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Home My WebLink AboutSR - Revenue Bonds PA2/Res 06-75/Res FA-56/Res 528/PA2CITY OF PALM DESERT PALM DESERT FINANCING AUTHORITY PALM DESERT REDEVELOPMENT AGENCY STAFF REPORT REQUEST: APPROVAL OF RESOLUTION NO. 06- 75 OF THE CITY COUNCIL OF THE CITY OF PALM DESERT MAKING A FINDING OF SIGNIFICANT PUBLIC BENEFIT AND OTHER FINDINGS IN CONNECTION WITH THE ISSUANCE AND SALE BY THE PALM DESERT FINANCING AUTHORITY OF ITS TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES B, TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES C, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES D APPROVAL OF RESOLUTION NO. FA- 56 OF THE PALM DESERT FINANCING AUTHORITY ACKNOWLEDGING A FINDING OF SIGNIFICANT BENEFIT AND APPROVING AS TO FORM AND AUTHORIZING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION WITH THE ISSUANCE, SALE AND DELIVERY OF THE AUTHORITY'S TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES B, TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES C, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES D, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO APPROVAL OF RESOLUTION NO. 528 OF THE PALM DESERT REDEVELOPMENT AGENCY APPROVING AS TO FORM AND AUTHORIZING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION WITH THE SALE AND ISSUANCE BY THE PALM DESERT FINANCING AUTHORITY OF TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES B, TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES C, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES D, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO SUBMITTED BY: DAVE YRIGOYEN, DIRECTOR OF REDEVELOPMENT/HOUSING DATE: JUNE 8, 2006 CONTENTS: (1) CITY COUNCIL RESOLUTION NO. 06-75 (2) PALM DESERT FINANCING AUTHORITY RESOLUTION NO. FA 56 Staff Report Approval of AgencylPDFA Resolutions — PAQ Subordinate Tax Allocation Refunding Revenue Bonds 2006 Series A Page 2 of 5 June 8, 2006 (3) PALM DESERT REDEVELOPMENT AGENCY RESOLUTION NO.528 (4) INDENTURE OF TRUST (SENIOR BONDS) (5) PROJECT AREA NO.2 LOAN AGREEMENT (2006 SENIOR LOANS) (6) INDENTURE OF TRUST (SUBORDINATE BONDS) (7) PROJECT AREA NO. 2 LOAN AGREEMENT (2006 SUBORDINATE LOAN) (8) ESCROW AGREEMENT (9) PRELIMINARY OFFICIAL STATEMENT (10) BOND PURCHASE AGREEMENT (11) CONTINUING DISCLOSURE AGREEMENT Recommendation: By Minute Motion: 1. That the City Council approve Resolution No. 06- 75 , making (i) findings of significant public benefit in connection with the issuance and sale of four series of bonds (the "Bonds") bythe Palm Desert Financing Authority: (A) Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A (the "Series 2006A Bonds"), (B) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series B (the "Series 2006E Bonds"), (C) Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C (the "Series 2006C Bonds"), and (D) Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series D (the "Series 2006D Bonds"), and (ii) findings pursuant to Sections 33679 and 33445 of the California Health and Safety Code with respect to the projects to be funded by proceeds of the Bonds; 2. That the Palm Desert Financing Authority approve Resolution No. FA-56 , acknowledging finding of significant public benefit in connection with the issuance and sale of the Bonds, approving of the issuance, sale and delivery of the Bonds and authorizing the execution and delivery of documents relating to the Bonds; and 3. That the Palm Desert Redevelopment Agency approve Resolution No. 528, approving and authorizing the execution and delivery of documents relating to the Bonds. Executive Summary Adoption of the attached resolutions will allow Staff to proceed with the issuance of the Bonds and the use of proceeds from the Bonds to pay for the costs of certain projects. Backaround and discussion: Staff recommends the issuance of four series of Bonds relating to the financing and refinancing of projects for the Agency's Project Area No. 2. The Bonds will be issued as tax-exempt bonds. A portion of the net proceeds of the Series 2006A Bonds will be used to refund certain Authority bonds Staff Report Approval of Agency/PDFA Resolutions — PA#2 Subordinate Tax Allocation Refunding Revenue Bonds 2006 Series A Page 3 of 5 June 8, 2006 issued in 1995 to finance projects for the Project Area No. 2. A portion of the net proceeds of the Series 2006A Bonds, along with the net proceeds of the Series 2006B Bonds, the Series 2006C Bonds and the Series 2006D Bonds will be used to pay all or a portion of the costs of certain Agency projects benefiting Project Area No. 2. The Series 2006C Bonds initially will be escrowed bonds, in that the net proceeds of the Series 2006C Bonds will be deposited in a Special Escrow Fund. In time, the Agency expects that, as certain conditions are met (primarily, that sufficient tax increments are generated with respect to the Project Area No. 2 to meet the coverage requirements set forth in the bond documents), money will be released from the Special Escrow Fund and become available for use on Agency projects. Based on current estimates by the Financing Advisor and the Underwriter, the sale of the four series of Bonds (including the moneys anticipated to be eventually released from the Special Escrow Fund) is expected to generate approximately $59,300,000 of net proceeds to be available for Agency projects. The refunding of the 1995 bonds is currently expected to generate approximately $250,000 net present value savings, while achieving annual debt service savings. The repayment of the Bonds will be primarily secured by tax increments generated with respect to Project Area No. 2. The Series 2006A Bonds, the Series 2006E Bonds and the Series 2006C Bonds will rank on a parity with the outstanding Authority bonds issued for Project Area No. 2, and will rank senior to the Series 2006D Bonds. The Series 2006A Bonds and the Series 2006C Bonds will be current interest bonds. The Series 2006E Bonds and the Series 2006D Bonds will be capital appreciation bonds. Previously on April 27, 2006, the City Council, the Authority and the Agency adopted resolutions (the "Prior Resolutions") approving the issuance, sale and delivery of the two series of bonds for Project Area No. 2 and proposed projects to be funded by the proceeds of the such bonds. After the April 27, 2006 Council meeting, the Financial Advisor and the Underwriter, in light of feedback from rating agencies and bond insurers, recommended a change to the structure of the financing, from two series of bonds to the four series of Bonds as described above. Staff also undertook to review the various potential Agency projects with respect to Project Area No. 2 and proposes to modify and expand on the proposed projects to be funded by the proceeds of the Bonds. The proposed projects are outlined in the attached City Council resolution and are also described in an Amended Summary Report which was made available to the public in connection with the City Council public hearing. The attached resolutions, once in effect, will supersede the Prior Resolutions in their entirety. Adoption of the attached resolutions will allow Staff to proceed with the issuance of the Bonds and the use of proceeds to pay for the costs of the identified projects. Staff is utilizing the following financing team: Kenneth L. Dieker, D.B.A. Del Rio Advisors, LLC, Modesto, CA — Financial Advisor, Richards, Watson & Gershon, A Professional Corporation, Los Angeles, CA — Bond Counsel Jones Hall, A Professional Law Corporation, San Francisco, CA — Disclosure Counsel Wells Fargo Bank, National Association, Los Angeles, CA — Trustee and Escrow Agent Citigroup Global Markets Inc., Los Angeles, CA — Underwriter Rosenow Spevacek Group, Inc., Santa Ana, CA — Fiscal Consultant MuniFinancial, Inc., Temecula, CA — Dissemination Agent Staff Report Approval of Agency/PDFA Resolutions — PA#2 Subordinate Tax Allocation Refunding Revenue Bonds 2006 Series A Page 4 of 5 June 8, 2006 SUMMARY OF DOCUMENTS TO BE APPROVED: Indentures of Trust Generally, an indenture sets forth all of the terms and conditions of the bonds (e.g., principal amounts, maturity and redemption schedules, payment, registration and transfer provisions and the form of the Bonds), the covenants and other obligations of the Authority to the bondholders, and the role and the duties of the Trustee. Two indentures are presented, one for the Series 2006A Bonds, the Series 2006E Bonds and the Series 2006C Bonds, and the other for the Series 2006D Bonds. As presented, the Indentures are in substantially final form, except that final dollar amounts and interest rates will be added after the Bonds have been priced and sold. Provisions may also be added, deleted or otherwise modified to accommodate the bond insurer requirements. Loan Agreements Presented are two loan agreements, one for the Series 2006A Bonds, the Series 2006E Bonds and the Series 2006C Bonds, and the other for the Series 2006D Bonds. Pursuant to the Loan Agreements, the Authority agrees to lend the Agency funds that would be used by the Agency to refund the 1995 bonds and fund capital projects for benefit to Project Area No. 2. The Agency agrees to pay tax increment revenues to the Trustee, as the Authority's assignee, in sufficient amounts to pay debt service on the Bonds. Bond Purchase Aqreement This is an agreement between the Authority, the Agency and the Underwriter for the purchase and sale of the bonds. Pursuant to the Bond Purchase Agreement, the underwriter agrees to purchase the Authority bonds at specified prices and interest rates, subject to the receipt of certain opinions, certificates and other conditions. The Bond Purchase Agreement will be presented to the appropriate officers of the Authority and Agency for approval and execution as soon as the Underwriter has completed the process of offering and then pricing the Bonds in the market. Preliminary Official Statement A Preliminary Official Statement relating to the Bonds, in substantially final form, has been prepared by Disclosure Counsel. The Preliminary Official Statement is designed to provide material information to investors with respect to the terms and the security of the Bonds. It includes a full description of the legal and financial aspects, as well as the various legal documents in regard to the Bonds, except for certain information which will be determined upon the pricing of the Bonds (such as the final principal amounts, the interest rates and the redemption dates). The Preliminary Official Statement also includes information regarding the Authority, the Agency, and the Project Area. The Preliminary Official Statement will be utilized by the Underwriter in its effort to market the bonds to the public. Once the Bonds have been priced and the Bond Purchase Agreement has been signed, Disclosure Counsel will insert the final pricing information into the Preliminary Official Statement, thereby converting it to the Official Statement. The Underwriter will then distribute the Official Statement to the individuals and institutions that purchased the Bonds. Continuina Disclosure Aareement The Continuing Disclosure Agreement is between the Agency, the Trustee and the Dissemination Agent. This agreement directs the Agency to provide an annual report to the Dissemination Agent. 110� 110' Staff Report Approval of Agency/PDFA Resolutions — PA#2 Subordinate Tax Allocation Refunding Revenue Bonds 2006 Series A Page 5 of 5 June 8, 2006 The Annual Report contains the Agency's audited financial statements and other pertinent information relating to Project Area No. 2. The Annual Report is sent to state and national repositories so that this information is available to the bondholders. This mechanism is used to keep bondholders informed on an annual basis of the financial status of the Agency. Escrow Aareement The Escrow Agreement is an agreement among the Agency, the Authority and the Trustee. Redemption of the 1995 Bonds will occur a short period of time after the issuance of the Bonds. During this period, money to be used for the redemption of the 1995 Bonds will be held by the Escrow Agent in an escrow fund. The Escrow Agreement provides for the establishment and maintenance of such escrow fund and the release of money on the redemption date The resolutions permit Staff to make the necessary changes to all of the documents in order to finalize and execute the documents. Staff is recommending that the City Council, the Authority and the Agency adopt their respective resolutions approving and authorizing the sale and issuance of the Bonds, and the execution and delivery of the related documents. Submi by: `D-ave Yri4(l Director edevelopment/Housing Ju tin McCarthy, Repevelopment Carlos L. Ortega City Manager/C /Executive Director fdld BY FIN AUTH ON �-' d to VERIFIED BY: 4 (� Original on file with City Clerk's Office Pau4SbstadPA4DTr`&ctor of Finance/Treasurer CITY COUNCIL -ACTION: APPROVED DENIED R CSIVED OTHER 79�, M1&TINO DATE AYES :6VZi�Z . Kolb, �,OT G sari NOES : /"Vov TUB ABSENT: t\Iwe. ABSTAIN:ALom- VERIFIED BY: Original on File wi h City Clerk's Office BY RDA ON (o • • 6u VERIFIED BY f Of tm Original on file with City Clerk's Office RESOLUTION NO. 06- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT MAKING A FINDING OF SIGNIFICANT PUBLIC BENEFIT AND OTHER FINDINGS IN CONNECTION WITH THE ISSUANCE AND SALE BY THE PALM DESERT FINANCING AUTHORITY OF ITS TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES B, TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES C, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES D RECITALS: WHEREAS, the Palm Desert Financing Authority (the "Authority") has proposed to sell and issue four series of bonds (collectively, "the Bonds"): (i) Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A, (ii) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series B, (iii) Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C, and (iii) Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series D; and WHEREAS, proceeds of the Bonds are to be applied to make four loans to the Palm Desert Redevelopment Agency (the "Agency") for the object and purpose of, among other things, assisting in (i) effecting a refunding of all of the Authority's remaining outstanding Tax Allocation Revenue Bonds (Project Area No. 2), Series 1995, and (ii) the financing of certain public capital improvements (the "Projects") of benefit to Project Area No. 2, of the Agency (the "Project Area"), including : (A) acquisition of open space for recreational purposes, (B) installation of Freedom Park at Country Club Drive and Liberty Avenue, (C) construction of a swimming pool and related shower and restroom facilities at the College of the Desert, (D) civic center park improvements, including the construction and improvements of public recreational buildings, (E) construction of a parking structure to accommodate a hotel and related development at the Desert Willow Golf Resort, (F) construction of a fire station and related improvements, (G) construction of a pedestrian bridge at University Park, (H) installation of a new section of Berger Drive and related improvements, (1) widening of Monterey Avenue between Magnesia Falls Drive and Gerald Ford Drive, (J) improvements to the on- and off -ramps at Monterey Avenue and Interstate 10, (K) construction of on- and off -ramps at Portola Avenue and Interstate 10, (L) drainage improvements along Monterey Avenue and (M) undergrounding of utilities on arterial streets throughout the Project Area; and P64 12.1c 55\992568.1 WHEREAS, pursuant to Section 6586.5 of the California Government Code and Section 33679 of the California Health and Safety Code, 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, there has been made available in the office of the City Clerk for two weeks prior to such public hearing for public inspection and copying, at a cost not to exceed the cost of duplication, an amended summary report which includes all of the following: (i) estimates of the amount of such taxes allocated to the Agency from the Project Area proposed to be used to pay for the Projects, including interest payments; (ii) facts supporting the determinations required to be made by the City Council pursuant to California Health and Safety Code Section 33445; and (iii) the redevelopment purpose for which such taxes are being used to pay for the installation and construction; and WHEREAS, it is the intent of the City Council that this Resolution shall supersede Resolution No. 06-57, adopted on April 27, 2006, in its entirety; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Recitals. The above recitals, and each of them, are true and correct. Section 2. Approval of Financinq. The City Council hereby finds that the financing and refinancing of public capital improvements described in Recitals hereof through the issuance by the Authority of the Bonds will result in significant public benefits to the constituents of the Agency and the City of Palm Desert, including demonstrable savings in effective interest rate and more efficient delivery of Agency and City services to residential and commercial development. The City Council hereby approves the issuance of the Bonds by the Authority. Section 3. Further Findinqs. The City Council hereby finds and determines that based upon the "Amended Summary Report Regarding Payment by the Palm Desert Redevelopment Agency for All or A Portion of the Cost of the Acquisition of Land for Open Space and the Installation and Construction of Certain Other Public Capital Improvements of Benefit to Project Area No. 2," which Report was made available at the office of the City Clerk in connection with the public hearing described in the Recitals hereof, and other information presented to the City Council: (i) the above - described public capital improvements are of benefit to the Project Area and to the immediate neighborhood in which the Projects are located; (ii) the payment of funds for the cost of such public capital improvements will assist in the elimination of one or more blighting conditions inside the Project Area; (iii) the payment of funds for the cost of 116402. 105 5\x92 568.1 2 such improvements is consistent with the Agency's implementation plan adopted pursuant to Health and Safety Code Section 33490; and (iv) no other reasonable means of financing such improvements is available to the City. Section 4. Approval of Payment by Agency. The City Council hereby approves payment by the Agency for the cost of the installation and construction of the above -described improvements from tax increment revenues of the Agency from the Project Area. Section 5. Resolution No. 06-57 Superseded. Upon adoption, this Resolution shall supersede Resolution No. 06-57 in its entirety. Section 6. Other Acts. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to effectuate the purposes of this Resolution and any such actions previously taken by such officers are hereby ratified and confirmed. Section 7. Effective Date. This Resolution shall take effect immediately upon adoption. APPROVED and ADOPTED this 8th day of June 2006 by the following vote to wit: AYES: NOES: ABSENT: ABSTAIN: Jim Ferguson, Mayor ATTEST: Rachelee D. Klassen, City Clerk 116402.105 5\992 56x.1 3 RESOLUTION NO. FA- A RESOLUTION OF THE PALM DESERT FINANCING AUTHORITY ACKNOWLEDGING A FINDING OF SIGNIFICANT BENEFIT AND APPROVING AS TO FORM AND AUTHORIZING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION WITH THE ISSUANCE, SALE AND DELIVERY OF THE AUTHORITY'S TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES B, TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES C, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES D, 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 Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the California Government Code (the "Act') and 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 (the "Agency"), and is authorized pursuant to Article 4 of the Act to issue bonds for the purpose of making loans to the Agency to provide financing and refinancing for public capital improvements; and WHEREAS, the Authority desires to issue and sell four series of bonds: (i) Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A (the "Series 2006A Bonds"), (ii) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series B (the "Series 2006B Bonds"), (iii) Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C (the "Series 2006C Bonds," and collectively with the Series 2006A Bonds and the Series 2006B Bonds, the "Senior Bonds"), and (iii) Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series D (the "Subordinate Bonds," and together with the "Series Bonds," the "Bonds"); and WHEREAS, proceeds of the Bonds are to be applied for the purpose of making four loans to the Agency pursuant to two loan agreements for the object and purpose of, among other things, (i) assisting in the financing of certain public capital improvements of benefit to Project Area No. 2, of the Agency, and (ii) effecting a P6402.105 5\992 569.1 refunding of all of the Authority's remaining outstanding Tax Allocation Revenue Bonds (Project Area No. 2), Series 1995; 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, it is the intent of the Authority that this Resolution shall supersede Resolution No. FA-52 and Resolution No. FA-54, adopted on April 27, 2006, in their entirety; NOW, THEREFORE, THE PALM DESERT FINANCING AUTHORITY DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Recitals. The above recitals, and each of them, are true and correct. Section 2.Acknowledament of Citv Council Findinas. 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 3.Issuance of Senior Bonds; Senior Indenture. The Indenture of Trust (the "Senior Indenture"), proposed to be entered into by and between the Authority and the Trustee (defined in Section 5 below) relating to the Senior Bonds, in the form presented at this meeting and on file in the office of the Secretary of the Authority (the "Secretary"), is hereby approved. The issuance of the Series 2006A Bonds in an aggregate principal amount not exceeding $46,000,000, the Series 2006B Bonds in an aggregate initial principal amount not exceeding $3,500,000, and the Series 2006C Bonds in an aggregate principal amount no exceeding $8,500,000, pursuant to the Senior Indenture is hereby approved. Subject to Section 12 below, each of the President, the Chief Administrative Officer and the Treasurer of the Authority, any deputy of such officers, and any member of the Authority Commission (each, an "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 Senior 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 Officer's execution and delivery thereof). Section 4.Issuance of Subordinate Bonds; Subordinate Indenture. The Indenture of Trust (the "Subordinate Indenture"), proposed to be entered into by and between the Authority and the Trustee relating to the Subordinate Bonds, in the form presented at this meeting and on file in the office of the Secretary, is hereby approved. The issuance of the Subordinate Bonds, in an aggregate principal amount not exceeding $18,000,000, pursuant to the Subordinate Indenture is hereby approved. Subject to Section 12 below, each Authorized Officer, acting singly, is hereby authorized 116402.1055\992569.1 2 and directed, for and in the name and on behalf of the Authority, to execute and deliver the Subordinate 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 Officer's execution and delivery thereof). Section 5.Appointment of Trustee and Escrow Aaent. The appointment of Wells Fargo Bank, National Association, as trustee (the "Trustee") under the Indenture and as escrow agent (the "Escrow Agent") under the Escrow Agreement described in Section 8 is hereby approved. Section 6. Senior Loan Agreement. The Project Area No. 2 Loan Agreement (2006 Senior Loans) (the "Senior Loan Agreement"), proposed to be entered into by and among the Agency, the Authority and the Trustee, in the form presented at this meeting and on file in the office of the 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 execute and deliver the Senior Loan Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may approve (such approval to be conclusively evidenced by such Officer's execution and delivery thereof). Section 7. Subordinate Loan Agreement. The Project Area No. 2 Loan Agreement (2006 Subordinate Loan) (the "Subordinate Loan Agreement"), proposed to be entered into by and among the Agency, the Authority and the Trustee, in the form presented at this meeting and on file in the office of the 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 execute and deliver the Subordinate Loan Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may approve (such approval to be conclusively evidenced by such Officer's execution and delivery thereof). Section 8. Escrow Agreement. The Escrow Agreement (Project Area No. 2) (the "Escrow Agreement"), proposed to be entered into by and among the Agency, the Authority and the Escrow Agent, in the form presented to this meeting and on file in the office of the 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 execute and deliver the Escrow Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may approve (such approval to be conclusively evidenced by such officer's execution and delivery thereof. Section 9. Preliminary Official Statement. The Preliminary Official Statement relating to the Bonds (the "Preliminary Official Statement"), in the form presented at this meeting and on file with the 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 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 116402.1055\992569.1 � 1934. The distribution by Citigroup Global Markets Inc. (the "Underwriter") of copies of the Preliminary Official Statement to potential purchasers of the Bonds is hereby approved. Section 10. 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 changes therein as such Authorized Officer may approve (such approval to be conclusively evidenced by such Authorized Officer's execution and delivery thereof). The distribution and use of the Official Statement by the Underwriter in connection with the sale of the Bonds are hereby approved. Section 11. Purchase Agreement. The form of the Bond Purchase Agreement as presented to this meeting by the Underwriter and the sale of the Bonds pursuant thereto upon the terms and conditions set forth therein are hereby approved. Subject to Section 12 below, each Authorized Officer, acting singly, is authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Purchase Agreement in substantially said form, with such changes therein as the officer executing the same may require or approve, including such matters as are authorized by Section 12 hereof (such approval to be conclusively evidenced by such Authorized Officer's execution and delivery thereof). Section 12. Terms of Sale of Bonds. Each Authorized Officer, acting singly, is hereby authorized and directed to act on behalf of the Authority to establish and determine each of the following: (a) the aggregate initial principal amount of each series of Bonds, which amount (i) with respect to the Series 2006A Bonds shall not exceed $46,000,000, (ii) with respect to the Series 2006B Bonds shall not exceed $3,500,000, (iii) with respect to the Series 2006C Bonds shall not exceed $8,500,000, and (iv) with respect to the Subordinate Bonds shall not exceed $18,000,000-1 (b) interest rates on the Bonds, provided that (i) the true interest cost with respect to the Series 2006A Bonds shall not exceed 6.25 percent, (ii) the true interest cost with respect to the Series 2006B Bonds shall not exceed 6.25 percent, (iii) the true interest cost with respect to the Series 2006C Bonds shall not exceed 6.25 percent, and (iv) the true interest cost with respect to the Subordinate Bonds shall not exceed 6.25 percent; (d) the Underwriter's compensation (i.e., underwriter's discount) with respect to the sale of the Bonds, provided that such compensation (i) with respect to the Series 2006A Bonds shall not exceed one percent of the aggregate principal amount of the Series 2006A 116402.1055\992569.1 4 Bonds, (ii) with respect to the Series 2006B Bonds shall not exceed one percent of the aggregate initial principal amount of the Series 2006B Bonds, (iii) with respect to the Series 2006C Bonds shall not exceed one percent of the aggregate principal amount of the Series 2006C Bonds, and (iv) with respect to the Subordinate Bonds shall not exceed one percent of the aggregate initial principal amount of the Subordinate Bonds; and (e) such provisions as may be required by the terms of the bond insurance, if any, or debt service reserve surety bond(s), if any, purchased in connection with the issuance of the Bonds. The authorization and powers delegated to such officer by this Section 12 shall be valid for a period of 120 days from the date of adoption of this Resolution. Section 13. Resolution No. FA-52 and Resolution No. FA-54 Superseded. Upon adoption, this Resolution shall supersede Resolution No. FA-52 and Resolution No. FA-54 in their entirety. Section 14. 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 which they may deem necessary or advisable in order to consummate the issuance, sale and delivery of the Bonds, or otherwise to effectuate the purposes of this Resolution, the Senior Indenture, the Senior Loan Agreement, the Subordinate Indenture, the Subordinate Loan Agreement, the Escrow Agreement, the Purchase Agreement and the Official Statement, and any such actions previously taken by such officers are hereby ratified and confirmed. 116402.1055\992569.1 5 Section 15. Effective Date. This Resolution shall take effect immediately upon adoption. APPROVED AND ADOPTED this 8th day of June 2006 by the following vote to wit: AYES: NOES: ABSENT: ABSTAIN: ATTEST: Rachelle D. Klassen, Secretary Jim Ferguson, President 116402.1055\992569.1 � RESOLUTION NO. 528 A RESOLUTION OF THE PALM DESERT REDEVELOPMENT AGENCY APPROVING AS TO FORM AND AUTHORIZING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION WITH THE SALE AND ISSUANCE BY THE PALM DESERT FINANCING AUTHORITY OF TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES B, TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES C, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES D, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO RECITALS: WHEREAS, the Palm Desert Financing Authority (the "Authority") has determined to sell and issue four series of bonds: (i) Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A (the "Series 2006A Bonds"), (ii) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series B (the "Series 2006B Bonds"), (iii) Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C (the "Series 2006C Bonds," and collectively with the Series 2006A Bonds and the Series 2006B Bonds, the "Senior Bonds"), and (iii) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series D (the "Subordinate Bonds," and together with the Senior Bonds, the "Bonds"); and WHEREAS, proceeds of the Bonds are to be applied for the purpose of making four loans (the "Loans") to the Palm Desert Redevelopment Agency (the "Agency") pursuant to two loan agreements for the object and purpose of, among other things, (i) assisting in the financing of certain public capital improvements of benefit to Project Area No. 2 of the Agency, and (ii) effecting a refunding of all of the Authority's remaining outstanding Tax Allocation Revenue Bonds (Project Area No. 2), Series 1995; and WHEREAS, it is the intent of the Agency that this Resolution shall supersede Resolution No. 525, adopted on April 27, 2006, in its entirety; NOW, THEREFORE, THE PALM DESERT REDEVELOPMENT AGENCY DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Recitals. The above recitals, and each of them, are true and correct. P6402.1055\892572.1 Section 2. Senior Loan Aqreement. The Project Area No. 2 Loan Agreement (2006 Senior Loans) (the "Senior Loan Agreement"), proposed to be entered into by and among the Authority, the Agency and Wells Fargo Bank, National Association, as trustee (the "Trustee"), in the form presented at this meeting and on file with the Secretary of the Agency (the "Secretary") is hereby approved. Each of the Chairman and the Executive Director, or either of them, or their designee (each, an "Authorized Officer"), is hereby authorized and directed, for and in the name and on behalf of the Agency, to execute and deliver the Senior Loan 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 3. Subordinate Loan Aqreement. The Project Area No. 2 Loan Agreement (2006 Subordinate Loan) (the "Subordinate Loan Agreement"), proposed to be entered into by and among the Authority, the Agency and the Trustee, in the form presented at this meeting and on file with the Secretary is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Agency, to execute and deliver the Subordinate Loan 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. Escrow Aqreement. The Escrow Agreement (Project Area No. 2), proposed to be entered into by and among the Agency, the Authority and the Escrow Agent, in the form presented to this meeting and on file in the office of the 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 execute and deliver the Escrow Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may approve (such approval to be conclusively evidenced by such officer's execution and delivery thereof). Section 5. Continuinq Disclosure Aqreement. The Continuing Disclosure Agreement (the "Continuing Disclosure Agreement"), proposed to be entered into by and among the Agency, the Trustee and MuniFinancial, Inc., as Dissemination Agent, in the form presented at this meeting and on file in the office of the Secretary, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Agency, to execute and deliver the Continuing Disclosure Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may approve (such approval to be conclusively evidenced by such officer's execution and delivery thereof). Section 6. Purchase Aqreement. The Bond Purchase Agreement (the "Purchase Agreement") proposed to be entered into by the Authority, the Agency and Citigroup Global Markets Inc. (the "Underwriter"), in the form presented at this meeting and on file with the Secretary, and the sale of the Bonds pursuant thereto upon the terms and conditions set forth therein, are hereby approved. Subject to the limitations P6402.1055\892572.1 2 imposed by the Authority by its Resolution relating to the issuance and sale of the Bonds, each Authorized Officer, acting singly, is authorized and directed, for and in the name and on behalf of the Agency, to execute and deliver the Purchase Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may require or approve (such approval to be conclusively evidenced by his execution and delivery thereof). Section 7. Requisitions. Each Authorized Officer, the Treasurer or any deputy of such officers, acting singly, is hereby authorized and directed to execute one or more requisitions authorizing the Trustee to pay costs relating to the incurrence of the Loans and the issuance of the Bonds from the proceeds of the Bonds pursuant to the Senior Loan Agreement and the Subordinate Loan Agreement. Section 8. Resolution No. 525 Superseded. Upon adoption, this Resolution shall supersede Resolution No. 525 in its entirety. Section 9. Other Acts. The Authorized Officers and all other officers of the Agency are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to effectuate the purposes of this Resolution, the Senior Loan Agreement, the Subordinate Loan Agreement, the Escrow Agreement, the Continuing Disclosure Agreement and the Purchase Agreement, and any such actions previously taken by such officers are hereby ratified and confirmed. Section 10. Effective Date. This Resolution shall take effect immediately upon adoption. APPROVED and ADOPTED this 8th day of June 2006 by the following vote to wit: AYES: NOES: ABSENT: ABSTAIN: ATTEST: Rachelle D. Klassen, Secretary Jim Ferguson, Chairman P6402.1055\892572.1 3 Indcnturc of Trust «ith rcfcrcncc to � Palm Dcscrt Financing Authorit� Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2) 2006 Scrics A Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2) 2006 Scrics B � Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2) 2006 Scrics C P6—Icl2.lcl;;\x72;;1.x RW(� UR�FI: �/22/2cu16 TABLE OF CONTENTS ARTICLE I DEFINITIONS: AUTHORIZATION AND PURPOSE OF BONDS: EQUAL SECURITY.................................................................................................... Scction I.01. Dcfinitions ............................................................................................ Scction I.02. Rulcs of Construction ............................................................................ Scction I.0 �. Authorization and Purposc of Bonds ..................................................... ScctionI.0�4. Equal Sccurit� ...................................................................................... ARTICLE II ISSUANCE OF BONDS ..................................... Scction 2.01. Dcsignation ................................................ Scction 2.02. Tcrms of Bonds ......................................... Scction 2.0 �. Rcdcmption of Bonds ................................. Scction 2.0�4. Form of Bonds ........................................... Scction 2.Oi. E�ccution of Bonds .................................... Scction 2.06. Transfcr of Bonds ...................................... Scction 2.07. E�changc of Bonds .................................... Scction 2.08. Tcmporar� Bonds ...................................... Scction 2.09. Rcgistration Books ..................................... Scction 2.10. Bonds Mutilatcd. Lost. Dcstro� cd or Stolcn ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS: ISSUANCE OF BONDS ........................................................... Scction ;.01. Issuancc of Bonds ............................................................ Scction �.02. Loan Funds: Application of Procccds of Salc of Bonds..... Scction ;.0;. Validit� of Bonds ............................................................. ARTICLE IV REVENUES: FLOW OF FUNDS ........................... Scction �4.01. Plcdgc of Rc� cnucs: Assignmcnt of Rights .... Scction �4.02. Rcccipt. Dcposit and Application of Rc� cnucs Scction �4.0;. In� cstmcnts .................................................... Scction �4.0�4. Valuation and Disposition of In� cstmcnts ...... ARTICLE V COVENANTS OF THE AUTHORITY ................................... Scction �.01. Punctual Pa� mcnt .......................................................... Scction �.02. E�tcnsion of Pa� mcnt of Bonds ...................................... Scction �.0�. Against Encumbranccs ................................................... Scction �.0�4. Po«cr to Issuc Bonds and Makc Plcdgc and Assignmcnt Scction �.0�. Accounting Rccords and Financial Statcmcnts ............... Scction �.06. No Additional Indcbtcdncss ........................................... Scction �.07. Ta� Co� cnants ............................................................... Scction �.08. Loan Agrccmcnt ............................................................ Scction �.09. Furthcr Assuranccs ........................................................ ARTICLE VI THE TRUSTEE ........................................... Scction 6.01. Appointmcnt of Trustcc ...................... Scction 6.02. Acccptancc of Tnists ........................... Scction 6.0 �. Fccs. Chargcs and E�pcnscs of Trustcc Scction 6.0�4. Noticc to O« ncrs of Dcfault ................ Scction 6.Oi. Intcr� cntion b� Trustcc ....................... Scction 6.06. Rcmo� al of Trustcc ............................. Pagc .2 .2 .9 .9 10 10 10 10 12 16 16 17 17 17 17 ix ix ix ix ix 19 19 19 20 21 21 21 21 21 21 22 22 22 2� 2�4 2�4 2�4 2�4 27 27 27 27 P6—Ic �2. I c�;;\x72; ; I. x —1— Scction 6.07 Scction 6.08 scction 6.09 scction 6.10 Scction 6. I I scction 6.12 Rcsignation b� Trustcc .................................. Appointmcnt of Succcssor Trustcc ................ Mcrgcr or Consolidation ............................... Conccrning am Succcssor Trustcc ................ Appointmcnt of Co-Trustcc ........................... Indcmnification: Limitcd Liabilit� of Trustcc ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE Scction 7.01. Amcndmcnt Hcrcof ............................................................ Scction 7.02. Effcct of Supplcmcntal Indcnturc ....................................... Scction 7.0 �. Endorscmcnt or Rcplaccmcnt of Bonds Aftcr Amcndmcnt . ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES .......................... Scction 8.01. E� cnts of Dcfault .......................................................... Scction 8.02. Rcmcdics Upon E� cnt of Dcfault .................................. Scction 8.0 �. Application of Rc� cnucs and Othcr Funds Aftcr Dcfault Scction 8.0�4. Po« cr of Trustcc to Control Procccdings ....................... Scction 8.Oi. Appointmcnt of Rccci� crs ............................................. Scction 8.06. Non-Wai�cr .................................................................. Scction 8.07. Limitation on Rights and Rcmcdics of O« ncrs .............. Scction 8.08. Tcrmination of Procccdings .......................................... ARTICLE IX BOND INSURANCE ARTICLE X BOOK-ENTRY SYSTEM ................................................... Scction 10.01 Book-Entr� S� stcm: Limitcd Obligation of Authorit� Scction I 0.02 Rcprescntation Lcttcr ................................................ Scction 10.0 � Transfcrs Outsidc Book-Entr� S� stcm ....................... Scction 10.0�4 Pa�mcnts to thc Nomincc .......................................... Scction I O.Oi Initial Dcpositon and Nomincc ................................. ARTICLE XI MISCELLANEOUS ............................................................................. Scction I I.01. Limitcd Liabilit� of Authorit� ................................................... Scction I I.02. Bcncfits of Indcnturc Limitcd to Partics .................................... Scction I I.O�. Dischargc of Indcnturc .............................................................. Scction I 1.0�4. Succcssor Is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor Scction I I.0;. Contcnt of Ccrtificatcs .............................................................. Scction I I.06. E�ccution of Documcnts b� O« ncrs .......................................... Scction I 1.07. Disqualificd Bonds .................................................................... Scction I I.08. Wai� cr of Pcrsonal Liabilit� ...................................................... Scction I I.09. Partial In� alidit� ....................................................................... Scction I I.10. Dcstruction of Canccllcd Bonds ................................................ Scction I I. I I. Funds and Accounts .................................................................. Scction I I.12. Pa� mcnt on Busincss Da� s ........................................................ ScctionI I.I;. Noticcs ...................................................................................... Scction I 1.1 �4. Unclaimcd Monc� s ................................................................... Scction I I. I�. Go� crning La« ......................................................................... EXHIBIT A— FORM OF SERIES 2006A BOND EXHIBIT B— FORM OF SERIES 2006B BOND EXHIBIT C— FORM OF SERIES 2006C BOND 27 zx zx zx zx 29 29 29 ;0 ;0 ;0 ;0 �I �2 ;; ;; >> >> ��4 ;�4 ;�4 ��4 �i �i �i �i ;; �i �6 �6 �6 �7 �7 �7 �x �x �x �x �x �x �9 �9 P6—Ic �2. I c�;;\x72; ; I. x —u— Indcnturc of Trust This Indcnturc of Trust (this "Indcnturc��) is madc and cntcrcd into as of Jul� I. 2006. b� and bet«ccn thc Palm Dcscrt Financing Authorit�. a joint po«crs authorit� dul� organizcd and �alidl� c�isting undcr thc la« s of thc Statc of California (thc "Authorit� ��) and Wclls Fargo Bank. National Association. a national banking association dul� organizcd and � alidl� c�isting undcr thc la«s of thc Unitcd Statcs of Amcrica. ha� ing a corporatc trust officc in Los Angcics. California. and bcing qualificd to acccpt and administcr thc trusts hcrcb� crcatcd (thc "Trustcc��). Rccitals A. Thc Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Agcnc� ��) is a rcdc� clopmcnt agcnc�. a public bod�. corporatc and politic. dul� crcatcd. cstablishcd and authorizcd to transact busincss and c�crcisc its po« crs. all undcr and pursuant to thc Rcdc� clopmcnt La«. and thc po« crs of thc Agcnc� includc thc po«cr to borro« monc� for am of its corporatc purposcs. B. A Rcdc� clopmcnt Plan for Projcct Arca No. 2 of thc Agcnc� (thc "Projcct Arca��) has bccn dul� appro� cd and adoptcd b� thc Cit� . C. Thc Authorit� is authorizcd to borro« monc� for thc purposc of making loans to thc Agcnc� to pro� idc financing and refinancing for public capital impro� cmcnts of thc Agcnc� . D. For thc purposc of aiding in thc financing and refinancing of rcdc� clopmcnt projccts for thc Projcct Arca. thc Authorit� has dctcrmincd to makc thrcc loans (thc "Loans��) to thc Agcnc� undcr and pursuant to thc Projcct Arca No. 2 Loan Agrccmcnt (2006 Scnior Loans). datcd as of Jul� I. 2006 (thc "Loan Agrccmcnt��), b� and among thc Authorit�. thc Agcnc� and thc Trustcc. E. To pro� idc thc monc� s rcquircd to makc thc Loans undcr thc Loan Agrccmcnt. thc Authorit� has dctcrmincd to issuc thrcc scrics of bonds (collccti� cl�. thc "Bonds��) pursuant to and sccurrd b� this Indcnturc in thc manncr pro� idcd hcrcin: (i) Tns Allocation Rcfiinding Rc� cnuc Ba�ds (Projcct Arca No. 2). 2006 Scrics A. in thc aggrcgatc principal amount of `f (thc "Scrics 2006A Bonds��). (ii) Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics B. in thc aggrcgatc initial principal amount of y� (thc "Scrics 2006B Bonds��). and (iii) Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics C(thc "Scrics 2006C Bonds��). F. To pro� idc for thc authcntication and dcli� cr� of thc Bonds. to cstablish and dcclarc thc tcrms and conditions upon «hich thc Bonds arc to bc issucd and to sccurc thc pa� mcnt of thc principal thcrcof. prcmium. if am. and intcrest thcrcon. thc Authorit� has authorizcd thc c�ccution and dcli� cr� of this Indcnturc. NOW. THEREFORE. THIS INDENTURE WITNESSETH. thnt in ordcr to sccurc thc pa� mcnt of thc principal of. prcmium. if am. and intcrest on thc Bonds at am timc issucd and Outstanding undcr this Indcnturc. according to thcir tcnor. and to sccurc thc performancc and obscr� ancc of all thc co� cnants and conditions thcrcin and hcrcin sct forth. and to dcclarc thc tcrms and conditions upon and subjcct to «hich thc Bonds arc to bc issucd and recci� cd. and in considcration of thc prcmiscs and of thc mutual co� cnants hcrcin containcd and of thc purchasc and acccptancc of thc Bonds b� thc O« ncrs thcrcof. and for othcr � aluablc considcrations. thc rcccipt «hcrcof is hcrcb� ackno« Icdgcd. thc Authorit� hcrcb� co� cnants and agrccs «ith thc Trustcc. for thc bcncfit of thc O« ncrs of thc Bonds. as follo« s: P6—Ic �2. I c�;;\x72; ; I. x — I— ARTICLE I DEFINITIONS: AUTHORIZATION AND PURPOSE OF BONDS: EQUAL SECURITY Scction I.01. Dcfinitions. Thc follo« ing tcrms shall for all purposcs of this Indcnturc and of am Supplcmcntal Indcnturc and of am ccrtificatc. opinion. rcqucst or othcr documcnts hcrcin mcntioncd ha� c thc mcanings ascribcd thcrcb� . In addition. thc tcrms dcfincd in Scction I.01 of thc Loan Agrccmcnt and not othcr« isc dcfincd in this Scction I.01 shall ha� c thc mcanings ascribcd thcrcb� in thc Loan Agrccmcnt. "Accrctcd Valuc�� mcans. «ith respcct to am Scrics 2006B Bond. as of am datc of calculation. thc sum of thc Initial Principal Amount thcrcof and thc intcrest accrucd thcrcon to such datc of calculation. compoundcd from thc Closing Datc at thc statcd � icld to maturit� thcrcof on cach Fcbruan I and August I. assuming in am such scmiannual period that such Accrctcd Valuc incrcascs in cqual dail� amounts on thc basis of a�60-da� � car of t« cl� c�0-da� months. "Act�� mcans Articics I through �4 (commcncing «ith Scction 6�00) of Chaptcr �. Di� ision 7. Titic I of thc Go� crnmcnt Codc of thc Statc. as in c�istcncc on thc Closing Datc or as thcrcaftcr amcndcd from timc to timc. ..A r��.. mcans thc Palm Dcscrt Rcdc�clopmcnt Agcnc�. a rcdc�clopmcnt agcnc�. a public bod� corporatc and politic. dul� crcatcd. cstablishcd and authorizcd to transact busincss and c�crcisc its po«crs all undcr and pursuant to thc Rcdc� clopmcnt La«. and am succcssor to its dutics and fiinctions. "Authorit�� mcans thc Palm Dcscrt Financing Authorit�. a joint po«crs authorit� dul� organizcd and c�isting undcr thc Joint E�crcisc of Po«crs Agrccmcnt. datcd Januar� 26. 1989. b� and bct« ccn thc Cit� and thc Agcnc� . and undcr thc la« s of thc Statc. "Authorit� Commission�� mcans thc go� crning bod� of thc Authorit� . "Bond Counscl�� mcans Richards. Watson c�. Gcrshon. A Profcssional Corporation. Los Angcics. California. or a firm of attornc� s of fa� orablc rcputation in thc ficld of municipal bond la« . "Bond La«�� mcans thc Marks-Roos Local Bond Pooling Act of 198�. bcing Articic �4 of thc Act (commcncing «ith Scction 6�8�4). as in c�istcncc on thc Closing Datc or as thcrcaftcr amcndcd from timc to timc. "Bond Ycar � mcans cach t« cl� c-month period c�tcnding from August 2 in onc calcndar � car to August I of thc succccding calcndar � car. both datcs inclusi� c. c�ccpt that thc first Bond Ycar shall bcgin on thc Closing Datc and c�tcnd to and includc August I. 2006. Bonds. "Bonds�� mcans thc Scrics 2006A Bonds. thc Scrics 2006B Bonds and thc Scrics 2006C "Busincss Da� �� mcans am da� othcr than (i) a Saturda� or a Sunda� or (ii) am othcr da� on «hich thc Nc« York Stock E�changc or banks arc authorizcd or obligatcd b� la« or c�ccuti� c ordcr to closc in Nc« York. Nc« York. San Francisco. California. Los Angcics. California or am cit� in «hich thc Trust Officc is locatcd. P6—Ic �2. I c�;;\x72; ; I. x —2— "Ccrtificatc�� mcans a ccrtificatc in «riting signcd b� am officcr of thc dcsignatcd public cntit�. dul� authorizcd b� its Icgislati� c bod� for that purposc. "Cit� �� mcans thc Cit� of Palm Dcscrt. a chartcr cit� and municipal corporation dul� organizcd and � alidl� c�isting undcr thc la« s of thc Statc. purchascr. "Closin� Datc�� mcans thc datc of dcli� cr� of thc Bonds to thc Undcr« ritcr as thc original "Codc�� mcans thc Intcrnal Rc� cnuc Codc of 1986. as a�ncndcd. "Count� �� mcans thc Count� of Ri� crsidc. "Dcfcasancc Obli�ations�� mcans (a) am obligations dcscribcd in paragraph A or B of thc dcfinition of "Pcrmittcd In� cstmcnts�� sct forth in this Scction or (b) collatcralizcd in� cstmcnt agrccmcnts. pro�idcd that (i) thc countcrpart� to am such agrccmcnt shall bc a domcstic bank or forcign bank «ith a scnior unsccurcd dcbt rating of AAA b� Sc�.P and Aaa b� Mood� �s: a domcstic or Canadian lifc insurancc compam «ith a claims-pa� ing or financial strcngth rating of AAA and Aaa b� Sc�.P and Mood� �s. respccti�cl�: a«holl�-o«ncd and guarantccd financial institution subsidiar� of onc of thc abo� c mcntioncd institutions: an insurancc holding compam. ratcd AAA and Aaa. b� Sc�.P and Mood� �s respccti� cl� : or a domcstic financial guarant� insurancc compam or an affiliatc of a domcstic financial guarant� insurancc compam. «hosc obligations arc fiill� guarantccd b� an affiliatc or thc parcnt compam «hich has a rating of AAA and Aaa b� Sc�.P and Mood� �s. respccti� cl� : (ii) am such agrccmcnt shall bc collatcralizcd b� sccuritics issucd or guarantccd b� thc Unitcd Statcs go� crnmcnt. thc Go� crnmcnt National Mortgagc Association. thc Fcdcral Homc Loan Mortgagc Corporation or thc Fcdcral National Mortgagc Association. or municipal. corporatc. assct-backcd and mortgagc-backcd obligations ratcd AAA and Aaa b� Sc�.P and Mood� �s. respccti� cl� : thc countcrpart� must grant to thc Trustcc or thc agcnt holding thc collatcral for thc Trustcc a first perfcctcd sccurit� intcrest in all collatcral dcli� crcd pursuant to thc agrccmcnt and in all procccds of thc collatcral: and thc collatcral must bc dcli� crcd frcc and cicar of claims of am third partics and must bc rcgistcrcd in thc namc of thc Trustcc or agcnt: and (iii) thc � aluc of thc collatcral. «hich shall bc � alucd b� thc Trustcc or thc collatcral agcnt «cckl�. must bc cqual to at Icast 10� perccnt of thc amount of cash transfcrrcd b� or on bchalf of thc Authorit� to thc countcrpart� plus accrucd intcrest. "Dcpositor�� mcans Thc Dcpositor� Trust Compam. Nc« York. Nc« York. and its succcssors and assigns as sccuritics dcpositor� for thc Bonds. or am othcr sccuritics dcpositor� acting as Dcpositor� undcr Articic X. "E� cnt of Dcfault�� mcans am of thc c� cnts dcscribcd in Scction 8.01. P6—Ic �2. I c �;;\x72; ; I . x — � — "Fiscal Ycar � mcans am t« cl� c-month period c�tcnding from Jul� I in onc calcndar � car to Junc �0 of thc succccding calcndar � car. both datcs inclusi� c. or am othcr t« cl� c-month period scicctcd and dcsignatcd b� thc Authorit� as its official fiscal � car period. "Indcnturc�� mcans this Indcnturc of Trust. as ma� from timc to timc bc supplcmcntcd. modificd or amcndcd b� am Supplcmcntal Indcnturc pursuant to thc pro� isions hcrcof. "Indcucndcnt Accountant�� mcans am ccrtificd public accountant or firm of ccrtificd public accountants appointcd and paid b� thc Authorit�. and «ho. or cach of «hom (i) is in fact indcpcndcnt and not undcr domination of thc Authorit�. thc Cit� or thc Agcnc�: (ii) docs not ha� c am substantial intcrest. dircct or indircct. in thc Authorit�. thc Cit� or thc Agcnc�: and (iii) is not conncctcd «ith thc Authorit�. thc Cit� or thc Agcnc� as an officcr or cmplo� cc of thc Authorit�. thc Cit� or thc Agcnc� but «hom ma� bc rcgularl� rctaincd to makc annual or othcr audits of thc books of or rcports to thc Authorit� . thc Cit� or thc Agcnc� . "Information Scr� iccs�� mcans Financial Information. Inc. �s "Dail� Callcd Bond Scr� icc. �0 Montgomcr� Strcet. IOth Floor. Jcrsc� Cit�. Nc« Jcrsc� 07�02. Attcntion: Editor: Mcrgcnt�s "Municipal and Go� crnmcnt.�� 2�0 77 Ccntcr Dri� c. Suitc I�0. Charlottc. North Carolina 28217. Attcntion: Callcd Bond Dcpartmcnt: and Kcnm Sc�.P. �� Watcr Strcct. �4� Floor. Nc« York. Nc« York 100�41. Attcntion: Notification Dcpartmcnt: or. in accordancc «ith thcn-currcnt guidclincs of thc Sccuritics and E�changc Commission. such othcr addresscs and/or such othcr scr� iccs pro� iding information «ith respcct to callcd bonds as thc Agcnc� ma� dcsignatc to thc Trustcc in «riting. "Initial Princival Amount.�� «ith respcct to am Scrics 2006B Bond. mcans thc initial principal amount thcrcof as of thc Closing Datc. ..Insurancc Pa� in� A�cnt�� mcans or its succcssors undcr thc Insurancc Polic�. "Insurancc Polic�� mcans thc municipal bond insurancc polic� issucd b� thc Insurcr insuring thc pa� mcnt «hcn duc of thc principal of and intcrest on thc Bonds. ..Insurcr � mcans "Intcrest Account�� mcans thc accow�t b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �4.02(b)( I ). August I. 2006. "Intcrest Pa� mcnt Datc�� mcans Fcbruar� I and August I of cach � car. commcncing "Loan A�rccmcnt�� mcans thc Projcct Arca No. 2 Loan Agrccmcnt (2006 Scnior Loans). datcd as of Jul� I. 2006. b� and among thc Authorit�. thc Agcnc� and thc Trustcc. rclating to thc Loans. as ma� from timc to timc bc supplcmcntcd. modificd or amcndcd. "Loan Funds�� mcans thc Scrics 2006A Loan Fund. thc Scrics 2006B Loan Fund. and thc Scrics 2006C Loan Fund. Loan. "Loans�� mcans thc Scrics 2006A Loan. thc Scrics 2006B Loan and thc Scrics 2006C "Maturit� Amount.�� «ith respcct to am Scrics 2006B Bond. mcans thc Accrctcd Valuc thcrcof at maturit� . P6—Ic �2. I c�;;\x72; ; I. x —�— "Mood� �s�� mcans Mood� �s In� cstors Scr� icc. its succcssors and assigns. "Nomincc�� mcans thc nomincc of thc Dcpositor�. «hich ma� bc thc Dcpositor�. as dctcrmincd from timc to timc pursuant to Articic X. "Outstandin�.�� «hcn uscd as of am particular timc «ith rcfcrcncc to Bonds. mcans (subjcct to thc pro� isions of Scction I I.07) all Bonds thcrctoforc c�ccutcd. issucd and dcli� crcd b� thc Autl�orit� undcr this Indcnturc c�ccpt (i) Bonds thcrctoforc canccllcd b� thc Trustcc or surrcndcrcd to thc Trustcc for canccllation. (ii) Bonds paid or dccmcd to ha� c bccn paid «ithin thc mcaning of Scction I I.0 �. and (iii) Bonds in licu of or in substitution for «hich othcr Bonds shall ha� c bccn c�ccutcd. issucd and dcli� crcd pursuant to this Indcnturc. "O« ncr � mcans thc person in «hosc namc thc o« ncrship of am Bond or Bonds shall bc rcgistcrcd on thc Rcgistration Books. "Particivants�� mcans thosc brokcr-dcalcrs. banks and othcr financial institutions from timc to timc for «hich thc Dcpositor� holds Bonds as sccuritics dcpositor� . ..Pa� in� A�cnt�� mcans thc Trustcc. "Pcrmittcd In� cstmcnts�� mcans am of thc follo« ing «hich at thc timc of im cstmcnt arc Icgal in� cstmcnts undcr thc la« s of thc Statc for thc monc� s proposcd to bc in� cstcd thcrcin: A. Dircct obligations of thc Unitcd Statcs of Amcrica (including obligations issucd on c�ld in book-cntn form on thc books of thc Dcpartmcnt of thc Trcasun. and CATS and TIGRS) or obligations thc principal of and intcrest on «hich arc unconditionall� guarantccd b� thc Unitcd Statcs of Amcrica. For purposcs of this paragraph A. "obligations thc principal of and intcrest on «hich arc unconditionall� guarantccd b� thc Unitcd Statcs of Amcrica�� includc «ithout limitation ta� c�cmpt obligations of a statc or a political subdi� ision thcrcof «hich ha� c bccn dcfcascd undcr irrc� ocablc cscro« instructions «ith non-callablc obligations for «hich thc fiill faith and crcdit of thc Unitcd Statcs of Amcrica arc plcdgcd for thc pa� mcnt of principal and intcrest and «hich arc ratcd "Aaa�� b� Mood� �s and "AAA�� b� Sc�'.P. B. Bonds. dcbcntures. notcs or othcr c� idcncc of indcbtcdncss issucd or guarantccd b� am of thc follo« ing fcdcral agcncics. pro� idcd such obligations arc backcd b� thc fiill faith and crcdit of thc Unitcd Statcs of Amcrica (pro� idcd that strippcd sccuritics arc onl� permittcd if thc� ha� c bccn strippcd b� thc agcnc� itscl�: I. Unitcd Statcs E�uort-Imuort Bank (E�imbank) Dircct obligations or fiill� guarantccd ccrtificatcs of bcncficial o« ncrship - 2. Farmcrs Homc Administration (FmHA) Ccrtificatcs of bcncficial o« ncrship �. Fcdcral Financin� Bank �4. Fcdcral Housin� Administration Dcbcntures (FHA) Gcncral Scr� iccs Administration Participation ccrtificatcs P6—Ic �2. I c�;;\x72; ; I. x —� — 6. Go� crnmcnt National Mort�a�c Association (GNMA or "Ginnic Mac") GNMA - guarantccd mortgagc-backcd bonds GNMA - guarantccd pass-through obligations Unitcd Statcs Maritimc Administration Guarantccd Titic XI financing Unitcd Statcs Dcuartmcnt of Housin� and Urban Dc� cloumcnt (HUD) Projcct Notcs Local Authorit� Bonds Nc« Communitics Dcbcntures - Unitcd Statcs go� crnmcnt guarantccd dcbcntures Unitcd Statcs Public Housing Notcs and Bonds - Unitcd Statcs go� crnmcnt guarantccd public housing notcs and bonds C. Bonds. dcbcntures. notcs or othcr c� idcncc of indcbtcdncss issucd or guarantccd b� am of thc follo« ing non-fiill faith and crcdit Unitcd Statcs go� crnmcnt agcncics (pro� idcd that strippcd sccuritics arc onl� permittcd if thc� ha� c bccn strippcd b� thc agcnc� itscl�: Fcdcral Homc Loan Bank S� stcm Scnior dcbt obligations Fcdcral Homc Loan Mort�a�c Coruoration (FHLMC or "Frcddic Mac") Participation Ccrtificatcs Scnior dcbt obligations Fcdcral National Mort�a�c Association (FNMA or "Fa��nic Mac") Mortgagc-backcd sccuritics and scnior dcbt obligations �4. Studcnt Loan Markctin� Association (SLMA or "Sallic Mac Scnior dcbt obligations Rcsolution Fundin� Coru. (REFCORP) obligations D. Monc� markct fiinds. including fiinds for «hich thc Tnistcc or its affiliatcs pro� idc in� cstmcnt ad� isor� or othcr managcmcnt scr� iccs. rcgistcrcd undcr thc In� cstmcnt Compam Act of 19�40. «hosc shares arc rcgistcrcd undcr thc Sccuritics Act of 19>;. and ha� ing a rating b� Sc�.P of AAAm-G. AAAm. or AAm and. if ratcd b� Mood� �s. ratcd Aaa. Aa I or Aa2. E. Ccrtificatcs of dcposit sccurcd at all timcs b� collatcral dcscribcd in A and/or B abo� c: pro� idcd that such ccrtificatcs must bc issucd b� commcrcial banks (including thc Trustcc and its affiliatcs). sa� ings and loan associations or mutual sa� ings banks and pro� idcd fiirthcr that thc collatcral must bc hcld b� a third part� and thc Trustcc on bchalf of thc O« ncrs must ha� c a perfcctcd first sccurit� intcrest in thc collatcral. PG—Ic l2. I c li i\872 i; I.8 —6— F. Ccrtificatcs of dcposit. sa� ings accounts. dcposit accounts or monc� markct dcposits «hich arc fiill� insurcd b� thc Fcdcral Dcposit Insurancc Corporation. including thosc of thc Trustcc and its affiliatcs. G. In� cstmcnt agrccmcnts. including guarantccd in� cstmcnt contracts (GICs). Fon�ard Purchasc Agrccmcnts and Rcscr� c Fund Put Agrccmcnts acccptablc to thc Insurcr. H. Commcrcial paper ratcd. at thc timc of purchasc. "Primc - I�� b� Mood� �s and "A- I" or bcttcr b� Sc�.P. I. Bonds or notcs issucd b� am statc or municipalit� «hich arc ratcd b� Mood� �s and Sc�.P in onc of thc t« o highcst rating catcgorics assigncd b� such agcncics. J. Fcdcral fiinds or bankcrs acccptanccs «ith a ma�imum tcrm of onc � car of am bank (including thc Trustcc and its affiliatcs) «hich has an unsccurcd. uninsurcd and unguarantccd obligation rating of "Primc - I�� or "A �� or bcttcr b� Mood� �s and "A- I�� or "A�� or bcttcr b� Sc�.P. K. Rcpurchasc Agrccmcnts. «hich arc appro� cd b� thc Insurcr. and «hich pro� idc for thc transfcr of sccuritics from a dcalcr bank or sccuritics firm (scllcr/borro« cr) to thc Trustcc or third part� custodian. as thc casc ma� bc (bu� cr/Icndcr). and thc transfcr of cash from thc Trustcc to thc dcalcr bank or sccuritics firm «ith an agrccmcnt that thc dcalcr bank or sccuritics firm «ill rcpa� thc cash plus a� icld to thc Trustcc in c�changc for thc sccuritics at a spccificd datc. L. Thc Local Agcnc� In� cstmcnt Fund in thc Statc Trcasur� or am similar poolcd in� cstmcnt fiind administcrcd b� thc Statc. to thc c�tcnt such in� cstmcnt is hcld in thc namc and to thc crcdit of thc Trustcc. M. Mcdium-tcrm notcs issucd b� corporations organizcd and operating «ithin thc Unitcd Statcs or b� dcpositor� institutions liccnscd b� thc Unitcd Statcs or am statc and operating «ithin thc Unitcd Statcs. Such notcs shall ha� c a minimum crcdit rating of "Aa �� b� Mood� �s and "AA-�� b� Sc�.P at timc of purchasc. and shall maturc «ithin thrcc � cars or Icss. N. Shares of bcncficial intcrest issucd b� thc California Assct Managcmcnt Trust. a common la« trust cstablishcd undcr thc la« s of thc Statc. "Princival Account�� mcans thc account b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �4.02(b)(2). "Princival Amount�� mcans. as of am datc of calculation. «ith respcct to (i) am Scrics 2006A Bond or Scrics 2006C Bond. thc principal amount thcrcof. and (ii) am Scrics 2006B Bond. thc Accrctcd Valuc thcrcof. "Proicct Arca�� mcans. unlcss thc contc�t cicarl� rcquires othcr« isc. thc projcct arca dcscribcd and dcfincd in thc Rcdc� clopmcnt Plan appro� cd and adoptcd b� thc Cit� b� its Ordinancc No. �09. - - "Rccord Datc�� mcans. «ith respcct to am Intcrest Pa� mcnt Datc. thc I�th calcndar da� of thc month immcdiatcl� prcccding such Intcrest Pa� mcnt Datc. «hcthcr or not such da� is a Busincss Da� . - - - "Rcdcmution Account�� mcans thc account b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �4.02(b)( �). PG—Icl2. I clii\872i ; I .8 —7— "Rcdc� cloumcnt La« �� mcans thc Communit� Rcdc� clopmcnt La«. bcing California Hcalth and Safct� Codc Scction >;000. ct scq.. and all firturc acts supplcmcntal thcrcto or amcndator� thcrcof. "Rcdc� cloumcnt Plan�� mcans thc Rcdc� clopmcnt Plan for thc Projcct Arca. appro� cd and adoptcd b� thc Cit� b� its Ordinancc No. �09 and includcs am amcndmcnt of thc Rcdc� clopmcnt Plan hcrctoforc on c�rcaftcr madc pursuant to la«. "Rc�istration Books�� mcans thc rccords maintaincd b� thc Trustcc pursuant to Scction 2.09 for thc rcgistration and transfcr of o« ncrship of thc Bonds. ..Rcport•• mcans a documcnt in «riting signcd b� an Indcpcndcnt Rcdc� clopmcnt Consultant and including: (i) a statcmcnt that thc person or firm making or gi� ing such Rcport has rcad thc pertincnt pro� isions of thc documcnt or documcnts to «hich such Rcport rclatcs: (ii) a bricf statcmcnt as to thc naturc and scopc of thc c�amination or in� cstigation upon ��hich thc Rcport is bascd: and (iii) a statcmcnt that. in thc opinion of such person or firm. sufficicnt c�amination or in� cstigation «as madc as is ncccssan to cnablc said consultant to c�press an informcd opinion «ith respcct to thc subjcct mattcr rcfcrrcd to in thc Rcport. "Rcurescntation Lcttcr � mcans thc Blankct Issucr Lcttcr of Rcprescntations. datcd Jul� I. 1997. from thc Authorit� to thc Dcpositon. qualif� ing bonds issucd b� thc Authorit� for thc Dcpositon �s book-cntn s� stcm. "Rc ucst�� mcans a rcqucst in «riting signcd b� am officcr of thc dcsignatcd public cntit� dul� authorizcd b� its Icgislati� c bod� for that purposc. "Rc� cnuc Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �4.02(a). "Rc� cnucs�� mcans (i) all amounts pa� ablc b� thc Agcnc� pursuant to Scction 2. � or Scction 2.�4 of thc Loan Agrccmcnt: (ii) am procccds of thc Bonds originall� dcpositcd «ith thc Trustcc and all monc�s dcpositcd and hcld from timc to timc b� thc Trustcc in thc fiinds and accounts cstablishcd hcrcundcr: and (iii) incomc and gains «ith respcct to thc in� cstmcnt of amounts on dcposit in thc fiinds and accounts cstablishcd hcrcundcr. othcr than amounts pa�ablc to thc Unitcd Statcs of Amcrica pursuant to Scction �.07. 'Sc�.P�� mcans Standard c�. Poor�s Ratings Scr� iccs and its succcssors and assigns. "Sccuritics Dcuositorics�� mcans Thc Dcpositor� Tnist Compam. �� Watcr Strcct. �0`�' Floor. Nc« York. Nc« York. 100�41. Attn: Call Notification Dcpartmcnt. Fa� (212) 8��-72 �2: and. in accordancc «ith thcn currcnt guidclincs of thc Sccuritics and E�changc Commission. such othcr addresscs or such othcr sccuritics dcpositorics as thc Authorit� ma� dcsignatc in a Ccrtificatc of thc Authorit� dcli� crcd to thc Trustcc. "Scrics 2006A Bonds�� mcans thc Palm Dcscrt Financing Authorit� Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics A. "Scrics 2006A Loan�� mcans thc Scrics 2006A Loan. as dcfincd in thc Loan Agrccmcnt. madc b� thc Authorit� to thc Agcnc� . "Scrics 2006A Loan Fund�� mcans thc fiind b� that namc cstablishcd znd hcld b� thc Trustcc pursuant to Scction �.02. PG—Icl2. I clii\872i ; I .8 —8— "Scrics 2006B Bonds�� mcans thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics B. ..Scrics 2006B Loan�� mcans thc Scrics 2006B Loan. as dcfincd in thc Loan Agrccmcnt. madc b� thc Authorit� to thc Agcnc� . "Scrics 2006B Loan Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �.02. "Scrics 2006C Bonds�� mcans thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics C. "Scrics 2006C Loan�� mcans thc Scrics 2006B Loan. as dcfincd in thc Loan Agrccmcnt. madc b� thc Authorit� to thc Agcnc� . "Scrics 2006C Loan Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �.02. "Statc�� mcans thc Statc of California. "Suuulcmcntal Indcnturc�� mcans am indcnturc. agrccmcnt or othcr instrumcnt hcrcaftcr dul� c�ccutcd b� thc Authorit� and thc Trustcc in accordancc «ith thc pro� isions of Scction 7.01. "Ta� Rc�ulations�� mcans tcmporar� and permancnt rcgulations promulgatcd undcr or «ith respcct to Scction I 0� and Scctions I�4 I through I�0. inclusi� c. of thc Codc. "Trust Officc�� mcans thc corporatc trust officc of thc Trustcc at thc address sct forth in Scction I I. I� or such othcr officcs as ma� bc spccificd to thc Authorit� b� thc Trustcc in «riting. With respcct to prescntation of Bonds for pa� mcnt or for rcgistration of transfcr and c�changc such tcrm shall mcan thc officc or agcnc� of thc Trustcc at «hich. at am particular timc. its corporatc trust busincss shall bc conductcd. "Trustcc�� mcans Wclls Fargo Bank. National Association. and its succcssors and assigns. and am othcr corporation or association «hich ma� at am timc bc substitutcd in its placc as pro� idcd in Articic VI. "Undcr« ritcr � mcans Citigroup Global Markcts Inc. Scction I.02. Rulcs of Construction. All rcfcrcnccs in this Indcnturc to "Articics.�� "Scctions.�� and othcr subdi� isions. unlcss indicatcd othcr« isc. arc to thc corresponding Articics. Scctions or subdi� isions of this Indcnturc: and thc «ords "hcrcin.�� "hcrcof.�� "hcrcundcr.