal has been effected shall be released from the leasehold hereunder and all right, title and interest in and to such Leased Property shall vest in the City. In connection with such release of part of the Leased Property, the Authority shall execute such conveyances, deeds, and other documents, and shall take or cause to be taken all actions that are necessary to provide that such released Leased Property constitutes a valid legal parcel, the ownership of which is recordable in the real property records of the County of Riverside for which a title insurance policy may be legally obtained, as may be necessary to effect such vesting of record. (b) No Substitution or Removal shall take place hereunder until the City delivers to the Authority, the Credit Entity and the Trustee the following: (1) A Certificate of the City containing, in the event of a Removal, a description of all or part of the Leased Property to be released and, in the event of a Substitution, a description of the Substituted Property to be substituted in its place and a certification that the remaining useful life of the Substituted Property is not less than remaining term of the Lease; (2) A Certificate of the City stating that the fair rental value of the Leased Property after a Substitution or Removal, in each year during the remaining term of this Lease is at least equal to the Base Rental payments in each such year attributable P6401.1039\1139611.7 6 to the Leased Property prior to said Substitution or Removal, as determined by the City on the basis of evidence satisfactory to Bond Counsel and the Credit Entity of the fair rental value of the Leased Property after said Substitution or Removal; (3) An Opinion of Counsel to the effect that the amendments hereto contemplating Substitution or Removal have been duly authorized, executed and delivered and constitute the valid and binding obligations of the City and the Authority enforceable in accordance with their terms; (4) In the event of a Substitution, a policy of title insurance in an amount equal to the same proportion of the principal amount as the Base Rental payments for the Substituted Property bears to the total Base Rental payments, insuring the City's leasehold interest in the Substituted Property (except any portion thereof which is not real property) subject to Permitted Encumbrances, together with an endorsement thereto making said policy payable to the Trustee for the benefit of the Owners of the Bonds and the Credit Entity; (5) In the event of a Substitution, an opinion of the City Attorney of the City to the effect that the exceptions, if any, contained in the title insurance policy referred to in (4) above do not interfere with the beneficial use and occupancy of the Substituted Property described in such policy by the City for the purposes of leasing or using the Substituted Property; (6) Evidence that the City has complied with the covenants contained in clauses (1) and (2) of Section 6.03 with respect to the Substituted Property; (7) Evidence that the City has delivered to any rating agency then rating the Bonds copies of the certificates and appraisal described in clauses (1) and (2) above, and that the rating agency has indicated that such Removal or Substitution, in and of itself, will not result in a lower rating on the Bonds; (8) Written Consent of the Credit Entity; and (9) Evidence that the parties hereto have amended this Lease (and any "short form" or"Memorandum of Lease Agreement" recorded pursuant to Section 11.09) to properly reflect such Removal or Substitution. (c) The City may grant or vacate, or cause the granting or vacating of, any easement burdening or benefiting the Leased Property, provided that the City shall satisfy the requirements of subsections (b)(1)through(b)(7) (such requirements understood to pertain to the granting or vacating of easements instead of the addition or removal of property), which are hereby declared to be conditions precedent to such grant or vacation. The City shall not be entitled to any reduction, diminution, extension or other modification of the Base Rental or Additional Rental payments whatsoever as a result of such granting and/or vacating of easements. P6401.1039\1139611.7 7 SECTION 2.07. Changes to the Leased Property. Subject to Sections 2.04, 2.05 and 4.02 and with the prior written consent of the Credit Entity, the City shall, at its own expense, have the right to remodel the Leased Property or to make additions, modifications and improvements to the Leased Property. All such additions, modifications and improvements shall thereafter comprise part of the Leased Property and be subject to the provisions of this Lease. Such additions, modifications and improvements shall not in any way damage the Leased Property or cause it to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of any additions, modifications and improvements made pursuant to this Section, shall be of a value which is at least equal to the value of the Leased Property immediately prior to the making of such additions, modifications and improvements. SECTION 2.08. Title to the Leased Property. During the term of this Lease, title to the Leased Property shall remain in the City. SECTION 2.09. Acquisition of Additional Property. The City covenants to use its best effort to acquire such additional real property as may be necessary or appropriate for the operation of the Leased Property, and, by executing appropriate amendments, to lease such property to the Authority pursuant to an appropriate ground lease and to sublease such property from the Authority pursuant to this Lease. ARTICLE III TERM OF THE LEASE SECTION 3.01. Commencement of the Lease. The term hereof shall commence as of [July 23, 2009], or the date the "short form" or "Memorandum of Lease Agreement" is recorded pursuant to Section 11.09, whichever is later, and shall end on September 1, 20_, unless such term is sooner terminated or is extended as hereinafter provided. If on September 1, 20 , the Indenture shall not be discharged by its terms or if the rental payable hereunder shall have been abated at any time and for any reason or any amounts remain owing to the Credit Entity under the Reimbursement Agreement, then the term of this Lease shall be extended until ten (10) days after all Bonds shall be fully paid and all amounts owing to the Credit Entity under the Reimbursement Agreement have been paid; once the Indenture shall be discharged by its terms, the term of this Lease shall thereupon end, except that the term shall in no event be extended beyond , 20 . SECTION 3.02. Termination of the Lease. This Lease will terminate upon the earlier of either of the following events: (a) a default by the City and the Authority's election to terminate this Lease under Article X; or (b) the payment by the City of all Base Rental payments, Additional Rental and all other amounts authorized or required to be paid by it hereunder. P6401.1039\1139611.7 8 ARTICLE IV USE OF PROCEEDS; POSSESSION OF THE LEASED PROPERTY; TAX COVENANTS SECTION 4.01. Use of Proceeds. The parties hereto acknowledge and agree that the proceeds of the Bonds will be used to (i) finance the Project, (ii) fund a reserve fund for the Bonds; and(iii)pay for Costs of Issuance. SECTION 4.02. Possession of the Leased Property. The City currently has possession of the Leased Property. SECTION 4.03. Continuing Disclosure. The City hereby covenants and agrees that it will comply with the continuing disclosure requirements promulgated under Securities and Exchange Commission Rule 15c2-12(b)(5), as it may from time to time hereafter be amended or supplemented. The City further covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Lease, failure of the City to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default hereunder; however, the Trustee (as assignee of the Authority under the Assignment Agreement) may (and, at the request of any participating underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds, or the Credit Entity, upon receipt of indemnification against its fees, costs and expenses reasonably acceptable to the Trustee, shall) or any Bondowner may take any such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order,to cause the City to comply with its obligations under this Section 4.03. ARTICLE V RENTAL PAYMENTS SECTION 5.01. Rental Payments. The City agrees to pay to the Authority, its successors or assigns, without deduction or offset of any kind, as rental for the use and occupancy of the Leased Property, the following amounts at the following times: (a) Base Rental. The City shall pay to the Authority as Base Rental hereunder rental payments with interest and principal components in accordance with the Base Rental Payment Schedule set forth in Exhibit B attached hereto and made a part hereof. Base Rental Payments shall be made by the City on the twenty-fifth day of the month immediately preceding each Bond Payment Date (or if the 25th day of the month is not a Business Day, on the next succeeding Business Day) (the "Lease Payment Date"), which shall be sufficient in both time and amount to pay when due the principal of the Bonds, as set forth in Exhibit B hereto, as such Exhibit B may be amended and supplemented from time to time, together with interest on the Bonds to be calculated by the Trustee as provided in Section 2.02.A of the Indenture. The interest components of the Base Rental payable by the City hereunder shall be paid by the City as and shall constitute interest paid on the principal components of the Base Rental payable by the City hereunder. Payment of Base Rental and Additional Rental for each rental payment period during the term hereof shall constitute the total rental for such rental payment period, and shall P6401.1039\1139611.7 9 be paid by the City in each rental payment period for and in consideration of the right to the use and occupancy, and the continued quiet enjoyment, of the Leased Property during the rental payment period for which such rental is paid. The City shall provide written notice to the Trustee, the Credit Entity and the Authority at least five (5) Business Days prior to any Lease Payment Date upon which the City expects to be unable to appropriate and pay the Base Rental payment due on such Lease Payment Date, informing the Trustee and the Authority of such inability to appropriate and pay. If the term of this Lease shall have been extended pursuant to Section 3.01, Base Rental payments shall continue to be due on Lease Payment Dates, and payable as hereinabove described, continuing to and including the date of termination of this Lease. Upon such extension of this Lease, the principal and interest components of the Base Rental shall be established so that the principal components will in the aggregate be sufficient to pay all unpaid principal components with interest components sufficient to pay all unpaid interest components plus interest on the extended principal components at a rate equal to the rate of interest on the principal component of the Base Rental payable on the Lease Payment Date with respect to September 1 of the year after the date of such extension. The parties hereto have agreed and determined that the Base Rental payments shown in the Base Rental Payment Schedule set forth in Exhibit B hereto represent the fair market value of the Leased Property. In making such determination, consideration has been given to the costs of the Leased Property, the fair market value thereof, the other obligations of the parties hereunder, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City, its residents and the general public. Each installment of Base Rental and Additional Rental payable hereunder shall be paid in lawful money of the United States of America to or upon the order of the Authority at the office of the Trustee. To the extent permitted by law, any such installment of Base Rental or Additional Rental accruing hereunder which shall not be paid when due shall bear interest at the rate equal to the interest rate applicable to the delinquent installment of Base Rental or, in the case of Additional Rental (other than amounts owing to the Credit Entity under the Reimbursement Agreement), the interest rate on the Bonds on the date the Additional Rental was not paid, and in the case of amounts owing to the Credit Entity under the Reimbursement Agreement, at the rate of interest set forth in the Reimbursement Agreement. All such delinquent installments of Base Rental and the interest thereon shall be deposited in the Lease Payment Account of the Debt Service Fund. All such delinquent installments of Additional Rental and interest thereon shall be paid to the order of the Authority, the Trustee or the Credit Entity. Notwithstanding any dispute between the Authority, or the Trustee and the City, the City shall make all rental payments when due hereunder without deduction or offset of any kind and shall not withhold any rental payments pending the final resolution of such dispute. (b) Additional Rent. The City shall pay to the Authority as Additional Rental hereunder such amounts in each year as shall be required by the Authority for the payment in full of payments to the Credit Entity required by the Reimbursement Agreement (other than reimbursement for draws on the Credit Facility which are payable from Base Rental), all costs P6401.1039\1139611.7 10 and expenses incurred by the Authority, and the Trustee in connection with the execution, performance or enforcement hereof or any assignment hereof, of the Indenture and of the lease of the Leased Property to the City, including but not limited to payment of all fees, costs and expenses and all administrative costs of the Authority, and the Trustee in connection with the Leased Property, the Lease, and the Indenture and all taxes, assessments and governmental charges of any nature whatsoever hereafter levied or imposed by any governmental authority against the Authority, the Leased Property, or the rentals and the other payments required to be made by the City hereunder. Such Additional Rental shall be billed to the City by the Authority, or the Trustee from time to time, together with a statement certifying that the amount so billed has been paid by the Authority, or the Trustee for one or more of the items above described, or that such amount is then payable by the Authority, or the Trustee for one or more of such items, and all amounts so billed shall be due and payable by the City within thirty (30) days after receipt of each bill therefor by the City. (c) Earned Excess Amount. Notwithstanding anything contained herein to the contrary, the difference in each annual lease period commencing on commencing on August 24 and ending on each August 25 (a "Rental Period"), or portion thereof, between (i) the fair rental value of the Leased Property, which the parties agree for this purpose is an amount equal to gross Tenant Rents and Profits actually received by the City during such Rental Period, and (ii) the Base Rental and Additional Rental, actually paid by the City during such Rental Period (together referred to as "Annual Rent"), or portion thereof, to the extent that such Annual Rent actually paid is less than such fair rental value (the "Earned Excess Amount"), shall be allocated by the City to a reserve account held by the City with respect to the Leased Property and, to the extent necessary, be paid by the City in any future Rental Period, or portion thereof, in which the sum of the Annual Rent exceeds the fair rental value in such Rental Period, or portion thereof; provided, however, that any such Earned Excess Amount which, when added to unused Earned Excess Amounts from prior years, is greater than Five Million Five Hundred Thousand Dollars ($5,500,000) shall, to the extent of that difference, be discharged, shall not be paid by the City to the Authority in any future year, and may be used by the City for any lawful purpose. The obligation to pay any portion of the Earned Excess Amount shall not arise until the Rental Period during which such Earned Excess Amount is required to be applied and in no event shall any Earned Excess Amount be used to pay Base Rental which would have accrued during any period of abatement with respect to such Base Rental. SECTION 5.02. Annual Budgets; Reporting Requirements. The City covenants to take action as may be necessary to include all such rental payments due hereunder in its annual budgets and to make the necessary annual appropriations for all such rental payments. For this budgetary purpose, and while the Bonds bear interest at the Weekly Rate, the City shall assume an interest component for any Fiscal Year equal to (i) while the Interest Rate Collar is in effect, an annual interest rate of 5.25%; and (ii) if the Interest Rate Collar has terminated or is no longer in effect, the average interest rate borne by the Bonds during the 12 months preceding the time of consideration, plus [200 basis points]; and for this budgetary purpose, the City also shall include (x) the annual Additional Rental attributable to the annual fees of any Credit Facility then in effect (including without limitation the irrevocable letter of credit being provided by the Wells Fargo Bank, National Association, on the Closing Date with respect to the Bonds), (y) the annual Additional Rental attributable to annual fees of the Tender P6401.1039\1139611.7 11 Agent under the Indenture, and (z) the annual Additional Rental attributable to annual fees of the Trustee under the Indenture. The City shall furnish to the Trustee by July 31 of each Fiscal Year a copy of the annual budget adopted by the City Council with respect to such Fiscal year, together with a certificate stating that it has included in the annual budget(as adopted by the City Council of the City) all Base Rental and Additional Rental due hereunder in the Fiscal Year covered by such adopted annual budget, calculated in accordance with this Section 5.02. To the extent that the amount of any such payment becomes known after the adoption of the annual budget, such amounts shall be included and maintained in such budget as amended. The City covenants to take such action as is necessary to include such amounts in a supplemental budget of the City. The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the ministerial duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the City. The obligation of the City to pay Base Rental and Additional Rental hereunder shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City, or the State, or any political subdivision thereof, in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, the State, or any political subdivision thereof, nor shall anything contained herein constitute a pledge of general revenues, funds or moneys of the City beyond the Fiscal Year for which the City has appropriated funds to pay Base Rental and Additional Rental hereunder or an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. SECTION 5.03. Application of Rental Payments. All rental payments received shall be applied first to the interest components of the Base Rental payments due hereunder, then to the principal components (including any prepayment premium components) of the Base Rental payments due hereunder and thereafter to all Additional Rental due hereunder, but no such application of any payments which are less than the total rental due and owing shall be deemed a waiver of any default hereunder. SECTION 5.04. Rental Abatement. Except to the extent of(i) amounts held by the Trustee in the Debt Service Fund, (ii) amounts received in respect of rental interruption insurance, and (iii) amounts, if any, otherwise legally available to the Trustee for payments in respect of the Bonds, during any period in which, by reason of material damage, destruction, title defect or condemnation there is substantial interference with the use and possession by the City of any portion of the Leased Property, rental payments due hereunder with respect to such portion of the Leased Property shall be abated proportionately by an amount such that the portion of Base Rental remaining unabated represents the fair rental value of the remaining portion of the Leased Property, as calculated by the City and set forth in writing to the Authority, the Trustee and the Credit Entity. Any abatement of rental payments pursuant to this Section shall not be considered an event of default as defined in Article X hereof. The City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 1933(4) and any and all other rights to terminate the P6401.1039\1139611.7 12 Lease by virtue of any such interference and the Lease shall continue in full force and effect. Such abatement shall continue for the period commencing with the date of such damage, destruction, title defect or condemnation and ending with the substantial completion of the work of repair or replacement of the portions of the Leased Property so damaged, destroyed, defective or condemned. In the event that rental is abated, in whole or in part, pursuant to this Section due to damage, destruction, title defect or condemnation of any part of the Leased Property and the City is unable to repair, replace or rebuild the Leased Property from the proceeds of insurance, if any, the City agrees to apply for and obtain, if reasonably available, any appropriate state and/or federal disaster relief in order to obtain funds to repair, replace or rebuild the Leased Property. SECTION 5.05. Prepayment of Rental Payments. (a) Prepayment from Net Proceeds. The City may prepay, from Net Proceeds received by it pursuant to Section 7.01, all or any portion of the components of Base Rental relating to any portion of the Leased Property then unpaid, in whole on any date, or in part on any Bond Payment Date in Authorized Denominations. (b) Optional Prepayment. Subject to the terms and conditions of this Section, the Authority hereby grants an option to the City to prepay in whole or in part the principal components of Base Rental payments relating to the Leased Property, to the extent, on the dates and at the redemption prices provided in Section 4.03 of the Indenture as such Section 4.03 may be amended from time to time with respect to conversion to a Fixed Rate. The City shall execute said option by giving written notice to the Trustee thereof at least 45 days (or such shorter period as approved by the Trustee) prior to the date of redemption of Bonds from such prepayment and depositing with said notice cash in the minimum amount of(1) accrued interest on the principal component of Base Rental payments to be prepaid to the date of redemption of Bonds with the proceeds of such prepayment, plus (2) the principal component of any Base Rental payments to be prepaid, plus (3) the applicable redemption premium described in such Section 4.03 of the Indenture. SECTION 5.06. Obligation to Make Rental Payments. The agreements and covenants on the part of the City contained herein shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the agreements and covenants contained herein agreed to be carried out and performed by the City. THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE SUCH BASE RENTAL PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA OR ANY POLITICAL P6401.1039\1139611.7 13 SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. ARTICLE VI MAINTENANCE; TAXES; INSURANCE AND OTHER CHARGES SECTION 6.01. Maintenance of the Leased Property by the City. The City agrees that, at all times during the term hereof, it will, at its own cost and expense, maintain, preserve and keep the Leased Property and every portion thereof in good repair, working order and condition and that it will from time to time make or cause to be made all necessary and proper repairs, replacements and renewals. The Authority shall have no responsibility in any of these matters or for the making of additions or improvements to the Leased Property. SECTION 6.02. Taxes, Other Governmental Charges and Utility Charges. The parties hereto contemplate that the Leased Property will be used for public purposes, in furtherance of the Energy Independence Program, by the City and the Authority pursuant to the terms of the Indenture, the Site Lease, and this Lease, and, therefore, that their respective leasehold interests in the Leased Property under the Site Lease and this Lease will be exempt from all taxes presently assessed and levied with respect to real and personal property, respectively. The parties acknowledge that (i) the Leased Property is a commercial office complex; (ii) although the City's ownership interest in the Leased Property is exempt from property taxation under applicable law, and the Authority's and City's respective leasehold interests under the Site Lease and this Lease are exempt from taxation as set forth in the forgoing sentence, pursuant to the California Revenue and Taxation Code, the County of Riverside assesses a possessory interest tax on the leasehold interest of the lessees leasing the space, payable by each such lessee unless it is granted an exemption by the County, generally provided to non-profit organizations and governmental and quasi-governmental agencies; (iii) any delinquencies in such possessory interest taxes are transferred to the unsecured roll and become and immediate lien on the lessee, not the Leased Property; and (iv) pursuant to the City's Tenant Lease Agreements with any non-governmental entities and applicable law, such possessory interest taxes and any personal property taxes on trade fixtures, furnishing, and equipment are the responsibility and obligation of, and payable by, the applicable lessees of the Leased Property, and not of, or by, the City or the Authority. In the event that the use, possession or acquisition by the City or the Authority of the Leased Property is found to be subject to taxation in any form, the City will pay during the term hereof, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Leased Property and any other property acquired by the City in substitution for, as a renewal or replacement of, or a modification, improvement or addition to the Leased Property, as well as all gas, water, steam, electricity, heat, power, air conditioning, telephone, utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Leased Property which are the responsibility of the City under the Tenant Lease Agreements (as opposed to those which are the responsibility of the lessees under the Tenant Lease Agreements);provided, that with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are accrued during such time as this Lease is in effect. P6401.1039\1139611.7 14 SECTION 6.03. Insurance. The City shall procure or cause to be procured and maintain or case to be maintained through the term hereof for the Leased Property insurance against the following risks in the following respective amounts: (1) insurance against loss or damage to the Leased Property or such structure or item of furniture or equipment caused by fire or lightning, with an extended coverage endorsement and vandalism and malicious mischief insurance, which such extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. The insurance required by this paragraph shall be in an amount equal to the replacement cost (without deduction for depreciation) of improvements located or to be located on the Leased Property but shall be not less than the principal amount of the Outstanding Bonds (except that such insurance may be subject to deductible clauses of not to exceed ten percent (10%) of the amount of any one loss); (2) rental interruption insurance against the Authority's loss of income due to events giving rise to the right of abatement on the part of the City under this Lease in an amount sufficient to pay the total Base Rental payments attributable to the Leased Property for a 24 month period (measured by the Base Rental payments for the 24 months following the month in which the insurance commences and assuming for such purpose that interest components will be payable at a fixed rate of 12% per annum or such lesser amount as may be agreed upon by the Credit Entity); provided, that the amount of such insurance need not exceed the total remaining Base Rental payments attributable to the Leased Property; (3) workers' compensation insurance covering all employees working in or on the Leased Property, in the same amount and type as other workers' compensation insurance maintained by the City for similar employees doing similar work; and the City shall also require any other person or entity working in or on the Leased Property to carry the foregoing amount of workers' compensation insurance; (4) a standard comprehensive public entity liability insurance policy or policies in protection of the City, the Authority, and their respective directors, officers and employees and the Trustee, and the Credit Entity as additional insured, indemnifying and defending such parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the possession, operation or use of the Leased Property. Such public liability and property damage insurance shall be in the form of a single limit policy in the amount of not less than three million dollars ($3,000,000), subject to a deductible clause of not to exceed $250,000, covering all such risks; and (5) a CLTA standard coverage leasehold policy of title insurance on the Leased Property in an amount at least equal to the initial aggregate amount of the principal amount of Base Rental payments issued by a company of recognized standing duly authorized to issue the same. The title policy or policies shall insure the City's P6401.1039\1139611.7 15 leasehold estate hereunder with respect to the Leased Property, subject only to Permitted Encumbrances together with an endorsement thereto making said policy payable to the Trustee for the benefit of the Owners of the Bonds and the Credit Entity. Insurance coverage required by paragraphs (1), (2), (3) and(4)may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of insurance maintained through a joint exercise of powers agency created for such purpose or other program providing pooled insurance. Notwithstanding the above provisions, as an alternative to providing the insurance required by paragraphs (1), (3) and (4) above, with the prior written consent of the Credit Entity, the City may provide a self-insurance method or plan of protection. Any such self-insurance maintained by the City pursuant to the foregoing sections, shall be similar in nature and scope to self-insurance programs maintained by other California cities of comparable size and operations, and shall be reviewed annually by an Insurance Consultant. Any insurance policy issued pursuant to Section 6.03(1) shall be so written or endorsed as to make losses, if any, payable to the City, the Authority, the Credit Entity and the Trustee as their respective interests may appear and the net proceeds of the insurance required in Section 6.03(1) shall be applied as provided in Section 7.01. The net proceeds, if any, of the insurance policy described in Section 6.03(2) shall be payable to the Trustee and deposited in the Debt Service Fund. Each insurance policy provided for in this Section shall contain a provision to the effect that the insurance company shall not cancel the policy or modify it materially and adversely to the interests of the Authority, the Credit Entity or the Trustee without first giving written notice thereof to the Authority, the Credit Entity and the Trustee at least sixty (60) days in advance of such intended cancellation or modification;provided, that the Trustee shall not be responsible for the sufficiency of any insurance herein required and shall be fully protected in accepting payment on account of such insurance or any adjustments, compromise or settlement of any loss agreed to by it. The City shall file a certificate with the Authority, the Trustee, and the Credit Entity not later than September 1 of each year certifying that the insurance required by this section is in full force and effect and that the Trustee and the Credit Entity are named as loss payees and/or additional insureds on each insurance policy which this Lease requires to be so endorsed. In the event that the City obtains insurance through a pooled insurance program of governmental entities, an annual statement or memorandum of coverage delivered to the Authority, the Trustee, and the Credit Entity will satisfy the requirements of this paragraph. Notwithstanding the generality of the foregoing, the City shall not be required to maintain or cause to be maintained more insurance than is specifically referred to above or any policies of insurance other than standard policies of insurance with standard deductibles offered by reputable insurers at a reasonable cost on the open market. SECTION 6.04. Advances. In the event the City shall fail to maintain the full insurance coverage required hereby or shall fail to keep the Leased Property in good repair and operating condition, the Authority may (but shall be under no obligation to) purchase the P6401.1039\1139611.7 16 required policies of insurance and pay the premiums on the same or may make such repairs or replacements as are necessary and provide for payment thereof; and all amounts so advanced therefor by the Authority shall become Additional Rental, which amounts the City agrees to pay within thirty (30) days of a written request therefor, together with interest thereon at the maximum rate allowed by law. ARTICLE VII DAMAGE, DESTRUCTION, TITLE DEFECT AND CONDEMNATION SECTION 7.01. Damage, Destruction, Title Defect and Condemnation., Use of Net Proceeds. If prior to the termination of the term hereof(a) the Leased Property or any portion thereof is destroyed (in whole or in part) or is damaged by fire or other casualty; or (b) title to, or the temporary use of, the Leased Property or any portion thereof or the estate of the City or the Authority in the Leased Property or any portion thereof is defective or shall be taken under the exercise of the power of eminent domain by any governmental body or by any person or firm or corporation acting under governmental authority, then the City shall, as expeditiously as possible, continuously and diligently cause the repair or replacement thereof(unless the City elects not to repair or replace), and the City and the Authority will cause the Net Proceeds remaining after such work has been completed to be paid to the City;provided, that the City, at its option with the prior written consent of the Credit Entity and provided that the proceeds of such insurance or condemnation award together with any other moneys then available for the purpose are at least sufficient to prepay aggregate annual amounts of principal and interest on any Outstanding Bonds attributable to the Base Rental payments with respect to that portion of the Leased Property so destroyed, damaged, defective or condemned (determined by reference to the proportion which the fair rental value of the destroyed, damaged, defective or condemned portion thereof bears to the fair rental value of the entire Leased Property), may elect not to repair, reconstruct or replace the damaged, destroyed, defective or condemned portion of the Leased Property and thereupon shall cause said Net Proceeds to be used for the redemption of Outstanding Bonds pursuant to the provisions of Section 4.02 of the Indenture. In the event that the Net Proceeds, if any, are insufficient either to (i) repair, rebuild or replace the Leased Property so that the fair rental value of the Leased Property would be at least equal to the Base Rental payments or (ii) to prepay the Outstanding Bonds, both as provided in the preceding paragraph, then the City may, in its sole discretion, budget and appropriate an amount necessary to effect such repair, rebuilding or replacement or prepayment; provided that the failure of the City to so budget and/or appropriate shall not be a breach of or default under this Lease. If the City does not elect to so budget and/or appropriate, it shall use its best efforts to substitute the Leased Property with property of sufficient fair rental value (approved by the Credit Entity) to support payment of the Base Rental and Additional Rental scheduled to be paid under this Lease. P6401.1039\1139611.7 17 ARTICLE VIII DISCLAIMER OF WARRANTIES; VENDOR'S WARRANTIES; USE OF THE LEASED PROPERTY SECTION 8.01. Disclaimer of Warranties. NEITHER THE TRUSTEE NOR THE AUTHORITY MAKES ANY AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR FITNESS FOR USE OF THE LEASED PROPERTY, OR WARRANTY WITH RESPECT THERETO. THE CITY ACKNOWLEDGES THAT NEITHER THE TRUSTEE NOR THE AUTHORITY IS A MANUFACTURER OF ANY PORTION OF THE LEASED PROPERTY OR A DEALER THEREIN, THAT THE CITY LEASES THE LEASED PROPERTY AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE CITY. In no event shall the Authority or the Trustee be liable for any incidental, indirect, special or consequential damage in connection with or arising out of the Lease or the existence, furnishing, functioning or the City's use of the Leased Property as provided hereby. SECTION 8.02. Vendor's Warranties. The Authority hereby irrevocably appoints the City its agent and attorney-in-fact during the term of this Lease, so long as the City shall not be in default hereunder, to assert from time to time whatever claims and rights, including warranties of the Leased Property, which the Authority may have against the manufacturers, vendors and contractors of the Leased Property. The City's sole remedy for the breach of such warranty, indemnification or representation shall be against the manufacturer or vendor or contractor of the Leased Property, and not against the Authority or the Trustee, nor shall such matter have any effect whatsoever on the rights and obligations of the Authority with respect to this Lease, including the right to receive full and timely payments hereunder. The City expressly acknowledges that neither the Trustee nor the Authority makes, and has made, any representation or warranties whatsoever as to the existence or availability of such warranties of the manufacturer, vendor or contractor. SECTION 8.03. Use of the Leased Property. (a) The City will not use, operate or maintain the Leased Property improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated hereby. The City shall provide all permits and licenses, if any, necessary for the use of the Leased Property. In addition, the City agrees to comply in all respects (including, without limitation, with respect to the use, maintenance and operation of each portion of the Leased Property) with all laws of the jurisdictions in which its operations involving any portion of the Leased Property may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Leased Property; provided, that the City may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of the City adversely affect the estate of the Authority or the Trustee in and to the Leased Property or its interest or rights hereunder. P6401.1039\1139611.7 18 (b) The City herein covenants by and for itself and its successors and assigns, and all persons claiming under or through it, and this Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the Leased Property nor shall the City itself, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the Leased Property. ARTICLE IX ASSIGNMENT AND INDEMNIFICATION SECTION 9.01. Assignment by Authority. The parties understand that certain of the rights of the Authority, as assignee hereunder, will be assigned to the Trustee pursuant to the Assignment Agreement, and the City hereby consents to such assignment. Accordingly the City agrees to make all payments due hereunder to the Trustee, notwithstanding any claim, defense, setoff or counterclaim whatsoever (whether arising from a breach hereof or otherwise) that the City may from time to time have against the Authority or the Trustee. The City agrees to execute all documents, including notices of assignment or financing statements which may be reasonably requested by the Authority or the Trustee to protect their interests in the Leased Property during the term hereof. SECTION 9.02. Assignment by City and Sublease. This Lease and the interest of the City in the Leased Property may not be assigned or encumbered by the City except with the written consent of the Credit Entity and except as provided in Section 2.04. The City may sublease all or any portion of the Leased Property in connection with the issuance by the Authority or additional bonds for the purpose of completing and/or making improvements to the Project. The City shall at all times remain liable for the performance of the covenants and conditions on its part to be performed under this Lease. Nothing herein contained shall be construed to relieve the City from its obligation to pay Base Rental and Additional Rental as provided in this Lease or to relieve the City from any other obligations contained herein. SECTION 9.03. Indemnification. The City shall, to the full extent then permitted by law, indemnify, protect, hold harmless, save and keep harmless the Authority, the Trustee, and their respective directors, officers, employees, attorneys, consultants, receivers and agents from and against any and all liability, obligations, losses, claims and damages whatsoever, regardless of the cause thereof, and expenses in connection therewith, including, without limitation, counsel fees and expenses, penalties and interest arising out of or as the result of the entering into of this Lease or the Indenture, or any accident in connection with the operation, use, condition or possession of the Leased Property or any portion thereof resulting in damage to property or injury to or death to any person including, without limitation, any claim alleging latent and other defects, whether or not discoverable by the City or the Authority; any claim for patent, trademark or copyright infringement, any claim arising out of strict liability in tort, and P6401.1039\1139611.7 19 any claim arising out of the use, presence, storage, disposal or release of any Hazardous Substances on or about the Leased Property. The indemnification arising under this Section shall continue in full force and effect notwithstanding the full payment of all obligations hereunder or the termination hereof for any reason. The City and the Authority mutually agree to promptly give notice to each other of any claim or liability hereby indemnified against following either's learning thereof. ARTICLE X DEFAULT SECTION 10.01. Default; Assignment of Rents. (a) The following events shall be events of default under this Lease: (i) the City shall fail to pay any item of Additional Rental as and when the same shall become due and payable pursuant to Section 5.01(b); or (ii) the City shall fail to deposit with the Trustee any Base Rental payment required to be so deposited by the close of business on the day such deposit is required pursuant to Section 5.01(a), provided, that failure to deposit any Base Rental payments abated pursuant to Section 5.04 shall not constitute an event of default; (iii) the City shall breach any other terms, covenants or conditions contained herein, and shall fail to remedy any such breach with all reasonable dispatch within a period of thirty (30) days after written notice thereof from the Authority, the Trustee or the Credit Entity to the City;provided, however, that if the failure stated in the notice cannot be corrected within such period, then the Authority shall not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the City within such period and is diligently pursued until the default is corrected. (b) In addition to any default resulting from breach by the City of any agreement, condition, covenant or term hereof, if(1) the City's interest herein or any part thereof be assigned, sublet or transferred without the written consent of the Authority and the Credit Entity, either voluntarily or by operation of law; or (2) the City or any assignee shall file any petition or institute any proceedings under any act or acts, state or federal, dealing with or relating to the subject of bankruptcy or insolvency or under any amendment of such act or acts, either as a bankrupt or as an insolvent or as a debtor or in any similar capacity, wherein or whereby the City asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of its debts or obligations, or offers to its creditors to effect a composition or extension of time to pay its debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for a readjustment of its debts or for any other similar relief, or if the City shall make a general or any assignment for the benefit of its creditors; or (3) the City shall abandon or vacate the Leased Property or any portion thereof; then in each and every such case the City shall be deemed to be in default hereunder. Upon the happening of any of the events specified in subsection (a) or (b) of this Section(in either case an"Event of Default"), then it shall be lawful for the Authority to exercise P6401.1039\1139611.7 20 any and all remedies available or granted to it pursuant to law or hereunder; provided, however, that notwithstanding anything herein or in the Indenture to the contrary, in no event shall the Authority have the right to accelerate the payment of any Base Rental under this Lease. Upon the breach of any agreement, condition, covenant or term contained herein required to be observed or performed by the City and subject to, and as limited by,the provisions of the Tenant Lease Agreements (as defined herein), the Authority may, with the consent of the Credit Entity, or at the direction of the Credit Entity, shall exercise any and all rights of entry upon or repossession of the Leased Property, and also, at its option, with or without such entry, may, with the consent of the Credit Entity, or at the direction of the Credit Entity, shall terminate this Lease; provided, that no termination shall be effected either by operation of law or acts of the parties hereto except upon express written notice from the Authority to the City terminating this Lease, as provided below. In the event of such default and notwithstanding any entry by the Authority, and in each instance subject to, and as limited by, the provisions of the Tenant Lease Agreements, the Authority may at any time thereafter (with or without notice and demand and without limiting any other rights or remedies the Authority may have): (1) Maintain this Lease in full force and effect and recover rent and other monetary charges as they become due without terminating the City's right to possession of the Leased Property, regardless of whether or not the City has abandoned the Leased Property. In connection therewith, the City hereby assigns to the Authority all of the City's right, title and interest, whether now existing or hereafter acquired, in all leases, subleases and other occupancy agreements of any nature now or hereafter covering all or any part of the Leased Property, together with all extensions, renewals, modifications or replacements of said leases, subleases and occupancy agreements, and together with any and all guarantees of the obligations of the lessees, sublessees, and occupants thereunder, whether now existing or hereafter executed and all extensions and renewals of said guarantees (said leases, subleases and occupancy agreements, together with any and all guarantees, modifications, extensions and renewals thereof, are hereinafter referred to collectively as the "Tenant Lease Agreements" and individually as a "Tenant Lease Agreement"); provided, that no such actions shall be deemed to terminate this Lease and the City shall continue to remain liable for any deficiency that may arise out of such assignment of rents, taking into account expenses incurred by the Authority due to collection of rents under such assignment, payable at the same time and manner as provided for Base Rental in Section 5.01. (i) The City's purpose in making the assignment under this Section 10.01(b)(1) is to relinquish to the Authority the City's right to collect and enjoy the rents, royalties, issues, profits, income and other benefits at any time accruing by virtue of the Tenant Lease Agreements in partial satisfaction of any indebtedness of the City to the Authority from time to time existing under this Lease (the "Tenant Rents and Profits"), and to furnish security for the performance of the City's obligations contained herein;provided, the Authority's right to collect any Tenant Rents and Profits under this Section 10.01(b)(1) shall only be to the extent such Tenant Rents and Profits do not exceed the earned but unpaid Base Rental and Additional Rental hereunder for the calendar year immediately preceding the Authority's collection of such Tenant Rents and Profits pursuant to such assignment. P6401.1039\1139611.7 21 (ii) The City and the Authority intent that the assignment under this Section 10.01(b)(1) shall be a present, absolute and unconditional assignment and shall, immediately upon execution, give the Authority the right to collect the Tenant Rents and Profits and to apply them in payment of the principal and interest and all other sums payable on the City's obligation under this Lease. However, the Authority hereby grants to the City a license to collect, subject to the provisions set forth below, the Tenant Rents and Profits, as they respectively become due and to enforce the Tenant Lease Agreements, so long as there is no default by the City in the performance of the terms, covenants or provisions of this Lease. Nothing contained herein, nor any collection of Tenant Rents and Profits by the Authority,the Trustee, or any receiver, shall be construed to make the Authority a "mortgagee-in possession" of the Leased Property so long as the Authority has not itself entered into actual possession of the Leased Property. (iii) Upon the occurrence of any Event of Default under the terms and conditions of this Lease, the assignment under this Section 10.01(b)(1) shall constitute a direction to, and full authority to, each lessee under any Tenant Lease Agreement and each guarantor of any tenant Lease Agreement to pay all Tenant Rents and Profits to the Authority without proof of the default relied upon. The City hereby irrevocably authorizes each lessee and guarantor under a Tenant Lease Agreement to rely upon and comply with any notice or demand by the Authority for the payment to the Authority of any Tenant Rents and Profits due or to become due, subject to the limitations in paragraph(i) above. (2) While maintaining this Lease in full force and effect and in each instance subject to, and as limited by,the provisions of the Tenant Lease Agreements, the Authority may elect to re-enter and re-let the Leased Property, and recover rent and other monetary charges as they become due without terminating the City's right to possession of the Leased Property, regardless of whether or not the City has abandoned the Leased Property. Should the Authority elect to re-enter and re-let the Leased Property pursuant to this Section 10.01(b)(2), it shall have the right and the City hereby irrevocably appoints the Authority as its agent and attorney-in-fact for such purpose to attempt to re- let the Lease Property at such rent, upon such conditions and for such term and to do all other acts to maintain or preserve the Leased Property, all subject to the provisions of the Tenant Lease Agreements, including removal of persons or property therefrom or taking possession thereof, as the Authority deems desirable or necessary (and subject to the provisions of the Tenant Lease Agreements), and the City hereby waives any and all claims for any damages that may result to the Leased Property thereby;provided, that no such actions shall be deemed to terminate this Lease and the City shall continue to remain liable for any deficiency that may arise out of such re-letting, taking into account expenses incurred by the Authority due to such re-letting, payable at the same time and manner as provided for Base Rental in Section 5.01. (3) Terminate the City's right to possession of the Leased Property by giving a written notice of termination to the City; provided, any such election to terminate shall be subject to, and limited by, the provisions of the Tenant Lease Agreements. Subject to the provisions of the Tenant Lease Agreements, on the date P6401.1039\1139611.7 22 specified in such notice (which shall be not less than three (3) days after the giving of such notice) the City's right to possession under this Lease shall terminate and the City shall surrender possession of the Leased Property to the Authority, unless on or before such date all arrears of rental and all other sums payable by the City hereunder, and all costs and expenses incurred by or on behalf of the Authority hereunder, including attorney's fees incurred in connection with such defaults, shall have been paid by the City and all other defaults or breaches hereunder by the City at the time existing shall have been fully remedied to the satisfaction of the Authority. Upon such termination, the Authority may recover, in addition to all other damages available by contract or at law, to the extent permitted by law, from the City: (i) the worth at the time of award of the unpaid rental which had been earned at the time of termination; and (ii) the worth at the time of award of the amount by which the unpaid rental which would have been earned after termination until the time of award exceeds the amount of such rental loss that the City proves could have been reasonably avoided. The "worth at the time of award" of the amounts referred to in clauses (i) and (ii) above is computed by allowing interest at the rate of twelve per cent(12%)per annum. Without otherwise limiting any of the rights or remedies of the Authority set forth herein, the Authority expressly waives the right to receive any amount from the City pursuant to Section 1951.2(a)(3) of the California Civil Code. Each and all of the remedies given to the Authority hereunder or by any law now existing or hereafter enacted are cumulative and the exercise of any one remedy shall not impair the right of the Authority to any or all other remedies. (c) Neither the City nor the Authority shall be in default in the performance of any of its obligations hereunder (except for the obligation to pay Base Rental and Additional Rental pursuant to Section 5.01) unless and until it shall have failed to perform such obligation within thirty (30) day after notice by the City or the Authority, as the case may be, to the other party properly specifying wherein it has failed to perform such obligation. ARTICLE XI MISCELLANEOUS SECTION 11.01. Notices. All written notices to be given hereunder shall be given by first class mail to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the Authority: Palm Desert Financing Authority 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: Chief Administrative Officer Facsimile: (760) 346-6372 Telephone: (760) 341-0611 P6401.1039\1139611.7 23 If to the City: City of Palm Desert 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: City Manager Facsimile: (760) 346-6372 Telephone: (760) 341-0611 If to the Trustee: Wells Fargo Bank,National Association 707 Wilshire Blvd., 17th Floor MAC E2818-176 Los Angeles, California 90017 Attention: Robert Schneider, Vice President Facsimile: (213) 614-3355 Telephone: (213) 614-3353 If to the Credit Entity: Wells Fargo Bank,National Association 707 Wilshire Blvd., 11th Floor MAC E2818-114 Los Angeles, California 90017 Attention: Lynn Love, Relationship Manager Facsimile: (213) 614-3555 Telephone: (213) 614-2235 SECTION 11.02. Binding Effect. The Lease shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. SECTION 11.03. Third Party Beneficiaries. The Trustee and the Credit Entity are hereby designated third party beneficiaries hereunder for the purpose of enforcing any of the rights hereunder assigned to the Trustee under the Assignment Agreement. SECTION 11.04. Net-Net-Net Lease. It is the purpose and intent of the Authority and the City that lease payments hereunder shall be absolutely net to the Authority so that the Lease shall yield to the Authority the lease payments, free of any charges, assessments or impositions of any kind charged, assessed or imposed on or against the Leased Property, and without counterclaim, deduction, defense, deferment or set-off by the City except as herein specifically otherwise provided. The Authority shall not be expected or required to pay any such charge, assessment or imposition, or be under any obligation or liability hereunder except as herein expressly set forth, and all costs, expenses and obligations of any kind relating to the maintenance and operation of the Leased Property which may arise or become due during the term of the Lease shall be paid by the City. SECTION 11.05. Amendments. The Lease may be amended in writing as may be mutually agreed by the Authority and the City, subject to the written approval of the Credit Entity and the Trustee; provided, that no such amendment which materially adversely affects the rights of the Owners shall be effective unless it shall have been consented to by the P6401.1039\1139611.7 24 Owners of more than majority in aggregate principal amount of the Bonds then Outstanding, and provided further, that no such amendment shall (a) extend the payment date of any Base Rental payment, without the prior written consent of the Owner of each Bond so affected, or (b) reduce the percentage of the Bonds the consent of the Owners of which is required for the execution of any amendment hereof. The Lease and the rights and obligations of the Authority and the City hereunder may also be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding upon execution by the Authority and the City without the written consents of any Owners, but with the written approval of the Credit Entity and only to the extent permitted by law and only for any one or more of the following purposes: (a) to add to the agreements, conditions, covenants and terms required by the Authority or the City to be observed or performed herein and other agreements, conditions, covenants and terms thereafter to be observed or performed by the Authority or the City, or to surrender any right or power reserved herein to or conferred herein on the Authority or the City, and which in either case shall not materially adversely affect the interests of the Owners; (b) to make such provisions for the purpose of curing any ambiguity or correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Authority or the City may deem desirable or necessary and not inconsistent herewith, and which shall not materially adversely affect the interests of the Owners; (c) to effect a Substitution or Removal; (d) to increase the amount of Base Rental payable hereunder for the purpose of allowing the Authority to issue Additional Bonds and to add any real property to be acquired and leased hereunder from the proceeds of such Additional Bonds to Exhibit A hereof; or (e) for any other purpose which shall not materially adversely affect the interests of the Owners. SECTION 11.06. Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms hereof shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining agreements, conditions, covenants or terms hereof shall be affected thereby, and each provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. SECTION 11.07. California Law. This Lease shall be governed by and construed and interpreted in accordance with the laws of the State of California. SECTION 11.08. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision hereof. P6401.1039\1139611.7 25 SECTION 11.09. Execution; Recordation. (a) This Lease may be executed in any number of counterparts, each of which shall be deemed to an original, but all together shall constitute but one and the same instrument. (b) This Lease shall not be recorded, but the parties shall, at the commencement of the term hereof, execute and cause to be recorded in the office of the County Recorder of the County of Riverside, California, a"short form" or Memorandum of Lease Agreement. SECTION 11.10. Consent of Credit Entity Required. Notwithstanding anything in this Lease to the contrary, no amendment or supplement to this Lease shall become effective unless first approved by the Credit Entity. All references herein to Credit Entity shall be of no force or effect during any period in which no Credit Facility is in effect or the Credit Entity is in default thereunder and so long as no amounts remain owing to the Credit Entity. P6401.1039\1139611.7 26 IN WITNESS WHEREOF, the parties hereby have executed and entered into this Lease by their officers thereunto duly authorized as of the day and year first written above. PALM DESERT FINANCING AUTHORITY By: Chief Administrative Officer CITY OF PALM DESERT By: Mayor Attest: By: City Clerk P6401.1039\1139611.7 S-1 EXHIBIT A Legal Description of Real Property PARCEL 1: ALL THAT PORTION OF TRACT NO. 19074-1, IN THE CITY OP PALM DESERT, AS SHOWN BY MAP ON FILE IN BOOK 141 PAGES 58 THROUGH 64, INCLUSIVE, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER OF LOT "A" OF SAID TRACT NO. 19074-1; THENCE SOUTH 89° 51' 00" WEST ALONG THE NORTH LINE OF SAID LOT "A", A DISTANCE OF 406.00 FEET; THENCE LEAVING SAID NORTH LINE, NORTH 00° 09' 17" EAST ALONG A LINE PARALLEL WITH THE EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 201.