�� and othcr «ords of similar import rcfcr to this Indcnturc as a«holc and not to am particular Articic. Scction or subdi� ision hcrcof. Scction I.0 �. Authorization and Puruosc of Bonds. Thc Authorit� has rc� ic« cd all procccdings hcrctoforc takcn rclati� c to thc authorization of thc Bonds and has found. as a result of such rc� ic«. and hcrcb� finds and dctcrmincs that all things. conditions. and acts rcquircd b� la« to c�ist. happcn and bc performcd prcccdcnt to and in thc issuancc of thc Bonds do c�ist. ha� c happcncd and ha� c bccn performcd in duc timc. form and manncr as rcquircd b� la«. and thc Authorit� is no« authorizcd undcr thc Bond La« and cach and c� cr� rcquircmcnt of la«. to issuc thc Bonds in thc manncr and form pro� idcd in this Indcnturc. Thc Authorit� hcrcb� authorizcs thc issuancc of thc Bonds pursuant to thc P6—Ic �2. I c�;;\x72; ; I. x —9— Bond La« and this Indcnturc for thc purposc of pro� iding fiinds to makc thc Loans to thc Agcnc� pursuant to thc Loan Agrccmcnt. Scction I.0�4. Equal Sccurit� . In considcration of thc acccptancc of thc Bonds b� thc O«ncrs thcrcof. this Indcnture shall bc dccmcd to bc and shall constitutc a contract among thc Authorit�. thc Trustcc and thc O« ncrs of thc Bonds: and thc co� cnants and agrccmcnts hcrcin sct forth to bc performcd on bchalf of thc Authorit� shall bc for thc cqual and proportionatc bcncfit. sccurit� and protcction of all O« ncrs of thc Bonds «ithout prcfcrcncc. priorit� or distinction as to sccurit� or othcn� isc of am of thc Bonds o� cr am of thc othcrs b� rcason of thc numbcr or datc thcrcof or thc timc of salc. c�ccution or dcli� cn thcrcof. or othcr« isc for a�� causc «hatsoc� cr. c�ccpt as c�pressl� pro�idcd thcrcin on c�rcin. ARTICLE II ISSUANCE OF BONDS Scction 2.01. Dcsi�nation. Thc Scrics 2006A Bonds shall bc dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics A. and shall bc issucd in thc original aggrcgatc Principal Amount of � . Thc Scrics 2006B Bonds shall bc dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics B and shall bc issucd in thc aggrcgatc Initial Principal Amount of � . Thc Scrics 2006C Bonds shall bc dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics C and shall bc issucd in thc original aggrcgatc Principal Amount of � . Scction 2.02. Tcrms of Bonds. (a) Thc Scrics 2006A Bonds shall bc issucd in fiill� rcgistcrcd form «ithout coupons in dcnominations of `f �.000 or am intcgral multiplc thcrcof. so long as no Scrics 2006A Bond shall ha� c morc than onc maturit� datc. Thc Scrics 2006A Bonds shall bc datcd thc Closing Datc. shall maturc on August I in cach of thc � cars and in thc amounts. and shall bcar intcrest (calculatcd on thc basis of a�60- da� � car of t« cl� c�0-da� months) at thc ratcs. as follo« s: Maturit� Datc Principal Intcrest Maturit� Datc Principal Intcrest (Au�ust I) Amount Ratc (Au�ust I) Amount Ratc (to comc) Each Scrics 2006A Bond shall bcar intcrest from thc Intcrest Pa�mcnt Datc nc�t prcccding thc datc of authcntication thcrcof. unlcss (i) it is authcnticatcd during thc period from thc da� aftcr thc Rccord Datc for an Intcrest Pa� mcnt Datc to and including such Intcrest Pa� mcnt Datc. in «hich c� cnt it shall bcar intcrest from such Intcrest Pa� mcnt Datc. or (ii) it is authcnticatcd on or prior to thc Rccord Datc for thc first Intcrest Pa� mcnt Datc. in «hich c� cnt it shall bcar intcrest from thc Closing Datc: uro� idcd. ho« c� cr. that if. at thc timc of rcgistration of am Scrics 2006A Bond intcrest «ith respcct to such Scrics 2006A Bond is in dcfault. such Scrics 2006A Bond shall bcar intcrest from thc Intcrest Pa� mcnt Datc to «hich intcrest has bccn paid or madc a� ailablc for pa� mcnt «ith respcct to such Scrics 2006A Bond. PG—IcJ2. I cJii\872i ; I.8 — I 0— Intcrest on thc Scrics 2006A Bonds shall bc pa�ablc on cach Intcrest Pa�mcnt Datc to thc person «hosc namc appcars on thc Rcgistration Books as thc O« ncr thcrcof as of thc closc of busincss on thc Rccord Datc. such intcrest to bc paid b� chcck or draft of thc Trustcc mailcd b� first class mail. postagc prcpaid. on cach Intcrest Pa� mcnt Datc to thc O�� ncr at thc address of such O�� ncr as it appcars on thc Rcgistration Books on such Rccord Datc: uro� idcd. ho« c� cr. that at thc «rittcn rcqucst of thc O« ncr of at Icast � I.000.000 in aggrcgatc principal amount of Outstanding Scrics 2006A Bonds filcd «ith thc Trustcc prior to am Rccord Datc. intcrest on such Scrics 2006A Bonds shall bc paid to such O« ncr on cach succccding Intcrest Pa� mcnt Datc b� «irc transfcr of immcdiatcl� a� ailablc fiinds to an account in thc Unitcd Statcs dcsignatcd in such «rittcn rcqucst (unlcss and until such rcqucst has bccn rc� okcd in «riting). Pa� mcnts of dcfaultcd intcrest «ith respcct to thc Scrics 2006A Bonds shall bc paid b� chcck or draft to thc O« ncrs as of a spccial rccord datc to bc fi�cd b� thc Trustcc. noticc of «hich spccial rccord datc shall bc gi� cn to thc O« ncrs not Icss than tcn da� s prior thcrcto. Principal of and prcmium. if am. on am Scrics 2006A Bond shall bc paid upon prescntation and surrcndcr thcrcof. at maturit� or thc prior rcdcmption thcrcof. at thc Trust Officc. Thc principal of and intcrest and prcmium. if am . on thc Scrics 2QQ6A Bonds shall bc pa� ablc in la�� fiil monc� of thc Unitcd Stltcs of Amcrica. (b) Thc Scrics 2006B Bonds shall bc issucd in fiill� rcgistcrcd form in am dcnominations of Initial Principal Amount but shall rcflcct dcnominations of `f �.000 Maturit� Amount or am intcgral multiplc thcrcof. No Scrics 2006B Bond shall ha� c morc than onc maturit� datc. Thc Scrics 2006B Bonds shall bc datcd thc Closing Datc. shall maturc on August I in cach of thc � cars and in thc Maturit� Amounts sct forth in thc follo« ing schcdulc. Thc Scrics 2006B Bonds shall bc dcli� crcd on thc Closing Datc in thc aggrcgatc Initial Principal Amounts sct forth bclo«. Intcrest on thc Initial Principal Amount of thc Scrics 2006B Bonds shall accruc and compound at thc � icld to thcir maturit� sct forth bclo« (such intcrest bcing cqual to thc diffcrcncc bct«ccn thc Maturit� Amounts and thc Initial Principal Amounts thcrco�: Maturit� Maturit� Initial Initial Principal Yicld to Datc Amount Principal Amount per `f �.000 Maturit� (Au�ust I) Amount Maturit� Amount Datc Intcrest on cach Scrics 2006B Bond shall bc compoundcd scmi-annuall� at thc � icld sct forth abo� c from thc Closing Datc on cach Fcbruan I and August I. commcncing August I. 2006. until maturit� or carlicr rcdcmption thcrcof. computcd using a� car of �60 da� s of t« cl� c�0-da� months and shall bc pa�ablc (i) at maturit� as part of thc Maturit� Amount. or (ii) at rcdcmption as part of thc Accrctcd Valuc to thc rcdcmption datc. Thc Maturit� Amount. or thc Accrctcd Valuc and redcmption prcmium (if am ). as applicablc. «ith respcct to am Scrics 2006B Bond shall bc paid upon prescntation and surrcndcr thcrcof. at maturit� or thc prior rcdcmption thcrcof. at thc Trust Officc. in la« fiil monc� of thc Unitcd Statcs of Amcrica. (c) Thc Scrics 2006C Bonds shall bc issucd in fiill� rcgistcrcd form �� ithout coupons in dcnominations of `f �.000 or am intcgral multiplc thcrcof. so long as no Scrics 2006C Bond shall ha� c morc than onc maturit� datc. Thc Scrics 2006C Bonds shall bc datcd thc Closing Datc. shall maturc on August I in cach of thc � cars and in thc amounts. and shall bcar intcrest (calculatcd on thc basis of a�60- da� � car of t« cl� c�0-da� months) at thc ratcs. as follo« s: PG—Ic l2. I c li i\872 i; I.8 — I I— Maturit� Datc Principal Intcrest (Au�ust I ) Amount Ratc (to comc) Maturit� Datc Principal Intcrest (Au�ust I ) Amount Ratc Each Scrics 2006C Bond shall bcar intcrest from thc Intcrest Pa�mcnt Datc nc�t prcccding thc datc of authcntication thcrcof. unlcss (i) it is authcnticatcd during thc period from thc da� aftcr thc Rccord Datc for an Intcrest Pa� mcnt Datc to and including such Intcrest Pa� mcnt Datc. in «hich c� cnt it shall bcar intcrest from such Intcrest Pa� mcnt Datc. or (ii) it is authcnticatcd on or prior to thc Rccord Datc for thc first Intcrest Pa� mcnt Datc. in «hich c� cnt it shall bcar intcrest from thc Closing Datc: uro� idcd. ho« c� cr. that if. at thc timc of rcgistration of am Scrics 2006C Bond intcrest «ith respcct to such Scrics 2006C Bond is in dcfault. such Scrics 2006C Bond shall bcar intcrest from thc Intcrest Pa� mcnt Datc to «hich intcrest has bccn paid or madc a� ailablc for pa� mcnt «ith respcct to such Scrics 2006C Bond. Intcrest on thc Scrics 2006C Bonds shall bc pa�ablc on cach Intcrest Pa� mcnt Datc to thc person «hosc namc appcars on thc Rcgistration Books as thc O« ncr thcrcof as of thc closc of busincss on thc Rccord Datc. such intcrest to bc paid b� chcck or draft of thc Trustcc mailcd b� first class mail. postagc prcpaid. on cach Intcrest Pa� mcnt Datc to thc O« ncr at thc address of such O« ncr as it appcars on thc Rcgistration Books on such Rccord Datc: uro� idcd. ho« c� cr. that at thc «rittcn rcqucst of thc O« ncr of at Icast � I.000.000 in aggrcgatc principal amount of Outstanding Scrics 2006C Bonds filcd «ith thc Trustcc prior to am Rccord Datc. intcrest on such Scrics 2006A Bonds shall bc paid to such O« ncr on cach succccding Intcrest Pa� mcnt Datc b� «irc transfcr of immcdiatcl� a� ailablc fiinds to an account in thc Unitcd Statcs dcsignatcd in such «rittcn rcqucst (unlcss and until such rcqucst has bccn rc� okcd in «riting). Pa� mcnts of dcfaultcd intcrest «ith respcct to thc Scrics 2006C Bonds shall bc paid b� chcck or draft to thc O« ncrs as of a spccial rccord datc to bc fi�cd b� thc Trustcc. noticc of «hich spccial rccord datc shall bc gi� cn to thc O« ncrs not Icss than tcn da� s prior thcrcto. Principal of and prcmium. if am. on am Scrics 2006C Bond shall bc paid upon prescntation and surrcndcr thcrcof. at maturit� or thc prior rcdcmption thcrcof. at thc Trust Officc. Thc principal of and intcrest and prcmium. ifam. on thc Scrics 2006C Bonds shall bc pa�ablc in la«fiil monc� ofthc Unitcd Statcs ofAmcrica. Scction 2.0 �. Rcdcmution of Bonds. (a) Scrics 2006A Bonds. ( I) Rcdcmution from Outional Loan Prcua� mcnt. In thc c� cnt that thc Agcnc� shall c�crcisc its option to prcpa� principal installmcnts of thc Scrics 2006A Loan pursuant to Scction 2.�4(a) of thc Loan Agrccmcnt. thc Rc� cnucs dcri� cd from such prcpa� mcnt shall bc applicd to thc rcdcmption of thc Scrics 2006A Bonds maturing on or aftcr August I. 20_. as a«holc. or in part among maturitics as dcsignatcd in «riting b� thc Authorit� and b� lot «ithin a maturit�. in intcgral multiplcs of y��.000 principal amount. on am Intcrest Pa� mcnt Datc on or aftcr August I. 20 . at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc principal amount of Scrics 2006A Bonds to bc rcdccmcd). plus accrucd intcrest thcrcon to thc datc of rcdcmption: Rcdcmption Datcs August I. 20_ and Fcbruar� I. 20 August I. 20_ and Fcbruar� I. 20 August I. 20_ and thcrcaftcr Rcdcmption Pricc `%� P6—Ic �2. I c�;;\x72; ; I. x — I 2— Thc Authorit� shall pro� idc «rittcn noticc to thc Trustcc of am rcdemption pursuant to this Scction 2.0 �(a)( I) at Icast �4� but not morc than 90 da� s prior to thc datc fi�cd for such rcdcmption. (2) Mandator� Sinkin� Fund Rcdcmution. Thc Scrics 2006A Bonds maturing on August I. 20_ and August I. 20_ shall also bc subjcct to mandaton rcdcmption b� lot. on August I in cach � car commcncing August I. 20 and August I. 20 . respccti� cl�. from sinking fiind pa� mcnts madc b� thc Authorit� into thc Principal Account pursuant to Scction �4.02(b)(2). at a rcdcmption pricc cqual to thc principal amount thcrcof to bc rcdccmcd. «ithout prcmium. plus accrucd intcrest to thc datc of rcdcmption. in thc aggrcgatc respccti� c principal amounts and on August I in thc respccti� c� cars as sct forth in thc follo« ing tablcs: uro� idcd. ho« c� cr. that (i) in licu of rcdcmption thcrcof on August I in am � car. thc Scrics 2006A Bonds ma� bc purchascd b� thc Agcnc� pursuant to Scction 2. � of thc Loan Agrccmcnt and tcndcrcd to thc Trustcc for canccllation no latcr than thc prcccding Ma� I�. and (ii) if somc but all of thc Scrics 2006A Bonds of a maturit� ha� c bccn rcdccmcd pursuant to Paragraph (a) abo� c. thc total amount of all firture sinking fiind pa� mcnts «ith respcct to thc Scrics 2006A Bonds of such maturit� shall bc rcduccd b� thc aggrcgatc principal amount of such Scrics 2006A Bonds so rcdccmcd. to bc allocatcd among such sinking fiind pa� mcnts on a pro rata basis. Scrics 2006A Bonds Maturin� Au�ust I. 20 Sinking Fund Rcdcmption Datc (Au�ust I ) Principal Amount to bc Rcdccmcd +Maturit� . Scrics 2006A Bonds Maturin� Au�ust I. 20 Sinking Fund Rcdcmption Datc (Au�ust I ) Principal Amount to bc Rcdccmcd +Maturit� . PG—Icl2.lclii\872i;1.8 —I �— (b) Scrics 2006B Bonds. ( I) Outional Rcdcmution. In thc c� cnt that thc Agcnc� shall c�crcisc its option to prcpa� installmcnts of thc Scrics 2006B Loan pursuant to Scction 2.�4(b) of thc Loan Agrccmcnt. thc Rc� cnucs dcri� cd from such prcpa� mcnt shall bc applicd to thc rcdcmption of thc Scrics 2006B Bonds maturing on or aftcr August I. 20_. as a«holc. or in part among maturitics as dcsignatcd in «riting b� thc Authorit� and b� lot «ithin a maturit� . in intcgral multiplcs of `f �.000 of Maturit� Amount. on am Fcbruar� I or August I on or aftcr August I. 20 . at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc Accrctcd Valuc of thc callcd Scrics 2006B Bonds on thc datc fi�cd for rcdemption): Rcdcmption Rcdcmption Datcs Pricc August I. 20_ and Fcbruar� I. 20_ '%� August I. 20_ and Fcbruar� I. 20_ August I. 20_ and thcrcaftcr Thc Authorit� shall pro� idc «rittcn noticc to thc Trustcc of am rcdcmption pursuant to this Scction 2.0 �(b)( I) at Icast �4� but not morc than 90 da� s prior to thc datc fi�cd for such rcdcmption. (c) Scrics 2006C Bonds. ( I) Outional Rcdcmution. In thc c� cnt that thc Agcnc� shall c�crcisc its option to prcpa� principal installmcnts of thc Scrics 2006C Loan pursuant to Scction 2.�4(c) of thc Loan Agrccmcnt. thc Rc� cnucs dcri� cd from such prcpa� mcnt shall bc applicd to thc rcdemption of thc Scrics 2006C Bonds maturing on or aftcr August I. 20_. as a«holc. or in part among maturitics as dcsignatcd in «riting b� thc Authorit� and b� lot «ithin a maturit� . in intcgral multiplcs of `f �.000 principal amount. on am Intcrest Pa� mcnt Datc on or aftcr August I. 20 . at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc principal amount of Scrics 2006C Bonds to bc rcdccmcd). plus accrucd intcrest thcrcon to thc datc of rcdcmption: Rcdcmption Rcdcmption Datcs Pricc August I. 20_ and Fcbruar� I. 20_ '%� August I. 20_ and Fcbruar� I. 20_ August I. 20_ and thcrcaftcr Thc Authorit� shall pro� idc «rittcn noticc to thc Trustcc of am rcdcmption pursuant to this Scction 2.0 �(a)( I) at Icast �4� but not morc than 90 da� s prior to thc datc fi�cd for such rcdcmption. (2) Mandator� Sinkin� Fund Rcdcmution. Thc Scrics 2006C Bonds maturing on August I. 20_ and August I. 20_ shall also bc subjcct to mandaton rcdcmption b� lot. on August I in cach � car commcncing August I. 20 and August I. 20 . respccti� cl�. from sinking fiind pa� mcnts madc b� thc Authorit� into thc Principal Account pursuant to Scction �4.02(b)(2). at a rcdcmption pricc cqual to thc principal amount thcrcof to bc rcdccmcd. «ithout prcmium. plus accrucd intcrest to thc datc of rcdcmption. in thc aggrcgatc respccti� c principal amounts and on August I in thc respccti� c� cars as sct forth in thc follo« ing tablcs: pro� idcd. ho« c� cr. that (i) in licu of rcdcmption thcrcof on August I in am � car. thc Scrics 2006C Bonds ma� bc purchascd b� thc Agcnc� pursuant to Scction 2. � of thc Loan Agrccmcnt and tcndcrcd to thc Trustcc for canccllation no latcr than thc PG—Ic l2. I c li i\872 i; I.8 — I�— prcccding Ma� I�. and (ii) if somc but all of thc Scrics 2006C Bonds of a maturit� ha� c bccn rcdccmcd pursuant to Paragraph (a) abo� c. thc total amount of all firture sinking fiind pa� mcnts «ith respcct to thc Scrics 2006A Bonds of such maturit� shall bc rcduccd b� thc aggrcgatc principal amount of such Scrics 2006A Bonds so rcdccmcd. to bc allocatcd among such sinking fiind pa� mcnts on a pro rata basis. Scrics 2006C Bonds Maturin� Au�ust I. 20 Sinking Fund Rcdcmption Datc Principal Amount (Au�ust I ) to bc Rcdccmcd tMaturit� . Scrics 2006C Bonds Maturin� Au�ust I. 20 Sinking Fund Rcdcmption Datc Principal Amount (Au�ust I ) to bc Rcdccmcd tMaturit� . (�) E�traordinar� Rcdcmution From Unrcicascd Succial Escro« Fund Monc� s. Thc Scrics 2006C Bonds shall bc subjcct to c�traordinar� rcdcmption in «holc or in part among maturitics and b� lot «ithin cach maturit� as dcsignatcd in «riting b� thc Authorit� from amounts transfcrrcd from thc Spccial Escro« Fund to thc Principal Account for such purposc pursuant to thc Loan Agrccmcnt. on August I. 20 . at a rcdcmption pricc cqual to perccnt of thc principal amount thcrcof to bc rcdccmcd. togcthcr «ith accrucd intcrest thcrcon to thc rcdcmption datc. (d) Gcncral Rcdcmution Pro� isions ( I) Noticc of Rcdcmution. Thc Tnistcc on bchalf and at thc c�pcnsc of thc Authorit� shall mail (b� first class mail) noticc of am rcdcmption to thc respccti� c O« ncrs of am Bonds dcsignatcd for rcdcmption at thcir respccti� c addresscs appcaring on thc Rcgistration Books and. b� such mcans acccptablc to thc follo« ing institutions. to thc Sccuritics Dcpositorics and to onc or morc Information Scr� iccs. at Icast �0 but not morc than 60 da� s prior to thc datc fi�cd for rcdcmption: uro� idcd. ho« c� cr. that ncithcr failurc to rccci� c am such noticc so mailcd nor am dcfcct thcrcin shall affcct thc � alidit� of thc procccdings for thc rcdcmption of such Bonds or thc ccssation of thc accrual of intcrest thcrcon. Such noticc shall statc thc datc of thc noticc. thc rcdcmption datc. thc rcdcmption placc and thc rcdcmption pricc and shall dcsignatc thc CUSIP numbcrs. thc scrics dcsignation of thc Bonds. thc Bond numbcrs (but onl� if Icss than all of thc Outstanding Bonds of such scrics arc to bc rcdccmcd) and thc maturit� or maturitics of thc Bonds of such scrics (in thc c� cnt of rcdcmption of all of such Bonds of such maturit� or maturitics in «holc) to bc rcdccmcd. and shall rcquire such Bonds bc thcn surrcndcrcd at thc Trust Officc of thc Trustcc in Los Angcics. California (or such othcr location as dcsignatcd b� thc Trustcc) for rcdcmption at thc rcdcmption pricc. gi� ing noticc also that fiirthcr intcrest on such Bonds «ill not accruc from and aftcr thc rcdcmption datc. P6—Ic �2. I c�;;\x72; ; I. x — I�— (2) Scicction of Bonds for Rcdcmution. With respcct to thc rcdcmption of Bonds of am scrics. «hcnc� cr pro� ision is madc in this Indcnturc for thc rcdcmption of Icss than all of such Bonds of am maturit�. thc Trustcc shall scicct thc Bonds to bc rcdccmcd from all Bonds of such scrics and maturit� not prc� iousl� callcd for rcdcmption. b� lot in am manncr «hich thc Trustcc in its solc discrction shall dccm appropriatc undcr thc circumstanccs. For purposcs of sciccting Scrics 200CA Bonds or Scrics 2006C «ithin a maturit� for rcdcmption. all of thc Bonds of such scrics shall bc dccmcd to bc compriscd of scparatc ��.000 principal amount portions and such portions shall bc trcatcd as scparatc bonds «hich ma� bc scparatcl� rcdccmcd. For purposcs of sciccting Scrics 2006B Bonds «ithin a maturit� for rcdcmption. all Scrics 2006B Bonds shall bc dccmcd to bc compriscd of scparatc ��.000 Maturit� Amount portions and such portions shall bc trcatcd as scparatc bonds «hich ma� bc scparatcl� rcdccmcd. (�) Partial Rcdcmution of Bonds. In thc c� cnt onl� a portion of am Bond is callcd for rcdcmption. thcn upon surrcndcr of such Bond thc Authorit� shall c�ccutc and thc Trustcc shall authcnticatc and dcli� cr to thc O« ncr thcrcof. at thc c�pcnsc of thc Authorit�. a nc« Bond or Bonds of thc samc scrics. tcnor and maturit� datc. of authorizcd dcnominations in aggrcgatc Principal Amount or Maturit� Amount. as thc casc ma� bc. cqual to thc unrcdccmcd portion of thc Bond to bc rcdccmcd. (�4) Effcct of Rcdcmution. From and aftcr thc datc fi�cd for rcdcmption. if fiinds a� ailablc for thc pa� mcnt of thc principal of. intcrest on and prcmium. if am. on thc Bonds so callcd for rcdcmption shall ha� c bccn dul� pro� idcd. such Bonds so callcd shall ccasc to bc cntiticd to am bcncfit undcr this Indcnturc othcr than thc right to rccci� c pa� mcnt of thc rcdcmption pricc. and no intcrest shall accruc thcrcon from and aftcr thc rcdcmption datc spccificd in such noticc. All Bonds rcdccmcd pursuant to this Scction shall bc dcstro� cd. Scction 2.0�4. Form of Bonds. Thc Scrics 2006A Bonds. thc Trustcc�s ccrtificatc of authcntication. and thc form of assignmcnt to appcar thcrcon shall bc substantiall� in thc respccti� c forms sct forth in E�hibit A attachcd hcrcto and b� this rcfcrcncc incorporatcd hcrcin. «ith ncccssar� or appropriatc � ariations. omissions and inscrtions. as pern�ittcd or rcquircd b� this Indcnturc. Thc Scrics 2006B Bonds. thc Trustcc�s ccrtificatc of authcntication. and thc form of assignmcnt to appcar thcrcon shall bc substantiall� in thc respccti� c forms sct forth in E�hibit B attachcd hcrcto and b� this rcfcrcncc incorporatcd hcrcin. «ith ncccssar� or appropriatc � ariations. omissions and inscrtions. as permittcd or rcquircd b� this Indcnturc. Thc Scrics 2006C Bonds. thc Trustcc�s ccrtificatc of authcntication. and thc form of assignmcnt to appcar thcrcon shall bc substantiall� in thc respccti� c forms sct forth in E�hibit C attachcd hcrcto and b� this rcfcrcncc incorporatcd hcrcin. «ith ncccssar� or appropriatc � ariations. omissions and inscrtions. as permittcd or rcquircd b� this Indcnturc. Scction 2.0�. E�ccution of Bonds. Thc Bonds shall bc signcd in thc namc and on bchalf of thc Authorit� «ith thc manual or facsimilc signatures of its Presidcnt and attcstcd «ith thc manual or facsimilc signaturc of its Sccrctar� or am dcput� dul� appointcd b� thc Authorit� Commission. and shall bc dcli� crcd to thc Trustcc for authcntication b� it. In casc am officcr of thc Authorit� «ho shall ha� c signcd am of thc Bonds shall ccasc to bc such officcr bcforc thc Bonds so signcd shall ha� c bccn authcnticatcd or dcli� crcd b� thc Trustcc or issucd b� thc Authorit�. such Bonds ma� nc� crthcicss bc authcnticatcd. dcli� crcd and issucd and. upon such authcntication. dcli� cr� and issuc. shall bc as binding upon thc Authorit� as though thc indi� idual «ho signcd thc samc had continucd to bc such officcr of thc Authorit� . Also. am Bond ma� bc signcd on bchalf of thc Authorit� b� am indi� idual «ho on thc actual datc of thc c�ccution of such Bond shall bc thc proper officcr although on thc nominal datc of such Bond such indi� idual shall not ha� c bccn such officcr. Onl� such of thc Bonds as shall bcar thcrcon a ccrtificatc of authcntication in substantiall� thc form sct forth in E�hibit A. E�hibit B or E�hibit C. as applicablc. manuall� c�ccutcd b� thc Trustcc. shall bc � alid or obligator� for am purposc or cntiticd to thc bcncfits of this Indcnturc. and P6—Ic �2. I c�;;\x72; ; I. x — I 6— such ccrtificatc of thc Trustcc shall bc conclusi� c c� idcncc that thc Bonds so authcnticatcd ha� c bccn dul� authcnticatcd and dcli� crcd hcrcundcr and arc cntiticd to thc bcncfits of this Indcnturc. Scction 2.06. Transfcr of Bonds. Am Bond ma�. in accordancc «ith its tcrms. bc transfcrrcd. upon thc Rcgistration Books. b� thc person in «hosc namc it is rcgistcrcd. in person or b� such O« ncr�s dul� authorizcd attornc�. upon surrcndcr of such Bond for canccllation. accompanicd b� dcli� cr� of a«rittcn instrumcnt of transfcr in a form acccptablc to thc Trustcc. dul� c�ccutcd. Whcnc� cr am Bond shall bc surrcndcrcd for transfcr. thc Authorit� shall c�ccutc and thc Trustcc shall thcrcupon authcnticatc and dcli� cr to thc transfcrcc a nc« Bond or Bonds of thc samc scrics and of likc tcnor. maturit� and aggrcgatc principal amount. Thc cost of printing am Bonds and am scr� iccs rcndcrcd or c�pcnscs incurrcd b� thc Trustcc in conncction «ith am such transfcr shall bc paid b� thc Authorit�. c�ccpt that thc Trustcc shall rcquirc thc pa� mcnt b� thc O« ncr rcqucsting such transfcr of am ta� or othcr go� crnmcntal chargc rcquircd to bc paid «ith respcct to such transfcr. Thc Trustcc shall not bc rcquircd to transfcr. pursuant to this Scction 2.06. cithcr (i) am Bond during thc period cstablishcd b� thc Trustcc for thc scicction of Bonds for rcdcmption. or (ii) am Bond scicctcd for rcdcmption pursuant to Scction 2.0 �. Scction 2.07. E�chan�c of Bonds. Bonds ma� bc c�changcd at thc Trust Officc for thc samc aggrcgatc Principal Amount or Maturit� Amount. as applicablc. of Bonds of thc samc scrics and of thc samc tcnor and maturit� and of othcr authorizcd dcnominations. Thc cost of printing am Bonds and am scr� iccs rcndcrcd or c�pcnscs incurrcd b� thc Trustcc in conncction «ith am such c�changc shall bc paid b� thc Authorit�. c�ccpt that thc Trustcc shall rcquirc thc pa�mcnt b� thc O«ncr rcqucsting such c�changc of am ta� or othcr go� crnmcntal chargc rcquircd to bc paid «ith respcct to such c�changc. Thc Trustcc shall not bc rcquircd to c�changc. pursuant to this Scction 2.07. cithcr (i) am Bond during thc period cstablishcd b� thc Tnistcc for thc scicction of Bonds for rcdcmption. or (ii) am Bond scicctcd for rcdcmption pursuant to Scction 2.0 �. Scction 2.08. Tcmuorar� Bonds. Thc Bonds ma� bc issucd initiall� in tcmporar� form c�changcablc for dcfiniti� c Bonds «hcn rcad� for dcli� cr� . Thc tcmporar� Bonds ma� bc printcd. lithographcd or t� pc« rittcn. shall bc of such dcnominations as ma� bc dctcrmincd b� thc Authorit� and ma� contain such rcfcrcncc to am of thc pro� isions of this Indcnturc as ma� bc appropriatc. E� cr� tcmporar� Bond shall bc c�ccutcd b� thc Authorit� and bc rcgistcrcd and authcnticatcd b� thc Trustcc upon thc samc conditions and in substantiall� thc samc manncr as thc dcfiniti� c Bonds: uro� idcd that am tcmporar� Bond nccd onl� bc signcd in thc namc and on bchalf of thc Authorit� «ith thc manual or facsimilc signaturc of thc Sccrctar�. or am dcput� dul� appointcd b� thc Authorit� Commission. and nccd not bc attcstcd. If thc Authorit� issucs tcmporar� Bonds. it «ill c�ccutc and fiirnish dcfiniti� c Bonds «ithout dcla�. and thcrcupon thc tcmporar� Bonds shall bc surrcndcrcd. for canccllation. in c�changc thcrcfor at thc Trust Officc of thc Trustcc in Los Angcics. California (or such othcr location dcsignatcd b� thc Trustcc). and thc Trustcc shall authcnticatc and dcli� cr in c�changc for such tcmporar� Bonds dcfiniti� c Bonds of likc scrics. tcrm. maturit� and aggrcgatc Principal Amow�t or Maturit� Amount. as applicablc. in authorizcd dcnominations. Until so c�changcd. thc tcmporar� Bonds shall bc cntiticd to thc samc bcncfits undcr this Indcnturc as dcfiniti� c Bonds authcnticatcd and dcli� crcd hcrcundcr. Scction 2.09. Rc�istration Books. Thc Trustcc «ill kccp or causc to bc kcpt at its Trust Officc sufficicnt rccords for thc rcgistration and transfcr of thc Bonds. «hich shall at all timcs during rcgular busincss hours bc opcn to inspcction b� thc Authorit� «ith rcasonablc prior noticc: and. upon prescntation for such purposc. thc Trustcc shall. undcr such rcasonablc rcgulations as it ma� prescribc. rcgistcr or transfcr or causc to bc rcgistcrcd or transfcrrcd. on such rccords. Bonds as hcrcinbcforc pro�idcd. PG—Ic l2. I c li i\872 i; I.8 — I 7— Scction 2.10. Bonds Mutilatcd. Lost. Dcstro� cd or Stolcn. If am Bond shall bccomc mutilatcd. thc Authorit�. at thc c�pcnsc of thc O« ncr of such Bond. shall c�ccutc. and thc Trustcc shall thcrcupon authcnticatc and dcli� cr. a nc« Bond of likc scrics. tcnor. maturit� and aggrcgatc Principal Amount or Maturit� Amount. as applicablc. in authorizcd dcnominations in c�changc and substitution for thc Bond so mutilatcd. but onl� upon surrcndcr to thc Trustcc of thc Bond so mutilatcd. E� cr� mutilatcd Bond so surrcndcrcd to thc Trustcc shall bc canccllcd b� it and dcstro� cd. If am Bond issucd hcrcundcr shall bc lost. dcstro� cd or stolcn. c� idcncc of such loss. dcstruction or thcft ma� bc submittcd to thc Trustcc and. if such c� idcncc bc satisfactor� to thc Trustcc and indcmnit� satisfactor� to thc Trustcc shall bc gi� cn. thc Authorit� . at thc c�pcnsc of thc O« ncr. shall c�ccutc. and thc Trustcc shall thcrcupon authcnticatc and dcli� cr. a nc« Bond of likc scrics and tcnor in licu of and in substitution for thc Bond so lost. dcstro� cd or stolcn (or if am such Bond shall ha� c maturcd or shall ha� c bccn callcd for rcdcmption. instcad of issuing a substitutc Bond thc Trustcc ma� pa� thc samc «ithout surrcndcr thcrcof upon rcccipt of indcmnit� satisfactor� to thc Trustcc). Thc Trustcc ma� rcquirc pa� mcnt of a rcasonablc fcc for cach nc« Bond issucd undcr this Scction 2.10 and of thc c�pcnscs «hich ma� bc incurrcd b� thc Authorit� and thc Trustcc. Am Bond issucd undcr thc pro� isions of this Scction 2.10 in licu of am Bond allcgcd to bc lost. dcstro� cd or stolcn shall constitutc an original contractual obligation on thc part of thc Authorit� «hcthcr or not thc Bond allcgcd to bc lost. dcstro� cd or stolcn bc at am timc cnforccablc b� am onc. and shall bc cquall� and proportionatcl� cntiticd to thc bcncfits of this Indcnturc «ith all othcr Bonds sccurcd b� this Indcnturc. ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS: ISSUANCE OF BONDS Scction �.01. Issuancc of Bonds. Upon thc c�ccution and dcli� cr� of this Indcnturc. thc Authorit� shall c�ccutc and dcli� cr thc Scrics 2006A Bonds and thc Scrics 2006B Bonds in thc respccti� c aggrcgatc Initial Principal Amounts sct forth hcrcin and shall dcli� cr thc Bonds to thc Trustcc for authcntication and dcli� cr� to thc original purchascr thcrcof upon thc Rcqucst of thc Authorit� . Scction �.02. Loan Funds: Auulication of Procccds of Salc of Bonds. (a) Thc Trustcc shall cstablish and maintain a scparatc fiind to bc kno«n as thc "Scrics 2006A Loan Fund.�� Upon thc rcccipt of pa� mcnt for thc Scrics 2006A Bonds on thc Closing Datc. thc Trustcc shall dcposit thc procccds of salc thcrcof in thc amount of `f in thc Scrics 2006A Loan Fund. Thc Trustcc shall disbursc all amounts in thc Scrics 2006A Loan Fund pursuant to Scction 2.2 of thc Loan Agrccmcnt. (b) Thc Trustcc shall cstablish and maintain a scparatc fiind to bc kno« n as thc "Scrics 2006B Loan Fund.�� Upon thc rcccipt of pa� mcnt for thc Scrics 2006B Bonds on thc Closing Datc. thc Trustcc shall dcposit thc procccds of salc thcrcof in thc amount of `f in thc Scrics 2006B Loan Fund. Thc Trustcc shall disbursc all amounts in thc Scrics 2006B Loan Fund pursuant to Scction 2.2 of thc Loan Agrccmcnt. (c) Thc Trustcc shall cstablish and maintain a scparatc fiind to bc kno« n as thc "Scrics 2006C Loan Fund.�� Upon thc rcccipt of pa� mcnt for thc Scrics 2006C Bonds on thc Closing Datc. thc Trustcc shall dcposit thc procccds of salc thcrcof in thc amount of `f in thc Scrics 2006C Loan Fund. Thc Trustcc shall disbursc all amounts in thc Scrics 2006B Loan Fund pursuant to Scction 2.2 of thc Loan Agrccmcnt. Scction �.0 �. Validit� of Bonds. Thc � alidit� of thc authorization and issuancc of thc Bonds shall not bc affcctcd in am «a� b� am procccdings takcn b� thc Agcnc� «ith respcct to thc application of thc procccds of thc Loans. and thc rccital containcd in thc Bonds that thc samc arc issucd P6—Ic �2. I c�;;\x72; ; I. x — I 8— pursuant to thc Bond La« shall bc conclusi� c c� idcncc of thcir � alidit� and of thc rcgularit� of thcir issuancc. ARTICLE IV REVENUES: FLOW OF FUNDS Scction �4.01. Plcd�c of Rc� cnucs: Assi�nmcnt of Ri�hts. Subjcct to thc pro� isions of Scction 6.0�. thc Bonds shall bc sccurcd b� a first licn on and plcdgc («hich shall bc cffcctcd in thc manncr and to thc c�tcnt hcrcinaftcr pro� idcd) of all of thc Rc� cnucs. Thc Bonds shall bc cquall� sccurcd b� a plcdgc. chargc and licn upon thc Rc� cnucs «ithout priorit� for scrics. numbcr. datc of Bonds. datc of c�ccution or datc of dcli� cr� : and thc pa� mcnt of thc intcrest on and principal of thc Bonds and am prcmiums upon thc rcdcmption of am thcrcof shall bc and are sccurcd b� an c�clusi� c plcdgc. chargc and licn upon thc Rc� cnucs. So long as am of thc Bonds arc Outstanding. thc Rc� cnucs shall not bc uscd for am othcr purposc: c�ccpt that out of thc Rc� cnucs thcrc ma� bc apportioncd such sums. for such purposcs. as arc c�pressl� permittcd b� Scction �4.02. Thc Authorit� hcrcb� transfcrs in trust and assigns to thc Trustcc. for thc bcncfit of thc O« ncrs from timc to timc of thc Bonds. all of thc Rc� cnucs and all of thc right. titic and intcrest of thc Authorit� in thc Loan Agrccmcnt (othcr than thc rights of thc Authorit� undcr Scction �.0�4 thcrco�. Thc Trustcc shall bc cntiticd to and shall rccci� c all of thc Rc� cnucs. and am Rc� cnucs collcctcd or rccci� cd b� thc Authorit� shall bc dccmcd to bc hcld. and to ha� c bccn collcctcd or rccci� cd. b� thc Authorit� as thc agcnt of thc Trustcc and shall forth« ith bc paid b� thc Authorit� to thc Trustcc. Thc Trustcc also shall bc cntiticd to and. subjcct to thc pro� isions hcrcof. shall takc all stcps. actions and procccdings rcasonabl� ncccssar� in its judgmcnt to cnforcc. cithcr jointl� «ith thc Authorit� or scparatcl�. all of thc rights of thc Authorit� and all of thc obligations of thc Agcnc� undcr thc Loan Agrccmcnt. Scction �4.02. Rccciut. Dcuosit and Auulication of Rc� cnucs. (a) Dcuosit of Rc� cnucs. Rc� cnuc Fund. All Rc� cnucs dcscribcd in clausc (i) of thc dcfinition thcrcof in Scction I.01 shall bc promptl� dcpositcd b� thc Trustcc upon rcccipt thcrcof in a spccial fiind dcsignatcd as thc "Rc� cnuc Fund�� «hich thc Trustcc shall cstablish. maintain and hold in trust hcrcundcr. (b) Auulication of Rc� cnucs: Accounts. On or bcforc cach Intcrest Pa� mcnt Datc. thc Trustcc shall transfcr from thc Rc� cnuc Fund and dcposit into thc follo« ing respccti� c accounts (cach of «hich thc Trustcc shall cstablish and maintain «ithin thc Rc� cnuc Fund). thc follo« ing amounts in thc follo« ing ordcr of priorit�. thc rcquircmcnts of cach such account (including thc making up of am dcficicncics in am such account resulting from lack of Rc� cnucs sufficicnt to makc am carlicr rcquircd dcposit) at thc timc of dcposit to bc satisficd bcforc am transfcr is madc to am account subscqucnt in priorit� : ( I) Intcrest Account. On or bcforc cach Intcrest Pa� mcnt Datc. thc Trustcc shall dcposit in thc Intcrest Account an amount rcquircd to causc thc aggrcgatc amount on dcposit in thc Intcrest Account to cqual thc amount of intcrest coming duc and pa�ablc on such Intcrest Pa� mcnt Datc on all Outstanding Scrics 2006A and Scrics 2006C Bonds. No dcposit nccd bc madc into thc Intcrest Account if thc amount containcd thcrcin is at Icast cqual to thc intcrest coming duc and pa�ablc upon all Outstanding Scrics 2006A and Scrics 2006C Bonds on thc nc�t succccding Intcrest Pa�mcnt Datc. All monc� s in thc Intcrest Account shall bc uscd and «ithdra«n b� thc Trustcc solcl� for thc purposc of pa� ing thc intcrest on thc Scrics 2006A Bonds and Scrics 2006C as it shall bccomc duc and pa�ablc (including accrucd intcrest on am Scrics 2006A Bonds or Scrics 2006C rcdccmcd prior to maturit� ). All amounts on dcposit in thc Intcrest Account on thc first da� of am Bond Ycar. to thc c�tcnt not rcquircd to P6—Ic �2. I c�;;\x72; ; I. x — I 9— pa� am intcrest thcn ha� ing comc duc and pa�ablc on thc Outstanding Scrics 2006A or Scrics 2006C Bonds. shall bc «ithdra« n thcrcfrom b� thc Trustcc and transfcrrcd to thc Agcnc� to bc uscd for am la« fiil purposcs of thc Agcnc� . (2) Princival Account. On or bcforc cach datc on «hich thc principal of thc Bonds shall bc pa�ablc. thc Trustcc shall dcposit in thc Principal Account an amount rcquircd to causc thc aggrcgatc amount on dcposit in thc Principal Account to cqual (i) thc Principal Amount of thc Bonds coming duc and pa�ablc on such datc pursuant to Scction 2.02. and (ii) thc Principal Amount ofthc Bonds subjcct to mandator� sinking fiind redcmption on such datc pursuant to Scction 2.0 �(a)(2) or 2.0 �(c)(2). All monc� s in thc Principal Account shall bc uscd and «ithdra« n b� thc Trustcc solcl� for thc purposc of pa� ing thc Principal Amount of thc Bonds (i) at thc maturit� thcrcof. or (ii) upon mandator� sinking fiind redcmption thcrcof. All amounts on dcposit in thc Principal Account on thc first da� of am Bond Ycar. to thc c�tcnt not rcquircd to pa� thc principal of am Outstanding Bonds thcn ha� ing comc duc and pa� ablc. shall bc «ithdra« n thcrcfrom and transfcrrcd to thc Agcnc� to bc uscd for am la« fiil purposcs of thc Agcnc� . (�) Rcdcmution Account. Thc Trustcc. at am timc that thc Agcnc� shall c�crcisc its option to prcpa� principal installmcnts of thc Loans pursuant to Scction 2.�4 of thc Loan Agrccmcnt. shall dcposit thc Rc� cnucs dcri� cd from such prcpa� mcnt in thc Rcdcmption Account («hich thc Trustcc shall also cstablish and maintain «ithin thc Rc� cnuc Fund). to bc uscd and «ithdra« n b� thc Trustcc solcl� for thc purposc of pa� ing thc Principal Amount and redcmption prcmiums. if am. on thc Bonds to bc rcdccmcd on thcir respccti� c rcdcmption datcs. as dircctcd b� thc Authorit� . Scction �4.0 �. In� cstmcnts. All monc� s in am of thc fiinds or accounts cstablishcd «ith thc Trustcc pursuant to this Indcnturc or pursuant to thc Loan Agrccmcnt shall bc in� cstcd b� thc Trustcc solcl� in Pcrmittcd In� cstmcnts pursuant to thc «rittcn dircction of thc Authorit� gi� cn to thc Trustcc t«o Busincss Da� s in ad� ancc of thc making of such in� cstmcnts (and promptl� confirmcd in «riting. as to am such dircction gi� cn orall� ): pro� idcd that monc� s in thc Rcscr� c Fund cstablishcd pursuant to thc Loan Agrccmcnt shall bc in� cstcd in Pcrmittcd In� cstmcnts «hich maturc not morc than fi� c� cars from thc datc of such in� cstmcnt. In thc abscncc of am such dircction from thc Authorit�. thc Tnistcc shall in� cst am such monc� s in Pcrmittcd In� cstmcnts dcscribcd in Paragraph D of thc dcfinition thcrcof. Obligations purchascd as an im cstmcnt of monc� s in am fiind shall bc dccmcd to bc part of such fiind or account. All intcrest or gain dcri� cd from thc in� cstmcnt of amounts in am of thc fiinds or accounts cstablishcd hcrcundcr shall bc dcpositcd in thc fiind or account from «hich such in� cstmcnt «as madc. For purposcs of acquiring am im cstmcnts hcrcundcr. thc Trustcc ma� comminglc fiinds hcld b� it hcrcundcr. Thc Tnistcc ma� (but shall not bc obligatcd to) act as principal or agcnt in thc acquisition or disposition of am im cstmcnt. Thc Trustcc shall incur no liabilit� for losscs arising from am in� cstmcnts madc at thc dircction of thc Authorit�. or othcr« isc madc pursuant to this Scction. Thc Trustcc shall bc cntiticd to rcl� conclusi� cl� upon thc «rittcn instructions of thc Authorit� dirccting in� cstmcnts in Pcrmittcd In� cstmcnts as to thc fact that cach such in� cstmcnt is permittcd b� thc la« s of thc Statc. and shall not bc rcquircd to makc fiirthcr in� cstigation «ith respcct thcrcto. With respcct to am restrictions sct forth in thc dcfinition of Pcrmittcd In� cstmcnts sct forth in Scction I.01 «hich cmbod� Icgal conclusions (c.g.. thc c�istcncc. � alidit� and perfcction of sccurit� intcrests in collatcral). thc Trustcc shall bc cntiticd to rcl� conclusi� cl� on an opinion of counscl or upon a rcprescntation of thc pro� idcr of such Pcrmittcd In� cstmcnt obtaincd at thc Authorit� �s or thc Agcnc� �s c�pcnsc. P6—Ic �2. I c�;;\x72; ; I. x —20— E�ccpt as spccificall� pro� idcd in this Indcnturc. thc Tnistcc shall not bc liablc to pa� intcrest on am monc� s rccci� cd b� it. but shall bc liablc onl� to account to thc Authorit� and thc Agcnc� for carnings dcri� cd from fiinds that ha� c bccn in� cstcd. Thc Authorit� ackno« Icdgcs that to thc c�tcnt rcgulations of thc Comptrollcr of thc Currcnc� or othcr applicablc rcgulator� cntit� grant thc Authorit� thc right to rccci� c brokcragc confirmations of sccurit� transactions as thc� occur. thc Authorit� spccificall� «ai� cs rcccipt of such confirmations to thc c�tcnt permittcd b� la«. Thc Trustcc «ill fiirnish thc Authorit� periodic cash transaction statcmcnts «hich includc dctail for all in� cstmcnt transactions madc b� thc Trustcc hcrcundcr. Thc Trustcc or am of its affiliatcs ma� act as sponsor. ad� isor or managcr in conncction «ith am in� cstmcnts madc b� thc Trustcc hcrcundcr. Scction �4.0�4. Valuation and Disuosition of In� cstmcnts. For thc purposc of dctcrmining thc amount in am fiind or account cstablishcd hcrcundcr or undcr thc Loan Agrccmcnt. am in� cstmcnts crcditcd to such fiind or account shall bc � alucd at Icast annuall�. on or bcforc Jul� I. at thc markct � aluc thcrcof. In making am � aluations hcrcundcr thc Trustcc ma� utilizc computcrizcd sccuritics pricing scr� iccs that ma� bc a� ailablc to it. including thosc a� ailablc through its rcgular accounting s� stcm. ARTICLE V COVENANTS OF THE AUTHORITY Scction �.01. Punctual Pa� mcnt. Thc Authorit� shall punctuall� pa� or causc to bc paid thc principal. intcrest and prcmium. if am. to bccomc duc in respcct of all thc Bonds. in strict conformit� «ith thc tcrms of thc Bonds and of this Indcnturc. according to thc truc intcnt and mcaning thcrcof. but onl� out of Rc� cnucs and othcr asscts plcdgcd for such pa� mcnt as pro� idcd in this Indcnturc. Scction �.02. E�tcnsion of Pa� mcnt of Bonds. Thc Authorit� shall not dircctl� or indircctl� c�tcnd or asscnt to thc c�tcnsion of thc maturit� of am of thc Bonds or thc timc of pa� mcnt of am claims for intcrest b� thc purchasc of such Bonds or b� am othcr arrangcmcnt. and in casc thc maturit� of am of thc Bonds or thc timc of pa� mcnt of am such claims for intcrest shall bc c�tcndcd. such Bonds or claims for intcrest shall not bc cntiticd. in casc of am dcfault hcrcundcr. to thc bcncfits of this Indcnturc. c�ccpt subjcct to thc prior pa� mcnt in fiill of thc principal of all of thc Bonds thcn Outstanding and of all claims for intcrest thcrcon «hich shall not ha� c bccn so c�tcndcd. Nothing in this Scction �.02 shall bc dccmcd to limit thc right of thc Authorit� to issuc bonds or othcr obligations for thc purposc of rcfiinding am Outstanding Bonds. and such issuancc shall not bc dccmcd to constitutc an c�tcnsion of maturit� of thc Bonds. Scction �.0 �. A�ainst Encumbranccs. Thc Authorit� shall not crcatc. or permit thc crcation of. am plcdgc. licn. chargc or othcr cncumbrancc upon thc Rc� cnucs and othcr asscts plcdgcd or assigncd undcr this Indcnturc «hilc am of thc Bonds arc Outstanding. c�ccpt thc plcdgc and assignmcnt crcatcd b� this Indcnturc. Subjcct to this limitation. thc Authorit� c�pressl� rescr� cs thc right to cntcr into onc or morc othcr indcntures for am of its corporatc purposcs. including othcr programs undcr thc Bond La«. and rescr� cs thc right to issuc othcr obligations for such purposcs. Scction �.0�4. Po«cr to Issuc Bonds and Makc Plcd�c and Assi�nmcnt. Thc Authorit� is dul� authorizcd pursuant to la« to issuc thc Bonds and to cntcr into this Indcnturc and to plcdgc and assign thc Rc� cnucs. thc Loan Agrccmcnt and othcr asscts purportcd to bc plcdgcd and assigncd. respccti� cl�. undcr this Indcnturc in thc manncr and to thc c�tcnt pro� idcd in this Indcnturc. Thc Bonds and thc pro� isions of this Indcnturc arc and «ill bc thc Icgal. � alid and binding spccial obligations of thc Authorit� in accordancc «ith thcir tcrms. and thc Authorit� shall at all timcs. to thc c�tcnt permittcd b� P6—Ic �2. I c�;;\x72; ; I. x —2 I— la«. dcfcnd. prescr� c and protcct said plcdgc and assignmcnt of Rc� cnucs and othcr asscts and all thc rights of thc O« ncrs undcr this Indcnturc against all claims and dcmands of all persons «homsoc� cr. Scction �.0�. Accountin� Rccords and Financial Statcmcnts. Thc Trustcc shall at all timcs kccp. or causc to bc kcpt. proper books of rccord and account. prcparcd in accordancc «ith corporatc trust industr� standards. in «hich complctc and accuratc cntrics shall bc madc of all transactions madc b� thc Trustcc rclating to thc procccds of Bonds. thc Rc� cnucs. thc Loan Agrccmcnt and all fiinds and accounts cstablishcd pursuant to this Indcnturc. Such books of rccord and account shall bc a� ailablc for inspcction b� thc Authorit� and thc Agcnc�. during rcgular busincss hours «ith rcasonablc prior noticc. Scction �.06. No Additional Indcbtcdncss. E�ccpt for thc Bonds. thc Authorit� shall not incur am indcbtcdncss pa� ablc out of thc Rc� cnucs. (For clarification. this pro� ision docs not prohibit thc Agcnc� from incurring additional dcbt sccurcd b� Ta� Rc� cnucs. so long as thc incurrcncc of such dcbt is in compliancc «ith thc Loan Agrccmcnt.) Scction �.07. Ta� Co� cnants. (a) Thc Authorit� co� cnants that. in ordcr to maintain thc c�clusion from gross incomc for Fcdcral incomc ta� purposcs of thc intcrest on thc Bonds. and for no othcr purposc. thc Authorit� «ill satisfi. or takc such actions as arc ncccssan to causc to bc satisficd. cach pro� ision of thc Codc ncccssan to maintain such c�clusion. In fiirthcrancc of this co� cnant thc Authorit� agrccs to compl� «ith such «rittcn instructions as ma� bc pro� idcd b� Bond Counscl. (b) Thc Authorit� co� cnants that no part of thc procccds of thc Bonds shall bc uscd. dircctl� or indircctl�. to acquirc am In� cstmcnt Propert� «hich «ould causc thc Bonds to bccomc arbitragc bonds. as that tcrm is dcfincd in Scction I�48 of thc Codc. or undcr applicablc Ta� Rcgulations. In ordcr to assurc compliancc «ith thc rcbatc rcquircmcnts of Scction 1�48 of thc Codc. thc Authorit� fiirthcr co� cnants that it «ill pa� or causc to bc paid to thc Unitcd Statcs thc amounts ncccssar� to satisfi thc rcquircmcnts of Scction 1�48(� of thc Codc. and that it «ill cstablish such accounting proccdures as arc ncccssar� to adcquatcl� dctcrminc. account for and pa� o� cr am such amount rcquircd to bc paid thcrcundcr in a manncr consistcnt «ith thc rcquircmcnts of Scction I�48 of thc Codc. such co� cnants to sur� i� c thc dcfcasancc of thc Bonds. (c) Thc Authorit� co� cnants that it «ill not takc am action or omit to takc am action. «hich action or omission. if rcasonabl� c�pcctcd on thc datc of initial c�ccution and dcli� cn of thc Bonds. «ould result in a loss of c�clusion from gross incomc for purposcs of Fcdcral incomc ta�ation. undcr Scction I 0� of thc Codc. of intcrest on thc Bonds. (d) Thc Authorit� co� cnants that it «ill not usc or permit thc usc of am propert� financcd «ith thc procccds of thc Bonds b� am person (othcr than a statc or local go� crnmcntal unit) in such manncr or to such c�tcnt as «ould result in a loss of c�clusion of thc intcrest on thc Bonds from gross incomc for Fcdcral incomc ta� purposcs undcr Scction I 0� of thc Codc. (c) Not« ithstanding am pro� ision of this Indcnturc. and c�ccpt as pro� idcd bclo«. thc Authorit� co� cnants that nonc of thc monc� s containcd in am of thc fiinds or accounts crcatcd pursuant to this Indcnturc «ith respcct to thc Bonds shall bc: (i) uscd in making loans guarantccd b� thc Unitcd Statcs (or am agcnc� or instrumcntalit� thcrco�. (ii) im cstcd dircctl� or indircctl� in a dcposit or account insurcd b� thc Fcdcral Dcposit Insurancc Corporation. National Crcdit Union Administration or am othcr similar Fcdcrall� chartcrcd corporation. or (iii) othcr« isc in� cstcd dircctl� or indircctl� in obligations guarantccd (in «holc or in part) b� thc Unitcd Statcs (or am agcnc� or instrumcntalit� thcrco�: pro� idcd. ho« c� cr. that thc abo� c restrictions do not appl� to: (a) thc in� cstmcnt on monc� s P6—Ic �2. I c�;;\x72; ; I. x —22— hcld in thc Rc� cnuc Fund or am othcr "bona fidc dcbt scr� icc fiind�� as dcfincd for purposcs of Scction I�48 of thc Codc. (b) in� cstmcnt in dircct obligations of thc Unitcd Statcs Trcasur�. (c) in� cstmcnt in obligations guarantccd b� thc Fcdcral National Mortgagc Association. Go� crnmcnt National Mortgagc Association. or thc Fcdcral Homc Loan Mortgagc Corporation. (d) in� cstmcnt in obligations issucd pursuant to Scction 2 I B(d)( �) of thc Fcdcral Homc Loan Bank Act. as amcndcd b� Scction � I I(a) of thc Financial Institutions Rcform. Rcco� cr�. and Enforccmcnt Act of 1989. (c) in� cstmcnts permittcd undcr rcgulations issucd pursuant to Scction 1�49(b)( �)(B) of thc Codc. or (� such othcr in� cstmcnts permittcd undcr this Indcnturc as. in thc opinion of Bond Counscl. do not jcopardizc thc c�clusion from gross incomc for Fcdcral incomc ta� purposcs of intcrest on thc Bonds. Scction �.08. Loan A�rccmcnt. Thc Trustcc. as assigncc of thc Authorit� �s rights pursuant to Scction �4.01. shall rccci� c all amounts duc from thc Agcnc� pursuant to thc Loan Agrccmcnt and. upon an E� cnt of Dcfault. shall diligcntl� cnforcc. and takc all stcps. actions and procccdings rcasonabl� ncccssar� for thc cnforccmcnt of all of thc rights of thc Authorit� thcrcundcr and for thc cnforccmcnt of all of thc obligations of thc Agcnc� thcrcundcr. Thc Loan Agrccmcnt ma� bc amcndcd or modificd pursuant to thc applicablc pro� isions thcrcof. but onl� «ith thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct) and onl� :(i) if thc Authorit�. thc Agcnc� or thc Trustcc first obtains thc «rittcn conscnt of thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding to such amcndmcnt or modification. pro� idcd. ho« c� cr. that no such amcndmcnt or modification shall (a) c�tcnd thc maturit� of or rcducc thc amount of intcrest or principal pa� mcnts on a Loan. or othcn� isc altcr or impair thc obligation of thc Agcnc� to pa� thc principal. intcrest or prcpa� mcnt prcmiums on a Loan at thc timc and placc and at thc ratc and in thc currcnc� pro� idcd thcrcin. «ithout thc c�press «rittcn conscnt of thc O« ncr of cach affcctcd Bond. (b) rcducc thc perccntagc of thc Bonds rcquircd for thc «rittcn conscnt to am such modification or amcndmcnt thcrcof on c�rcof. or (c) «ithout its «rittcn conscnt thcrcto. modif� am of thc rights or obligations of thc Trustcc: or (ii) «ithout thc conscnt of am of thc O« ncrs. if such amcndmcnt or modification docs not modif� thc rights or obligations of thc Trustcc «ithout its prior «rittcn conscnt. and is for am onc or morc of thc follo« ing purposcs: (a) to add to thc co� cnants and agrccmcnts of thc Agcnc� containcd in thc Loan Agrccmcnt othcr co� cnants and agrccmcnts thcrcaftcr to bc obscr� cd. or to limit or surrcndcr am rights or po« cr thcrcin rescr� cd to or confcrrcd upon thc Agcnc� so long as such limitation or surrcndcr of such rights or po« crs shall not matcriall� ad� crscl� affcct thc O« ncrs of thc Bonds: (b) to makc such pro� isions for thc purposc of curing am ambiguit�. or of curing. corrccting or supplcmcnting am dcfccti� c pro� ision containcd in thc Loan Agrccmcnt. or in am othcr respcct «hatsoc� cr as thc Agcnc� and thc Authorit� ma� dccm ncccssar� or dcsirablc. pro� idcd undcr am circumstanccs that such modifications or amcndmcnts shall not matcriall� ad� crscl� affcct thc intcrests of thc O« ncrs of thc Bonds: (c) to amcnd am pro� ision thcrcof rclating to thc Codc. to am c�tcnt «hatsoc� cr but onl� if and to thc c�tcnt such amcndmcnt «ill not ad� crscl� affcct thc c�clusion from gross incomc for fcdcral incomc ta� purposcs of intcrest on am of thc Bonds undcr thc Codc. in thc opinion of Bond Counscl: or (d) to pro� idc for thc issuancc of Parit� Dcbt undcr and in accordancc «ith thc pro� isions of thc Loan Agrccmcnt. Nothing in this Scction �.08 shall prc� cnt thc Agcnc� and thc Authorit�. «ith thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct). from cntcring into am amcndmcnt or modification of thc Loan Agrccmcnt «hich solcl� affccts a particular Bond or Bonds all of P6—Ic �2. I c �;;\x72; ; I . x —2 � — thc O« ncrs of «hich shall ha� c conscntcd to such amcndmcnt or modification: pro� idcd. ho« c� cr. no such amcndmcnt or modification shall affcct thc rights or obligations of thc Trustcc «ithout its prior «rittcn conscnt. Thc Tnistcc shall bc cntiticd to rcl� upon thc opinion of Bond Counscl stating that thc rcquircmcnts of this Scction �.08 ha� c bccn mct «ith respcct to am amcndmcnt or modification of thc Loan Agrccmcnt. Scction �.09. Furthcr Assuranccs. Thc Authorit� «ill adopt. makc. c�ccutc and dcli� cr am and all such fiirthcr resolutions. instrumcnts and assuranccs as ma� bc rcasonabl� ncccssar� or proper to carn out thc intcntion or to facilitatc thc performancc of this Indcnturc. and for thc bcttcr assuring and confirming unto thc O« ncrs of thc Bonds thc rights and bcncfits pro� idcd in this Indcnturc. ARTICLE VI THETRUSTEE Scction 6.01. Auuointmcnt of Trustcc. Wclls Fargo Bank. National Association. a national banking association organizcd and c�isting undcr and b� � irtuc of thc la« s of thc Unitcd Statcs of Amcrica. «ith a corporatc trust officc in Los Angcics. California. is hcrcb� appointcd Trustcc b� thc Authorit� for thc purposc of rccci� ing all monc� s rcquircd to bc dcpositcd «ith thc Trustcc hcrcundcr and to allocatc. usc and appl� thc samc as pro� idcd in this Indcnturc. Thc Authorit� agrccs that it «ill maintain a Trustcc «hich shall bc a financial institution ha� ing a corporatc trust officc in thc Statc. «ith a combincd capital and surplus of at Icast �7�.000.000. and subjcct to super� ision or ctiamination b� fcdcral or Statc authorit�. so long as am Bonds arc Outstanding. If such financial institution publishcs a rcport of condition at Icast annuall� pursuant to la« or to thc rcquircmcnts of am super� ising or c�amining authorit� abo� c rcfcrrcd to. thcn for thc purposc of this Scction 6.01 thc combincd capital and surplus of such financial institution shall bc dccmcd to bc its combincd capital and surplus as sct forth in its most rcccnt rcport of condition so publishcd. Thc Trustcc is hcrcb� authorizcd to pa� thc principal of and intcrest and redcmption prcmium. ifam. on thc Bonds «hcn dul� prescntcd for pa�mcnt at maturit�. or on rcdcmption or purchasc prior to maturit�. and to canccl all Bonds upon pa� mcnt thcrcof. Thc Trustcc shall kccp accuratc rccords of all funds administcrcd b� it and of all Bonds paid and dischargcd. Scction 6.02. Acccutancc of Tnists. Thc Trustcc hcrcb� acccpts thc trusts imposcd upon it b� this Indcnturc. and agrccs to perform said trusts. but onl� upon and subjcct to thc follo« ing c�press tcrms and conditions: (a) Thc Trustcc. prior to thc occurrcncc of an E� cnt of Dcfault and aftcr curing of all E� cnts of Dcfault «hich ma� ha� c occurrcd. undcrtakcs to perform such dutics and onl� such dutics as are spccificall� sct forth in this Indcnturc and no implicd co� cnants. dutics or obligations shall bc rcad into this Indcnturc against thc Trustcc. In casc an E� cnt of Dcfault hcrcundcr has occurrcd («hich has not bccn curcd or «ai� cd). thc Trustcc ma� c�crcisc such of thc rights and po« crs � cstcd in it b� this Indcnturc. and shall usc thc samc dcgrcc of carc and skill and diligcncc in thcir c�crcisc. as a prudcnt person «ould usc in thc conduct of its o« n affairs. (b) Thc Trustcc ma� c�ccutc am of thc trusts or po« crs hcrcof and perform thc dutics rcquircd of it hcrcundcr b� or through attornc� s. agcnts. or rccci� crs. and shall bc cntiticd to ad� icc of cow�scl conccrning all mattcrs of trust and its dut� hcrcundcr. Thc Trustcc ma� conclusi� cl� rcl� on an opinion of counscl as fiill and complctc protcction for am action takcn or suffcrcd b� it hcrcundcr. (c) Thc Trustcc shall not bc responsiblc for am rccital hcrcin. in thc Loan Agrccmcnt or in thc Bonds. or for am of thc supplcmcnts hcrcto or thcrcto or instrumcnts of fiirthcr P6—Ic �2. I c�;;\x72; ; I. x —2�1— assurancc. or for thc � alidit� of this Indcnturc or thc Loan Agrccmcnt. or for thc sufficicnc� of thc sccurit� for thc Bonds issucd hcrcundcr or intcndcd to bc sccurcd hcrcb�. or thc ta� status of thc intcrest on thc Bonds. and thc Trustcc shall not bc bound to asccrtain or inquirc as to thc obscr�ancc or performancc of am co� cnants. conditions or agrccmcnts on thc part of thc Authorit� hcrcundcr. (d) Thc Trustcc (including its officcrs and cmplo� ccs) ma� bccomc thc O« ncr of Bonds sccurcd hcrcb� «ith thc samc rights «hich it «ould ha� c if not thc Trustcc: ma� acquirc and disposc of othcr bonds or c� idcnccs of indcbtcdncss of thc Authorit� «ith thc samc rights it «ould ha� c if it «crc not thc Trustcc: and ma� act as a dcpositar� for and permit am of its officcrs or dircctors to act as a mcmbcr of. or in am othcr capacit� «ith respcct to. a�� committcc formcd to protcct thc rights of O« ncrs of Bonds. «hcthcr or not such committcc shall rcprescnt thc O« ncrs of thc majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding. Thc Trustcc. cithcr as principal or agcnt. ma� cngagc in or bc intcrestcd in am financial or othcr transaction «ith thc Authorit� . (c) Thc Trustcc shall bc protcctcd in acting upon am Rcport. noticc. rcqucst. conscnt. ccrtificatc. ordcr. affida� it. Icttcr. dircction. tcicgram. facsimilc transmission. cicctronic mail or othcr paper or documcnt bclic� cd b� it to bc gcnuinc and corrcct and to ha� c bccn signcd or scnt b� thc proper person or persons and nccd not makc am in� cstigation into thc facts or mattcrs containcd thcrcin. Am action takcn or omittcd to bc takcn b� thc Trustcc pursuant to this Indcnturc upon thc rcqucst or authorit� or conscnt of am person «ho at thc timc of making such rcqucst or gi� ing such authorit� or conscnt is thc O« ncr of am Bond. shall bc conclusi� c and binding upon all firturc O« ncrs of thc samc Bond and upon Bonds issucd in c�changc thcrcfor or in placc thcrcof. Thc Trustcc shall not bc bound to rccognizc am person as an O« ncr of am Bond or to takc am action at his rcqucst unlcss thc o« ncrship of such Bond b� such person shall bc rcflcctcd on thc Rcgistration Books. (� As to thc c�istcncc or non-c�istcncc of am fact or as to thc sufficicnc� or � alidit� of am instrumcnt. paper or procccding. thc Trustcc shall bc cntiticd to rcl� upon a Ccrtificatc of thc Authorit� as sufficicnt c� idcncc of thc facts thcrcin containcd and prior to thc occurrcncc of an E� cnt of Dcfault hcrcundcr of «hich thc Trustcc has bccn gi� cn noticc or is dccmcd to ha� c noticc. as pro� idcd in Scction 6.02(h). shall also bc at libcrt� to acccpt a Ccrtificatc of thc Authorit� to thc cffcct that am particular dcaling. transaction or action is ncccssar� or c�pcdicnt. but ma� at its discrction sccure such fiirthcr c� idcncc dccmcd b� it to bc ncccssar� or ad� isablc. but shall in no casc bc bound to sccurc thc samc. (g) Thc permissi� c right of thc Trustcc to do things cnumcratcd in this Indcnturc shall not bc construcd as a dut� and it shall not bc ans«crablc for othcr than its ncgligcncc or «illfiil misconduct. Thc immunitics and c�ccptions from liabilit� of thc Trustcc shall c�tcnd to its officcrs. dircctors. cmplo� ccs and agcnts. In thc abscncc of ncgligcncc or «illfiil misconduct. thc Trustcc shall not bc liablc for am crror of judgmcnt. (h) Thc Trustcc shall not bc rcquircd to takc noticc or bc dccmcd to ha� c noticc of am E� cnt of Dcfault hcrcundcr c�ccpt failurc b� thc Authorit� to makc am of thc pa� mcnts to thc Trustcc rcquircd to bc madc b� thc Authorit� pursuant hcrcto. unlcss thc Trustcc shall bc spccificall� notificd in «riting of such dcfault b� thc Authorit�. thc Insurcr or b� thc O« ncrs of at Icast 2� perccnt in aggrcgatc principal amount of thc Bonds thcn Outstanding and all noticcs or othcr instrumcnts rcquircd b� this Indcnturc to bc dcli� crcd to thc Trustcc must. in ordcr to bc cffccti� c. bc dcli� crcd at thc Trust Officc of thc Trustcc in Los Angcics. California. and in thc abscncc of such noticc so dcli� crcd thc Trustcc ma� conclusi� cl� assumc thcrc is no E� cnt of Dcfault hcrcundcr c�ccpt as aforesaid. (i) At am and all rcasonablc timcs thc Trustcc. and its dul� authorizcd agcnts. attornc� s. c�perts. accountants and represcntati� cs. shall ha� c thc right. but not thc obligation. fiill� to P6—Ic �2. I c �;;\x72; ; I . x —2 � — inspcct all books. papers and records of thc Authorit� pertaining to thc Bonds. and to makc copics of am of such books. papers and records such as ma� bc dcsircd but «hich is not pri� ilcgcd b� statutc or b� la« . (j) Thc Trustcc shall not bc rcquircd to gi� c am bond or surct� in respcct of thc c�ccution of thc said trusts and po« crs or othcr« isc in respcct of thc prcmiscs hcrcof. (k) Not«ithstanding amthing clsc«hcrc in this Indcnturc «ith respcct to thc c�ccution of am Bonds. thc «ithdra«al of am cash. thc rcicasc of am propert�. or am action «hatsoc� cr «ithin thc pur� ic« of this Indcnturc. thc Trustcc shall ha� c thc right. but shall not bc rcquircd. to dcmand am sho« ings. ccrtificatcs. opinions. appraisals or othcr information. or corporatc action or c� idcncc thcrcof. as ma� bc dccmcd dcsirablc for thc purposc of cstablishing thc right of thc Authorit� to thc c�ccution of am Bonds. thc «ithdra«al of am cash. or thc taking of am othcr action b� thc Trustcc. (I) Bcforc taking action rcfcrrcd to in Scction 6.0�. Scction 8.02 or thc first paragraph of Scction �.08. thc Trustcc ma� rcquirc that a satisfactor� indcmnit� bond bc fi�rnishcd for thc rcimburscmcnt of all c�pcnscs to «hich it ma� bc put and to protcct it against all liabilit�. c�ccpt liabilit� «hich is adjudicatcd to ha� c resultcd from its ncgligcncc or «illfiil misconduct in conncction «ith am such action. (m) All monc� s rccci� cd b� thc Trustcc shall. until uscd or applicd or in� cstcd as hcrcin pro� idcd. bc hcld in trust for thc purposcs for «hich thc� «crc rccci� cd but nccd not bc scgrcgatcd from othcr fiinds c�ccpt to thc c�tcnt rcquircd b� la«. (n) Thc Trustcc shall ha� c no liabilit� or obligation to thc Bond O« ncrs «ith respcct to thc pa� mcnt of dcbt scr� icc b� thc Authorit� or «ith respcct to thc obscr� ancc or performancc b� thc Authorit� of thc othcr conditions. co� cnants and tcrms containcd in this lndcnturc. or �� ith respcct to thc in� cstmcnt of am monc� s in am fiind or account cstablishcd. hcld or maintaincd b� thc Authorit� pursuant to this Indcnturc or othcr« isc. (o) Thc Trustcc makcs no co� cnant. rcprescntation or «arrant� conccrning thc currcnt or fiiturc ta� status of intcrest on thc Bonds. Thc Trustcc nccd onl� kccp accuratc rccords of all in� cstmcnts and fiinds. and scnd rebatc pa� mcnts to thc Unitcd Statcs in accordancc �� ith c�plicit instructions from thc Authorit� . (p) Thc Trustcc shall ha� c no responsibilit� «ith respcct to am information. statcmcnt. or rccital in am official statcmcnt. offcring mcmorandum or am othcr disclosurc matcrial prcparcd or distributcd «ith respcct to thc issuancc of thc Bonds. (q) Thc Trustcc in its capacit� as Trustcc is authorizcd and dircctcd to c�ccutc thc Loan Agrccmcnt. (r) Thc Trustcc shall not bc considcrcd in brcach of or in dcfault in its obligations hcrcundcr or progress in respcct thcrcto in thc c� cnt of cnforccd dcla� ("una� oidablc dcla� ��) in thc performancc of such obligations duc to unforesccablc causcs bc� ond its control and «ithout its fault or ncgligcncc. including. but not limitcd to. Acts of God or of thc public cncm� or tcrrorists. acts of a go� crnmcnt. acts of thc othcr part�. fires. floods. cpidcmics. quarantinc restrictions. strikcs. frcight cmbargocs. carthquakcs. c�plosion. mob � iolcncc. riot. inabilit� to procurc or gcncral sabotagc or rationing of labor. cquipmcnt. facilitics. sourccs of cncrg�. matcrial or supplics in thc opcn markct. litigation or arbitration im ol� ing a part� or othcrs rclating to zoning or othcr go� crnmcntal action or inaction pertaining to thc projcct. malicious mischicf. condcmnation. and unusuall� sc� crc «cathcr or dcla� s of supplicrs or subcontractors duc to such causcs or am similar c� cnt and/or occurrcnccs bc� ond thc control of thc Trustcc: pro� idcd that. in thc c� cnt of am such una� oidablc dcla� undcr this paragraph P6—Ic �2. I c�;;\x72; ; I. x —26— 6.02(r). thc Tnistcc notif� thc Authorit� and thc Agcnc� in «riting «ithin fi� c busincss da� s aftcr (i) thc occurrcncc of thc c� cnt gi� ing risc to thc una� oidablc dcla�. (ii) thc Trustcc�s actual kno« Icdgc of thc impcnding una� oidablc dcla�. or (iii) thc Trustcc�s kno« Icdgc of sufficicnt facts undcr «hich a rcasonablc person «ould concludc thc una� oidablc dcla� «ill occur. (s) Thc Trustcc agrccs to acccpt and act upon facsimilc transmission of «rittcn instructions and/or dircctions pursuant to this Indcnturc. pro� idcd. ho« c� cr. that: (i) subscqucnt to such facsimilc transmission of «rittcn instructions and/or dircctions thc Trustcc shall forth« ith rccci� c thc originall� c�ccutcd instructions and/or dircctions. (ii) such originall� c�ccutcd instructions and/or dircctions shall bc signcd b� a person as ma� bc dcsignatcd and authorizcd to sign for thc part� signing such instructions and/or dircctions. and (iii) thc Trustcc shall ha� c rccci� cd a currcnt incumbcnc� ccrtificatc containing thc spccimcn signaturc of such dcsignatcd person. Scction 6.0 �. Fccs. Char�cs and E�ucnscs of Trustcc. Thc Trustcc shall bc cntiticd to pa� mcnt and reimburscmcnt for rcasonablc fccs for its scr� iccs rcndcrcd hcrcundcr and all ad� anccs (« ith intcrest on such ad� anccs at thc ma�imum ratc allo« cd b� la« ). counscl fccs and c�pcnscs (including thosc of in-housc counscl to thc c�tcnt thc� arc for scr� iccs not duplicati� c of othcr counscls� «ork) and othcr c�pcnscs rcasonabl� and ncccssaril� madc or incurrcd b� thc Trustcc in conncction «ith such scr� iccs. «hich pa� mcnt and reimburscmcnt shall not bc limitcd b� am pro� ision of la« in rcgard to thc compcnsation of a trustcc of an c�press trust. Upon thc occurrcncc of an E� cnt of Dcfault hcrcundcr. but onl� upon an E� cnt of Dcfault. thc Trustcc shall ha� c a first licn «ith right of pa� mcnt prior to pa� mcnt of am Bond upon thc amounts hcld hcrcundcr for thc forcgoing fccs. chargcs and c�pcnscs incurrcd b� it respccti� cl�. «hich right to pa� mcnt shall sur� i� c thc resignation or rcmo� al of thc Trustcc. Scction 6.0�4. Noticc to O« ncrs of Dcfault. If an E� cnt of Dcfault hcrcundcr occurs «ith respcct to am Bonds of «hich thc Trustcc has bccn gi� cn or is dccmcd to ha� c noticc. as pro� idcd in Scction 6.02(h). thcn thc Trustcc shall promptl� gi� cn «rittcn noticc thcrcof b� first-class mail to thc O« ncr of cach such Bond. unlcss such E� cnt of Dcfault shall ha� c bccn curcd bcforc thc gi� ing of such noticc: pro� idcd. ho« c� cr. that unlcss such E� cnt of Dcfault consists of thc failurc b� thc Authorit� to makc am pa� mcnt «hcn duc. thc Trustcc ma� cicct not to gi� c such noticc if and so long as thc Trustcc in good faith dctcrmincs that such E� cnt of Dcfault docs not matcriall� ad� crscl� affcct thc intcrests of thc O« ncrs or that it is othcn� isc not in thc bcst intcrests of thc O« ncrs to gi� c such noticc. Scction 6.0�. Intcr� cntion b� Trustcc. In am judicial procccding to «hich thc Authorit� is a part� «hich. in thc opinion of thc Trustcc. has a substantial bcaring on thc intcrests of O« ncrs of am of thc Bonds. thc Trustcc ma� intcr� cnc on bchalf of such O« ncrs. and subjcct to Scction 6.02(I). shall do so if rcqucstcd in «riting b� thc O« ncrs of a majorit� in aggrcgatc Principal Amount of such Bonds thcn Outstanding. Scction 6.06. Rcmo� al of Trustcc. Thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds ma� at am timc. and thc Authorit� ma� (and at thc rcqucst of thc Agcnc� shall) so long as no E� cnt of Dcfault shall ha� c occurrcd and thcn bc continuing. rcmo� c thc Trustcc initiall� appointcd. and am succcssor thcrcto. b� an instrumcnt or concurrcnt instrumcnts in «riting dcli� crcd to thc Tnistcc. «hcrcupon thc Authorit� or such O« ncrs. as thc casc ma� bc. shall appoint a succcssor or succcssors thcrcto: pro� idcd that am such succcssor shall bc a financial institution mccting thc rcquircmcnts sct forth in Scction 6.01. Scction 6.07. Rcsi�nation b� Trustcc. Thc Trustcc and am succcssor Trustcc ma� at am timc gi� c«rittcn noticc of its intcntion to resign as Trustcc hcrcundcr. such noticc to bc gi� cn to thc Authorit� and thc Agcnc� b� rcgistcrcd or ccrtificd mail. Upon rccci� ing such noticc of resignation. thc Authorit� shall promptl� appoint a succcssor Trustcc. Am resignation or rcmo� al of thc Trustcc and appointmcnt of a succcssor Trustcc shall bccomc cffccti� c upon acccptancc of appointmcnt b� thc P6—Ic �2. I c�;;\x72; ; I. x —2 7— succcssor Trustcc. Upon such acccptancc. thc Authorit� shall causc noticc thcrcof to bc gi� cn b� first class mail. postagc prcpaid. to thc Bond O« ncrs at thcir respccti� c addresscs sct forth on thc Rcgistration Books. Scction 6.08. Auuointmcnt of Succcssor Trustcc. In thc c� cnt of thc rcmo� al or resignation of thc Trustcc pursuant to Scctions 6.06 or 6.07. respccti� cl�. «ith thc prior «rittcn conscnt of Agcnc�. thc Authorit� shall promptl� appoint a succcssor Trustcc. In thc c� cnt thc Authorit� shall for am rcason «hatsoc� cr fail to appoint a succcssor Trustcc «ithin 60 da� s follo« ing thc dcli� cr� to thc Trustcc of thc instrumcnt dcscribcd in Scction 6.06 or «ithin 60 da� s follo« ing thc rcccipt of noticc b� thc Authorit� pursuant to Scction 6.07. thc Trustcc ma�. at thc c�pcnsc ofthc Authorit�. appl� to a court of compctcnt jurisdiction for thc appointmcnt of a succcssor Trustcc mccting thc rcquircmcnts of Scction 6.01. Am such succcssor Trustcc appointcd b� such court shall bccomc thc succcssor Trustcc hcrcundcr not« ithstanding am action b� thc Authorit� purporting to appoint a succcssor Trustcc follo« ing thc c�piration of such si�t� -da� period. Scction 6.09. Mcr�cr or Consolidation. Am bank or tnist compam into «hich thc Trustcc ma� bc mcrgcd or con� crtcd or «ith «hich cithcr of thcm ma� bc consolidatcd or am bank or trust compam resulting from am mcrgcr. con� crsion or consolidation to «hich it shall bc a part� or am bank or trust compam to «hich thc Trustcc ma� scll or transfcr all or substantiall� all of its corporatc trust busincss. pro� idcd such bank or trust compam shall bc cligiblc undcr Scction 6.01. shall bc thc succcssor to such Trustcc «ithout thc c�ccution or filing of am paper or fiirthcr act. c�ccpt as pro� idcd in Scction 6.10. Scction 6.10. Conccrnin� am Succcssor Trustcc. E� cr� succcssor Trustcc appointcd hcrcundcr shall c�ccutc. ackno« Icdgc and dcli� cr to its prcdcccssor and also to thc Authorit� an instrumcnt in «riting acccpting such appointmcnt hcrcundcr and thcrcupon such succcssor. «ithout am fiirthcr act. dccd or con� c� ancc. shall bccomc fiill� � cstcd «ith all thc cstatcs. propertics. rights. po« crs. trusts. dutics and obligations of its prcdcccssors: but such prcdcccssor shall. nc� crthcicss. on thc Rcqucst of thc Authorit�. or of thc Trustcc�s succcssor. c�ccutc and dcli� cr an instrumcnt transfcrring to such succcssor all thc cstatcs. propertics. rights. po« crs and trusts of such prcdcccsson c�rcundcr: and c� cr� prcdcccssor Trustcc shall dcli� cr all sccuritics and monc� s hcld b� it as thc Trustcc hcrcundcr to its succcssor. Should am instrumcnt in «riting from thc Authorit� bc rcquircd b� am succcssor Trustcc for morc fiill� and ccrtainl� � csting in such succcssor thc cstatc. rights. po« crs and dutics hcrcb� � cstcd or intcndcd to bc � cstcd in thc prcdcccssor Trustcc. am and all such instrumcnts in «riting shall. on rcqucst. bc c�ccutcd. ackno« Icdgcd and dcli� crcd b� thc Authorit� . Scction 6. I I. Auuointmcnt of Co-Trustcc. It is thc purposc of this Indcnturc that thcrc shall bc no � iolation of am la« of am jurisdiction (including particularl� thc la« of thc Statc) dcm ing or restricting thc right of banking corporations or associations to transact busincss as Trustcc in such jurisdiction. It is rccognizcd that in thc casc of litigation undcr this Indcnturc. and in particular in casc of thc cnforccmcnt of thc rights of thc Trustcc on dcfault. or in thc casc thc Trustcc or thc Authorit� dccros that b� rcason of am prescnt or firturc la« of am jurisdiction it ma� not c�crcisc ain of thc po« crs. rights or rcmcdics hcrcin grantcd to thc Trustcc or hold titic to thc propertics. in trust. as hcrcin grantcd. or takc am othcr action «hich ma� bc dcsirablc or ncccssar� in conncction thcrc« ith. it ma� bc ncccssar� that thc Trustcc or thc Authorit� appoint an additional indi� idual or institution as a scparatc co-trustcc. Thc follo« ing pro� isions of this Scction 6. I I arc adoptcd to thcsc cnds. In thc c� cnt that thc Trustcc or thc Authorit� appoints an additional indi� idual or institution as a scparatc or co-trustcc. cach and c� cr� rcmcd�. po«cr. right. claim. dcmand. causc of action. immunit�. cstatc. titic. intcrest and licn c�presscd or intcndcd b� this Indcnturc to bc c�crciscd b� or � cstcd in or con� c� cd to thc Trustcc «ith respcct thcrcto shall bc c�crcisablc b� and � cst in or con� c� cd to thc Trustcc «ith respcct thcrcto shall bc c�crcisablc b� and � cst in such scparatc or co-trustcc P6—Ic �2. I c�;;\x72; ; I. x —2 8— but onl� to thc c�tcnt ncccssan to cnablc such scparatc or co-trustcc to c�crcisc such po«crs. rights and rcmcdics. and c� cr� co� cnant and obligation ncccssan to thc c�crcisc thcrcof b� such scparatc or co- trustcc shall run to and bc cnforccablc b� cithcr of thcm. Thc Trustcc shall not bc liablc for thc acts or omissions of am scparatc or co-trustcc appointcd hcrcundcr. Should am instrumcnt in «riting from thc Authorit� bc rcquircd b� thc scparatc trustcc or co-trustcc so appointcd b� thc Trustcc for morc fiill� and ccrtainl� � csting in and conforming to it such propertics. rights. po«crs. trusts. dutics and obligations. am and all such instrumcnts in «riting shall. on rcqucst. bc c�ccutcd. ackno« Icdgcd and dcli� crcd b� thc Authorit� . In casc am scparatc trustcc or co- trustcc. or a succcssor to cithcr. shall bccomc incapablc of acting. resign or bc rcmo� cd. all thc cstatcs. propertics. rights. po«crs. trusts. dutics and obligations of such scparatc trustcc or co-trustcc. so far as permittcd b� la«. shall � cst in and bc c�crciscd b� thc Trustcc until thc appointmcnt of a nc« trustcc or succcssor to such scparatc trustcc or co-trustcc. Scction 6.12. Indcmnification: Limitcd Liabilit� of Trustcc. Thc Authorit� fiirthcr co� cnants and agrccs to indcmnif�. dcfcnd and sa� c thc Trustcc and its officcrs. dircctors. agcnts and cmplo� ccs. harmlcss against am loss. c�pcnsc and liabilitics «hich it ma� incur arising out of or in thc c�crcisc and performancc of its po« crs and dutics hcrcundcr. including thc costs of c�pcnscs of dcfcnding against am claim of liabilit�. but c�cluding am and all losscs. c�pcnscs and liabilitics «hich arc duc to thc ncgligcncc or intcntional misconduct of thc Trustcc. its officcrs. dircctors or cmplo� ccs. No pro� ision in this Indcnture shall rcquirc thc Trustcc to risk or c�pcnd its o« n fiinds or othcr« isc incur am financial liabilit� hcrcundcr if it shall ha� c rcasonablc grounds for bclic� ing rcpa� mcnt of such fiinds or adcquatc indcmnit� against such liabilit� or risk is not assurcd to it. Thc Trustcc shall not bc liablc for am action takcn or omittcd to bc takcn b� it in accordancc «ith thc dircction of thc Insurcr or thc O« ncrs of at Icast a majorit� in aggrcgatc Principal Amount of Bonds Outstanding rclating to thc timc. mcthod and placc of conducting am procccding or rcmcd� a� ailablc to thc Trustcc undcr this Indcnturc in c�crcising am trust or po«cr confcrrcd on thc Tnistcc b� this Indcnturc. T7�c obligations of thc Authorit� undcr this Scction shall sur� i� c thc pa� mcnt and dischargc of thc Bonds or thc resignation or rcmo� al of thc Trustcc undcr this Indcnturc. ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE Scction 7.01. Amcndmcnt Hcrcof. This Indcnturc and thc rights and obligations of thc Authorit� and of thc O« ncrs of thc Bonds ma� bc modificd or amcndcd at am timc b� a Supplcmcntal Indcnturc «hich shall bccomc binding upon adoption. «ith thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct) but «ithout conscnt of am Bond O« ncrs. to thc c�tcnt permittcd b� la« but onl� for am onc or morc of thc follo« ing purposcs: (a) To add to thc co� cnants and agrccmcnts of thc Authorit� in this Indcnturc containcd. othcr co� cnants and agrccmcnts thcrcaftcr to bc obscr� cd. or to limit or surrcndcr am rights or po« crs hcrcin rescr� cd to or confcrrcd upon thc Authorit� so long as such limitation or surrcndcr of such rights or po« crs shall not matcriall� ad� crscl� affcct thc O« ncrs of thc Bonds: or (b) To makc such pro� isions for thc purposc of curing am ambiguit�. or of curing. corrccting or supplcmcnting am dcfccti� c pro� ision containcd in this Indcnturc. or in am othcr respcct «hatsoc� cr as thc Authorit� ma� dccm ncccssar� or dcsirablc. pro� idcd undcr am circumstanccs that such modifications or amcndmcnts shall cithcr (i) conform to thc original intcntion of thc Authorit�. or (ii) not matcriall� ad� crscl� affcct thc intcrests of thc O« ncrs of thc Bonds in thc rcasonablc judgmcnt of thc Authorit� : or PG—Ic l2. I c li i\872 i; I.8 —29— (c) To amcnd am pro� ision hcrcof rclating to thc Codc. to am c�tcnt «hatsoc� cr but onl� if and to thc c�tcnt such amcndmcnt «ill not ad� crscl� affcct thc c�clusion from gross incomc of intcrest on am of thc Bonds undcr thc Codc. in thc opinion of Bond Counscl. E�ccpt as sct forth in thc prcccding paragraphs of this Scction 7.01. this Indcnturc and thc rights and obligations of thc Authorit� and of thc O« ncrs of thc Bonds ma� onl� bc modificd or amcndcd at am timc b� a Supplcmcntal Indcnturc «hich shall bccomc binding «hcn thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct) and of thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding arc filcd «ith thc Trustcc. No such modification or amcndmcnt shall (i) c�tcnd thc maturit� of or rcducc thc intcrest ratc on am Bond or othcn� isc altcr or impair thc obligation of thc Authorit� to pa� thc principal. intcrest or prcmiums. if am. at thc timc and placc and at thc ratc and in thc currcnc� pro� idcd thcrcin of am Bond «ithout thc c�press «rittcn conscnt of thc O« ncr of such Bond or (ii) rcducc thc perccntagc of Bonds rcquircd for thc «rittcn conscnt to am such amcndmcnt or modification. In no c� cnt shall am Supplcmcntal Indcnturc modif� am of thc rights or obligations of thc Trustcc «ithout its prior «rittcn conscnt. Scction 7.02. Effcct of Suuulcmcntal Indcnturc. From and aftcr thc timc am Supplcmcntal Indcnturc bccomcs cffccti� c pursuant to this Articic VII. this Indcnture shall bc dccmcd to bc modificd and amcndcd in accordancc thcrc« ith. thc respccti� c rights. dutics and obligations of thc partics hcrcto or thcrcto and all O« ncrs of Outstanding Bonds. as thc casc ma� bc. shall thcrcaftcr bc dctcrmincd. c�crciscd and cnforccd hcrcundcr subjcct in all respccts to such modification and amcndmcnt. and all thc tcrms and conditions of am Supplcmcntal Indcnture shall bc dccmcd to bc part of thc tcrms and conditions of this Indcnturc for am and all purposcs. Scction 7.0 �. Endorscmcnt or Rculaccmcnt of Bonds Aftcr Amcndmcnt. Aftcr thc cffccti� c datc of am action takcn as hcrcinabo� c pro� idcd. thc Authorit� ma� dctcrminc that thc Bonds shall bcar a notation. b� cndorscmcnt in form appro� cd b� thc Authorit�. as to such action. and in that casc upon dcmand of thc O« ncr of am Bond Outstanding at such cffccti� c datc and prescntation of his bond for that purposc at thc Trust Officc of thc Trustcc. a suitablc notation as to such action shall bc madc on such Bond at thc c�pcnsc of thc Authorit� . If thc Authorit� shall so dctcrminc. nc« Bonds so modificd as. in thc opinion of thc Authorit�. shall bc ncccssan to conform to such Bond O« ncrs� action shall bc prcparcd and c�ccutcd. and in that casc upon dcmand of thc O« ncr of am Bond Outstanding at such cffccti� c datc such nc« Bonds shall bc c�changcd at thc Trust Officc of thc Trustcc. at thc c�pcnsc of thc Authorit�. for Bonds thcn Outstanding. upon surrcndcr of such Outstanding Bonds. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN. SO LONG AS THE INSURANCE POLICY REMAINS IN EFFECT AND THE INSURER HAS NOT DEFAULTED WITH RESPECT TO ITS PAYMENT OBLIGATIONS UNDER THE INSURANCE POLICY. ALL PROVISIONS OF THIS ARTICLE VIII SHALL BE SUBJECT TO. AND QUALIFIED BY. THE PROVISIONS SET FORTH IN ARTICLE IX. INCLUDING. WITHOUT LIMITATION. THE INSURER�S RIGHT TO CONSENT TO ACCELERATION OF THE BONDS. AND THE INSURER�S RIGHT TO CONSENT TO OR DIRECT CERTAIN AUTHORITY. TRUSTEE OR OWNER ACTIONS. hcrcundcr: Scction 8.01. E� cnts of Dcfault. Thc follo« ing c� cnts shall bc E� cnts of Dcfault PG—Icl2.lclii\872i;1.8 —�0— (a) Dcfault in thc duc and punctual pa� mcnt of thc principal of am Bond «hcn and as thc samc shall bccomc duc and pa�ablc. «hcthcr at maturit� as thcrcin c�presscd. b� procccdings for rcdcmption. b� dcclaration or othcr« isc. (b) Dcfault in thc duc and punctual pa� mcnt of am installmcnt of intcrest on am Bond «hcn and as such intcrest installmcnt shall bccomc duc and pa�ablc. (c) Failurc b� thc Authorit� to obscr� c and perform am of thc co� cnants. agrccmcnts or conditions on its part in this Indcnturc or in thc Bonds containcd. othcr than as rcfcrrcd to in thc prcccding Paragraphs (a) and (b). for a period of 60 da� s aftcr «rittcn noticc. spccif� ing such a failurc and requcsting that it bc rcmcdicd has bccn gi� cn to thc Authorit� b� thc Trustcc. or to thc Authorit� and thc Trustcc b� thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds: pro� idcd. ho« c� cr. that if in thc rcasonablc opinion of thc Authorit� thc failure statcd in such noticc can bc corrcctcd. but not «ithin such 60 da� period. such failure shall not constitutc an E� cnt of Dcfault if corrccti� c action is institutcd b� thc Authorit� «ithin such 60 da� period and diligcntl� pursucd until such failurc is corrcctcd. (d) Thc filing b� thc Authorit� of a pctition or ans«cr sccking rcorganization or arrangcmcnt undcr thc fcdcral bankruptc� la« s or am othcr applicablc la« of thc Unitcd Statcs of Amcrica. or if a court of compctcnt jurisdiction shall appro� c a pctition. filcd «ith or «ithout thc conscnt of thc Authorit�. sccking rcorganization undcr thc fcdcral bankruptc� la«s or am othcr applicablc la« of thc Unitcd Statcs of Amcrica. or if. undcr thc pro� isions of am othcr la« for thc rclicf or aid of dcbtors. am court of compctcnt jurisdiction shall assumc custod� or control of thc Authorit� or of thc «holc or am substantial part of its propert� . (c) Thc occurrcncc of am E� cnt of Dcfault undcr. and as that tcrm is dcfincd in. thc Loan Agrccmcnt. Scction 8.02. Rcmcdics Uuon E� cnt of Dcfault. Subjcct to thc pro� isions of Articic IX. if am E� cnt of Dcfault shall occur. thcn. and in cach and c� cn such casc during thc continuancc of such E� cnt of Dcfault. thc Trustcc ma�. and at thc «rittcn dircction of thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Bonds at thc timc Outstanding shall. upon noticc in «riting to thc Authorit� and thc Agcnc�. dcclarc thc principal of all of thc Bonds thcn Outstanding. and thc intcrest accrucd thcrcon. to bc duc and pa�ablc immcdiatcl�. and upon am such dcclaration thc samc shall bccomc and shall bc immcdiatcl� duc and pa�ablc. amthing in this Indcnturc or in thc Bonds containcd to thc contrar� not« ithstanding. Am such dcclaration is subjcct to thc condition that if. at am timc aftcr such dcclaration and bcforc am judgmcnt or dccrcc for thc pa� mcnt of thc monc� s duc shall ha� c bccn obtaincd or cntcrcd. thc Authorit� or thc Agcnc� shall dcposit «ith thc Trustcc a sum sufficicnt to pa� all thc principal of and installmcnts of intcrest on thc Bonds pa� mcnt of «hich is o� crduc. «ith intcrest on such o� crduc principal at thc ratc bornc b� thc respccti� c Bonds to thc c�tcnt permittcd b� la«. and thc chargcs and c�pcnscs of thc Trustcc and its counscl (including thc allocatcd costs and disburscmcnts of in-housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl). and am and all othcr E� cnts of Dcfault kno« n to thc Trustcc (othcr than in thc pa� mcnt of principal of and intcrest on thc Bonds duc and pa� ablc solcl� b� rcason of such dcclaration) shall ha� c bccn madc good or curcd to thc satisfaction of thc Trustcc or pro� ision dccmcd b� thc Trustcc to bc adcquatc shall ha� c bccn madc thcrcfor. thcn. and in c� cr� such casc. thc O« ncrs of not Icss than a majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding. b� «rittcn noticc to thc Authorit�. thc Agcnc� and thc Trustcc. or thc Trustcc if such dcclaration «as madc b� thc Trustcc. ma�. on bchalf of thc O« ncrs of all of thc Bonds. rescind and annul such dcclaration and its conscqucnccs and P6—Ic �2. I c�;;\x72; ; I. x —� I— «ai� c such E� cnt of Dcfault: but no such rescission and annulmcnt shall c�tcnd to or shall affcct am subscqucnt E� cnt of Dcfault. or shall impair or c�haust am right or po« cr conscqucnt thcrcon. In addition. upon thc occurrcncc and during thc continuancc of an E� cnt of Dcfault. thc Trustcc ma� pursuc am a� ailablc rcmcd� at la« or in cquit� to cnforcc thc pa� mcnt of thc principal of and intcrest and prcmium. if am. on thc Bonds. and to cnforcc am rights of thc Trustcc undcr or «ith respcct to thc Loan Agrccmcnt and this Indcnturc. If an E� cnt of Dcfault shall ha� c occurrcd and bc continuing and if rcqucstcd so to do b� thc O« ncrs of a majorit� in aggrcgatc Principal Amount of Outstanding Bonds and indcmnificd as pro� idcd in Scction 6.02(I). thc Trustcc shall bc obligatcd to c�crcisc such onc or morc of thc rights and po«crs confcrrcd b� this Articic VIII. as thc Tnistcc. bcing ad� iscd b� counscl. shall dccm most c�pcdicnt in thc intcrest of thc Bond O« ncrs. No rcmcd� b� thc tcrms of this Indcnturc confcrrcd upon or rescr� cd to thc Trustcc (or to thc O« ncrs) is intcndcd to bc c�clusi� c of am othcr rcmcd� . but cach and c� cr� such rcmcd� shall bc cumulati� c and shall bc in addition to am othcr rcmcd� gi� cn to thc Trustcc or to thc O« ncrs hcrcundcr or no« on c�rcaftcr c�isting at la« or in cquit� . No dcla� or omission to c�crcisc am right or po« cr accruing upon am E� cnt of Dcfault shall impair am such right or po« cr or shall bc construcd to bc a«ai� cr of am such E� cnt of Dcfault or acquicsccncc thcrcin: such right or po«cr ma� bc c�crciscd from timc to timc as oftcn as ma� bc dccmcd c�pcdicnt. - - Scction 8.0 �. Auulication of Rc� cnucs and Othcr Funds Aftcr Dcfault. All amounts rccci� cd b� thc Trustcc pursuant to am right gi� cn or action takcn b� thc Trustcc undcr thc pro� isions of this Indcnture shall bc applicd b� thc Trustcc in thc follo« ing ordcr upon prescntation of thc sc� cral Bonds. and thc stamping thcrcon of thc amount of thc pa� mcnt if onl� partiall� paid. or upon thc surrcndcr thcrcof if fiill� paid: First. to thc pa� mcnt of thc fccs. costs and c�pcnscs of thc Trustcc. including rcasonablc compcnsation to its agcnts. attornc� s and counscl (including thc allocatcd costs and disburscmcnts of in- housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl): and Sccond. to thc pa� mcnt of thc «holc amount of intcrest on and principal of thc Bonds thcn duc and unpaid. «ith intcrest on o� crduc installmcnts of principal. and such intcrest to thc c�tcnt permittcd b� la« at thc nct cffccti� c ratc of intcrest thcn bornc b� thc Outstanding Bonds: pro� idcd. ho« c� cr. that in thc c� cnt such amounts shall bc insufficicnt to pa� in fiill thc fiill amount of such intcrest and principal. thcn such amounts shall bc applicd in thc follo« ing ordcr of priorit� : (i) first. to thc pa� mcnt of all installmcnts of intcrest on thc Bonds thcn duc and unpaid. on a pro rata basis in thc c� cnt that thc a� ailablc amounts arc insufficicnt to pa� all such intcrest in fiill. (ii) sccond. to thc pa� mcnt of principal of all installmcnts of thc Bonds thcn duc and pa� ablc. on a pro rata basis in thc c� cnt that thc a� ailablc amounts arc insufficicnt to pa� all such principal in fiill. and (iii) third. to thc pa� mcnt of intcrest on o� crduc installmcnts of principal and intcrest. on a pro rata basis in thc c� cnt that thc a� ailablc amounts arc insufficicnt to pa� all such intcrest in fiill. PG—Icl2.lclii\872i;1.8 —�2— Scction 8.0�4. Po« cr of Trustcc to Control Procccdin�s. Subjcct to thc pro� isions of Articic IX. in thc c� cnt that thc Trustcc. upon thc happcning of an E� cnt of Dcfault. shall ha� c takcn am action. b� judicial procccdings or othcr« isc. pursuant to its dutics hcrcundcr. «hcthcr upon its o« n discrction or upon thc rcqucst of thc O�� ncrs of at lcast a majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding. it shall ha� c fiill po«cr. in thc c�crcisc of its discrction for thc bcst intcrests of thc O«ncrs. «ith respcct to thc continuancc. discontinuancc. «ithdra«al. compromisc. sctticmcnt or othcr disposal of such action: pro� idcd. ho« c� cr. that thc Trustcc shall not. unlcss thcrc no longcr continucs an E� cnt of Dcfault. discontinuc. «ithdra«. compromisc or scttic. or othcn� isc disposc of am litigation pcnding at la« or in cquit�. if at thc timc thcrc has bccn filcd «ith it a«rittcn rcqucst signcd b� thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds hcrcundcr opposing such discontinuancc. «ithdra«al. compromisc. sctticmcnt or othcr disposal of such litigation. Am suit. action or procccding «hich am O« ncr shall ha� c thc right to bring to cnforcc am right or rcmcd� hcrcundcr ma� bc brought b� thc Trustcc for thc cqual bcncfit and protcction of all O« ncrs similarl� situatcd and thc Trustcc is hcrcb� appointcd (and thc succcssi� c respccti� c O« ncrs. b� taking and holding thc samc. shall bc conclusi� cl� dccmcd so to ha� c appointcd it) thc truc and la�� fiil attornc� -in-fact of thc respccti� c O« ncrs for thc purposc of bringing am such suit. action or procccding and to do and perform am and all acts and things for an on bchalf of thc respccti� c O« ncrs as a class or classcs. as ma� bc ncccssan or ad� isablc in thc opinion of thc Trustcc as such attornc� -in-fact. Scction 8.0�. Auuointmcnt of Rccci� crs. Upon thc occurrcncc of an E� cnt of Dcfault hcrcundcr. and upon thc filing of a suit or othcr commcnccmcnt of judicial procccdings to cnforcc thc rights of thc Trustcc and of thc O« ncrs undcr this Indcnturc. thc Trustcc shall bc cntiticd. as a mattcr or right. to thc appointmcnt of a rccci� cr or rccci� crs of thc Rc� cnucs and othcr amounts plcdgcd hcrcundcr. pcnding such procccdings. «ith such po«crs as thc court making such appointmcnt shall confcr. Scction R.Q6. Non-Wai� cr. Nothing in this Articic V111 or in am othcr pro� ision of this Indcnturc. or in thc Bonds. shall affcct or impair thc obligation of thc Authorit�. «hich is absolutc and unconditional. to pa� thc intcrest on and principal of thc Bonds to thc respccti� c O« ncrs of thc Bonds at thc respccti� c datcs of maturit�. as hcrcin pro� idcd. out of thc Rc� cnucs and othcr monc� s hcrcin plcdgcd for such pa� mcnt. A«ai� cr of am dcfault or brcach of dut� or contract b� thc Trustcc or am O« ncrs shall not affcct am subscqucnt dcfault or brcach of dut� or contract. or impair am rights or rcmcdics on am such subscqucnt dcfault or brcach. No dcla� or omission of thc Trustcc or am O« ncr to c�crcisc am right or po«cr accruing upon am dcfault shall impair am such right or po«cr or shall bc construcd to bc a«ai� cr of am such dcfault or am acquicsccncc thcrcin: and c� cr� po« cr and remcd� confcrrcd upon thc Trustcc or O«ncrs b� thc Bond La« or b� this Articic V111 ma� bc cnforccd and c�crciscd. upon an E� cnt of Dcfault. from timc to timc and as oftcn as shzll bc dccmcd c�pcdicnt b� thc Trustcc or thc O« ncrs. as thc casc ma� bc. Scction 8.07. Limitation on Ri�hts and Rcmcdics of O« ncrs. No O« ncr shall ha� c thc right to institutc am suit. action or procccding at la« or in cquit�. for am rcmcd� undcr or upon this Indcnturc. unlcss (i) such O« ncr shall ha� c prc� iousl� gi� cn to thc Trustcc «rittcn noticc of thc occurrcncc of an E� cnt of Dcfault: (ii) thc O« ncrs of a majorit� in aggrcgatc Principal Amount of all thc Bonds thcn Outstanding shall ha� c madc «rittcn rcqucst upon thc Trustcc to c�crcisc thc po« crs hcrcinbcforc grantcd or to institutc such action. suit or procccding in its o« n namc: (iii) said O« ncrs shall ha� c tcndcrcd to thc Trustcc indcmnit� rcasonabl� acccptablc to thc Trustcc against thc costs. c�pcnscs and liabilitics to bc incurrcd in compliancc �� ith such rcqucst: and (i� ) thc Trustcc shall ha� c rcfi�scd or omittcd to compl� «ith such rcqucst for a period of 60 da� s aftcr such «rittcn rcqucst shall ha� c bccn rccci� cd b�. and said tcndcr of indcmnit� shall ha� c bccn madc to. thc Trustcc. P6—Ic �2. I c �;;\x72; ; I . x —> ; — Such notification. rcqucst. tcndcr of indcmnit� and refiisal or omission arc hcrcb� dcclarcd. in c� cr� casc. to bc conditions prcccdcnt to thc c�crcisc b� am O« ncr of am rcmcd� hcrcundcr: it bcing undcrstood and intcndcd that no onc or morc O« ncrs shall ha� c am right in am manncr «hatc� cr b� thc O« ncr or O« ncrs� action to cnforcc am right undcr this Indcnturc. c�ccpt in thc manncn c�rcin pro� idcd. and that all procccdings at la« or in cquit� to cnforcc am pro� ision of this Indcnture shall bc institutcd. had and maintaincd in thc manncn c�rcin pro� idcd and for thc cqual bcncfit of all O« ncrs. Thc right of am O« ncr of am Bond to rccci� c pa� mcnt of thc principal of and intcrest and prcmium. if am. on such Bond as hcrcin pro� idcd or to institutc suit for thc cnforccmcnt of am such pa� mcnt. shall not bc impaircd or affcctcd «ithout thc «rittcn conscnt of such O« ncr. not« ithstanding thc forcgoing pro� isions of this Scction or am othcr pro� ision of this Indcnturc. Scction 8.08. Tcrmination of Procccdin�s. In casc thc Trustcc shall ha� c procccdcd to cnforcc am right undcr this Indcnturc b� thc appointmcnt of a rccci� cr or othcn� isc. and such procccdings shall ha� c bccn discontinucd or abandoncd for am rcason. or shall ha� c bccn dctcrmincd ad� crscl� . thcn and in c� cr� such casc. thc Authorit� . thc Trustcc and thc O« ncrs shall bc restorcd to thcir formcr positions and rights hcrcundcr. respccti� cl�. «ith rcgard to thc propert� subjcct to this Indcnturc. and all rights. rcmcdics and po« crs of thc Tnistcc shall continuc as if no such procccdings had bccn takcn. ARTICLE IX BONDINSURANCE (to comc) ARTICLE X BOOK-ENTRY SYSTEM Scction 10.01 Book-Entr� S� stcm: Limitcd Obli�ation of Authorit� . Thc Bonds shall bc initiall� dcli� crcd in thc form of a scparatc singlc fiill� rcgistcrcd Bond (« hich ma� bc t� pc« rittcn) for cach of thc maturitics of thc Bonds. Upon initial dcli� cr�. thc o« ncrship of cach such Bond shall bc rcgistcrcd in thc rcgistration books kcpt b� thc Trustcc in thc namc of thc Nomincc as nomincc of thc Dcpositor� . E�ccpt as pro� idcd in Scction 10.0 �. all of thc Outstanding Bonds shall bc rcgistcrcd in thc rcgistration books kcpt b� thc Trustcc in thc namc of thc Nomincc. With respcct to Bonds rcgistcrcd in thc rcgistration books kcpt b� thc Trustcc in thc namc of thc Nomincc. thc Authorit� and thc Trustcc shall ha� c no responsibilit� or obligation to am Participant or to am person on bchalf of «hich such a Participant holds an intcrest in thc Bonds. Without limiting thc immcdiatcl� prcccding scntcncc. thc Authorit� and thc Trustcc shall ha� c no responsibilit� or obligation «ith respcct to (i) thc accurac� of thc rccords of thc Dcpositon. thc Nomincc. or am Participant «ith respcct to am o« ncrship intcrest in thc Bonds. (ii) thc dcli� cr� to am Participant or am othcr person. othcr than an O« ncr as sho« n in thc rcgistration books kcpt b� thc Trustcc. of am noticc «ith respcct to thc Bonds. including am noticc of rcdcmption. (iii) thc scicction b� thc Dcpositor� and its Participants of thc bcncficial intcrests in thc Bonds to bc rcdccmcd in thc c� cnt thc Bonds arc rcdccmcd in part. or (i� ) thc pa� mcnt to am Participant or am othcr person. othcr than an O« ncr as sho« n in thc rcgistration books kcpt b� thc Trustcc. of am amount «ith respcct to principal of. prcmium. if am. or intcrest duc «ith respcct to thc Bonds. Thc Authorit� and thc Trustcc ma� trcat and considcr thc person in «hosc namc cach Bond is rcgistcrcd in thc rcgistration books kcpt b� thc Tnistcc as thc holdcr and absolutc o« ncr of such Bond for thc purposc of pa� mcnt of principal. prcmium. if am. and intcrest «ith P6—Ic �2. I c �;;\x72; ; I . x — � �4— respcct to such Bond. for thc purposc of gi� ing noticcs of rcdcmption and othcr mattcrs «ith respcct to such Bond. for thc purposc of rcgistcring transfcrs «ith respcct to such Bond. and for all othcr purposcs «hatsoc� cr. Thc Trustcc shall pa� all principal of. prcmium. if am. and intcrest duc «ith respcct to thc Bonds onl� to or upon thc ordcr of thc respccti� c O�� ncrs. as sho« n in thc rcgistration books kcpt b� thc Trustcc. or thcir respccti� c attornc� s dul� authorizcd in «riting. and all such pa� mcnts shall bc � alid and cffccti� c to satisfi and dischargc fiill� thc Authorit� �s obligations «ith respcct to pa� mcnt of thc principal. prcmium. if am. and intcrest duc «ith respcct to thc Bonds to thc c�tcnt of thc sum or sums so paid. No person othcr than an O« ncr. as sho« n in thc rcgistration books kcpt b� thc Trustcc. shall rccci� c a Bond c� idcncing thc obligation of thc Authorit� to makc pa� mcnts of principal. prcmium. if am. and intcrest pursuant to this Indcnturc. Upon dcli� cr� b� thc Dcpositor� to thc Trustcc and thc Authorit� of «rittcn noticc to thc cffcct that thc Dcpositor� has dctcrmincd to substitutc a nc« nomincc in placc of thc Nomincc. and subjcct to thc pro� isions hcrcin «ith respcct to Rccord Datcs. thc «ord Nomincc in this Indcnture shall rcfcr to such nc« nomincc of thc Dcpositor� . Scction 10.02 Rcurescntation Lcttcr. In ordcr to qualif� thc Bonds for thc Dcpositor� �s book cntr� s� stcm. thc Authorit� has hcrctoforc c�ccutcd and dcli� crcd to such Dcpositor� thc Rcprescntation Lcttcr. Thc c�ccution and dcli� cr� of a Rcprescntation Lcttcr shall not in am «a� imposc upon thc Authorit� or thc Tnistcc am obligation «hatsoc� cr «ith respcct to persons ha� ing intcrests in thc Bonds othcr than thc O« ncrs. as sho« n on thc rcgistration books kcpt b� thc Trustcc. Thc Trustcc agrccs to takc all action ncccssan to continuousl� compl� «ith thc Rcprescntation Lcttcr to thc c�tcnt that such action is not inconsistcnt «ith this Indcnturc. In addition to thc c�ccution and dcli� cn of thc Rcprescntation Lcttcr. thc officcrs of thc Authorit� arc hcrcb� authorizcd to takc am othcr actions. not inconsistcnt «ith this Indcnturc. to qualif� thc Bonds for thc Dcpositor� �s book cntr� program. Scction 10.0 � Transfcrs Outsidc Book-Entr� S� stcm. In thc c� cnt (a) thc Dcpositor� dctcrmincs not to continuc to act as sccuritics dcpositor� for thc Bonds. or (b) thc Authorit� dctcrmincs that thc Dcpositor� shall no longcr so act. thcn thc Authorit� «ill discontinuc thc book-cntr� s� stcm «ith thc Dcpositor� . If thc Authorit� fails to idcntif� anothcr qualificd sccuritics dcpositor� to rcplacc thc Dcpositor�. thcn thc Bonds so dcsignatcd shall no longcr bc restrictcd to bcing rcgistcrcd in thc rcgistration books kcpt b� thc Trustcc in thc namc of thc Nomincc. but shall bc rcgistcrcd in «hatc� cr namc or namcs persons transfcrring or c�changing Bonds shall dcsignatc. in accordancc «ith thc pro� isions of Scction 2.09. Scction 10.0�4 Pa� mcnts to thc Nomincc. Not« ithstanding am othcr pro� isions of this Indcnturc to thc contrar�. so long as am Bond is rcgistcrcd in thc namc of thc Nomincc. all pa� mcnts «ith respcct to principal. prcmium. if am. and intcrest duc «ith respcct to such Bond and all noticcs «ith respcct to such Bond shall bc madc and gi� cn. respccti� cl� . as pro� idcd in thc Rcprescntation Lcttcr or as othcn� isc instructcd b� thc Dcpositor� . Scction 10.0� Initial Dcuositor� and Nomincc. Thc initial Dcpositor� undcr this Articic shall bc Thc Dcpositor� Trust Compam. Nc« York. Nc« York. Thc initial Nomincc shall bc Ccdc c�. Co.. as Nomincc ofThc Dcpositor� Trust Compam. Nc« York. Nc« York. ARTICLE XI MISCELLANEOUS Scction l l.O l. Limitcd Liabilit� of Authorit� . Not�� ithstanding am thing in this Indcnturc containcd. thc Authorit� shall not bc rcquircd to ad� ancc am monc� s dcri� cd from am sourcc of incomc othcr than thc Rc� cnucs for thc pa� mcnt of thc principal of or intcrest on thc Bonds. or am prcmiums upon thc rcdcmption thcrcof. or for thc performancc of am co� cnants hcrcin containcd (c�ccpt to thc c�tcnt am such co� cnants arc c�pressl� pa� ablc hcrcundcr from thc Rc� cnucs or othcr« isc from P6—Ic �2. I c �;;\x72; ; I . x — � � — amounts pa�ablc undcr thc Loan Agrccmcnt). Thc Authorit� ma�. ho«c�cr. ad�ancc fiinds for am such purposc. pro� idcd that such fiinds arc dcri� cd from a sourcc Icgall� a� ailablc for such purposc and ma� bc uscd b� thc Authorit� for such purposc «ithout incurring indcbtcdncss. Thc Bonds shall bc rc� cnuc bonds. pa� ablc c�clusi� cl� from thc Rc� cnucs and othcr fiinds as in this Indcnturc pro� idcd. Thc gcncral fiind of thc Authorit� is not liablc. and thc crcdit of thc Authorit� is not plcdgcd. for thc pa� mcnt of thc intcrest and prcmium. if am. on or principal of thc Bonds. Thc O« ncrs of thc Bonds shall nc� cr ha� c thc right to compcl thc forfciturc of am propert� of thc Authorit� . Thc principal of and intcrest on thc Bonds. and am prcmiums upon thc rcdcmption of am thcrcof. shall not bc a Icgal or cquitablc plcdgc. chargc. licn or cncumbrancc upon am propert� of thc Authorit� or upon am of its incomc. rcccipts or rc� cnucs c�ccpt thc Rc� cnucs and othcr fiinds plcdgcd to thc pa� mcnt thcrcof as in this Indcnturc pro� idcd. Scction I I.02. Bcncfits of Indcnturc Limitcd to Partics. Nothing in this Indcnturc. c�presscd or implicd. is intcndcd to gi� c to am person othcr than thc Authorit�. thc Trustcc. thc Agcnc�. thc Insurcr. and thc O« ncrs of thc Bonds. am right. rcmcd� or claim undcr or b� rcason of this Indcnturc. Am co� cnants. stipulations. promiscs or agrccmcnts in this Indcnturc containcd b� and on bchalf of thc Authorit� shall bc for thc solc and c�clusi� c bcncfit of thc Trustcc. thc Agcnc�. thc Insurcr. and thc O« ncrs of thc Bonds. Scction I I.0 �. Dischar�c of Indcnturc. If thc Authorit� shall pa� and dischargc am or all of thc Outstanding Bonds in am onc or morc of thc follo« ing «a� s: (a) B� «cll and trul� pa� ing or causing to bc paid thc principal of and intcrest and prcmium. ifam. on such Bonds. as and «hcn thc samc bccomc duc and pa�ablc: (b) B� irrc� ocabl� dcpositing «ith thc Trustcc. in trust, at or bcforc maturit�. monc� «hich. togcthcr «ith thc a� ailablc amounts thcn on dcposit in thc fiinds and accounts cstablishcd «ith thc Trustcc pursuant to this Indcnturc and thc Loan Agrccmcnt. is fiill� sufficicnt to pa� such Bonds. including all principal. intcrest and prcmiums. ifam: or (c) B� irrc� ocabl� dcpositing «ith thc Trustcc or am othcr fiduciar�. in trust. non-callablc Defcasancc Obligations in such amount as an Indcpcndcnt Accow�tant shall dctcrminc «ill. togcthcr «ith thc intcrest to accruc thcrcon and a� ailablc monc� s thcn on dcposit in thc fiinds and accounts cstablishcd «ith thc Trustcc pursuant to this Indcnturc and thc Loan Agrccmcnt. bc fiill� sufficicnt to pa� and dischargc thc indcbtcdncss on such Bonds (including all principal. intcrest and rcdcmption prcmiums) at or bcforc thcir respccti� c maturit� datcs: and if such Bonds arc to bc rcdccmcd prior to thc maturit� thcrcof noticc of such rcdcmption shall ha� c bccn scnt pursuant to Scction 2.0 � or pro� ision satisfactor� to thc Trustcc shall ha� c bccn madc for thc scnding of such noticc. thcn. at thc Rcqucst of thc Authorit� . and not« ithstanding that am of such Bonds shall not ha� c bccn surrcndcrcd for pa� mcnt. thc plcdgc of thc Rc� cnucs and othcr fiinds pro� idcd for in this Indcnturc «ith respcct to such Bonds. and all othcr pccuniar� obligations of thc Authorit� undcr this Indcnturc «ith respcct to all such Bonds. shall ccasc and tcrminatc. c�ccpt onl� thc obligation of thc Authorit� to pa� or causc to bc paid to thc O« ncrs of such Bonds not so surrcndcrcd and paid all sums duc thcrcon from amounts sct asidc for such purposc as aforesaid. and all c�pcnscs and costs of thc Trustcc. Am fiinds hcld b� thc Trustcc. follo« ing am pa� mcnt or dischargc of thc Outstanding Bonds pursuant to this Scction I I.0 � and thc pa� mcnt of thc Tnistcc�s and thc Insurcr�s c�pcnscs and costs. shall bc paid o� cr to thc Authorit� . Scction I 1.0�4. Succcssor Is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor. Whcnc� cr in this Indcnturc or am Supplcmcntal Indcnturc thc Authorit� is namcd or rcfcrrcd to. such rcfcrcncc shall bc dccmcd to includc thc succcssor to thc po«crs. dutics and fiinctions. «ith respcct to thc managcmcnt. administration and control of thc affairs of thc Authorit�. that arc prescntl� � cstcd in thc P6—Ic �2. I c�;;\x72; ; I. x —� 6— Authorit�. and all thc co� cnants. agrccmcnts and pro� isions containcd in this Indcnturc b� or on bchalf of thc Authorit� shall bind and inurc to thc bcncfit of its succcssors «hcthcr so c�presscd or not. Scction I I.0�. Contcnt of Ccrtificatcs. E� cr� Ccrtificatc of thc Authorit� «ith respcct to compliancc «ith a condition or co� cnant pro� idcd for in this Indcnture shall includc (i) a statcmcnt that thc person or persons making or gi� ing such Ccrtificatc ha� c rcad such co� cnant or condition and thc dcfinitions hcrcin rclating thcrcto: (ii) a bricf statcmcnt as to thc naturc and scopc of thc c�amination or in� cstigation upon «hich thc statcmcnts or opinions containcd in such Ccrtificatc arc bascd: (iii) a statcmcnt that. in thc opinion of thc signcrs. thc� ha� c madc or causcd to bc madc such c�amination or in� cstigation as is ncccssar� to cnablc thcm to c�press an informcd opinion as to «hcthcr or not such co� cnant or condition has bccn complicd «ith: and (i� ) a statcmcnt as to «hcthcr. in thc opinion of thc signcrs. such condition or co� cnant has bccn complicd «ith. Am such ccrtificatc madc or gi� cn b� an officcr of thc Authorit� ma� bc bascd. insofar as it rclatcs to Icgal mattcrs. upon a ccrtificatc or opinion of or rcprescntations b� counscl. unlcss such officcr kno«s that thc ccrtificatc or opinion or rcprescntations «ith respcct to thc mattcrs upon «hich his ccrtificatc ma� bc bascd. as aforesaid. arc crroncous. or in thc c�crcisc of rcasonablc care should ha� c kno« n that thc samc «crc crroncous. Am such ccrtificatc or opinion or rcprescntation madc or gi� cn b� counscl ma� bc bascd. insofar as it rclatcs to factual mattcrs. on information «ith respcct to «hich is in thc posscssion of thc Authorit�. or upon thc ccrtificatc or opinion of or rcprescntations b� an officcr or officcrs of thc Authorit�. unlcss such counscl kno«s that thc ccrtificatc or opinion or rcprescntations «ith respcct to thc mattcrs upon «hich his ccrtificatc. opinion or rcprescntation ma� bc bascd. as aforesaid. arc crroncous. Scction I I.06. E�ccution of Documcnts b� O« ncrs. Am rcqucst. conscnt or othcr instrumcnt rcquircd b� this Indcnturc to bc signcd and c�ccutcd b� Bond O«ncrs ma� bc in am numbcr of concurrcnt «ritings of substantiall� similar tcnor and ma� bc signcd or c�ccutcd b� such Bond O« ncrs in person or b� thcir agcnt or agcnts dul� appointcd in «riting. Proof of thc c�ccution of am such rcqucst. conscnt or othcr instrumcnt or of a«riting appointing am such agcnt. shall bc sufficicnt for am purposc of this Indcnturc and shall bc conclusi� c in fa� or of thc Trustcc and of thc Authorit� if madc in thc manncr pro� idcd in this Scction I I.06. Thc fact and datc of thc c�ccution b� am person of am such rcqucst. conscnt or othcr instrumcnt or «riting ma� bc pro� cd b� thc affida� it of a«itncss of such c�ccution or b� thc ccrtificatc of am notan public or othcr officcr of am jurisdiction, authorizcd b� thc la« s thcrcof to takc ackno« Icdgmcnts of dccds. ccrtif� ing that thc person signing such rcqucst. conscnt or othcr instrumcnt or «riting ackno« Icdgcd to him thc c�ccution thcrcof. Thc o« ncrship of Bonds shall bc pro� cd b� thc Rcgistration Books. Am rcqucst. conscnt or � otc of thc O« ncr of am Bond shal l bind c� cr� firturc O« ncr of thc samc Bond and thc O« ncr of am Bond issucd in c�changc thcrcfor or in licu thcrcof. in respcct of am thing donc or suffcrcd to bc donc b� thc Trustcc or thc Authorit� in pursuancc of such rcqucst. conscnt or � otc. In licu of obtaining am dcmand. rcqucst. dircction. conscnt or «ai� cr in «riting. thc Trustcc ma� call and hold a mccting of thc Bond O«ncrs upon such noticc and in accordancc «ith such rulcs and obligations as thc Trustcc considcrs fair and reasonablc for thc purposc of obtaining am such action. Scction I I.07. Disqualificd Bonds. In dctcrmining «hcthcr thc O« ncrs of thc rcquisitc aggrcgatc principal amount of Bonds ha� c concurrcd in am dcmand. rcqucst. dircction. conscnt or «ai� cr undcr this Indcnturc. Bonds «hich arc o« ncd on c�ld b� or for thc account of thc Agcnc� or thc Authorit� (but c�cluding Bonds hcld in am cmplo� ccs� rctircmcnt fiind) shall bc disrcgardcd and dccmcd not to bc Outstanding for thc purposc of am such dctcrmination. pro� idcd. ho« c� cr. onl� Bonds «hich a responsiblc officcr of thc Trustcc actuall� kno« s to bc so o« ncd on c�ld shall bc disrcgardcd. P6—Ic �2. I c�;;\x72; ; I. x —� 7— Scction I I.08. Wai� cr of Pcrsonal Liabilit� . No officcr. agcnt or cmplo� cc of thc Authorit� shall bc indi� iduall� or personall� liablc for thc pa� mcnt of thc intcrest on or principal of thc Bonds: but nothing hcrcin containcd shall rclic� c am such officcr. agcnt or cmplo� cc from thc performancc of am official dut� pro� idcd b� la« . Scction I I.09. Partial In� alidit� . If am onc or morc of thc co� cnants or agrccmcnts. or portions thcrcof. pro� idcd in this Indcnturc on thc part of thc Authorit� (or of thc Trustcc) to bc performcd should bc contran to la«. thcn such co� cnant or co� cnants. such agrccmcnt or agrccmcnts. or such portions thcrcof. shall bc null and � oid and shall bc dccmcd scparablc from thc rcmaining co� cnants and agrccmcnts or portions thcrcof and shall in no «a� affcct thc � alidit� of this Indcnturc or of thc Bonds: but thc Bond O« ncrs shall rctain all rights and bcncfits accordcd to thcm undcr thc Bond La« or am othcr applicablc pro� isions of la« . Thc Authorit� hcrcb� dcclares that it «ould ha� c cntcrcd into this Indcnturc and cach and c� cr� othcr scction. paragraph. subdi� ision. scntcncc. clausc and phrasc hcrcof and «ould ha� c authorizcd thc issuancc of thc Bonds pursuant hcrcto irrespccti� c of thc fact that am onc or more scctions. paragraphs. subdi� isions. scntcnccs. clauscs or phrascs of this Indcnturc or thc application thcrcof to am person or circumstancc ma� bc hcld to bc unconstitutional. uncnforccablc or in� alid. - - Scction I I.10. Dcstruction of Canccllcd Bonds. Whcnc� cr in this Indcnturc pro� ision is madc for thc surrcndcr to thc Trustcc of am Bonds «hich ha� c bccn paid or canccllcd pursuant to thc pro� isions of this Indcnturc. thc Trustcc shall. as permittcd b� la«. dcstro� such canccllcd Bonds and. upon Rcqucst of thc Authorit�. pro� idc to thc Authorit� a ccrtificatc of dcstruction dul� c�ccutcd b� thc Trustcc. and thc Authorit� shall bc cntiticd to rcl� upon am statcmcnt of fact containcd in such ccrtificatc «ith respcct to thc dcstruction of am such Bonds thcrcin rcfcrrcd to: pro� idcd. ho« c� cr. thc Authorit� shall rcimbursc thc Trustcc for thc Trustcc�s costs incurrcd in conncction «ith thc microfilming or thc rcquircd permancnt rccording. if am. rclatcd thcrcto. Scction I I. I I. Funds and Accounts. Am fiind or account rcquircd b� this Indcnturc to bc cstablishcd and maintaincd b� thc Authorit� or thc Trustcc ma� bc cstablishcd and maintaincd in thc accounting rccords of thc Authorit� or