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING NORTH 00° 09' 17" EAST ALONG SAID PARALLEL LINE A DISTANCE OF 181.00 FEET; THENCE SOUTH 89° 50' 43"EAST, A DISTANCE OF 42.00 FEET; THENCE NORTH 00° 09' 17" EAST, ALONG A LINE PARALLEL WITH SAID EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 76.00 FEET; THENCE NORTH 43° 47' 18" EAST, A DISTANCE OF 147.81 FEET; THENCE SOUTH 89° 50' 43" EAST, A DISTANCE OF 228.00 FEET TO A POINT IN A LINE PARALLEL WITH AND DISTANT 34.00 FEET WESTERLY OF MEASURED AT RIGHT ANGLES TO THE EAST LINE OF SAID TRACT NO. 19074-1; THENCE SOUTH 00° 09' 17" WEST ALONG SAID PARALLEL LINE A DISTANCE OF 362.00 FEET TO A POINT IS NORTH 00° 09' 17" EAST, A DISTANCE OF 201.00 FEET FROM SAID NORTH LINE OF SAID LOT "A"; THENCE SOUTH 89° 51' 00" WEST ALONG A LINE PARALLEL WITH AND DISTANT 201.00 FEET NORTHERLY OF, MEASURED AT RIGHT ANGLES TO SAID NORTH LINE OF SAID LOT "A", A DISTANCE OF 372.00 FEET, TO THE TRUE POINT OF BEGINNING. PARCEL 2: ALL THAT PORTION OF TRACT NO. 19074-1, IN THE CITY OF PALM DESERT, AS SHOWN BY MAP ON FILE IN BOOK 141 PAGES 58 THROUGH 64, INCLUSIVE, OF P6401.1039\1139611.7 A-1 MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER OF SAID LOT "A" OF SAID TRACT NO. 19074-1; THENCE SOUTH 89° 51' 00" WEST ALONG THE NORTH LINE OF SAID LOT "A", A DISTANCE OF 34.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 89° 51' 00" WEST ALONG SAID NORTH LINE A DISTANCE OF 372.00 FEET; THENCE LEAVING SAID NORTH LINE, NORTH 00° 09' 17" EAST, ALONG A LINE PARALLEL WITH THE EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 201.00 FEET; THENCE NORTH 89° 51' 00" EAST, ALONG A LINE PARALLEL WITH THE NORTH LINE OF SAID LOT "A", A DISTANCE OF 372.00 FEET TO THE INTERSECTION WITH A LINE PARALLEL WITH AND DISTANT 34.00 FEET WESTERLY OF, MEASURED AT RIGHT ANGLES TO THE EAST LINE OF SAID TRACT NO. 19074-1; THENCE SOUTH 00° 09' 17" WEST ALONG SAID PARALLEL LINE A DISTANCE OF 201.00 FEET TO THE TRUE POINT OF BEGINNING. APN: 622-260-081 and 622-260-083 P6401.1039\113961 1.7 A-2 EXHIBIT B Aggregate Annual Base Rental Payment Schedule Period Ending (September 1) Principal Interest' 2009 $ 20 * * Maturity (1) The interest component of the Base Rental payments shall equal the interest component due with respect to the Bonds as determined under Section 2.02.A of the Indenture and shall be due and payable on the twenty-fifth day of the month immediately preceding each Bond Payment Date as set forth in Section 5.01(a)hereof. P6401.1039\1139611.7 B-1 Recording requested by and when recorded mail to: Palm Desert Financing Authority c/o Richards, Watson & Gershon, A Professional Corporation 355 South Grand Avenue, 40th Floor Los Angeles, California 90071 Attention: Diana K. Chuang, Esq. ASSIGNMENT AGREEMENT by and between the PALM DESERT FINANCING AUTHORITY and WELLS FARGO BANK, NATIONAL ASSOCIATION as Trustee Dated as of July 1, 2009 Exempt from recording fees pursuant to Government Code Sections 6103 and 27383. This Assignment Agreement is exempt from Documentary Transfer Tax pursuant to Revenue and Taxation Code Section 11901, et seq. P6401.103 9\113 9686.2 RWG DRAFT 6/7/09 ASSIGNMENT AGREEMENT This Assignment Agreement (the "Agreement"), dated as of July 1, 2009, is made by and between the Palm Desert Financing Authority, a joint powers agency duly organized and existing pursuant to the laws of the State of California (the "Authority"), and Wells Fargo Bank, National Association, a national banking association, duly organized and existing under and by virtue of the laws of the United States of America, as Trustee (the "Trustee"). RECITALS: A. The Authority and the City of Palm Desert, California (the "City"), have executed and entered into a Lease Agreement, dated as of even date herewith (the "Lease Agreement"), under which the Authority subleases to the City, as provided therein, certain parcel of land described in the Exhibit A attached hereto, together with the commercial office complex and all the other facilities and improvements thereon, and incorporated by reference (collectively, the"Leased Property"). B. Pursuant to the Lease Agreement, the City is obligated to make certain rental payments to the Authority for the sublease of the Leased Property. C. The Authority desires to assign to the Trustee, without recourse, all of the Authority's rights to receive "Base Rental" payments scheduled or required to be paid by the City under and pursuant to the Lease Agreement. D. In consideration of such assignment and the execution and entering into of an Indenture, dated as of even date herewith (the "Indenture"), by and between the Authority and the Trustee, the Authority has agreed to issue its Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable), in an aggregate principal amount of$ . E. The Authority has determined that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Agreement. NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: SECTION 1. DEFINITIONS. Unless context clearly requires otherwise, all capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. P6401.1039\1139686.2 I SECTION 2. ASSIGNMENT. The Authority hereby transfers in trust and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the right, title and interest of the Authority in the Lease Agreement (except the Authority's rights to indemnification and payment or reimbursement for any costs or expenses thereunder), including the Authority's rights to receive the Base Rental payments scheduled to be paid by the City under and pursuant to the Lease Agreement, and any and all of the other rights of the Authority under the Lease Agreement as may be necessary to enforce payment of such Base Rental payments when due or otherwise to protect the interest of the Owners of the Bonds. SECTION 3. ACCEPTANCE. The Trustee hereby accepts the foregoing assignment for the benefit of the Bond Owners, subject to the conditions and terms of the Indenture, and all such Base Rental payments shall be applied and all such rights so assigned shall be exercised by the Trustee under and pursuant to the Indenture. This Agreement shall confer no rights and shall impose no obligations up ,f7 the Trustee beyond those expressly provided in the Indenture. SECTION 4. MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the laws of the State of California. This Agreement shall be binding on and inure to the benefit of the parties hereto, and their successors and assigns. This Agreement may be executed in counterparts, and all such executed counterparts shall constitute the same instrument. It shall be necessary to account for only one set of such counterparts in proving this Agreement. [Remainder of Page Intentionally Left Blank] P6401.1039\1 139686.2 2 IN WITNESS WHEREOF, the parties hereto have executed and entered into this Agreement by their authorized signatories thereunto duly authorized as of the day and year first above written. PALM DESERT FINANCING AUTHORITY By Name: John M. Wohlmuth Title: Chief Administrative Officer WELLS FARGO BANK,NATIONAL ASSOCIATION, as Trustee By Name Authorized Officer P6401.1039\1139686.2 3 EXHIBIT A Description of the Real Property PARCEL 1: ALL THAT PORTION OF TRACT NO. 19074-1, IN THE CITY OP PALM DESERT, AS SHOWN BY MAP ON FILE IN BOOK 141 PAGES 58 THROUGH 64, INCLUSIVE, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER OF LOT"A" OF SAID TRACT NO. 19074-1; THENCE SOUTH 89° 51' 00" WEST ALONG THE NORTH LINE OF SAID LOT "A", A DISTANCE OF 406.00 FEET; THENCE LEAVING SAID NORTH LINE, NORTH 00° 09' 17" EAST ALONG A LINE PARALLEL WITH THE EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 201.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING NORTH 00° 09' 17" EAST ALONG SAID PARALLEL LINE A DISTANCE OF 181.00 FEET; THENCE SOUTH 89° 50' 43"EAST, A DISTANCE OF 42.00 FEET; THENCE NORTH 00° 09' 17" EAST,ALONG A LINE PARALLEL WITH SAID EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 76.00 FEET; THENCE NORTH 43° 47' 18" EAST, A DISTANCE OF 147.81 FEET; THENCE SOUTH 89° 50' 43" EAST, A DISTANCE OF 228.00 FEET TO A POINT IN A LINE PARALLEL WITH AND DISTANT 34.00 FEET WESTERLY OF MEASURED AT RIGHT ANGLES TO THE EAST LINE OF SAID TRACT NO. 19074-1; THENCE SOUTH 00° 09' 17" WEST ALONG SAID PARALLEL LINE A DISTANCE OF 362.00 FEET TO A POINT IS NORTH 00° 09' 17" EAST, A DISTANCE OF 201.00 FEET FROM SAID NORTH LINE OF SAID LOT "A"; THENCE SOUTH 89° 51' 00" WEST ALONG A LINE PARALLEL WITH AND DISTANT 201.00 FEET NORTHERLY OF, MEASURED AT RIGHT ANGLES TO SAID NORTH LINE OF SAID LOT"A", A DISTANCE OF 372.00 FEET, TO THE TRUE POINT OF BEGINNING. PARCEL 2: ALL THAT PORTION OF TRACT NO. 19074-1, IN THE CITY OF PALM DESERT, AS SHOWN BY MAP ON FILE IN BOOK 141 PAGES 58 THROUGH 64, INCLUSIVE, OF P6401.1039\1139686.2 MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST CORNER OF SAID LOT"A" OF SAID TRACT NO. 19074-1; THENCE SOUTH 89° 51' 00" WEST ALONG THE NORTH LINE OF SAID LOT "A", A DISTANCE OF 34.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 89° 51' 00" WEST ALONG SAID NORTH LINE A DISTANCE OF 372.00 FEET; THENCE LEAVING SAID NORTH LINE,NORTH 00° 09' 17"EAST, ALONG A LINE PARALLEL WITH THE EAST LINE OF SAID TRACT NO. 19074-1, A DISTANCE OF 201.00 FEET; THENCE NORTH 89° 51' 00" EAST, ALONG A LINE PARALLEL WITH THE NORTH LINE OF SAID LOT"A", A DISTANCE OF 372.00 FEET TO THE INTERSECTION WITH A LINE PARALLEL WITH AND DISTANT 34.00 FEET WESTERLY OF, MEASURED AT RIGHT ANGLES TO THE EAST LINE OF SAID TRACT NO. 19074-1; THENCE SOUTH 00° 09' 17" WEST ALONG SAID PARALLEL LINE A DISTANCE OF 201.00 FEET TO THE TRUE POINT OF BEGINNING. APN: 622-260-081 and 622-260-083 P6401.1039\1139686.2 STATE OF CALIFORNIA }ss. COUNTY OF } On before me, , a notary public, personally appeared who of satisfactory evidence to be the person whose name is subscribed to the witch mn oe nstrrumenton thels and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (This area for official notarial seal) P6401.1039\1 139686.2 STATE OF CALIFORNIA }ss. COUNTY OF } On , before me, , a notary public, personally appeared who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (This area for official notarial seal) P6401.1039\1139686.2 DRAFT(R WG COMMENTS 6/9/09) Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) REMARKETING AGREEMENT Palm Desert Financing Authority Palm Desert, California Ladies and Gentlemen: This Remarketing Agreement, dated as of July 1, 2009, confirms the understanding reached between Wells Fargo Brokerage Services, LLC (the "Remarketing Agent") and Palm Desert Financing Authority (the "Authority"), for the Remarketing Agent to act as exclusive remarketing agent in connection with the offering and sale from time to time in the secondary market of$ aggregate principal amount of Energy Independence Program, Variable Rate Demand, Lease Revenue Bonds, Series 2009 (the "Bonds")of the Palm Desert Financing Authority(the "Authority"). The Bonds shall be substantially in the form described in, shall be executed, delivered and secured under the provisions of, and shall be payable as provided in, that certain Indenture, dated as of July 1, 2009 (the "Indenture"), between the Authority and Wells Fargo Bank, National Association, as trustee (the "Trustee"). All capitalized terms used herein and not otherwise defined herein shall have the meanings specified in the Indenture. The payment of(i)the principal, redemption amounts and interest but not premium on the Bonds, and (ii) the purchase price of any Bonds tendered but not remarketed is supported by an irrevocable direct pay letter of credit (the "Letter of Credit") issued by Wells Fargo Bank, National Association (the "Bank"), in favor of the Trustee pursuant to the Reimbursement Agreement (the "Reimbursement Agreement"), dated as of July 1, 2009 by and between the Bank and the City of Palm Desert (the "City"). The Letter of Credit has been issued in the principal amount of the Bonds, plus 45 days' interest thereon (calculated at the rate of %per annum, on the basis of a 365 day year). The Authority has appointed the Trustee and the Trustee has agreed to serve as the Bond Registrar under the Indenture (subject to Section 2.04(g) of the Indenture). References in this Remarketing Agreement to the Bond Registrar shall mean the Trustee unless the context requires otherwise. 1. Appointment of Remarketing Agent; Responsibilities of Remarketing Agent. (a) Subject to the terms and conditions in the Indenture and those herein contained, the Authority has appointed the Remarketing Agent, and the Remarketing Agent hereby accepts such appointment, as exclusive remarketing agent in connection with the offering and sale of the Bonds from time to time in the secondary market subsequent to the initial sale of the Bonds. 1 DOC S SF/69670v 4/024669-0002 (b) Subject to the terms and conditions set forth in this Remarketing Agreement, the Remarketing Agent agrees to perform the duties and comply with the requirements imposed upon it by this Remarketing Agreement and the Indenture in a diligent, careful and professional manner and in accordance with industry standards applicable to remarketing agents marketing variable rate bonds. The Principal Office of the Remarketing Agent is located at the address set forth in Section 12 hereof. It is understood that in undertaking to perform such duties, and in the performance thereof, it is the intention of the parties that the Remarketing Agent will act solely as an agent and not as a principal except as expressly provided in Section 10 hereof. (c) The Authority and the Remarketing Agent agree that the responsibilities of the Remarketing Agent hereunder will include (i)the soliciting of purchases of Bonds from investors that customarily purchase tax-exempt securities in large denominations, (ii) effecting and processing such purchases, (iii)billing and receiving payment for Bonds purchased, (iv)causing the proceeds from the secondary sale of the Bonds to be transferred to the Trustee for deposit pursuant to the Indenture or transferred to the Trustee for payment to the Bank, as required by the Indenture, and (v)performing such other related functions as may reasonably be requested by the Authority and agreed to by the Remarketing Agent which are consistent with the Remarketing Agent's obligations under the Indenture. (d) The Remarketing Agent shall determine the interest rates on the Bonds in accordance with Section 2.02.A.(a)(3) of the Indenture and upon determination shall provide notice thereof to the parties in the manner and at the times set forth in Section 2.02.A.(c)of the Indenture. (e) The Authority agrees, at the Authority's expense, to take all steps reasonably requested by the Remarketing Agent to enable the Remarketing Agent to comply with the requirements, if any, of any applicable laws, rules, and regulations of any governmental body, board or commission relating to the remarketing of the Bonds as contemplated by this Remarketing Agreement, such as rules and regulations of the Municipal Securities Rulemaking Board and the Securities and Exchange Commission, including Rule 15c2-12, as promulgated and amended from time to time by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended("Rule 15c2-12"). (f) In connection with the performance of its duties hereunder, the Remarketing Agent agrees to keep such books and records with respect to its activities as Remarketing Agent for the Bonds as shall be consistent with prudent industry practice and to make such books and records with respect to the remarketing of the Bonds available for inspection by each of the Authority, the Trustee, the Bank and the Authority at all reasonable times. (g) The Remarketing Agent shall not remarket Bonds after it has been notified by the Bank of an Event of Default under the Reimbursement Agreement until such time as such notice is rescinded by the Bank in writing. 2. The Bonds. As more fully described in the Indenture, the Bonds will be issuable, subject to the terms and conditions of the Indenture, in the form of fully registered Bonds in the denominations of (1) $100,000 or any integral multiple of $5,000 in excess thereof with respect to the Bonds bearing interest at the Weekly Rate, or (2) $5,000 or any integral multiple thereof with respect to the Bonds bearing interest at the Annual Rate or Fixed Rate. The Bonds shall initially bear interest at the Weekly Interest Rate determined by the Remarketing Agent, as provided in the Indenture. 2 DO C S S F/69670v4/024669-0002 3. Furnishing of Offering Materials. (a) The Authority agrees to furnish (or cause to be furnished) the Remarketing Agent with as many copies as the Remarketing Agent may reasonably request of the Official Statement, dated July , 2009, relating to the Bonds (the "Original Official Statement"), as the same may be supplemented or amended from time to time, including the replacement of such Original Official Statement with a separate reoffering memorandum or other disclosure document relating to the Bonds (the Original Official Statement, as so supplemented and amended, by any such replacement reoffering memorandum or other disclosure document being referred to herein as the "Official Statement"), and such other information with respect to the Authority, the City, the Bank, the Indenture, the Lease, the Reimbursement Agreement, the Letter of Credit, the Trustee, and the Bonds, as the Remarketing Agent shall reasonably request from time to time. (b) If, at any time during the term of this Remarketing Agreement, any event or condition known to the Authority relating to or affecting the Authority, the City,the Bank, the Indenture, the Lease, the Reimbursement Agreement, the Letter of Credit, the Trustee, the Bonds, or the documents or transactions contemplated thereby, shall occur which in the reasonable judgment of the Authority, m affect the correctness or completeness of any representation or warranty of the City contained in the Lease or the Authority in this Remarketing Agreement or any statement of a material fact contained in the Official Statement, as it shall have been supplemented or amended with the information furnished from time to time pursuant to this Section 3, or which in the reasonable judgment of the Authority, might result in the Official Statement, as so supplemented or amended, containing any untrue, incorrect or misleading statement of a material fact or omitting to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, (i)the Authority will promptly notify the Remarketing Agent of the circumstances and details of such event, and (ii) if, in the reasonable opinion of the Remarketing Agent or the Authority, such event or condition requires the preparation and publication of an amendment or supplement to the Official Statement, the Authority, at its expense, will promptly prepare or cause to be prepared an appropriate amendment or supplement thereto so that the statements in the Official Statement as so amended or supplemented will not contain any untrue, incorrect or misleading statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, in a form and manner approved by the Remarketing Agent and the Authority. (c) In connection with the remarketing of the Bonds as a result of, or in anticipation of, the expiration or termination of the then applicable Credit Facility for the Bonds or the replacement of the then applicable Credit Facility with an Alternate Credit Facility, the Authority shall prepare, or cause to be prepared, at its sole expense, any disclosure documents that in the reasonable opinion of the Remarketing Agent and the Authority are necessary or desirable. Such disclosure documents shall be in form and substance acceptable to the Remarketing Agent and its counsel, if any. The Authority and the Remarketing Agent agree to cooperate fully in the preparation of any such disclosure documents. 3 DOGS SF/69670v4/024669-0002 4. Representations, Warranties, Covenants and Agreements of the Authority. The Indenture, the Lease,the Bond Purchase Contract dated July_, 2009 (the "Purchase Contract"),among Wells Fargo Institutional Securities, LLC (the "Underwriter"), the Authority, and the City relating to the Bonds and to approve the Original Official Statement, and this Remarketing Agreement are collectively referred to herein as the "Authority Documents." The Lease, the Purchase Contract, and the Reimbursement Agreement are collectively referred to herein as the "City Documents." The Authority represents, warrants, covenants and agrees that: (a) The Authority is a joint exercise of powers authority and in good standing under the laws of the State of California, has full legal right, power and authority to enter into the Authority Documents, and to carry out and consummate all transactions contemplated by the Authority Documents. (b) The Authority Documents have been duly authorized, executed and delivered by the Authority and constitute the legal,valid and binding agreements of the Authority with the other parties thereto enforceable against the Authority in accordance with their terms, except in each case as enforcement may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally, by the application of equitable principles regardless of whether enforcement is sought in a proceeding at law or in equity and by public policy. (c) The execution and delivery of the Authority Documents by the Authority and the City Documents by the City, the consummation of the transactions therein contemplated and the fulfillment of or compliance with the terms and conditions thereof, will not conflict in any material way with or constitute a material violation or material breach of or material default(and no event has occurred and is continuing which with the giving of notice or the passage of time or both could constitute such a breach or default) under, as to the Authority, its joint exercise of powers agreement or bylaws or with respect to each of the Authority and the City, any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, loan agreement, lease, contract or other agreement or instrument to which such entity is a party or by which it or its properties are otherwise subject or bound, or to the best knowledge of the Authority and with respect to each of the Authority and the City, any applicable law or administrative rule or regulation, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority or the City, as applicable, which conflict, violation, breach, default, lien, charge or encumbrance might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Authority Documents or the City Documents, as applicable, or the financial condition,assets,properties or operations of the Authority or the City, as applicable. (d) To the best knowledge of the Authority, no consent or approval of any trustee or holder of any indebtedness of the Authority or the City, as applicable, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority (except with respect to any state securities or "Blue Sky" laws) is necessary in connection with the execution and delivery of this Remarketing Agreement or the Lease by the Authority, or the Lease or the Reimbursement Agreement by the City, or the consummation by the Authority or the City of any transaction herein or therein contemplated, as applicable, or the fulfillment by the Authority or the City of or compliance by the Authority or the City with the terms and conditions hereof or thereof, as applicable, the absence of which consent, approval, permission, authorization, order, license, filing, or registration would materially adversely affect the due performance by the Authority and the City, respectively, under such documents, except as have been obtained or made and are in full force and effect. 4 DO C S SF/69670v4/024669-0002 (e) Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, before or by any court or federal, state, municipal or other governmental authority pending and notice of which has been served on the Authority or the City or, to the knowledge of the Authority or the City, threatened against (i)the Authority or the City or their respective assets, properties or operations which, if determined adversely to the Authority or the City, as applicable, or its respective interests, would have a material adverse effect upon the consummation of the transactions contemplated by, or the validity of, this Remarketing Agreement, the Indenture, the Lease or the Reimbursement Agreement, as applicable, or upon the financial condition, assets, properties or operations of the Authority or the City, and each of the Authority and the City is not in default (and no event has occurred and is continuing which with the giving of notice or the passage of time or both could constitute a default) with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Remarketing Agreement, the Indenture, the Lease or the Reimbursement Agreement, as applicable, or the financial condition, assets, properties or operations of the Authority or the City, as applicable, or (ii) alleging or otherwise asserting that the Official Statement is not true, correct and complete in all material respects or that the information contained in the Official Statement contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements and information contained in the Official Statement, in light of the circumstances under which they were made,not misleading. (f) No written information, exhibit or report furnished by the Authority or the City to the Bank in connection with the negotiation of this Remarketing Agreement, the Lease or the Reimbursement Agreement, as applicable, contains any untrue statement of a material fact or omits 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. (g) The descriptions in the Official Statement pertaining to the Authority,the City,the Leased Property,the Bonds, the Authority Documents, and the City Documents do not include any untrue statement of a material fact and do not omit to state any material fact necessary in order to make the statements therein in the light of the circumstances under which they were made, not misleading, except that no representation is made with respect to the information contained under the captions "THE CREDIT ENTITY," "SECURITY FOR THE BONDS — Insurance," "CERTAIN LEGAL MATTERS," "TAX MATTERS," "UNDERWRITING," and Appendices D and E in the Official Statement. The Authority authorizes the Official Statement to be used by the Remarketing Agent in connection with the offering and sale from time to time of the Bonds in the secondary market. (h) The Authority will diligently cooperate with the Remarketing Agent to qualify the Bonds and/or the related obligations of the Authority for offer and sale under the securities or Blue Sky laws of such states as the Remarketing Agent may request; provided, that in no event shall the Authority or the City be obligated to qualify to do business in any state where it is not now so qualified or to take any action which would subject it to general service of process in any state where it is not now so subject. 5. Representations, Warranties, Covenants and Agreements of the Remarketing Agent. The Remarketing Agent represents, warrants, covenants and agrees as follows: (a) The Remarketing Agent has been duly incorporated and is validly existing and in good standing under the laws of the state of its incorporation. 5 DO C S S F/69670v4/024669-0002 (b) The Remarketing Agent has full power and authority to take all action required to be taken by it by or under, and to perform and observe, the covenants and agreements on its part contained in this Remarketing Agreement. (c) The Remarketing Agent has, on or before the date hereof, duly taken all action necessary to be taken by it prior to such date to authorize the execution, delivery and performance of this Remarketing Agreement and the carrying out, giving effect to, consummation and performance of the transactions and obligations contemplated hereby,this Remarketing Agreement has been duly authorized, executed and delivered by the Remarketing Agent, and this Remarketing Agreement constitutes the legal, valid and binding agreement of the Remarketing Agent enforceable against the Remarketing Agent in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally, by the application of equitable principles regardless of whether enforcement is sought in a proceeding at law or in equity and by public policy. 6. Conditions To Remarketing Agent's Obligations. The obligations of the Remarketing Agent under this Remarketing Agreement have been undertaken in reliance on, and shall be subject to, on and as of the date of delivery of this Remarketing Agreement and on and as of each date on which Bonds are to be offered and sold in the secondary market pursuant to this Remarketing Agreement, the due performance by the Authority of the obligations and agreements to be performed by the Authority hereunder, and the accuracy of each of the representations and warranties made by the Authority herein, in the Purchase Contract and in the Lease. The obligations of the Remarketing Agent hereunder with respect to each date on which Bonds are to be offered and sold in the secondary market pursuant to this Remarketing Agreement are also subject, in the discretion of the Remarketing Agent, to the following further conditions: (a) The Indenture, the Lease,the Letter of Credit and the Reimbursement Agreement, shall be in full force and effect and shall not have been amended, modified or supplemented in any way which would materially and adversely affect the terms or payment of the Bonds, except as may have been agreed to in writing by the Remarketing Agent, and there shall be in full force and effect such additional resolutions, agreements, certificates (including such certificates as may be required in order to establish the exclusion of interest on the Bonds from gross income for federal, state and local income tax purposes) and opinions as shall be necessary to effect the transactions contemplated hereby, which resolutions, agreements, certificates and opinions shall be reasonably required by, and satisfactory in form and substance to, Richards, Watson& Gershon,A Professional Corporation, Bond Counsel. (b) There shall be no downgrade of the short-term rating of the Bank or the Bonds since the latest date as of which the Official Statement has been amended or supplemented in accordance with this Remarketing Agreement and no "Event of Default" under the Lease or the Indenture shall have occurred and be continuing and no other event shall have occurred and be continuing which, with the passage of time or giving of notice or both under the Indenture,would constitute such an Event of Default under the Lease or the Indenture. 7. Term and Termination of Remarketing Agreement. (a) This Remarketing Agreement shall become effective upon execution by the Remarketing Agent and the City, and shall continue in full force and effect to and including the earlier of (i)the establishment of an Annual Rate Period ending on the day immediately preceding the maturity date of the Bonds or (ii)the date on which payment in full of the Bonds, including Credit Facility Bonds, if any, shall have been made or provided for in accordance with the Indenture, subject to the right of the 6 DOC S SF/69670v4/024669-0002 Remarketing Agent to resign as Remarketing Agent at any time upon the giving of not less than 45 days prior written notice to the Authority,the Bank, the City, and the Trustee. The Remarketing Agent may be removed at any time upon the giving of not less than 45 days written notice by the City, provided that no such removal shall be effective until the successor has delivered an acceptance of its appointment to the Trustee. Upon such resignation or removal, this Remarketing Agreement shall terminate. If the then current Credit Facility for the Bonds is terminated for any reason, or an Event of Default under the Lease or the Indenture occurs, the Remarketing Agent shall have the right to resign, and such resignation shall be effective upon the Remarketing Agent's giving notice in writing or Electronic Notice of such resignation to the Authority, the Trustee and the City and the earlier of the expiration of thirty (30) days or the appointment of a successor Remarketing Agent. (b) In addition to the provisions of paragraph (a) of this Section 7, the parties acknowledge that the Remarketing Agent's best efforts to remarket Bonds will be unsuccessful if any of the conditions listed below exist, and the Remarketing Agent may suspend its obligations to remarket Bonds under this Remarketing Agreement at any time (which suspension shall be effective upon the Remarketing Agent's giving notice in writing or by Electronic Notice thereof to the Authority, the City, the Trustee and the Bank) if: (i) Legislation shall be introduced by committee, by amendment or otherwise, in, or be enacted by the Congress of the United States of America ("Congress") or the Legislature of the State of California (the State Legislature") or adopted by either House of Congress or House of the State Legislature, or a decision by a court of the United States of America shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the United States Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be made or proposed,to the effect that the offering or sale of the Bonds or obligations of the general character of the Bonds as contemplated hereby, is or would be in violation of any provision of the Securities Act of 1933, as amended and as then in effect (the "1933 Act" or the "Securities Act"), or the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect, or with the purpose or effect of otherwise prohibiting the offering or sale of the Bonds or obligations of the general character of the Bonds as contemplated hereby; (ii) Any information shall have become known, which, in the reasonable opinion of the Remarketing Agent, makes untrue, incorrect or misleading in any material respect any statement or information contained in the Official Statement, as the information contained therein has been supplemented or amended by other information furnished in accordance with Section 3 hereof, or causes the Official Statement, as so supplemented or amended, to contain an untrue, incorrect or misleading statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made,not misleading; (iii) Except as provided in clause (ii) hereof, any legislation, resolution, ordinance, governmental or quasi-governmental rule or regulation shall be introduced in, or be enacted by any body, department or agency of the United States of America or the State of California or a decision by any court of competent jurisdiction within the United States of America shall be rendered which, in the reasonable opinion of the Remarketing Agent, materially adversely affects the marketability of the Bonds on the terms contemplated by the Official Statement and this Remarketing Agreement; 7 D O C S S F/69670v4/024669-0002 (iv) Additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority purporting to have jurisdiction regarding the trading of the Bonds or by any national securities exchange regarding the trading of the Bonds or obligations of the general character of the Bonds which, in the reasonable opinion of the Remarketing Agent,materially adversely affects the marketability of the Bonds on the terms contemplated by the Official Statement and this Remarketing Agreement; (v) Any 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 which, in the reasonable opinion of the Remarketing Agent, materially adversely affects the marketability of the Bonds on the terms contemplated by the Official Statement and this Remarketing Agreement; (vi) A general banking moratorium shall have been established by federal, California or New York authorities; (vii) There shall have occurred the new outbreak or material escalation or material re-escalation of hostilities involving the United States of America, or the declaration by the United States of America of a new national emergency or war, which in the reasonable opinion of the Remarketing Agent materially adversely affects the marketability of the Bonds on the terms and in the manner contemplated hereby and by the Official Statement; or (viii) An event, including, without limitation, the bankruptcy or default of any other issuer of obligations of the general character of the Bonds or tax-exempt commercial paper, shall have occurred which, in the reasonable opinion of the Remarketing Agent, makes the marketability of the Bonds at par plus accrued interest while bearing interest at rates not in excess of the Maximum Rate permitted pursuant to the Indenture unlikely over an extended period of time. 8. Payment of Fees and Expenses. (a) In consideration of the services to be performed by the Remarketing Agent under this Remarketing Agreement, the Authority agrees to pay to the Remarketing Agent the following fees: (i)while the Bonds are in a Weekly Rate Period, an annual fee equal to one-eighth of one percent (0.125%) of the weighted average daily principal amount of such Bonds Outstanding on the date of payment; provided, that in no event shall the amount of such annual fee be less than $3,500, and (ii) in connection with the remarketing of Bonds in an Annual Rate Period, an amount as shall be agreed to between the Authority and the Remarketing Agent prior to any such remarketing and as shall reflect, in the opinion of the Remarketing Agent, then current sales commissions and associated expenses for tax exempt obligations comparable to the Bonds being remarketed in such Interest Rate Period (which sales commissions and associated expenses shall be in accordance with the then current standard in the market for such obligations). It is understood and agreed that the initial payment of the fee referred to in this paragraph(a) shall be made by the Authority on the date of the date of delivery of the Bonds in an amount of$9,625.00, and subsequent payments of such annual fee shall be made on each October 1 during the term hereof, commencing October 1, 2009, subject to a pro rata rebate should this Agreement be terminated prior to the end of a year for which the Authority has pre-paid the above annual fee. It is further understood and agreed that payment of the fee referred to in clause (ii) of this paragraph (a) shall be made by the Authority on the date on which such Bonds are being remarketed. 8 DOCSSF/69670v4/024669-0002 (b) The Authority shall pay upon demand therefor all reasonable expenses of the Authority in connection with the remarketing of the Bonds as contemplated by this Remarketing Agreement and all reasonable expenses incident to the performance of the obligations of the Authority and the Remarketing Agent hereunder, including but not limited to (i)the cost of printing and preparation for printing or other reproduction (for distribution in connection with any offering of Bonds hereunder) and distribution of the Official Statement or any amendment or supplement thereof, and any additional material described in and/or furnished pursuant to Section 3 hereof; (ii)the fees and disbursements of counsel to the Authority and the City and any other experts or consultants retained by the Authority or the City; (iii)the reasonable fees and disbursements of counsel to the Remarketing Agent in connection with the preparation and review of any amendment or supplement to the Original Official Statement or any subsequent Official Statement or any amendment or supplement to any such subsequent Official Statement or any additional material described in and/or furnished pursuant to Section 3 hereof; and (iv)the fees and expense of each securities rating agency in connection with the Bonds; it being understood that none of such expenses shall be paid by the Remarketing Agent. (c) Notwithstanding the foregoing, the Authority shall be under no obligation to pay the fees described in paragraph(a) of this Section 8 during any period in which the Remarketing Agent Lt, terminated or suspended its obligations pursuant to Section 7 hereof or any expenses described in paragraph (b) of this Section 8 incurred after such termination or suspension other than those incurred at the request of the Authority; provided, however, that such fees shall be prorated to the extent there has been performance of the obligations of the Remarketing Agent hereunder for less than a full period. 9. Indemnification and Contribution. (a) The Authority and the City will, to the extent permitted by law, (i) indemnify and hold harmless the Remarketing Agent, its employees, directors, officers, agents and attorneys and each person, if any, who `controls' (within the meaning of the 1933 Act) the Remarketing Agent (the "Indemnified Remarketing Party" and for the purposes of this paragraph(a), as the context requires, collectively, the"Indemnified Remarketing Parties"),to the extent permitted under applicable law, against any losses, claims, damages or liabilities,joint or several, to which the Indemnified Remarketing Parties may become subject, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon the representations and warranties of the Authority contained in Section 4 hereof or any of the representations and warranties made by the Authority or the City in the Lease, in light of the circumstances in which they were made, being untrue or alleged as being untrue in any material respect, at the time of remarketing any Bond pursuant hereto; and (ii) will reimburse any legal or other expenses reasonably incurred by such Indemnified Remarketing Parties in connection with investigating, defending or preparing to defend any such loss, claim, damage, liability or any action in respect thereof; provided, however, that the Authority and the City shall not be liable to any Indemnified Remarketing Party in any such case to the extent that any such judgment, loss, claim, damage or liability arises out of, or is based upon, any information furnished by such Indemnified Remarketing Party specifically for inclusion therein or the sole negligence or willful misconduct of an Indemnified Remarketing Party or the breach by the Remarketing Agent of any express obligation of the Remarketing Agent set forth in this Agreement. This indemnity provision will be in addition to any liability insurance which the Authority or the City may otherwise have. (b) The Remarketing Agent agrees to indemnify and hold harmless, to the extent permitted by law, the Authority and the City and their respective council members, board members, officers, agents and each person, if any, who controls the City within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified City Parties" and individually, an "Indemnified City Party") 9 DOC S SF/69670v4/024669-0002 from all claims, losses, damages or liabilities (or actions in respect thereof)to which any Indemnified City Party may become subject insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue or misleading statement of material fact made by the Remarketing Agent or its officers or employees in connection with the remarketing of Bonds under this Agreement, so long as such untrue or misleading statement was actually made and finally determined to have been untrue or misleading when made, and will reimburse each Indemnified City Party for any legal or other expense reasonably incurred by such Indemnified City Party investigating, defending or preparing to defend any such action or claim; provided,however,that the Remarketing Agent shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission (i) made in the Official Statement which was not furnished in writing by or on behalf of the Remarketing Agent specifically for inclusion therein or (ii) made in reliance upon and in conformity with written information furnished by the Authority or the City to the Remarketing Agent. The indemnity agreement in this paragraph shall be in addition to any liability which the Remarketing Agent may otherwise have to any Indemnified City Party. The Remarketing Agent agrees that upon the reasonable request of the Authority or the City, it will undertake due investigation and inquiry of any alleged untrue or misleading statement of material fact which could result in the indemnification of the Authority or the City by the Remarketing Aent under this paragraph(b). (c) Promptly after receipt by an Indemnified Remarketing Party or an Indemnified City Party (each separately, an "Indemnified Party") under paragraph (a) or (b) of this Section, of notice of the commencement of any action, such Indemnified Party shall notify the other party (the "Indemnifying Party") in writing of the commencement thereof; but the omission to so notify the Indemnifying Party shall not relieve the Indemnifying Party of any liability which it may have to any Indemnified Party otherwise than under such paragraph. In case any such action shall be brought against any Indemnified Party, and such Indemnified Party shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate in and, to the extent that it wishes, to assume the defense thereof, with counsel reasonably satisfactory to the Indemnified Party and after notice from the Indemnifying Party to such Indemnified Party of its election to so assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party under such paragraph for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of any such investigation; provided, however, that if the named parties to any such action(including any impleaded parties) include both the Indemnified Party (or its directors, officers or employees or any person so controlling the Indemnified Party) and the Indemnifying Party, and the Indemnified Party (or such directors, officers or employees or such person so controlling the Indemnified Party) shall have reasonably concluded that there may be one or more legal defenses available to it which are different from or in addition to those available to the Indemnifying Party, the Indemnified Party (or such directors, officers or employees or such persons so controlling the Indemnified Party) shall have the right to be represented by separate counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party to assume such legal defenses and to otherwise participate in the defense of such action on behalf of the Indemnified Party (or such directors, officers or employees or such person so controlling the Indemnified Party); provided further, however, that the Indemnifying Party shall not, in connection with anyone such action or separate but substantially similar or related actions arising out the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys at any point in time for the Indemnified Party and its directors, officers and employees and all persons so controlling the Indemnified Person. Notwithstanding the foregoing, the Indemnifying Party shall not be liable for any settlement of an action or claim affected without its consent,which consent shall not be unreasonably withheld. 10 DOC S SF/69670v4/024669-0002 (d) If the indemnification provided for in paragraph (a) of this Section 9 is unavailable, because of limitations imposed by securities laws or for any other reason, to a party that would otherwise have been an Indemnified Party in respect of any losses, claims, damages or liabilities (cr actions in respect thereof) referred to in paragraph (a) of this Section 9, then the Authority and the City shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion so that the Remarketing Agent is responsible for that portion represented by the percentage that the Remarketing Agent's commission with respect to the remarketing of Bonds referred to in paragraph (a) of this Section 9 bears to the aggregate principal amount of Bonds sold in such remarketing and the Authority and/or the City is responsible for the balance;provided, however,that(i) in no case shall the Remarketing Agent be responsible for any amount in excess of such commission and (ii) no person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act) be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in paragraph(a) of this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claims (which shall be limited as provided in paragraph(c) of this Section 9 if the Authority and/or the City has assumed the defense of any such action in accordance with the provision thereof). 10. Dealing in Bonds by Remarketing Agent. The Remarketing Agent, either as principal or agent, may in good faith buy, sell, own, hold and deal in any of the Bonds, and may join in any action which any Bondowner may be entitled to take with like effect as if it did not act in any capacity hereunder. The Remarketing Agent in its individual capacity, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Authority or the City, and may act as depositary, trustee, or agent for any committee or body of Bondowners or other obligations of the Authority or the City, as freely as if it did not act in any capacity hereunder. Under such circumstances, the Remarketing Agent shall have only those rights set forth in the Bonds. 11. Remarketing Agent Not Acting as Underwriter. It is understood and agreed by the parties hereto that the Remarketing Agent is only obligated hereunder to use its best efforts to solicit indications of interest on the part of the purchasers of any tendered Bonds. The Remarketing Agent shall be construed to be acting as agent only for and on behalf of the owners from time to time of the tendered Bonds. 12. Notices. Except as otherwise specifically provided in this Remarketing Agreement, all notices, demands and formal actions under this Remarketing Agreement shall in writing and mailed, by registered or certified mail, postage prepaid, return receipt requested, telegraphed or delivered by Electronic Notice, as follows: (a) to the Remarketing Agent, by delivering the same in writing to Wells Fargo Brokerage Services, LLC, MAC N9303-105, 608 Second Avenue South, 10th Floor, Minneapolis, Minnesota 55402-1916,Attention: Remarketing Desk; (b) to the Authority, by delivering the same in writing to the Palm Desert Financing Authority, Palm Desert, California, 73-510 Fred Waring Drive, Palm Desert, California 92260, Attention: Chief Administrative Officer; 11 DOCS SF/69670v4/024669-0002 (c) to the City, by delivering the same in writing to City of Palm Desert, Palm Desert, California, 73-510 Fred Waring Drive, Palm Desert, California 92260, Attention: City Manager; (d) to the Trustee, by delivering the same in writing to Wells Fargo Bank, National Association, 707 Wilshire Boulevard, 17th Floor, Los Angeles, California 90017, Attention: Corporate Trust Department; and (e) to the Bank, by delivering the same in writing to Wells Fargo Bank, National Association, MAC E2818-114, 707 Wilshire Boulevard, 11th Floor, Los Angeles, California 90017, Attention: Judith Zimmerman. Each party may, by notice given under this Remarketing Agreement, designate other addresses to which subsequent notices, requests, reports or other communications shall be directed. Any notice hereunder shall be deemed given when mailed or sent by the methods described above. 13. Assignment; Third Party Beneficiaries. The obligations of the respective parties hereto may not be assigned or delegated to any other person without the consent of the other party hereto and the Bank. In addition, Section 14 below also governs assignments and third party beneficiaries. 14. Miscellaneous. This Remarketing Agreement, and the obligations of the Authority hereunder, may not be assigned or delegated to any other person without the prior written consent of the Remarketing Agent. This Remarketing Agreement, and the rights and obligations of the Remarketing Agent hereunder, may be assigned by the Remarketing Agent to any other direct or indirect subsidiary of Wells Fargo & Co. or any affiliate of the Remarketing Agent meeting the requirements of Section 8.08 of the Indenture without the consent of any person, and upon such assignment, such subsidiary or affiliate shall become the Remarketing Agent hereunder and under the Indenture without any further action. Any other assignment of this Remarketing Agreement by the Remarketing Agent shall require the consent of the Authority, which consent shall not be unreasonably withheld. This Agreement will inure to the benefit of and be binding upon the Authority and the Remarketing Agent and their respective successors and assigns, and will not confer any rights upon any other person, partnership, association or corporation other than persons, if any, controlling the Remarketing Agent or the Authority within the meaning of the Securities Act. The terms "successors" and"assigns" shall not include any purchaser of any of the Bonds merely because of such purchase. 15. Survival of Representations and Warranties. All of the representations and warranties of the Authority in this Remarketing Agreement and in the Lease shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Remarketing Agent and termination of this Remarketing Agreement. 16. Section Headings. Section headings have been inserted in this Remarketing Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part this Remarketing Agreement and will not be used in the interpretation of any provision of this Remarketing Agreement. 17. Severability. If any provision of this Remarketing Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any constitution, statute, role of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or 12 DOCSSF/69670v4/024669-0002 circumstances, or of rendering any other provisions inoperative or unenforceable to any extent whatsoever. 18. Counterparts. This Remarketing 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. 19. Amendments. This Remarketing Agreement may not be altered, amended, supplemented or modified in any manner whatsoever except by written instrument signed by the Authority and the Remarketing Agent, with the consent of the Bank. 20. Legal Fees. In the event of a dispute between the parties under this Remarketing Agreement, the losing party in such dispute shall pay all reasonable costs and expenses incurred by the prevailing party in connection therewith, including but not limited to reasonable attorney's fees. 21. Intention of Parties. It is the express intention of the parties hereto that no purchase, sale or transfer of any Bonds, as herein provided, or the setting of interest rates in respect thereof, shall constitute or be construed to be the extinguishment of any Bond or the indebtedness represented thereby or the reissuance of any Bond or the refunding of any indebtedness represented thereby. 22. Entire Agreement. The parties agree that the terms and conditions of this Remarketing Agreement supersede those of all previous agreements between the parties, and that this Remarketing Agreement contains the entire agreement between the parties hereto, with respect to the subject matter hereof. 13 D O C S S F/69670v4/024669-0002 23. Governing Law. This Remarketing Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State of California applicable to contracts made and performed in the State of California. Very truly yours, WET I S FARGO BROKERAGE SERVICES, LLC By: Authorized Officer Accepted and agreed to as of the date first above written: PALM DESERT FINANCING AUTHORITY, CALII'ORNIA By: Its: Chief Administrative Officer DOCSSF/69670v4/024669-0002 REIMBURSEMENT AGREEMENT Between CITY OF PALM DESERT And WELLS FARGO BANK, NATIONAL ASSOCIATION Dated as of July 1, 2009 (Letter of Credit No. for $ ) REIMBURSEMENT AGREEMENT REIMBURSEMENT AGREEMENT, dated as of July 1, 2009 (the "Agreement") between the CITY OF PALM DESERT (the "City") and WELLS FARGO BANK, NATIONAL ASSOCIATION (the "Bank") WHEREAS, pursuant to that certain Indenture dated as of July 1, 2009 between the Palm Desert Financing Authority (the "Authority"), and Wells Fargo Bank, National Association(the"Trustee") (the"Indenture"), the Authority issued its Energy Independence Program,Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the"Bonds"), in the aggregate principal amount of$[5,000,000].00, the proceeds of which will be used to finance and refinance the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City pursuant to the City's Energy Independence Program (collectively, the "Project"); and WHEREAS, as a condition precedent to the issuance of the Bonds and the making of the lease to the City, the Authority requires that the City obtain and deliver to the Trustee, for the benefit of the holders of the Bonds, an irrevocable letter of credit to secure payment of the Bonds; and WHEREAS, the City has requested that the Bank issue an irrevocable direct-pay letter of credit to the Trustee substantially in the form attached hereto as Exhibit A (the "Letter of Credit"), and the Bank has agreed to issue such Letter of Credit upon and subject to the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing recitals and the covenants contained herein, and in order to induce the Bank to issue the Letter of Credit, the City and the Bank hereby agree as follows. (Capitalized terms used herein and not otherwise defined have the meaning set forth in Section 17 hereof.) SECTION 1. Terms and Amount of Letter of Credit. The Bank hereby agrees, on the terms and subject to the conditions set forth in this Agreement, to issue its irrevocable direct-pay Letter of Credit for the account of the City in favor of the Trustee in an initial amount not to exceed the Stated Amount, which amount approximates the aggregate principal amount of the Bonds plus sixty (60) days' interest calculated at twelve percent(12%), based on the actual number of days elapsed in a year of 365 days. The Letter of Credit shall be issued on the date which the Bank, in its sole discretion, shall determine that all of the conditions precedent set forth in Section 4 of this Agreement shall have been satisfied, and shall expire on the Expiration Date. Notwithstanding anything herein to the contrary, this Agreement shall not expire or be otherwise terminated until such time as all payment obligations to the Bank due or to become due hereunder have been paid. SECTION 2. Reimbursement and Other Payments. (a) Reimbursement Obligations. Except as provided in Section 2(b) hereof, the City by payment of Base Rental Payments or Additional Rental Payments agrees to pay to the Bank (i)on the day that the Bank pays a Drawing made by the Trustee under the Letter of Credit, all amounts paid by the Bank pursuant to the Letter of Credit to or on behalf of the City in respect of such Drawing; and (ii) interest on any and all amounts unpaid by the City when due under this Agreement from the date such amounts become payable until payment in full (collectively, the "Reimbursement Obligations"). Except as provided in Section 2(b) hereof, interest shall accrue on unpaid Reimbursement Obligations at a rate per annum equal to the Default Rate. (b) Tender Reimbursement Obligations. (i) Each Tender Drawing paid by the Bank under the Letter of Credit shall constitute a Tender Reimbursement Obligation which obligation shall be due and payable by the City as set forth below. The Trustee shall use the proceeds of Tender Drawings only for the purpose of purchasing Bonds tendered or deemed tendered for purchase pursuant to Sections 4.11, 4.12 and 4.14 of the Indenture. (ii) Upon receiving, or receiving notification of, any Tender Drawing, the Bank shall notify the City of such Tender Drawing and the amount of the Tender Drawing. Subject to the provisions of subsection (vi) below, the amount of any Tender Drawing shall be due and payable within ninety(90) days following the date the Tender Drawing is paid by the Bank(the"Tender Drawing Date"). Interest shall accrue at the Tender Drawing Rate on all unreimbursed Tender Drawing amounts from the Tender Drawing Date to the date that payment of the principal amount of the Tender Drawing becomes due hereunder and at the Default Rate thereafter. Interest due on such amounts shall be paid in arrears to the Bank on the first day of each month commencing on the first day of the month following the Tender Drawing Date, and on the date that reimbursement of the principal amount of such Tender Drawing is due and payable. City shall submit to the Bank together with every payment of Tender Drawing amounts and interest due thereon under this Section 2, a statement specifying the amounts paid, the principal and interest portions of such payments, and the basis upon which City calculated such amounts. (iii) The City may, upon at least one (1) Business Day's notice to the Bank, prepay the outstanding amount of any Tender Reimbursement Obligation in whole or in part (but not in sums less than $10,000.00 per prepayment) together with accrued interest at the Tender Drawing Rate from the Tender Drawing Date related to such Tender Reimbursement Obligation to the date of such prepayment on the amount prepaid; provided, however, that prepayments shall be credited first to interest due and owing on any Reimbursement Obligations outstanding hereunder other than Tender Reimbursement Obligations, then to interest due and owing on any Tender Reimbursement Obligations, and finally to principal due and owing on any Tender Reimbursement Obligations, applied in the order in which Drawings connected therewith were paid by the Bank; provided, further, that the proceeds paid to the Bank from any redemption of Bank Bonds pursuant to the Indenture or from any remarketing of Bank Bonds pursuant to Section 4.16 of the Indenture will be credited toward the Tender Reimbursement Obligations of the City, applied in the order in which Drawings connected therewith were paid by the Bank. 2 (iv) All proceeds of the sale by the Remarketing Agent(as provided in Section 4.16 of the Indenture) of Bank Bonds, shall be remitted by the Tender Agent to the Bank to prepay any then outstanding Tender Reimbursement Obligations, applied in the order in which the Drawings connected therewith were paid by the Bank. (v) The Trustee shall deliver all Bonds purchased with the proceeds of a Tender Drawing to the Bank (or its designated nominee) and shall register the Bank (or its designated nominee)as owner of such Bonds in its registration books,which Bonds shall evidence the corresponding Tender Reimbursement Obligation. Such Bonds shall be deemed Bank Bonds and shall be entitled to all of the rights and privileges of and shall be governed by all of the terms and conditions of the Bonds and the Indenture; provided, however, that: a. such Bonds shall be redeemed or purchased and all principal and interest owing thereon shall be payable to the Bank; b. if the Bank receives reimbursement in full of amounts paid by the Bank with respect to any Tender Drawing by 5:00 p.m. (San Francisco time)on the Tender Drawing Date of such Tender Drawing, no interest shall be payable by the City with respect thereto; c. such Bonds may not be tendered for purchase pursuant to Section 4.14 of the Indenture; d. such Bonds shall not be entitled to payment of any premium upon redemption. (vi) In the event that any Bank Bonds remain such for a period of ninety(90) days, the City shall (i) increase the Lease Payments in each year up to the maximum fair rental value of the Leased Property in that year; and (ii) use its best efforts to amend the Lease and the Site Lease to substitute or add real property and/or improvements to the Property subject to the Lease so that the resulting annual fair rental value of all real property subject to the Lease is at least equal to the annual Lease Payments(taking into consideration Base Rental and all Additional Rental due) from the City so that the Bank Bonds may be paid in full within a three (3)-year period. In addition, the City agrees, subject to the terms of the Lease, to extend the term of the Lease if, on the stated expiration date of the Lease, any amounts remain owing hereunder or with respect to any Bank Bond. The City also agrees that it will allocate the amounts set aside pursuant to Section 5.01(c) of the Lease in the accumulated reserve account held by the City with respect to the Leased Property to the payment of the Bank Bonds pursuant to the terms of this Agreement. The City and the Authority shall, solely, at the Bank's request, redetermine or cause to be redetermined the fair market value for the Leased Property if any Bank Bonds remain such for more than ninety (90) days or upon the Expiration Date. Such redetermination shall be by any method which the Bank may reasonably request, including an appraisal conducted by an MAI appraiser approved by the Bank, and shall be at the expense of the City. 3 If, the Bank Bonds remain such after 180 days and the Bank reasonably determines that the actions taken by the City pursuant to subsection (vi) will not result in payment of the Bank Bonds within three (3) years, the City will use its best efforts to (A) convert the interest rate on the Bonds to the Annual Rate or Fixed Rate or (B) refund the Bonds. (c) Initial Fee. Borrower shall pay to Bank a non-refundable initial fee (the "Initial Fee") for the issuance of the Letter of Credit equal to $10,000.00, which fee shall be fully earned and payable on the earlier of the Date of Issuance or August 15, 2009 . (d) Continuing Letter of Credit Fees. The City agrees to pay to the Bank continuing nonrefundable letter of credit fees(the"Continuing Fees") in an amount equal to at least one and one-half percent (1.50%) per annum of the Stated Amount then in effect pursuant to the Letter of Credit plus any unreimbursed drawings due within 90 days of the date of determination. Such fee shall be based on the City's Liquidity Ratio as provided below: Liquidity Ratio Continuing Fee 3.0x or above 1.50% 2.5x 1.75% 2.0x 2.00 Below 2.0x Default Said fees shall be payable quarterly in arrears commencing on October 1, 2009 and on each January 1, April 1, July 1 and October 1 thereafter. Upon the occurrence of an Event of Default, the Continuing Fees shall be increased by 1.5% per annum above the Continuing Fee in effect on the date of the default. In addition, the City shall pay to Bank an amendment fee of$2,500.00 plus out of pockets costs and expenses, including without limitation attorneys fees(including allocated costs of in-house counsel) upon the amendment or transfer of the Letter of Credit and $300.00 upon the negotiation of each draft presented under the Letter of Credit, fees and charges determined by Bank in accordance with Bank's standard fees and charges in effect at the time the Letter of Credit is amended or transferred or any draft is paid. (d) Computation of Interest and Fees. Interest and Letter of Credit Fees payable hereunder (including interest at the Default Rate and the Tender Drawing Rate) shall be computed on the basis of the actual number of days elapsed in a year of 360 days. (e) Termination or Substitution of Letter of Credit. The Letter of Credit may be terminated by the City upon sixty (60) days written notice to the Bank at any time. In the event the City terminates the Letter of Credit prior to the first anniversary of the execution and delivery of this Reimbursement Agreement, the City shall pay the Bank Agent a fee (the "Termination Fee") in an amount equal to the Continuing Fees that would have accrued had this Reimbursement Agreement been in effect for one full years (less any amounts already paid pursuant to Section 2(c) above). 4 (f) Payment of Amounts Due From City. The City agrees to pay, in lawful currency of the United States and in immediately available funds, or to cause the Trustee to pay, all amounts due the Bank under this Agreement directly to the Bank by wire transfer as provided below until such time as the City is notified in writing by the Bank of a different account or address where payment should be made. Payment by wire shall be made to the following account: Bank: ABA#: Address: Account: (g) Method of Payment of Amounts Due. Bank shall, and City hereby authorizes Bank to, debit any demand deposit account of City with Bank designated by City in writing, or if no such account is designated by City, any demand deposit account of City with Bank as Bank shall determine in its sole discretion, for all payments of principal, interest, fees and other payments payable under this Agreement, as they become due. Should, for any reason whatsoever, the good funds in any such demand deposit account be insufficient to pay all such sums when due, City shall immediately upon demand remit to Bank the full amount of any such delinquency. (h) Payments to be made on a Business Day; Maximum Rate. If any amount payable hereunder shall fall due on a day that is not a Business Day, then such due date shall be extended to the next succeeding Business Day, and interest at the rates provided herein shall continue to accrue during such extension. Nothing contained in this Agreement shall be deemed to establish or require the payment of a rate of interest in excess of the maximum rate permitted by applicable law (the "Maximum Rate"); provided, that If the Tender Drawing Rate of interest on the Bank Bonds or any other amounts owed to the Bank hereunder (the "Effective Rate") exceeds the maximum rate permitted by law, the difference in the amount of interest which could be collected by Bank by applying the Effective Rate (the "Accumulated Interest Amount") shall be calculated and applied to a special account(the"Accumulated Interest Account")to be kept in the records of the Bank. Whenever, in the future, the interest rate on the Loan at the Effective Rate is less than the Maximum Rate, the rate to be borne on the Bank Bonds or other obligations hereunder shall nevertheless be the Maximum Rate until Lender shall have earned, as the difference between the Maximum Rate and the Effective Rate, the amount credited to the Accumulated Interest Account; provided, that the amount in the Accumulated Interest Account shall become immediately due and payable in whole upon redemption in full of the Bank Bonds or the termination of this Agreement and on a pro rata basis upon the redemption of Bank Bonds in part. The calculations described in this subsection shall be performed by the Bank and given in writing to the City. SECTION 3. Security Interest in Collateral: Optional Redemption of Bonds (a) Collateral. The City hereby grants, and the Authority has pursuant to Section 5.02(a) of the Indenture granted, to the Bank as security for the performance by City of its obligations hereunder, a lien on the Revenues(as defined in the Indenture), the Lease and 5 all Base Rental Payments and Additional Rental Payments under the Lease, all funds maintained pursuant to the Indenture (the "Bond Funds") and the Bank Bonds (as defined in the Indenture) and all proceeds of the foregoing (collectively, the"Collateral")on a parity with the lien on such Collateral in favor of the Trustee for the benefit of the holders of the Bonds. City hereby represents and warrants to the Bank that, except for the lien and encumbrance in favor of the Trustee for the benefit of the holders of the Bonds, the Collateral is free and clear of liens and encumbrances and shall continue to remain free and clear of liens and encumbrances until such time as all amounts due under this Agreement have been paid in full. SECTION 4. Issuance of the Letter of Credit. (a) Agreement of the Bank. Subject to the terms and conditions of this Agreement, on the Date of Issuance and subject to satisfaction of the conditions set forth in Subparagraph (b) below, the Bank shall issue the Letter of Credit in the Stated Amount effective on the Date of Issuance. (b) Conditions Precedent to Issuance of the Letter of Credit. The obligation of the Bank to issue the Letter of Credit is subject to the following conditions precedent: (i) The Bank shall have received on or before the Date of Issuance the following, each dated such date and in such form and substance as is satisfactory to the Bank and its counsel: (A) Copies of the executed Indenture, Lease and Site Lease; (B) Certified resolution of the City Council of the City authorizing the execution, delivery and performance of the obligations of the City under this Reimbursement Agreement; (C) Certified resolution of the governing body of the Authority authorizing the execution, delivery and performance of the obligations of the Authority under the Indenture; (D) Evidence of all insurance required to be maintained by the terms of the Lease; (E) Description of the Leased Property, a title report for the Leased Property, appraisal of the Leased Property or other evidence of the fair rental value of the Leased Property in an amount acceptable to the Bank; (F) A reliance letter from Richard Watson Gershon, Bond Counsel, addressed to the Bank giving the Bank the right to rely on the final approving opinion of Bond Counsel with respect to the issuance of the Bonds, and a supplemental opinion of Bond Counsel and/or Best, Best& Krieger, the City Attorney, dated the Date of Issuance and addressed to the Bank concerning, among other things, the authorization, execution and delivery of this Agreement and the enforceability of this Agreement, which opinions shall be satisfactory to the Bank and its counsel in form and substance; (G) Executed copies of this Agreement; (H) Evidence that the Bonds will be rated AA+ (long term) and A-1+ (short term) by S&P; 6 (I) Evidence of property insurance meeting the requirements of the Lease; (J) CLTA extended coverage title policy in favor of the Trustee insuring the Lease; (K) Current brokerage statements evidencing unrestricted cash and investments in the City's General Fund in an amount not less than 4.0x principal amount of debt supported or repaid by the General Fund; (L) Such other documents, instruments, approvals (and, if requested by Bank, certified duplicates of executed copies thereof)or opinions, including,without limitation, opinions of City's legal counsel, as Bank may reasonably request. (ii) The following statements shall be true and correct on the Date of Issuance as they pertain to the City, and the Bank shall have received a certificate signed by City dated the Date of Issuance stating that: (A) The representations and warranties contained in Section 6 of this Agreement or in any instrument delivered pursuant to or in connection with this Agreement are true and correct in all material respects on and as of the Date of Issuance (and after giving effect to the issuance of the Letter of Credit) as though made on and as of such date; (B) No Default or Event of Default has occurred and is continuing, or would result from the issuance of the Letter of Credit; (C) There is no litigation pending against the Authority or the City, notice of which has been served upon the City or the Authority, as applicable, or, to the best of City's knowledge threatened litigation against the City or the Authority wherein an unfavorable decision, ruling, or finding would materially adversely affect the authorization, execution, delivery or performance by the City or the Authority of this Agreement and the Related Documents to which each is a party that has not been previously disclosed to the Bank in writing and approved by the Bank; (D) No material adverse change has occurred in the operations or condition (financial or otherwise) of City as shown in the financial statements of the City for the fiscal year ended June 30, 2008; and (E) All conditions precedent to the issuance of the Bonds to be performed by the Borrower shall have been satisfied. (iii) On or prior to the Date of Issuance, the Bank shall have received reimbursement of Bank's fees and expenses, including attorneys fees (including, without limitation, allocated in-house counsel fees) incurred in connection with this Agreement and the Letter of Credit, together with payment of the Initial Fee. (c) Other Obligations of City. As soon as possible following the Date of Issuance, City shall ensure that a complete transcript of proceedings relating to the issuance of the Bonds is delivered to Bank. SECTION 5. Obligations Absolute. Except as hereinafter provided, the obligations of the City under this Agreement shall be absolute, unconditional and irrevocable and shall be paid and performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever, including, without limitation, the following circumstances: (a) any lack of validity or enforceability of the Letter of Credit or any of the Related Documents, except if such lack of validity or enforceability shall be the result of any action or omission of the Bank; (b) any amendment or waiver of, or any consent to, this Agreement or any Related Documents; (c) the existence of any claim, set-off, defense or other rights which the City may have at any time against the Trustee, any beneficiary, or any transferee of the Letter of Credit (or any Person for whom the Trustee, any such beneficiary, or any such transferee may be acting), the Bank or any other Person, whether in connection with this Agreement, the Related Documents or any unrelated transaction; provided, however, that nothing in this Section 5 shall prevent the assertion of any such claim by separate suit or counterclaim; (d) any statement in any certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (e) payment by the Bank under the Letter of Credit against presentation of a draft or certificate which does not comply with the terms of the Letter of Credit except if such payment constitutes the gross negligence or willful misconduct of the Bank or such draft or certificate does not substantially comply with the requirements of the Letter of Credit under which it is presented; (f) any other circumstance or happening whatsoever,whether or not similar to any of the foregoing, which results from the Bank's gross negligence or willful misconduct; (g) any delay, extension of time, renewal, compromise or other indulgence agreed to by the Bank without notice to, or approval of, the City in respect to any of the City's obligations to the Bank under this Agreement; (h) any failure to complete the Project; or (i) any exchange, release or nonperfection of any lien or security interest in any collateral pledged or otherwise provided to secure any of the obligations contemplated herein or in any of the other Related Documents. SECTION 6. Representations and Warranties. A. The City represents and warrants as follows: (a) Legal Status. City is a municipal corporation and charter law city, duly organized and existing under the laws of the State of California. (b) Business Operations; Leased Property. The City has all powers and all governmental licenses, authorizations, consents and approvals required to carry on its 8 business as now conducted. The Leased Property is in good condition and the fair rental value of the Leased Property supports payment of the Base Rental Payments and Additional Rental Payments. (c) Power and Authority. The execution, delivery and performance by the City of this Agreement and the Related Documents to which it is a party are within the City's powers, have been duly authorized by all necessary action, do not contravene or constitute a default under any provision of applicable law or regulation or of any agreement,judgment, injunction, order, decree or contractual restriction binding on the City or its property, and do not result in or require the creation or imposition of any lien, security interest or other charge or encumbrance upon or with respect to any of its properties, except as contemplated by such Related Documents. (d) Approvals. To the best of the City's knowledge, no further approval, authorization, consent, order, notice to or filing or registration with any governmental authority or any public board or body (other than in connection or in compliance with the p-ovisions of the securities or"blue sky"laws of any jurisdiction which were not required on or prior to the Date of Issuance) is legally required with respect to the City's participation in the issuance of the Bonds and the entering into performance by the City of this Agreement and the Related Documents to which it is a party, which would constitute a condition precedent to or the absence of which could materially adversely affect the due performance by the City under this Agreement or any of the Related Documents to which the City is a party. (e) Enforceability. This Agreement and the Related Documents to which the City is a party have been or will be duly executed and delivered and are, or upon execution will be, the valid and legally binding obligations of the City, enforceable against the City in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles relating to, or limiting, creditors' rights generally or the availability of equitable remedies. (f) Disclosure of Information. The statements and information contained in the official statement issued in connection with the issuance of the Letter of Credit which relate to the City and the Project, and which relate to information provided by the City in connection with the issuance of the Letter of Credit are, and at the Date of Issuance will continue to be, true, correct and complete in all material respects and as to such statements, do not, and at the Date of Issuance will not, omit any statement or information necessary to make the statements and information therein, in the light of the circumstances under which they were made, not misleading in any material respect. (g) Financial Statements. The financial statements of the City, copies of which have been delivered to the Bank, fairly present the financial position of the City as of the date thereof and the results of operations and changes in financial position for the periods indicated. Since the date of the most recent financial statements, there have been no material adverse change in the condition or operations of the City not disclosed in such information, and no event has occurred which materially adversely affects or is likely to affect the business, operations, assets or condition (financial or otherwise)of the City or the performance by the City of its obligations under this Agreement or any of the Related Documents to which the City is a party. (h) Litigation. Except as disclosed to the Bank in writing prior to the date hereof, there are no actions, suits or proceedings, including,without limitation, proceedings before 9 any governmental commission, board, bureau or other administrative agency, pending against the City, notice of which has been served on the City, or, to the knowledge of the City, threatened against or affecting the City which will (to the extent not covered by insurance) in the opinion of the City have a material adverse effect on the Project, the business, the financial condition, or the results of operations of the City or which in any manner questions the validity of this Agreement or any of the Related Documents to which the City is a party. (i) Related Documents. The City makes the representations and warranties made by it in the Related Documents to and for the benefit of the Bank as if the same were set forth at length in this Agreement. (j) Changes in Law. To the best of the City's knowledge, there is not pending any change of law which, if enacted or adopted, could have a material adverse effect on the City's ability to perform its obligations under the Related Documents. (k) Environmental Matters. Except as disclosed to the Bank in writing prior to the date hereof, the Leased Property does not contain or incorporate and is not threatened with contamination from Hazardous Materials (hereinafter defined). The Leased Property will not be used and has never been used in connection with the handling, storage, or disposal of Hazardous Materials. There have been no releases and there are no threatened releases of Hazardous Materials on, onto, from, or under the Leased Property. For purposes of this Agreement, the terms"disposal,""release,"and "threatened release"shall have the definitions assigned thereto by the Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. Section 9601 et seq., as amended. "Hazardous Materials"means any asbestos, PCB'S, ureaformaldehyde, flammable explosives, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances or related materials, radioactive materials, or materials defined under Federal or California laws and regulations as "hazardous substances," "hazardous materials," or "toxic substances", including, without limitation, any substances defined as or included in the definition of "hazardous substances", "hazardous materials", or "toxic substances" in the comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended,42 U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act,49 U.S.C.Section 1801, et seq.; the Resource Conservation and Recovery Act,42 U.S.C. Section 6901 et seq.; and those substances defined as "hazardous wastes" or "hazardous substances" in the California Health & Safety Code; and in the regulations adopted, published and/or promulgated pursuant to said laws. To the best of City's knowledge, all past and current uses of the Leased Property comply with all federal, state, and local laws regulating Hazardous Materials, owners of the Leased Property have never received notice of a violation of any federal, state, or local law regulating Hazardous Materials applicable to the Leased Property, and no actions have been commenced or threatened for non-compliance with such laws. The City is not required by any law regulating Hazardous Materials to obtain any permit or license to use the Leased Property. The Leased Property does not contain and has never contained an underground storage tank(including, without limitation, a tank for which a permit to operate was obtained under the Underground Storage of Hazardous Substances Act). No event has occurred which requires or required any owner of the Leased Property to give any public entity notice of any spill, release, threatened release, disposal, or existence of Hazardous Materials on the Leased Property. There has been no litigation brought or threatened against any owner of the Leased Property nor have any settlements been reached by or with any party or parties alleging the presence, io disposal, release, or threatened release of any Hazardous Materials on, onto, from, or under the Leased Property. (I) No Breach. The consummation of the transactions contemplated hereby and the execution, delivery and performance of this Agreement and the other Related Documents by the City will not violate or constitute or result in a material breach of or a default under any mortgage, deed of trust, lease, loan or security agreement, corporate charter, articles, or bylaws, as applicable, or any other instrument to which the City is a party or by which it may be bound or affected. (m) Immunity from Jurisdiction. The City is not entitled under California law to claim immunity on sovereign or other similar grounds with respect to itself in relation to this Agreement or its revenues or assets(irrespective of their use or intended use) in relation to this Agreement from (i) suit, (ii)jurisdiction of any court, or (iii) relief by way of injunction, order for specific performance or order for recovery of property; provided, that no representation is made with respect to the waiver of immunity under the XI Amendment of the United States Constitution; and provided further, that any claim made hereunder shall be made in accordance with and pursuant to the procedures provided by the laws of the State of California. SECTION 7. Covenants of the City. So long as the Expiration Date has not occurred or any amount is due or owing to the Bank hereunder, the City agrees that it will comply with the following covenants: (a) Reporting Requirements. The City will deliver to the Bank, in form and detail satisfactory to Bank: (i) not later than one hundred eighty(180)calendar days after and as of the end of each fiscal year, financial statements for the preceding fiscal year, audited by a firm of independent certified public accountants acceptable to the Bank; (ii) not later than thirty (30) calendar days after the commencement of each fiscal year, commencing with the fiscal year commencing July 1, 2009, a copy of the adopted budget of the City, as approved by the City Council, for such fiscal year; (iii) not later than thirty (30) calendar days after the commencement of each fiscal year, commencing with the fiscal year commencing July 1, 2009, a copy of the rent roll for the Leased Property, as of the last day of the prior fiscal year; (iv) not later than thirty (30)days after the end of each fiscal quarter, a compliance certificate, with calculations, certified by the Finance Director of the City confirming the City's compliance with the financial covenants set forth in Section 7(m) below; (v) at such time as delivery of the financial statements of the City required by Section 7(a)(i), a copy of the unqualified opinion of the accountants with respect to such financial statements; (vi) at such time as any reports or certificates are delivered to the Trustee pursuant to the Indenture or the Lease, a copy of such report or certificate; 11 (vii) prompt written notice of any default under the Indenture, the Lease or the Site Lease; and (viii) from time to time such other information as the Bank may reasonably request. (b) Maintenance of Property; Insurance. The City will keep the Leased Property in reasonably good working order and condition and will maintain,with financially sound and reputable insurance companies, the insurance required by Section 6.03 of the Lease, including without limitation not less than 24 months of rental interruption insurance, and will deliver to Bank from time to time at Bank's request schedules setting forth all insurance then in effect. (c) Conduct of Business. The City will preserve, renew and keep in full force and effect all rights, privileges, contracts and leases necessary or desirable for the normal conduct of City's business. (d) Compliance with Laws. The City will comply, in all material respects, with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities except where the necessity of compliance therewith is contested in good faith by appropriate proceedings; provided, however, that the foregoing shall not require compliance with any such law, ordinance, rule, regulation and/or requirement so long as failure to comply shall not have a material adverse effect on the condition of the City and its ability to perform its obligations under this Agreement and the Related Documents. (e) Inspection of Property, Books and Records. The City will keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. The City will permit representatives of the Bank at reasonable times and intervals upon prior written notice to visit and inspect any of City's properties, books and records, to examine and make copies of any books and records(subject to proprietary and confidentiality policies and agreements binding upon the City), and to discuss its affairs, finances and accounts with his employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. (f) Notices. The City will promptly give signed written notice to the Bank of the occurrence of any Default or Event of Default at the earliest possible date after discovery of such Default or Event of Default, but in any event no later than three (3) Business Days following discovery of a Default or Event of Default relating to payment obligations of City and five (5) Business Days following discovery of any other Default or Event of Default, setting forth the details of, and the actions which the City proposes to take with respect to, such Default or Event of Default. The City will also give notice to the Bank within thirty(30) days after the City has actual knowledge of any pending or threatened action, suit or proceeding with a claim against City in excess of$1,000,000.00, or of any action, suit or proceeding with a claim in any amount, which when aggregated with all claims under other action suits or proceedings existing at such time, exceed $1,000,000.00. (g) Related Documents. The City will comply with the terms and covenants of the Related Documents to which it is a party. The City will not amend, modify or terminate or agree to amend, modify or terminate any Related Documents without the prior written consent of the Bank. 12 (h) Taxes and Other Liabilities. City shall pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real and personal and including federal and state income taxes, except such as the City may in good faith contest or as to which a bona fide dispute may arise, provided provision is made to the satisfaction of the Bank for eventual payment thereof in the event that it is found that the same is an obligation of the City. (i) Other Indebtedness. The City shall not, without the prior written consent of the Bank, create, incur, assume or permit to exist any indebtedness or liabilities in connection with the Leased Property resulting from borrowings, loans or advances,whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except the liabilities of the City to the Bank and any other liabilities of the City in connection with the Leased Property existing as of, and disclosed to Bank in writing prior to, the date hereof, and indebtedness in connection with the Leased Property subordinated to City's obligations to Bank pursuant to a subordination agreement(s) in form and content acceptable to Bank. (j) Optional Redemption. The City shall not optionally prepay any Base Rental Payment or cause the optional redemption of the Bonds unless all outstanding Bank Bonds are redeemed as a part of such redemption. (k) Pledge of Assets. The City shall not mortgage, pledge, grant or permit to exist a security interest in, or a lien upon, any of its assets now owned or hereafter acquired which are part of, or relate to, the Leased Property, except any of the foregoing in favor of the Bank and the Trustee for the benefit of the Bond holders. (I)Substitution of Leased Property. The City shall not substitute any property for the Leased Property without the prior written consent of the Bank. (m) Minimum Liquidity Ratio. The City shall maintain unrestricted cash and investments in the General Fund, tested quarterly as of the last day of each March, June, September and December in each year, commencing with the quarter ending June 30, 2009, in an amount equal to two (2.0) times the principal amount of all debt and other obligations of the City payable from unrestricted revenues in the General Fund. (n) Disposition of Property and Assets. The City shall not sell, lease, transfer or otherwise dispose of more than 10% of the total value of the City's assets (calculated on a book value basis as stated in the City's most recent audited financial statements) in any fiscal year except (i) in return for other property of equal value, (ii) in which the proceeds are applied to repay the principal of(A) Bank Bonds or (B) other funded debt of the City, in each case without the prior written consent of the Bank, which consent shall not be unreasonably withheld. (o) Use of Bond Proceeds. The City shall only use the proceeds of the Bonds for the purposes set forth in the Indenture and shall not invest the Bond proceeds in financial derivative products or investments other than the Authorized Investments consistent with the City's investment policy without the prior written consent of the Bank. (p) Covenants in Other Agreements. In the event that the City agrees with 13 any other creditor to financial covenants, ratios or tests that are more restrictive than those set forth in this Agreement, the more restrictive covenants shall be deemed to be incorporated, mutatis mutandi, into this Agreement. SECTION 8. Events of Default. The occurrence of any of the following events shall constitute an Event of Default under this Agreement (each herein referred to as an "Event of Default"): (a) Misrepresentation. Any representation or warranty made by the City herein or in any certificate, financial or other statement furnished by the City pursuant to this Agreement shall prove to have been untrue or incomplete in any material respect when made; (b) Required Payments. The City shall fail to pay to Bank or deposit with Bank any amount specified in this Agreement when due to be paid or deposited; (c) Other Covenants. The City shall fail to perform or observe any other material term, covenant or agreement on its part to be performed or observed hereunder(other than as specified in (b)above)and, except in the case of the covenants set forth in Section 7(g), (i), (j), (k), (I), (m), (n) and (o) any such failure shall remain unremedied for a period of twenty (20) calendar days; (d) Invalidity. Any material provision of this Agreement or any Related Document shall at any time for any reason cease to be in full force and effect or valid and binding on the City or the Authority, or shall be declared to be null and void, or the validity or enforceability thereof shall be contested by the City or the Authority or the City shall deny that it has any further liability or obligation under this Agreement, and such event shall have, or be likely to have, a material adverse effect on the condition of the City and its ability to perform its obligations under this Agreement or the Related Documents; (e) Voluntary Insolvency. The City or the Authority shall (i)apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of its property, (ii) admit in writing its inability to pay its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, or (v) commence a voluntary case under the federal bankruptcy laws of the United States of America or file a voluntary petition or answer seeking reorganization, an arrangement with creditors, or an order for relief, or seeking to take advantage of any insolvency law, or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding; or corporate action shall be taken by it for the purpose of effecting any of the foregoing; (f) Default under Lease. Indenture or Related Documents. Any Event of Default shall occur under the Indenture, the Lease or any of the Related Documents; (g) Other Defaults. The City or the Authority shall default in the payment or performance of any obligation, or the occurrence of any defined event of default under the terms of any contract or instrument pursuant to which City or the Authority has incurred any debt or other liability, including, without limitation, the Related Documents, to any person or entity, including,without limitation, the Bank,which in any case could result in a judgment in excess of$1,000,000.00; 14 (h) Material Adverse Change. A Material Adverse Change, as determined by Bank in the good faith exercise of its discretion, shall occur; SECTION 9. Remedies. (a) Remedies. Upon the occurrence of an Event of Default, the Bank may, and the Bank shall upon the occurrence of an Event of Default for which the Bank has received a notice from the Trustee that an event of default has occurred under the Indenture or from the Authority that an event of default has occurred under the Loan Agreement and such default is not cured by the City within the applicable time period, (a)exercise all of its rights and remedies under any Related Document (to which the Bank is a party or the Bank is a third party beneficiary) or applicable law, (b) require the Trustee to cause a mandatory tender as provided in Section 4.12 of the Indenture or to exercise the remedies set forth in Section 10 of the Lease, or(c)exercise all or any combination of the remedies provided for in this Section. (b) Right of Set-Off: Waiver of Right of Set-Off. Upon the occurrence and during the continuance of any Event of Default,the Bank is hereby authorized at any time and from time to time,without notice to the City (any such notice being expressly waived by the City), to set-off and apply any and all deposits(general or special, time or demand, provisional or final, including,without limitation, indebtedness evidenced by certificates of deposit,whether matured or unmatured, but not including trust accounts) at any time held, and other indebtedness at any time owing, by the Bank to or for the credit or the account of the City against any and all of the obligations of the City now or hereafter existing under this Agreement, irrespective of whether or not the Bank shall have made any demand under this Agreement and although such obligations may be contingent and unmatured. The Bank agrees promptly to notify the City after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Bank under this Section are in addition to other rights and remedies which the Bank may have, including, without limitation, other rights of set-off; provided, however, that the Bank waives any such right, and any other similar right it may have at law or otherwise,during the pendency of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation, or similar proceedings against the City under the laws of any jurisdiction, to the extent that the exercise of such rights during the pendency of such proceedings would result in the Bank's being released, prevented or restrained from or delayed in fulfilling the Bank's obligations with respect to the Letter of Credit, as provided herein. SECTION 10. Amendments. Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by the City therefrom shall in any event be effective unless the same shall be in writing and signed by the Bank, and the City and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 11. Notices. Except as expressly provided for herein, all notices and other communications provided for hereunder shall be in writing (including tested telex, telegraphic and facsimile communication) and mailed, telegraphed, telexed, faxed or delivered to each party at the 15 address or telex or facsimile number specified for such party on the signature page of this Agreement, or at such other address or telex or facsimile number as shall be designated by such party in a written notice to the other party. All such notices and other communications shall, if mailed, telegraphed or faxed, be effective when received addressed as aforesaid, if telexed, when the appropriate answer back is received, and if faxed, when confirmation of receipt is received. Communications by the Trustee with the Bank with respect to the Letter of Credit shall be made as provided in the Letter of Credit. Any tested telex, telegraphic or facsimile communication provided to the Bank hereunder shall be promptly followed by a written confirmation thereof. SECTION 12. No Waiver: Remedies. No failure on the part of the Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 13. Indemnification. (a) Indemnification. In addition to its other obligations hereunder, to the extent permitted by law, the City hereby agrees, to the fullest extent permitted by law, to indemnify and hold harmless the Bank, its officers, directors, employees and agents (collectively, the "Indemnitees") from and against any and all claims, damages, losses, liabilities, costs or expenses (collectively "Claim") (including, without limitation, reasonable attorneys fees) whatsoever which the Indemnitees may incur (or which may be claimed against the Indemnitees by any Person) by reason of or in connection with (a)any failure by the City to comply with applicable federal and state laws and regulations pertaining to the Bonds; (b) any breach by the City of any representation, warranty or covenant made in or pursuant to this Agreement; or(c) any action or proceeding relating to a court order, injunction or other process or decree restraining or seeking to restrain the Bank from paying any amount under the Letter of Credit. Nothing in this Section 13 is intended to limit any obligation of the City contained in this Agreement or to include any Claims caused by Bank's gross negligence or willful misconduct. (b) City Assuming Bank's Defense. If any action shall be brought against the Bank or any other Indemnitee in respect of which indemnity may be sought against the City, the Bank shall promptly notify the City in writing, and the City shall promptly assume the defense thereof, including, without limitation, the employment of counsel (the selection of which shall have been approved by the Bank, and such approval shall not be unreasonably withheld), the payment of all expenses, and the right to negotiate and consent to settlement. In addition, the Bank shall have the right at City's expense to employ separate counsel and to participate in the defense of any such action if the Bank has been advised by counsel of recognized standing in matters of banking or securities laws that it has defenses or causes of action separate from those of the City. If the City elects not to defend such action, the Bank shall have the right to employ counsel to defend such action and to participate in the defense thereof, and the fees and expenses of such counsel shall be at the expense of the City. The City shall not be liable for any settlement of any such action effected without its consent by the Bank, but if settled with the consent of the City or if there be a final judgment for the plaintiff in any such action against the City or the Bank,with or without the consent of 16 the City, the City agrees to indemnify and hold harmless the Bank to the extent provided herein. SECTION 14. Continuing Obligation. The obligation of the City under this Agreement shall continue until the later of(a)the Expiration Date or (b) the date upon which all amounts due and owing to the Bank under this Agreement shall have been paid in full and shall (i) be binding upon the City and the Bank, their successors and assigns, and (ii) inure to the benefit of and be enforceable by the Bank and the City and their successors and assigns; provided, however, that the City may not assign all or any part of this Agreement without the prior written consent of the Bank. Notwithstanding the foregoing, the indemnity set forth in Section 13 and Section 31 herein shall survive the termination of this Agreement. SECTION 15. Transfer of Letter of Credit. The Letter of Credit may be transferred in accordance with the provisions set forth therein and in the Indenture. SECTION 16. Liability of the Bank. As between the City and the Bank, the City • assumes all risks of the acts or omissions of the Authority, the Trustee and any transferee of the Letter of Credit with respect to its use of the Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the City from pursuing such rights and remedies as it may have against the Trustee or the Authority at law or in equity or under any other agreement; unless any such act or omission is the result of Bank's willful misconduct or gross negligence. SECTION 17. Certain Defined Terms. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A Drawing" means any draw in the form of Annex A to the Letter of Credit made under the Letter of Credit to pay interest with respect to the Bonds in accordance with the Indenture. "Agreement" means this Reimbursement Agreement, as the same may be from time to time amended or supplemented. "Authority" means the Palm Desert Financing Authority. "Bank" means Wells Fargo Bank, National Association. "Base Rate" means, for any day, a fluctuating rate equal to the highest of: (i) the Prime Rate in effect on such day, (ii) a rate determined by Bank to be one and one- half percent (1.50%) above Daily One Month LIBOR in effect on such day, (iii) the Federal Funds Rate plus one and one-half percent (1.50%) and three percent (3.00%). 17 "Bank Bonds"means the Bonds purchased or deemed to be purchased or otherwise acquired with Drawings under the Letter of Credit during any period such Bonds are held by or on behalf of the Bank. "B Drawinq" means any draw in the form of Annex B to the Letter of Credit made under the Letter of Credit to pay principal and unpaid interest upon an optional and/or a mandatory redemption of a portion of the Bonds. "Bonds" means the Palm Desert Financing Authority, Energy Independence Program, Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable), in the original principal amount of$[5,000,000.00]. "Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close. "C Drawinq" means any draw in the form of Annex C to the Letter of Credit made under the Letter of Credit to pay the principal amount of those Bonds which the Remarketing Agent has been unable to remarket within the time limits established in the Indenture. "Continuing Fees" has the meaning assigned to such term in Section 2(d) hereof. "D Drawing"means the any draw in the form of Annex D to the Letter of Credit made under the Letter of Credit to pay the principal and unpaid interest on the Bonds in full upon maturity or redemption in full. "Daily One Month LIBOR" means, for any day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period. "Date of Issuance" is the date the Letter of Credit is issued, that date being July_, 2009. "Default" means any event or condition specified in Section 8 hereof which, with the giving of notice or the lapse of time or both would, unless cured or waived, become an Event of Default. "Default Rate"means a variable rate of interest equal to the Base Rate in effect from time to time plus five percent (5%). "Drawinq"means an A Drawing, B Drawing, C Drawing or D Drawing, as the context may require. Event of Default" has the meaning set forth in Section 8 hereof. "Expiration Date" has the meaning assigned to that term in the Letter of Credit. "Lease"means the Lease Agreement dated as of July 1, 2009 between the Authority, as lessor, and City, as lessee, as amended from time to time. "Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of 18 the Federal Reserve System arranged by Federal funds brokers for the immediately preceding day, as published by the Federal Reserve Bank of New York; provided that if no such rate is so published on any day, then the Federal Funds Rate for such day shall be the rate most recently published. "GAAP" shall mean generally accepted accounting principles. "Indenture" means the Indenture dated July 1, 2009 between the Authority and the Trustee together with any amendments and supplements thereto. "Leased Property" means the parcels of real and personal property that are the subject of the Site Lease and the Lease. "Letter of Credit" means the Bank's irrevocable direct-pay Letter of Credit No. • "LIBOR" means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula: LIBOR = Base LIBOR 100% - LIBOR Reserve Percentage (i) "Base LIBOR" means the rate per annum for United States dollar deposits quoted by Bank (A) for the purpose of calculating effective rates of interest for loans making reference to LIBOR, as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies, or (B) for the purpose of calculating effective rates of interest for loans making reference to the Daily One Month LIBOR Rate, as the Inter-Bank Market Offered Rate in effect from time to time for delivery of funds for one (1) month in amounts approximately equal to the principal amount of such loans. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter- Bank Market. (ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Wells Fargo Bank for expected changes in such reserve percentage during the applicable term of this Agreement. 19 "Material Adverse Change" means the occurrence or existence of any event that has had a material adverse effect on the financial condition of the City. "Moody's" means Moody's Investor Services, Inc. "Notice of Intent to Borrow" means the notice in the form attached hereto as Exhibit B. "Person"means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or agency or instrumentality thereof. "Prime Rate" means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank's base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto. "Related Documents" means the Bonds, the Indenture, the Lease, the Site Lease, the Remarketing Agreement, this Agreement, and any amendments thereto. "Remarketing Agent" means the Remarketing Agent appointed pursuant to the Remarketing Agreement and any successors appointed in accordance with Section 8.07 of the Indenture. "Reimbursement Obligations" has the meaning set forth in Section 2(a) of this Agreement. "S&P" means Standard & Poor's, a division of the McGraw—Hill Companies, Inc. "Site Lease" means the Site Lease dated as of the dated date of this Agreement. "Stated Amount" means initially $ , with such adjustments as provided in the Letter of Credit. "Tender Drawing" means any draw upon the Letter of Credit pursuant to a draft accompanied by a certificate in the form of Annex B or Annex C to the Letter of Credit for the purchase price of the Bonds which are tendered for repurchase pursuant to Sections 4.11, 4.12 and 4.14 of the Indenture. "Tender Drawing Date" has the meaning set forth in Section 2(b) (ii) of this Agreement. "Tender Drawing Rate"means a variable rate of interest equal to(i)for the first thirty (30) days following the applicable Tender Drawing Date, the Base Rate in effect from time to time plus two percent (2.0%), (ii) for the thirty-first (31st) through the sixtieth (60th) day following the applicable Tender Drawing Date, the,the Base Rate in effect from time to time plus three percent (3.0%), (iii) for the sixty-first (61st) through the ninetieth (90th) day following the applicable Tender Drawing Date, the, the Base Rate in effect from time to time plus four percent (4.0%), (iv) thereafter, the Default Rate; provided, that in no event shall the Tender Drawing Rate be less than the rate then in effect on the Bonds that are not Bank Bonds. 20 "Tender Reimbursement Obligation" means any obligation of the City to the Bank resulting from a Tender Drawing. "Trustee"means Wells Fargo Bank, National Association, acting as trustee under the Indenture, or any successor to such party as Trustee under the Indenture. "UCP" means the Uniform Customs and Practices for Documentary Credits, an International Chamber of Commerce publication, current on the date of this Agreement or any substitution therefor or replacement thereof. SECTION 18. Costs, Expenses and Taxes; Allocation of Increased Costs. (a) Costs, Expenses and Taxes. The City agrees to pay on demand by Bank all costs, expenses and fees incurred or assessed by the Bank in connection with the preparation, execution and delivery of this Agreement, the Letter of Credit (including, without limitation, any extensions thereof) , the Related Documents and any other documents which may be delivered in connection with this Agreement and the Letter of Credit, the granting of any extension of the Letter of Credit, any waiver or amendment or the giving of any consent under, this Agreement,the Related Documents and such instruments or any transfer of the Letter of Credit, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Bank (to include outside counsel fees and all allocated costs of the Bank's in-house counsel) with respect thereto and with respect to advising the Bank as to its rights and responsibilities under this Agreement, all reasonable costs and expenses, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Bank(to include outside counsel fees and all allocated costs of the Bank's in-house counsel), if any, in connection with the enforcement of this Agreement and such other documents which may be delivered in connection with this Agreement. In addition, the City shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, the Letter of Credit (including any extensions thereof), the Related Documents and such other documents, and agrees to save the Bank harmless from and against any an all liabilities with respect to or resulting from any delay by the City in paying or omission to pay such taxes and fees. The Bank agrees promptly to notify the City of any such taxes and fees which are incurred by the Bank. (b) Allocation of Increased Costs. If any past, present or future legislative, administrative or judicial action has the direct or indirect effect of imposing upon the Bank any requirement or condition regarding this Agreement or the Letter of Credit that directly or indirectly increases the cost to the Bank of issuing, maintaining or honoring draws under the Letter of Credit, over the cost thereof as of the date of this Agreement, the Bank shall so notify the City and the City shall pay to the Bank on or before the due date or dates specified in the Bank's notice all additional amounts necessary to compensate the Bank for such additional costs. The Bank shall deliver to the City a certificate showing the amount and manner of calculation of such increased costs, and stating that the assessment of such increase in costs is fair and reasonable and has not been arbitrarily applied to the City. Such certificate shall be conclusive (absent manifest error) as to such amount. Without limiting the generality of the foregoing, if (a) any insurance premium is imposed by the Federal Deposit Insurance Corporation or other similar banking authority in connection with the Letter of Credit, (b) any reserve requirement is imposed by any banking authority in connection with the Letter of Credit, or(c) any capital adequacy requirement not currently in 21 effect is imposed by any banking authority which has the effect of reducing the anticipated return on capital of the Bank in connection with the Letter of Credit, then the cost to the Bank of such premium, reserve requirement and/or capital adequacy requirement shall be payable by the City as an additional cost in accordance with this Section. (c) Limit on Participating Bank's Costs. No participating bank (other than the Bank) shall be entitled to receive any amount pursuant to this Section 18 in respect of its participation that is greater than the amount the Bank would have been entitled to receive in respect of the participated amount had the Bank not granted such participation. No such participation shall relieve the Bank of its duties under the Letter of Credit. SECTION 19. Attorneys' Fees. In the event that any party hereto shall incur legal fees and costs in connection with the actual or threatened breach of any provision hereof, or to enforce any right or remedy hereunder, such party shall be entitled to recover such reasonable fees and costs from the breaching party. In the event that an action is brought in connection with this Agreement the prevailing party shall be entitled to recover from the losing party in addition to any money judgment or other relief, such reasonable attorneys'fees, actual disbursements and costs as may be incurred by the prevailing party instituting or defending such litigation, together with such reasonable costs and expenses of litigation as may be allowed by the court. Such attorneys' fees shall include reasonable outside counsel fees and all reasonable allocated costs of a party's in-house counsel. SECTION 20. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. SECTION 21. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California applicable to contracts to be performed in said State. Unless Bank otherwise specifically agrees in writing, the Letter of Credit, even if it is not a documentary credit, the opening of the Letter of Credit, the performance by Bank under the Letter of Credit, and the performance by the beneficiary and any advising, confirming, negotiating, paying or other bank under the Letter of Credit, shall be governed by and be construed in accordance with the UCP in force on the Date of Issuance of the Letter of Credit. SECTION 22. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. SECTION 23. Consent of Jurisdiction and Venue. Etc. 22 The City irrevocably (i) agrees that any suit, action or other legal proceeding arising out of or relating to this Agreement or such other documents which may be delivered in connection with this Agreement may be brought in a court of record in the State of California or in the Courts of the United States of America located in the State of California, (ii) consents to the jurisdiction of each such court in any such suit, action or proceeding and (iii) waives any objection which it may have to the laying of venue of any suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. The City irrevocably consents to the service of any and all process in any such suit, action or proceeding by mailing of copies of such process to the City at the office of the City Attorney at the address shown on the signature page hereto by certified mail, return receipt requested. The City agrees that a final and non- appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Bank to bring any suit, action or proceeding against the City or its property in the courts of any other jurisdictions. SECTION 24. Satisfaction Requirement. If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to the Bank, the determination of such satisfaction shall be made by the Bank in its sole and exclusive judgment reasonably exercised in good faith. SECTION 25. Consents. Any time the Bank's consent is required hereunder, such consent shall not be unreasonably withheld or delayed. SECTION 26. Accounting Terms and Definitions. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, and all accounting determinations hereunder shall be made, in accordance with GAAP in effect from time to time, on a basis consistent with the most recent financial statements of the City delivered to the Bank. SECTION 27. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 28. Rights and Remedies Cumulative. All rights and remedies of the Bank under this Agreement are in addition to all rights and remedies of the Bank as a bondholder under the Indenture, so long as the Letter of Credit is outstanding or any Bank Bonds are outstanding hereunder. SECTION 29. Bank Reliance. 