thc Trustcc. as thc casc ma� bc. cithcr as a fiind or an account. and ma�. for thc purposc of such rccords. am audits thcrcof and am rcports or statcmcnts «ith respcct thcrcto. bc trcatcd cithcr as a fiind or as an account. All such rccords «ith respcct to all such fiinds and accounts hcld b� thc Authorit� shall at all timcs bc maintaincd in accordancc «ith gcncrall� acccptcd accounting principlcs and all such rccords «ith respcct to all such fiinds and accounts hcld b� thc Trustcc shall bc at all timcs maintaincd in accordancc «ith corporatc trust industr� practiccs. Am fiind or account rcquircd b� this Indcnturc to bc cstablishcd and maintaincd b� thc Authorit� or thc Trustcc ma� bc cstablishcd and maintaincd in thc form of multiplc funds. accounts or sub-accounts thcrcin. Scction I I.12. Pa� mcnt on Busincss Da� s. Whcnc� cr in this Indcnturc am amount is rcquircd to bc paid on a da� «hich is not a Busincss Da�. such pa� mcnt shall bc rcquircd to bc madc on thc Busincss Da� immcdiatcl� follo« ing such da�. pro� idcd that intcrest shall not accruc from and aftcr such da�. - - - Scction I I. I�. Noticcs. Am noticc. rcqucst. complaint. dcmand or othcr communication undcr this Indcnture shall bc gi� cn b� first class mail or personal dcli� cr� to thc part� cntiticd thcrcto at its address sct forth bclo«. or b� tciccop� or othcr form of tciccommunication. confirmcd b� tcicphonc at its numbcr sct forth bclo« . Noticc shall bc cffccti� c cithcr (i) upon transmission b� tciccop� or othcr form of tciccommunication. (ii) �48 hours aftcr dcposit in thc Unitcd Statcs mail. postagc prcpaid. or (iii) in thc casc of personal dcli� cr� to am person. upon actual rcccipt. Thc Authorit�. thc Agcnc� or thc Trustcc ma�. b� «rittcn noticc to thc othcr partics. from timc to timc modif� thc address or numbcr to «hich communications arc to bc gi� cn hcrcundcr. P6—Ic �2. I c�;;\x72; ; I. x —� 8— If to thc Authorit� : Palm Dcscrt Financing Authorit� 7�-� I 0 Frcd Waring Dri� c Palm Dcscrt. California 92260 Attcntion: Chicf Administrati� c Officcr Facsimilc: (760) ��40-Oi7�4 If to thc Agcnc� : Palm Dcscrt Rcdc� clopmcnt Agcnc� 7�-� I 0 Frcd Waring Dri� c Palm Dcscrt. California 92260 Attcntion: E�ccuti� c Dircctor Facsimilc: (760) ��40-Oi7�4 If to thc Trustcc: Wclls Fargo Bank. National Association 707 Wilshirc Boulc�ard. 17th Floor Los Angcics. California 90017 Attcntion: Corporatc Trust Dcpartmcnt Facsimilc: (21 �) 61�4->>ii If to thc Insurcr: Attcntion: Facsimilc: ( ) Thc Authorit�. thc Agcnc�. thc Trustcc and thc Insurcr ma� dcsignatc am fiirthcr or diffcrcnt addresscs to «hich subscqucnt noticcs. ccrtificatcs or othcr communications shall bc scnt. Noticcs to thc Insurcr shall bc go� crncd b� Scction 9.02. Scction I I.1�4. Unclaimcd Monc�s. Amthing in this Indcnturc to thc contrar� not« ithstanding. am monc� s hcld b� thc Trustcc in trust for thc pa� mcnt and dischargc of am of thc Bonds or thc intcrest thcrcon «hich rcmain unclaimcd for t«o � cars aftcr thc datc «hcn such Bonds or thc intcrest thcrcon ha� c bccomc duc and pa� ablc. cithcr at thcir statcd maturit� datcs or b� call for carlicr rcdcmption. if such monc� s«crc hcld b� thc Trustcc at such datc. or for t« o� cars aftcr thc datc of dcposit of such monc� s if dcpositcd «ith thc Trustcc aftcr said datc «hcn such Bonds or thc intcrest thcrcon bccomc duc and pa� ablc. shall. at thc Rcqucst of thc Authorit� . bc rcpaid b� thc Trustcc to thc Authorit�. as its absolutc propert� and frcc from trust. and thc Trustcc shall thcrcupon bc rcicascd and dischargcd «ith respcct thcrcto and thc O« ncrs shall look onl� to thc Authorit� for thc pa� mcnt of such Bonds: pro� idcd. ho«c� cr. that bcforc making am such pa� mcnt to thc Authorit�. thc Trustcc shall. at thc Rcqucst and at thc c�pcnsc of thc Authorit� . causc to bc mailcd to thc O« ncrs of all such Bonds. at thcir respccti� c addresscs appcaring on thc Rcgistration Books. a noticc that said monc� s rcmain unclaimcd and that. aftcr a datc namcd in said noticc. «hich datc shall not bc Icss than �0 da� s aftcr thc datc of mailing of such noticc. thc balancc of such monc� s thcn unclaimcd «ill bc rcturncd to thc Authorit� . Scction I I. I�. Go� crnin� La« . This Agrccmcnt shall bc construcd and go� crncd in accordancc «ith thc la« s of thc Statc of California. P6—Ic �2. I c�;;\x72; ; I. x —� y— IN WITNESS WHEREOF. thc PALM DESERT FINANCING AUTHORITY has causcd this Indcnturc to bc signcd in its namc b� its dul� authorizcd officcr and WELLS FARGO BANK. NATIONAL ASSOCIATION. in tokcn of its acccptancc of thc trust crcatcd hcrcundcr. has causcd this Indcnturc to bc signcd in its corporatc namc b� its officcr idcntificd bclo«. all as of thc da� and � car first abo� c «rittcn. PALM DESERT FINANCING AUTHORITY : Chicf Administrati� c Officcr WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc : Authorizcd Officcr PG—Ic l2. I c li i\872 i; I.8 —�0— EXHIBIT A �FORM OF SERIES 2006A BOND� Unlcss this ccrtificatc is prescntcd b� an authorizcd represcntati� c of Thc Dcpositor� Trust Compam. a Nc« York corporation ("DTC��). to thc Authorit� or its agcnt for rcgistration of transfcr. c�changc. or pa� mcnt. and am ccrtificatc issucd is rcgistcrcd in thc namc of Ccdc c�. Co. or in such othcr namc as is rcqucstcd b� an authorizcd represcntati� c of DTC (and am pa� mcnt is madc to Ccdc c�. Co. or to such othcr cntit� as is rcqucstcd b� an authorizcd represcntati� c of DTC). ANY TRANSFER. PLEDGE. OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as thc rcgistcrcd o« ncn c�rcof. Ccdc c�. Co.. has an intcrest hcrcin. No. PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REFUNDING REVENUE BOND (PROJECT AREA NO. 2) 2006 SERIES A � RATE OF INTEREST MATURITY DATE ORIGINAL ISSUE DATE CUSIP August I. 20 REGISTERED OWNER: CEDE c�'. CO. PRINCIPAL AMOUNT: Thc PALM DESERT FINANCING AUTHORITY. a joint po«crs authorit� organizcd and c�isting undcr thc la« s of thc Statc of California (thc "Authorit� ��). for � aluc rccci� cd. hcrcb� promiscs to pa� (but onl� out of thc Rc� cnucs. as dcfincd in thc Indcnturc hcrcinaftcr rcfcrrcd to. and ccrtain othcr monc� s) to thc Rcgistcrcd O« ncr idcntificd abo� c or rcgistcrcd assigns (thc "Rcgistcrcd O« ncr'�). on thc Maturit� Datc idcntificd abo� c or am carlicr rcdcmption datc. thc Principal Amount idcntificd abo� c in la«fiil monc� of thc Unitcd Statcs of Amcrica: and to pa� intcrest thcrcon at thc Ratc of Intcrest idcntificd abo� c in likc monc� from thc Intcrest Pa� mcnt Datc (as hcrcinaftcr dcfincd) nc�t prcccding thc datc of authcntication of this Scrics 2006A Bond (unlcss this Scrics 2006A Bond is authcnticatcd on or bcforc an Intcrest Pa� mcnt Datc and aftcr thc fiftccnth calcndar da� of thc month prcccding such Intcrest Pa� mcnt Datc. in «hich c� cnt it shall bcar intcrest from such Intcrest Pa� mcnt Datc. or unlcss this Scrics 2006A Bond is authcnticatcd on or prior to Jul� I�. 2006. in «hich c� cnt it shall bcar intcrest from thc Original Issuc Datc idcntificd abo� c: uro� idcd. ho« c� cr. that if. at thc timc of authcntication of this Scrics 2006A Bond. intcrest is in dcfault on this Scrics 2006A Bond. this Scrics 2006A Bond shall bcar intcrest from thc Intcrest Pa� mcnt Datc to «hich intcrest hcrcon has prc� iousl� bccn paid or madc a� ailablc for pa� mcnt). pa� ablc scmiannuall� on Fcbruar� I and August I in cach � car. commcncing August I. 2006 (thc "Intcrest Pa� mcnt Datcs��) until pa� mcnt of such Principal Amount in fiill. Thc Principal Amount hcrcof is pa� ablc upon prescntation hcrcof upon maturit� or carlicr rcdcmption at thc corporatc trust officc of Wclls Fargo Bank. National Association (thc "Trustcc��) in Los Angcics. California or such othcr location as thc Trustcc shall dcsignatc (thc "Trust Officc��). Intcrest hcrcon is pa�ablc b� chcck or draft of P6—Ic �2. I c�;;\x72; ; I. x A— I thc Trustcc mailcd b� first class mail on cach Intcrest Pa� mcnt Datc to thc Rcgistcrcd O« ncn c�rcof at thc address of thc Rcgistcrcd O« ncr as it appcars on thc rcgistration books of thc Trustcc as of thc fiftccnth calcndar da� of thc month prcccding such Intcrest Pa� mcnt Datc (c�ccpt in thc casc of a Rcgistcrcd O« ncr of at Icast � I.000.000 in aggrcgatc principal amount. such pa� mcnt ma� . at such Rcgistcrcd O« ncr�s option. bc madc b� «irc transfcr of immcdiatcl� a� ailablc fiinds in accordancc «ith «rittcn instructions pro� idcd b� such Rcgistcrcd O« ncr prior to thc fiftccnth calcndar da� of thc month prcccding such Intcrest Pa� mcnt Datc). This Scrics 2006A Bond is onc of a dul� authorizcd scrics of bonds of thc Authorit� dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics A(thc "Scrics 2006A Bonds��). limitcd in principal amount of `f . Thc Authorit� has issucd t« o othcr scrics of bonds concurrcntl� «ith thc issuancc of thc Scrics 2006A Bonds. dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics B. limitcd in initial principal amount to `f (thc "Scrics 2006B Bonds��) and thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics C. limitcd in initial principal amount to `f (thc "Scrics 2006C Bonds.�� and collccti� cl� «ith thc Scrics 2006A Bonds and thc Scrics 2006B Bonds. thc "Bonds��). Thc Scrics 2006A Bonds. thc Scrics 2006B Bonds and thc Scrics 2006C Bonds are sccurcd b� an Indcnturc of Trust. datcd as of Jul� I. 2006 (thc "Indcnturc��). b� and bct«ccn thc Authorit� and thc Trustcc. Unlcss thc contc�t cicarl� rcquires othcn� isc. capitalizcd tcrms uscd but not dcfincd hcrcin ha� c thc mcanings ascribcd to thcm in thc Indcnturc. Rcfcrcncc is hcrcb� madc to thc Indcnturc and all indcntures supplcmcntal thcrcto for a dcscription of thc rights thcrcundcr of thc o« ncrs of thc Bonds. of thc naturc and c�tcnt of thc Rc� cnucs. of thc rights. dutics and immunitics of thc Tnistcc and of thc rights and obligations of thc Authorit� thcrcundcr: and all of thc tcrms of thc Indcnturc arc hcrcb� incorporatcd hcrcin and constitutc a contract bct« ccn thc Authorit� and thc Rcgistcrcd O« ncn c�rcof. and to all of thc pro� isions of «hich Indcnturc thc Rcgistcrcd O« ncn c�rcof. b� acccptancc hcrcof. asscnts and agrccs. Thc Bonds arc authorizcd to bc issucd pursuant to thc pro� isions of thc Marks-Roos Local Bond Pooling Act of 198�. constituting Articic �4. Chaptcr �. Di� ision 7. Titic I of thc Go� crnmcnt Codc of thc Statc of California (thc "Act��). Thc Bonds are spccial obligations of thc Authorit� and. as and to thc c�tcnt sct forth in thc Indcnturc. arc pa�ablc solcl� from and sccurcd b� a first licn on and plcdgc ofthc Rc� cnucs and ccrtain othcr monc� s and sccuritics hcld b� thc Trustcc as pro� idcd in thc Indcnturc. All of thc Bonds arc cquall� sccurcd b� a plcdgc of. and chargc and licn upon. all of thc Rc� cnucs and such othcr monc� s and sccuritics. and thc Rc� cnucs and such othcr monc� s and sccuritics constitutc a tnist fiind for thc sccurit� and pa� mcnt of thc principal of and intcrest on thc Bonds. Thc fiill faith and crcdit of thc Authorit� is not plcdgcd for thc pa� mcnt of thc principal of or intcrest or prcmium (if am ) on thc Bonds. Thc Bonds arc not sccurcd b� a Icgal or cquitablc plcdgc of. or chargc. licn or cncumbrancc upon. am of thc propert� of thc Authorit� or am of its incomc or rcccipts. c�ccpt thc Rc� cnucs and such othcr monc� s and sccuritics as pro� idcd in thc Indcnturc. Thc Scrics 2006A Bonds ha� c bccn issucd for thc purposc of making a loan (thc "Scrics 2006A Loan��) to thc Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Agcnc� ��) to financc and refinancc ccrtain public capital impro� cmcnts «ith respcct to a rcdc� clopmcnt projcct kno« n and dcsignatcd as Projcct Arca No. 2. Thc Scrics 2006A Loan has bccn madc b� thc Autl�orit� to thc Agcnc� pursuant to a Projcct Arca No. 2 Loan Agrccmcnt (2006 Scnior Loans). datcd as of Jul� I. 2006 (thc "Loan Agrccmcnt��). b� and among thc Agcnc�. thc Authorit� and thc Trustcc. Thc Scrics 2006A Bonds maturing on or aftcr August I. 20 are subjcct to rcdcmption prior to thcir respccti� c maturit� datcs as a«holc. or in part among maturitics as dcsignatcd b� thc Authorit� and b� lot «ithin a maturit�. from prcpa� mcnts of thc Scrics 2006A Loan madc at thc option of thc Agcnc� pursuant to thc Loan Agrccmcnt. on am Intcrest Pa� mcnt Datc on or aftcr August I. 20_. at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc principal amount of Scrics P6—Ic �2. I c�;;\x72; ; I. x A-2 2006A Bonds to bc rcdccmcd). plus accrucd intcrest thcrcon to thc datc of rcdcmption: Rcdcmution Datcs Rcdcmution Pricc August I. 20_ and Fcbruar� I. 20_ '%� August I. 20_ and Fcbruar� I. 20_ August I. 20_ and thcrcaftcr Thc Scrics 2006A Bonds maturing on August I. 20 and August I. 20 arc also subjcct to mandator� sinking fiind redcmption b� lot. on August I in cach � car commcncing August I. 20 and August I. 20 . respccti� cl�. at a rcdcmption pricc cqual to thc principal amount thcrcof to bc rcdccmcd. «ithout prcmium. plus accrucd intcrest to thc datc of rcdcmption. in thc aggrcgatc respccti� c principal amounts sct forth in thc Indcnturc: pro� idcd. ho«c� cr. that in licu of rcdcmption thcrcof. such Scrics 2006A Bonds ma� bc purchascd b� thc Agcnc� pursuant to thc Loan Agrccmcnt. Thc Trustcc on bchalf and at thc c�pcnsc of thc Authorit� shall mail (b� first class mail) noticc of am rcdcmption to thc respccti� c o« ncrs of am Scrics 2006A Bonds dcsignatcd for rcdcmption. at thcir respccti� c addresscs appcaring on thc rcgistration books maintaincd b� thc Trustcc. and b� such mcans as acccptablc to thc follo« ing institutions. to thc Sccuritics Dcpositorics and to onc or morc Information Scr� iccs. at Icast �0 but not morc than 60 da� s prior to thc rcdcmption datc: pro� idcd. ho« c� cr. that ncithcr failurc to rccci� c am such noticc so mailcd nor am dcfcct thcrcin shall affcct thc � alidit� of thc procccdings for thc rcdcmption of such Scrics 2006A Bonds or thc ccssation of thc accrual of intcrest thcrcon. Such noticc shall statc thc datc of thc noticc. thc rcdcmption datc. thc rcdcmption placc and thc rcdcmption pricc and shall dcsignatc thc CUSIP numbcrs. thc scrial numbcrs of cach maturit� or maturitics (c�ccpt that if thc c� cnt of rcdcmption is of all of thc Scrics 2006A Bonds of such maturit� or maturitics in «holc. thc Trustcc shall dcsignatc such maturitics or thc maturit� in «holc «ithout rcfcrcncing cach indi� idual numbcr) of thc Scrics 2006A Bonds to bc rcdccmcd. and shall rcquirc that such Scrics 2006A Bonds bc thcn surrcndcrcd at thc Tnist Officc for rcdcmption at thc rcdcmption pricc. gi� ing noticc also that fiirthcr intcrest on such Scrics 2006A Bonds «ill not accruc from and aftcr thc rcdcmption datc. Subjcct to thc limitations and upon pa� mcnt of thc chargcs. if am. pro� idcd in thc Indcnturc. this Scrics 2006A Bond ma� bc c�changcd at thc Trust Officc for a likc aggrcgatc Principal Amount and maturit� of fiill� rcgistcrcd Scrics 2006A Bonds of othcr authorizcd dcnominations. This Scrics 2006A Bond is transfcrablc b� thc Rcgistcrcd O« ncn c�rcof. in person or b� thc Rcgistcrcd O«ncr�s attornc� dul� authorizcd in «riting. at thc Trust Officc. but onl� in thc manncr. subjcct to thc limitations and upon pa� mcnt of thc chargcs pro� idcd in thc Indcnturc. and upon surrcndcr and canccllation of this Scrics 2006A Bond. Upon such transfcr a nc« fiill� rcgistcrcd Scrics 2006A Bond or Scrics 2006A Bonds. of authorizcd dcnomination or dcnominations. for thc samc aggrcgatc principal amount and of thc samc maturit� «ill bc issucd to thc transfcrcc in c�changc thcrcfor. Thc Trustcc shall not bc rcquircd to rcgistcr thc transfcr or c�changc of am Scrics 2006A Bond during thc I�- da� period prcccding thc scicction of Scrics 2006A Bonds for rcdcmption or am Scrics 2006A Bond scicctcd for rcdcmption. Thc Authorit� and thc Trustcc ma� trcat thc Rcgistcrcd O« ncn c�rcof as thc absolutc o« ncn c�rcof for all purposcs. and thc Authorit� and thc Trustcc shall not bc affcctcd b� am noticc to thc contran . Thc Indcnturc and thc rights and obligations of thc Authorit� and of thc o« ncrs of thc Scrics 2006A Bonds and of thc Trustcc ma� bc modificd or a�ncndcd from timc to timc and at am timc in thc manncr. to thc c�tcnt. and upon thc tcrms pro� idcd in thc Indcnturc: pro� idcd that no such modification or amcndmcnt shall (a) c�tcnd thc maturit� of or rcducc thc intcrest ratc on am Scrics 2006A Bond or P6—Ic �2. I c�;;\x72; ; I. x A— � othcn� isc altcr or impair thc obligation of thc Authorit� to pa� thc principal. intcrest or prcmiums at thc timc and placc and at thc ratc and in thc currcnc� pro� idcd thcrcin of am Scrics 2006A Bond «ithout thc c�press «rittcn conscnt of thc O« ncr of such Scrics 2006A Bond. (b) rcducc thc perccntagc of Scrics 2006A Bonds rcquircd for thc «rittcn conscnt to am such amcndmcnt or modification. or (c) «ithout its «rittcn conscnt thcrcto. modif� am of thc rights or obligations of thc Trustcc. all as morc fiill� sct forth in thc Indcnturc. - - - It is hcrcb� ccrtificd that all things. conditions and acts rcquircd to c�ist. to ha� c happcncd and to ha� c bccn performcd prcccdcnt to and in thc issuancc of this Scrics 2006A Bond do c�ist. ha� c happcncd and ha� c bccn performcd in duc timc. form and manncr as rcquircd b� thc Constitution and statutcs of thc Statc of California and b� thc Act and thc amount of this Scrics 2006A Bond. togcthcr «ith all othcr indcbtcdncss of thc Authorit�. docs not c�cccd am limit prescribcd b� thc Constitution or statutcs of thc Statc of California or b� thc Act. This Scrics 2006A Bond shall not bc cntiticd to am bcncfit undcr thc Indcnturc. or bccomc � alid or obligaton for am purposc. until thc ccrtificatc of authcntication hcrcon shall ha� c bccn signcd b� thc Trustcc. IN WITNESS WHEREOF. thc Authorit� has causcd this Scrics 2006A Bond to bc c�ccutcd in its namc and on its bchalf b� thc manual or facsimilc signatures of its Presidcnt and Sccrctar� all as of thc Original Issuc Datc idcntificd abo� c. PALM DESERT FINANCING AUTHORITY : Attcst: Sccrctar� Presidcnt STATEMENT OF INSURANCE �to comc� P6—Ic �2. I c�;;\x72; ; I. x A—�4 �FORM OF TRUSTEE�S CERTIFICATE OF AUTHENTICATION� This is onc of thc Scrics 2006A Bonds dcscribcd in thc «ithin-mcntioncd Indcnturc and rcgistcrcd on thc Bond Rcgistration Books. Datc: WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc : Authorizcd Signator� ----------------------------------- ----------------------------------- �FORM OF ASSIGNMENT� For � aluc rccci� cd thc undcrsigncd do(cs) hcrcb� scll. assign and transfcr unto «hosc taz idcntification numbcr is . thc «ithin-mcntioncd registcrcd Scrics 2006A Bond and hcrcb� irrc� ocabl� constitutc(s) and appoint(s) attornc� to transfcr thc samc on thc books of thc Trustcc «ith fiill po« cr of substitution in thc prcmiscs. Datcd: Signaturc guarantccd: NOTE: Signaturc(s) must bc guarantccd b� a mcmbcr of an institution «hich is a participant in thc Sccuritics Transfcr Agcnt Mcdallion Program (STAMP) or othcr similar program. ---------------------------------------- ---------------------------------------- NOTE: Thc signaturc(s) on this Assignmcnt must correspond «ith thc namc(s) as «rittcn on thc facc of thc «ithin Scrics 2006A Bond in c� cr� particular «ithout altcration or cnlargcmcnt or am changc «hatsoc� cr. PG—Icl2. I clii\872i ; I.8 A—� EXHIBIT B �FORM OF SERIES 2006B BOND� Unlcss this ccrtificatc is prescntcd b� an authorizcd represcntati� c of Thc Dcpositor� Trust Compam. a Nc« York corporation ("DTC��). to thc Authorit� or its agcnt for rcgistration of transfcr. c�changc. or pa� mcnt. and am ccrtificatc issucd is rcgistcrcd in thc namc of Ccdc c�. Co. or in such othcr namc as is rcqucstcd b� an authorizcd represcntati� c of DTC (and am pa� mcnt is madc to Ccdc c�. Co. or to such othcr cntit� as is rcqucstcd b� an authorizcd represcntati� c of DTC). ANY TRANSFER. PLEDGE. OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as thc rcgistcrcd o« ncn c�rcof. Ccdc c�. Co.. has an intcrest hcrcin. No. Maturit� Amount: `f PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE CAPTIAL APPRECIATION BOND (PROJECT AREA NO. 2) 2006 SERIES B YIELD TO MATURITY MATURITY DATE ORIGINAL ISSUE DATE CUSIP August I. 20 REGISTERED OWNER: CEDE c�'. CO. INITIAL PRINCIPAL AMOUNT: MATURITY AMOUNT: Thc PALM DESERT FINANCING AUTHORITY. a joint po«crs authorit� organizcd and c�isting undcr thc la« s of thc Statc of California (thc "Authorit� ��). for � aluc rccci� cd. hcrcb� promiscs to pa� (but onl� out of thc Rc� cnucs. as dcfincd in thc Indcnturc hcrcinaftcr rcfcrrcd to. and ccrtain othcr monc� s) to thc Rcgistcrcd O« ncr idcntificd abo� c or rcgistcrcd assigns (thc "Rcgistcrcd O« ncr'�). in la« fiil monc� of thc Unitcd Statcs of Amcrica. cithcr thc Maturit� Amount idcntificd abo� c on thc Maturit� Datc or thc Accrctcd Valuc. plus am applicablc rcdcmption prcmium. upon rcdcmption prior to maturit� ."Accrctcd Valuc.�� «ith respcct to am Scrics 2006B Bond. mcans as of am datc of calculation. thc sum of thc Initial Principal Amount thcrcof and thc intcrest accrucd thcrcon to such datc of calculation. compoundcd from thc Original Issuc Datc at thc statcd Yicld to Maturit� thcrcof on cach Fcbruar� I and August I. commcncing August I. 2006. Intcrest on cach Scrics 2006B Bond shall bc computcd using a� car of �60 da� s of t« cl� c�0-da� months and shall bc pa� ablc (i) at maturit� as part of thc Maturit� Amount. or (ii) at rcdcmption as part of thc Accrctcd Valuc to thc rcdcmption datc. Thc Maturit� Amount. or thc Accrctcd Valuc and redcmption prcmium (if am ). as applicablc. «ith respcct to am Scrics 2006B Bond shall bc paid upon prescntation and surrcndcr thcrcof. at maturit� or thc prior rcdcmption thcrcof. at thc corporatc trust officc of Wclls Fargo Bank. National Association (thc "Trustcc��) in Los Angcics. California or such othcr location as thc Trustcc shall dcsignatc (thc "Trust Officc��). P6—Ic �2. I c�;;\x72; ; I. x B— I This Scrics 2006B Bond is onc of a dul� authorizcd scrics of bonds of thc Authorit� dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics B(thc "Scrics 2006B Bonds��). limitcd in initial principal amount to `f . Thc Authorit� has issucd t« o othcr scrics of bonds concurrcntl� «ith thc issuancc of thc Scrics 2006B Bonds. dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics A. limitcd in initial principal amount to `f (thc "Scrics 2006A Bonds��) and thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics C. limitcd in initial principal amount to `f (thc "Scrics 2006C Bonds.�� and collccti� cl� «ith thc Scrics 2006A Bonds and thc Scrics 2006B Bonds. thc "Bonds��). Thc Scrics 2006A Bonds. thc Scrics 2006B Bonds and thc Scrics 2006C Bonds are sccurcd b� an Indcnturc of Trust. datcd as of Jul� I. 2006 (thc "Indcnturc��). b� and bct«ccn thc Authorit� and thc Trustcc. Unlcss thc contc�t cicarl� rcquires othcn� isc. capitalizcd tcrms uscd but not dcfincd hcrcin ha� c thc mcanings ascribcd to thcm in thc Indcnturc. Rcfcrcncc is hcrcb� madc to thc Indcnturc and all indcntures supplcmcntal thcrcto for a dcscription of thc rights thcrcundcr of thc o« ncrs of thc Bonds. of thc naturc and c�tcnt of thc Rc� cnucs. of thc rights. dutics and immunitics of thc Tnistcc and of thc rights and obligations of thc Authorit� thcrcundcr: and all of thc tcrms of thc Indcnturc arc hcrcb� incorporatcd hcrcin and constitutc a contract bct« ccn thc Authorit� and thc Rcgistcrcd O« ncn c�rcof. and to all of thc pro� isions of «hich Indcnturc thc Rcgistcrcd O« ncn c�rcof. b� acccptancc hcrcof. asscnts and agrccs. Thc Bonds arc authorizcd to bc issucd pursuant to thc pro� isions of thc Marks-Roos Local Bond Pooling Act of 198�. constituting Articic �4. Chaptcr �. Di� ision 7. Titic I of thc Go� crnmcnt Codc of thc Statc of California (thc "Act��). Thc Bonds are spccial obligations of thc Authorit� and. as and to thc c�tcnt sct forth in thc Indcnturc. arc pa�ablc solcl� from and sccurcd b� a first licn on and plcdgc ofthc Rc� cnucs and ccrtain othcr monc� s and sccuritics hcld b� thc Trustcc as pro� idcd in thc Indcnturc. All of thc Bonds arc cquall� sccurcd b� a plcdgc of. and chargc and licn upon. all of thc Rc� cnucs and such othcr monc� s and sccuritics. and thc Rc� cnucs and such othcr monc� s and sccuritics constitutc a tnist fiind for thc sccurit� and pa� mcnt of thc principal of and intcrest on thc Bonds. Thc fiill faith and crcdit of thc Authorit� is not plcdgcd for thc pa� mcnt of thc principal of or intcrest or prcmium (if am ) on thc Bonds. Thc Bonds arc not sccurcd b� a Icgal or cquitablc plcdgc of. or chargc. licn or cncumbrancc upon. am of thc propert� of thc Authorit� or am of its incomc or rcccipts. c�ccpt thc Rc� cnucs and such othcr monc� s and sccuritics as pro� idcd in thc Indcnturc. Thc Scrics 2006B Bonds ha� c bccn issucd for thc purposc of making a loan (thc "Scrics 2006B Loan��) to thc Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Agcnc� ��) to financc ccrtain public capital impro� cmcnts «ith respcct to a rcdc� clopmcnt projcct kno« n and dcsignatcd as Projcct Arca No. 2. Thc Scrics 2006B Loan has bccn madc b� thc Authorit� to thc Agcnc� pursuant to a Projcct Arca No. 2 Loan Agrccmcnt (2006 Scnior Loans). datcd as of Jul� I. 2006 (thc "Loan Agrccmcnt��). b� and among thc Agcnc�. thc Authorit� and thc Trustcc. Thc Scrics 2006B Bonds maturing on or aftcr August I. 20 are subjcct to rcdcmption prior to thcir respccti� c maturit� datcs as a«holc. or in part among maturitics as dcsignatcd b� thc Authorit� and b� lot «ithin a maturit�. from prcpa� mcnts of thc Scrics 2006B Loan madc at thc option of thc Agcnc� pursuant to thc Loan Agrccmcnt. on am August I or Fcbruar� I on or aftcr August I. 20 . at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc Accrctcd Valuc of thc callcd Scrics 2006B Bonds on thc datc fi�cd for rcdcmption): Rcdcmution Datcs Rcdcmution Pricc August I. 20_ and Fcbruar� I. 20_ '%� August I. 20_ and Fcbruar� I. 20_ August I. 20_ and thcrcaftcr P6—Ic �2. I c�;;\x72; ; I. x B-2 Thc Trustcc on bchalf and at thc c�pcnsc of thc Authorit� shall mail (b� first class mail) noticc of am rcdcmption to thc respccti� c o« ncrs of am Scrics 2006B Bonds dcsignatcd for rcdcmption. at thcir respccti� c addresscs appcaring on thc rcgistration books maintaincd b� thc Trustcc. and b� such mcans as acccptablc to thc follo« ing institutions. to thc Sccuritics Dcpositorics and to onc or morc Information Scr� iccs. at Icast �0 but not morc than 60 da� s prior to thc rcdcmption datc: pro� idcd. ho« c� cr. that ncithcr failurc to rccci� c am such noticc so mailcd nor am dcfcct thcrcin shall affcct thc � alidit� of thc procccdings for thc rcdcmption of such Scrics 2006B Bonds or thc ccssation of thc accrual of intcrest thcrcon. Such noticc shall statc thc datc of thc noticc. thc rcdcmption datc. thc rcdcmption placc and thc rcdcmption pricc and shall dcsignatc thc CUSIP numbcrs. thc scrial numbcrs of cach maturit� or maturitics (c�ccpt that if thc c� cnt of rcdcmption is of all of thc Scrics 2006B Bonds of such maturit� or maturitics in «holc. thc Trustcc shall dcsignatc such maturitics or thc maturit� in «holc «ithout rcfcrcncing cach indi� idual numbcr) of thc Scrics 2006B Bonds to bc rcdccmcd. and shall rcquirc that such Scrics 2006B Bonds bc thcn surrcndcrcd at thc Tnist Officc for rcdcmption at thc rcdcmption pricc. gi� ing noticc also that fiirthcr intcrest on such Scrics 2006B Bonds «ill not accruc from and aftcr thc rcdcmption datc. Subjcct to thc limitations and upon pa� mcnt of thc chargcs. if am. pro� idcd in thc Indcnturc. this Scrics 2006B Bond ma� bc c�changcd at thc Tnist Officc for a likc aggrcgatc Maturit� Amount and maturit� of fiill� rcgistcrcd Scrics 2006B Bonds of othcr authorizcd dcnominations. This Scrics 2006B Bond is transfcrablc b� thc Rcgistcrcd O« ncn c�rcof. in person or b� thc Rcgistcrcd O«ncr�s attornc� dul� authorizcd in «riting. at thc Trust Officc. but onl� in thc manncr. subjcct to thc limitations and upon pa� mcnt of thc chargcs pro� idcd in thc Indcnturc. and upon surrcndcr and canccllation of this Scrics 2006B Bond. Upon such transfcr a nc« fiill� rcgistcrcd Scrics 2006B Bond or Scrics 2006B Bonds. of authorizcd dcnomination or dcnominations. for thc samc aggrcgatc Maturit� Amount and of thc samc maturit� «ill bc issucd to thc transfcrcc in c�changc thcrcfor. Thc Trustcc shall not bc rcquircd to rcgistcr thc transfcr or c�changc of am Scrics 2006B Bond during thc I�- da� period prcccding thc scicction of Scrics 2006B Bonds for rcdcmption or am Scrics 2006B Bond scicctcd for rcdcmption. Thc Authorit� and thc Trustcc ma� trcat thc Rcgistcrcd O« ncn c�rcof as thc absolutc o« ncn c�rcof for all purposcs. and thc Authorit� and thc Trustcc shall not bc affcctcd b� am noticc to thc contran . Thc Indcnturc and thc rights and obligations of thc Authorit� and of thc o« ncrs of thc Scrics 2006B Bonds and of thc Trustcc ma� bc modificd or a�ncndcd from timc to timc and at am timc in thc manncr. to thc c�tcnt. and upon thc tcrms pro� idcd in thc Indcnturc: pro� idcd that no such modification or amcndmcnt shall (a) c�tcnd thc maturit� of or rcducc thc intcrest ratc on am Scrics 2006B Bond or othcn� isc altcr or impair thc obligation of thc Authorit� to pa� thc principal. intcrest or prcmiums at thc timc and placc and at thc ratc and in thc currcnc� pro� idcd thcrcin of am Scrics 2006B Bond «ithout thc c�press «rittcn conscnt of thc O« ncr of such Scrics 2006B Bond. (b) rcducc thc perccntagc of Scrics 2006B Bonds rcquircd for thc «rittcn conscnt to am such amcndmcnt or modification. or (c) «ithout its «rittcn conscnt thcrcto. modif� am of thc rights or obligations of thc Trustcc. all as morc fiill� sct forth in thc Indcnturc. - - - It is hcrcb� ccrtificd that all things. conditions and acts rcquircd to c�ist. to ha� c happcncd and to ha� c bccn performcd prcccdcnt to and in thc issuancc of this Scrics 2006B Bond do c�ist. ha� c happcncd and ha� c bccn performcd in duc timc. form and manncr as rcquircd b� thc Constitution and statutcs of thc Statc of California and b� thc Act and thc amount of this Scrics 2006B Bond. togcthcr «ith all othcr indcbtcdncss of thc Authorit�. docs not c�cccd am limit prescribcd b� thc Constitution or statutcs of thc Statc of California or b� thc Act. P6—Ic �2. I c�;;\x72; ; I. x B— � This Scrics 2006B Bond shall not bc cntiticd to am bcncfit undcr thc Indcnturc. or bccomc � alid or obligaton for am purposc. until thc ccrtificatc of authcntication hcrcon shall ha� c bccn signcd b� thc Trustcc. IN WITNESS WHEREOF. thc Authorit� has causcd this Scrics 2006B Bond to bc c�ccutcd in its namc and on its bchalf b� thc manual or facsimilc signatures of its Presidcnt and Sccrctar� all as of thc Original Issuc Datc idcntificd abo� c. PALM DESERT FINANCING AUTHORITY : Attcst: Sccrctar� STATEMENT OF INSURANCE �to comc� Presidcnt P6—Ic �2. I c�;;\x72; ; I. x B—�4 �FORM OF TRUSTEE�S CERTIFICATE OF AUTHENTICATION� This is onc of thc Scrics 2006B Bonds dcscribcd in thc «ithin-mcntioncd Indcnturc and registcrcd on thc Bond Rcgistration Books. WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc Datc: : Authorizcd Signator� ----------------------------------- ----------------------------------- �FORM OF ASSIGNMENT� For � aluc rccci� cd thc undcrsigncd do(cs) hcrcb� scll. assign and transfcr unto «hosc taz idcntification numbcr is . thc «ithin-mcntioncd registcrcd Scrics 2006B Bond and hcrcb� irrc� ocabl� constitutc(s) and appoint(s) attornc� to transfcr thc samc on thc books of thc Trustcc «ith fiill po« cr of substitution in thc prcmiscs. Datcd: Signaturc guarantccd: NOTE: Signaturc(s) must bc guarantccd b� a mcmbcr of an institution «hich is a participant in thc Sccuritics Transfcr Agcnt Mcdallion Program (STAMP) or othcr similar program. ---------------------------------------- ---------------------------------------- NOTE: Thc signaturc(s) on this Assignmcnt must correspond «ith thc namc(s) as «rittcn on thc facc of thc «ithin Scrics 2006B Bond in c� cr� particular «ithout altcration or cnlargcmcnt or am changc «hatsoc� cr. PG—Icl2. I clii\872i ; I.8 B—� EXHIBIT A �FORM OF SERIES 2006C BOND� Unlcss this ccrtificatc is prescntcd b� an authorizcd represcntati� c of Thc Dcpositor� Trust Compam. a Nc« York corporation ("DTC��). to thc Authorit� or its agcnt for rcgistration of transfcr. c�changc. or pa� mcnt. and am ccrtificatc issucd is rcgistcrcd in thc namc of Ccdc c�. Co. or in such othcr namc as is rcqucstcd b� an authorizcd represcntati� c of DTC (and am pa� mcnt is madc to Ccdc c�. Co. or to such othcr cntit� as is rcqucstcd b� an authorizcd represcntati� c of DTC). ANY TRANSFER. PLEDGE. OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as thc rcgistcrcd o« ncn c�rcof. Ccdc c�. Co.. has an intcrest hcrcin. No. � PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE BOND (PROJECT AREA NO. 2) 2006 SERIES C RATE OF INTEREST MATURITY DATE ORIGINAL ISSUE DATE CUSIP August I. 20 REGISTERED OWNER: CEDE c�'. CO. PRINCIPAL AMOUNT: Thc PALM DESERT FINANCING AUTHORITY. a joint po«crs authorit� organizcd and c�isting undcr thc la« s of thc Statc of California (thc "Authorit� ��). for � aluc rccci� cd. hcrcb� promiscs to pa� (but onl� out of thc Rc� cnucs. as dcfincd in thc Indcnturc hcrcinaftcr rcfcrrcd to. and ccrtain othcr monc� s) to thc Rcgistcrcd O« ncr idcntificd abo� c or rcgistcrcd assigns (thc "Rcgistcrcd O« ncr'�). on thc Maturit� Datc idcntificd abo� c or am carlicr rcdcmption datc. thc Principal Amount idcntificd abo� c in la«fiil monc� of thc Unitcd Statcs of Amcrica: and to pa� intcrest thcrcon at thc Ratc of Intcrest idcntificd abo� c in likc monc� from thc Intcrest Pa� mcnt Datc (as hcrcinaftcr dcfincd) nc�t prcccding thc datc of authcntication of this Scrics 2006C Bond (unlcss this Scrics 2006C Bond is authcnticatcd on or bcforc an Intcrest Pa� mcnt Datc and aftcr thc fiftccnth calcndar da� of thc month prcccding such Intcrest Pa� mcnt Datc. in «hich c� cnt it shall bcar intcrest from such Intcrest Pa� mcnt Datc. or unlcss this Scrics 2006C Bond is authcnticatcd on or prior to Jul� I�. 2006. in «hich c� cnt it shall bcar intcrest from thc Original Issuc Datc idcntificd abo� c: uro� idcd. ho« c� cr. that if. at thc timc of authcntication of this Scrics 2006C Bond. intcrest is in dcfault on this Scrics 2006C Bond. this Scrics 2006C Bond shall bcar intcrest from thc Intcrest Pa� mcnt Datc to «hich intcrest hcrcon has prc� iousl� bccn paid or madc a� ailablc for pa� mcnt). pa�ablc scmiannuall� on Fcbruar� I and August I in cach �car. commcncing August I. 2006 (thc "Intcrest Pa� mcnt Datcs��) until pa� mcnt of such Principal Amount in fiill. Thc Principal Amount hcrcof is pa� ablc upon prescntation hcrcof upon maturit� or carlicr rcdcmption at thc corporatc trust officc of P6—Ic �2. I c�;;\x72; ; I. x C— I Wclls Fargo Bank. National Association (thc "Trustcc��) in Los Angcics. California or such othcr location as thc Trustcc shall dcsignatc (thc "Trust Officc��). Intcrest hcrcon is pa� ablc b� chcck or draft of thc Trustcc mailcd b� first class mail on cach Intcrest Pa� mcnt Datc to thc Rcgistcrcd O« ncn c�rcof at thc address of thc Rcgistcrcd O« ncr as it appcars on thc rcgistration books of thc Trustcc as of thc fiftccnth calcndar da� of thc month prcccding such Intcrest Pa� mcnt Datc (c�ccpt in thc casc of a Rcgistcrcd O« ncr of at Icast � I.000.000 in aggrcgatc principal amount. such pa� mcnt ma� . at such Rcgistcrcd O« ncr�s option. bc madc b� «irc transfcr of immcdiatcl� a� ailablc fiinds in accordancc «ith «rittcn instructions pro� idcd b� such Rcgistcrcd O« ncr prior to thc fiftccnth calcndar da� of thc month prcccding such Intcrest Pa� mcnt Datc). This Scrics 2006C Bond is onc of a dul� authorizcd scrics of bonds of thc Authorit� dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics C (thc "Scrics 2006C Bonds��). limitcd in principal amount of `f . Thc Authorit� has issucd t«o othcr scrics of bonds concurrcntl� «ith thc issuancc of thc Scrics 2006C Bonds. dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics A. limitcd in initial principal amount to `f (thc "Scrics 2006A Bonds��) and thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics B. limitcd in initial principal amount to `f (thc "Scrics 2006B Bonds.