23 It is specifically understood by the City that all statements, representations and warranties made by the City in this Agreement and any other Related Document to which the City is a party shall be deemed to have been relied upon by the Bank as an inducement to enter into this Agreement and the other agreements contemplated hereby and that if any such statements, representations and warranties were materially incorrect at the time they were made, the Bank may consider any such misrepresentation or breach an Event of Default hereunder. There are no facts that the City has failed to disclose to the Bank that, individually or in the aggregate, could have a materially adverse effect on the City's ability to perform its obligations under any of the Related Documents. Each of the representations and warranties shall survive any investigations or inquiries made by the Bank or any of its representatives. SECTION 30. Permitted Contests. The City shall have the right, before any delinquency occurs, to contest or object in good faith to any claim, demand, levy or assessment (other than in respect of any indebtedness or obligation of the City under any of the Related Documents), by appropriate legal proceedings which are not prejudicial to the Bank's rights, but this shall not be deemed or construed as in any way relieving, modifying or providing any extension of time with respect to the City's covenant to pay and comply with any such claim, demand, levy or assessment, unless the City shall have given prior written notice to the Bank of the City's intent to so contest or object thereto, and unless (i)the City shall have demonstrated to the Bank's satisfaction that such legal proceedings shall conclusively operate to prevent enforcement prior to final determination of such proceedings, and (ii) the City shall have furnished such bond, surety, undertaking, or other security in connection therewith as is requested by and satisfactory to the Bank, in the amount of such claim plus reasonable sums to pay costs, interest and penalties, to assure payment of the matters under contest and to prevent any sale or forfeiture of the Project. SECTION 31. Environmental Indemnity. (a) Indemnity. To the extent permitted by law, the City agrees unconditionally and absolutely to defend, indemnify and hold harmless the Bank and its respective directors, officers, employees, and agents from and against any and all damages, diminution in value, penalties, fines, losses, liabilities, causes of actions, suits, claims, demands, costs and expenses (including, without limitation, all out-of-pocket litigation costs and the reasonable fees and expenses of counsel) of any nature, directly or indirectly arising out of or in connection with: (a) the inaccuracy or incompleteness of any representation or warranty provided by the City in Section 6(k) of this Agreement (b) the release, or disposal of Hazardous Materials on, onto, from or under the Project; and (c) any failure by the City to comply with the terms of any order of any federal, state or municipal authority having regulatory authority over environmental matters. The City's obligations pursuant to the foregoing indemnification and hold harmless agreement shall survive the closing, disbursement of the loan funds,judicial or nonjudicial sale under the deed of trust securing the loan to the City, conveyance by deed in lieu of foreclosure to the Bank and any subsequent conveyance of the Project. (b) Defense of Environmental Claims. If any claim is made or brought against the Bank which is subject to the indemnification set forth in this Section 31, the City shall defend the same, if necessary in the name of the Bank, by attorneys approved by the Bank. 24 Notwithstanding the foregoing, the Bank may in its discretion, upon the occurrence of any claim, engage its own attorneys to defend or assist therein and at the Bank's option, its counsel shall control the litigation or resolution of such claim. The resolution and settlement of any such claim shall require the written consent of Bank. The City shall pay or, on demand, shall reimburse the Bank for the payment of the reasonable fees and disbursements of the Bank's attorneys. The indemnity set forth in this Section 31 shall survive the termination of this Agreement. SECTION 32. Arbitration. (a) Arbitration. Upon the demand of any party, any Dispute shall be resolved by binding arbitration (except as set forth in (e) below) in accordance with the terms of this Agreement. A"Dispute" shall mean any action, dispute, claim or controversy of any kind, whether in contract or tort, statutory or common law, legal or equitable, now existing or hereafter arising under or in connection with, or in any way pertaining to, any of the Related Documents, or any past, present or future extensions of credit and other activities, transactions or obligations of any kind related directly or indirectly to any of the Related Documents, including,without limitation, any of the foregoing arising in connection with the exercise of any self-help, ancillary or other remedies pursuant to any of the Related Documents. Any party may by summary proceedings bring an action in court to compel arbitration of a Dispute. Any party who fails or refuses to submit to arbitration following a lawful demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute. (b) Governing Rules. Arbitration proceedings shall be administered by the American Arbitration Association ("AAA") or such other administrator as the parties shall mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be resolved in accordance with the Federal Arbitration Act(Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Related Documents. The arbitration shall be conducted at a location in California selected by the AAA or other administrator. If there is any inconsistency between the terms hereof and any such rules, the terms and procedures set forth herein shall control. All statutes of limitation applicable to any Dispute shall apply to any arbitration proceeding. All discovery activities shall be expressly limited to matters directly relevant to the Dispute being arbitrated. Judgment upon any award rendered in an arbitration may be entered in any court having jurisdiction; provided, however, that nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C.. 91 or any similar applicable state law. (c) No Waiver; Provisional Remedies,Self-Help and Foreclosure. No provision hereof shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies, including,without limitation, injunctive relief, sequestration, attachment, garnishment or the appointment of a receiver, from a court of competent jurisdiction before, after or during the pendency of any arbitration or other proceeding. The exercise of any such remedy shall not waive the right of any party to compel arbitration or reference hereunder. 25 (d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be active members of the California State Bar or retired judges of the state or federal judiciary of California, with expertise in the substantive laws applicable to the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary rulings in response to motions filed prior to the final arbitration hearing. Arbitrators (i)shall resolve all Disputes in accordance with the substantive law of the state of California, (ii) may grant any remedy or relief that a court of the State of California could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award, and (iii) shall have the power to award recovery of all costs and fees, to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Any Dispute in which the amount in controversy is$5,000,000 or less shall be decided by a single arbitrator who shall not render an award of greater than $5,000,000 (including damages, costs, fees and expenses). By submission to a single arbitrator, each party expressly waives any right or claim to recover more than$5,000,000. Any Dispute in which the amount in controversy exceeds$5,000,000 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. (e) Judicial Review. Notwithstanding anything herein to the contrary, in any arbitration in which the amount in controversy exceeds$25,000,000, the arbitrators shall be required to make specific, written findings of fact and conclusions of law. In such arbitrations (i) the arbitrators shall not have the power to make any award which is not supported by substantial evidence or which is based on legal error, (ii)an award shall not be binding upon the parties unless the findings of fact are supported by substantial evidence and the conclusions of law are not erroneous under the substantive law of the State of California, and (iii)the parties shall have in addition to the grounds referred to in the Federal Arbitration Act for vacating, modifying or correcting an award the right to judicial review of (A) whether the findings of fact rendered by the arbitrators are supported by substantial evidence, and (B)whether the conclusions of law are erroneous under the substantive law of the State of California. Judgment confirming an award in such a proceeding may be entered only if a court determines the award is supported by substantial evidence and not based on legal error under the substantive law of the State of California. (f) Real Property Collateral:Judicial Reference. Notwithstanding anything herein to the contrary, no Dispute shall be submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i)the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or(ii)all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such Dispute is not submitted to arbitration, the Dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. 26 (g) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the Dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the parties potentially applies to a Dispute, the arbitration provision most directly related to the Related Documents or the subject matter of the Dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Related Documents or any relationship between the parties. 27 Executed as of the date first written above. CITY OF PALM DESERT WELLS FARGO BANK, NATIONAL ASSOCIATION By: By: Name: Lynn Love Title: Vice President Address for Notices: Address for Notices: 73-510 Fred Waring Drive Wells Fargo Bank, N.A. Palm Desert, California 92260 Government & Institutional Banking 707 Wilshire Blvd., 11th Floor MAC E2818-114 Attention: City Manager Los Angeles, California 90017 Facsimile: (760) 346-6372 Attention: Lynn Love Facsimile: (213) 614-3555 With copy to: Wells Fargo Bank, N.A. Government & Institutional Banking 550 California St., 10th Floor MAC AO112-102 San Francisco, California 94104 Attention: Betty Yang Facsimile: (415) 646-8767 28 EXHIBIT A IRREVOCABLE LETTER OF CREDIT DRAFT ISDA CONFIRMATION To: City of Palm Desert 73-510 Fred Waring Drive Palm Desert,California 92260 Attention: City Manager Telephone: (760)346-0611 Fax: (760)346-6372 From: Wells Fargo Bank, N.A. 550 California Street .,. t.}, MAC A0112-121 „.- San Francisco,CA 94104 ,'' Telephone: (415)222-2216 -, Fax:(415)986-2604 t' t-, Re: USD 5,225,000.00 Interest Rate Collar Transaction(543405) Date: TBD '`` p Ladies and Gentlemen: 4.,-;,, The purpose of this letter agreement is to confirm the terms and conditiotrs of the transaction("Transaction")entered into between Wells Fargo Bank, N.A.("Party A")and City o#Palm Desert("Party_titY.'This Transaction is effective at,and as of 12:01 a.m.,California time, on the Trade Date specified belii rr__ The definitions and provisions contained in the 2000 ISDA, Definitions-Os published by the International Swaps and Derivatives Association, Inc,( PSDA"});-including the Annex to the 2000 ISDA Definitions(the"Definitions"), are incorporated into this Confirmation. In tha event of any ii ponsistency between those definitions and provisions and this Confirmation,this Confirmation will govern. 4 Itt it- 1.This confirmation SuPplementsTforiii andiasribject to,the ISDA Master Agreement dated as of (as the same may be amended,modifled-or supplemented-from time to time,the"Agreement')between Party A and Party B. This communication itself constitutes a binding agreement setting forth the essential terms of the Transaction described herein.All provisions containein the Agreement shall govern this Confirmation except as expressly modified below. 2.The terms of the particular Traction to which this Confirmation relates are as follows: .t f Notional Amount 11, i°USD 5,225,000.00 (Initial Notional Amount - please refer to the attached kt' ' Schedule I) Trade Date: TBD _ _ Effective Date: July[23],2009 Termination Date: September 1, 2014, subject to adjustment in accordance with the Modified Following Business Day Convention. Floating Amounts Floating Rate Payer: Party B Floor Rate: TBD Floating Rate Payer The 1st day of each month, beginning with August 3, 2009, continuing up to and Payment Dates: including the Termination Date, subject to adjustment in accordance with the designated Business Day Convention. Calculation Period: From the 1st day of each month, up to the 1st day of the following month, continuing Wells Fargo [543405]—[ 1 Page 1 of 5 until the Termination Date, subject to adjustment in accordance with the designated Business Day Convention.The first Calculation Period will be July[23],2009 to August 3, 2009. Floating Rate Option: USD-LIBOR-BBA Designated Maturity: 1 Month Spread: None Floating Rate Day Count Fraction: Actual/360 Floating Rate for Initial Calculation Period: To be determined. rt4#=�+;„} Reset Dates: Each Thursday during the Calculation' " , or if such day is not a London Business Day,the next succeeding London♦ sinew , provided, however, the Floating Rate for the initial Calculation Periodshah be the effect for the immediately preceding Thursday. i ` : "', ` ,, Rate Cut-off Date: Not Applicable pi' '= Method of Averaging: Weighted - 4 f'' Compounding: Not Applicable r , Business Day '1,f Convention: Modified Following ,, Floating Amounts(II) 414, frt. Floating Rate Payer: Party A lh s - -ET Cap Rate: 5.25% ,� � Floating Rate Payer— The 1st day of each month beginning with August 3, 2009, continuing up to and Payment Dates: 1 including the Termination Date, subject to adjustment in accordance with the l designated Business Day Convention. Calculation Per , From,' m the 1st day of eachmonth, up to the 1st day of the following month, continuing ,� untit.the.Termination Date, subject to adjustment in accordance with the designated Businesa> ty Convention.The first Calculation Period will be July[23],2009 to August 1 I <1 E 1 ,, 3,2009 _.. Floating Rate Option: USD-LIBOR-BBA Designated Maturity:,-11 Month Spread; r�_, p done Floating Rate Day 'l i Count Fraction: Actual/360 i A Floating Rate for J7 Initial Calculation Period: To be determined. Reset Dates: Each Thursday during the Calculation Period, or if such day is not a London Business Day, the next succeeding London Business Day, provided, however, the Floating Rate for the initial Calculation Period shall be the rate in effect for the immediately preceding Thursday. Rate Cut-off Date: Not Applicable Method of Averaging: Weighted Compounding: Not Applicable Business Day Convention: Modified Following Wells Fargo[543405]—[ ] Page 2 of 5 Business Days: New York City Credit Support Document: As set forth in and pursuant to the Agreement. Credit Support Provider for Party B: As set forth in and pursuant to the Agreement. Account Details: Payments due to Settlement instructions to be provided. Party A: Payments due to Settlement instructions to be provided. I,r 4- Party B: 1 Calculation Agent: Party A i: „ 1 1 3. Please confirm that the foregoing correctly sets forth-thettrps of our agreement by havinioin authorized officer sign one copy of this telecopy Confirmation and returning it to us by fellecopier'tdk,, Wells Fargo Bank, N.A. Attention: Documentation Group Fax:(415)986-2604 !h 4. Each party represents to the other party hereto that(i)it*hot-acting as a fiduciary or a financial or investment advisor for the other party; (ii)it is not relying upon any advice,counsel orreppr ntations(whether written or oral)of the other party other than the representation "expressly set forth in the Master Agreement, any Credit Support Document and herein; (iii)the other party hereto has not given to it any advice or counsel as to the expected or projected success, return, performance, result, consequence or benefit(either legatt,regulatory,tax, financial,accounting, or otherwise)of this Transaction; (iv)it has corisu d with itslown legal, regulator!*tax, business, investment financial and accounting advisors to the extent it has deemed neiressary and,has made its owll investment, hedging, and trading decisions(including decisions regarding the suitabiUty of thisTr iftsaction)Tbated upon its own judgment and upon any advice from such advisors as it has deetted necessaryand not upon any view expressed by the other party hereto; (v)it has determined that the rates,prices,or amounts and other terms of this Transaction in the indicative quotations(if any)provided by the other party hereto reflect thoslin the referent market for similar transactions, and all trading decisions have been the result of arms length negotiate between tl *parties;(vi)it is entering into this Transaction with a full understanding of all of the terms;conditions and risl1hereof(ec'onomic and otherwise), and it is capable of assuming and willing to assume (financially and otherwise)those risks;and(vii)it is a sophisticated investor. Yours sincerely, Wells Fargo Bank,N.A. By: Name: Its: Wells Fargo[543405]—[ ] Page 3 of 5 City of Palm Desert By: Name: Its: Schedule I for Transaction 543405: , y ? 3 '3 y„ ''','4, ..., ''' }�� w '--4 ' ''�c . 7 al�e,„.gyp' j'' 6 _ ._.t p * ' % �" '�E ,fi ,' 9 ": �',' E,� he a,:. j z •-..Rs.�x �,� �n'�y, o40,...6, _t 44 07/[23]/2009 08/03/2009 08/03/2009 USD 5,225,000.00 08/03/2009 09/01/2009 09/01/2009 USD 5225,000.00 USD 0.00 09/01/2009 10/01/2009 10/01/2009 USD 5 25,000.00 USD 0.00 10/01/2009 11/02/2009 11/02/2009 USD 5,225,000.00 USD 0.00 11/02/2009 12/01/2009 12/01/2009 USD 5,225,00000 USD 0.00 12/01/2009 01/04/2010 01/04/2010 USD 5,225,000.0 - USD 0.00 01/04/2010 02/01/2010 02/01/2010 USD 5,225,000.00 USD 0.00 02/01/2010 03/01/2010 03/01/2010"4-2I1 USp 5,225,000.00 -- USD 0.00 03/01/2010 04/01/2010 04/01/2010 11,, USD 5,225,000.00 '` USD 0.00 04/01/2010 05/03/2010 05/03/2010 USD 5,225,000.00 USD 0.00 05/03/2010 06/01/2010 06/01/2010 USD 5,225,000.00 USD 0.00 06/01/2010 07/01/2010 07/01120104 USD.5,225,000.00 USD 0.00 07/01/2010 08/02/2010 08102/20101, t.- USD 5,225,000.00 USD 0.00 08/02/2010 09/01/2010 09/0112010,. -USD 5,225,000.00 USD 0.00 09/01/2010 10/0112010- 10/01/2010' USD 5,225,000.00 USD 0.00 10/01/2010 11/01/2010 11/01/2010 USD 5,225,000.00 USD 0.00 11/01/2010 --12101/2010 12/01/2010-, _ USD 5,225,000.00 USD 0.00 12/01/2010 01/00/2011 ,. 01/03/2011 "" USD 5,225,000.00 USD 0.00 01/03/2011 , 02/01/20' 1 ''' ii 02101/201-1` USD 5,225,000.00 USD 0.00 02/01/2011' 11 I ',03/01/2011 `.. 03/01/2011 USD 5,225,000.00 USD 0.00 03/0112011 04/E 02011 .;;, 04/01/2011 USD 5,225,000.00 USD 0.00 04/01/2.011 05/021 11 05/02/2011 USD 5,225,000.00 USD 0.00 05/02/2011 06/01/2011 ` 06/01/2011 USD 5,225,000.00 USD 0.00 06/01/2011�r*_ 4 07/01/20 1 07/01/2011 USD 5,225,000.00 USD 0.00 07/01/2011 ;I,08/01/201 1 08/01/2011 USD 5,225,000.00 USD 0.00 08/01/2011 'I] 09/01011 09/01/2011 USD 5,225,000.00 USD 0.00 09/01/2011 10/03/2011 10/03/2011 USD 5,115,000.00 USD 110,000.00 10/03/2011 11/01/2011 11/01/2011 USD 5,115,000.00 USD 0.00 11/01/2011 12/01/2011 12/01/2011 USD 5,115,000.00 USD 0.00 12/01/2011 01/03/2012 01/03/2012 USD 5,115,000.00 USD 0.00 01/03/2012 02/01/2012 02/01/2012 USD 5,115,000.00 USD 0.00 02/01/2012 03/01/2012 03/01/2012 USD 5,115,000.00 USD 0.00 03/01/2012 04/02/2012 04/02/2012 USD 5,115,000.00 USD 0.00 04/02/2012 05/01/2012 05/01/2012 USD 5,115,000.00 USD 0.00 05/01/2012 06/01/2012 06/01/2012 USD 5,115,000.00 USD 0.00 06/01/2012 07/02/2012 07/02/2012 USD 5,115,000.00 USD 0.00 Wells Fargo[5434051-[ ] Page 4 of 5 07/02/2012 08/01/2012 08/01/2012 USD 5,115,000.00 USD 0.00 08/01/2012 09/04/2012 09/04/2012 USD 5,115,000.00 USD 0.00 09/04/2012 10/01/2012 10/01/2012 USD 4,975,000.00 USD 140,000.00 10/01/2012 11/01/2012 11/01/2012 USD 4,975,000.00 USD 0.00 11/01/2012 12/03/2012 12/03/2012 USD 4,975,000.00 USD 0.00 12/03/2012 01/02/2013 01/02/2013 USD 4,975,000.00 USD 0.00 01/02/2013 02/01/2013 02/01/2013 USD 4,975,000.00 USD 0.00 02/01/2013 03/01/2013 03/01/2013 USD 4,975,000.00 USD 0.00 03/01/2013 04/01/2013 04/01/2013 USD 4,975,000.00 USD 0.00 04/01/2013 05/01/2013 05/01/2013 USD 4,975,000.00 USD 0.00 05/01/2013 06/03/2013 06/03/2013 USD 4,915000.'00 USD 0.00 06/03/2013 07/01/2013 07/01/2013 U$) 4 .5,000.00 USD 0.00 07/01/2013 08/01/2013 08/01/2013 USD 4,97$+.0.00 USD 0.00 08/01/2013 09/03/2013 09/03/2013 ,. i USD4,9750Er=10 USD 0.00 09/03/2013 10/01/2013 10/01/2013 i. ' USD 4,830 000. USD 145,000.00 10/01/2013 11/01/2013 11/01/2013. USD4,830,000.00' �1; USD 0.00 11/01/2013 12/02/2013 12/02/201' s 11, US4 4,830,000.00 USD 0.00 12/02/2013 01/02/2014 01/02/2014 ( USD4;830,000.00 USD 0.00 01/02/2014 02/03/2014 02/03/2014 1 USD 4,830,000.00 USD 0.00 02/03/2014 03/03/2014 03/03/2014 USt14,830,000.00 USD 0.00 03/03/2014 04/01/2014 04/0112014, US114,1 -U;000.00 USD 0.00 04/01/2014 05/01/2014 05/01/201''a1 i, -+ USD 440,000.00 USD 0.00 05/01/2014 06/02/2014 06/02/2014..,' - USp"4,830,000.00 USD 0.00 06/02/2014 07/01/2014" 07/01/2014 USD 4,830,000.00 USD 0.00 07/01/2014 08/01/2014 08/01/2014 USD 4,830,000.00 USD 0.00 08/01/2014 0942/2014 09/02/2014s, , USD 4,830,000.00 USD 0.00 ;1, 1 F' 1 rr w, +' Wells Fargo[543405]—[ ] Page 5 of 5 WF DRAFT 06/18/09 (Local Currency—Single Jurisdiction) ISDA® International Swaps and Derivatives Association,Inc. MASTER AGREEMENT dated as of 1. . Wells Fargo Bank,National Association and City of Palm D have entered and/or anticipate entering into one or more transactions fe ich ransaction")that are or will be governed by this Master Agreement,which includes the schedule(the"Schedule"), and the documents and other confirming evidence (each a "Confirmation") exc ` ed between the(parties confirming those Transactions. - Accordingly,the parties agree as follows:— i., 1. Interpretation 1` 4 `21 (a) Definitions. The terms defined in Section 12 and in the-Schedule will have the meanings therein specified for the purpose of this Master Agree neat.} (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the-*Schedule Trevail. t "the event of any inconsistency between the provisions of any_ mation and-this Mister Agment (including the Schedule), such Confirmation will prevail forthepu 4 ° of the relevant Transaction.r-- (c) Single Agrerteelit. All Trans ons are entered into in reliance on the fact that this Master Agreement and all Confirmations form `single agree m t between the parties (collectively referred to as g this"Agreement"),and the parties oult otherwise enter into any Transactions. i miles: .,f r . 2. Obli' atlu 1 !s h (a) General Conditiox 1, r Each `1.Pt (i)a party will mace each payment or delivery specified in each Confirmation to be made by it,subject to the other visions of this Agreement. I.1 (ii) P :ments under thiAgreement will be made on the due date for value on that date in the place of the account. specified in the relevant Confirmation or otherwise pursuant to this Agreement, iii freely,transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1)the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2)the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3)each other applicable condition precedent specified in this Agreement. Copyright©1992 by International Swaps and Derivatives Association,Inc. (b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) Netting.If on any date amounts would otherwise be payable:— (i)in the same currency;and (ii)in respect of the same Transaction, by each party to the other,then,on such date,each party's obligation to make payment of any such amount will be automatically satisfied and discharged and,if the aggregate amount that'would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the largaaegate amount would have been payable to pay to the other party the excess of the larger aggreg amount over the smaller aggregate amount. i The parties may elect in respect of two or more Transactions that a net amount`'will be determined in respect of all amounts payable on the same date in the;same currency in respect of Such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph(ii) above will not apply to the Transactions identified as being subject to the election, together.with the starting date (in which case subparagraph(ii)above will not,or will cease to,apply to such Transactions from such date).This election may be made separately for different groups of Transactions and will apply separately to each pairing of branches or offices through which the parties make and receive payments or deliveries. (d) Default Interest; Other Amounts. Prior,to the occurrence or ective designation of an Early Termination Date in respect of the,relevant Transaction,a party.de aults in the performance of any payment obligation will, to the,extent ermitted'by law'and subjectsubjeerto Section 6(c), be required to pay interest(before as well asufter judgment)on the overdue amount to the other party on demand in the same currency as such overdue amount,for the period from(and including)the original due date for payment to (but excluding)the date Of actual payment,at the Default.Rate. Such interest will be calculated on the basis of daily compounding and';the actual number o ,days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance-of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provide ;for in the relevant Confirmation or elsewhere in this Agreement. 1 1, 1 3. Representations -,i=r, ; Each party represents to the outer party(which representations will be deemed to be repeated by each party on each date ont.which a Transa w'•i is entered into)that:- 7 (a) Basic Representations.;1 (i) Status. It' dy organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and,if relevant under such laws,in good standing; (ii)Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii)No Violation or Conflict. Such execution,delivery and performance do not violate or conflict with any law applicable to it,any provision of its constitutional documents,any order or judgment 2 ISDA®1992 Second Printing of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with;and (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal,valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors'rights generally and subject,as to enforceability,to equitable principles of general application (regardless of whet but,enforcement is sought in a proceeding in equity or at law)). (b) Absence of Certain Events. No Event of Default or Pr ntfaF vent of Default or, to its knowledge, Termination Event with respect to it has occurred anti is cont.! g and no such event or circumstance would occur as a result of its entering into or perf© ning its obligatit ,under this Agreement or any Credit Support Document to which it is a party. , f (c) Absence of Litigation.There is not pending or,to its knowledge,threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal,governmental body, agency or official or any arbitrator that is likely th..affectrt a legality, validity or enforceability against it of this Agreement or any Credit Support Documen€to witch it is a party or its ability to perform its obligations under this Agreement or such:Credit Support Docuthept. (d) Accuracy of Specified Information_Alt applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the pose of this Section 3(d)in the Schedule is,as of the date of the information,true,,accurate and-complete in everyr+rmaterial'respect. 4. Agreements Each agreeswith party other that, llong as either party has or may have any obligation under this Agreement or under anylCredit Suppo .lcument to which it is a party: (a) Furnish Specified Informallori. `It will'.dyel very to the other party any forms, documents or certificates spit e}c i .,the Schedule or any Conti by the date specified in the Schedule or such Confirmation or,if none 's specifieas soon as reasonably practicable. (b) Maintain Authoris ns. It wi use all reasonable efforts to maintain in full force and effect all consents of,any governmenta1,4 other authority that are required to be obtained by it with respect to this Agreement'or;;any Credit SupportDocument to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) Comply with Laws. Itjwill comply in all material respects with all applicable laws and orders to which it may be subject if Whim so to comply would materially impair its ability to perform its obligations under this Agreement of any'Credit Support Document to which it is a party. 5. Events of Default and Termination Events (a) Events of Default.The occurrence at any time with respect to a party or, if applicable,any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default(an"Event of Default")with respect to such party:— (i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i)or 2(d)required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; 3 ISDA®1992 Second Printing (ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation(other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i)or 2(d)or to give notice of a Termination Event)to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii)Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Dbtionient or the failing or ceasing of such Credit Support Document to be in full force and,effect for the purpose of this Agreement(in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to Which such Credit Support Document relates without the written consent of the other party,or, I% t (3) the party or such Credit Support Provider disaffirms,disclaims,repudiates or rejects,in whole or in part,or challenges the validity of,such Credit Support Document; (iv)Misrepresentation.A representation made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made"or repeated; (v)Default under Specified Transaction. The party,any Credit Support Provider of such party or any applicable Specified Entity of such party (1)defaults under a`Specified Transaction and, after giving effect to any applicable notice requiment or grace period,there occurs a liquidation of, an acceleration of obligations under,ror an early er mnation of,that Specified Transaction,(2)defaults, after giving effect,tri any applicable notice requirement or grace period, in making any payment or delivery due on the last payment,delivery or exchange date of,or any payment on early termination of,a Specified Transaction(or such default continues for at least three Local Business Days if there is no applicable notice requ ement or grace period) or (3)disaffirms, disclaims, repudiates or rejects,inwhole or in'part, a Specified Transaction(or such action is taken by any person or entity appointed ors empowered to;operate it or act on its behalf); ; + (vi) Cross Default. If"Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence tt(1)a default,event of default or other similar condition or event(however described) in respect oftch party,any Credit Support Provider of such party or any applicable SpecifiedkEntity of such`prty under one or more agreements or instruments relating to Specified Indebtedness of any of the (individually or collectively)in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becomingr becoming capable at such time of being declared,due and payable under such agreements or;instruments, before it would otherwise have been due and payable or (2)a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively)in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments(after giving effect to any applicable notice requirement or grace period); (vii)Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:— (1)is dissolved(other than pursuant to a consolidation, amalgamation or merger); (2)becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;(3)makes a general assignment,arrangement or composition with or for the benefit of its creditors;(4)institutes or has instituted against it a proceeding seeking a 4 ISDA®1992 Second Printing judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A)results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or(B)is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5)has a resolution passed for its winding-up,official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6)seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator,receiver,trustee, custodian or other similar official for it or for all or substantially all its assets; (7)has a secured party take possession of all or substantially all its assets or has a distress, execution,attachment, sequestration or other legal press levied, enforced or sued on or against all or substantially all its assets and such secured,partic maintains possession, or any such process is not dismissed, discharged, stayed or rastrilinek4 each case within 30 days thereafter; (8)causes or is subject to any event with reiPect to it'sA' h, under the applicable laws of any jurisdiction,has an analogous effecttei any of the events fled in clauses(1)to (7)(inclusive);or(9)takes any action in furtherance of,or indicating its etent to,approval of, or acquiescence in,any of the foregoing acts;or 111, (viii) Merger Without Assumption. The party or any Cr t Support Provider of such party consolidates or amalgamates with, or merges witW or into,,or transfers all or substantially all its assets to,another entity and,at the time of such consolidation,amalgamation,merger or transfer: (1) the resulting,surviving or transftkea=entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was party by operation of!ly or pursuant to an agreement reasonably satin ry to the oth arty to t11is A „not;or (2) the be�s of anyr edit Sup ocument fail to extend(without the consent of the other party) to the performance by 1 such resulting, surviving or transferee entity of its obligations under this Aement F4. (b) Termination Ev .,The occurrence,oettirOteP at any time with respect to a party or, if applicable, any Credit Support Provider of such or any SpecifiedEntity of such party of any event specified below constitutes an:,lllega _if the event is specified in (i)below, and, if specified to be applicable, a Credit Event Upon Merger if the event is`�e specified pursuant to (ii)below or an Additional Termination Event if the event is specified pursuant to(iii)Wow:— (1 Illegality.Due to adoption of,or any change in,any applicable law after the date on which a Transaction is entered into,or due to the promulgation of,or any change in,the interpretation by any court,tribunal or r _z latory authority with competent jurisdiction of any applicable law after such date#,it becomes unlawful(other than as a result of a breach by the party of Section 4(b))for such party(which will be the Affected Party):— (1) to.perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction;or (2) to perform,or for any Credit Support Provider of such party to perform,any contingent or other obligation which the party(or such Credit Support Provider)has under any Credit Support Document relating to such Transaction; (ii) Credit Event Upon Merger. If"Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with,or merges with or into,or transfers all or substantially all its assets to,another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the 5 ISDA®1992 Second Printing case may be,immediately prior to such action(and,in such event,X or its successor or transferee, as appropriate,will be the Affected Party);or (iii) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event(and, in such event,the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. Early Termination (a) Right to Terminate Following Event of Default.If at any time aty Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continui other party (the"Non-defaulting Party") may, by not more than 20 days notice to the Defaulting spec ing the relevant Event of Default, designate a day not earlier than the day such notice 1s,effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Auton'atic Early Termination is specified in the Schedule as applying to a party,then an Early TerminatioknDate in respect of all outatanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto,(8)i and as of the timid immediately preceding the institution of the relevant proceeding or thetheipresentatfon of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto,(8). �_ .q a.. _♦J 3eh (b) Right to Terminate Following Termination,Event.+ (i)Notice. If a Termination Event occurs,an Affected Party will,promptly upon becoming aware of it, notify the other partyspecifying the nature of that.Termination Event and each Affected Transaction and will also gisuch other information about that Termination Event as the other party may reasonably require. tit (ii) Two AffiCieof Parties. If an Illegality under Section 5(b)(i)(1) occurs and there are two Affected Parties,each party wirll;:use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)Oon�action to avoid that Termination Event. (iii)Right to Terminate.if ,,:. (1) an agreement under Section 6(b)(ii) has not been effected with respect to all Affected Transactions wit in 30 days after an Affected Party gives notice under Section 6(b)(i);or (2. an Illegalit other than that referred to in Section 6(b)(ii), a Credit Event Upon Merger or an Additional Termination Event occurs, either party in th ,case of an Illegality, any Affected Party in the case of an Additional Termination Eventrif there is more than one Affected Party,or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may,by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) Effect of Designation. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. 6 ISDA®1992 Second Printing (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i)or 2(d)in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) Calculations. (i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e)and will provide to the other party a statement(1)show' ,in reasonable detail,such calculations (including all relevant quotations and specifying any amount payable under Section 6(e))and(2)giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the,source of a quotation obtained in determining a Market Quotation, the records of the o'F.9R d g such quotation will be conclusive evidence of the existence and accuracy of such' tion. I_il G , (ii)Payment Date. An amount calculated as beingdue in respect of any Early Termination Date under Section 6(e)will be payable on the day that `"tice of the amount payable ip effective(in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the,day on which notice of the amount payable is effective(in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (b'efore as well as after judgment), from (and including) the relevant Early Termination Date to(but excluding)the date such amount is paid,at the Applicable Rate. Such interest will be calculated_on the basis.of daily compounding and the actual number of days elapsed. -, I .tr (e) Payments on Early Ter ation. If an Early Termination Date occurs, the following provisions shall apply based on the parties/eieat` in the Schedule of a payment'measure,either"Market Quotation" or"Loss", and a payment method, eith ,the"First Method"or the"Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation"or the"Second Method",as t o case may be,'shall apply.The amount,if any,payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i)Event*of Default Ifthe Early Termination Date results from an Event of Default:— (1) First Method and Market Quotation.If the First Method and Market Quotation apply,the Defaulting Partywill pay1'to the Non-defaulting Party the excess, if a positive number, of f - (A)the sum of the-Settlement tiAmount(determined by the Non-defaulting Party)in respect of ''the Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party over (B)the Unpaid Amounts owing to the Defaulting Party. (2) First Method aid Loss.If the First Method and Loss apply,the Defaulting Party will pay to the N)n-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to(A)the sum of the Settlement Amount(determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party less (B)the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement.If that amount is a positive number,the Defaulting Party will pay it to the Non-defaulting Party;if it is a negative 7 ISDA®1992 Second Printing number,the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii)Termination Events.If the Early Termination Date results from a Termination Event:— (1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4),if Loss applies,except that,in either case,references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party,respectively,and,if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties.If there are two Affected Partie : I , (A) if Market Quotation applies, each party wine a Settlement Amount in respect of the Terminated Transactions, and.Jan amountwill be payable equal to (I)the sum of(a)one-half of the difference between the Settlement Amount of the party with the higher Settlement Amour("X") and the Settlient Amount of the party with the lower Settlement Amount("Y")and(b)the Unpaid Amounts owing to X less(II)the Unpaid Amounts owing to Y;and (B) if Loss applies,each party will det*trmme its Loss in respect of this Agreement(or,if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party.,with the higher-Loss ("X") and the Loss of the party with the lower Loss("Y"). If the amount payable is a positive number,Y will pay it�to X; if it is a negative number, X will pay the absolute value of that amount to (iii) Adjustment for Bankrupky. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section46(e)will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement(and retained by,such other party) during the period from the relevant Early Termination Date to the date fdrr payment determined under Section 6(d)(ii). (iv)Pre-Estimate.The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e)is areasonable pre-estimate of loss and not a penalty. Such amount is payable for thloss of bargain and le loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. 11 Transfer fi£ k� Neither this Agreement not sty interest or obligation in or under this Agreement may be transferred(whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:— (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with,or merger with or into,or transfer of all or substantially all of its assets to,another entity(but without prejudice to any other right or remedy under this Agreement);and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8 ISDA®1992 Second Printing 8. Miscellaneous (a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) Survival of Obligations. Without prejudice to Sections 2(a)(iii)and 6(c)(ii),the obligations of the parties under this Agreement will survive the termination of any Transaction ( (d) Remedies Cumulative. Except as provided in this Agreem-nt,,pie rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusi ifif iiy,rights,powers,remedies and privileges provided by law. i i" ; = �Y1z (e) Counterparts and Confirmations. (i) This Agreement (and each amendment, 7:cation and waiver in respect of it) may be executed and delivered in counterparts (incluy facsimile,transmission), each-of which will be deemed an original. : (ii) The parties intend that they are legally bound:hy the-terms of each Transaction from the moment they agree to those terms}(whether orally or otherwise).A Confirmation shall be entered into as soon as practicable and may ay ber-executed and delivered in counterparts (including by facsimile transmission) or be created-by an exchange of telexesor by an exchange of electronic messages on an electronic messaging system,which-in each case will be sufficient for all purposes to evidence a binding supplement to this greement'iiiit-parties will specify therein or through another effective means tl ,,any such ounterpart, telex,or electronic message constitutes a Confirmation (f) No Waiver of Rli hts. A failure Or delay in exercising any right, power or privilege in respect of this Agreement will not presumed'te operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed ter preclude€any,subsequent or further exercise,of that right,power or privilege or title exercise of any oilier right,power or privilege. (g) Headings.The headings used in this Agreement are for convenience of reference only and are not to affect the construction of Or to be taken into consideration in interpreting this Agreement. 9. Expenses ' A Defaulting g Party will, on d nd, indemnify and hold harmless the other party for and against all reasonable out-of-lppcket expense, including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a paVor by reason of the early termination of any Transaction, including,but not limited to,costs of collection. 10. Notices (a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below(except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system)to the address or number or in accordance with the electronic messaging system details provided(see the Schedule)and will be deemed effective as indicated:— (i)if in writing and delivered in person or by courier,on the date it is delivered; (ii)if sent by telex,on the date the recipient's answerback is received; 9 ISDA®1992 Second Printing (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form(it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested),on the date that mail is delivered or its delivery is attempted;or (v)if sent by electronic messaging system,on the date that electronic message is received, unless the date of that delivery(or attempted delivery)or that receipt,as applicable,is not a Local Business Day or that communication is delivered(or attempted)or received,as applicable,after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. , , (b) Change of Addresses. Either party may by notice to the tthe change the address, telex or facsimile number or electronic messaging system details at which notices or Other communications are to be given to it. 11. Governing Law and Jurisdiction = i f (a) Governing Law. This Agreement will be governed by and construed in accordance the law specified in the Schedule. :n (b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"),each party irrevocably: (i)submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law,or to the non-exclusive jurisdiction of the courts,of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed it l governed by the laws of the State of New York;and (ii)waives any objection which it may have at any time to the laying of venue of any Proceedings brought in and such court, waives any claim that such Proceedings have been brought in an inconvenient fotzumi and further Waives the right object, with respect to such Proceedings,that such court does not.have M. jurisdiction over such party. Nothing in this Ageement precludes •either party''from bringing Proceedings in any other jurisdiction (outside,if this Agreement is expressed to be governed by English law,the Contracting States,as defined in Section"1(3) of the CivilJurisdiction.and Judgments Act 1982 or any modification, extension or re- enactment thereof for the timelbeing in force) nor will the bringing of Proceedings in any one or more jurisdictio4 preclude the bringing of Proceedings in any other jurisdiction. (c) Waiver Immunities.Each party irrevocably waives,to the fullest extent permitted by applicable law, with respect to itself andl its revenues and assets (irrespective of their use or intended use), all immunity on the grounds ofsovereignty or other similar grounds from(i)suit,(ii)jurisdiction of any court, (iii)relief by way of inj#rich,order for specific performance or for recovery of property,(iv)attachment of its assets(whether before or after judgment)and(v)execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees,to the extent permitted by applicable law,that it will not claim any such immunity in any Proceedings. 12. Definitions As used in this Agreement:— "Additional Termination Event"has the meaning specified in Section 5(b). "Affected Party"has the meaning specified in Section 5(b). 10 ISDA®1992 Second Printing "Affected Transactions" means (a)with respect to any Termination Event consisting of an Illegality, all Transactions affected by the occurrence of such Termination Event and (b)with respect to any other Termination Event,all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly,by the person,any entity that controls,directly or indirectly,the person or any entity directly or indirectly under common control with the person.For this purpose,"control"of any entity or person means ownership of a majority of the voting power of the entity or person. "Applicable Rate"means:— (a) in respect of obligations payable or deliverable(or which would have been but for Section 2(a)(iii))by a Defaulting Party,the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e)of either party from and after the date (determined in accordance with Section 6(d)(ii))on which that amount is payable,the Default Rate; (c) in respect of all other obligations ; p g payable or deliverable, r whit "would have been but for Section 2(a)(iii))by a Non-defaulting Party,the Non-default Rai„and • I . (d) in all other cases,the Termination Rate. "consent" includes a consent, approval, action, authorisation, exemption, notice, filing',registration or exchange control consent. k. "Credit Event Upon Merger"has the meaning specified in Section 5 . "Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider"has the meaning specified'in the Schedule.` 11 "Default Rate"means a rate per annum equal to tie cost(withoti proof or evidence of any actual cost)to the relevant payee (as certified by it) it were t .,,fundror of funding the relevant amount plus 1% per annum. .:Y "Defaulting Party"has the meaning specified in Section 6(a). IY "Early Termination Datel'ineans the'd to determined in accordance with Section 6(a)or 6(b)(iii). "Event of Default;a ii the meaning specified in She 5(a)and,if applicable,in the Schedule. "Illegality",has the meaning specified in Section 5(b). "law" includes any treaty, l w, rule, or regulation and "lawful" and "unlawful" will be construed accordingly. - "Local Business.Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings int foreign exchange and foreign currency deposits) (a)in relation to any obligation under Section 2(a)(i) in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreby the parties in writing or determined pursuant to provisions contained, or incorporated by referent*_ this Agreement, (b)in relation to any other payment, in the place where the relevant account is located, (c)in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b),in the place where the relevant new account is to be located and(d)in relation to Section 5(a)(v)(2),in the relevant locations for performance with respect to such Specified Transaction. "Loss"means,with respect to this Agreement or one or more Terminated Transactions,as the case may be, and a party, an amount that party reasonably determines in good faith to be its total losses and costs (or gain,in which case expressed as a negative number)in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions,as the case may be,including any loss of bargain,cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain 11 ISDA®1992 Second Printing resulting from any of them).Loss includes losses and costs(or gains)in respect of any payment or delivery required to have been made(assuming satisfaction of each applicable condition precedent)on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)or 6(e)(ii)(2)(A)applies.Loss does not include a parry's legal fees and out-of-pocket expenses referred to under Section 9.A party will determine its Loss as of the relevant Early Termination Date,or,if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not)determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "Market Quotation"means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any,that would be paid to such party(expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect :0i the obligations of such party) and the quoting Reference Market-maker to enter into a transaction(t "Replacement Transaction")that would have the effect of preserving for such party the economic,equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assume the satisfaction of each applicable condition precedent) by the parties under Section2(a)(i) in respect,of such Terminated Transaction or group of Terminated Transactions that would,but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amount<in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent).anat.-that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith,agree.The party making the determination(or its agent)will request each Reference Market-maker to provide itS quotation to the extent reasonably practicable as of the same day and time(without regard to different time zones)on or as soon asreasonably practicable after the relevant Early Termination Date. The day and time as of winch-those quotations are to be obtained will be selected in good faith by the party obli ed to makeia determination itnner Section 6(e),and,if each party is so obliged, after consultation- with t e other. If'mole than three quotations are provided, the Market Quotation will be the arithmetic mean ofe quotations,without regard to the quotations having the highest and lowest values.If exactly three such quotations are provided,the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations.For this purpose,if more than one quotation has the same highest value lowest value then one,of such quotations shall be disregarded. If fewer than three quotations are-provided,tt w 11 be deemed that* Market Quotation in respect of such Terminated Transaction or group'©fTerminated,Transactions cannot be determined. "Non-de, 'cult Rate" meansi it rate per annum equal to the cost (without proof or evidence of any actual cost)to the Non-defaulting P (as certified by it)if it were to fund the relevant amount. "Non defaulting Party"has the Meaning specified in Section 6(a). "Potential Event*.Default"means any event which,with the giving of notice or the lapse of time or both, would constitute an vent of Default "Reference Market-mameans four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith(a)from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b)to the extent practicable, from among such dealers having an office in the same city. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i)with respect to a Transaction. "Set-off'means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject(whether arising under 12 ISDA®1992 Second Printing this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "Settlement Amount"means,with respect to a party and any Early Termination Date,the sum of:— (a) the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined;and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. .14 "Specified Entity"has the meaning specified in the Schedule. �:;; "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise,as principal or surety or otherwise)in respecof borrowed money. "Specified Transaction"means, subject to the Schedule, (a)ant-transaction(inducting an agreement with respect thereto)now existing or hereafter entered into between'one party to this Ag*ement(or any Credit Support Provider of such party or any applicable Specifi Entity of such party)and the'other party to this Agreement(or any Credit Support Provider of such othearty or any applicable Specified_Entity of such other party) which is a rate swap transaction, basis s4np, forward rate transaction, commodity swap, commodityoption, equity or equity index swap, equity orequity x option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b)-any combination of these transactions and (c)any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Terminated Transactions'I: .-roTlth respect s mj y Early Termination Date (a)if resulting from a Termination Event,all Ad Transactions and( if resulting from an Event of Default,all Transactions (in either case) in effecf immediately ipefore the effectiveness of the notice designating that Early Termination Date (ors if "Automatic Early Termination" applies, immediately before that Early i Termination Date). } P + "Termination nt"means an:Illegality or, if specified to be applicable,a Credit Event Upon Merger or an Additional`Tetmination Event` "Termination Rate" means a rate par annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost)to each party;(as certified by such party)if it were to fund or of funding such amounts "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of(a) in respect of nil Terminated Transactions, the amounts that became payable (or that would have become payablebut for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Terminati `Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from(and including) the date such amounts or obligations were or would have been required to have been paid or performed to(but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause(b)above shall be reasonably determined 13 ISDA®1992 Second Printing by the party obliged to make the determination under Section 6(e)or, if each party is so obliged,it shall be the average of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. WELLS FARGO BANK,NATIONAL CITY OF PALM DESERT ASSOCIATION Is ;l DRAFT - DRAFT a ,a .. 13 By: y: 1-P r5. t. Name: Delene M.Travella ''' Name: ' 11. t Title: Vice President Title:,„ .1; -' r Date: D wM- +,-Lie 1 I1 i '111, ,i t11 fit,11, -1 { 41, dry; Y I. 14 ISDA®1992 Second Printing WF DRAFT 06/18/09 SCHEDULE to the ISDA Master Agreement dated as of[Date], between WELLS FARGO BANK,NATIONAL ASSOCIATION a national banking association organized and e .'sting under the laws of the United States of Ale 'a ("Party A") `4 'j t r and CITY OF PALM DESERT, a municipal corporation and charter la v city organized and existiri - under the laws of the State of California «Par B„) Part 1.Termination Provisions. 6 In this Agreement:— (a) "Specified Enti "rieans in r lation to Party A for the purpose o£- 4 Section 5(a)(v)Osfault and Specified Affiliates. Transaction) . r - Section 5(a)(vi)(Cross Default), None. Section 5(a)(vii) (Bankruptcy),4 None. Section 5(b)(ii) (CrediEvent Upon Merger), None. 1-4 and in relationto Pa • B for the purpose of:— , Section 5(a)(v) (Default under Specified Affiliates. Transaction), Section 5(a)(vi) (Cross Default), Affiliates. Section 5(a)(vii) (Bankruptcy), Affiliates. Section 5(b)(ii) (Credit Event Upon Merger), Affiliates. (b) "Specified Transaction" will have the meaning specified in Section 12 of this Agreement. In addition, Specified Transaction shall also include any agreement or obligation between Party A (or any Credit Support Provider or Specified Entity of Party A) and Party B (or any Credit Support Provider or Specified Entity of Party B), including, without limitation, any loan, line of credit, credit agreement, reimbursement agreement, security agreement or other similar agreement. (c) The "Cross Default"provisions of Section 5(a)(vi) of this Agreement will apply to Party A and to Party B. "Specified Indebtedness"means any obligation(whether present or future, contingent or otherwise, as principal or surety or otherwise) for th1yment or repayment of any money; provided, however, with respect to Party A suittiln shall not include deposits and obligations in respect of deposits received in the ordinary course of Party A's banking business. "Threshold Amount" means with respect; r Party A an amount' equal to 3% of the Shareholders Equity (as hereinafter defined of WFC and with respect Party B U.S. $ 1,000,000 (or the equivalent in another curvet y, currency unit or combination thereof); provided that with respect to obligations owed'by;Party B or any Specified Entity of Party B to Party A or its Affiliates,the Threshold Amount shall mean $0.00. For purposes of the foregoing, the berm "Shareholders: quity" shall mean an amount equal to WFC's total assets minus its total hadilt , as reflected on WFC's most recent audited financial statements.+, l (d) The "Credit Event Upon Meer" provi• sions of Section 5(b)(ii) will apply to Party A and to Party B. the purposes of such previsions, "materially weaker" shall mean with respect only to Party-A that the tong term unsecured, unenhanced senior indebtedness of the resulting, sipiving ot transferee entity is rated below "BBB-" in the case of Standard & Poor's, a div"isi , of'I' McGraw Hill Companies, Inc.and any replacement or successor thereto ("S&P") or &low "Baa3" in the case of Moody's Investors Service, Inc. and any replacement or success thereto Moody's") or such entity has no such indebtedness that is rated{by S&P or Mood' s. • (e) The "Automatic Earlygermination"provisions of Section 6(a)will not apply to Party A or to Party 8.prroviced.however, that with respect to a party, where the Event of Default specified in Section''5(a)(vii)(1), (3), (4), (5), (6) or to the extent analogous thereto, (8) is governed by a system of law which does not permit termination to take place after the occurrence of the relevant Event of Default, then the Automatic Early Termination provisions of Section 6(a)will apply to such party. Section 6(e)(iii) of this Agreement shall be amended to include the following sentences after the existing sentence: "In addition to and notwithstanding anything to the contrary in the preceding sentence of this Section 6(e)(iii), if an Early Termination Date is deemed to have occurred under Section 6(a) as a result of Automatic Early Termination, the Defaulting Party hereby 2 agrees to indemnify the Non-Defaulting Party on demand against all loss or damage that the Non-Defaulting Party may sustain or incur in respect of each Transaction as a result of movement in interest rates, currency exchange rates or market quotations between the Early Termination Date and the date (the "Determination Date") upon which the Non- Defaulting Party obtains the information confirming the existence of the Event of Default leading to the deemed Early Termination Date under Section 6(a) that has been derived from reasonably reliable source of information, including publicly available information, such as Telerate, Reuters, Financial Times and The Wall Street Journal. If the Non-Defaulting Party shall determine that it wouldgain or benefit from the movement in interest rates, currency exchange rates or market quotations between the Early Termination Date and the Determination Date t shall be deducted from the amount payable bythe � k��ount of such gain or benefit p Y 1~ ��g Party pursuant to Section 6(e)(i)(4)." �, I 44.1 (0 Payments on Early Termination. For the pure of Section 6(e)O' this Agreement, (i) Market Quotation will apply and (ii) Second Method will apply. Additional ,) �(g) Termination Event will apply 4Each oe following shall constitute an Additional Termination Event:— ,H (i) Continuing Relationship. (a)Party A (or anit:Affiliate of Party A) and Party B are no longer parties to any contractual agreement or o r'. instrument pursuant to which Party A (or any Affiliate,of Party A) ovid :any'service,+r product to or for the benefit of Party B; or(b) the 1 e Agreement_or any promissory note, loan agreement, credit agreement, reimb. ement"" eement'o other document or instrument evidencing a credit extensio. ` om Party Ailla Party 3 is terminated, cancelled, voided or breached or amended in any' nner we would affect.Party B's ability to perform its obligations under this Agreeme it d ine 1 in its sole discretion. (ii) , Related Agree": If on any date, the Notional Amount of a Transaction exceeds the outstanding ''g pal amount of the loan or other extension of credit (or the commitment therefor. :'to which such Transaction relates, if any, and Party A and Party B have not, on or prior to;, ch date identified in writing another loan or credit extension by Party A'td-Party B to v h such excess Notional Amount shall relate, then there shall be an Additionalt.Termiri, n Event solely with respect to the excess Notional Amount of such Transacton sne that following the termination the remaining un-terminated Notional Amount of such Transaction equals the outstanding principal amount. Upon the occurrence of such event, Party B shall be the sole Affected Party and only that Notional portion of the applicable Transaction that is being terminated shall be deemed the Affected Transaction. Upon the occurrence of any of the foregoing events and unless otherwise noted, Party B shall be deemed to be the sole Affected Party and all Transactions shall be deemed to be Affected Transactions. 3 (h) Events of Default. (i) Failure to Pay or Deliver. Section 5(a)(i) of this Agreement is hereby amended by replacing the word"third"with"first"in the third line thereof. (ii) Credit Support Default. Subparagraph (3) of Section 5(a)(iii) is hereby amended by adding the phrase "(or such action is taken by any person or entity appointed or empowered to operate or act on its behalf)" after the words "such Credit Support Document". (iii) Default under Specified Transaction. Section 5(a (v) of this Agreement is hereby amended by the substitution of"(or such default_+ nues for at least one Local Business Day if there is no applicable notice requirement or grace period)" for the parenthetical clause in the seventh and eighth lines t�of. (iv) Bankruptcy. Clause (6) of Section 5(a) ii) of this Agre t is hereby amended to read in its entirety as follows:— "(6)(A) seeks or becomes subject`*to the _appointment of an administrator, provisional liquidator, conservator, ret eiver trrustee, custodian or other similar official for it or for all or bstantially all its,assets (or, in the case of Party B, for the Project) or (B) in the case of}Party B, arid-Credit Support Provider of Party B or any applicable Specified Entity of-Party B -.J there shall be appointed or designated with respect totEit, an entity, such as an organization, board, commission, autt4tritx, agency or to nnitor, review, oversee, recommend or declare.a, financial emergency or similar state of financial distress with respect to it or (jijAhere shall be declared:or introduced or proposed for consideration by it or by legislative or regulatory`body with competent jurisdiction over it, the existence of state o anci. l;em`ergency or similar state of financial distress in res tof i f1n t;, ° + (v - Merger Without Assumption. Section 5(a)(viii) of this Agreement is hereby a ended to read in itsentirety'a' follows:— (rtii) Merger l 'ithout Assumption. The party or any Credit Support Provider of - party. any applicable Specified Entity consolidates or amalgamates with, met with or into, or transfers all or substantially all its assets (or, in the case of arty B, all or substantially all of the Project to, another entity or an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or powers and duties granted to, such party, any Credit Support Provider of such party or any applicable Specified Entity generally or with respect to the Project and, at the time of such consolidation, amalgamation, merger,transfer, or succession:— (1) the resulting, surviving, transferee or successor entity fails to assume all the obligations of such party, such Credit Support Provider or such Specified Entity under this Agreement or any Credit Support Document to 4 which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving, transferee or successor entity of its obligations under this Agreement; or (3) in the case of Party B, the sources of payment for the obligations of Party B as set forth in the Schedule are no longer available for the satisfaction of such resulting, surviving, transferee or successor entity's obligations to the other party hereto." ,51= (i) Termination Events. Section 5(b)(ii) of this Agreement is by amended to read in its entirety as follows:— "(ii) Credit Event Upon Merger. If"Crew; Event Upon Merge is specified in the Schedule as applying to the party, such ("X"), an, Credit SupporPros ider of X or any applicable Specified Entity of X consolis orgamates with, or merges with or into, or transfers all or substantially all its asset ; r, in the case of Party B, all or substantially all of the Project)° to, or reorganizes, incorporates, reincorporates, or reconstitutes into or as another entity;,or another entit,transfers all or substantially all of its assets (or, in the case of Park B, all or substantially all of the Project) to, or reorganizes, incorporates reincorporates, or recon tuts into or as, X (or, without limiting the foregoin ` T case oft -a B an e � � �'� , ` such as an organization, board, commission, auth 9i1 -" , agency or bodybodfittoceeds to the principal functions of, or powers and duties grantedto, X (or applicable,Specified Entity) generally or with respect to the Project) an �h •actio es not constitute an event described in Section 5(a)(viii) but the creditworthjr'ess oft X orr.the s,.lting, surviving, transferee or successor entity (which;will# the Auppted Party) its Materially weaker than that of X, such Credit Support Provide or such1 ecified Entity, as the case may be, immediately prior to such action; or". - . Part 2.Agreement to Deliver Documents. 14 For the purposes of Secjn 4(a) of this Agreement, the parties agree that the following documents wilt be deli ered:— Party required Covered by to deliver Section 3(d) document Form/Document/Certificate Date by which to be Delivered Party A A secretary's certificate of Upon request Yes Designation of Authority, Authorized Persons and Signatures. 5 Party required Covered by to deliver Section 3(d) document Form/Document/Certificate Date by which to be Delivered Party B A secretary's certificate Prior to the Trade Date of the Yes certifying authorizing initial Transaction hereunder or resolutions for Party B and upon execution of this Agreement any Credit Support and as deemed necessary for any Provider of Party B further documentation. reasonably satisfactory in } form and substance to Jje Party A. Tr Party B Copies of: (1)the charter Prior to the Trade' e of the Yes or similar document, if initial Transaction her*der or any, and enabling statutes upon execution of this Agreement (or comparable legislation) and thereafter at least ten(IOO creating Party B and any Business Days prior to the 44- Credit Support Provider of adoption of anamendment, Party B and authorizing supplement c modification Party B and any Credit., thereto. `; Support Provider of Party B to enter into derivative transactions; (2) any ' constituent instruments of } . , Party B any Credit r,/ Support off-.. arty } , B. regulation °" R, investment poli s t guideline*;r lutions. rt --* ordit ances, bra provisions affectinithe ati o•'rity of rsuch Cre ''',,' Party B oSupport Provider of Party B to enter into'derivatives r sactions; d(3) t. amendmen supplements or othr modifications to any of the foregoing. Party B A written opinion of legal Upon execution of this Yes counsel to Party B and any Agreement and upon the Credit Support Provider of execution of each Confirmation. Party B addressed to Party A, in the form attached hereto as Exhibit A with such changes as Party A agrees to in its sole 6 Party required to deliver Covered by document Form/Document/Certificate Date by which to be Delivered Section 3(d) discretion. Party B Incumbency certificate for Upon execution of this Yes Party B and any Credit Agreement and as deemed Support Provider of Party necessary by Party A in B. connection with any further documentation. Party B Duly executed and Upon execution of this Yes completed U.S. Internal Agreement, „,i'4i.!.i ptly upon Revenue Service Form W- reasonable ; nand D Party A 9 (or successor thereto). and promptl upon �" ' + ng that any such form pj iously provided by Party B has biegme obsolete or incect. t� i Party B A duly executed copy of Upon: t emotion of this No the Credit Support Agreements'' Documents specified in ,., s Part 3 of this Schedule. 'I t: Party B Covered Agreement and 4. Upon-,j.-; . e ecut of this Yes all other d 7 merit 'at least ten (10) relating the Incorporated Business Days prior to the 1.Provtoions (as such term is adoption of any amendment, definedSection4 f this supplement or modification Agreement), ,. # - 11. -t thereto. Party B k ' A copy ofall fi�cial As required under the Covered Yes IT statement d other Agreement �, documenta t. required to be delivered any lender under the to ye, of the Covered A04ement Party A and Such oth r documents as Upon request. No Party B the other party may reasonably request. Part 3.Miscellaneous. (a) Addresses for Notices. For the purpose of Section 10(a)to this Agreement:— Address for notices or communications to Party A:- 7 Address: Wells Fargo Bank,National Association 550 California Street, 12th Floor MAC A0112-121 San Francisco, California 94104 Attention: Derivatives Documentation Manager Facsimile No.:(415) 986-2604 And if such notice or communication is rfor operational purposes (payments and settlements), with a copy to:„4;�_ ry ri Lit« Wells Fargo Bank,National Associations 550 California Street, 12th Floor , ' MAC A0112-121 San Francisco, California 94104 a t Attention: Back Office Operations—Settlements ,. Facsimile No.:(415) 646-9208 Address for financial statements to Party A: Wells F. • :ank,National Associate o >,- Government Institutional-Banking 7 Wilshire>1d., 11t'Floor MAC E2818 Los ngele li#`o is 001 ,+ ttAption,'.. t.ynn Love Facsimile No :(21.3) 614-3555 Address'for notices or communications to Party B:— Address: }i Cityofalm Desert 7 --50'Fred Waring Drive Palm Desert, California 92260 Attention: City Manager Facsimile No.: (760) 346-6372 Telephone No.: (760) 346-0611 (b) Calculation Agent. The Calculation Agent is Party A. 8 (c) Credit Support Document. Credit Support Document means, in relation to Party A, None. Credit Support Document means in relation to Party B: None. (d) Credit Support Provider. Credit Support Provider means in relation to Party A: Not applicable. Credit Support Provider means in relation to Party B: Any person or entity (other than Party B), that now or hereafter secures, guarantees or otherwise provides assurance of payment or performance of any existing or future obligation of Party B under this Agreement or any Credit Support Document. (e) Governing Law and Jurisdiction. This Agreement and each Confirmation will be governed by and construed in accordance with the laws o ,State of New York, other than any principles therein of conflicts of laws (other thanFSection 5-1401 and 5-1402 of the General Obligations Law of New York, which'[ apply hereto and thereto); provided, however, that the power and authority of lty B=tenter into this Agreement will be governed by the laws of the State of California and prdvided, that a claimant may be required to comply with the provisions of the Tort Claims Act lAtt forth in California Government Code Section 810 et seq. in kits, actions or proceeding brought against Party B. Section 11(b) is hereby amended (1) deleting"non" from' hi;second line of clause (i); (2) deleting the phrase "the courts of the State of New York and"; (3) adding the phrase "; provided that Party_A will consent to the transfer of any such Proceeding initiated by Party B to the United-States District Court with jurisdiction over Party B if a jury trial waiver is permitted by law and prior to seeking such transfer Party B has taken all steps as may be required or permitted by the laws-that would be applicable in such transferee court to effec a valid waiver of jury trialby Party B in such court"at the end of Section 11(b), ;d 4•c;, leting t� final paragraph; provided, however, that any judgment receive inn a Proceeding shall be enforceable in any court of competent jurisdiction. Notwithstandinghe foregoing, in the event that if a valid waiver of jury trial cannot be efihnted in_t ited States District Court with jurisdiction over PartyB and if the United Statue i ictCOurtifileated in the Borough of Manhattan in New York City does no have jurisd ction, the parties hereby submit to the jurisdiction of the courts of the State of New york (f) Netting}of Payments. 4, nless'otherwise agreed by Party A and Party B, subparagraph (ii) of Section 2(c) of this Agreement will apply to each Transaction. (g) "Affiliate" will haver-to meaning specified in Section 12 of this Agreement, provided, however, that, Alan for purposes of Section 6(f) of this Agreement(as added by Part 4(f) of this Schedule), Section 5(a)(v) of this Agreement and Part 1(g)(i) of this Schedule, Party A shall not have any Affiliates for purposes of this Agreement. Part 4.Other Provisions. (a) Deferral of Payments and Deliveries in Connection with Illegality and Incipient Illegality; Interest on Deferred Payments. Section 2(a)(iii) is hereby amended in its entirety as follows:- 9 "(iii) Each obligation of each party (or any Credit Support Provider of such party) under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default, Illegality, Potential Event of Default or Incipient Illegality with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and(3) each other applicable condition precedent specified in this Agreement." (b) Representations. (i) The introductory clause of Section 3 is hereby amended to read in its entirety as follows: "Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a TiriSactiainAs entered into and, in the case of the representations in Sections 3(a) and 3(k), at all times ntil the termination of this Agreement)that:" w (ii) Section 3(a)(ii) of this Agreement hereby amended to readn its entirety as follows:— "rz.- _rr "(ii) Powers. It has the power (itt the case of Party_B, pursuant to the Authorizing Law) to execute this Agreement and any other documentation relating to this Agreement to which it is a party,to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to-Olivet rand to perform its obligations under this Agreement-Old tny obligationsiii=has under any Credit Support Document to which it is a party. and' has taken aft necessary- action and made all necessary determinations arid findings to''authorize'such execution, delivery and performance;". (iii) Section 3(b) of the A eement is_hereby amended to read in its entirety as follows:- ,rev, "tb Absence of ertain Events. No Event of Default or Potential Event of Default or, i&its knowledge, Incipient Illegality (in the case of a Party B) or Termination Event with respectIto it has occurred and is continuing and no such event or circumstance would occur as aEresult of its entering into or performing its obligations under this Agreement or any Credit�S'upport Document to which it is a party." (iv) For purposesof Section 3, the following shall be added, immediately following paragraph(d)thereof: "(e) It has entered into this Agreement (including each Transaction evidenced hereby) in conjunction with its line of business (including financial intermediation services) or the financing of its business. (f) No Immunity. It is not entitled to claim immunity on the grounds of sovereignty or other similar grounds with respect to itself or its revenues or assets (irrespective of their use or intended use) from (i) suit, (ii)jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of 10 its assets (whether before or after judgment) or (v) execution or enforcement of any judgment which it or its revenues or assets might otherwise be made subject in any Proceedings (as defined in Section 11(b)) in the courts of any jurisdiction and no such immunity (whether or not claimed) may be attributed to such party or its revenues or assets; provided, however, that a claimant may be required to comply with the provisions of the Tort Claims Act set forth in California Government Code Section 810 et seq. in suits, actions or proceedings brought against Party B. (g) Eligible Contract Participant. It is an "eligible contract participant" as defined in Section 1 a(12) of the Commodity Exchange Act (7 U.S.C. la), as amended by the Commodity Futures Modernization Act of 2000. With e ect to Party B, it (i) is a political subdivision, instrumentality or agency of the State 'f California, (ii) is acting for its own account hereunder and(iii) owns and invests cirt onediscretionary basis $25,000,000 or more in investments. (h) This Agreement (including each Traccation) has been subject to individual negotiation by it, including individualized ccla tworthiness determinate s.(i) It is entering into this Agreement, any Cit Support Document to which it is a party, each Transaction and any other documentation;, relating to this Agreement or any Transaction as principal (and not as agent or tin any other capacity, fiduciary or otherwise). -; ci i' (j) It acknowledges_that. ursuant t the terries of s Agreement (including, without limitation, Section (p) ,.it; owe a vent to the ether party upon the designation of an EarlyTermi ion event pn Date, in the event such Early Termination Date is the result of an Event ofDefault or Term ation Event (including Additional Termination Events) with respect toes T-other (k) Mkt'Represent iion. (i) It is ,not an employee benefit plan (hereinafter an "ERIS�A Plan"), asefine Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ISA"), subject to Title I of ERISA or a plan subject to Sectionk4975 of the In R nal .e, nue Code of 1986, as amended (the "Code"), or subject to any,'other statute, reg ulation, procedure or restriction that is materially similar to Section 404 of ERISA or 4975 of the Code (together with ERISA Plans, "Plans") or any federal, state local or oreign rule, law, regulation or policy that is materially similar thereto ("Simila-Law"), (ii) neither this Agreement nor any Transaction contemplated hereunder violates°-ERISA, the Code or any Similar Law, (iii) its assets do not and will not constitute (or be deemed to constitute) assets of a Plan, and (iv) it is not a person acting on behalf of a Plan. It will provide notice to the other party in the event that it is aware that it is in breach of any aspect of this representation or is aware that with the passing of time, giving of notice or expiry of any applicable grace period it will breach this representation. (1) Creditworthiness. The economic terms of this Agreement, and any Credit Support documents to which it is a party, and each Transaction have been individually tailored and negotiated by it, and the creditworthiness of the other party was a material 11 consideration in its entering into or determining the terms of this Agreement, such Credit Support Document, and such Transaction." (c) Additional Representations of Party B. Party B hereby further represents to Party A (which representations will be deemed to be repeated by Party B at all times until the termination of this Agreement)that: (i) This Agreement has been, and each Transaction hereunder will be (and, if applicable, has been), entered into for the purposes of managing its borrowings or investments and not for purposes of speculation. (ii) Any Transaction entered into pursuant to thistf eement together with any transactions that it has or may enter into with Party A'a; � with any or all other parties does not and will not violate or exceed any limits or reitr4ctions contained in any authorizations, approvals or resolutions of its board'of directorsr any other applicable governing or authorized body. (iii) The execution and delivery by it-Of this Agreement, each Confirmation and any other documentation relating hereto, and,ue performance by it of its obligations hereunder and thereunder, are in furtherance,and'-riot in violation, of the governmental purposes for which it is organized pursuant to the laws of the relevant state. (iv) This Agreement and each Transaction_hereunder do not constitute any kind of investment by it that is proscribed by any constitution,^.charter, law, rule, regulation, government code, constituent or governing instrument, resolution, guideline, ordinance, order, writ,judgme tt decree,`eharge, or ruling to which it (or any of its officials in their respective capacities as such41or its property is subject. The obligations of Party B to make payments,613arty A under this Agreement and each Transaction hereunder are not subect to J appropriation or smite action _`r l4.4„µ (v) , 1 Io Affiliate or H M ier person, firm, corporation, entity, or association may liquidate, borrow, encumber or otherwise utilize the assets of Party B, other than Party B or as otherwise permitted by the Covered Agreement. }, r1 (vi) It;ais a state or political subdivision thereof, or an instrumentality, agency or department either ore foregoing. E (d) Agreements. (i) The introductory clause of Section 4 of this Agreement is hereby amended to read in its entirety as follows:— "Each party hereby agrees with the other (or, in the case of Section 4(d) and (e), Party B hereby agrees with Party A) that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:—" (ii) Section 4 of this Agreement is hereby amended by adding the following subsections"(d)", "(e)"and"(f)"thereto:- 12 "(d) Compliance with Covered Agreement. Party B will observe, perform and fulfill each covenant, term, and provision in the relevant Covered Agreement applicable to Party B, as any of those covenants, terms, and provisions may be amended, supplemented or modified for the purposes of this Agreement with the prior written consent of Party A (the "Incorporated Provisions"), with the effect, among other things, and without limiting the generality of the foregoing, that Party A will have the benefit of each of the Incorporated Provisions (including without limitation, covenants, right to consent to certain actions subject to consent under the relevant Covered Agreement and delivery of financial statements and other notices and information). In the event the relevant Covered Agreement ceases to be in effect for any reason, including, without limitation, defeasance of the Bonds/Lease issued in connection wit 'prepayment of the lease described in such Covered Agreement, prior to the t �ation of this Agreement, the Incorporated Provisions (other than those provision a',a q, ring payments in respect of bonds, notes, warrants or other similar instruments issued in . ection with the relevant Covered Agreement) will remain in full force and for p' es of this Agreement as though set forth herein until such date on w_ich all of the obliges ry s of Party B under this Agreement and any obligations of tip B have been fui satisfied. The Incorporated Provisions are hereby incorporated bywr. rence and made a part of this Agreement to the same extent as if such provisions,wer set forth herein. For purposes of this Agreement, the Incorporated Provisions- shall be construed as though (i) all references therein to any party making loans,.'extensions of credit or financial accommodations thereunder or commitments therefor(the "Financings") were to Party A and (ii) to the extent that such Incorporated Pro isions 40 conditioned on or related to the existence of such T.ncings or Party-13 having any obligations in connection therewith, all references to su�Financings or obligations were to the obligations of Party B under this Agr ent. Any mendment, supplement, modification or waiver of any of the Incorporat os isions without the prior written consent of Party A shall be void ab initio and have no'force. with respect to this Agreement. Any amendment, supplement mod'x n for which such consent is obtained shall be part of the Incorp ted isions - purposes of this Agreement. (e) Notice of Incipii Illeg'' ; . If an Incipient Illegality occurs, Party B will, promptly upon becoming awa ,of it, 'ntify Party A, specifying the nature of that Incipient Illegali (and will also gym; e such other information about that Incipient Illegality as Party A may reasonably req, H 41 (I) Security and ource of Payments. Party B agrees that its obligation to make payments to Party A under this Agreement and each Transaction hereunder constitutes a general contractual obligation of Party B payable from any legally available source. Party B further agrees that it shall not grant, assume, create or incur, or permit to be granted, assumed, created or incurred, any pledge of or lien or encumbrance of any kind on any of its revenues, assets or other property, real or personal, tangible or intangible, and wherever situated ("Security") to secure any obligation of Party B under any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency 13 option or any other similar transaction (including any option with respect to any of these transactions) or any combination of these transactions unless Party B shall grant and pledge to Party A an equal and ratable pari passu security interest on such Security to secure Party B's obligations to Party A hereunder. For purposes of subsections (d), (e) and (f) of Section 4, capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to them in the Covered Agreement." (e) Additional Definitions. As used in this Schedule, the following terms shall have the following meanings:— " `Authorizing Law' means Section 5922 of t e C lalifornia Government Code." " `Bonds/Lease' means the Palm Desert Financing Authority Energy Independence Program Variable Rate.Demand Lease Revenue Bonds Series 2009 (Federally Taxable) in the original principal amount of$5,000." " `Covered Agreement' means the Reimbursement Agreement between Party A and Party B, expected to be entered info on or about July 1, 2009 (as it may be modified, amended or supplemented from:time to time with the consent of Party A), and/or any promissory note, loan agreement, credit agreement, reimbursement agreement or other document or,snstrument evidencing a credit extension from Parry A to Parlor B." j " `Incipient rllegali ' means(ay the enactment by any legislative body with competent jurisdiction hover a Party B of legislation which, if adopted as law, would render unlaul (i)the performance by Party B of any absolute or contingent obligation t 'make, payment, or delivery or to receive a payment or delivery in respect of a Transact s n or the compliance by Party B with any other material provision Lof this Agreement relating to such Transaction or (ii)the performanc b Pa ,13 or a Specified Entity of Party B of any contingent or other obligationwhiclirt Party B (or such Specified Entity)has under any Credit Support Document reIating to such Transaction, (b) any assertion in any proceeding, forum or action by Party B, in respect of Party B or in respect of any entity located organized under the laws of the state in which Party B is located to the effectkticat performance under this Agreement or similar agreements is unlawful or'(c)the occurrence with respect to Party B or any Specified Entity of Party B of any event that constitutes an Illegality." " `Project' means, collectively, the construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City of Palm Desert pursuant to Party B's Energy Independence Program and the any other Project identified as such in a Confirmation." " WFC' means Wells Fargo& Co." 14 (f) Right of Setoff. Section 6 of this Agreement is amended by adding the following new Section 6(f):— "(f) Set-off. Without affecting the provisions of the Agreement requiring the calculation of certain net payment amounts, all payments under this Agreement will be made without set-off or counterclaim; provided, however, that upon the designation of an Early Termination Date, in addition to and not in limitation of any other right or remedy (including any right to set off, counterclaim, or otherwise withhold payment or any recourse to any Credit Support Document) under applicable law the Non-defaulting Party or the party that is not the Affected Party (in either case, "X") may without prior notice thy person set off any sum or obligation (irrespective of the currency, place, ; ayment or booking office of the sum or obligation) owed by the Defaultin '° or the Affected Party (in either case, "Y") to X or any Affiliate of X tint.. ..any other agreement or instrument against any sum or obligation(irrespective �tthe currency, place of payment or booking office of the sum or'obligation) owed°3 X to Y under this m Agreement and, for this purpose, ay convert one currency into another at a market rate reasonably determine by X. f any sums or obligation is unascertained, X may in good faith estimate Mai sum or obligation and set-off in respect of that estimate, subject to X or Y asthe case may be, accounting to the other party when such sum or obligation is ascertained. Nothing in this Section 6(0 will have1 the effect':of creating a charge or other security interest is Sectio h 6 u prejudice� and in addition to any.right of.sea-. (�-shall'�l combination of`accounts lien or other right to which any party is at a#y time otherwise entitled (whether by operation of law, contract or otherwise (g) Confirmations. Notwithstanding an ,to the contrary in this Agreement:— (i) The parties hereto agrs that with respect to each Transaction hereunder a legally binding agreement`��11 exist ,from the moment that the parties hereto agree on the essential terms of sushi ransact on,which the parties anticipate will occur by telephone. 411 i i,.. (ii) For each TransactioParty A and Party B agree to enter into hereunder, Party A shall promptly send to Par .B a Confirmation setting forth the terms of such Transaction. Party B shall execute-and return the Confirmation to Party A or request correction of any error within three;Local Business Days of receipt. Failure of Party B to respond within such period shall not affect the validity or enforceability of such Transaction and shall be deemed to be an affirmation of such terms (h) Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT. 15 (i) Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Agreement or affecting the validity or enforceability of such provision in any other jurisdiction;provided, however, that this severability provision will not be applicable if any provision of Section 1(c), 2, 5, or 6 is held to be invalid or unenforceable. The parties hereto shall endeavor in good faith negotiations to replace the prohibited or unenforceable provision with a valid provision, the economic effect of which comes as close as possible to that of the prohibited or unenforceable provision. 6) Risk Disclosure. PARTY B HEREBY ACKNOWLEDGEVAND AGREES THAT IT HAS: (X) READ THE RISK DISCLOSURE SET FORTH ON EXHIBIT B; (Y) UNDERSTANDS SUCH RISK DISCLOSURE; ; ) HAD AN ADEQUATE OPPORTUNITY TO DISCUSS ANY QUESTION r, .R 60.I .,COMMENTS THAT IT MAY HAVE HAD WITH RESPECT TO SUCH RISK DISCLOSUREPRIOR TO THE '' EXECUTION OF THIS AGREEMENT. 1 p sents to-the recording � ;;the telephone (k) Consent to Recording. Each party (i) g P conversations of trading and marketing personnel of-tti parties in connection with this Agreement or any potential Transaction, (ii) agrees to obtain any necessary consents of and give notice of such recording to its-personnel, and OK) consents to the submission of any such tape recording in evidence in any Proceedings. (1) Relationship Between Parties. Each arty will be deeme to represent to the other party on the date on which it eri into a Transaction that(ab"sent a written agreement between the parties, and, ift plicab a-`Fany Credit Support Provider of any party, that expressly imposes affirmative obligationito the contrary for that Transaction):— (i) Non-Reliance~. It*at-ting forits oven account, and it has made an independent a +, decision toe ter_ ,into tha Transaction and to whether that Transaction is appropriate or proper "for it b upon''its judgment and upon advice from such advisers as it has deed necessary. t is not relying on any communication (written or oral) of the other parr-or any Credit Support Provider of such party, as applicable, as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations relate to the terms and conditions of a Transaction shall not be considered irivestmentt idvice or a recommendation to enter into that Transaction. No communication w tten or oral) received from the other party or any Credit Support iT Provider of such party, as applicable, shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. (ii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. 16 (iii) Status of Parties. The other party and any Credit Support Provider of such party, as applicable, are not acting as a fiduciary for or an adviser to it in respect of that Transaction. 1-7 -4 r3+a 1it 17 The parties executing this Schedule have executed the Master Agreement and have agreed as to the contents of this Schedule. WELLS FARGO BANK,NATIONAL ASSOCIATION By: Name: Delene M.Travella Title: Vice President 41- "' t , CITY OF PALM DESERT, a California municipal corporation and charter law city t,rt.k TN k By: Name: Title: p ILL,-' ",� DLL f vir I Q r;*� r 18 EXHIBIT A to Schedule [Form of Opinion of Counsel to Party B] Ladies and Gentlemen: We have acted as counsel to the ( ] ("Party B") in connection with the execution and delivery of the ISDA Master Agreement (including the Schedule thereto), each dated as of , [and the Confirmation, dated t, ], each between Party B and Wells Fargo Bank,National Association(collectively,the',Agreement"). In connection with this opinion, we have ex an executed copy of the Agreement and such documents and records of Party B, c'1 ificat officers of Party B and such other documents as we have deemed necessa, appropriate ,, purposes of this ry: , the opinion. In rendering such opinion, we have assume**genuineness of'atlhe signatures (other than Party B), the authenticity of all documents:subil itted to us as original' •-.. the conformity to authentic original documents of all documents submitted: us as certifi- _ conformed or photostatic copies. Based upon the foregoing, we are _the inion that: 1. Party B is duly or mod, validly ex'sting, and in good standing under the laws of the State of( 1. - , ;,. 2. Party B ' authori 'tzedo enter into e Agreement and to perform its obligations thereunder.;�"hhe�� ment has been duly executed and delivered by Party B. 3. Tt fil. Fri. e execution 0nd delivery of the Agreement and performance of the Agreement does notF'vlate, c ,it with, or constitute a breach of or default under, any law applicable to Parry B, any Tonii4'ofitpprfonizational documents, any order or judgment of any court o ff er agent of government applicable to it or any of its assets or any contractualcontractual'restrictinttbindinibn or affecting it or any of its assets. ,.4. All local and stateconsents in the State of j 1 that are required to have been obtained by Party B{ ith respect to the Agreement have been obtained and are in full force and effect and all conditions of any such consents have been complied with. 5. The Agreement has been duly authorized, executed and delivered by Party B, and the obligations;>i'f Party B under the Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, liquidation, receivership, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including concepts of reasonableness, materiality, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). Exhibit A Page 1 6. There is not pending or,to our knowledge,threatened against Party B (nor to our knowledge is there any basis for), any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of the Agreement or its ability to perform its obligations under the Agreement. 7. Party B is not entitled to claim immunity on the grounds of sovereignty or other similar grounds with respect to itself or its revenues or assets (irrespective of their use or intended use) from (i) suit, (ii)jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (ivy) attachment of its assets (whether before or after judgment) or(v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be made1:1Sthj eOL to in any suit, action or proceedings relating to the Agreement brought in the courts ofanyjurisdiction and no such immunity (whether or not claimed)may be attributed to such party or its revenues or assets. In giving the opinions expressed above, we do not purport Wipe experts in, or generally familiar with or qualified to express Legal opinions based on the laws of, any jurisdiction other than the federal laws of the united'States ofAmerica and the laws of the State off 1. To the extent that the laws of the State of New York may apply as to matters covered by the opinions expressed above, we tfav assumed that the laws of the State of [ j are substantially identical to the laws of the State ©[New York for the purpose of giving such opinions. We are furnishing theopinions expressed above-to you solely for your benefit and no other person is entitledato rely on such opinions. Such opinions are not to be used, circulated or referred to for any other purpose without our prior written consent. r, .$ , - _very truly yours, FtliF iT Exhibit A Page 2 EXHIBIT B to Schedule RISK DISCLOSURE AS IS COMMON WITH MANY OTHER FINANCIAL INSTRUMENTS AND TRANSACTIONS, FINANCIAL RISK MANAGEMENT PRODUCTS, IN ADDITION TO PROVIDING SIGNIFICANT BENEFITS, MAY IN CERTAIN CASES INVOLVE A VARIETY OF SIGNIFICANT RISKS. BEFORE ENTERING INTO ANY FINANCIAL RISK MANAGEMENT TRANSACTION, YOU SHOULD CAREFULLY CONSIDER WHETHER THE TRANSACTION IS APPROPRIATE FOR YOU IN LIGHT OF YOUR OBJECTIVES, EXPERIENCE, FINANCIAL AND OPERATIONAL RESOURCES, A D OTHER RELEVANT CIRCUMSTANCES. YOU SHOULD ALSO ENSURE THAT YOU ULLY UNDERSTAND THE NATURE AND EXTENT OF YOUR EXPOSURE°TO RISK OF LOSS, IF ANY, WHICH IN SOME CIRCUMSTANCES MAY SIGNIFICANnY EXCEED THEAMOUNT OF ANY INITIAL PAYMENT MADE BY OR TO YOU. FINANCIAL RISK MANAGEMENT PRODUCT.-PERMIT PRECISE CUSTOMIZATION TO ACCOMPLISH PARTICULAR FINANCIAL AND_ MANAGEMENT OBJECTIVES THAT MIGHT OTHERWISE BE UNACH-IIdEVABLE. THE SPECIFIC RISKS PRESENTED BY A PARTICULAR TRANSACTION NECESSARILY DEPEND UPON THE TERMS OF THAT TRANSACTION AND YOUR CIRCUMSTANCES. COMMON TO ALL, HOWEVER, IS THEIR NATURE AS LEGAL .Y BIND*commtAqpAti, COMMITMENTS, WHICH, ONCE AGREED TO, CANNOTBE AL I`E .01Eli-OTHEItjTHAN BY TERMINATION OR MODIFICATION. YO U I-IOULD INDERSTAND THAT SUCH TERMINATION AND/OR MODIFICATION MA:I IN CERTAIN CIRCUMSTANCES, RESULT IN SIGNIFICANT LOSSES. �a w AS IN ANyt:L; �CIAL' ` ' ANSACTION, YOU SHOULD ENSURE THAT YOU UNDERSTAND THE-REQUIREMENTS, IF ANY, APPLICABLE TO YOU THAT ARE ESTABLISHED BY YOUR G TORS OR BY YOUR BOARD OF DIRECTORS OR OTHER GOVERNING BOPY. Y SHOULD ALSO CONSIDER THE LEGAL, TAX, ACCOUNTING, AND ECONOMIC TRANSACTION, INDEPENDENTLY AND IF NECESSARY, THROUGONSULTATION WITH SUCH ADVISORS AS MAY BE APPROPRIATE TO fe 'TYOU IN UNDERSTANDING THE RISKS INVOLVED. IN ENTERING INTO ANY FINANCIAL RISK MANAGEMENT TRANSACTION WITH, OR ARRANGED BY US, WELLS FARGO BANK, N.A. (THE "BANK"), YOU SHOULD ALSO UNDERSTAND THAT THE BANK IS ACTING SOLELY IN THE CAPACITY OF AN ARM'S LENGTH CONTRACTUAL COUNTER PARTY AND NOT IN THE CAPACITY OF YOUR FINANCIAL ADVISOR OR FIDUCIARY UNLESS THE BANK HAS SO AGREED IN WRITING AND THEN ONLY TO THE EXTENT SO PROVIDED. THI BRIEF STATEMENT DOES NOT PURPORT TO DISCLOSE ALL OF THE RISKS OR OTHER RELEVANT CONSIDERATIONS OF ENTERING INTO FINANCIAL RISK MANAGEMENT TRANSACTION. ©,/\. 1 $ ` / . r 2 «\y :p S f % y - «. y> : « & - % d± « • ,y �� > d 7-S ©y :_ . \ » \ , = < . : < > <§ •\y ©y: : amx«»> ,» » �� , .«.. > ~ ° ar: \.,, » ' � \ 1 »a_ \ . »@ ' «:: \ > .-. y ± { - ƒ y >. �{ w -%/. -- ` 2 Fulbright& Jaworski L.L.P.—Draft 6/15/09 Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) BOND PURCHASE AGREEMENT , 2009 Palm Desert Financing Authority 73-510 Fred Waring Drive Palm Desert, California 92260 City of Palm Desert 73-510 Fred Waring Drive Palm Desert, California 92260 Ladies and Gentlemen: Wells Fargo Institutional Securities, LLC (the "Underwriter") hereby offers to enter into this agreement with the Palm Desert Financing Authority (the "Issuer") and the City of Palm Desert (the "City"). Upon the acceptance hereof by the Issuer and the City, this offer will be binding upon the Issuer, the City and the Underwriter. This offer is made subject to (i) the written acceptance hereof by the Issuer and the City and (ii) withdrawal by the Underwriter upon written notice (by telegraph or otherwise) delivered to the Issuer and the City at any time prior to the acceptance hereof by the Issuer and the City. 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the Issuer at the Closing Time on the Closing Date (both as defined herein), and the Issuer hereby agrees to sell and deliver to the Underwriter, $ aggregate principal amount of its Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) (the "Bonds"). The Bonds shall be dated the date of their initial delivery, shall mature on September 1, 2029 and shall bear interest, be subject to redemption and have such other terms as are provided in the Indenture. The aggregate purchase price for the Bonds shall be $ , representing the aggregate principal amount thereof, less an Underwriter's discount of $ . (The date of such payment and delivery is referred to herein as the "Closing Date," the hour and date of such 85093203.3 delivery and payment is referred to herein as the "Closing Time," and the other actions contemplated hereby to take place at the time of such payment and delivery being herein sometimes called the "Closing"). 2. The Bonds. The Bonds shall be described in, and shall be issued and secured pursuant to, the provisions of the Constitution and the laws of the State of California including the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 (commencing with Section 6584), Division 7, Title 1 of the Government Code of the State of California (the "Bond Law"). The Bonds shall be issued and secured pursuant to an Indenture, dated as of July 1, 2009 (the "Indenture"), by and between the Issuer and Wells Fargo Bank, National Association (the "Trustee") authorizing the issuance of the Bonds. The Bonds are being issued to provide funds to finance the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City and to reimburse the City for certain expenditures. The Bonds are secured by Revenues (as defined in the Indenture). Revenues primarily consist of amounts received by the Authority as lessor under a Lease Agreement, dated as of July 1, 2009 (the "Lease"), by and between the City and the Issuer. Payments of principal of and interest (but not any premium) on the Bonds will be initially supported by an irrevocable direct-pay letter of credit (the "Letter of Credit") issued by Wells Fargo Bank, National Association (the "Credit Entity") to the Trustee pursuant to a Reimbursement Agreement, dated as of July 1, 2009 (the "Reimbursement Agreement"), by and between the City and the Credit Entity, the drawings under which will be used to pay the principal of and interest on the Bonds when due. The Letter of Credit will also be drawn on, if other funds are not available, to purchase Bonds tendered by Owners at the purchase price. Herein, the Indenture, the Assignment Agreement, dated as of July 1, 2009 (the "Assignment Agreement"), by and between the Issuer and the Trustee, the Lease, the Site Lease, dated as of July 1, 2009 (the "Site Lease"), by and between the City and the Issuer, the Remarketing Agreement (as defined in the Indenture) and this Bond Purchase Agreement are referred to collectively as the "Issuer Documents." The Site Lease, the Lease, the Reimbursement Agreement and this Bond Purchase Agreement are referred to collectively herein as the "City Documents." The Bonds shall be payable and shall be subject to redemption as provided in the Indenture and shall be as described in the Official Statement of the Issuer, dated , 2009, of the Issuer dated of even date herewith. Such Official Statement, including the cover page, the appendices thereto relating to the Bonds, as amended to conform to the terms of this Bond Purchase Agreement and with such changes and amendments thereto as have been mutually agreed to by the Issuer, the City and the Underwriter, is hereinafter referred to as the "Official Statement." 3. Offering by the Underwriter. It shall be a condition to the Issuer's obligations to sell and to deliver the Bonds to the Underwriter and to the Underwriter's obligation to purchase, to accept delivery of and to pay for the Bonds that the entire principal amount of the Bonds shall be issued, sold and delivered by the Issuer and purchased, accepted and paid for by the Underwriter at the Closing. It is understood that the Underwriter proposes to 85093203.3 2 offer the Bonds for sale to the public (which may include selected dealers) at prices or yields as set forth on the cover page of the Official Statement. Concessions from the public offering price may be allowed to selected dealers. It is understood that the initial public offering price and concessions set forth in the Official Statement may vary after the initial public offering. It is further understood that the Bonds may be offered to the public at prices other than the par value thereof The net premium on the sale of the Bonds to the public, if any, shall accrue to the benefit of the Underwriter. 4. Official Statement, Delivery of Other Documents, Use of Documents. (a) The Issuer and the City hereby authorize the use by the Underwriter of the Official Statement (including any supplements or amendments to the Official Statement) and the Indenture and the information therein contained, in connection with the public offering and sale of the Bonds. (b) The Issuer shall deliver to the Underwriter, such number of copies of the final Official Statement executed on behalf of and approved for distribution by the Issuer as the Underwriter may reasonably request in order for the Underwriter to comply with the rules of the Municipal Securities Rulemaking Board. (c) As soon as practicable following receipt thereof, the Underwriter shall deliver the Official Statement, and any supplements or amendments thereto, to a nationally recognized municipal securities information repository. 5. Representations,Warranties and Agreements of the Issuer. The Issuer represents, warrants and agrees as follows: (a) The Issuer is an entity duly organized and validly existing under the laws of the State of California. (b) The Issuer has full legal right, power and authority (i) to enter into the Issuer Documents, to sell, issue and deliver the Bonds to the Underwriter as provided herein; and (ii) to carry out and consummate the transactions on its part contemplated by the Issuer Documents. (c) By all necessary official action, the Issuer has duly authorized and approved the Issuer Documents, has duly authorized and approved the Official Statement, has duly authorized and approved the execution and delivery of, and the performance by the Issuer of the obligations in connection with the issuance of the Bonds on its part contained in the Bonds and the Issuer Documents and the consummation by it of all other transactions contemplated by the Issuer Documents in connection with the issuance of the Bonds. (d) To its knowledge, the Issuer is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation of any state or of the United States, or any agency or instrumentality of either, or any applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement (including, without limitation, the Indenture) or other instrument to which the Issuer is a party which breach or default has or may have an adverse effect on the ability of the Issuer to perform its obligations under the Issuer Documents, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or 85093203.3 3 event of default under any such instrument; and the authentication and delivery of the Bonds, or the execution and delivery of the Issuer Documents, and compliance with the provisions on the Issuer's part contained therein, will not conflict in any material way with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer or under the terms of any such law, regulation or instrument, except as provided by the Bonds and the Indenture. (e) To its knowledge, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the Issuer of its obligations in connection with the issuance of the Bonds under this Bond Purchase Agreement or the Indenture have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds; except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by,the Issuer of its obligations under the Indenture have been duly obtained. (f) The Bonds when issued will conform to the descriptions thereof contained in the Official Statement under the captions "INTRODUCTORY STATEMENT" and "THE BONDS"; and the Indenture and Lease will conform to the descriptions thereof contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE BONDS," "SECURITY FOR THE BONDS" and "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS." (g) The Bonds, when issued, authenticated and delivered in accordance with the Indenture, and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of the Issuer, entitled to the benefits of the Indenture, and upon such issuance and delivery, the Indenture will provide, for the benefit of the owners from time to time of the Bonds, the legally valid and binding pledge of and lien and security interest it purports to create. (h) As of the date hereof, there is no action, suit, proceeding, inquiry or investigation, notice of which has been served on the Issuer, at law or in equity before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds or the pledge and lien on the Revenues pursuant to the Indenture, or contesting or affecting as to the Issuer the validity or enforceability of the Bond Law, the Bonds, or the Issuer Documents or contesting the tax-exempt status of interest on the 85093203.3 4 Bonds, or contesting the completeness or accuracy of the Official Statement, or contesting the powers of the Issuer for the issuance of the Bonds, or the execution and delivery or adoption by the Issuer of the Issuer Documents, or in any way contesting or challenging the consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of the Issuer, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity of the Bond Law, as to the Issuer, or the authorization, execution, delivery or performance by the Issuer of the Bonds, or the Issuer Documents. (i) The Issuer will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order(i)to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States of America as the Underwriter may designate (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and the Issuer will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the Issuer shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction other than where the Issuer is currently qualified, provided, that the Underwriter shall bear all costs in connection with the Issuer's action under (i) and (ii) herein, and (iii) assure or maintain the tax-exempt status of the interest on the Bonds. (j) As of the date thereof, the Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein with respect to the Issuer, in light of the circumstances under which they were made, not misleading. (k) At the time of the Issuer's acceptance hereof, and (unless an event occurs of the nature described in paragraph (m) of this Section 5) at all times subsequent thereto up to and including the date of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that these representations and warranties of the Issuer shall apply only to the information contained in the Official Statement relating to the Issuer. (1) If the Official Statement is supplemented or amended pursuant to paragraph (m) of this Section 5, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the date of the Closing, the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that these representations and warranties of the Issuer shall apply only to the information contained in the Official Statement relating to the Issuer. (m) If between the date of this Bond Purchase Agreement and that date which is 25 days after the end of the underwriting period (as determined in accordance with 85093203.3 5 Section 14 hereof) any event known to the Issuer shall occur affecting the Issuer which might adversely affect the marketability of the Bonds or the market prices thereof, or which might cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Issuer shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Issuer will at its sole cost and expense prepare and furnish to the Underwriter a reasonable number of copies of such supplement to, or amendment of, the Official Statement in a form and in a manner approved by the Underwriter. (n) The Issuer will refrain from taking any action, or permitting any action to be taken, with regard to which the Issuer may exercise control, that results in the loss of the tax-exempt status of the interest on the Bonds. (o) Any certificate signed by any officer of the Issuer and delivered to the Underwriter pursuant to the Issuer Documents or any document contemplated thereby, shall be deemed a representation and warranty by the Issuer to the Underwriter as to the statements made therein. (p) The Issuer will cause the proceeds from the sale of the Bonds to be paid to the Trustee for the purposes specified in the Indenture and the Official Statement. So long as any of the Bonds are outstanding and except as may be authorized by the Indenture, the Issuer will not issue or sell any bonds or other obligations, other than the Bonds sold thereby, the interest on and premium, if any, or principal of which will be payable from the Revenues and funds and accounts pledged under the Indenture. (q) The Issuer shall honor all other covenants on its part contained in the Issuer Documents which are incorporated herein and made a part of this Bond Purchase Agreement. 6. Representations, Warranties and Agreements of the City. The City represents, warrants and agrees as follows: (a) The City is a charter city duly organized and validly existing under the laws of the State of California. (b) The City has full legal right, power and authority to enter into and to carry out the transactions on its part contemplated by the City Documents. (c) By all necessary official action, the City has duly authorized and approved the City Documents, has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations in connection with the issuance of the Bonds on its part contained in the City Documents and the consummation by it of all other transactions contemplated by the City Documents in connection with the issuance of the Bonds. (d) To its knowledge, the City is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation of 85093203.3 6 any state or of the United States of America, or any agency or instrumentality of either, or any applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party, which breach or default has or may have an adverse effect on the ability of the City to perform its obligations under the City Documents, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any such instrument; and the execution and delivery of the City Documents, and compliance with the provisions on the City's part contained therein, will not conflict in any material way with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the City or under the terms of any such law, regulation or instrument, except as may be provided by the City Documents. (e) To its knowledge, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the City of its obligations in connection with the City Documents have been duly obtained; except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the City of its obligations under the City Documents have been duly obtained. (f) The City Documents when adopted will conform to the descriptions thereof contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE BONDS" and"SECURITY FOR THE BONDS." (g) Reserved. (h) As of the date hereof, there is no action, suit, proceeding, inquiry or investigation, notice of which has been served on the City, at law or in equity before or by any court, government agency, public board or body, pending or, to the knowledge of the City, threatened against the City, affecting the existence of the City or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds or the pledge and lien on the Revenues pursuant to the Indenture, or contesting or affecting as to the City the validity or enforceability of the Bond Law, the Bonds, or the City Documents or contesting the tax-exempt status of interest on the Bonds, or contesting the completeness or accuracy of the Official Statement, or the execution and delivery or adoption by the City of the City Documents, or in any way contesting or challenging the consummation of the transactions contemplated hereby or thereby; nor is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would 85093203.3 7 materially adversely affect the authorization, execution, delivery or performance by the City of the City Documents. (i) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order(i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and the City will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the City shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction, provided, that the Underwriter shall bear all costs in connection with the City's action under (i) and (ii) herein, and (iii) assure or maintain the tax-exempt status of the interest on the Bonds. (j) As of the date thereof, the Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k) At the time of the City's acceptance hereof, and (unless an event occurs of the nature described in paragraph (m) of this Section 6) at all times subsequent thereto up to and including the date of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that these representations and warranties of the City shall apply only to the information contained in the Official Statement relating to the City. (1) If the Official Statement is supplemented or amended pursuant to paragraph (m) of this Section 6, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the date of the Closing, the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that these representations and warranties of the City shall apply only to the information contained in the Official Statement relating to the City. (m) If between the date of this Bond Purchase Agreement and that date which is 25 days after the end of the underwriting period (as determined in accordance with Section 14 hereof) any event known to the City shall occur affecting the City which might adversely affect the marketability of the Bonds or the market prices thereof, or which might cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the City shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will, in 85093203.3 8 conjunction with and at the expense of the Issuer, prepare and furnish to the Underwriter a reasonable number of copies of such supplement to, or amendment of, the Official Statement in a form and in a manner approved by the Underwriter. (n) The City will refrain from taking any action, or permitting any action to be taken, with regard to which the City may exercise control, that results in the loss of the tax-exempt status of the interest on the Bonds. (o) Any certificate signed by any officer of the City and delivered to the Underwriter pursuant to the City Documents or any document contemplated thereby shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. 