�� and collccti� cl� «ith thc Scrics 2006A Bonds and thc Scrics 2006C Bonds. thc "Bonds��). Thc Scrics 2006A Bonds. thc Scrics 2006B Bonds and thc Scrics 2006C Bonds are sccurcd b� an Indcnturc of Trust. datcd as of Jul� I. 2006 (thc "Indcnturc��). b� and bct«ccn thc Authorit� and thc Trustcc. Unlcss thc contc�t cicarl� rcquires othcn� isc. capitalizcd tcrms uscd but not dcfincd hcrcin ha� c thc mcanings ascribcd to thcm in thc Indcnturc. Rcfcrcncc is hcrcb� madc to thc Indcnturc and all indcntures supplcmcntal thcrcto for a dcscription of thc rights thcrcundcr of thc o« ncrs of thc Bonds. of thc naturc and c�tcnt of thc Rc� cnucs. of thc rights. dutics and immunitics of thc Tnistcc and of thc rights and obligations of thc Authorit� thcrcundcr: and all of thc tcrms of thc Indcnturc arc hcrcb� incorporatcd hcrcin and constitutc a contract bct« ccn thc Authorit� and thc Rcgistcrcd O« ncn c�rcof. and to all of thc pro� isions of «hich Indcnturc thc Rcgistcrcd O« ncn c�rcof. b� acccptancc hcrcof. asscnts and agrccs. Thc Bonds arc authorizcd to bc issucd pursuant to thc pro� isions of thc Marks-Roos Local Bond Pooling Act of 198�. constituting Articic �4. Chaptcr �. Di� ision 7. Titic I of thc Go� crnmcnt Codc of thc Statc of California (thc "Act��). Thc Bonds are spccial obligations of thc Authorit� and. as and to thc c�tcnt sct forth in thc Indcnturc. arc pa�ablc solcl� from and sccurcd b� a first licn on and plcdgc ofthc Rc� cnucs and ccrtain othcr monc� s and sccuritics hcld b� thc Trustcc as pro� idcd in thc Indcnturc. All of thc Bonds arc cquall� sccurcd b� a plcdgc of. and chargc and licn upon. all of thc Rc� cnucs and such othcr monc� s and sccuritics. and thc Rc� cnucs and such othcr monc� s and sccuritics constitutc a tnist fiind for thc sccurit� and pa� mcnt of thc principal of and intcrest on thc Bonds. Thc fiill faith and crcdit of thc Authorit� is not plcdgcd for thc pa� mcnt of thc principal of or intcrest or prcmium (if am ) on thc Bonds. Thc Bonds arc not sccurcd b� a Icgal or cquitablc plcdgc of. or chargc. licn or cncumbrancc upon. am of thc propert� of thc Authorit� or am of its incomc or rcccipts. c�ccpt thc Rc� cnucs and such othcr monc� s and sccuritics as pro� idcd in thc Indcnturc. Thc Scrics 2006C Bonds ha� c bccn issucd for thc purposc of making a loan (thc "Scrics 2006C Loan��) to thc Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Agcnc� ��) to financc ccrtain public capital impro� cmcnts «ith respcct to a rcdc� clopmcnt projcct kno« n and dcsignatcd as Projcct Arca No. 2. Thc Scrics 2006C Loan has bccn madc b� thc Authorit� to thc Agcnc� pursuant to a Projcct Arca No. 2 Loan Agrccmcnt (2006 Scnior Loans). datcd as of Jul� I. 2006 (thc "Loan Agrccmcnt��). b� and among thc Agcnc�. thc Authorit� and thc Trustcc. P6—Ic �2. I c�;;\x72; ; I. x C-2 Thc Scrics 2006C Bonds are subjcct to c�traordinar� rcdcmption. as a«holc or in part among maturitics and b� lot «ithin cach maturit�. on August I. 20 . at a rcdcmption pricc cqual to perccnt of thc principal amount of thc Scrics 2006C Bonds to bc rcdccmcd as morc fiill� sct forth in thc Indcnturc. Thc Scrics 2006C Bonds maturing on or aftcr August I. 20 are subjcct to rcdcmption prior to thcir respccti� c maturit� datcs as a«holc. or in part among maturitics as dcsignatcd b� thc Authorit� and b� lot «ithin a maturit�. from prcpa� mcnts of thc Scrics 2006C Loan madc at thc option of thc Agcnc� pursuant to thc Loan Agrccmcnt. on am Intcrest Pa� mcnt Datc on or aftcr August I. 20_. at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc principal amount of Scrics 2006C Bonds to bc rcdccmcd). plus accrucd intcrest thcrcon to thc datc of rcdcmption: Rcdcmution Datcs Rcdcmution Pricc August I. 20_ and Fcbruar� I. 20_ '%� August I. 20_ and Fcbruar� I. 20_ August I. 20_ and thcrcaftcr Thc Scrics 2006C Bonds maturing on August I. 20 and August I. 20 arc also subjcct to mandator� sinking fiind redcmption b� lot. on August I in cach � car commcncing August I. 20 and August I. 20 . respccti� cl�. at a rcdcmption pricc cqual to thc principal amount thcrcof to bc rcdccmcd. «ithout prcmium. plus accrucd intcrest to thc datc of rcdcmption. in thc aggrcgatc respccti� c principal amounts sct forth in thc Indcnturc: pro� idcd. ho«c� cr. that in licu of rcdcmption thcrcof. such Scrics 2006C Bonds ma� bc purchascd b� thc Agcnc� pursuant to thc Loan Agrccmcnt. Thc Trustcc on bchalf and at thc c�pcnsc of thc Authorit� shall mail (b� first class mail) noticc of am rcdcmption to thc respccti� c o« ncrs of am Scrics 2006C Bonds dcsignatcd for rcdcmption. at thcir respccti� c addresscs appcaring on thc rcgistration books maintaincd b� thc Trustcc. and b� such mcans as acccptablc to thc follo« ing institutions. to thc Sccuritics Dcpositorics and to onc or morc Information Scr� iccs. at Icast �0 but not morc than 60 da� s prior to thc rcdcmption datc: pro� idcd. ho« c� cr. that ncithcr failurc to rccci� c am such noticc so mailcd nor am dcfcct thcrcin shall affcct thc � alidit� of thc procccdings for thc rcdcmption of such Scrics 2006C Bonds or thc ccssation of thc accrual of intcrest thcrcon. Such noticc shall statc thc datc of thc noticc. thc rcdcmption datc. thc rcdcmption placc and thc rcdcmption pricc and shall dcsignatc thc CUSIP numbcrs. thc scrial numbcrs of cach maturit� or maturitics (c�ccpt that if thc c� cnt of rcdcmption is of all of thc Scrics 2006C Bonds of such maturit� or maturitics in «holc. thc Trustcc shall dcsignatc such maturitics or thc maturit� in «holc «ithout rcfcrcncing cach indi� idual numbcr) of thc Scrics 2006C Bonds to bc rcdccmcd. and shall rcquirc that such Scrics 2006C Bonds bc thcn surrcndcrcd at thc Tnist Officc for rcdcmption at thc rcdcmption pricc. gi� ing noticc also that fiirthcr intcrest on such Scrics 2006C Bonds «ill not accruc from and aftcr thc rcdcmption datc. Subjcct to thc limitations and upon pa� mcnt of thc chargcs. if am. pro� idcd in thc Indcnturc. this Scrics 2006C Bond ma� bc c�changcd at thc Tnist Officc for a likc aggrcgatc Principal Amount and maturit� of fiill� rcgistcrcd Scrics 2006C Bonds of othcr authorizcd dcnominations. This Scrics 2006C Bond is transfcrablc b� thc Rcgistcrcd O« ncn c�rcof. in person or b� thc Rcgistcrcd O«ncr�s attornc� dul� authorizcd in «riting. at thc Trust Officc. but onl� in thc manncr. subjcct to thc limitations and upon pa� mcnt of thc chargcs pro� idcd in thc Indcnturc. and upon surrcndcr and canccllation of this Scrics 2006C Bond. Upon such transfcr a nc« fiill� rcgistcrcd Scrics 2006C P6—Ic �2. I c�;;\x72; ; I. x C— � Bond or Scrics 2006C Bonds. of authorizcd dcnomination or dcnominations. for thc samc aggrcgatc principal amount and of thc samc maturit� «ill bc issucd to thc transfcrcc in c�changc thcrcfor. Thc Trustcc shall not bc rcquircd to rcgistcr thc transfcr or c�changc of am Scrics 2006C Bond during thc I�- da� period prcccding thc scicction of Scrics 2006C Bonds for rcdcmption or am Scrics 2006C Bond scicctcd for rcdcmption. Thc Authorit� and thc Trustcc ma� trcat thc Rcgistcrcd O« ncn c�rcof as thc absolutc o« ncn c�rcof for all purposcs. and thc Authorit� and thc Trustcc shall not bc affcctcd b� am noticc to thc contran . Thc Indcnturc and thc rights and obligations of thc Authorit� and of thc o« ncrs of thc Scrics 2006C Bonds and of thc Trustcc ma� bc modificd or a�ncndcd from timc to timc and at am timc in thc manncr. to thc c�tcnt. and upon thc tcrms pro� idcd in thc Indcnturc: pro� idcd that no such modification or amcndmcnt shall (a) c�tcnd thc maturit� of or rcducc thc intcrest ratc on am Scrics 2006C Bond or othcn� isc altcr or impair thc obligation of thc Authorit� to pa� thc principal. intcrest or prcmiums at thc timc and placc and at thc ratc and in thc currcnc� pro� idcd thcrcin of am Scrics 2006C Bond «ithout thc c�press «rittcn conscnt of thc O« ncr of such Scrics 2006C Bond. (b) rcducc thc perccntagc of Scrics 2006C Bonds rcquircd for thc «rittcn conscnt to am such amcndmcnt or modification. or (c) «ithout its «rittcn conscnt thcrcto. modif� am of thc rights or obligations of thc Trustcc. all as morc fiill� sct forth in thc Indcnturc. - - - It is hcrcb� ccrtificd that all things. conditions and acts rcquircd to c�ist. to ha� c happcncd and to ha� c bccn performcd prcccdcnt to and in thc issuancc of this Scrics 2006C Bond do c�ist. ha� c happcncd and ha� c bccn performcd in duc timc. form and manncr as rcquircd b� thc Constitution and statutcs of thc Statc of California and b� thc Act and thc amount of this Scrics 2006C Bond. togcthcr «ith all othcr indcbtcdncss of thc Authorit�. docs not c�cccd am limit prescribcd b� thc Constitution or statutcs of thc Statc of California or b� thc Act. This Scrics 2006C Bond shall not bc cntiticd to am bcncfit undcr thc Indcnturc. or bccomc � alid or obligaton for am purposc. until thc ccrtificatc of authcntication hcrcon shall ha� c bccn signcd b� thc Trustcc. P6—Ic �2. I c�;;\x72; ; I. x C—� IN WITNESS WHEREOF. thc Authorit� has causcd this Scrics 2006C Bond to bc c�ccutcd in its namc and on its bchalf b� thc manual or facsimilc signatures of its Presidcnt and Sccrctar� all as of thc Original Issuc Datc idcntificd abo� c. PALM DESERT FINANCING AUTHORITY : Attcst: Sccrctar� STATEMENT OF INSURANCE �to comc� Presidcnt P6—Ic �2. I c�;;\x72; ; I. x C—� �FORM OF TRUSTEE�S CERTIFICATE OF AUTHENTICATION� This is onc of thc Scrics 2006C Bonds dcscribcd in thc �� ithin-mcntioncd Indcnturc and registcrcd on thc Bond Rcgistration Books. WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc Datc: : Authorizcd Signator� �FORM OF ASSIGNMENT� For � aluc rccci� cd thc undcrsigncd do(cs) hcrcb� scll. assign and transfcr unto «hosc tas idcntification numbcr is . thc «ithin-mcntioncd registcrcd Scrics 2006C Bond and hcrcb� irrc� ocabl� constitutc(s) and appoint(s) attornc� to transfcr thc samc on thc books of thc Trustcc «ith fiill po« cr of substitution in thc prcmiscs. Datcd: Signaturc guarantccd: NOTE: Thc signaturc(s) on this Assignmcnt must correspond «ith thc namc(s) as «rittcn on thc facc of thc «ithin Scrics 2006C Bond in c� cr� particular «ithout altcration or cnlargcmcnt or am changc «hatsoc� cr. NOTE: Signaturc(s) must bc guarantccd b� a mcmbcr of an institution «hich is a participant in thc Sccuritics Transfcr Agcnt Mcdallion Program (STAMP) or othcr similar program. ---------------- ---------------- PG—Ic l2. I c li i\872 i; I.8 C-6 Projcct Arca No. 2 Loan Agrccmcnt (2006 Scnior Loans) «ith rcfcrcncc to � Palm Dcscrt Financing Authorit� Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2) 2006 Scrics A � Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2) 2006 Scrics B Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2) 2006 Scrics C P(,—Ic�2.lc��\x72��x.x RWG DRAFT: �/22/200G TABLE OF CONTENTS ARTICLE I DEFINITIONS ................ Scction I . I . Dcfinitions ............... Scction I.2. Rulcs of Construction ARTICLE II THE LOANS: APPLICATION OF LOAN PROCEEDS: PARITY DEBT Scction 2. I . Authorization ................................................................................... Scction 2.2. Disburscmcnt and Application of Loan Procccds .............................. Scction 2.;. Rcpa� mcnt of Loans ......................................................................... Scction 2.�4. Optional Prcpa� mcnt ........................................................................ Scction2.�. Rcscr� c Fund ................................................................................... Scction 2.6. Costs of Issuancc Fund ..................................................................... Scction 2.7. Spccial Escro« Fund ........................................................................ Scction2.8. Projcct Fund ..................................................................................... Scction2.9. Parit� Dcbt ....................................................................................... Scction 2.10. Issuancc of Subordinatc Dcbt .......................................................... Scction 2. I I. Validit� of Loans ............................................................................ ARTICLE III PLEDGE AND APPLICATION OF TAX REVENUES Scction ;. I. Plcdgc of Ta� Rc� cnucs ........................................ Scction �.2. Spccial Fund: Dcposit of Ta� Rc� cnucs ................. Scction �. �. Transfcr of Ta� Rc� cnucs From Spccial Fund ....... Scction �.�4. Im cstmcnt of Monc� s: Valuation of In� cstmcnts... ARTICLE IV OTHER COVENANTS OF THE AGENCY ..... Scction �4. I. Punctual Pa� mcnt: E�tcnsion of Pa� mcnts. Scction �4.2. Limitation on Additional Indcbtcdncss ...... Scction �4. �. Pa� mcnt of Claims .................................... Scction �4.�4. Books and Accounts: Financial Statcmcnts Scction �4.�. Protcction of Sccurit� and Rights ............... Scction �4.6. Pa� mcnts of Ta�cs and Othcr Chargcs ....... Scction �4.7. Ta�ation of Lcascd Propert� ...................... Scction �4.8. Disposition of Propert� .............................. Scction �4.9. Maintcnancc of Ta� Rc� cnucs ................... Scction �4.10. Pa� mcnt of E�pcnscs: Indcmnification .... Scction �4. I I. Ta� Co� cnants ......................................... Scction �4.12. Rcdc� clopmcnt of Projcct Arca ............... Scction �4. I�. Lo« and Modcratc Incomc Housing Fund Scction �4. I�4. Annual Rc� ic« of Ta� Rc� cnucs ............. Scction �4. I �. Furthcr Assuranccs .................................. ARTICLE V EVENTS OF DEFAULT AND REMEDIES .............. Scction �. I. E� cnts of Dcfault and Acccicration of Maturitics Scction �.2. Application of Funds Upon Dcfault .................... Scction �.;. No Wai� cr .......................................................... Scction �.�4. Agrccmcnt to Pa� Attornc� s' Fccs and E�pcnscs Scction �.�. Rcmcdics Not E�clusi�c ..................................... Scction �.6. Control of Rcmcdics b� Insurcr .......................... P� 2 2 i .� .� .6 .7 .x .9 10 10 II 12 I� I� I� I� I� I� I �4 I� I� I� I� I� I� 16 16 16 16 16 17 ix ix ix ix 19 19 20 20 20 21 21 P6—Ic �2. I c�;;\x72; ; x. x ARTICLE VI MISCELLANEOUS ......................................................................... Scction 6. I. Bcncfits Limitcd to Partics ........................................................ Scction 6.2. Succcssor is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor Scction 6. �. Dischargc of Loan Agrccmcnt ................................................... Scction 6.�4. Amcndmcnt ............................................................................... Scction 6.�. Wai� cr of Pcrsonal Liabilit� ...................................................... Scction 6.6. Pa� mcnt on Busincss Da� s ........................................................ Scction6.7. Noticcs ...................................................................................... Scction6.8. Surct� Bond .............................................................................. Scction6.9. Partialln�alidit� ........................................................................ Scction 6.10. Articic and Scction Hcadings and Rcfcrcnccs Scction 6. I I. E�ccution of Countcrparts ............................ Scction 6.12. Go� crning La« ............................................. Scction 6. I�. Thc Trustcc .................................................. EXHIBIT A— Schcdulc of Scrics 2006A Loan Pa�mcnts EXHIBIT B— Schcdulc of Scrics 2006B Loan Pa� mcnts EXHIBIT C— Schcdulc of Scrics 2006C Loan Pa�mcnts 21 21 21 21 22 22 22 22 22 22 22 2� 2� 2� ii P6—Ic �2. I c�;;\x72; ; x. x PROJECT AREA NO. 2 LOAN AGREEMENT (2006 Scnior Loans) This Projcct Arca No. 2 Loan Agrccmcnt (2006 Scnior Loans) (this "Loan Agrccmcnt��) is madc and cntcrcd into as of Jul� I. 2006. b� and among thc Palm Dcscrt Rcdc� clopmcnt Agcnc�. a public bod�. corporatc and politic. dul� organizcd and �alidl� c�isting undcr thc la«s ofthc Statc of California (thc "Agcnc��). thc Palm Dcscrt Financing Authorit�. a joint po«crs authorit� dul� organizcd and � alidl� c�isting undcr thc la« s of thc Statc of California (thc "Authorit� ��). and Wclls Fargo Bank. National Association. a national banking association dul� organizcd and �alidl� c�isting undcr thc la«s of thc Unitcd Statcs of Amcrica (thc "Trustcc��). Rccitals A. Thc Agcnc� is a rcdc� clopmcnt agcnc�. a public bod�. corporatc and politic. dul� crcatcd. cstablishcd and authorizcd to transact busincss and c�crcisc its po«crs. all undcr and pursuant to thc Rcdc� clopmcnt La«. and thc po«crs of thc Agcnc� includc thc po«cr to borro« monc� for am of its corporatc purposcs. B. A Rcdc� clopmcnt Plan for Projcct Arca No. 2 of thc Agcnc� (thc "Projcct Arca��) has bccn dul� appro� cd and adoptcd b� thc Cit� . C. Thc Agcnc� has dctcrmincd to incur thrcc loans (thc "Loans��) hcrcundcr for thc objcct and purposc of assisting in thc financing and refinancing of public capital impro� cmcnts and rcdc� clopmcnt acti� itics for thc bcncfit of thc Projcct Arca. pursuant to thc Rcdc� clopmcnt La« and thc Marks-Roos Local Bond Pooling Act of 198�. Articic �4. Chaptcr �. Di� ision 7. Titic I of thc Go� crnmcnt Codc of thc Statc of California (thc "Bond La« ��). D. Concurrcntl� «ith thc c�ccution and dcli� cr� of this Loan Agrccmcnt. thc Authorit� has issucd its Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics A. in thc principal amount of � . its Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics B. in thc initial principal amount of � . and its Ta� Allocation Rc� cnuc Bonds. 2006 Scrics C. in thc principal amount of `f (collccti� cl�. thc "Bonds"). all pursuant to thc Bond La« and an Indcnturc of Trust. datcd as of Jul� I. 2006 (thc "Indcnturc��). b� and bct« ccn thc Authorit� and thc Trustcc. for thc purposc of pro� iding fiinds to makc thc Loans to thc Agcnc� - E. Thc Authorit� has found and dctcrmincd that thcrc «ill bc significant public bcncfits accruing from such borro« ing. consisting of dcmonstrablc sa� ings in cffccti� c intcrest ratcs and financing costs associatcd «ith thc issuancc of thc Bonds pursuant to thc Bond La«. F. Thc Agcnc� and thc Authorit� ha� c dctcrmincd that all acts and procccdings rcquircd b� la« ncccssar� to makc this Loan Agrccmcnt. «hcn c�ccutcd b� thc Agcnc�. thc Authorit� and Trustcc. thc �alid. binding and Icgal obligation ofthc Agcnc� and thc Authorit�. and to constitutc this Loan Agrccmcnt a� alid and binding agrccmcnt for thc uscs and purposcs hcrcin sct forth in accordancc «ith its tcrms. ha� c bccn donc and takcn. and thc c�ccution and dcli� cr� of this Loan Agrccmcnt ha� c bccn in all respccts dul� authorizcd. NOW. THEREFORE. in considcration of thc prcmiscs and thc mutual agrccmcnts hcrcin containcd. thc partics hcrcto do hcrcb� agrcc as follo«s: P6—Ic �2. I c�;;\x72; ; x. x 1 ARTICLE I DEFINITIONS Scction I. I. Dcfinitions. Unlcss thc contc�t cicarl� rcquires or unlcss othcn� isc dcfincd hcrcin. thc capitalizcd tcrms in this Loan Agrccmcnt shall ha� c thc respccti� c mcanings «hich such tcrms arc gi� cn in thc Indcnturc. In addition. thc follo« ing tcrms dcfincd in this Scction I. I shall. for all purposcs of this Loan Agrccmcnt. ha� c thc respccti� c mcanings hcrcin spccificd. "Additional Rc� cnucs�� mcans. as of thc datc of calculation. thc amount of Ta� Rc� cnucs «hich. as sho« n in thc Rcport of an Indcpcndcnt Rcdc� clopmcnt Consultant. arc cstimatcd to bc rccci� ablc b� thc Agcnc� «ithin thc Fiscal Ycar follo« ing thc Fiscal Ycar in «hich such calculation is madc as a result of incrcascs in thc asscsscd � aluation of ta�ablc propert� in thc Projcct Arca duc to cithcr (i) construction «hich has bccn complctcd but «hich is not thcn rcflcctcd on thc ta� rolls. or (ii) transfcr of o« ncrship or am othcr intcrest in rcal propert� «hich has bccn rccordcd but «hich is not thcn rcflcctcd on thc ta� rolls. For purposcs of this dcfinition. thc tcrm "incrcascs in thc asscsscd � aluation�� mcans thc amount b� «hich thc asscsscd � aluation of ta�ablc propert� in thc Projcct Arca is cstimatcd to incrcasc abo� c thc asscsscd � aluation of ta�ablc propert� in thc Projcct Arca (as rcportcd b� an appropriatc official of thc Count� ) as of thc datc on «hich such calculation is madc. Bonds. Bonds�� mcans thc Scrics 2006A Bonds. thc Scrics 2006B Bonds and thc Scrics 2006C "Costs of Issuancc�� mcans all c�pcnscs incurrcd in conncction «ith thc authorization. issuancc. salc and dcli� cr� of thc Bonds and thc making of thc Loans pursuant to this Loan Agrccmcnt. including but not limitcd to all compcnsation. fccs and c�pcnscs (including but not limitcd to fccs and c�pcnscs for Icgal counscl) of thc Authorit� and am trustcc. compcnsation to am financial ad� isors or undcn� ritcrs and thcir counscl. Icgal fccs and c�pcnscs. filing and recording costs. rating agcnc� fccs. crcdit cnhanccmcnt fccs (including insurancc. surct� bonds and Icttcrs of crcdit). costs of prcparation and rcproduction of documcnts and costs of printing. "Costs of Issuancc Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction 2.6. "Dccmcd Escro« Portion�� mcans a portion of thc Scrics 2006C Bonds in thc principal amount cqual to thc balancc in thc Spccial Escro« Fund (not including am monc� dcpositcd in thc Escro« Intcrest Account). "Escro« Fund�� mcans thc fiind b� that namc cstablishcd undcr thc Escro« Agrccmcnt (Projcct Arca No. 2). datcd as of c� cn datc hcrc« ith. b� and among thc Authorit�. thc Agcnc� and Wclls Fargo Bank. National Association. as cscro« agcnt. rclating to thc rcfiinding of thc Authorit� �s rcmaining outstanding Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2) Scrics 199�. "Escro« Intcrest Account�� mcans thc account «ithin thc Spccial Escro« Fund b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction 2.7. "Escro« Rcdcmution Datc�� mcans August I. 20�09�. "E� cnt of Dcfault�� mcans am of thc c� cnts dcscribcd in Scction �. I. P6—Ic �2. I c�;;\x72; ; x. x 2 "Indcnturc�� mcans thc Indcnturc of Trust. datcd as of Jul� I. 2006. b� and bct« ccn thc Authorit� and thc Trustcc. authorizing thc issuancc of thc Bonds. as ma� from timc to timc bc supplcmcntcd. modificd or amcndcd. "Indcucndcnt Rcdc� cloumcnt Consultant�� mcans am consultant or firm of such consultants appointcd b� or acccptablc to thc Agcnc�. a��d «ho. or cach of «hom: (i) is judgcd b� thc Agcnc� to ha� c c�pericncc in mattcrs rclating to thc collcction of Ta� Rc� cnucs or othcr« isc «ith respcct to thc financing of rcdc� clopmcnt projccts: (ii) is in fact indcpcndcnt and not undcr thc domination of thc Agcnc�: (iii) docs not ha� c am substantial intcrest. dircct or indircct. «ith thc Agcnc�. othcr than as original purchascr of am obligations of thc Agcnc� : and (i� ) is not conncctcd «ith thc Agcnc� as an officcr or cmplo� cc of thc Agcnc�. but «ho ma� bc rcgularl� rctaincd to makc rcports to thc Agcnc� . Loan. "Loans�� mcans thc Scrics 2006A Loan. thc Scrics 2006B Loan and thc Scrics 2006C "Loan A�rccmcnt�� mcans this Projcct Arca No. 2 Loan Agrccmcnt (2006 Scnior Loans). as ma� from timc to timc bc amcndcd. modificd or supplcmcntcd. "Ma�imum Annual Dcbt Scr� icc�� mcans. as of thc datc of calculation. thc largcst amount obtaincd b� totaling. for thc currcnt or am fiiturc Bond Ycar. thc sum of (i) thc amount of intcrest pa�ablc on thc Loans and all outstanding Parit� Dcbt in such Bond Ycar. assuming that principal thcrcof is paid as schcdulcd and that am mandator� sinking fiind pa� mcnts arc madc as schcdulcd. and (ii) thc amount of principal pa�ablc on thc Loans and all outstanding Pariri Dcbt in such Bond Ycar. including am principal rcquircd to bc prcpaid b� operation of mandator� sinking fiind pa� mcnts. For purposcs of such calculation. thcre shall bc c�cludcd a pro rata portion of cach installmcnt of principal of am Loan or Parit� Dcbt. togcthcr «ith thc intcrest to accruc thcrcon. in thc c� cnt and to thc c�tcnt that thc procccds of such Loan or Parit� Dcbt arc dcpositcd in an cscro« fiind from «hich amounts ma� not bc rcicascd to thc Agcnc� unlcss thc Ta� Rc� cnucs for thc currcnt Fiscal Ycar. plus at thc option of thc Agcnc� thc Additional Rc� cnucs, mcct thc co� cragc tcst sct forth in Scction 2.9(b). "Parit� Dcbt�� mcans thc 2002 Loan. thc 200 � Loan and am othcr loans. bonds. notcs. ad� anccs. or indcbtcdncss pa� ablc from Ta� Rc� cnucs on a parit� «ith thc Loans. issucd or incurrcd pursuant to and in accordancc «ith thc pro� isions of Scction 2.9. ..Parit� Dcbt Instrumcnt�� mcans thc 2002 Loan Agrccmcnt. thc 200 � Loan Agrccmcnt and am othcr resolution. indcnturc of trust. tnist agrccmcnt or othcr instrumcnt authorizing thc issuancc of am Parit� Dcbt. "Pass-Throu�h A�rccmcnts�� mcans, collccti� cl�. thc agrccmcnts cntcrcd into b� thc Agcnc� on or prior to thc datc hcrcof pursuant to Scction >>�401 of thc Rcdc� clopmcnt La« «ith (i) thc Count� of Ri� crsidc. (ii) thc Coachclla Vallc� Communit� Collcgc District. (iii) thc Coachclla Vallc� Mosquito Abatcmcnt District. (i� ) thc Dcscrt Sands Unificd School District. (� ) thc Palm Springs Unificd School District and (� i) thc Ri� crsidc Count� Superintcndcnt of Schools. "Plan Limitations�� mcans thc limitations containcd or incorporatcd in thc Rcdc� clopmcnt Plan on (i) thc aggrcgatc principal amount of bondcd indcbtcdncss pa� ablc from Ta� Rc� cnucs «hich ma� bc outstanding at am timc. (ii) thc aggrcgatc amount of ta�cs «hich ma� bc di� idcd and allocatcd to thc Agcnc� pursuant to thc Rcdc� clopmcnt Plan. and (iii) thc period of timc for establishing or rcpa� ing loans. ad� anccs and indcbtcdncss pa� ablc from Ta� Rc� cnucs. P6—Ic �2. I c�;;\x72; ; x. x "Proicct Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction 2.8. "Oualificd Rcscr� c Fund Crcdit Instrumcnt�� mcans an irrc� ocablc standb� or dircct-pa� Icttcr of crcdit or surct� bond issucd b� a commcrcial bank or insurancc compam and dcpositcd «ith thc Trustcc pursuant to Scction 2.�. pro� idcd that all of thc follo« ing rcquircmcnts arc mct at thc timc of dcposit «ith thc Trustcc: (i) cithcr (a) thc long-tcrm crcdit rating of such bank is «ithin onc of thc t« o highcst rating catcgorics b� Mood� �s or Sc�.P. or thc claims pa� ing abilit� of such insurancc compam is ratcd «ithin onc of thc t« o highcst rating catcgorics b� Mood� �s or Sc�.P. at thc timc of dcli� cr� of such Icttcr of crcdit or surct� bond. or (b) thc Authorit� shall causc to bc filcd «ith thc Trustcc «rittcn c� idcncc from Mood� �s and Sc�.P that thc dcli� cn of such Icttcr of crcdit or surct� bond «ill not. of itsclf. causc a rcduction or «ithdra«al of am rating thcn assigncd to thc Bonds: (ii) such Icttcr of crcdit or surct� bond has a tcrm of at Icast 12 months: (iii) such Icttcr of crcdit or surct� bond has a statcd amount at Icast cqual to thc portion of thc Rcscr� c Rcquircmcnt «ith respcct to «hich fiinds arc proposcd to bc rcicascd pursuant to Scction 2.�: and (i� ) thc Trustcc is authorizcd pursuant to thc tcrms of such Icttcr of crcdit or surct� bond to dra« thcrcundcr an amount cqual to am dcficicncics «hich ma� c�ist from timc to timc «ith respcct to dcposits rcquircd pursuant to Scction �. �(a). "Rcdc� cloumcnt Fund�� mcans thc Projcct Arca No. 2 Rcdc� clopmcnt Fund. hcrctoforc cstablishcd and hcld b� thc Agcnc�. "Rcdc� cloumcnt Proicct�� mcans thc undcrtaking of thc Agcnc� pursuant to thc Rcdc� clopmcnt Plan and thc Rcdc� clopmcnt La« for thc rcdc� clopmcnt of thc Projcct Arca. "Rcscr� c Fund�� mcans thc "Projcct Arca No. 2 Rcscr� c Fund�� hcld b� thc Trustcc pursuant to Scction 2.�. "Rcscr� c Rcquircmcnt�� mcans thc Icast of (i) Ma�imum Annual Dcbt Scr� icc. (ii) 12� perccnt of a� cragc annual dcbt scr� icc on thc Loans and all outstanding Parit� Dcbt. and (iii) 10 perccnt of thc procccds of thc Loans (i.c.. thc original Principal Amount of thc Bonds) and of thc procccds of am Parit� Dcbt. Thc amount of thc Rcscr� c Rcquircmcnt on am datc is subjcct to confirmation b� thc Authorit� to thc Trustcc upon thc Trustcc�s «rittcn rcqucst. At thc Closing Datc. thc Rcscr� c Rcquircmcnt shall bc � . "Scrics 2006A Bonds�� mcans thc Palm Dcscrt Financing Authorit� Ta� Allocation Rcfiinding Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics A. "Scrics 2006A Loan�� mcans thc loan madc b� thc Authorit� to thc Agcnc� pursuant to Scction 2. I(a) from thc procccds of thc Scrics 2006A Bonds in thc initial principal amount of � . "Scrics 2006B Bonds�� mcans thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics B. "Scrics 2006B Loan�� mcans thc loan madc b� thc Authorit� to thc Agcnc� pursuant to Scction 2. I(b) from thc procccds of thc Scrics 2006B Bonds in thc initial principal amount of � . "Scrics 2006C Bonds�� mcans thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. 2). 2006 Scrics C. P6—Ic �2. I c�;;\x72; ; x. x 4 "Scrics 2006C Loan�� mcans thc loan madc b� thc Authorit� to thc Agcnc� pursuant to Scction 2. I(c) from thc procccds of thc Scrics 2006C Bonds in thc initial principal amount of � . "Succial Fund�� mcans thc fiind b� that namc hcld b� thc Agcnc� pursuant to Scction �.2. "Subordinatc Dcbt�� mcans am loans. ad� anccs or indcbtcdncss issucd or incurrcd b� thc Agcnc� in accordancc «ith thc rcquircmcnts of Scction 2.10. «hich arc cithcr: (i) pa�ablc from. but not sccurcd b� a plcdgc of or licn upon. thc Ta� Rc� cnucs: or (ii) sccurcd b� a plcdgc of or licn upon thc Ta� Rc� cnucs «hich is subordinatc to thc plcdgc of and licn upon thc Ta� Rc� cnucs hcrcundcr for thc sccurit� of thc Loans and am Parit� Dcbt. "Surct� Bond�� mcans thc Qualificd Rcscr� c Fund Crcdit Instrumcnt issucd b� thc Insurcr guarantccing ccrtain pa� mcnts into thc Rcscr� c Fund as pro� idcd thcrcin and subjcct to thc limitations sct forth thcrcin. "Ta� Rc� cnucs�� mcans that portion of thc ta�cs Ic� icd upon ta�ablc propert� in thc Projcct Arca allocatcd and paid into a spccial fiind of thc Agcnc� pursuant to Articic 6 of Chaptcr 6 of thc Rcdc� clopmcnt La« and Scction 16 of Articic XVI of thc California Constitution. c�clusi� c of amounts placcd into thc Lo« and Modcratc Incomc Housing Fund ofthc Agcnc� pursuant to Scctions >;>>�4.2 and >;>>�4. � of thc Rcdc� clopmcnt La«. and c�cluding amounts pa�ablc to affcctcd ta�ing agcncics pursuant to thc Pass-Through Agrccmcnts or pursuant to Scction >;607. � or >;607.7 of thc Rcdc� clopmcnt La« . "200 � Loan�� mcans thc outstanding balancc of thc loan madc b� thc Authorit� to thc Agcnc� pursuant to thc 200 � Loan Agrccmcnt. "200 � Loan A�rccmcnt�� mcans thc Projcct Arca No. 2 Loan Agrccmcnt. datcd as Januar� I. 200 �. b� and bct« ccn thc Authorit� and thc Agcnc� . "2002 Loan�� mcans thc outstanding balancc of thc loan madc b� thc Authorit� to thc Agcnc� pursuant to thc 2002 Loan Agrccmcnt. ..2002 Loan A�rccmcnt�� mcans thc Loan Agrccmcnt datcd as of Junc I. 2002. b� and among thc Agcnc�. thc Authorit� and BNY Wcstcrn Tnist Compam. as succccdcd b� Wclls Fargo Bank. National Association. as trustcc. Scction I.2. Rulcs of Construction. All rcfcrcnccs hcrcin to "Articics.�� "Scctions�� and othcr subdi� isions arc to thc corresponding Articics. Scctions or subdi� isions of this Loan Agrccmcnt. and thc «ords "hcrcin.�� "hcrcof.�� "hcrcundcr � and othcr «ords of similar import rcfcr to this Loan Agrccmcnt as a«holc and not to am particular Articic. Scction or subdi� ision hcrcof. ARTICLE II THE LOANS: APPLICATION OF LOAN PROCEEDS: PARITY DEBT Scction 2. I. Authorization. (a) Thc Authorit� hcrcb� agrccs to Icnd to thc Agcnc�. from thc procccds of thc salc of thc Scrics 2006A Bonds dcpositcd in thc Scrics 2006A Loan Fund cstablishcd undcr thc Indcnturc. thc principal amount of `f undcr and subjcct to thc tcrms of this Loan Agrccmcnt. thc Bond La« and thc Rcdc� clopmcnt La« . P6—Ic �2. I c�;;\x72; ; x. x (b) Thc Authorit� hcrcb� agrccs to Icnd to thc Agcnc�. from thc procccds of thc salc of thc Scrics 2006B Bonds dcpositcd in thc Scrics 2006B Loan Fund cstablishcd undcr thc Indcnturc. thc initial principal amow�t of `f undcr and subjcct to thc tcrms of this Loan Agrccmcnt. thc Bond La« and thc Rcdc� clopmcnt La« . (c) Thc Authorit� hcrcb� agrccs to Icnd to thc Agcnc�. from thc procccds of thc salc of thc Scrics 2006C Bonds dcpositcd in thc Scrics 2006C Loan Fund cstablishcd undcr thc Indcnturc. thc principal amount of `f undcr and subjcct to thc tcrms of this Loan Agrccmcnt. thc Bond La« and thc Rcdc� clopmcnt La« . (d) This Loan Agrccmcnt constitutcs a continuing agrccmcnt to sccurc thc fiill and final pa� mcnt of thc Loans. subjcct to thc co� cnants. agrccmcnts. pro� isions and conditions hcrcin containcd. Scction 2.2. Disburscmcnt and Auulication of Loan Procccds. (a) On thc Closing Datc. thc Authorit� shall causc to bc dcpositcd into thc Scrics 2006A Loan Fund thc amount of � «hich shall bc hcld b� thc Trustcc and «hich shall bc disburscd as follo«s: (i) Thc Trustcc shall transfcr thc amount of � to thc Scrics 2006A Account of thc Costs of Issuancc Fund. Fund. (ii) Thc Trustcc shall transfcr thc amount of `f to thc Escro« (iii) Thc Trustcc shall transfcr thc rcmaining amount of `f to thc Projcct Fund. On thc Closing Datc. thc Authorit� shall also causc thc amount of � and thc amount of � to bc paid to thc Insurcr for thc costs of a portion of thc prcmiums for thc Insurancc Polic� and thc Surct� Bond. Thc Trustcc ma�. in its discrction. cstablish z tcmporan fiind or account to facilitatc or account for thc forcgoing transfcrs. (b) On thc Closing Datc. thc Authorit� shall causc to bc dcpositcd into thc Scrics 2006B Loan Fund thc amount of � «hich shall bc hcld b� thc Trustcc and «hich shall bc disburscd as follo«s: (i) Thc Trustcc shall transfcr thc amount of `f to thc Scrics 2006B Account of thc Costs of Issuancc Fund. Projcct Fund. (ii) Thc Trustcc shall transfcr thc rcmaining amount of `f� to thc On thc Closing Datc. thc Authorit� shall also causc thc amount of � and thc amount of � to bc paid to thc Insurcr for thc costs of a portion of thc prcmiums for thc Insurancc Polic� and thc Surct� Bond. P6—Ic �2. I c�;;\x72; ; x. x 6 (c) On thc Closing Datc. thc Authorit� shall causc to bc dcpositcd into thc Scrics 2006C Loan Fund thc amount of � «hich shall bc hcld b� thc Trustcc and «hich shall bc disburscd as follo«s: (i) Thc Trustcc shall transfcr thc amount of $ to thc Scrics 2006C Account of thc Costs of Issuancc Fund. (ii) Thc Trustcc shall transfcr thc amount of `f to thc Escro« Intcrest Account of thc Escro« Fund. (iii) Thc Trustcc shall transfcr thc rcmaining amount of y� to thc Escro« Fund. On thc Closing Datc. thc Authorit� shall also causc thc amount of � and thc amount of � to bc paid to thc Insurcr for thc costs of a portion of thc prcmiums for thc Insurancc Polic� and thc Surct� Bond. Thc Trustcc ma�. in its discrction. cstablish a tcmporan fiind or account to facilitatc or account for thc forcgoing transfcrs. Scction 2. �. Rcua� mcnt of Loans. Thc Agcnc� shall. subjcct to prcpa� mcnt as pro� idcd in Scction 2.�4(a). rcpa� thc principal of thc Scrics 2006A Loan in installmcnts on August I in cach of thc � cars and in thc amounts. and shall pa� intcrest on thc unpaid principal balancc of thc Scrics 2006A Loan duc on cach Intcrest Pa� mcnt Datc not latcr than thc fifth Busincss Da� prcccding such Intcrest Pa� mcnt Datc in thc amounts sct forth in E�hibit A attachcd hcrcto and b� this rcfcrcncc incorporatcd hcrcin. Such intcrest shall accruc from thc Closing Datc. Am installmcnt of principal or intcrest «hich is not paid «hcn duc shall continuc to accruc intcrest from and including thc datc on «hich such principal or intcrest is pa� ablc to but not including thc datc of actual pa� mcnt. In thc c� cnt am unpaid principal installmcnts of thc Scrics 2006A Loan shall bc prcpaid pursuant to Scction 2.�4(a). or in thc c� cnt thc Scrics 2006A Bonds shall bc rcdccmcd pursuant to Scction 2.0 �(a)( I) of thc Indcnturc. thc schcdulc of principal installmcnts sct forth in E�hibit A hcrcto shall bc rcduccd as dircctcd b� thc Agcnc� to thc Trustcc. Thc Agcnc� shall. subjcct to prcpa� mcnt as pro� idcd in Scction 2.