7. Closing. At 8:00 a.m., Los Angeles time, on July , 2009, or on such earlier date or as soon thereafter as practicable, as may be mutually agreed upon by the Issuer, the City and the Underwriter, the Issuer will, subject to the terms and conditions hereof, cause the Trustee to deliver to The Depository Trust Company ("DTC") in New York, New York, on behalf of the Underwriter, the Bonds, in definitive form duly executed by the Trustee, together with the other documents hereinafter mentioned; and the Underwriter will accept such delivery to DTC and will pay the purchase price of the Bonds in Los Angeles, California as set forth in Paragraph 1(a) hereof by delivering Federal or other immediately available funds in the amount of such purchase price to the Trustee. The Bonds shall be prepared in fully registered form without coupons in authorized denominations and registered in the name of or at the direction of the Underwriter. 8. Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations and warranties of the Issuer and the City contained herein, and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer and the City of its respective obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Bond Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Issuer and the City of their obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions: (a) The representations and warranties of the Issuer and the City contained herein shall be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) At the time of the Closing, the Issuer Documents and the City Documents shall be in full force and effect in accordance with their terms and shall not have been amended, modified or supplemented and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; 85093203.3 9 (c) At the time of the Closing, all necessary official action of the Issuer, the City and of the other parties thereto relating to the Issuer Documents and the City Documents, respectively, shall have been taken and shall be in full force and effect and shall not have been amended, modified or supplemented in any material respect; (d) Subsequent to the date hereof, there shall not have occurred any change in or affecting particularly the Issuer, the City or the Bonds, as the foregoing matters are described in the Official Statement, which in the reasonable opinion of the Underwriter materially impairs the investment quality of the Bonds; (e) At or prior to the Closing, the Underwriter shall have received copies of each of the following documents: (1) The Official Statement and each supplement or amendment, if any, thereto, executed by a designated officer of the Issuer; (2) A copy of the Indenture, executed by the Issuer and the Trustee; (3) Copies of the Site Lease, executed by the Issuer and the City along with evidence of its recordation; (4) Copy of the Lease, executed by the Issuer and the City along with evidence of its recordation; (5) Title Insurance Policy; (6) Certificates of the Issuer and the City, respectively, with respect to the matters described in Sections 5 and 6 and in paragraphs (a), (b), (c) and (d) of this Section 8; (7) An opinion (the "Final Approving Legal Opinion"), dated the date of the Closing and addressed to the Issuer of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, in substantially the form attached hereto as Exhibit A, accompanied by a reliance letter from Bond Counsel to the effect that such opinion may be relied upon by the Underwriter and the Credit Entity, with the same effect as if such opinion were addressed to it; (8) An opinion(the "Supplemental Opinion"), dated the date of the Closing and addressed to the Underwriter of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, in substantially the form attached hereto as Exhibit B; (9) An opinion, dated the date of the Closing and addressed to the Underwriter, of counsel for the Issuer, in substantially the form attached hereto as Exhibit C; 85093203.3 10 (10) An opinion, dated the date of the Closing and addressed to the Underwriter, of counsel for the City, in substantially the form attached hereto as Exhibit D; (11) An opinion, dated the date of the Closing and addressed to the Issuer and the Underwriter, of Fulbright & Jaworski L.L.P., Los Angeles, California, Disclosure Counsel for the Issuer, in substantially the form attached hereto as Exhibit E; (12) A certificate of the Trustee to the effect that: (i) Due Organization and Existence - the Trustee is duly organized and existing as a national banking association in good standing under the laws of the United States of America having the full power and authority to enter into and perform their respective duties under the Indenture and the Assignment Agreement, and to authenticate and deliver the Bonds to the Underwriter pursuant to the terms of the Indenture; (ii) Due Authorization; Valid and Binding Obligations - the Trustee is duly authorized to enter into the Indenture and the Assignment Agreement and, when executed by the other parties thereto, the Indenture and the Assignment Agreement will constitute legal, valid and binding obligations of the Trustee enforceable in accordance with their terms; (iii) Due Authentication — the Bonds have been duly authenticated and delivered to the Underwriter pursuant to direction from the Issuer; (iv) No Breach or Default — the Trustee is not in breach of or default under any law or administrative rule or regulation of the United States of America or of any department, division, agency or instrumentality thereof, or any applicable court or administrative decree or order, or any other instrument to which the Trustee is a party or is otherwise subject or bound and which would materially impair the ability of the Trustee to perform its obligations under the Indenture and the Assignment Agreement; provided, however, that the Trustee need not certify to compliance with any federal or state securities laws; (v) No Conflict - to the best of the knowledge of the Trustee, after due investigation, the execution and delivery by the Trustee of the Indenture and the Assignment Agreement, and the authentication and delivery of the Bonds, and compliance with the terms thereof will not, in any material respect, 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, or (except with respect to the lien of the Indenture and the Assignment Agreement) result in the creation or imposition of any lien, charge or other 85093203.3 1 1 security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Trustee; and (vi) No Litigation - 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 service on the Trustee having been effected or, to the best of its knowledge, threatened in any way affecting the existence of the Trustee or the titles of its directors or officers to their respective offices, or seeking to restrain or enjoin the sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Indenture, or in any way contesting or affecting the validity or enforceability of the Bonds; (13) An opinion of counsel to the Trustee to the effect that: (i) Due Organization and Existence - the Trustee has been duly organized and is validly existing and in good standing as a national banking association under the laws of the United States of America with full corporate power to undertake the trusts of the Indenture; (ii) Corporate Action - the Trustee has duly authorized, executed and delivered the Indenture and the Assignment Agreement, and by all proper corporate action has authorized the acceptance of the duties and obligations of the Trustee under the Indenture and the Assignment Agreement, and to authorize in such capacity as Trustee the authentication and delivery of the Bonds; (iii) Due Authorization, Execution and Delivery - assuming due authorization, execution and delivery by the Issuer, the Indenture and the Assignment Agreement are the valid, legal and binding agreements of the Trustee, enforceable in accordance with their 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); (iv) Consents - exclusive of federal or state securities laws and regulations, to the best of such counsel's knowledge after reasonable inquiry and investigation, other than routine filings required to be made with governmental agencies in order to preserve the Trustee's authority to perform a trust business (all of which routine filings such counsel believes, after reasonable inquiry and investigation, to have been made), no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee is or will be required for the execution and delivery by the Trustee of the Indenture and the Assignment Agreement or the authentication and delivery of the Bonds; and 85093203.3 12 (v) No Conflict—the authentication and delivery of the Bonds and the execution and delivery of and performance by the Trustee of its duties under the Indenture and the Assignment Agreement does not and will not conflict with, violate or result in a breach of, the terms, conditions or provisions of, or constitute a default under the charter or Bylaws of the Trustee, any law of the State of California or of the United States of America or any rule or regulation thereunder governing the Trustee, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking known to us to which the Trustee is a party or by which it is bound; (14) A certified copy 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 and delivery of the Indenture, and the authentication and delivery of the Bonds by the Trustee; (15) A copy of the Remarketing Agreement; (16) A copy of the Letter of Credit; (17) A copy of the Reimbursement Agreement; (18) A certificate of an authorized representative of the Credit Entity to the effect that the financial and statistical information concerning the Credit Entity set forth in the Official Statement under the heading "CREDIT ENTITY" is true and correct in all material respects; (19) An opinion of counsel to the Credit Entity addressed to the Authority and the Underwriter to the effect that (i) the Letter of Credit has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, the Credit Entity enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, arrangement and other similar laws affecting creditors' right, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on the legal remedies against public bodies and (ii) the statements contained in the Official Statement under the heading "LETTER OF CREDIT AND THE REIMBURSEMENT AGREEMENT" are materially accurate; (20) [documents and opinions relating to the collar]; (21) Transcripts of all proceedings relating to the authorization and issuance of the Bonds certified by the Secretary or an Assistant Secretary of the Issuer; and (22) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's and the City's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction 85093203.3 13 by the Issuer and the City on or prior to the date of the Closing of all the agreements then to be performed and conditions then to be satisfied by each of the Issuer and the City. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Bond Purchase Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to Bond Counsel, Counsel for the Underwriter, if any, and the Underwriter. The opinions and certificates referred to in clauses (7), (8), (9) and (10) of this paragraph (e) shall be deemed satisfactory provided they are substantially in the forms attached as exhibits to this Bond Purchase Agreement. If the Issuer and the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Bond Purchase Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and neither the Underwriter nor the Issuer nor the City shall be under any further obligation hereunder. 9. Termination. The Underwriter shall have the right to terminate the Underwriter's obligations under this Bond Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds by notifying the Issuer and the City, in writing or by telegram, of their election to do so, if, after the execution hereof and prior to the Closing: (a) the United States has become engaged in hostilities which have resulted in a declaration of war or a national emergency; (b)there shall have occurred the declaration of a general banking moratorium by any authority of the United States or the States of New York or California; (c) an event shall have occurred or been discovered as described in paragraph (m) of Section 5 or paragraph (m) of Section 6 hereof which in the opinion of the Underwriter requires the preparation and publication of disclosure material or a supplement or amendment to the Official Statement; (d) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency in the State of California, or a decision by any court of competent jurisdiction within the State of California shall be rendered which, in the Underwriter's reasonable opinion, materially adversely affects the market price of the Bonds; (e) legislation shall be introduced, by amendment or otherwise, or be enacted by the House of Representatives or the Senate of the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be made or proposed, to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement, is or would be in violation of any provision of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering or sale of obligations of the general character of the Bonds or the Bonds, as contemplated hereby or by the Official Statement; (f) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (g) the New York Stock Exchange, or other national securities exchange or association or any 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 85093203.3 14 increase materially those now in force, with respect to the extension of credit by or the charge to the net capital requirements of broker-dealers; (h) trading in securities on the New York Stock Exchange or the American Stock Exchange shall have been suspended or limited or minimum prices have been established on either such exchange; or (i) any action shall have been taken by any government in respect of its monetary affairs which, in the reasonable opinion of the Underwriter, has a material adverse effect on the United States securities market. If this Bond Purchase Agreement shall be terminated pursuant to Section 8 or this Section 9, or if the purchase provided for herein is not consummated because any condition to the Underwriter's obligation hereunder is not satisfied or because of any refusal, inability or failure on the part of the Issuer or the City to comply with any of the terms or to fulfill any of the conditions of this Bond Purchase Agreement, or if for any reason the Issuer or the City shall be unable to perform all of their respective obligations under this Bond Purchase Agreement, the Issuer and the City shall not be liable to the Underwriter for damages on account of loss of anticipated profits arising out of the transactions covered by this Bond Purchase Agreement. 10. Payment of Costs and Expenses. (a) The Issuer shall pay or reimburse all costs and expenses incident to the sale and delivery of the Bonds to the Underwriter, including, but not limited to: (i) the fees and expenses of the Issuer and its Counsel; (ii) the fees and expenses of the City and its Counsel and consultants; (iii) the fees and expenses of Bond Counsel and Disclosure Counsel; (iv) all costs and expenses incurred in connection with the preparation and printing of the Bonds; (v) all expenses in connection with the preparation, printing, distribution and delivery of the Official Statement and any amendment or supplement thereto; (vi)the fees and expenses of the Trustee; and(vii) CUSIP Bureau fees. (b) The Underwriter shall pay all advertising expenses in connection with the public offering of the Bonds and all other expenses incurred in underwriting the Bonds. 11. Representations, Warranties and Agreements to Survive Delivery. The representations, warranties, indemnities, agreements and other statements of the Issuer, the City and the Underwriter or their officers or partners set forth in, or made pursuant to, this Bond Purchase Agreement will remain operative and in full force and effect regardless of any investigation made by or on behalf of the Issuer, the City or the Underwriter or any controlling person and will survive delivery of and payment for the Bonds. 12. Notices. Any notice or other communication to be given under this Bond Purchase Agreement may be given by delivering the same in writing: 85093203.3 15 To the Issuer: Palm Desert Financing Authority 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: Chief Administrative Officer Facsimile: (760) 346-6372 Telephone: (760) 341-0611 To the City: City of Palm Desert 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: City Manager Facsimile: (760) 346-6372 Telephone: (760) 341-0611 To the Underwriter: Wells Fargo Institutional Securities, LLC 707 Wilshire Blvd., 17th Fl., MAC E2818-178 Los Angeles, California 90017 Attention: Margo Kairoff Facsimile: (213) 614-2720 Telephone: (213) 614-3327 13. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the Issuer, the City and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. All of the Issuer's and the City's representations, warranties and agreements contained in this Bond Purchase Agreement shall remain operative and in full force and effect, regardless of: (i) any investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the Bonds pursuant to this Bond Purchase Agreement; and (iii) any termination of this Bond Purchase Agreement. 14. Determination of End of the Underwriting Period. For purposes of this Bond Purchase Agreement, the End of the Underwriting Period for the Bonds shall mean the earlier of(a) the day of the Closing unless the Issuer and the City have been notified in writing by the Underwriter, on or prior to the day of the Closing, that the "end of the underwriting period" for the Bonds will not occur on the day of the Closing, or (b) the date on which notice is given to the Issuer and the City by the Underwriter in accordance with the following sentence. If the Underwriter has given notice to the Issuer and the City pursuant to clause (a) above that the "end of the underwriting period" for the Bonds will not occur on the day of the Closing, the Underwriter agrees to notify the Issuer and the City in writing as soon as practicable following the "end of the underwriting period" for the Bonds. 15. Effectiveness. This Bond Purchase Agreement shall become effective upon the execution of the acceptance by the designee of the Issuer and the City and shall be valid and enforceable at the time of such acceptance. 16. Headings. The headings of the sections of this Bond Purchase Agreement are inserted for convenience only and shall not be deemed to be a part hereof. 85093203.3 16 17. Governing Law. This Bond Purchase Agreement shall be construed in accordance with the laws of the State of California. 18. Counterparts. This Bond Purchase Agreement may be executed in any number of counterparts. 85093203.3 17 If the foregoing is in accordance with your understanding of the Bond Purchase Agreement please sign and return to us the enclosed duplicate copies hereof, whereupon it will become a binding agreement among the Issuer, the City and the Underwriter in accordance with its terms. Very truly yours, WELLS FARGO INSTITUTIONAL SECURITIES, LLC, as the Underwriter By: Senior Vice President Accepted: This day of July 2009 PALM DESERT FINANCING AUTHORITY By: Chief Administrative Officer CITY OF PALM DESERT By: Mayor 85093203.3 18 Exhibit A 85093203.3 A-1 Exhibit B B-1 85093203.3 Exhibit C Opinion of Counsel for the Issuer Addressed to the Underwriter Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) [dated the Closing Date] Palm Desert Financing Authority 7" 510 Fred Waring Drive Palm Desert, California 92260 Wells Fargo Bank,National Association 707 Wilshire Blvd., 11th Floor MAC E2818-114 Los Angeles, California 90017 Wells Fargo Institutional Securities, LLC 707 Wilshire Blvd., 17th Fl., MAC E2818-178 Los Angeles, California 90017 Ladies and Gentlemen: We are counsel to the Palm Desert Financing Authority (the "Issuer") in connection with the issuance of the above-referenced Bonds and in such capacity, we have examined the original, certified copies, or copies otherwise identified to our satisfaction as being true copies of such resolutions, documents, certificates, and records as we have deemed relevant and necessary (except as we have specifically limited the scope of our investigation herein) as the basis for the opinions set forth herein relying on such examination and pertinent law and subject to the limitations and qualifications hereinafter set forth, we are of the opinion that: 1. The Issuer is a duly organized and validly existing public body, corporate and politic, organized under the laws of the State of California acting pursuant to the Bond Law (as defined in the Official Statement respecting the Bonds) with full legal right, power and authority to perform all of its obligations under the Bond Purchase Agreement, dated , 2009 (the "Bond Purchase Agreement"), among the Issuer, the City of Palm Desert (the "City") and Wells Fargo Institutional Securities, LLC (the "Underwriter"), the Indenture, dated as of July 1, 2009 (the "Indenture"), by and between the Issuer and Wells Fargo Bank, National Association (the "Trustee"), the Assignment Agreement, dated as of July 1, 2009 (the "Assignment Agreement"), by and 85093203.3 C-1 between the Issuer and the Trustee, the Remarketing Agreement, dated as of July 1, 2009 (the "Remarketing Agreement"), by and between the Issuer, Wells Fargo Brokerage Services, LLC, the Site Lease, dated as of July 1, 2009 (the "Site Lease"), by and between the Issuer and the City, and the Lease Agreement, dated as of July 1, 2009 (the "Lease," and together with the Bond Purchase Agreement, the Indenture, the Assignment Agreement, the Remarketing Agreement and the Site Lease, the "Legal Documents"), by and between the Issuer and the City. The Issuer has duly authorized the Legal Documents and assuming due authorization, execution and delivery by the other parties thereto, the Legal Documents constitute the legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, moratorium, insolvency, reorganization or other similar laws affecting creditors' rights generally or as to the availability of any particular remedy. 2. To the best of our knowledge, there is no action, suit or proceeding before or by any court, public board or body pending or threatened wherein an unfavorable decision, ruling or finding would(a) affect the creation, organization, existence or powers of the Issuer or the titles of its officers to their respective offices, (b) in any way question or affect the validity or enforceability of the Legal Documents, or (c) find illegal, invalid or unenforceable the Bond Purchase Agreement or the transactions contemplated thereby, or any other agreement or instrument related to the issuance of the Bonds to which the Issuer is a party. 3. The execution and delivery of the Legal Documents and the other instruments contemplated by any of such documents to which the Issuer is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States or any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Issuer is a party or is otherwise subject or bound in a manner which would materially adversely affect the Issuer's performance under the Legal Documents. 4. All approvals, consents, authorizations, 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 performance by the Issuer of its obligations under the Legal Documents have been obtained and are in full force and effect. We are furnishing this letter to the addressees hereof with respect to the Bonds at the request of the Issuer, and this letter may not be relied upon for any purpose other than in connection with the issuance of the Bonds. This letter shall not extend to, and may not be used, circulated, quoted, referred to, or relied upon by, any other person, firm, corporation or other entity without our prior written consent. Respectfully submitted, 85093203.3 C-2 Exhibit D Opinion of Counsel for the City Addressed to the Underwriter Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) [dated the Closing Date] City of Palm Desert 73-510 Fred Waring Drive Palm Desert, California 92260 Wells Fargo Bank,National Association 707 Wilshire Blvd., 11th Floor MAC E2818-114 Los Angeles, California 90017 Wells Fargo Institutional Securities, LLC 707 Wilshire Blvd., 17th Fl., MAC E2818-178 Los Angeles, California 90017 Ladies and Gentlemen: We are counsel to the City of Palm Desert (the "City") in connection with the issuance of the above-referenced Bonds and in such capacity, we have examined the original, certified copies, or copies otherwise identified to our satisfaction as being true copies of such resolutions, documents, certificates, and records as we have deemed relevant and necessary (except as we have specifically limited the scope of our investigation herein) as the basis for the opinions set forth herein relying on such examination and pertinent law and subject to the limitations and qualifications hereinafter set forth, we are of the opinion that: 1. The City is a duly organized and validly existing public body, corporate and politic, organized under the laws of the State of California with full legal right,power and authority to perform all of its obligations under the Bond Purchase Agreement, dated , 2009 (the "Bond Purchase Agreement"), among the Palm Desert Financing Authority (the "Issuer"), the City and Wells Fargo Institutional Securities, LLC (the "Underwriter"), the Site Lease, dated as of July 1, 2009 (the "Site Lease"), by and between the City and the Palm Desert Financing Authority (the "Authority"), the Lease 85093203.3 D-1 Agreement, dated as of July 1, 2009 (the "Lease"), by and between the Authority and the City, the Reimbursement Agreement, dated as of July 1, 2009 (the "Reimbursement Agreement," and together with the Bond Purchase Agreement, the District Site Leases, the Site Lease and the Lease, the "Legal Documents"), by and between the City and Wells Fargo Bank, National Association. The City has duly authorized the Legal Documents and assuming due authorization, execution and delivery by the other parties thereto, the Legal Documents constitute legal, valid and binding obligations of the City enforceable against the City in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, moratorium, insolvency, reorganization or other similar laws affecting creditors' rights generally or as to the availability of any particular remedy. 2. To the best of our knowledge, there is no action, suit or proceeding before or by any court, public board or body pending or threatened wherein an unfavorable decision, ruling or finding would (a) affect the creation, organization, existence or powers of the City or the titles of its officers to their respective offices, (b) in any way question or affect the validity or enforceability of the Legal Documents, or (c) find illegal, invalid or unenforceable the Bond Purchase Agreement or the transactions contemplated thereby, or any other agreement or instrument related to the issuance of the Bonds to which the City is a party. 3. The execution and delivery of the Legal Documents and the other instruments contemplated by any of such documents to which the City is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States or any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound in a manner which would materially adversely affect the City's performance under the Legal Documents. 4. All approvals, consents, authorizations, 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 performance by the City of its obligations under the Legal Documents have been obtained and are in full force and effect. We are furnishing this letter to the addressees hereof with respect to the Bonds at the request of the City, and this letter may not be relied upon for any purpose other than in connection with the issuance of the Bonds. This letter shall not extend to, and may not be used, circulated, quoted, referred to, or relied upon by, any other person, firm, corporation or other entity without our prior written consent. Respectfully submitted, 85093203.3 D-2 Exhibit E Opinion of Fulbright& Jaworski L.L.P. Disclosure Counsel Addressed to the Authority and the Underwriter Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) [dated the Closing Date] Palm Desert Financing Authority 73-510 Fred Waring Drive Palm Desert, California 92260 Wells Fargo Institutional Securities, LLC 707 Wilshire Blvd., 17th Fl., MAC E2818-178 Los Angeles, California 90017 Ladies and Gentlemen: We have acted as Disclosure Counsel to the Palm Desert Financing Authority (the "Issuer") with respect to the above-captioned bonds (the "Bonds"). This opinion is rendered to the Issuer and the Underwriter named in the Bond Purchase Agreement dated , 2009 (the "Bond Purchase Agreement"), by and among the Underwriter, the City of Palm Desert (the "City") and the Issuer,pursuant to which the Underwriter has agreed to purchase the Bonds. The Bonds are being issued pursuant to the provisions of the Constitution and the laws of the State of California including the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 (commencing with Section 6584), Division 7, Title 1 of the Government Code of the State of California. The Bonds shall be issued and secured pursuant to an Indenture, dated as of July 1, 2009 (the "Indenture"), between the Issuer and Wells Fargo Bank, National Association authorizing the issuance of the Bonds. The Bonds are more fully described in the final Official Statement of the Issuer, dated , 2009 (the "Official Statement"). In rendering this opinion, we have reviewed such records, documents, certificates and opinions, and made such other investigations of law and fact as we have deemed necessary or appropriate. 85093203.3 E-1 With respect to the matters covered by the approving opinion rendered by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, as Bond Counsel to the Issuer ("Bond Counsel"), dated the date hereof, the Underwriter has received a letter from Bond Counsel allowing the Underwriter to rely on such opinion. This letter is limited to matters governed by the federal securities law of the United States, and we assume no responsibility with respect to the applicability or effect of the laws of any other jurisdiction. In our capacity as Disclosure Counsel, we have rendered certain legal advice and assistance to the Issuer in connection with the preparation of the Official Statement. Rendering such legal advice and assistance involved, among other things, discussions and inquiries concerning various legal matters, review of certain records, documents and proceedings, and participation in telephone conferences with, among others, your representatives and representatives of the Issuer and the City, at which telephone conferences the contents of the Official Statement and related matters were discussed. On the basis of the information made available to us in the course of the foregoing (but without having undertaken to determine or verify independently, or assuming any responsibility for, the accuracy, completeness or fairness of any of the statements contained in the Official Statement), no facts have come to the attention of the personnel in our firms directly involved in rendering legal advice and assistance to you in connection with the preparation of the Official Statement which cause us to believe that the Official Statement as of its date (excluding therefrom financial, engineering and statistical data; forecasts, projections, estimates, assumptions and expressions of opinions; statements relating to credit enhancement and the provider of the credit enhancement; The Depository Trust Company and its book-entry only system; statements relating to the treatment of the Bonds or the interest, discount or premium related thereto for tax purposes under the law of any jurisdiction; and the statements contained in the Official Statement under the caption "TAX EXEMPTION;" as to all of which we express no view) contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. During the period from the date of the Official Statement to the date of this opinion, except for our review of the certificates and opinions regarding the Official Statement delivered on the date hereof, we have not undertaken any procedures or taken any actions which were intended or likely to elicit information concerning the accuracy, completeness or fairness of any of the statements contained in the Official Statement. 85093203.3 E-2 We are furnishing this opinion to you, as Disclosure Counsel to the Issuer, pursuant to the Bond Purchase Agreement, solely for your benefit. This opinion is rendered in connection with the transaction described herein, and may not be relied upon by you for any other purpose. This opinion shall not extend to, and may not be used, circulated, quoted, referred to, or relied upon by, any other person, firm, corporation or other entity without our prior written consent. Our engagement with respect to this matter terminates upon the delivery of this opinion to you at the time of the closing relating to the Bonds, and we have no obligation to update this opinion. Very truly yours, 85093203.3 E_3 Fulbright&Jaworski L.L.P.—Draft 6/16/09 NEW ISSUE--BOOK-ENTRY ONLY RATING: S&P: " / " In the interest on the Bonds is pp (See"RATING"herein) inccune taxation.pinion INTE��T ON THEond eBONDS IS existing under NO EXCLUDED FROM GROSS INCOMt ErFORom tateFE of INCOMES TAX PURPOSES. See "TAX MATTERS." PALM DESERT FINANCING AUTHORITY ENERGY INDEPENDENCE PROGRAM VARIABLE RATE DEMAND LEASE REVENUE BONDS,SERIES 2009 (FEDERALLY TAXABLE) Dated: Date of Delivery Due: September 1,2029 The Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds,Series 2009(the"Bonds")will be issued by the Palm Desert Financing Authority(the"Authority")under an Indenture,dated as of July 1, 2009 (the "Indenture"), by and between the Authority and Wells Fargo Bank, National Association, as trustee (the "Trustee"). The proceeds of the Bonds will be used (i) to finance the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City,(ii)to reimburse the City for certain expenditures made by the City, and (iii)to pay costs of issuance of the Bonds. See "THE PROJECT" and "ESTIMATED SOURCES AND USES OF FUNDS"herein. The Bonds are being issued as fully registered bonds,registered in the name of Cede&Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to ultimate purchasers in Authorized Denominations as described herein, under the book-entry system maintained by DTC. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds. Interest on the Bonds will be payable on the first Business Day of each month, commencing August 1, 2009, so long as the Bonds bear interest at a Weekly Rate. The Trustee will make payments of the principal of, premium, if any, and interest on the Bonds directly to DTC, or its nominee, Cede& Co., so long as DTC or Cede& Co. is the registered owner of the Bonds. Disbursements of such payments to the Beneficial Owners of the Bonds is the responsibility of DTC's Participants and Indirect Participants, as more fully described herein. See "APPENDIX D -- BOOK- ENTRY ONLY SYSTEM." The Bonds are subject to optional redemption,mandatory sinking fund redemption and mandatory redemption from net proceeds as described herein. The Bonds are also subject to mandatory tender and optional tender as described herein. See"THE BONDS"herein. The Authority has leased certain real property and improvements thereon(the "Leased Property") from the City of Palm Desert (the "City")pursuant to a Site Lease, dated as of July 1, 2009, by and between the Authority and the City, and has leased the Leased Property back to the City pursuant to a Lease Agreement, dated as of July 1, 2009 (the"Lease"), by and between the Authority and the City. Under the Lease, the City will pay to the Authority certain base rental payments (the "Base Rental Payments") in amounts equal to the scheduled debt service on the Bonds. Pursuant to the Indenture and an Assignment Agreement, dated as of July 1, 2009(the"Assignment Agreement"),by and between the Authority and the Trustee,the Authority vt ill assign its right to receive the Base Rental Payments to the Trustee for the benefit of the Owners of the Bonds. This Official Statement describes the Bonds only while bearing interest at a Weekly Rate. Investors must not rely upon the information in this Official Statement if the method of determining the interest rate on the Bonds is changed to bear interest other than at a Weekly Rate. Investors must rely on the offering document used in connection with any such other rate. The Bonds are special limited obligations of the Authority secured by and payable solely from Revenues, consisting primarily of(i)all Base Rental Payments payable by the City under the Lease(including prepayments), (ii)any proceeds of Bonds originally deposited with the Trustee and all moneys on deposit in the funds and accounts established under the Indenture, m investment income with respect to such moneys held by the Trustee and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee with respect to the Leased Property, including rental interruption insurance. See "SECURITY FOR THE BONDS"herein. Payments of principal and interest(but not any premium)on the Bonds will be initially supported by an irrevocable letter of credit(the"Letter of Credit" or"Credit Facility")to be issued to the Trustee,the drawings under which will be used to pay the principal of,redemption price, and interest on the Bonds when due. The Letter of Credit will also be drawn on, if other funds are not available,to purchase Bonds tendered by Owners at the purchase price of such Bonds. The Letter of Credit will be issued by WELLS FARGO BANK,NATIONAL ASSOCIATION [bank logo] (the"Credit Entity"). The Letter of Credit will expire on July ,20 ,unless extended,terminated or a substitute letter of credit or other replacement meeting the requirements of the Indenture is provided. The City is required under the Lease to make Base Rental Payments in each year in consideration for the use and occupancy of the Leased Property from any source of legally available funds, and in an amount sufficient to pay the annual principal of and interest on the Bonds. The City's obligation to make Base Rental Payments is subject to abatement in the event of substantial interference with the use and possession of all or a part of the Leased Property. See "RISK FACTORS --Abatement" 85071062.6 herein. The City has covenanted under the Lease to take such action as may be necessary to include and maintain all Base Rental Payments in its annual budget and to make the necessary appropriations therefor,subject to such abatement. THE BONDS ARE NOT A DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS(OTHER THAN THE AUTHORITY), AND NONE OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AUTHORITY) IS LIABLE THEREFOR. THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM REVENUES, CONSISTING PRIMARILY OF BASE RENTAL PAYMENTS PAID BY THE CITY PURSUANT TO THE LEASE AND AMOUNTS HELD IN THE FUNDS AND ACCOUNTS ESTABLISHED UNDER THE INDENTURE. THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS ITS PDOES NOT ANOLITICAL SOUBDIVISIONS NSTITUTE WITSS H NT HEEMEANNGOFEOFTANY CONSTITUTIONAL, THE STATE OFFA OR I TA UTORYOR ANYOF DEBT LIMITATION OR RESTRICTION. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to make an informed investment decision. The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to the approval as to legality by Richards, Watson& Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel. Certain legal matters will be passed on for the Authority by Fulbright&Jaworski L.L.P., Los Angeles, California, Disclosure Counsel for the Authority and for the Authority and the City by the City Attorney of the City of Palm Desert, and for the Credit Entity by Law Offices of Kathleen Johnson, Santa Barbara, California. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about July , 2009. WELLS FARGO INSTITUTIONAL SECURITIES,LLC Dated: July ,2009. PALM DESERT FINANCING AUTHORITY CITY OF PALM DESERT AUTHORITY GOVERNING BOARD Robert A. Spiegel,President Cindy Finerty, Vice President Jean M. Benson,Member Jim Ferguson,Member Richard S. Kelly,Member CITY COUNCIL Robert A. Spiegel,Mayor Cindy Finerty,Mayor Pro Tem Jean M. Benson, Councilwoman Jim Ferguson,Councilman Richard S. Kelly, Councilman SPECIAL SERVICES Bond Counsel Richards, Watson&Gershon,A Professional Corporation Los Angeles, California Disclosure Counsel Fulbright&Jaworski L.L.P. Los Angeles, California Financial Advisor to the Authority Del Rio Advisors, LLC Modesto, California Counsel to Credit Entity Law Offices of Kathleen Johnson Santa Barbara, California Remarketing Agent Wells Fargo Institutional Securities,LLC Los Angeles, California Trustee and Tender Agent Wells Fargo Bank,National Association Los Angeles, California 85071062.6 No dealer, broker, salesperson or other person has been authorized by the Authority,the City,the Credit Entity or the Underwriter to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. The Official Statement does not constitute an offer to sell or the solicitation of an offer to buy by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Authority,the City and other sources which are believed to be reliable. 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, under any circumstances, shall create any implication that there has been no change in the affairs of the Authority, the City, the Credit Entity or any other party described herein subsequent to the date as of which such information is presented. 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 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. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,IF COMMENCED,MAY BE DISCONTINUED AT ANY TIME. 85071062.6 TABLE OF CONTENTS Page INTRODUCTORY STATEMENT 1 The Bonds 1 Security for the Bonds 1 Collar 2 Further Information 2 THE BONDS 2 General Provisions 2 Interest Rate Determination Methods 4 Conversion of Interest to Annual Rate or Fixed Rate 4 Remarketing Agent 6 Redemption 6 Mandatory Tender of Bonds—Conversion 8 Mandatory Tender of Bonds—Other than on Conversion 8 Mechanics of Mandatory Tender 9 Option to Tender Prior to Conversion 9 Purchase of Bonds Delivered On a Tender Date 10 Remarketing of Bonds by Remarketing Agent 11 Collar 11 Book-Entry Only System 12 SECURITY FOR THE BONDS 12 Revenues 12 Base Rental Payments; Covenant to Appropriate Funds 12 No Reserve Fund 13 Insurance 13 Additional Obligations 14 THE LETTER OF CREDIT AND THE REIMBURSEMENT AGREEMENT 14 Letter of Credit 14 Reimbursement Agreement 14 Alternate Credit Facility 14 THE CREDIT ENTITY 15 SPECIAL CONSIDERATIONS RELATING TO THE BONDS SUBJECT TO OPTIONAL TENDER AND REMARKETING 16 The Remarketing Agent is Paid by Authority 16 The Remarketing Agent Routinely Purchases Bonds for its Own Account 16 Bonds May Be Offered at Different Prices on Any Date Including a Rate Determination Date 16 The Ability to Sell the Bonds Other Than through Tender Process May Be Limited 16 Under Certain Circumstances, a Remarketing Agent May be Removed, Resign or Cease Remarketing the Bonds,Without a Successor Being Named 17 ESTIMATED SOURCES AND USES OF FUNDS 17 THE PROJECT 18 LEASED PROPERTY 18 -i- TABLE OF CONTENTS (continued) Page CITY FINANCIAL INFORMATION 18 General 18 Budgetary Process 19 Financial Statements 19 General Fund 20 Sales Tax 23 Commercial Activity 23 State Budgets 24 Future State Budgets 28 Long-Term General Fund Obligations 29 Direct and Overlapping Bonded Debt 30 Employees and Labor Relations 30 Defined Benefit Pension Plan 30 Other Post-Employment Benefits 31 RISK FACTORS 32 Substitution of Property 32 Base Rental Payments Not Debt 32 Abatement 32 Risk of Uninsured Loss 33 Seismic Risks 33 Bankruptcy 33 Enforcement of Remedies Under the Lease 34 No Liability of Authority to the Owners 34 Credit Entity's Obligations Unsecured 34 Risks Related to Taxation in California 35 Future Initiatives 37 THE AUTHORITY 37 UNDERWRITING 37 FINANCIAL ADVISOR 37 CERTAIN LEGAL MATTERS 38 TAX MATTERS 38 Original Issue Discount 38 Original Issue Premium 38 Circular 230 39 LITIGATION 39 RATING 39 NO CONTINUING DISCLOSURE 39 MISCELLANEOUS 40 -ii- TABLE OF CONTENTS (continued) Page APPENDICES: APPENDIX A—CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING THE CITY OF PALM DESERT A-1 APPENDIX B—AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30,2008 B-1 APPENDIX C—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS C-1 APPENDIX D—BOOK-ENTRY ONLY SYSTEM D-1 APPENDIX E—FORM OF BOND COUNSEL OPINION E-1 -iii- OFFICIAL STATEMENT PALM DESERT FINANCING AUTHORITY ENERGY INDEPENDENCE PROGRAM VARIABLE RATE DEMAND LEASE REVENUE BONDS,SERIES 2009 (FEDERALLY TAXABLE) INTRODUCTORY STATEMENT This Official Statement, including the cover page and appendices, is provided to furnish information in connection with the sale by the Palm Desert Financing Authority (the "Authority') of $ aggregate principal amount of the Authority's Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (the "Bonds'). This Introductory Statement 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 appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of Bonds to potential investors is made only by means of the entire Official Statement. The Bonds The Bonds will be issued under the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the "Bond Law"). The Bonds will be issued pursuant to an Indenture, dated as of July 1, 2009 (the"Indenture"), by and between the Authority and Wells Fargo Bank, National Association, as trustee (the "Trustee"). The proceeds of the Bonds will be used (i) to finance the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City, (ii)to reimburse the City for certain expenditures made by the City, and (iii) to pay costs of issuance of the Bonds. See "THE PROJECT" and "ESTIMATED SOURCES AND USES OF FUNDS." Security for the Bonds The Authority will lease certain real property and improvements thereon (the "Leased Property") from the City of Palm Desert (the "City") pursuant to a Site Lease, dated as of July 1, 2009 (the "Site Lease"), by and between the Authority and the City, and then lease the Leased Property back to the City pursuant to a Lease Agreement, dated as of July 1, 2009 (the "Lease"), by and between the Authority and the City. Under the Lease, the City will pay to the Authority certain base rental payments (the "Base Rental Payments")in amounts equal to the scheduled debt service on the Bonds. The Bonds are special obligations of the Authority secured by and payable solely from Revenues, defined in the Indenture as (i) all Base Rental Payments payable by the City under the Lease (including prepayments),(ii) any proceeds of Bonds originally deposited with the Trustee and all moneys on deposit in the funds and accounts established under the Indenture, (iii) investment income with respect to such moneys held by the Trustee and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee with respect to the Leased Property, including rental interruption insurance. Under the Lease, the City is obligated to budget and appropriate from its General Fund amounts sufficient to make Base Rental Payments. See"SECURITY FOR THE BONDS." 85071062.6 1 Pursuant to an Assignment Agreement, dated as of July 1, 2009 (the "Assignment Agreement"), by and between the Authority and the Trustee, the Authority will assign to the Trustee certain of its rights under the Lease, as additional security for the performance of its obligations under the Bonds and the Indenture, including its right to receive Base Rental Payments and Additional Rental Payments under the Lease. The Base Rental Payments and the Additional Rental Payments are to be applied, and the rights so assigned are to be exercised, by the Trustee as provided in the Indenture. The obligation of the City to make Base Rental Payments under the Lease is an unsecured obligation of the City, payable from its General Fund. See "SECURITY FOR THE BONDS." Under the Lease, the City has covenanted to budget and appropriate sufficient funds to make all payments required to be made under the Lease, subject only to abatement as provided therein. See"RISK FACTORS—Base Rental Payments Not Debt"and"—Abatement." Letter of Credit. Payments of principal, redemption price (but not any premium)and interest on the Bonds will be initially supported by an irrevocable letter of credit (the "Letter of Credit" or "Credit Facility") to be issued by Wells Fargo Bank, National Association (the "Credit Entity") pursuant to a Reimbursement Agreement,dated as of June 1, 2009(the "Reimbursement Agreement"), by and between the City and the Credit Entity. Drawings under the Letter of Credit will be used to pay the principal of and interest on the Bonds when due. The Letter of Credit will also be drawn on, if other funds are not available, to purchase Bonds tendered by Owners. See "THE LETTER OF CREDIT AND THE REIMBURSEMENT AGREEMENT"and"THE CREDIT ENTITY." Collar The Authority expects to establish an interest rate floor and an interest rate cap in connection with the Bonds under an ISDA Master Agreement, as supplemented by a Schedule, a Credit Support Annex, and a Confirmation(collectively,the "Collar Documents"), each by and between the Authority and Wells Fargo Bank, National Association, as the provider under the Collar Documents (the "Collar Provider"). See "THE BONDS—Collar." Further Information Brief descriptions of the Bonds, the Indenture, the Site Lease, the Lease, the Assignment Agreement, the Letter of Credit, the Reimbursement Agreement, the Authority and the City, the Credit Entity, and other information are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. The descriptions herein of the Bonds,the Indenture,the Site Lease, the Lease, the Assignment Agreement, the Letter of Credit, the Reimbursement Agreement and other documents are qualified in their entirety by reference to the forms thereof For definitions of certain capitalized terms used herein and not otherwise defined, and a description of certain terms relating to the Bonds, see"APPENDIX C—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS." THE BONDS General Provisions The Bonds will initially bear interest at the Weekly Rate. This Official Statement describes the Bonds only while bearing interest at a Weekly Rate. Investors must not rely upon the information in this Official Statement if the method of determining the interest rate on the Bonds is changed to bear interest other than at a Weekly Rate. Investors must rely on the offering document used in connection with any such other rate. 85071062.6 2 The Bonds will be dated the Closing Date thereof and will bear interest until their maturity, payable on the first Business Day of each month commencing August 1, 2009 (each a "Bond Payment Date") to and including the date the Bonds are converted to bear interest at the Annual Rate or the Fixed Rate (the "Conversion"), except that interest due with respect to any Bonds purchased by the Trustee by means of a drawing on the Letter of Credit pursuant to the tender of Bonds on a Tender Date and which Bonds are registered in the name of and owned by the Credit Entity and held by the Tender Agent ("Credit Facility Bonds"), will accrue from the date such Bonds become Credit Facility Bonds at the rate set forth in the Reimbursement Agreement and shall be payable as set forth therein. Each Bond will bear interest from the Bond Payment Date next preceding the date on which it is authenticated unless it is (a)authenticated after a Record Date and on or before the next Bond Payment Date, in which event it will bear interest from such Bond Payment Date or(b)authenticated on or before the first Record Date, in which event it will bear interest from the Closing Date; provided, however, that if at the time of authentication of any Bond interest is in default, such Bond will bear interest from the date to which interest has been paid. The Bonds will bear interest at the Weekly Rate until the Conversion,and on and after the Conversion, at the Annual Rate or the Fixed Rate. Interest on the Bonds during the Weekly Rate Period will be computed upon the basis of a 365- or 366-day year, as applicable, for the number of days actually elapsed prior to the Conversion. "Weekly Rate Period" means the period hum each Thursday to and including the following Wednesday during which the Bonds bear interest at a Weekly Rate. Payment of interest with respect to any Bond on any Bond Payment Date or Redemption Date will be made to the person appearing on the registration books of the Trustee as the Owner thereof as of the Record Date immediately preceding such Bond Payment Date or Redemption Date, as the case may be, such interest to be paid by check mailed by first class mail on the Bond Payment Date to such Owner at his address as it appears on such registration books. Payments of defaulted interest will be paid by check of the Trustee mailed to the registered Owners as of a special record date to be fixed by the Trustee in its sole discretion, notice of which will be given to the Owners not less than 10 days prior to such special record date. Payment of interest represented by the Bonds may, at the option of any Owner of at least $1,000,000 principal amount of Bonds of a series (such option to be exercised by written request of such Owner to the Trustee), be transmitted by wire transfer to such Owner to the bank account number in the United States filed with the Trustee prior to the Record Date for a Bond Payment Date. See "THE BONDS—Book-Entry Only System." The principal payable upon maturity or prior redemption with respect to the Bonds will be payable upon surrender prior to the Conversion at the Principal Office of the Trustee or the Principal Office of the Tender Agent and thereafter at the Principal Office of the Trustee with such principal to be paid by check mailed by the Trustee on the Bond Payment Date or redemption date by first class mail to each Owner at his address as it appears on the registration books; provided, however, that prior to the Conversion payment of such principal will be made by wire transfer to an Owner of Bonds who has exercised his/her option for payment by wire transfer pursuant to the Indenture. Said amounts will be payable in lawful money of the United States of America. The Trustee is authorized to pay or redeem the Bonds when duly presented for payment at maturity or on redemption and to cancel all Bonds upon payment thereof; provided, however, that no such cancellation of Bonds will affect the obligations of the Credit Entity arising under the Credit Facility; provided that the Credit Facility is subject to reduction in accordance with its terms in connection with the payment at maturity or earlier redemption of the Bonds. Upon surrender by the Owner of a Bond for partial redemption at the Principal Office, payment of such partial redemption of the principal amount of a Bond will be made to such Owner by check mailed by first class mail to the Owner at his address as it appears on the registration books of the Trustee, or prior to the Conversion by wire transfer to any Owner who has exercised its option for payment by wire transfer pursuant to the Indenture. Upon surrender of any Bond redeemed in part only, 85071062.6 3 the Trustee or the Tender Agent will execute and deliver to the Owner thereof, at the expense of the City, a new Bond or Bonds of the same series which will be of Authorized Denominations equal in aggregate principal amount to the unredeemed portion of the Bond surrendered and of the same interest rate and the same maturity. Such partial redemption will be valid upon payment of the amount thereby required to be paid to such Owner, and the City, the Authority and the Trustee will be released and discharged from all liability to the extent of such payment. Subject to the book-entry only system, Bonds may be exchanged or substituted for or in lieu of mutilated, lost, stolen or destroyed Bonds by request to the Trustee. The Trustee and the Tender Agent may require payment of an appropriate fee and expenses with respect to any such exchange or substitution. Interest Rate Determination Methods Weekly Rate. The rate of interest on the Bonds may,at the option of the City, be established at a Weekly Rate on any Bond Payment Date during a Weekly Rate Period. So long as the Bonds bear interest at a Weekly Rate, the Remarketing Agent will set the Weekly Rate on Wednesday of each calendar week. The Remarketing Agent will give notice in writing to the Trustee and the Credit Entity of n(•h Weekly Rate as soon as possible following the determination of such rate. Each Weekly Rate will be the rate per annum equal to the minimum rate necessary (as determined by the Remarketing Agent) for the Remarketing Agent to sell the Bonds on the date the Weekly Rate is set at a price equal to 100% of the principal amount thereof plus accrued interest; provided, however, that in no event will the interest rate borne by the Bonds(other than Credit Facility Bonds)exceed the Maximum Rate. Each Weekly Rate will be effective Thursday through the next succeeding Wednesday (or through the end of the period in which the Bonds bear interest at a Weekly Rate,whichever first occurs). The City shall deliver a written notice to the Trustee, the Tender Agent, the Remarketing Agent, and the Credit entity specifying the date of Conversion upon which the interest rate borne by the Bonds shall be converted to a Weekly Rate, which shall be not less than thirty (30) days after notice is received by the parties. The Trustee shall give notice to the registered owners of the bonds, in the same manner that notices of redemption are given, not less than fifteen (15) days before the date of Conversion specifying the date of Conversion, and that the interest rate on the Bonds will be established at a Weekly Rate on the date of Conversion, that all outstanding Bonds not tendered for purchase at least seven (7) days before the date of Conversion will be deemed to have been so tendered and shall, unless remarketed, be purchased on the date of Conversion at a price equal to the principal amount thereof plus interest accrued on such date and that all Bonds must be surrendered to the Tender Agent for purchase not later than 11:00 a.m.,New York time,on the date of Conversion. If for any reason the Remarketing Agent does not set a Weekly Rate on Wednesday of a calendar week, then the Weekly Rate for that period will remain at the Weekly Rate set for the immediately preceding Thursday through Wednesday period. If a court holds that the Weekly Rate set for any period is invalid or unenforceable, the Weekly Rate for that period, will be the rate that is equal to the 30-day tax- exempt commercial paper rate published in The Bond Buyer(or any successor to such publication) as of the date of determination of the unenforceable rate or, in the event The Bond Buyer (or any such successor) is no longer published, any other newspaper or journal containing financial news, printed in the English language and customarily published on each Business Day, of general circulation in New York,New York and selected by the Authority,whose decision will be final and conclusive. Conversion of Interest to Annual Rate or Fixed Rate Notice and Opinion of Bond Counsel. The City may initiate action to convert the interest borne by all of the Bonds from the Weekly Rate to the Annual Rate or the Fixed Rate by notifying the 85071062.6 4 Authority, the Trustee, the Tender Agent, the Credit Entity and the Remarketing Agent of the proposed Conversion at least 60 days prior to such proposed date. The notice will be accompanied by (i)an opinion of Bond Counsel stating that the conversion is not prohibited by the law of the State or the Indenture and (ii)written evidence of satisfaction of the limitations specified in the Indenture. The Trustee will have no obligation to provide notice to the Owners of a change to a Fixed Rate unless the Trustee has received the notice from the City and the opinion of Bond Counsel in accordance with the provisions set forth under this heading. The City may not request a conversion from the Weekly Rate to the Fixed Rate during the existence of an Event of Default and the notice from the City will certify as to the absence thereof. If the City's notice complies with the provisions of this paragraph, the Fixed Rate will be applicable from the effective date specified in the notice until maturity of the Bonds. Upon conversion from the Weekly Rate to the Fixed Rate, the Trustee promptly will surrender the Letter of Credit to the Credit Entity required by the terms of the Letter of Credit. Limitation. A conversion from the Weekly Rate to the Annual Rate or the Fixed Rate pursuant to the paragraph above will comply with the following: (i)the effective date of the conversion will be a Bond Payment Date; and (ii)the Remarketing Agent will have agreed to remarket the Bonds on the Conversion. Notice to Owners of Change to Annual Rate or Fixed Rate. When a conversion from the Weekly Rate to the Annual Rate or the Fixed Rate is to be made,the Trustee will notify the Owners and the Credit Entity by first class mail at least 30 but not more than 60 days prior to the proposed Conversion. The notice will be prepared and furnished by the City to the Trustee for mailing at least 60 days prior to the proposed Conversion and will state: (i) that the interest rate payable with respect to the Bonds will be converted to the Annual Rate or the Fixed Rate, as applicable; (ii)the effective date of the Annual Rate or the Fixed Rate, as applicable; (iii) the Bond Payment Dates and Record Dates following the Conversion; (iv) that following the Conversion there will be no option to tender Bonds for purchase; (v)that all Bonds are subject to mandatory tender for purchase on the Conversion and will be deemed to have been so tendered and will be purchased on the Conversion at the principal amount thereof plus interest accrued to such date; and (vi) that if the opinion of Bond Counsel described under the heading "Notice and Opinion of Bond Counsel" above is rescinded, the interest rate will not be converted to the Annual Rate or the Fixed Rate,as applicable. Calculation of Interest. During the Weekly Rate Period, interest with respect to the Bonds will be computed on the basis of the actual number of days elapsed in a year of 365 days (366 days in leap years) and will be payable on each Bond Payment Date as set forth in the Indenture. On and after the Fixed Rate Conversion, interest with respect to the Bonds will be computed on the basis of a 360-day year comprised of twelve 30-day months and will be payable on each Bond Payment Date as set forth in the Indenture. Interest on overdue principal and, to the extent lawful, on overdue premium and interest with respect to any Bond will be payable at the rate applicable to such Bond until paid. Provisions in the Reimbursement Agreement may make different arrangements with respect to interest accruing on Credit Facility Bonds. The Trustee will compute the amount of interest payable with respect to the Bonds using the rates supplied to the Trustee by the Remarketing Agent. The Remarketing Agent will send notice in writing to the Trustee and the Tender Agent on the Wednesday of each week in which interest on the Bonds is payable at a Weekly Rate, of the Weekly Rate for the applicable Thursday through Wednesday period. Using the rates supplied by such notices, the Trustee will calculate the interest payable with respect to the Bonds for the applicable period. During the Weekly Rate Period, the Trustee will send the City at least five (5) days prior to each Bond Payment Date as set forth in the Indenture written notice of the interest that will have accrued with respect to the Bonds for the period from the preceding Bond Payment Date to the upcoming Bond Payment Date. The Remarketing Agent will inform the Trustee,the City, the Tender Agent and the Credit Entity orally at the oral request of any of them of any interest rate 85071062.6 5 established by the Remarketing Agent. The Trustee will confirm the effective interest rate by telephone or }n writing to any Owner(at such Owner's cost)who requests it in any manner. The setting of the rates and the calculation of interest payable with respect to the Bonds as provided in the Indenture will be conclusive and binding on all parties. Rescission of Opinion of Bond Counsel Notwithstanding any provision in the Indenture to the contrary, no conversion will be made from the Weekly Rate to the Fixed Rate if the Trustee and the Tender Agent receive written notice from Bond Counsel prior to such conversion that the opinion of Bond Counsel required as described under the heading "Notice and Opinion of Bond Counsel" above has been rescinded. If the Trustee has sent any notice to the Owners and the Credit Entity regarding the conversion to the Fixed Rate pursuant to Indenture, then in the event of rescission of the opinion of Bond Counsel, the Trustee will promptly notify all Owners and the Credit Entity of such rescission and that the rate will not be converted to the Fixed Rate. Remarketing Agent Wells Fargo Institutional Securities, LLC, has been appointed Remarketing Agent for the Bonds. �. Remarketing Agent may be removed or replaced by the Authority and may resign, all as provided in the Remarketing Agreement, dated as of July 1, 2009, by and among the Authority, the Trustee, and the Remarketing Agent. Redemption Mandatory Redemption from Net Proceeds. The Bonds are subject to mandatory redemption on any Bond Payment Date, in whole or in part,from moneys drawn under the Credit Facility,which shall be reimbursed from Net Proceeds following the deposit by the Trustee in the Lease Prepayment Account of the Redemption Fund of Net Proceeds deposited by the City under the Indenture, at least 45 days prior to a Bond Payment Date which have been credited towards the Prepayment made by the City pursuant to the Lease Agreement, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption,without premium;provided, however, that if there shall no longer be available a Credit Facility to secure the payment of principal and interest represented by the Bonds or if the Credit Facility does not permit a draw with respect to Prepayments,the Bonds are subject to redemption from Net Proceeds which the Trustee shall deposit in the Lease Prepayment Account of the Redemption Fund,to be used to redeem the Bonds by the Trustee as provided herein. In the event that amounts remain in the Lease Prepayment Account because such amounts did not constitute an Authorized Denomination of a Bond, then such amounts shall be transferred to the Lease Payment Account of the Debt Service Fund. Optional Redemption. During the Weekly Rate Period and upon Conversion, the Bonds are subject to optional redemption in whole or in part (in an amount of$100,000 or any integral multiple of $5,000 in excess thereof)on any Business Day, at the option of the Authority at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption, without premium. During the term of any Credit Facility no notice of any optional redemption shall be sent unless either (1)the Authority has deposited with the Trustee moneys in an amount sufficient to cover the principal of, premium, if any, and interest due on such redemption date (exclusive of anticipated investment earnings thereon), or(2)the Authority delivers to the Trustee the written consent of the Credit Entity. 85071062.6 6 Sinking Fund Redemption. The Bonds are subject to mandatory redemption in part on the dates in the following years in the following amounts at a redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption,without premium: Redemption Date Principal Redemption Date Principal (September 1) Amount (September 1) Amount 2010 $ 2020 $ 2011 2021 2012 2022 2013 2023 2014 2024 2015 2025 2016 2026 2017 2027 2018 2028 2019 2029 *Final Maturity. At the Conversion, any annual sinking fund redemption which has not yet become due may be treated as a serial maturity of principal bearing interest at the Fixed Rate payable on September 1 thereafter to maturity. In the event of a partial redemption of Bonds pursuant to mandatory redemption from Net Proceeds or optional redemption as described in the Indenture, the foregoing annual sinking fund payments shall be reduced in equal percentages, as nearly as practicable, provided that the reductions shall be made in multiples of$5,000. The City shall provide the Trustee with the amended sinking fund payments schedule calculated as set forth above. Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of Bonds and less than all Outstanding Bonds are called for redemption, the Trustee shall select Bonds for redemption, from the Outstanding Bonds not previously called for redemption, in Authorized Denominations, first from Credit Facility Bonds, then with respect to a mandatory redemption from Net Proceeds on a pro rata basis among maturities and by lot within a maturity, and in the case of an optional redemption from such maturities as are designated in a City Certificate. The Trustee shall promptly notify the City and the Authority in writing of the Bonds so selected for redemption. Partial Redemption of Bonds. Upon surrender by the Owner of a Bond for partial redemption at the Principal Office, payment of such partial redemption of the principal amount of a Bond will be made to such Owner by check mailed by first class mail to the Owner at his address as it appears on the registration books of the Trustee, or prior to the Conversion by wire transfer to any Owner who has exercised its option for payment by wire transfer pursuant to the Indenture. Upon surrender of any Bond redeemed in part only, the Trustee or the Tender Agent shall execute and deliver to the Owner thereof, at the expense of the City, a new Bond or Bonds which shall be of Authorized Denominations equal in aggregate principal amount to the unredeemed portion of the Bond surrendered and of the same interest rate and the same maturity. Such partial redemption shall be valid upon payment of the amount thereby required to be paid to such Owner, and the City, the Authority and the Trustee shall be released and discharged from all liability to the extent of such payment. Notice of Redemption. When redemption is authorized or required pursuant to the Indenture,the Trustee shall give notice of the redemption of the Bonds. Such notice shall specify: (a)that the Bonds or 85071062.6 7 a designated portion thereof are to be redeemed, (b)the CUSIP numbers and, if less than all of the Bonds of a maturity are to be redeemed, the serial numbers of the Bonds to be redeemed, (c) the date of redemption, (d)the place or places where the redemption will be made, (e)the following descriptive information regarding the Bonds: date, interest rates and stated maturity dates, and (f)that a new Bond in an amount equal to that portion not so redeemed will be executed by the Trustee and delivered to the Owner in the event of a partial redemption. Such notice shall further state that on the specified date there shall become due and payable upon each Bond to be redeemed, the portion of the principal amount of such Bond to be redeemed,together with interest accrued to said date, and that from and after such date, provided that moneys therefore have been deposited with the Trustee, interest with respect to such Bonds to be redeemed shall cease to accrue and be payable. Notice of such redemption shall be mailed by first-class mail, postage prepaid, to the City, to all municipal Securities Depositories and to at least one national Information Service which the City shall designate to the Trustee, and to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Bond registration books, at least 30 days, but not more than 60 days, prior to the redemption date; provided that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such Bonds, and provided, further, however, that the Trustee shall, on the day it receives notice of redemption by the City, provide telephonic, telegraphic or telex notice of such notice of redemption to the Remarketing Agent and the Credit Entity. Effect of Notice of Redemption. Notice having been given as described above, and the moneys for the redemption(including the interest to the applicable date of redemption), having been set aside in the Redemption Fund, the Bonds shall become due and payable on said date of redemption, and, upon presentation and surrender thereof at the Principal Office, said Bonds shall be paid at the unpaid principal price with respect thereto, plus interest accrued and unpaid to said date of redemption. If, on said date of redemption, moneys for the redemption of all the Bonds to be redeemed, together with interest to said date of redemption, shall be held by the Trustee so as to be available therefor on such date of redemption, and, if notice of redemption thereof shall have been given as aforesaid, then, from and after said date of redemption, interest with respect to the Bonds shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds shall be held in trust for the account of the Owners of the Bonds so to be redeemed. All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions of the Indenture shall be canceled upon surrender thereof and delivered to or upon the order of the City. Mandatory Tender of Bonds—Conversion In the event the City has complied with the requirements of the Indenture to change the interest rate represented by the Bonds to a Fixed Rate, all Bonds will be subject to mandatory tender and purchase on the Conversion in accordance with the provisions of the Indenture. Mandatory Tender of Bonds—Other than on Conversion The Bonds are subject to mandatory tender on the last Bond Payment Date occurring on or prior to the date at least five days prior to the date on which the Credit Facility is scheduled to expire or terminate in accordance with its respective terms and if the Trustee has not received notice at least 40 days prior to such Bond Payment Date that an Alternate Credit Facility is to be provided. Not less than thirty days before each such Mandatory Tender Date under this paragraph, the Trustee shall send a notice to all Owners by first class mail, postage prepaid, which notice shall contain the following information: (l)that the Credit Facility is scheduled to expire or terminate and no Alternate Credit Facility will be provided,(2)that each Owner's Bond is subject to mandatory tender as provided in such notice, and(3)if any of the nationally recognized rating agencies which has a credit rating outstanding on the Bonds has 85071062.6 8 indicated to the Trustee in writing that it will lower or withdraw its rating on the Bonds as of such Mandatory Tender Date,notice of such new rating, or if no new rating is available,notice that any of such rating agencies may lower or withdraw such rating as of such Mandatory Tender Date. The Bonds are subject to mandatory tender on a Conversion for which a notice can be given. The Bonds are subject to mandatory tender under this paragraph on the first Business Day to occur on or after the seventh day following receipt by the Trustee of notice from the Credit Entity of the occurrence of an event of default under the Reimbursement Agreement, or that the Credit Entity will not reinstate the interest portion of the Credit Facility. Not later than the third Business Day after receipt by the Trustee of such notice,the Trustee shall send to all Owners by first class mail,postage prepaid, and to the Depository also by facsimile, a notice which shall contain the following information: (1)that an event of default has been declared under the Reimbursement Agreement, or that the Credit Entity will not reinstate the interest portion of the Credit Facility, and (2)that each Owner's Bond is subject to mandatory tender on the first Business Day to occur on the seventh day following the receipt by the Trustee of such notice from the Credit Entity. See "THE LETTER OF CREDIT AND THE REIMBURSEMENT AGREEMENT" for a description of the Events of Default which could cause a mandatory tender under the Letter of Credit and the Reimbursement Agreement. The Bonds are subject to mandatory tender on the last Business Day prior to the effective date of any Alternate Credit Facility in accordance with the provisions of the Indenture. All notices of a Mandatory Tender Date will also be mailed by the Trustee to the Credit Entity, the Remarketing Agent and the Tender Agent. Mechanics of Mandatory Tender Owners of Bonds will be required to tender the Bonds to the Tender Agent by 11:00 a.m., New York time, on the Mandatory Tender Date for purchase at a purchase price equal to the principal amount thereof plus accrued interest thereon to and including the Mandatory Tender Date. So long as the Bonds are registered in the name of the Nominee, such tenders shall be made through the book-entry system. Any Untendered Bonds will be deemed to have been tendered. In the event of a failure by Owners of Bonds to tender Bonds on the Mandatory Tender Date, said Owners of Untendered Bonds will not be entitled to any payment(including any interest to accrue subsequent to the Mandatory Tender Date)other than the purchase price for such Untendered Bonds, and any Untendered Bonds will no longer be entitled to the benefits of the Indenture, except for the purpose of payment of the purchase price thereof. Such Untendered Bonds will be deemed purchased, canceled and no longer Outstanding under the Indenture. However,the purchase price will be paid only upon presentation of the Bonds to the Tender Agent. In the case of a Conversion, if the Remarketing Agent notifies the Trustee not less than fifteen days before the Conversion that it cannot remarket all of the Bonds or if the requirements for the effectiveness of a Conversion are not satisfied before the Conversion, the Trustee will give notice thereof by first-class mail, postage prepaid, to all Owners, the Remarketing Agent, the Credit Entity and the City and each of such parties will be restored to their respective positions as if notice of the Conversion had not been given and no mandatory tender will occur. In addition to the mailed notice required by the preceding sentence, the Trustee will deliver a duplicate copy of such notice to the Depository and the Credit Entity by telecommunications or overnight delivery. Option to Tender Prior to Conversion Prior to the Conversion, any Owner of the Bonds may give irrevocable written notice to the Tender Agent at its Principal Office and request that the Tender Agent purchase all or any part (in 85071062.6 9 Authorized Denominations)of the Bonds then outstanding and registered in the name of such Owner at an amount or price equal to the unpaid principal amount thereof plus accrued and unpaid interest thereon to, hut not including, the Business Day on which the Bonds are to be tendered to the Tender Agent (the 'Optional Tender Date") and without premium. Such notice (the "Optional Tender Notice") will specify the Optional Tender Date(which,during a Weekly Rate Period, shall not be less than seven(7) days after the date of receipt by the Tender Agent of such Optional Tender Notice,the CUSIP number,the principal amount being tendered in integral multiples of Authorized Denominations and, so long as the Bonds are registered in the name of the Nominee, such notice shall also specify the Participant number and the contact person of the Participant. Upon receipt of an Optional Tender Notice, the Tender Agent will, as soon as is practicable but in no event later than the close of business on the Business Day following the day of receipt of such Optional Tender Notice, give notice to the Trustee, the Authority, the Credit Entity and the Remarketing Agent of the Optional Tender Notice, the Optional Tender Date specified therein and the principal amount of Bonds to be purchased on such Optional Tender Date. Owners providing an Optional Tender Notice will be required to tender the Bonds to the Tender Agent for purchase by 11:00 a.m.,New York time,on the Optional Tender Date. In the event of a failure by Owners of Bonds to tender Bonds on the Optional Tender Date, said Owners of Bonds will not be entitled to any payment (including any interest to accrue subsequent to the Optional Tender Date) other ;haul the purchase price for such Untendered Bonds, and any Untendered Bonds will no longer be entitled to the benefits of the Indenture, except for the purpose of payment of the purchase price thereof. However,the purchase price will be paid only upon presentment of the Bonds to the Tender Agent. Upon the cancellation of Untendered Bonds, the Trustee will execute new Bonds in the same aggregate principal amount as, and in substitution for, the Bonds not so tendered by such Owner and will hold, deliver and make available such new Bonds to the new Owner thereof in accordance with the provisions of the Indenture which will be fully applicable notwithstanding that such new Bonds are executed in substitution for the Bonds not so tendered. From and after the Conversion,the Tender Agent will not be required to purchase such Bonds on demand and optional tender by the Owners thereof in accordance with the provisions set forth under this heading. Purchase of Bonds Delivered On a Tender Date Bonds purchased from Owners on any Tender Date will be purchased at a price equal to the principal amount thereof plus accrued interest, if any, to the Tender Date in immediately available funds, but solely from the following sources of funds in the following order of priority: (I) moneys deposited into the Remarketing Proceeds Account, other than moneys representing remarketing proceeds from the sale of Bonds to the Authority or the City, in accordance with the Indenture; (2) moneys deposited into the Liquidity Account in accordance with the Indenture; (3) other Available Moneys(as described in the Indenture)furnished to the Trustee; and (4) other moneys made available to the Trustee for such purpose from the Authority or the City. The Tender Agent or Trustee, as applicable, will promptly give notice to the Credit Entity, the Remarketing Agent, the Tender Agent, the Trustee and the City of any notice given by or to an Owner pursuant to certain provisions of the Indenture. 85071062.6 10 No later than 11:00 a.m. New York time on the Business Day next preceding each Tender Date, the Remarketing Agent will give telex or telephonic notice, promptly confirmed in writing, to the Tender Agent and the Trustee and specifying the amount of the proceeds of the sale of such Bonds, if any, sold by the Remarketing Agent pursuant to the Indenture and the name, address and tax identification number of the purchasers thereof as well as the denominations of such remarketed Bonds. The purchase price of any Bonds tendered for purchase will be payable by check mailed to the Owners of record as of the close of business on the day next preceding the Tender Date; provided, however,that the purchase price of such tendered Bonds for purchase may, at the option of any Owner,be transferred to such Owner by wire transfer on the Tender Date if prior to such Tender Date such Owner has delivered to the Tender Agent a request in writing for such wire transfer specifying the bank account number to which such transfer is to be made. On the Business Day next preceding each Tender Date, the Trustee shall draw on the Credit Facility and shall deposit the amount of such draw in the Liquidity Account to pay for the purchase price of any Bonds that cannot be paid from remarketing proceeds in the Remarketing Proceeds Account. In the event that the Trustee has not received notice from the Remarketing Agent as to the availability of remarketing proceeds prior to the time of its draw on the Credit Facility on the Business Day next preceding each Tender Date, the Trustee shall draw on the Credit Facility to pay the purchase price of all Bonds tendered for purchase on such Tender Date. The Tender Agent shall pay, to the extent that it has received funds therefor, the purchase price of such tendered Bonds, plus accrued interest, if any, no later than 5:00 p.m.,New York time, on any Optional Tender Date or Mandatory Tender Date. Remarketing of Bonds by Remarketing Agent Subject to the terms of the Remarketing Agreement, the Remarketing Agent will use its best efforts to remarket Bonds subject to purchase on a Tender Date and to remarket Bonds registered in the name of the Credit Entity. The proceeds of any sale with respect to a Tender Date will be delivered to the Tender Agent for deposit into the Remarketing Proceeds Account by no later than 11:00 a.m.,New York time,on the Business Day prior to each Tender Date. The proceeds of the sale of any Bonds registered to or on behalf of the Credit Entity will be delivered to the Tender Agent for deposit in the Remarketing Proceeds Account by 11:00 a.m., New York time, on the date of sale and the Tender Agent will remit such amounts to the Credit Entity no later than 4:00 p.m.,New York time, on such date. If any Bonds are purchased for the benefit of the Credit Entity pursuant to the Indenture, the Remarketing Agent will continue to offer for sale and use its best efforts to sell such Bonds. So long as the Credit Facility is in effect, prior to the release of any Credit Facility Bonds or the remarketing of any Bonds purchased following the mandatory tender thereof pursuant to the Indenture, the Tender Agent shall have received written notice from the Credit Entity that the Letter of Credit has been reinstated or an Alternate Credit Facility has been delivered in an amount equal to the principal amount of the Credit Facility Bonds and interest thereon in accordance with its terms. Collar The Authority expects to establish an interest rate floor and an interest rate cap in connection with the Bonds under the Collar Documents. The Collar Documents provide that . The collar under the Collar Documents expires on , 20_. 85071062.6 11 Book-Entry Only System The Depository Trust Company,New York,New York("DTC"), will act as securities depository for the Bonds. The Bonds will be registered in the name of Cede & Co. (DTC's partnership nominee), and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds. So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the Owners shall mean Cede & Co., and shall not mean the ultimate purchasers of the Bonds. Payments of the principal of, premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co., by the Trustee, so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursements of such payments to DTC's Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC's Participants and Indirect Participants. See"APPENDIX D—BOOK-ENTRY ONLY SYSTEM." SECURITY FOR THE BONDS Revenues THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM REVENUES, CONSISTING PRIMARILY OF BASE RENTAL PAYMENTS PAID BY THE CITY PURSUANT TO THE LEASE AND AMOUNTS HELD IN THE FUNDS AND ACCOUNTS ESTABLISHED UNDER THE INDENTURE. THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. The Indenture provides that, subject to certain rights of the Trustee, the Bonds are secured by a first lien on and pledge of all of the Revenues and a pledge of moneys in all Funds and Accounts established and held by the Trustee under the Indenture including the investments thereof and the proceeds of such investments. "Revenues" are defined in the Indenture to mean: (i) all Base Rental Payments payable by the City pursuant to the Lease (including prepayments), (ii) any proceeds of Bonds originally deposited with the Trustee and all moneys on deposit in the funds and accounts established under the Indenture, (iii) investment income with respect to such moneys held by the Trustee and(iv)any insurance proceeds or condemnation awards received by or payable to the Trustee relating to the Base Rental Payments, including rental interruption insurance. Base Rental Payments; Covenant to Appropriate Funds As security for the Bonds, the Authority will assign to the Trustee for the payment of the Bonds certain rights of the Authority in the Lease, including the right to receive the Base Rental Payments to be made by the City. Under the Lease, the City agrees to make Base Rental Payments for the beneficial use and occupancy of the Leased Property, and to take such action as is necessary to budget for and to appropriate such amounts. See "APPENDIX C— SUMMARY OF PRINCIPAL LEGAL DOCUMENTS —The Lease." 85071062.6 12 The Base Rental Payments are equal to the principal of and interest on the Bonds, and are payable on the twenty-fifth day of the month immediately preceding each Bond Payment Date. The Base Rental Payments will be paid by the City to the Trustee for the benefit of the Owners of the Bonds. The City's obligation to make Base Rental Payments is subject to abatement in the event of substantial interference with the use and possession of all or a part of the Leased Property. See "RISK FACTORS—Abatement." No Reserve Fund The Reserve Fund established under the Indenture is not funded while the Bonds bear interest at the Weekly Rate. Insurance The Lease requires the City to maintain insurance coverage on the Leased Property, consisting of the following: (1) insurance against loss or damage to the Leased Property or such structure or item of furniture or equipment caused by fire or lightning,with an extended coverage endorsement and vandalism and malicious mischief insurance, which such extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. The insurance required by this paragraph shall be in an amount equal to the replacement cost(without deduction for depreciation)of improvements located or to be located on the Leased Property but shall be not less than the principal amount of the Outstanding Bonds (except that such insurance may be subject to deductible clauses of not to exceed ten percent(10%)of the amount of any one loss); (2) rental interruption insurance against the Authority's loss of income due to events giving rise to the right of abatement on the part of the City under the Lease in an amount sufficient to pay the total Base Rental payments attributable to the Leased Property for a 24 month period (measured by the Base Rental payments for the 24 months following the month in which the insurance commences and assuming for such purpose that Interest Components will be payable at a fixed rate of 12% per annum or such lesser amount as may be agreed upon by the Credit Entity); provided, that the amount of such insurance need not exceed the total remaining Base Rental payments attributable to the Leased Property; (3) workers' compensation insurance covering all employees working in or on the Leased Property, in the same amount and type as other workers' compensation insurance maintained by the City for similar employees doing similar work; and the City shall also require any other person or entity working in or on the Leased Property to carry the foregoing amount of workers' compensation insurance; (4) a standard comprehensive public entity liability insurance policy or policies in protection of the City, the Authority, and their respective directors, officers and employees and the Trustee, indemnifying and defending such parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the possession, operation or use of the Leased Property. Such public liability and property damage insurance shall be in the form of a single limit policy in the amount of not less than three million dollars ($3,000,000), subject to a deductible clause of not to exceed $250,000, covering all such risks; and 85071062.6 13 (5) a CLTA standard coverage leasehold policy of title insurance on the Leased Property in an amount at least equal to the initial aggregate amount of the principal amount of Base Rental payments issued by a company of recognized standing duly authorized to issue the same. The title policy or policies shall insure the City's leasehold estate hereunder with respect to the Leased Property, subject only to Permitted Encumbrances. Notwithstanding the foregoing, the Lease does not require the City to maintain more insurance than is specifically referred to above or any policies of insurance other than standard policies of insurance with standard deductibles offered by reputable insurers at a reasonable cost on the open market. Furthermore, as an alternative to providing the insurance required by paragraphs (1), (3) and (4) above, with the prior written consent of the Credit Entity, the City may provide a self-insurance method or plan or protection. See "APPENDIX C— SUMMARY OF PRINCIPAL LEGAL DOCUMENTS —The Lease —Insurance." Additional Obligations Other than refunding bonds, the Authority may not issue bonds, notes or indebtedness that are payable out of Revenues in whole or in part. See "APPENDIX C — SUMMARY OF PRINCIPAL 1 ' GAL DOCUMENTS — The Indenture — Additional Obligations." However, the City may incur additional lease or other obligations payable from the City's general fund without the consent of or notice to the Owners of the Bonds. See"RISK FACTORS—Base Rental Payments Not Debt." THE LETTER OF CREDIT AND THE REIMBURSEMENT AGREEMENT The following are brief outlines of certain provisions contained in the Letter of Credit established in favor of the Trustee and the Reimbursement Agreement between the City and the Credit Entity and are not to be considered a full statement pertaining thereto. Reference is made to the Letter of Credit and the Reimbursement Agreement on file with the Authority for the complete text thereof Letter of Credit [to come from bank counsel] Reimbursement Agreement [to come from bank counsel] Alternate Credit Facility The Indenture provides that an Alternate Credit Facility may be substituted for the Letter of Credit; provided, that not less than fifteen days before the effective date of any Alternate Credit Facility, the Trustee shall send a notice to all Owners by first class mail, postage prepaid, which notice shall contain the following information: (1) that the Letter of Credit will expire or terminate and that an Alternate Credit Facility will be provided, (2) the identity of the provider of such Alternate Credit Facility and (3) that all Bonds are subject to mandatory tender on the last Business Day which is at least five days prior to the expiration date of the Letter of Credit. If at any time there shall have been delivered to the Trustee (i) an Alternate Credit Facility, which shall be for a term of not less than the stated expiration date of the Letter of Credit then in effect for which it substitutes, (ii) an opinion of Bond Counsel stating that the delivery of such Alternate Credit Facility to the Trustee is authorized under the 85071062.6 14 Indenture, and complies with the terms of the Indenture and (iii) written confirmation from the Credit Entity that no amounts are then due and unpaid under the Reimbursement Agreement, then the Trustee shall accept such Alternate Credit Facility and promptly surrender the Letter of Credit then in effect to the Credit Entity in accordance with its terms for cancellation. THE CREDIT ENTITY The following information concerning the Credit Entity has been provided by representatives of the Credit Entity and has not been confirmed or verified by any of the Authority, the City, the Underwriter or the Remarketing Agent. No representation is made herein to the accuracy or adequacy of such information or as to the absence of material adverse changes to such information subsequent to the date hereof or that the information contained or incorporated herein by reference is correct as of any time subsequent to its date. The Credit Entity is a national banking association organized under the laws of the United States of America with its main office at 101 North Phillips Avenue, Sioux Falls, South Dakota 57104, and engages in retail,commercial and corporate banking,real estate lending and trust and investment services. The Credit Entity is an indirect, wholly owned subsidiary of Wells Fargo & Company, a diversified financial services company, a financial holding company and a bank holding company registered under the Bank Holding Company Act of 1956, as amended, with its principal executive offices located in San Francisco,California("Wells Fargo"). As of March 31, 2009, the Credit Entity had total consolidated assets of approximately $552.170 billion, total domestic and foreign deposits of approximately $372.428 billion and total equity capital of approximately$45.268 billion. Effective at 11:59 p.m. on December 31, 2008, Wells Fargo acquired Wachovia Corporation and its subsidiaries in a stock-for-stock merger transaction. Information about this merger has been included in filings made by Wells Fargo with the Securities and Exchange Commission("SEC"). Copies of these filings are available free of charge on the SEC's website at www.sec.gov. or by writing to Wells Fargo's Corporate Secretary at the address given below. Each quarter, the Credit Entity files with the FDIC financial reports entitled "Consolidated Reports of Condition and Income for Insured Commercial Banks with Domestic and Foreign Offices," commonly referred to as the "Call Reports." The Credit Entity's Call Reports are prepared in accordance with regulatory accounting principles, which may differ from generally accepted accounting principles. The publicly available portions of the Call Reports for the period ending March 31, 2009, and for Call Reports filed by the Credit Entity with the FDIC after the date of this Offering Memorandum may be obtained from the FDIC, Disclosure Group, Room F518, 550 17th Street,N.W., Washington, D.C. 20429 at prescribed rates, or from the FDIC on its Internet site at http://www.fdic.gov,or by writing to the Wells Fargo Corporate Secretary's Office, Wells Fargo Center, Sixth and Marquette, MAC N9305-173, Minneapolis, MN 55479. The Letter of Credit will be solely an obligation of the Credit Entity and will not be an obligation of, or otherwise guaranteed by, Wells Fargo & Company, and no assets of Wells Fargo & Company or any affiliate of the Credit Entity or Wells Fargo & Company will be pledged to the payment thereof. Payment of the Letter of Credit will not be insured by the FDIC. The information contained in this section, including financial information, relates to and has been obtained from the Credit Entity, and is furnished solely to provide limited introductory information regarding the Credit Entity and does not purport to be comprehensive. Any financial information provided in this section is qualified in its entirety by the detailed information appearing in the Call 85071062.6 15 Reports referenced above. The delivery hereof shall not create any implication that there has been no change in the affairs of the Credit Entity since the date hereof. SPECIAL CONSIDERATIONS RELATING TO THE BONDS SUBJECT TO OPTIONAL TENDER AND REMARKETING The Remarketing Agent is Paid by Authority The Remarketing Agent's responsibilities include determining the interest rate from time to time and remarketing Bonds that are optionally or mandatorily tendered by the Owners thereof (subject, in each case, to the terms of the Remarketing Agreement), as further described in this Official Statement. The Remarketing Agent is appointed by the Authority and is paid by the Authority for their services. As a result, the interests of the Remarketing Agent may differ from those of existing holders and potential purchasers of such Bonds. The Remarketing Agent Routinely Purchases Bonds for its Own Account The Remarketing Agent acts as remarketing agent for a variety of variable rate demand )1 li ,ations and, in their sole discretion, routinely purchase such obligations for their own account. The Remarketing Agent is permitted,but not obligated,to purchase tendered Bonds for their own account and, in their sole discretion, routinely acquire such tendered Bonds to achieve a successful remarketing of the Bonds (i.e., because there otherwise are not enough buyers to purchase the Bonds) or for other reasons. However,the Remarketing Agent is not obligated to purchase Bonds, and may cease doing so at any time without notice. The Remarketing Agent may also make a market in the Bonds by routinely purchasing and selling Bonds other than in connection with an optional or mandatory tender and remarketing. Such purchases and sales may be at or below par. However, the Remarketing Agent is not required to make a market in the Bonds. The Remarketing Agent may also sell any Bonds they have purchased to one or more affiliated investment vehicles for collective ownership or enter into derivative arrangements with affiliates or others in order to reduce its exposure to the Bonds. The purchase of Bonds by the Remarketing Agent may create the appearance that there is greater third party demand for the Bonds in the market than is actually the case. The practices described above also may result in fewer Bonds being tendered in a remarketing. Bonds May Be Offered at Different Prices on Any Date Including a Rate Determination Date Pursuant to the Remarketing Agreement, the Remarketing Agent is required to determine the applicable rate of interest that, in its judgment, is the lowest rate that would permit the sale of the applicable Bonds bearing interest at the applicable interest rate at par plus accrued interest, if any, on and as of the applicable date. The interest rate will reflect, among other factors, the level of market demand for the applicable Bonds (including whether the Remarketing Agent is willing to purchase such Bonds for its own account). There may or may not be Bonds tendered and remarketed on any given date, the Remarketing Agent may or may not be able to remarket any Bonds tendered for purchase on such date at par and the Remarketing Agent may sell Bonds at varying prices to different investors on such date or any other date. The Remarketing Agent is not obligated to advise purchasers in a remarketing if they do not have third party buyers for all of the Bonds at the remarketing price. If the Remarketing Agent owns any Bonds for their own account, they may, in their sole discretion in a secondary market transaction outside the tender process,offer such Bonds on any date at a discount to par to some investors. The Ability to Sell the Bonds Other Than through Tender Process May Be Limited The Remarketing Agents may buy and sell Bonds other than through the tender process. However, they are not obligated to do so and may cease doing so at any time without notice and may 85071062.6 16 require holders that wish to tender their Bonds to do so through the Tender Agent with appropriate notice. Thus, investors who purchase the Bonds, whether in a remarketing or otherwise, should not assume that they will be able to sell their Bonds other than by tendering the Bonds in accordance with the tender process. Under Certain Circumstances,a Remarketing Agent May be Removed,Resign or Cease Remarketing the Bonds,Without a Successor Being Named Under certain circumstances a Remarketing Agent may be removed or have the ability to resign or cease its remarketing efforts, without a successor having been named, subject to the terms of the applicable Remarketing Agreement. If there is no Remarketing Agent for the Bonds, the Trustee may assume such duties as described in the Indenture. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds related to the issuance of the Bonds. Sources of Funds: Principal Amount of Bonds $ Less: Underwriter's Discount Total Sources of Funds S Uses of Funds: Deposit to Energy Independence Fund(1) $ Deposit to Costs of Issuance Fund(2) Total Uses of Funds S (1) The Energy Independence Fund was established and is held by the City. Deposit includes $ to reimburse the City for prior expenditures. (2) Costs of issuance include fees and expenses of Bond Counsel, Disclosure Counsel, Credit Entity Counsel, Trustee fees,rating agency fees,printing expenses and other costs of issuance of the Bonds. 85071062.6 17 THE PROJECT The Project consists of (i) the acquisition, construction and/or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties located within the City and (ii) reimbursement of $2.5 million advanced to the City for energy efficiency improvements pursuant to Resolution No. 08-89 of the City Council of the City, adopted on August 28, 2008 in connection with the City's Energy Independence Loan Program("EILP"). The EILP is designed to accept funds from any lawfully available source, including the proceeds of the Bonds,to fund Energy Independence Program ("EIP")loans to owners of improved real property in the City. EILP loans are available for a broad range of energy efficiency improvements, solar systems and custom energy measures. The maximum term for an EILP loan is 20 years. The City will offer property owners on-site surveys to advise property owners about the potential energy improvements, the estimated costs of such improvements and the estimated savings that may be achieved through the EIP. Owners that receive assistance through the EILP must complete the improvements within 180 days after contracting with the City for the improvement funds. The EIP is administered by the City's Office of Energy Management. LEASED PROPERTY The Leased Property consists of the land and two commercial office buildings owned by the City located at 73-710 ("Building 1") and 73-720 ("Building 2") Fred Waring Drive in the City. Building 1 is a two story 32,073 square foot, facility and Building 2 is a one story 19,629 square foot facility. As of April 2009, Building 1 had a 6.83%vacancy rate and Building 2 had no vacancies. As of April 2009, the Coachella Valley Association of Governments was the largest tenant in Building 1, occupying 4,292 square feet, and the State of California occupied all of Building 2, occupying the entire facility. [lease expiration terms to come] The following table sets forth certain historical information regarding Buildings 1 and 2. Percent Leased Revenues Per Year Percent Used by City Percent Vacant Building 1 Building 2 * All numbers are five year averages. The Lease permits the City to substitute other premises for the Leased Property or portions thereof under the Lease; provided, that the fair market value and the fair rental value of the substitute premises are at least equal to those of such portion of the Leased Property as is to be removed from the Lease, and provided certain other criteria are met. See "APPENDIX C — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—The Lease—Substitution of Property." CITY FINANCIAL INFORMATION General The City of Palm Desert is located in the central portion of the Coachella Valley and is approximately midway 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 is bounded by Indian Wells to the east, Rancho Mirage to the west, the Santa Rosa mountains to the south and Interstate 10 to the north. Palm Desert is approximately 250 feet above sea level and is the point of termination for State Highway 74, the most direct access to the San Diego area. The City was incorporated on November 26, 85071062.6 18 1973, as a general law city. In 1997 the City became a charter city. See "APPENDIX A — CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING THE CITY OF PALM DESERT"for additional information relating to the City. Budgetary Process The fiscal year of the City begins on the first day of July of each year and ends on the thirtieth day of June of the following year. The City Manager and City staff review estimates of revenues and expenditures for each department for the ensuing fiscal year. At least ( ) days prior to the beginning of each fiscal year, the City Manager submits to the Council the proposed budget. After reviewing and making such revisions as it deems advisable, the City Council determines the time for the holding of a public meeting thereon. At the conclusion of the public meeting, the City Council further considers the proposed budget and makes any revision thereof that it deems advisable. On or before June 30 it adopts the budget with revisions, if any, by the affirmative vote of at least a majority of the total members of the City Council. From the effective date of the budget, the amounts stated as proposed expenditures become appropriated to the several departments, offices and agencies for the objects and purposes named, provided that the City Manager may transfer the appropriations from one object or purpose to another within the divisional budget. All appropriations lapse at the end of the fiscal year to the extent that they have not been expended or lawfully encumbered. The City Council employs, at the beginning of each fiscal year, an independent certified public accountant who, at such time or times as specified by the City Council, and at such other times as it shall determine, examines the books, records, inventories and reports of all officers and employees who receive, control, handle or disburse public funds and of all such other officers, employees or departments as the City Council may direct. As soon as practicable after the end of the fiscal year, a final audit and report is submitted by such accountant to the City Council and a copy of the financial statements as of the close of the fiscal year is published. Financial Statements A copy of the most recent financial statements of the City audited by Diehl, Evans & Company, LLP (the "Auditor") are included hereto as "APPENDIX B — AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2008." The Auditor's letter concludes that the general purpose financial statements present fairly, in all material respects, the financial position of the City as of June 30, 2008 and the results of its operations and the cash flows of its proprietary fund types for the year then ended in conformity with account principals generally accepted in the United States of America. The City has not requested nor did the City obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit work on the financial statements. [Remainder of page intentionally left blank.] 85071062.6 19 General Fund The following table sets forth the City's General Fund balance sheet for the past five fiscal years. CITY OF PALM DESERT GENERAL FUND BALANCE SHEET For Fiscal Years Ended June 30,2004 Through June 30,2008 2004 2005 2006 2007 2008 Assets Pooled cash and investments $31,118,311 $39,796,479 $50,159,726 $52,401,509 $66,045,124 Receivables: Accounts 1,127,528 1,218,948 1,372,644 1,699,023 1,516,427 Notes 3,000,000 3,000,000 3,000,000 3,783,000 3,748,000 Interest 378,994 865,864 1,208,172 1,204,318 1,724,482 Loans 2,100,000 1,604,985 - 256,004 231,176 Prepaid costs 919,074 87,550 865,061 803,761 920,938 Deposits 680,000 - - - - Dtuc from other governments 3,002,654 4,039,466 3,434,525 3,194,082 3,249,502 Due from other funds 651,555 654,390 657,992 698,976 218,256 Advances to other funds 19,378,140 19,366,480 19,366,480 19,366,480 9,236,000 Inventories 36,058 35,878 54,505 45,669 47,906 Due from component unit 672,000 468,000 285,000 465,000 285,000 Total Assets $63,064,314 $71,138,040 $80,404,105 $83,818,822 $87,222,811 Liabilities and Fund Balances Accounts payable $4,525,239 $4,253,004 $ 2,840,806 $ 4,581,464 $ 4,489,023 Accrued liabilities 258,680 339,470 245,465 400,295 365,145 Unearned revenues 14,976 16,145 28,507 15,546 1,170 Deferred revenue 2,807,000 3,230,637 2,938,959 2,707,118 2,548,185 Total Liabilities $7,605,895 $7,839,256 $ 6,053,737 $ 7,704,423 $ 7,403,523 Fund Balances Reserved $27,838,819 $26,505,414 $26,345,859 $25,198,118 $16,304,234 Unreserved 27,619,600 36,793,370 48,004,509 50,916,281 63,515,054 Total Fund Balances $55,458,419 $63,298,784 $74,350,368 $76,114,399 $79,819,288 Total Liabilities and Fund Balances $63,064,314 $71,138,040 $80,404,105 $83,818,822 $87,222,811 Source: City of Palm Desert Audited Financial Statements. 85071062.6 20 The following table sets forth the City's General Fund revenues, expenditures and changes in fund balances for the past five fiscal years. CITY OF PALM DESERT GENERAL FUND REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES For Fiscal Years Ended June 30,2004 Through June 30,2008 2004 2005 2006 2007 2008 Revenues Taxes $30,887,340 $32,464,343 $39,699,104 $40,942,143 $40,876,935 Licenses and permits 1,053,905 1,631,094 2,200,513 1,855,366 1,180,020 Intergovernmental revenues 3,633,489 5,604,654 2,374,134 3,129,601 5,193,161 Charges for services 1,048,667 1,442,098 1,994,163 1,822,685 1,190,725 Investment earnings 1,135,952 1,486,830 2,636,050 4,890,891 4,571,147 Fines and forfeitures 147,378 158,011 170,106 109,497 105,365 Miscellaneous 178,016 800,695 757,340 258,299 866,843 TOTAL REVENUES $38,084,747 $43,587,725 $49,831,410 $53,008,482 $53,984,196 Expenditures Current: General government $10,497,307 $11,460,389 $12,958,977 $15,071,281 $16,306,128 Public safety 13,052,963 14,433,485 15,019,337 16,488,071 17,674,051 Parks,recreation and culture 2,638,386 2,889,789 3,304,867 3,921,063 4,572,695 Public works 5,255,530 6,375,888 6,899,913 7,380,140 10,153,794 Capital Outlay: 230,557 266,717 305,273 704,553 531,589 TOTAL EXPENDITURES $31,674,743 $35,426,268 $38,488,367 $43,565,108 $49,238,257 Excess(deficiency)of revenues over(under)expenditures $6,410,004 $ 8,161,457 $11,343,043 $9,443,374 $4,745,939 OTHER FINANCING SOURCES (USES): Transfers in $ 1,092,475 $ 1,130,231 $ 1,083,589 $ 1,122,224 $ 1,101,610 Transfers out (859,328) (1,451,323) (1,375,048) (9,282,884) (2,142,660) TOTAL OTHER FINANCING SOURCES(USES) $ 233,147 $ 321,092) $ (291,459) $(8,160,660) $ (1,041,050) NET CHANGE IN FUND BALANCES $ 6,643,151 $7,840,365 $11,051,584 $ 1,282,714 $ 3,704,889 FUND BALANCES AT BEGINNING OF YEAR $48,815,268 $55,458,419 $63,298,784 $74,831,685 $76,114,399 FUND BALANCES AT END OF YEAR $55,458,419 $63,298,784 $74,350,368 $76,114,399 $79,819,288 Source: City of Palm Desert Audited Financial Statements. 85071062.6 21 The following table sets forth the City's budgeted and actual General Fund revenues and expenditures for the Fiscal Year ended June 30,2009. CITY OF PALM DESERT GENERAL FUND ESTIMATED REVENUES,ESTIMATED EXPENDITURES AND CHANGES IN FUND BALANCE For Fiscal Year Ended June 30,2009 Estimated Original Revised Actual Budget Budget 2008-09 Revenues Taxes $38,470,000 $35,970,000 $33,342,240 Licenses and permits 1,045,000 1,045,000 1,016,534 Inter-governmental revenues 6,571,500 6,910,500 7,022,791 Charges for services 1,365,000 1,365,000 964,225 Investment earnings 3,930,000 1,330,000 1,503,260 Fines and forfeitures 110,000 110,000 130,000 Miscellaneous 490,000 490,000 474,880 TOTAL REVENUES $51,981,500 $47,220,500 $44,453,930 Expenditures Current: General government $16,945,154 $17,186,030 $16,995,344 Public safety 19,034,143 18,591,031 18,623,335 Parks,recreation and culture 6,388,852 5,990,804 5,275,611 Public works 10,242,557 11,104,292 9,103,158 Capital Outlay - - - TOTAL EXPENDITURES $52,610,706 $52,872,157 $49,997,448 Excess(deficiency)of revenues over(under)expenditures ($ 629,206) ($ 5,651,657) ($ 5,543,518) OTHER FINANCING SOURCES (USES): Transfers in $ 1,250,000 $ 2,900,000 $ 2,900,000 Transfers Out (620,000) (3,120,000) (3,120,000) TOTAL OTHER FINANCING SOURCES (USES) 630,000 (220,000) (220,000) NET CHANGE IN FUND BALANCES $ 794 ($5,871,657) ($ 5,763,518) FUND BALANCES AT BEGINNING OF YEAR $79,114,399 $79,114,399 $79,114,399 FUND BALANCES AT END OF YEAR $79,115,193 $73,242,742 $73,350,881 Source: City of Palm Desert. 85071062.6 22 Sales Tax Sales tax revenues of the City have trended upwards during the last five Fiscal Years as shown in the following table. CITY OF PALM DESERT SALES AND USE TAX REVENUES Fiscal Years 2003-04 Through 2007-08 Fiscal Years Totals 2003-04 $15,138,424 2004-05 15,453,148 2005-06 17,776,928 2006-07 17,918,375 2007-08 17,195,743 Source: City of Palm Desert. Commercial Activity The following table shows the dollar value of taxable transactions within the City for the years 2004 through 2008. CITY OF PALM DESERT TAXABLE TRANSACTIONS,BY TYPE OF BUSINESS Calendar Years 2004 through 2008 (Dollar Amounts in Thousands) 2004 2005 2006 2007 2008(1) Retail Stores: Apparel stores $132,831 $148,723 $160,053 170,981 $52,262 General merchandise 340,277 374,757 390,648 391,997 98,600 Food stores 47,455 51,404 49,660 53,854 14,683 Eating&drinking establishments 167,315 176,486 182,697 175,083 56,435 Home furnishings &appliances 155,921 154,580 136,496 127,396 32,828 Building materials and farm implements 68,737 66,579 96,141 103,874 19,608 Auto dealers and supplies 5,862 5,841 8,642 12,361 2,761 Service stations 45,585 56,581 64,309 77,892 21,828 Other retail stores 264,129 282,286 284,476 261,599 71,905 Total retail stores 1,228,112 1,317,337 1,373,122 1,375,037 370,910 All other outlets 205,184 212,005 220,577 218,661 57,299 Total Taxable Transactions 1,433,296 1,529,342 1,593,699 1,593,698 428,209 (1) Data as of the First Quarter 2008. Source: California State Board of Equalization. 85071062.6 23 State Budgets Information regarding the State budget is regularly available at various State-maintained websites. The Fiscal Year 2009-10 State Budget further described below may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading "California Budget." Additionally, an impartial analysis of the State's Budgets is posted by the Office of the Legislative Analyst at www_lao.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the City, and the City takes no responsibility for the continued accuracy of the internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references. Budget Reform and 2009 Budget Act. On November 6, 2008, the Governor called a special session of the State Legislature and announced a plan to address a projected revenue shortfall for fiscal year 2008-09, estimated as of December 10,2008 to be approximately$14.8 billion, as well as substantial shortfalls in future fiscal years. This legislative special session ended without a resolution. Coinciding with the swearing-in of the new Legislature on December 1, 2008, the Governor declared a fiscal emergency for the State, allowing him to call several Proposition 58 legislative special sessions to address the shortfall. On February 19, 2009, the State Legislature passed a budget-balancing reform package signed by Governor Schwarzenegger on February 20, 2009 (the "2009 Budget Act"), intended to close the State's then projected $41.6 billion deficit through June of 2010. The 2009 Budget Act, enacted nearly five months ahead of the constitutional deadline, along with a number of accompanying measures, was designed to reduce the deficit forecasts and to achieve budget solutions for both the 2008-09 and 2009-10 fiscal years. The Department of Finance has reported that California's chronic and cyclic budget crises are largely attributable to the use of higher than normal revenues to create permanent, ongoing spending commitments and tax cuts. The 2009 Budget Act and accompanying ballot measures designed to end this cycle by preventing government from spending revenue above the long-term trend line and by creating a substantial "rainy day" fund of up to 12.5 percent of General Fund revenue for use only during times when revenue is insufficient to fund a moderate, population-and-inflation-based growth in spending. Certain of these reforms, to be effective, were required to be approved as constitutional amendments by qualified voters voting at an election on May 19, 2009. See"May Revision to 2009 Budget Act"below. The 2009 Budget Act requires the Director of Finance and the Treasurer to determine how much General Fund benefit the State will receive in 2008-09 and 2009-10 from the receipt of the American Recovery and Reinvestment Act of 2009. If the determination at that time is $10 billion or greater, the expenditure solutions labeled as "trigger reductions" will not go into effect, nor will the additional 0.125 percent surcharge on the income tax rate. The Department of Finance estimate of $8 billion would be insufficient to trigger the cuts and tax increase. However, such amount if received, is expected to increase the General Fund reserve and thereby reduce the need for the State to sell Revenue Anticipation Warrants ("RAWs") for budgetary purposes in July of 2009. However, the State may still need to sell RAWs in spring of 2009 for cash management purposes. To the extent the State realizes more from the federal government for certain programs,the 2009 Budget Act provides that smaller spending reductions will be made in those areas. The 2009 State Budget Act projected $42 billion deficit through fiscal year-end 2009-10 and consists of$15 billion in expenditure reductions, $11.4 billion in borrowing, $12.8 billion in taxes and $2 billion in federal moneys. Certain of these reductions may affect the City's fiscal year 2008- 09 budget. The 2009 Budget Act includes reductions in State funding for county public hospitals and social services programs including CalWORKs, Supplemental Security Income/State Supplementary Payment,Medi-Cal, In-Home Supportive Services,and other social service programs. 85071062.6 24 The 2009 Budget Act includes the following major expenditure reductions: • No COLAs. $1.2 billion in combined spending-related savings for fiscal years 2008-09 and 2009-10 by suspending COLAs for various programs, including Supplemental Security Income ("SSI"), State Supplementary Payment ("SSP"), California Work Opportunities and Responsibilities to Kids("CalWORKs") and Medi-Cal, as well as trial courts and the University of California and California State University systems. • Fund Shifts. The 2009 Budget Act uses approximately$1 billion in fund shifts to balance the State General Fund. The two largest shifts include $608 million from Proposition 10 child development programs and $227 million from Proposition 63 mental health funds. Both of these provisions were subject to voter approval of the May 19,2009 election. • Deferred Spending. The 2009 Budget Act also defers approximately $500 million in costs for expenses the State will face in future years, including approximately $200 million in tribal revenues to the General Fund that would otherwise have been used to pay off prior transportation loans. The 2009 Budget Act also defers approximately $91 million in mandate reimbursements to local governments. • Health. $184 million in savings in fiscal year 2009-10 by eliminating certain optional Medi-Cal benefits and reducing reimbursements rates to public hospitals by 10%. This provision may be triggered off by the receipt of sufficient federal stimulus funds. The 2009 Budget Act also assumes $160 million in savings from reductions to reimbursement rates for developmental health service providers. • Social Services. $74 million in savings in fiscal year 2009-10 for In-Home Supportive Service("IHSS")expenditures from the reduction of IHSS provider wages, as well as $4 million in savings by eliminating state assistance with Medi-Cal co-payments for new IHSS participants. The 2009 Budget Act also achieves $147 million in savings by reducing CalWORKs grants by 4% and $268 million in savings by reducing SSI/SSP grants by 2.3%. All of these Social Services reductions can be triggered off by the receipt of sufficient federal stimulus funds. • Transportation. $460 million in combined savings in fiscal years 2008-09 and 2009-10 for transportation services expenditures by reducing state funding of the State Transit Assistance program in fiscal year 2008-09 and eliminating such funding in fiscal year 2009-10. • Employee Compensation. $1.2 billion in combined savings for fiscal years 2008-09 and 2009-10, realized primarily from the continued implementation of monthly one and two- day furloughs for state employees. • Higher Education Savings. $232 million in unallocated reductions for higher education funding, as well as an additional $100 million unallocated reduction for fiscal year 2009- 10 that may be triggered off by the receipt of sufficient federal stimulus funds. • Other Reductions. The 2009 Budget Act also includes (i) a $171.4 million reduction in judiciary expenditures in fiscal year 2009-10 that may be triggered off by the receipt of sufficient federal stimulus funds, and (ii) $580 million in unspecified correctional services reductions. 85071062.6 25 The 2009 Budget Act assumes an additional $12.5 billion in revenues, including $1.5 billion in fiscal year 2008-09 and $11 billion in fiscal year 2009-10, through the enactment of the following major revenue and borrowing solutions: • Sales Tax. $5.8 billion from a temporary one-cent increase in the state sales tax, including $1.2 billion of additional revenue for fiscal year 2008-09 and $4.6 billion of such revenues for fiscal year 2009-10. The increased tax becomes effective April 1, 2009 and is set to lapse on July 1, 2011. • Vehicle License Fees. $2 billion from a temporary increase in vehicle license fees, including $346 million in additional revenues for fiscal year 2008-09 and $1.7 billion of such revenues in fiscal year 2009-10. This increase is set to lapse on July 1,2011. • Personal Income Tax. $1.8 billion from a temporary increase of 0.125% in each personal income tax rate. The 2009 Budget Act also provides for $1.8 billion from an additional personal income tax increase of 0.125% that may be triggered off if sufficient federal stimulus funds are received. This tax increase is set to lapse after tax year 2010. • Reduction of Dependent Tax Credit. $1.4 billion from a temporary reduction in the value of dependent credit for income tax purposes. This reduction is set to lapse after tax year 2010. • Borrowing. $5 billion by accounting for the proceeds from the securitization of the State lottery, and used to offset General Fund expenditures. This provision was subject to voter approval at the May 19, 2009 state election. The 2009 Budget Act also provides for an additional$328 million in borrowing from various state special funds. May Revision to the 2009 Budget Act. On May 14, 2009,the office of the Governor proposed its May revision to the 2009 Budget Act (the "May Revision"). The May Revision proposes additional solutions to address growing revenue losses and expenditure increases experienced by the State since the passage of the 2009 Budget Act. The May Revision projects that, absent corrective action, State expenditures will exceed revenues by approximately $15.4 billion through the current fiscal year and fiscal year 2009-10. To address this projected deficit, the May Revision proposes $2 billion in expenditure reductions and revenue increases for fiscal year 2008-09 and $12.5 billion of such solutions for fiscal year 2009-10, coupled with a$889 million reduction to the $2.1 billion reserve approved as part of the 2009 Budget Act. The May Revision also acknowledges that the 2009 Budget Act included approximately $6 billion of solutions subject to voter approval at the May 19, 2009 special election, including the sale of future State Lottery revenues and diversion of tax revenues to general fund purposes that were previously dedicated by voter initiative to childhood development and mental health services. However, on May 19, 2009, five of the six proposed Statewide ballot measures failed to pass. Failure to secure voter approval for these measures, increases the projected deficit by the amount of approximately $6 billion. Accordingly, in response to worsening revenue projections and the May 19, 2009 special election results,the May Revision proposes the following budgetary measures,among numerous others: • Revenues: the acceleration of state income tax withholding ($1.7 billion) and personal and corporation estimated tax payments ($610 million) and sale of a portion of the State Compensation Insurance Fund($1.0 billion). • Expenditures: a cut and deferral of K-14 education funding (Proposition 98) by $1.6 billion in 2008-09 and by $4.6 billion in 2009-10 and a reduction of $1.02 billion from 2008-09 California State University and University of California funding. 85071062.6 26 • Borrowing: diversion of$1.98 billion in local property tax revenues to the State, to be repaid within three years under Proposition lA of 2004. Additional changes include spending cuts, revenue enhancements, and shifting revenues and expenditures between programs. For further details regarding the May Revision, please see the summary thereof published by the California State Department of Finance (the "May Revision Report"). The May Revision Report may be found at www.dof.ca.gov. The information set forth on this website is not incorporated herein by reference and neither the City nor the Underwriter makes any representation as to the accuracy of the information provided therein. In addition, the City is unable to predict what further actions might be taken by the State Legislature and the Governor to address changing State revenues and expenditures or the exact impact such actions or the 2009 Budget Act and accompanying legislation will have on State revenues available for City purposes. The State Budget will continue to be affected by future national and State economic conditions and other factors over which the City has no control. LAO Overview of May Revision. The Legislative Analyst's Office (the "LAO") has indicated that the May Revision proposals include major spending reductions and efforts for long-term State efficiencies and savings and that by acting promptly, rejecting the Governor's RAW proposal, and reducing reliance on certain of the Governor's proposals, the State Legislature can return the budget to balance, prevent another State cash crunch, and preserve core funding for what it deems to be the State's long-term priorities. To accomplish these goals, the LAO believes that the State Legislature must cut lower-priority programs substantially or eliminate them and,to address significant budget deficits forecast in future years, the State Legislature also needs to begin work on measures that further improve the efficiency of State services in future fiscal years. The May Revision includes the following items affecting local government: Workload, Caseload, and Program Issues. The May Revision always includes updates of program spending, including actual and estimated caseloads in the health and social services areas. In total, the administration has identified $1.1 billion in higher spending requirements of this type in the May Revision. The Governor proposes major spending reductions affecting most parts of state government, as well as many local governments and individual Californians. The proposed spending reduction measures include: • Medi-Cal Reductions. The Governor proposes $1.1 billion of total reductions to Medi- Cal, including $750 million of changes that would likely require federal approval. • In-Home Supportive Services ("IHSS"). The May Revision includes several proposals which would result in combined General Fund savings of about $500 million in IHSS. Specifically, the May Revision would limit the scope of services and copayments currently provided to the less disabled, reduce state participation in wages to the minimum wage, restrict program eligibility to the more severely disabled, and enhance fraud prevention activities. The Governor proposes use of$7.5 billion of borrowing proceeds to return the budget to balance. The proposed borrowing measures include: • RAWs. The Governor proposes counting $5.5 billion of RAW proceeds in 2009-10 as helping to balance the 2009-10 budget. • Borrowing Local Government Property Taxes. The Governor proposes to use the constitutional mechanism authorized by Proposition 1A (the measure approved in 2004 85071062.6 27 related to local government finance)to borrow almost$2 billion of property tax revenues received by cities, counties, and special districts. Under the Governor's proposal, the borrowing would be instituted on an across-the-board basis, with each agency lending 8 percent of its 2008-09 property tax revenues. Repayment would be required within three years with interest. In an effort to minimize the short-term financial strain for local governments associated with these loans,the Governor also proposes legislation to create an authority that would allow local agencies to borrow against future state repayments collectively, rather than just individually. LAO Recommendations. In connection with municipalities, the LAO recommends the Legislature acknowledge the impact of the state's budget solutions on local government. California's cities, counties, and special districts have been experiencing fiscal stress due to the economic downturn. Some of the Governor's budget solutions would exacerbate this stress because they (i) decrease local revenues (particularly the property tax) or (ii) indirectly increase demand for local programs (such as county jails and indigent health programs). Any budget package that the Legislature adopts is likely to negatively affect local governments in some way—whether by budgetary cuts or payment delays. Consequently, the LAO recommends that the Legislature acknowledge the impact of the state's budget solutions on local governments, implement budget solutions in a targeted fashion, and take actions to maximize local government program flexibility and resources whenever possible. While the LAO believes that the Governor's estimate of the budget problem that now needs to be addressed, namely $21.3 billion, is reasonable, the LAO's updated estimates of General Fund revenues and expenditures differ somewhat from the administration's, indicating that the problem may be larger by about $3 billion. In March 2009, the LAO projected that the State faced huge operating shortfalls in future years even after the adoption of the 2009 Budget Act. The LAO now estimates that the May Revision proposals would leave the General Fund with an imbalance between resources and expenditures of greater than $15 billion in 2010-11, with the annual shortfall rising even more in the subsequent three fiscal years. A complete copy of the LAO overview of the May Revision is posted by the Legislative Analyst's Office at www.lao.ca.gov. This website is not incorporated herein by reference and neither the City nor the Underwriter makes any representation as to the accuracy of the information provided therein. Future State Budgets Changes in the revenues received by the State can affect the amount of funding, if any, to be received from the State by the City and other cities and counties in the State. The City cannot predict the extent of the budgetary problems the State will encounter in this or in any future fiscal year, and, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of current or future State budget negotiations, the impact that such budgets will have on its finances and operations or what actions will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures. Current and future State budgets are being and will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control. 85071062.6 28 Long-Term General Fund Obligations The chart below provides a summary of governmental long-term liabilities of the City for the year ended June 30,2008. Balance at Balance at June 30, Due Within July 1, 2007 Additions Retirements 2008 One Year Special assessment debt with Government $ 2,783,000 - $ (35,000) $ 2,748,000 $ 46,000 commitment Tax allocation bonds 421,819,894 $1,484,806 (10,610,000) 412,694,700 12,610,000 Notes payable 613,535 - (122,707) 490,828 122,707 Claims and judgments 537,001 218,647 (314,335) 441,313 320,000 payable Subtotal 428,285,483 3,571,730 (12,599,148) 419,258,065 13,798,707 Add: Unamortized bond premium 8,326,646 - (475,703) 7,850,943 - Less: Deferred amount on refunding (1,728,965) - 122,715 (1,606,250) - Total $434,883,164 $3,571,730 $(12,952,136) $425,502,758 $13,798,707 Capital Leases $ 2,181,546 - $ (598,764) $ 1,582,782 $ 627,649 Source: City of Palm Desert Audited Financial Statement for the Fiscal Year ended June 30,2008. 85071062.6 29 Direct and Overlapping Bonded Debt The following table present a statement of the outstanding direct and overlapping debt for properties within the City as of 1, 2009. All of the debt shown is of taxing agencies other than the City. As stated above,the City currently has no bonded indebtedness. CITY OF PALM DESERT DIRECT AND OVERLAPPING BONDED DEBT [table has been ordered] Source: California Municipal Statistics Inc. Employees and Labor Relations The City currently employs approximately 167 full-time and part-time employees. A historical summary of City employment levels is set forth below. CITY OF PALM DESERT EMPLOYMENT LEVELS Fiscal Years 2003-04 Through 2007-08 Number of Fiscal Year Employees 2003-04 152 2004-05 155 2005-06 160 2006-07 167 2007-08 169 Source: City of Palm Desert. The City [has never] experienced a work stoppage by its employees. [add more detail] Defined Benefit Pension Plan The City contributes to the California Public Employees Retirement System ("PERS"), an agent multiple-employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute and city ordinance. Copies of PERS' annual financial report may be obtained from their executive office: 400 Q Street, Sacramento, CA 95814. Participants are required to contribute 8% of their annual covered salary. The City contributes 7% of the required employee contribution on their behalf and the employee contributes the remaining 1%. 85071062.6 30 The City is required to contribute at an actuarially determined rate;the rate for fiscal year 2007-2008,was 17.546% for non-safety employees of annual covered payroll. The contribution requirements of plan members and the City are established and may be amended by PERS. For 2008,the City's annual pension cost of$3,680,511 for PERS was equal to the City's required and actual contributions. The required contribution was determined as part of the June 30, 2005, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included: (a) 7.75% investment rate of return (net of administrative expenses), (b) projected annual salary increases of 3.25% to 14.45% depending on age, service and type of employment, and (c) 3.25% per year cost-of- living adjustments. (a) and (b) included an inflation component of 3.00%. The actuarial value of PERS' assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a three-year period (smoothed market value). PERS' unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis that depends on the plan's entry into PERS. The remaining amortization period was 17 years. For additional information, including a schedule of funding progress of PERS, see APPENDIX B — AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2008 to the Official Statement,Note 9. Other Post-Employment Benefits The City provides post-employment medical benefits to eligible employees at retirement through the "Retiree Service Stipend Program." All full-time or part-time employees who meet the eligibility requirements for this program may continue their medical coverage through the PERS Health Plan and receive reimbursement from the City for a portion of the costs for the coverage. Employees Hired Prior to January 1, 2008 Eligibility for the stipend requires retirement simultaneously from the City and PERS on or after age 50 with at least 10 consecutive years of service with the City. Eligible employees must be covered under the PERS Health Plan at the time of retirement and elect to participate in the stipend program within 30 days of retirement. For employees hired on or after January 1, 2008, eligibility for the stipend requires retirement simultaneously from the City and PERS on or after age 50 with at least 15 consecutive years of service with the City. Eligible employees must be covered under the PERS Health Plan at the time of retirement and elect to participate in the stipend program within 30 days of retirement. The stipend is discontinued when the retiree reaches Medicare eligibility age. The City's contribution towards the coverage will be applied to the lowest cost plan and is based on age at retirement and consecutive years of service with the City. The contribution requirements of plan members and the City are established and may be amended by the City, City Council, and/or the employee associations. Currently, contributions are not required from plan members. During the fiscal year ended June 30, 2008, the City contributed $7,428,386 to the plan, which included $759,139 of the Annual Required Contribution of which $187,616 were pay-as-you- go premiums. The purpose of these contributions is to cover the required City contribution rate of 5.5%of annual covered payroll(annual payroll of active employees covered by the plan)and to prefund benefits. For additional information, including a schedule of funding progress of PERS, see APPENDIX B — AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30,2008 to the Official Statement,Note 13. 85071062.6 31 RISK FACTORS The following factors, along with the other information in this Official Statement, should be considered by potential investors in evaluating any purchase of the Bonds. The following is not an exhaustive listing of risks and other considerations which may be relevant to an investment in the Bonds. In addition, the order in which the following factors are presented is not intended to reflect the relative importance of any such risks. Substitution of Property The Lease permits the City to substitute other premises for the Leased Property or portions thereof under the Lease, provided that the fair market value and the fair rental value of the substitute premises are at least equal to such portion of the Leased Property to be removed from the Lease, and provided certain other criteria are met. See "APPENDIX C — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—The Lease—Substitution of Property." Base Rental Payments Not Debt The obligation of the City to make the Base Rental Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the Bonds nor the obligation of the City to make Base Rental Payments constitute a debt of the City, the State of California or any political subdivision thereof (other than the Authority) within the meaning of any constitutional or statutory debt limitation or restriction. The Bonds are not general obligations of the Authority, but are limited obligations payable solely from and secured by a pledge of Revenues, consisting primarily of Base Rental Payments. The Authority has no taxing power. Although the Lease does not create a pledge, lien or encumbrance upon the funds of the City,the City is obligated under the Lease to pay the Base Rental Payments from any source of legally available funds and the City has covenanted in the Lease that, for so long as the Leased Property is available for its use, it will make the necessary annual appropriations within its budget for the Base Rental Payments. The City is currently liable and may become liable on other obligations payable from general revenues, some of which may have a priority over the Base Rental Payments. The City has the capacity to enter into other obligations payable from the City's general fund, without the consent of or prior notice to the Owners of the Bonds. To the extent that additional obligations are incurred by the City,the funds available to make Base Rental Payments may be decreased. In the event the City's revenue sources are less than its total obligations, the City could choose to fund other activities before making Base Rental Payments and other payments due under the Lease. The same result could occur if state constitutional expenditure limitations were to prohibit the City from appropriating and spending all of its otherwise available revenues. Abatement In the event of loss or substantial interference in the use and occupancy by the City of all or any portion of the Leased Property caused by material damage,title defect, destruction to or condemnation of the Leased Property, Base Rental Payments will be subject to abatement. In the event that such component of the Leased Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time that proceeds of the City's rental interruption insurance will be available in lieu of Base Rental Payments, or in the event that casualty insurance proceeds or condemnation proceeds are 85071062.6 32 insufficient to provide for complete repair or replacement of such component of the Leased Property or prepayment of the Bonds,there could be insufficient funds to make payments to Owners in full. Risk of Uninsured Loss The City covenants under the Lease to maintain certain insurance policies on the Leased Property. See "SECURITY FOR THE BONDS — Insurance." These insurance policies do not cover all types of risk. For instance, the City does not covenant to maintain earthquake insurance. The Leased Property could be damaged or destroyed due to earthquake or other casualty for which the Leased Property is uninsured. Additionally, the Leased Property could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Base Rental Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City's liability and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. Further, there can be no assurances that amounts received as proceeds from insurance or from condemnation of the Leased Property will be sufficient to repair the Leased Property or to redeem the Bonds and any other obligations secured by Base Rental Payments. Certain of the City's insurance policies provide for deductibles up to $1,000,000. Should the City be required to meet such deductible expenses, the availability of General Fund revenues to make Base Rental Payments may be correspondingly affected. Seismic Risks The State of California, including the County and the City area, are located in seismically active regions. There are several geological faults in the area, including the San Andres and San Jacinto faults, which have the potential to cause serious earthquakes and damage to the Leased Property. Should an earthquake occur such that extensive damage is caused to the Leased Property that results in substantial interference with the use and occupancy of the Leased Property, under the abatement provisions of the Lease, the City would not be obligated to make the Base Rental Payments. See "RISK FACTORS — Abatement"above. Bankruptcy The City is a unit of State government and therefore is not subject to the involuntary procedures of the United States Bankruptcy Code (the "Bankruptcy Code"). However, pursuant to Chapter 9 of the Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes of adjusting its debts. In the event the City were to become a debtor under the Bankruptcy Code, the City would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding. Among the adverse effects of such a bankruptcy might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the City or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt which may have a priority of payment superior to that of Owners of Bonds; and (iv)the possibility of the adoption of a plan for the adjustment of the City's debt (a "Plan") without the consent of the Trustee or all of the Owners of Bonds, which Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable. In addition,the City could either reject the Lease or assume the Lease despite any provision of the Lease which makes the bankruptcy or insolvency of the City an event of default thereunder. In the event 85071062.6 33 the City rejects the Lease, the Trustee, on behalf of the Owners of the Bonds, would have a pre-petition claim that may be limited under the Bankruptcy Code and treated in a manner under a Plan over the objections of the Trustee or Owners of the Bonds. Moreover, such rejection would terminate the Lease and the City's obligations to make payments thereunder. The Authority is a public agency and, like the City, is not subject to the involuntary procedures of the Bankruptcy Code. The Authority may also seek voluntary protection under Chapter 9 of the Bankruptcy Code. In the event the Authority were to become a debtor under the Bankruptcy Code, the Authority would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding. Such a bankruptcy could adversely affect the payments under the Indenture. Among the adverse effects might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the Authority or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the Authority; (ii)the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt which may have priority of payment superior to that of the Owners of the Bonds; and (iv) the possibility of the adoption of a plan for the adjustment of the Authority's debt without the consent of the Trustee or all of the Owners of the Bonds, which plan may restructure, delay, compromise or reduce the amount of a.r claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable. However, the bankruptcy of the Authority, and not the City, should not affect the Trustee's rights under the Lease. The Authority could still challenge the assignment, and the Trustee and/or the Owners of the Bonds could be required to litigate these issues in order to protect their interests. Enforcement of Remedies Under the Lease If an event of default occurs and is continuing under the Lease, there is no remedy of acceleration of any Base Rental Payments which have not become due and payable in accordance with the Lease. There is no remedy under the Lease providing for re-letting of the Leased Property or termination of the Lease. The City will continue to be liable for Base Rental Payments as they become due and payable in accordance with the Lease and the Trustee would be required to seek a separate judgment each year for that year's defaulted Base Rental Payments. Any such suit for money damages would be subject to limitations on legal remedies against counties in California, including a limitation on enforcement of judgments against funds or property needed to serve the public welfare and interest. No Liability of Authority to the Owners Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to the Owners of the Bonds with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the City of other agreements and covenants required to be performed by it contained in the Lease or the Indenture, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Indenture. Credit Entity's Obligations Unsecured The ability of the Credit Entity to honor draws on the Letter of Credit is based solely on the general credit of the Credit Entity and is not collateralized or otherwise guaranteed by the United States of America or any agency or instrumentality thereof. No provision has been made for replacement of or substitution for the initial Letter of Credit in the event of any deterioration in the financial condition of the Credit Entity. None of the Authority,the City,or the Credit Entity assume any liability to any Owner as a result of any deterioration of the financial condition of the Credit Entity. 85071062.6 34 Risks Related to Taxation in California Constitutional Amendments Affecting Tax Revenues. Article XIIIA of the California Constitution limits the amounts of ad valorem tax on real property to 1% of "full cash value" as determined by the county assessor. Article XIIIA defines "full cash value"to mean"the City Assessor's valuation of real property as shown on the 1975-76 tax bill under 'full cash value', or thereafter the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment period." Furthermore, all real property valuation may be increased to reflect the inflation rate, as shown by the consumer price index, not to exceed 2% per year, or may be reduced in the event of declining property values caused by damage, destruction or other factors. Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-thirds of the voters voting on the proposition approving such bonds, and requires a vote of two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any State tax law resulting in increased tax revenues. Article XIIIB of the California Constitution limits the annual appropriations from the proceeds of taxes of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax or fee schedules over the subsequent two years. On November 5, 1996, California voters approved an initiative to amend the California Constitution known as the Right to Vote on Taxes Act ("Proposition 218"), which added Article XIIIC and XIIID to the California Constitution. Among other provisions, Proposition 218 requires majority voter approval for the imposition, extension or increase of general taxes and two-thirds voter approval for the imposition, extension or increase of special taxes by a local government, which is defined in Proposition 218 to include cities. Proposition 218 also provides that any general tax imposed, extended or increased without voter approval by any local government on or after January 1, 1995 and prior to November 6, 1996 will continue to be imposed only if approved by a majority vote in an election held within two years of November 6, 1996. Proposition 218 also provides that the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. This extension of the initiative power is not limited by the terms of Proposition 218 to impositions after November 6, 1996 and absent other legal authority, could result in retroactive reduction in any existing taxes, assessments, fees and charges. In addition, Proposition 218 limits the application of assessments, fees and charges and requires certain existing, new and increased assessments, fees and charges to be submitted to property owners for approval or rejection, after notice and public hearing. The City does not expect Proposition 218 to have any immediate material effect on the revenues from which Base Rental Payments are expected to be appropriated. Implementing Legislation. Legislation enacted by the California Legislature to implement Article XIIIA (Statutes of 1978, Chapter 292, as amended)provides that, notwithstanding any other law, local agencies may not levy any property tax, except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article XIIIA of$4.00 per$100 assessed valuation (based on the traditional practice of using 25% of full cash value as the assessed value for tax purposes). The legislation further provided that, for Fiscal Year 1978-79 only, the tax levied by each county was to be appropriated among all taxing agencies within the county in proportion to their average share of taxes levied in certain previous years. 85071062.6 35 Future assessed valuation growth allowed under Article XIIIA (i.e., new construction, change of ownership, and 2% annual value growth)will be allocated on the basis of"situs"among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the t th of"base" revenue from the tax rate area. Each year's growth allocation becomes part of each agency's allocation in the following year. The Authority is unable to predict the nature or magnitude of future revenue sources which may be provided by the State to replace lost property tax revenues. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above those described above, even with the approval of the affected voters. Constitutional Challenges to Property Tax System. There have been many challenges to Article XIIIA of the California Constitution. The United States Supreme Court heard the appeal in Nordlinger v. Hahn, a challenge relating to residential property. Based upon the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax assessment under Article XIIIA did not violate the federal Constitution. The Authority cannot predict whether there will be any future challenges to California's present system of property tax assessment and cannot evaluate the ultimate effect on the Agency's receipt of tax increment revenues should a future decision hold unconstitutional the method of assessing property. Statutory Revenue Limitations — Proposition 62. Proposition 62 is a statewide statutory initiative adopted by the voters at the November 4, 1986 general election. It added Sections 53720 to 53730 to the Government Code to require that all new local taxes be approved by the voters. The statute provides that all local taxes are either general taxes or special taxes. General taxes are imposed for general governmental purposes. Special taxes are imposed for specific purposes only. General taxes may not be imposed by local government unless approved by a two-thirds vote of the entire legislative body and a majority of the voters voting on the proposed general tax. Special taxes may not be imposed by local government unless approved by a majority of the entire legislative body and by two-thirds of the voters voting on the special tax. Soon after Proposition 62 was adopted by the voters, legal challenges to taxes adopted contrary to its provisions were filed. In 1991, in the most significant case, City of Woodlake v. Logan, the California Court of Appeal held that the statutory voter approval requirement for general taxes was unconstitutional. The California Supreme Court refused to review Woodlake. On September 28, 1995, the California Supreme Court, on a 5-2 vote, in a decision entitled Santa Clara County Local Transportation Authority v. Guardino(Case No. S036269), "disapproved" Woodlake and held that the voter approval requirements of Proposition 62 are valid. On December 14, 1995, the Supreme Court made minor nonsubstantive changes to its written opinion and denied the petition for rehearing. The decision provides that the voter approval requirements of Proposition 62 for both general and special taxes are valid. The Guardino case fails to say (1) whether the decision is retroactively applicable to general taxes adopted prior to the decision; (2) whether taxpayers have any remedies for refund of taxes paid under a tax ordinance that was not voter approved; (3) what statute of limitations applies to taxes adopted without voter approval prior to Guardino; (4) whether Proposition 62 applies only to new taxes or to tax increases as well. The Court of Appeals in a December 15, 1997 decision entitled McBearty v. City of Brawley (Case No. D027877) addressed some of these issues. In Brawley, a taxpayer challenged the city's utility tax that was passed by the city council in 1991 without a vote of the electorate. The Court of Appeals held that (i) a three year statute of limitations applies to challenges to a tax ordinance subject to Proposition 62; and (ii) the statute of limitations did not begin to run until September 1995 when the Guardino case determined that Proposition 62 was constitutional. The effect of the holding in Brawley is that any tax ordinances passed between November 1986 and December 1995 that were not approved by the electorate would be subject to a challenge until December 1998. The court ordered the city to either cease collecting the tax or seek voter approval to continue levying the tax. However, in Howard Jarvis Taxpayers Association v. City of La Habra, decided on June 4, 2001, the California Supreme Court 85071062.6 36 overruled part of McBearty, finding that the three year statute of limitations applicable to such taxes does not run from the date of the Guardino decision, but rather the continued imposition and collection of such tax is an ongoing violation,upon which the limitations period begins with each new collection. Several questions raised by the Guardino decision remain unresolved. Proposition 62 provides that if a jurisdiction imposes a tax in violation of Proposition 62,the portion of the one percent general ad valorem tax levy allocated to that jurisdiction is reduced by $1 for every $1 in revenue attributable to the improperly imposed tax for each year that such tax is collected. The practical applicability of this provision has not been fully determined. Potential future litigation and legislation may resolve some or all of the issues raised by the Guardino decision. The Authority cannot predict the outcome of any pending or future litigation concerning the validity of Proposition 62, nor can it predict the scope of the Guardino or Brawley decisions discussed above. Proposition 62 could affect the ability of the City to continue the imposition of, or to retain, certain taxes, and restrict the City's ability to raise revenue. Future Initiatives Articles XIIIA, XIIIB, XIIIC and XIIID were each adopted as measures that qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City's ability to expend revenues. The nature and impact of these measures cannot be anticipated by the Authority or the City. THE AUTHORITY The Authority was established pursuant to Joint Exercise of Powers Agreement,as of January 26, 1989, by and between the City and the Palm Desert Redevelopment Agency in accordance with the provisions of the Bond Law. The Authority was created for the purpose of providing financing for public capital improvements for the City through the acquisition by the Authority of such public capital improvements and/or the purchase by the Authority of local obligations within the meaning of the Bond Law. Under the Bond law, the Authority has the power to pay and finance the costs of acquiring, installing and constructing the Leased Property. The Authority has no independent staff and consequently will be dependent upon the City's officers and employees to administer its programs on its behalf. The Board of Directors of the Authority is composed of the members of the City Council. UNDERWRITING The Wells Fargo Institutional Securities, LLC has agreed to purchase the Bonds at a purchase price of $ , which includes an underwriter's discount of $ . The 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 purchase agreement,the approval of certain legal matters by counsel and certain other conditions. The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices, and such dealers may reallow any such discounts on sales to other dealers. FINANCIAL ADVISOR The Authority has retained Del Rio Advisors, LLC of Modesto, California, as financial advisor (the"Financial Advisor")in connection with the preparation of this Official Statement and with respect to 85071062.6 37 the issuance of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The compensation of the Financial Advisor is contingent on the issuance of the Bonds. CERTAIN LEGAL MATTERS Richards, Watson& Gershon,A Professional Corporation, Los Angeles, California will render an opinion with respect to the validity and enforceability of the Bonds, the Indenture, the Lease and the Site Lease, substantially in the form set forth in APPENDIX E hereto. Certain other legal matters will be passed on for the Authority and the City by Fulbright & Jaworski L.L.P., Los Angeles, California, Disclosure Counsel, and for the Authority and the City by the City Attorney of the City of Palm Desert. TAX MATTERS In the opinion of Bond Counsel, under existing law, interest on the Bonds are exempt from State of California personal income taxation. Bond Counsel expresses no opinion as to any other tax consequences regarding the Bonds. INTEREST ON THE BONDS IS NOT EXCLUDED FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES. OWNERS OF THE BONDS SHOULD CONSULT WITH THEIR OWN INDEPENDENT TAX ADVISORS AS TO THE FEDERAL, STATE, AND FOREIGN TAX CONSEQUENCES OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF THE BONDS. Original Issue Discount 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, provided that difference equals or exceeds a statutory de minimis amount(one quarter of one percent of the Bond's stated redemption price at maturity multiplied by the number of complete years to its maturity). Such original issue discount accrues actuarially on a constant yield basis over the term of each such Bond. The portion of OID that accrues during the time a purchaser owns a Bond (i) constitutes interest includable in the purchaser's gross income for federal income tax purposes and(ii) is added to the purchaser's tax basis for purposes of determining gain or loss on the maturity, redemption, prior sale, or other disposition of the Bond. The effect of OID is to accelerate the recognition of taxable income during the term of the Bond. Original Issue Premium 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. A purchaser of a Bond with original issue premium may elect, in accordance with the applicable provisions of Section 171 of the Code, to amortize that premium as an offset to the interest payments on the Bond. Pursuant to Section 67(b)(11) of the Code, the amortization of that premium is not considered a miscellaneous itemized deduction. The amount of amortizable Bond premium for a taxable year is determined actuarially on a constant yield basis over the term of each such Bond, or in the case of a callable bond, possibly on a more accelerated basis. 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 annually by the amount of amortizable Bond premium for the taxable year. 85071062.6 38 Circular 230 EACH PROSPECTIVE OWNER OF THE BONDS SHOULD SEEK ADVICE BASED UPON THE PROSPECTIVE OWNER'S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. THE FOREGOING DISCUSSION UNDER THE HEADING "TAX MATTERS" IS NOT INTENDED AND WAS NOT WRITTEN TO BE USED, AND IT CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON AN OWNER OF THE BONDS. SUCH DISCUSSION WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE BONDS. LITIGATION There is no action, suit or proceeding known to the Authority to be pending or threatened, restraining or enjoining the execution or delivery of the Bonds, the Indenture or the Lease or in any way contesting or affecting the validity of the foregoing or any proceedings of the Authority taken with respect to any of the foregoing. The City has pending against it claims and lawsuits arising in the normal course of City operations. The City is of the view that, if determined adversely to the City, such claims and lawsuits would not, in the aggregate, materially impair the City's ability to make payments of Base Rental and Additional Rental when due. RATING Standard & Poor's ("S&P") has assigned the rating of " / " to the Bonds, based upon issuance of the Letter of Credit. Such rating reflects only the view of S&P, and explanation of the significance of the ratings may be obtained from S&P. There is no assurance that the rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by S&P, if in the judgment of S&P circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. NO CONTINUING DISCLOSURE Neither the City nor the Authority has covenanted in the Indenture or the Lease while the Bonds bear interest at the Weekly Rate that it will undertake any continuing disclosure with respect to the Bonds. 85071062.6 39 MISCELLANEOUS All of the preceding summaries of the Indenture, the Lease, the Site Lease, the Assignment Agreement, the Letter of Credit, the Reimbursement Agreement, the Bond Law, other applicable legislation, agreements and 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 Authority for further information in connection therewith. This Official Statement does not constitute a contract with the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or estimates, whether or not expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The execution and delivery of this Official Statement by the Executive Director of the Authority have been duly authorized by the Board of Directors of the Authority. PALM DESERT FINANCING AUTHORITY By President 85071062.6 40 APPENDIX A CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING THE CITY OF PALM DESERT The following information concerning the City and surrounding areas are included only for the purpose of supplying general information regarding the community, General Description The City of Palm Desert (the "City") comprises an area of approximately 26 square miles and is located in the central portion of the Coachella Valley and is approximately midway 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 is bounded by Indian Wells to the east, Rancho Mirage to the west, the Santa Rosa mountains to the south and Interstate 10 to the north. Palm Desert is approximately 250 feet above sea level and is the point of termination for State Highway 74,the most direct access to the San Diego area. The City was incorporated on November 26, 1973, as a general law city. In 1997 the City became a charter city. Elevation of the City is 243 feet and the mean temperature is 73.1 degrees. Except for the summers, the weather is mild and annual average rainfall is 3.38 inches. The City occupies an area of 24.75 square miles. Government Voters elect a five member City Council to four-year overlapping terms.The City Council selects one of its members to serve as Mayor and appoints a City Manager to conduct the day-to-day business of the City. Population The following table sets forth the City, the County and the State population estimates as of January 1 for the years 2005 to 2009: CITY OF PALM DESERT,RIVERSIDE COUNTY AND STATE OF CALIFORNIA Estimated Population Year City of Riverside State of (January 1) Palm Desert County California 2005 49.490 1.883.735 36.676.931 2006 49.774 1.962.014 37.086.191 2007 49.717 2.030.315 37.472.074 2008 50.686 2.078.601 37.883.992 2009 51,509 2,107,653 38,292,687 Source: State of California Department of Finance,Demographic Research Unit. 85071062.6 A-1 Taxable Transactions The following table sets forth a summary of historic taxable sales within the City. CITY OF PALM DESERT TAXABLE RETAIL SALES Number of Permits and Valuation of Taxable Transactions (Dollars In Thousands) Retail Stores Total All Outlets Number Taxable Number Taxable Year of Permits Transactions of Permits Transactions 2003 1,538 $1,103,689 3,146 $1,296,730 2004 1,684 1,228,112 3,254 1,433,296 2005 1,733 1,317,337 3,263 1,529,342 2006 1,661 1,373,122 3,091 1,593,699 2007 1,627 1,375,037 3,129 1,593,698 Source: California State Board of Equalization, Taxable Sales in California(Sales& Use Tax). The following table sets forth a summary of historic taxable sales within the County. COUNTY OF RIVERSIDE Taxable Retail Sales Number Of Permits And Valuation Of Taxable Transactions (Dollars In Thousands) Retail Stores Total All Outlets Number Taxable Number Taxable Year of Permits Transactions of Permits Transactions 2003 18,300 $16,030,952 40,833 $21,709,135 2004 20,642 18,715,949 42,826 25,237,148 2005 22,691 20,839,212 44,222 28,256,491 2006 23,322 21,842,345 43,672 29,816,237 2007 22,918 21,242,516 45,279 29,023,609 Source: California State Board of Equalization, Taxable Sales in California(Sales&Use Tax). 85071062.6 A-2 Employment The City is located in the County of Riverside. The largest employers in the Riverside County labor market as of June 30,2008, are set forth in the following tables. COUNTY OF RIVERSIDE Major Employers(1) as of June 30,2008 Number of Company Name Product/Service Employees County of Riverside Government 19,595 March Air Base Military 8,400 U.C. Riverside Education 6,657 Stater Brothers Market Grocery Stores 6,425 Pechanga Resort& Casino Hospitality and Gaming 4,800 Abbott Vascular Vascular Care 4,500 Riverside Unified School District Education 4,041 Riverside Community College District Education 3,753 Kaiser Permanente Health Care 3,200 Temecula Valley Unified School District Education 2,952 (1)Only the top ten employers that provided data to the Business Press are listed for each year. Source: The Business Press,Riverside,California. COUNTY OF RIVERSIDE Labor Market Civilian Labor Force,Employment And Unemployment Labor Unemployment Year Force Employment Unemployment Rate 2003 781,700 730,700 51,100 6.5% 2004 820,900 771,600 49,300 6.0 2005 857,300 811,000 46,300 5.4 2006 890,100 845,300 44,800 5.0 2007 911,500 856,500 55,000 6.0 2008 918,800 839,900 79,000 8.6 2009(11 923,000 805,100 117,900 12.8 (1)Data as of April 2009. Source: State of California Employment Development Department. 85071062.6 A-3 Construction Activity The following tables show a five year summary of the valuation of building permits issued in the City and the County. CITY OF PALM DESERT Building Permit Valuation (Valuation In Thousands Of Dollars) 2005 2006 2007 2008 2009(1) Permit Valuation New Single-family $46,917,643 $109,344,724 $121,735,110 $ 32,568,378 $4,436,126 New Multi-family 17,553,063 36,518,464 18,177,280 87,103,429 1,388,640 Res. Alterations/Additions 13,660,217 17,241,651 15,959,691 10,579,015 1,160,966 Total Residential $78,130,923 $163,104,839 $155,872,081 $130,250,822 $6,985,732 New Commercial 60,005,214 38,796,411 33,761,937 20,880,389 New Industrial 13,495,493 11,385,183 0 New Other 0 0 0 5,278,036 14,619,583 14,780,825 13,570,429 2,419,150 Com. Alterations/Additions 13,756,668 29,509,621 31,922,485 16,852,293 1,623,300 Total Nonresidential $92,535,411 $ 94,310,798 $ 80,465,247 $ 51,303,111 $4,042,450 New Dwelling Units Single Family 100 285 217 66 26 Multiple Family 135 442 94 471 12 TOTAL 235 727 311 537 38 (I)Data as of April 2009. Source: Construction Industry Research Board, Building Permit Summary. COUNTY OF RIVERSIDE Building Permit Valuation (Valuation In Thousands Of Dollars) 2005 2006 2007 2008 2009(1) Permit Valuation New Single-family $6,243,790 $4,412,257 $2,207,520 $1,214,752 $ 1,322 New Multi-family 407,429 431,579 238,316 243,741 256,601 Res. Alterations/Additions 164,312 158,098 141,996 118,490 37,042 Total Residential $6,815,531 $5,001,934 $2,587,832 $1,576,983 $24,921 New Commercial 552,665 648,068 682,331 539,944 318,564 New Industrial 120,366 288,353 184,506 70,411 29,727 New Other 344,702 290,010 240,765 138,766 8,610 Corn.Alterations/Additions 274,339 303,407 350,539 292,694 38,742 Total Nonresidential $1,292,072 $1,529,838 $1,458,141 $1,041,815 $ 52,557 New Dwelling Units Single Family 29,994 20,692 9,763 3,815 880 Multiple Family 4,140 4,519 2.690 2,104 442 TOTAL 34,134 25,211 12,453 5,919 1,322 (I)Data as of April 2009. Source: Construction Industry Research Board,Building Permit Summary. 85071062.6 A-4 Utilities Services Water is supplied to the City by the Coachella Valley Water District. Sewage treatment and disposal is 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. Telephone service is available through Verizon.Cable television services are provided by Time Warner. Transportation Inter-City transportation is provided by Greyhound Bus which provides service from its connection points in the City to its lines located outside of the City in addition to the community owned and operated Sunline Bus System which provides service throughout the entire Coachella Valley. IntraCity transportation is provided by Tel-a-Ride and local taxi firms. The City's central highways are California Highway 111 and 74 which connect to US Interstate 10 and to California Highway 63 and 86. A full service airport is located in Palm Springs, twelve 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. In addition, 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 the Coachella Valley. Community Service Facilities The City of Palm Desert provides both police and fire protection through contracts with the County of Riverside. Educational services are provided through the Desert Sands Unified School District. The College of Desert is the Coachella Valley's Community College and is located in Palm Desert. A satellite campus of Cal State University, San Bernardino is located on the College of the Desert Campus. Cultural and recreational facilities include sixteen churches. The City of Palm Desert has library services provided by the Riverside County Public Library System. The City has one public library located on the College of the Desert campus. This 43,000 square foot library is jointly used by the College of the Desert and the public library system. 85071062.6 A-5 APPENDIX B AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30,2008 85071062.6 B-1 APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following statements are summaries of the provisions of the Indenture and the Lease. These statements are qualified in their entirety by reference to the full terms of such documents, copies of which may be obtained from the Trustee. 85071062.6 C-1 APPENDIX D BOOK-ENTRY ONLY SYSTEM The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof The Depository Trust Company("DTC"),New York,NY, 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 maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with 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 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instrument(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. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The information set forth on such websites is not incorporated herein by reference. 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 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. D'fC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the 85071062.6 D-1 to whose accounts such onds are ited, which y or may not be identity of the Direct Participantsct and Indirect Partic pang will remaindrespons'ble forakeeping account the Beneficial Owners. The Dire 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. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being prepaid,DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be prepaid. 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 Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority (or the Trustee on behalf thereof) 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 Authority or Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, Trustee, or the Authority, 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 Authority or 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. A Beneficial 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 Authority or Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bonds are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event,Bonds will be printed and delivered. 85071062.6 D-2 APPENDIX E FORM OF BOND COUNSEL OPINION 85071062.6 E-1 Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) Sources and Uses of Funds Sources of Funds Par Amount of Bonds 5,225,000.00 Plus:Accrued Interest _ Less: (OID) Plus:OIP - Less: Underwriter's Discount (1) (52,250.00) Net Bond Proceeds at Closing 5,172,750.00 Uses of Funds Loan Program Fund 5,000,000.00 Reserve Fund (2) - Reserve Fund Surety (3) - Bond Insurance Premium (4) _ Costs of Issuance (5) 172,750 00 Accrued Interest Total Uses of Funds 5,172,750.00 Rounding Adjustment(Contingency) - Assumptions (1) 1.00% ($10.00/bond) of the Par Amount of Bonds (2) Not Applicable (3) Not Applicable (4) Not Applicable (5) Estimated Amount (Budget TBD) Run Date June 16, 2009 Run Time 3:05 PM Page 1 0/5 Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds, Series 2009 (Federally Taxable) Estimated Costs of Issuance Bond Counsel 35,000.00 Bond Counsel Expenses 2,500.00 Disclosure Counsel 25,000.00 Financial Advisor 37,500.00 LOC Counsel Fee 25,000.00 LOC Fee (Origination) 10,000.00 Remarketing Fee (1st Year in Advance) 9,625.00 Trustee Origination 3,500.00 Trustee Fee (1st Year in Advance) 2,500.00 Rating Fee 8,500.00 Title Insurance 4,850.00 Printing/ Miscellaneous 7,500.00 Rounding Adjustment (Contingency) 1,275.00 Total 172,750.00 Page 2 of 5 0) o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CD 0 0 010 �p 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 c , o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C l0 C U)U)In O O O O U) 0 0 U) U) U)U)Ln U)U)0 0 0 _ NN r N. 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CAr016NOMCD N 5 5LL o l0 N N N N N N CO CO M M ,r d' St N m u a w co CO C C) 0. CL o T > C C C LL ECC @ a •C 0Cn c � A o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0) 0) � .0 0) w C C 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C C LL 7 0 y C C U) Ln U) Lr o O O O t) o O U) U) Lin U) LC) LC LC O O O '5 '5 -0 Q aJ L l0 C N N r I. CO 1- O N N N O CD sr U) V' O co co t0 C 5 x y N N r o) W CD L) M .- CT t` N T CD M O co.,N co N ... LL C U C N 8, m d U) Ln U) V rt X' V d d' M M CO CO N N N N r ..- _ _ LL Ca) Emu 0 0 = CD CD c t CD /a F N N CT O r N CO V U) CD N. CO CA O N CO Cr V) CD N co co W \ \ N N N N N N N N N N N jp o o d C T�Q1 A 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Iii O C1 N N N N N N N N N N N N N N N N N N N N N O 0 U) E 0 >`a y M ~ N U1 r y N CO w N CB Q) CB CB CB O) rn CB CB CB CB m CB rn CB C) CB O) CB CB r o Li)ii E d . y o N 0 - aw > �(7 z � Palm Desert Financing Authority Energy Independence Program Variable Rate Demand Lease Revenue Bonds,Series 2009 (Federally Taxable) Bonds Debt Service vs.Loan Cash Flow Total Periodic Annual Annual Loan Loan Annual Date Costs Cash Flow Cash Flow (Savings)/Cost 7/23/2009 12/10/2009 234,136.41 3/1/2010 4/10/2010 234,136.42 9/1/2010 493210.21 468,272.83 24,937.38 12/10/2010 234,136.41 3/1/2011 4/10/2011 234,136.42 9/1/2011 495,690.75 468,272.82 27,417.93 12/10/2011 234,136.41 3/1/2012 4/10/2012 234,136.42 9/1/2012 491,023.75 468,272.82 22,750.93 12/10/2012 234,136.41 3/1/2013 4/10/2013 234,136.41 9/1/2013 496,011.50 468,272.82 27,738.68 12/10/2013 234,136.41 3/1/2014 4/10/2014 234,136.41 9/1/2014 494,963.50 468,272.82 26,690.68 12/10/2014 234.136.41 3/1/2015 4/10/2015 234,136.41 9/1/2015 493,225.00 468,272.82 24,952.18 12/10/2015 234,136.41 3/1/2016 4/10/2016 234.136.41 9/1/2016 495,796.00 468,272.83 27,523.17 12/10/2016 234,136.41 3/1/2017 4/10/2017 234,136.41 9/1/2017 492,331.25 468,272.82 24,058.43 12/10/2017 234,136.41 3/1/2018 4/10/2018 234,136.41 9/1/2018 493,176.00 468,272.82 24,903.18 12/10/2018 234,136.41 3/1/2019 4/10/2019 234,136.41 9/1/2019 492,985.00 468,272.82 24,712.18 12/10/2019 234,136.41 3/1/2020 4/10/2020 234,136.41 9/1/2020 491,758.25 468,272.82 23,485.43 12/10/2020 234,136.41 3/1/2021 4/10/2021 234,136.41 9/1/2021 494,495.75 468,272.81 26,222.94 12/10/2021 234,136.41 3/1/2022 4/10/2022 234,136.41 9/1/2022 495,852.25 468,272.82 27,579.43 12/10/2022 234,136 41 3/1/2023 4/10/2023 234,136.41 9/1/2023 495,827.75 468,272.82 27,554.93 12/10/2023 234,136.42 3/1/2024 4/10/2024 234,136.41 9/1/2024 494,422.25 468,272.83 26,149.42 12/10/2024 234,136.41 3/1/2025 4/10/2025 234,136.41 9/1/2025 491,635.75 468,272.83 23,362.92 12/10/2025 234,136.41 3/1/2026 4/10/2026 234,136.41 9/1/2026 492,468.25 468,272,82 24.195.43 12/10/2026 234,136.41 3/1/2027 4/10/2027 234,136.42 9/1/2027 491,574.50 468,272.83 23,301.67 12/10/2027 234,136.42 3/1/2028 4/10/2028 234,136.41 9/1/2028 493,954.50 468,272.83 25,681.67 12/10/2028 234,136.41 3/1/2029 4/10/2029 234,136.41 9/1/2029 494.263,00 468,272.81 25,990.19 Totals 9,874,665.21 9,365,456.45 9,365,456.45 509,208.76 Page 5 of CITY OF PALM DESERT, CALIFORNIA NOTICE IS I-�LREBY GIVF,N that the City Council of tha City of Palm Desert (the "City") will hold a public hearing on the proposed issuance of a single series of bonds by the Palm Desert Financing Authority (the "Authority") to (i) finance the acquisition and construction or installation of distributed generation renewable energy sources and energy efficiency improvements on or in properties in the City pursuant to the City's Energy Independence Program and (ii) reimburse the City for ihe entire amount of its $2.5 million advance, authorized by Resolution No. 08-89 of the City Council of' the C.ity, adopted on August 28, 2008, to initially fund the Energy Independence Fund. The time, date and place of the hearing shall be as follows: TIMF,: 4:00 P.M. _... I 5wx �' � 1 PLACE: Palm Desert City Hall Council Chamber 73-510 Fred Waring Drive Palm Desert, California 92260 Any person ��ho wishes to be heard regarding the proposed financing may appear at the public hearing or may send written comments to the undersigned at the address shown above. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a City Council ineeting or other services offered by the City of Palm Desert, please contact the City Clerk's Office at (760) 346-0611. Notification at least 48 hours prior to the meeting time when services are needed will assist the City staff in assuring that reasonable arrangements can be made to provide accessibility to tl�e meeting or service. /s/ Rachelle D. Klassen Dated this 17'�' day of .Tune, 2009. City Clerk of the City of Palm Desert, California P6401.1039\ 1 1 �#=1791. I