�4(b). rcpa� thc Scrics 2006B Loan in installmcnts on August I in cach of thc � cars and in thc amounts sct forth in E�hibit B attachcd hcrcto and b� this rcfcrcncc incorporatcd hcrcin. Intcrest on cach installment of thc Scrics 2006B Loan shall accruc in thc samc manncr as thc intcrest accrucs on thc Scrics 2006B Bonds pursuant to thc Indcnturc. Thc installmcnts pa�ablc on thc Scrics 2006B Loan on cach August I sct forth in E�hibit B correspond «ith thc aggrcgatc Maturit� Amount of Scrics 2006B Bonds coming duc and pa�ablc on such datc. Am installmcnt ofthc Scrics 2006B Loan «hich is not paid «hcn duc shall continuc to accruc intcrest from and including thc datc on «hich such installmcnt is pa�ablc to but not including thc datc of actual pa� mcnt. In thc c� cnt am unpaid installmcnts of thc Scrics 2006B Loan shall bc prcpaid pursuant to Scction 2.�4(b). or in thc c� cnt thc Scrics 2006B Bonds shall bc rcdccmcd pursuant to Scction 2.0 �(b)( I) of thc Indcnturc. thc schcdulc of installmcnts sct forth in E�hibit B hcrcto shall bc rcduccd as dircctcd b� thc Agcnc� to thc Trustcc. Thc Agcnc� shall. subjcct to prcpa� mcnt as pro� idcd in Scctions 2.�4(c) and 2.7. rcpa� thc principal of thc Scrics 2006C Loan in installmcnts on August I in cach of thc � cars and in thc amounts. and shall pa� intcrest on thc unpaid principal balancc of thc Scrics 2006C Loan duc on cach Intcrest Pa� mcnt Datc not latcr than thc fifth Busincss Da� prcccding such Intcrest Pa� mcnt Datc in thc amounts sct forth in E�hibit C attachcd hcrcto and b� this rcfcrcncc incorporatcd hcrcin. Such intcrest shall accruc from thc Closing Datc. Am installmcnt of principal or intcrest «hich is not paid «hcn duc shall continuc PG—Icl2.lclii\872i;8.8 7 to accruc intcrest from and including thc datc on «hich such principal or intcrest is pa�ablc to but not including thc datc of actual pa� mcnt. In thc c� cnt am unpaid principal installmcnts of thc Scrics 2006C Loan shall bc prcpaid pursuant to Scction 2.�4(c) or 2.7. or in thc c� cnt thc Scrics 2006C Bonds shall bc rcdccmcd pursuant to Scction 2.0 �(c)( l) or 2.0;(c)(i) of thc Indcnturc. thc schcdulc of principal installmcnts sct forth in E�hibit C hcrcto shall bc rcduccd as dircctcd b� thc Agcnc� to thc Trustcc. Thc obligation of thc Agcnc� to rcpa� thc Loans is. subjcct to Scction �. I. absolutc and unconditional. and such pa� mcnts shall not bc subjcct to rcduction «hcthcr b� offsct or othcr« isc and shall not bc conditional upon thc performancc or nonperformancc b� am part� to am agrccmcnt for am causc «hatsoc� cr. - - - - Principal of and intcrest on thc Loans shall bc pa� ablc b� thc Agcnc� to thc Trustcc. as assigncc of thc Authorit� undcr thc Indcnturc in la« fiil monc� of thc Unitcd Statcs. Pa� mcnt of such principal and intcrest shall bc sccurcd. and amounts for thc pa� mcnt thcrcof shall bc dcpositcd «ith thc Trustcc at thc timcs. as sct forth in Articic lll. Not« ithstanding thc forcgoing pro� isions of this Scction 2. �. in licu of pa� mcnt of am installmcnt of principal of thc Loans coming duc and pa� ablc on August I in am � car in «hich am Bonds are subjcct to mandator� sinking fiind redcmption. thc Agcnc� shall ha� c thc right to purchasc am of such Bonds in an amount not c�cccding thc amount thcrcof «hich is subjcct to mandaton sinking fiind rcdcmption on such August I. and tcndcr such Bonds for canccllation. pro� idcd that such tcndcr shall bc madc bcforc thc prcccding Ma� I�. Scction 2.�4. Outional Prcua� mcnt (a) Thc Agcnc� shall ha� c thc right to prcpa� principal installmcnts of thc Scrics 2006A Loan. in am intcgral multiplc of ��.000. such prcpa� mcnt to bc allocatcd among such principal installmcnts as thc Agcnc� ma� dctcrminc upon Rcqucst to thc Authorit� and thc Trustcc pro� idcd not Icss than �4� da� s prior to thc prcpa� mcnt datc. on am datc on «hich thc Scrics 2006A Bonds are subjcct to rcdcmption pursuant to Scction 2.0 �(a)( I) of thc Indcnturc. b� dcpositing «ith thc Trustcc an amount sufficicnt to rcdccm a likc aggrcgatc principal amount of Scrics 2006A Bonds togcthcr «ith thc amount of accrucd intcrest and prcmium. if am. rcquircd to bc paid upon such rcdcmption. (b) Thc Agcnc� shall ha� c thc right to prcpa� installmcnts of thc Scrics 2006B Loan on am datc on «hich thc Scrics 2006B Bonds are subjcct to rcdcmption pursuant to Scction 2.0 �(b)( I) of thc Indcnturc and cffcct a corresponding rcdcmption of thc Scrics 2006B Bonds. Such prcpa� mcnt shall bc allocatcd among such installmcnts of thc Scrics 2006B Loan as thc Agcnc� ma� dctcrminc upon Rcqucst to thc Authorit� and thc Trustcc pro� idcd not Icss than �4� da� s prior to thc prcpa� mcnt datc: uro� idcd that such prcpa� mcnt shall causc rcdcmption of Scrics 2006 Bonds in intcgral multiplcs of y��.000 Maturit� Amount. To cffcct such prcpa� mcnt. thc Agcnc� shall dcposit «ith thc Trustcc no latcr than thc rcdcmption datc an amount sufficicnt to rcdccm thc callcd Scrics 2006B Bonds («hich amount shall includc thc Accrctcd Valuc of thc callcd Scrics 2006B Bonds as of thc datc of rcdcmption and thc applicablc rcdcmption prcmium. if am ). (c) Thc Agcnc� shall ha� c thc right to prcpa� principal installmcnts of thc Scrics 2006C Loan. in am intcgral multiplc of ��.000. such prcpa� mcnt to bc allocatcd among such principal installmcnts as thc Agcnc� ma� dctcrminc upon Rcqucst to thc Authorit� and thc Trustcc pro� idcd not Icss than �4� da� s prior to thc prcpa� mcnt datc. on am datc on «hich thc Scrics 2006C Bonds are subjcct to rcdcmption pursuant to Scction 2.0 �(c)( I) of thc Indcnturc. b� dcpositing «ith thc Trustcc an amount sufficicnt to rcdccm a likc aggrcgatc principal amount of Scrics 2006C Bonds togcthcr «ith thc amount of accrucd intcrest and prcmium. if am. rcquircd to bc paid upon such rcdcmption. PG—Icl2. Iclii\872i;8.8 (d) Bcforc making am prcpa� mcnt pursuant to this Scction. thc Agcnc� shall gi� c «rittcn noticc to thc Authorit� and thc Trustcc dcscribing such c� cnt and spccif� ing thc datc on «hich thc prcpa� mcnt «ill bc paid and thc ordcr thcrcof. «hich datc shall bc not Icss than �4� da� s from thc datc such noticc is gi� cn: pro� idcd. that not« ithstanding am such prcpa� mcnt. thc Agcnc� shall not bc rclic� cd of its obligations «ith respcct to a Loan hcrcundcr. including spccificall� its obligations undcr this Articic. until such Loan shall ha� c bccn fiill� paid (or pro� ision for pa� mcnt thcrcof shall ha� c bccn madc pursuant to Scction 6. �). (c) Thc Authorit� agrccs that upon pa� mcnt b� thc Agcnc� to thc Trustcc of such amount. thc Authorit� shall takc or causc to bc takcn am and all stcps rcquircd undcr thc Indcnturc to rcdccro such Outstanding Bonds of thc applicablc scrics on thc rcdcmption datc dcsignatcd b� thc Agcnc� : uro� idcd. ho« c� cr. that such datc shall bc a datc of rcdcmption of such Bonds. for «hich noticc has bccn timcl� gi� cn pursuant to thc Indcnturc. Scction 2.�. Rcscr� c Fund. Thcrc is hcrctoforc cstablishcd a scparatc fiind kno« n as thc "Projcct Arca No. 2 Rcscr� c Fund.�� «hich shall continuc to bc hcld b� thc Trustcc in trust for thc bcncfit of thc Authorit� and thc O« ncrs of thc Bonds and thc rcgistcrcd o« ncrs of all othcr bonds issucd b� thc Authorit� in conncction «ith am Parit� Dcbt. Thc Agcnc� hcrcb� plcdgcs and grants a licn and a sccurit� intcrest in thc Rcscr� c Fund to thc Trustcc in ordcr to sccurc thc Agcnc� �s pa� mcnt obligations undcr Scctions 2. � and �. �(a). Thc amount on dcposit in thc Rcscr� c Fund shall bc maintaincd at thc Rcscr� c Rcquircmcnt at all timcs. c�ccpt to thc c�tcnt rcquircd for thc purposcs sct forth in this Scction. In thc c� cnt that thc Agcnc� shall fail to dcposit «ith thc Trustcc thc fiill amount rcquircd to bc dcpositcd pursuant to Scction �. �(a). thc Trustcc shall «ithdra« from thc Rcscr� c Fund and transfcr to thc Intcrest Account and thc Principal Account. in such ordcr. an amount cqual to thc diffcrcncc bct«ccn (i) thc amow�t rcquircd to bc dcpositcd pursuant to Scction �. �(a) and (ii) thc amount actuall� dcpositcd b� thc Agcnc� . In thc c� cnt that thc amount on dcposit in thc Rcscr� c Fw�d shall at am timc bc Icss than thc Rcscr� c Rcquircmcnt. thc Trustcc shall notif� thc Agcnc� as soon as practicablc of thc amount rcquircd to bc dcpositcd thcrcin to restorc thc balancc to thc Rcscr� c Rcquircmcnt. such noticc to bc gi� cn b� tcicphonc. tcicfa� or othcr form of tciccommunications promptl� confirmcd in «riting. and thc Agcnc� shall thcrcupon transfcr to thc Trustcc thc amount nccdcd to restorc thc Rcscr� c Fund to thc Rcscr� c Rcquircmcnt. In thc c� cnt that thc amount on dcposit in thc Rcscr� c Fund on thc I�th calcndar da� prcccding am Intcrest Pa� mcnt Datc (othcr than thc final Intcrest Pa� mcnt Datc) — pro� idcd that thc dcposits rcquircd b� Scction �. �(a) ha� c bccn madc — c�cccds thc Rcscr� c Rcquircmcnt. thc Trustcc shall «ithdra« from thc Rcscr� c Fund all amounts in c�ccss of thc Rcscr� c Rcquircmcnt and appl� such amounts to«ard thc prcpa� mcnt of thc Loans pursuant to Scction 2.�4 or thc prcpa� mcnt of am Parit� Dcbt. unlcss thc Trustcc shall ha� c rccci� cd prior Requcst of thc Agcnc� to pa� such amounts to thc Agcnc� to bc uscd for am la«fiil purposc rclating to thc Projcct Arca. as spccificd in such Rcqucst of thc Agcnc� . Not« ithstanding thc forcgoing pro� isions of this paragraph. ho« c� cr. no amounts shall bc «ithdra« n from thc Rcscr� c Fund and transfcrrcd to thc Agcnc� pursuant to this paragraph during am period in «hich an E� cnt of Dcfault shall ha� c occurrcd and bc continuing hcrcundcr. With thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct) and of thc insurcr of am Parit� Dcbt (as long as thc polic� insuring such Parit� Dcbt is in fiill forcc and cffcct). thc Rcscr� c Rcquircmcnt ma� bc satisficd b� crcditing to thc Rcscr� c Fund monc� s or a Qualificd Rcscr� c Fund Crcdit Instrumcnt or am combination thcrcof. «hich in thc aggrcgatc makc fiinds a� ailablc in thc Rcscr� c Fund in an amount cqual to thc Rcscr� c Rcquircmcnt. Upon thc dcposit «ith thc Trustcc of such Qualificd Rcscr� c Fund Crcdit Instrumcnt. thc Trustcc shall rcicasc monc� s thcn on hand P6—Ic �2. I c�;;\x72; ; x. x 9 in thc Rcscr� c Fund to thc Agcnc�. to bc uscd for am la«fiil purposc rclating to thc Projcct Arca. in an amount cqual to thc facc amount of thc Qualificd Rcscr� c Fund Crcdit Instrumcnt. If at am timc thc amount on dcposit in. or crcditcd to. thc Rcscr� c Fund includcs both cash and thc Surct� Bond. am dra« on thc Surct� Bond shall bc madc onl� aftcr all cash in thc Rcscr� c Fund has bccn c�pcndcd. If at am timc thc amount crcditcd to thc Rcscr� c Fund includcs thc Surct� Bond and onc or morc othcr Qualificd Rcscr� c Fund Crcdit Instrumcnts issucd b� cntitics othcr than thc issucr of thc Surct� Bond. am dra« on thc Surct� Bond shall bc madc on a pro rata basis «ith dra« s on such othcr Qualificd Rcscr� c Fund Crcdit Instrumcnts. bascd on thc rclati� c amounts of dcbt scr� icc co� crcd b� thc Surct� Bond and thc dcbt scr� icc co� crcd b� such othcr Qualificd Rcscr� c Fund Crcdit Instrumcnts in such Fiscal Ycar. Scction 2.6. Costs of Issuancc Fund. Thcrc is hcrcb� cstablishcd a fiind to bc hcld b� thc Trustcc kno« n as thc "Costs of Issuancc Fund�� and t�� o accounts thcrcin kno« n as thc "Scrics 2006A Account�� and thc "Scrics 2006B Account.�� A portion of thc procccds of thc Scrics 2QQ6A Loan shall bc dcpositcd in thc Scrics 2006A Account pursuant to Scction 2.2(a). A portion of thc procccds of thc Scrics 2006B Loan shall bc dcpositcd in thc Scrics 2006B Account pursuant to Scction 2.2(b). A portion of thc procccds of thc Scrics 2006C Loan shall bc dcpositcd in thc Scrics 2006C Account pursuant to Scction 2.2(c). Thc monc� s in cach account of thc Costs of Issuancc Fund shall bc uscd to pa� Costs of Issuancc of thc rclatcd scrics of Bonds from timc to timc upon rcccipt of a Rcqucst of thc Agcnc� . On thc 90th da� aftcr thc Closing Datc (or thc first Busincss Da� thcrcaftcr). or upon thc carlicr rcccipt b� thc Trustcc of a Rcqucst of thc Agcnc� stating that all Costs of Issuancc ha� c bccn paid. thc Trustcc shall transfcr all rcmaining amounts in thc accounts of thc Costs of Issuancc Fund to thc Rc� cnuc Fund. Scction 2.7. Succial Escro« Fund. Thcrc is hcrcb� cstablishcd a scparatc fiind to bc kno« n as thc "Spccial Escro« Fund.�� and an account thcrcin to bc kno�� n as thc "Escro�� Intcrest Account�� «hich shall bc hcld b� thc Trustcc in trust. On thc Closing Datc. thc Trustcc shall transfcr monc� from thc Scrics 2006B Loan Fund to thc Escro« Intcrest Account and thc Spccial Escro« Fund in accordancc «ith Scction 2.2(b). Amounts in thc Spccial Escro« Fund and thc Escro« Intcrest Account shall bc applicd as follo«s: (a) On cach Intcrest Pa�mcnt Datc. thc Trustcc shall transfcr from thc Escro« Intcrest Account to thc Intcrest Account. an amount cqual to thc intcrest pa�ablc on such datc «ith respcct to thc Dccmcd Escro« Portion of thc Scrics 2006B Bonds. (b) On or bcforc �Januar� � I of cach � car up to and including �Januar� � I. 20�09�. thc Agcnc� shall filc «ith tllc Trustcc a Ccrtificatc accompanicd b� a Rcport of an Indcpcndcnt Rcdc� clopmcnt Consultant «hich idcntifics (i) thc amounts. if am. proposcd to bc rcicascd from thc Spccial Escro« Fund and thc Escro« Intcrest Account. and (ii) thc Rcscr� c Rcquircmcnt «hich results from such rcicasc. If an amount is proposcd to bc rcicascd from thc Spccial Escro« Fund. such Rcport shall concludc that thc amount of Ta� Rc� cnucs rccci� cd or to bc rccci� cd for thc thcn currcnt Fiscal Ycar. as sct forth in a Ccrtificatc of thc Agcnc�. bascd on asscsscd � aluation of propert� in thc Projcct Arca. as c� idcnccd in thc rccords of thc Count�. plus at thc option of thc Agcnc� thc Additional Rc� cnuc. shall bc at Icast cqual to 120 perccnt of thc amount of thc Ma�imum Annual Dcbt Scr� icc idcntificd in such Rcport. Thc Agcnc� �s Ccrtificatc shall also bc accompanicd b� a schcdulc sho« ing that thc balancc rcmaining in thc Escro« Intcrest Account �plus thc anticipatcd intcrest carnings thcrcon� «ill bc sufficicnt to pa� intcrest on thc Dccmcd Escro« Portion of thc Scrics 2006C Bonds aftcr thc proposcd transfcr on cach fi�turc Intcrest Pa� mcnt Datc to and including thc Escro�� Rcdcmption Datc. Promptl� follo« ing rcccipt of am such Rcport. thc Trustcc shall «ithdra« from thc Spccial Escro« Fund and thc Escro« Intcrest Account thc amounts idcntificd in such Rcport and (subjcct to thc pro� isions of Paragraph (c) bclo« ) transfcr such amount as follo« s: P6—Ic �2. I c�;;\x72; ; x. x 10 ( I) Thc Trustcc shall dcposit into thc Rcscr� c Fund an amount rcquircd to causc thc balancc thcrcin to cqual thc Rcscr� c Rcquircmcnt: (2) Thc Trustcc shall transfcr thc amount indicatcd in thc Agcnc� �s Ccrtificatc to thc Intcrest Account: and (�) Thc Trustcc shall transfcr thc rcmaindcr of such amounts to thc Agcnc� for dcposit in thc Projcct Fund. (c) On �Junc I. 2009�. thc Tnistcc shall (i) transfcr amounts thcn on dcposit in thc Spccial Escro« Fund to thc Principal Account. to bc applicd to thc c�traordinan rcdcmption of thc largcst principal amount of Scrics 2006C Bonds «hich can bc callcd pursuant to Scction 2.0 �(c)( �) of thc Indcnturc. and (ii) transfcr amounts thcn on dcposit in thc Escro« Intcrest Account to thc Intcrest Account. to bc applicd to pa� accrucd intcrest on thc Scrics 2006C Bonds bcing rcdccmcd pursuant to Scction 2.0 �(c)( �) of thc Indcnturc on Escro« Rcdcmption Datc. lf thc balancc in thc Spccial Escro�� Fund c�cccds thc amount rcquircd to call and redccm all Outstanding Scrics 2006C Bonds. such c�ccss shall bc transfcrrcd to thc Agcnc� for dcposit in thc Projcct Fund. Not« ithstanding thc forcgoing. if thc balancc in thc Spccial Escro« Fund on �Junc I. 2009� is Icss than `f �.000. thcn thc Trustcc shall transfcr all of such balancc to thc Projcct Fund and transfcr all rcmaining monc� in thc Spccial Intcrest Account to thc Intcrest Account. Scction 2.8. Proicct Fund. Thcrc is hcrcb� cstablishcd a fiind to bc kno« n as thc "Projcct Fund��. «hich shall bc hcld and maintaincd b� thc Trustcc. Amounts on dcposit in such fiind shall bc dcri� cd solcl� from thc portion of thc procccds of thc Loans transfcrrcd thcrcto and from carnings on thc in� cstmcnt of amounts thcrcin. E�ccpt as pro� idcd in this Scction. thc monc� s sct asidc and placcd in thc Projcct Fund shall rcmain thcrcin until c�pcndcd from timc to timc for thc purposc of pa� ing am portion of thc costs of thc Rcdc� clopmcnt Projcct. and othcr costs rclatcd thcrcto. «hich othcr costs ma� includc. but arc not limitcd to. (a) thc cost of impro� cmcnts and othcr costs «hich ma� not bcncfit thc Rcdc� clopmcnt Projcct c�clusi� cl� but «hich arc ncccssar� to thc rcdc� clopmcnt of thc Projcct Arca and thc disposition of land thcrcin: (b) thc rcpa� mcnt of am ad� anccs madc b� thc Cit� for thc Rcdc� clopmcnt Projcct: and (c) to thc c�tcnt not paid from thc Costs of Issuancc Fund. thc ncccssan c�pcnscs in conncction «ith thc issuancc and salc of thc Bonds. Bcforc am pa� mcnt of monc� is madc from thc Projcct Fund. thc Agcnc� shall filc «ith thc Trustcc a Rcqucst of thc Agcnc� sho« ing «ith respcct to cach pa� mcnt of monc� to bc madc: Fund. Trustcc: (a) thc namc and address of thc person to «hom pa� mcnt is duc: (b) thc amount of monc� to bc paid: (c) thc purposc for «hich thc obligation to bc paid «as incurrcd: and (d) that such amount has not bccn paid prc� iousl� for such purposc from thc Projcct Each such Rcqucst of thc Agcnc� shall statc and shall bc sufficicnt c� idcncc to thc ►>�,-�c �z. � c�;;�x7z; ;x. x 1 1 (i) that an obligation in thc statcd amount has bccn properl� incurrcd undcr and pursuant to this Loan Agrccmcnt and that such obligation is a proper chargc against thc Projcct Fund: and (ii) that thcrc has not bccn filcd «ith or scr� cd upon thc Agcnc� a stop noticc or am othcr noticc of am licn. right to licn or attachmcnt upon. or claim affccting thc right to rccci� c pa� mcnt of. am of thc monc� pa� ablc to thc person namcd in such Rcqucst of thc Agcnc� «hich has not bccn rcicascd or «ill not bc rcicascd simultancousl� «ith thc pa� mcnt of such obligation. othcr than licns accruing b� mcrc operation of la«. Upon rcccipt of cach such Rcqucst of thc Agcnc�. thc Trustcc shall pa� thc amount sct forth in such Rcqucst of thc Agcnc� as dircctcd b� thc tcrms thcrcof «ithin thrcc Busincss Da� s. If am monc� s dcpositcd in thc Projcct Fund remain thcrcin aftcr thc fiill accomplishmcnt of thc objccts and purposcs for «hich thc Loans «crc madc. said monc� s shall bc transfcrrcd to thc Spccial Fund. Scction 2.9. Parit� Dcbt. From timc to timc. thc Agcnc� ma� issuc or incur additional Parit� Dcbt in such principal amount as shall bc dctcrmincd b� thc Agcnc�. subjcct to thc follo« ing spccific conditions «hich arc hcrcb� madc conditions prcccdcnt to thc issuancc and dcli� cr� of such Parit� Dcbt issucd undcr this Scction 2.9: (a) No E� cnt of Dcfault shall ha� c occurrcd and bc continuing. and thc Agcnc� shall othcn� isc bc in compliancc «ith all co� cnants sct forth in this Loan Agrccmcnt. (b) Thc amount of Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar. as sct forth in a Ccrtificatc of thc Agcnc�. bascd on asscsscd � aluation of propert� in thc Projcct Arca as c� idcnccd in thc «rittcn rccords of thc Count�. plus at thc option of thc Agcnc� thc Additional Rc� cnucs. shall bc at Icast cqual to (i) 120 perccnt of Ma�imum Annual Dcbt Scr� icc. and (ii) 100 perccnt of thc sum of Ma�imum Annual Dcbt Scr� icc (of thc Loans and Parit� Dcbt) and ma�imum annual dcbt scr� icc on all outstanding Subordinatc Dcbt that is sccurcd b� a plcdgc of or licn upon thc Ta� Rc� cnucs. (c) Thc rclatcd Parit� Dcbt Instrumcnt shall pro� idc that thc balancc of thc Rcscr� c Fund shall bc incrcascd to thc nc« Rcscr� c Rcquircmcnt cffccti� c aftcr thc incurrcncc of such Parit� Dcbt. (d) All amounts hcld in thc Spccial Escro« Fund shall ha� c bccn transfcrrcd to thc Agcnc� or othcr« isc applicd in accordancc «ith Scction 2.7: uro� idcd that this condition shall not limit thc authorit� of thc Agcnc� to issuc or incur Parit� Dcbt for thc purposc of rcfiinding thc Loans or othcr Parit� Dcbt so long as cithcr (i) thc total amount of principal and intcrest pa�ablc «ith respcct to such proposcd refiinding Parit� Dcbt shall bc Icss than thc total amount of principal and intcrest rcmaining to bc paid «ith respcct to thc Loan or thc Parit� Dcbt to bc rcfiindcd. or (ii) thc total amount of principal and intcrest pa� ablc «ith respcct to such proposcd refiinding Parit� Dcbt rcflccts a prescnt � aluc sa� ings «hcn comparcd «ith thc total amount of principal and intcrest rcmaining to bc paid «ith respcct to thc Loan or thc Parit� Dcbt to bc rcfiindcd. (c) Thc rclatcd Parit� Dcbt Instrumcnt shall pro� idc that: ( I) With respcct to am Parit� Dcbt «hich bcars currcnt intcrest. intcrest on such Parit� Dcbt shall not bc pa� ablc on a datc othcr than Fcbruar� I and August I of am � car. and (2) Thc principal of such Parit� Dcbt shall not bc pa�ablc on am datc othcr PG—Icl2.lclii\872i;8.8 12 than thc datc on «hich principal ofthc Loans is pa�ablc. (� Thc issuancc of such Parit� Dcbt shall not causc thc Agcnc� to c�cccd am applicablc Plan Limitations. (g) Thc Agcnc� shall dcli� cr to thc Trustcc a Ccrtificatc of thc Agcnc� ccrtif� ing that thc conditions prcccdcnt to thc issuancc of such Parit� Dcbt sct forth in Paragraphs (a) through (� abo� c ha� c bccn satisficd. Thc Agcnc� shall also fiirnish a cop� of an Indcpcndcnt Rcdc� clopmcnt Consultant�s rcport c� idcncing compliancc «ith thc condition sct forth in Paragraph (b). Scction 2.10. Issuancc of Subordinatc Dcbt. In addition to thc Loans and am Parit� Dcbt. from timc to timc thc Agcnc� ma� issuc or incur Subordinatc Dcbt in such principal amount as shall bc dctcrmincd b� thc Agcnc�. pro� idcd that (i) thc issuancc of such Subordinatc Dcbt shall not causc thc Agcnc� to cticccd am applicablc Plan Limitations. and (ii). «ith respcct to am Subordinatc Dcbt that is to bc sccurcd b� a plcdgc or licn upon Ta� Rc� cnucs. thc amount of Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar. as sct forth in a Ccrtificatc of thc Agcnc�. bascd on asscsscd � aluation of propert� in thc Projcct Arca as c� idcnccd in thc «rittcn rccords of thc Count�. plus at thc option of thc Agcnc� thc Additional Rc� cnucs. shall bc at Icast cqual to 100 perccnt of thc sum of Ma�imum Annual Dcbt Scr� icc (of thc Loans and Parit� Dcbt) and ma�imum annual dcbt scr� icc on all Outstanding Subordinatc Dcbt that is sccurcd b� a plcdgc of or licn upon thc Ta� Rc� cnucs. Scction 2.I I. Validit� of Loans. Thc �alidit� ofthc Loans shall not bc dcpcndcnt upon thc complction of thc Rcdc� clopmcnt Projcct or upon thc performancc b� am person of am obligation «ith respcct to thc Rcdc� clopmcnt Projcct. ARTICLE III PLEDGE AND APPLICATION OF TAX REVENUES Scction �. I. Plcd�c of Ta� Rc� cnucs. Thc Loans and all Parit� Dcbt shall bc cquall� sccurcd b� a first plcdgc of and licn on all of thc Ta� Rc� cnucs and all of thc monc� s on dcposit in thc Spccial Fund. «ithout prcfcrcncc or priorit� for scrics. issuc. numbcr. datcd datc. salc datc. datc of c�ccution or datc of dcli� cr� . E�ccpt for thc Ta� Rc� cnucs and othcr fiinds plcdgcd hcrcundcr. no fiinds or propertics of thc Agcnc� shall bc plcdgcd to. or othcn� isc liablc for. thc pa� mcnt of principal of or intcrest on or prcpa� mcnt prcmium. if am. on thc Loans. Scction �.2. Succial Fw�d: Dcuosit of Tax Rc� cnucs. Thc Agcnc� has hcrctoforc cstablishcd a spccial fiind kno«n as thc "Spccial Fund.�� «hich is and shall continuc to bc hcld b� thc Agcnc� as a scparatc fiind apart from all othcr fiinds and accounts of thc Agcnc� . Thc Agcnc� shall dcposit all Ta� Rc� cnucs in thc Spccial Fund promptl� upon thc rcccipt thcrcof. E�ccpt as ma� bc othcn� isc pro� idcd in am Parit� Dcbt Instrumcnt. am Ta� Rc� cnucs rccci� cd during thc Bond Ycar in c�ccss of amounts rcquircd to bc transfcrrcd to thc Trustcc pursuant to Scction �. � shZll bc rcicascd from thc plcdgc and licn hcrcundcr and ma� bc uscd for am la«fiil purposcs of thc Agcnc� . Prior to thc pa� mcnt in fiill of thc principal of and intcrest and prcpa� mcnt prcmium. if am. on thc Loans and all Parit� Dcbt and thc pa� mcnt in fiill of all othcr amounts pa� ablc undcr this Loan Agrccmcnt and am Parit� Dcbt Instrumcnt. thc Agcnc� shall not ha� c am bcncficial right or intcrest in thc monc� s on dcposit in thc Spccial Fund. c�ccpt onl� as pro� idcd in this Loan Agrccmcnt and am Parit� Dcbt Instrumcnt. and such monc� s shall bc uscd and applicd as sct forth hcrcin and thcrcin. Scction �. �. Transfcr of Ta� Rc� cnucs From Succial Fund. In addition to thc transfcrs rcquircd to bc madc pursuant to am Parit� Dcbt Instrumcnt. thc Agcnc� shall «ithdra« from thc Spccial P6—Ic �2. I c�;;\x72; ; x. x 13 Fund and transfcr to thc Trustcc thc follo« ing amounts at thc follo« ing timcs and in thc follo« ing ordcr of priorit� : (a) Intcrest and Princival Dcuosits. No latcr than thc fifth Busincss Da� prcccding cach datc on «hich thc principal of or intcrest on thc Loans or am Parit� Dcbt shall bccomc duc and pa� ablc. including but not limitcd to thc principal amounts of thc Loans to bc prcpaid hcrcundcr togcthcr «ith am prcpa� mcnt prcmium thcrcon. thc Agcnc� shall «ithdra« from thc Spccial Fund and transfcr to thc Trustcc an amount «hich. togcthcr «ith thc amounts thcn hcld on dcposit in thc Intcrest Account. thc Principal Account and thc Rc� cnuc Fund. is cqual to thc aggrcgatc amount of such principal. intcrest and prcpa� mcnt prcmium. (b) Rcscr� c Fund Dcuosits. In thc c� cnt that thc Trustcc shall notif� thc Agcnc� pursuant to Scction 2.� that thc amount on dcposit in thc Rcscr� c Fund is Icss than thc Rcscr� c Rcquircmcnt. thc Agcnc� shall immcdiatcl� «ithdra« from thc Spccial Fund and transfcr to thc Tnistcc for dcposit in thc Rcscr� c Fund an amount of monc� ncccssar� to maintain thc Rcscr� c Rcquircmcnt in thc Rcscr� c Fund (including rcpa� mcnt of am dra« madc undcr a Qualificd Rcscr� c Fund Crcdit Instrumcnt. including thc Surct� Bond. prior to rcplcnishing am cash in thc Rcscr� c Fund). (c) Sur lus. E�ccpt as ma� bc othcr« isc pro� idcd in am Parit� Dcbt Instrumcnt. thc Agcnc� shall not bc obligatcd to dcposit in thc Spccial Fund in am Bond Ycar an amount of Ta� Rc� cnucs «hich. togcthcr «ith othcr a� ailablc amounts in thc Spccial Fund. c�cccds thc amounts rcquircd in such Bond Ycar pursuant to this Scction. All Ta� Rc� cnucs «hich arc rccci� cd b� thc Agcnc� during am Bond Ycar in c�ccss of thc amounts rcquircd to bc dcpositcd in thc Spccial Fund in such Bond Ycar pursuant to this Loan Agrccmcnt shall bc rcicascd from thc plcdgc thcrcof and licn thcrcon «hich is cstablishcd pursuant hcrcto. In thc c� cnt that for am rcason «hatsoc� cr am amounts shall rcmain on dcposit in thc Spccial Fund on am August 2 aftcr making all of thc transfcrs thcrctoforc rcquircd to bc madc pursuant to thc prcccding Paragraphs (a) and (b) and pursuant to am Parit� Dcbt Instrumcnt. thc Agcnc� ma� «ithdra« such amounts from thc Spccial Fund. to bc uscd for am la«fiil purposcs of thc Agcnc�. including but not limitcd to thc pa� mcnt of am Subordinatc Dcbt or thc pa� mcnt of am amounts duc and o« ing to thc Unitcd Statcs pursuant to Scction �4. I I. Scction �.�4. In� cstmcnt of Monc� s: Valuation of Im cstmcnts. Subjcct to Scction �4.0 � of thc Indcnturc. all monc� s in thc Spccial Fund. thc Projcct Fund. thc Rcscr� c Fund and thc Costs of Issuancc Fund shall bc in� cstcd in Pcrmittcd In� cstmcnts. Abscnt am prior «rittcn instruction from thc Agcnc� or thc Authorit�. monc� s in am fiind hcld b� thc Trustcc hcrcundcr or undcr thc Indcnture shall bc in� cstcd in Pcrmittcd In� cstmcnts dcscribcd in clausc D of thc dcfinition thcrcof. Obligations purchascd as an in� cstmcnt of monc� s in am fiind or account cstablishcd hcrcundcr shall bc crcditcd to and dccmcd to bc part of such fiind or account. Thc Agcnc� or thc Trustcc. as thc casc ma� bc. ma� comminglc am amounts in am of thc fiinds and accounts hcld hcrcundcr «ith am othcr amounts hcld b� thc Agcnc� or thc Trustcc for purposcs of making am in� cstmcnt. uro� idcd that thc Agcnc� and thc Trustcc shall maintain scparatc accounting proccdures for thc in� cstmcnt of all fiinds and accounts hcld hcrcundcr. All intcrest. profits and othcr incomc rccci� cd from thc in� cstmcnt of monc� s in am fiind or account cstablishcd hcrcundcr shall bc crcditcd to such fiind or account. Not« ithstanding amthing to thc contrar� containcd in this Scction. an amount of intcrest rccci� cd «ith respcct to am in� cstmcnt cqual to thc amount of accrucd intcrest. if am. paid as part of thc purchasc pricc of such in� cstmcnt shall bc crcditcd to thc fiind or account from «hich such accrucd intcrest «as paid. For thc purposc of dctcrmining thc amount in am fiind or account cstablishcd hcrcundcr. am in� cstmcnts crcditcd to such fiind shall bc � alucd at Icast annuall� at thc markct � aluc thcrcof. ►>�,-�c �z. � c �;;�x7z; ;x. x 14 ARTICLE IV OTHER COVENANTS OF THE AGENCY Scction �4. I. Punctual Pa� mcnt: E�tcnsion of Pa� mcnts. Thc Agcnc� shall punctuall� pa� or causc to bc paid thc principal of and intcrest and prcpa� mcnt prcmium. if am. on thc Loans in strict conformit� «ith thc tcrms of this Loan Agrccmcnt. and it «ill faithfiill� obscr� c and perform all of thc conditions. co� cnants and requircmcnts of this Loan Agrccmcnt. Thc Agcnc� shall not dircctl� or indircctl� c�tcnd or asscnt to thc c�tcnsion of thc maturit� of am installmcnt of principal of or intcrest or prcpa� mcnt prcmium. if am. on thc Loans. and in casc thc principal of or intcrest or prcmium. if am. on thc Loans or thc timc of pa� mcnt of am such claims thcrcfor shall bc c�tcndcd. such principal. intcrest. prcmium or claims for intcrest shall not bc cntiticd. in casc of am E� cnt of Dcfault hcrcundcr. to thc bcncfits of this Loan Agrccmcnt c�ccpt for pa� mcnt of all amounts «hich shall not ha� c bccn so c�tcndcd. Scction �4.2. Limitation on Additional Indcbtcdncss. Thc Agcnc� hcrcb� co� cnants that it shall not issuc am bonds. notcs or othcr obligations. cntcr into am agrccmcnt or othcn� isc incur am indcbtcdncss. «hich is in am casc pa� ablc from all or am part of thc Ta� Rc� cnucs. c�ccpting onl� thc Loans. am Parit� Dcbt and am Subordinatc Dcbt. and am othcr obligations permittcd b� this Loan Agrccmcnt. - - - - Scction �4. �. Pa� mcnt of Claims. Thc Agcnc� shall pa� and dischargc. or causc to bc paid and dischargcd. am and all la«fiil claims for labor. matcrials or supplics «hich. if unpaid. might bccomc a licn or chargc upon thc propertics o« ncd b� thc Agcnc� or upon thc Ta� Rc� cnucs or am part thcrcof. or upon am fiinds in thc hands of thc Trustcc. or «hich might impair thc sccurit� of thc Loans. Nothing hcrcin containcd shall rcquirc thc Agcnc� to makc am such pa� mcnt so long as thc Agcnc� in good faith shall contcst thc � alidit� of said claims. Scction �4.�4. Books and Accounts: Financial Statcmcnts. Thc Agcnc� shall kccp. or causc to bc kcpt. proper books of rccord and accounts. scparatc from all othcr rccords and accounts of thc Agcnc� and thc Cit�. in «hich complctc and corrcct cntrics shall bc madc of all transactions rclating to thc Rcdc� clopmcnt Projcct. thc Ta� Rc� cnucs. thc Spccial Fund. thc Rcscr� c Fund. thc Lo« and Modcratc Incomc Housing Fund and thc Rcdc� clopmcnt Fund. Such books of rccord and accounts shall at all timcs during busincss hours bc subjcct. upon prior «rittcn rcqucst. to thc rcasonablc inspcction of thc Authorit�. thc Trustcc and thc O« ncrs of not Icss than tcn perccnt in aggrcgatc Principal Amount of a scrics of Bonds thcn Outstanding. or thcir rcprescntati� cs authorizcd in «riting. Thc Agcnc� «ill causc to bc prcparcd annuall�. «ithin I80 da� s aftcr thc closc of cach Fiscal Ycar so long as am of thc Bonds arc Outstanding. complctc auditcd financial statcmcnts «ith respcct to such Fiscal Ycar sho« ing thc Ta� Rc� cnucs. all disburscmcnts from thc Spccial Fund and thc Rcdc� clopmcnt Fund and thc financial condition of thc Rcdc� clopmcnt Projcct. including thc balanccs in all fiinds and accounts rclating to thc Rcdc� clopmcnt Projcct. as of thc cnd of such Fiscal Ycar. Thc Agcnc� «ill fiirnish a cop� of such statcmcnts. upon rcasonablc rcqucst. to am O« ncr. Scction �4.�. Protcction of Sccurit� and Ri�hts. Thc Agcnc� «ill prescr� c and protcct thc sccurit� of thc Loans and thc rights of thc Trustcc and thc O« ncrs «ith respcct to thc Loans. From and aftcr thc Closing Datc. thc Loans shall bc incontcstablc b� thc Agcnc� . Thc Loans and thc pro� isions of this Loan Agrccmcnt arc and �� ill bc thc Icgal. � alid and binding spccial obligations of thc Agcnc� cnforccablc in accordancc «ith thcir tcrms. and thc Agcnc� shall at all timcs. to thc cstcnt permittcd b� la«. dcfcnd. prescr� c and protcct all thc rights of thc Authorit�. thc Trustcc and thc O«ncrs undcr this Loan Agrccmcnt against all claims and dcmands of all persons «homsoc� cr. Thc Agcnc� �s obligations to ►>�,-�c �z. � c �;;�x7z; ;x. x 15 thc Trustcc undcr this Scction �4.� shall sur� i� c thc pa� mcnt of thc Bonds and thc dischargc of thc Indcnturc. thc rcmo� al or resignation of thc Tnistcc pursuant to thc Indcnturc or thc pa� mcnt of thc Loans and thc dischargc of this Loan Agrccmcnt. Scction �4.6. Pa� mcnts of Ta�cs and Othcr Char�cs. Thc Agcnc� «ill pa� and dischargc. or causc to bc paid and dischargcd. all ta�cs. scr� icc chargcs. asscssmcnts and othcr go� crnmcntal chargcs «hich ma� hcrcaftcr bc la« fiill� imposcd upon thc Agcnc� or thc propertics thcn o« ncd b� thc Agcnc� in thc Projcct Arca «hcn thc samc shall bccomc duc. Nothing hcrcin containcd shall rcquirc thc Agcnc� to makc am such pa� mcnt so long as thc Agcnc� in good faith shall contcst thc � alidit� of such ta�cs. asscssmcnts or chargcs. Thc Agcnc� «ill dul� obscr� c and compl� «ith all � alid requircmcnts of am go� crnmcntal authorit� rclati� c to thc Rcdc� clopmcnt Projcct or am part thcrcof. Scction �4.7. Ta�ation of Lcascd Propert� . All ad � alorcm propert� ta�cs dcri� cd b� thc Agcnc� pursuant to Scction >;67 � of thc Rcdc� clopmcnt La« «ith respcct to thc Icasc of propert� for rcdc� clopmcnt shall bc trcatcd as Ta� Rc� cnucs for all purposcs of this Loan Agrccmcnt. and shall bc dcpositcd b� thc Agcnc� in thc Spccial Fund promptl� upon rcccipt. Scction �4.8. Disuosition of Proucrt�. Thc Agcnc� «ill not participatc in thc disposition of am land or rcal propert� in thc Projcct Arca to am onc «hich «ill result in such propert� bccoming c�cmpt from ta�ation bccausc of public o« ncrship or usc or othcr« isc (c�ccpt propert� dcdicatcd for public right-of-«a� and c�ccpt propert� planncd for public o« ncrship or usc b� thc Rcdc� clopmcnt Plan in cffcct on thc datc of this Loan Agrccmcnt) so that such disposition shall. «hcn takcn togcthcr «ith othcr such dispositions. aggrcgatc morc than tcn perccnt of thc land arca in thc Projcct Arca unlcss such disposition is permittcd as hcrcinaftcr pro� idcd in this Scction. If thc Agcnc� proposcs to participatc in such a disposition. it shall thcrcupon appoint an Indcpcndcnt Rcdc� clopmcnt Consultant to rcport on thc cffcct of said proposcd disposition. If thc Rcport of thc Indcpcndcnt Rcdc� clopmcnt Consultant concludcs that thc sccurit� of thc Loans or thc rights of thc Authorit� . thc O« ncrs and thc Trustcc hcrcundcr «ill not bc matcriall� impaircd b� said proposcd disposition. thc Agcnc� ma� thcrcaftcr makc such disposition. If such Rcport concludcs that such sccurit� «ill bc matcriall� impaircd b� such proposcd disposition. thc Agcnc� shall disappro� c said proposcd disposition. Scction �4.9. Maintcnancc of Ta� Rc� cnucs. Thc Agcnc� shall compl� «ith all rcquircmcnts of thc Rcdc� clopmcnt La« to insurc thc allocation and pa� mcnt to it of thc Ta� Rc� cnucs. including «ithout limitation thc timcl� filing of am ncccssar� statcmcnts of indcbtcdncss «ith appropriatc officials of thc Count� and (in thc casc of supplcmcntal rc� cnucs and othcr amounts pa� ablc b� thc Statc) appropriatc officials of thc Statc. Thc Agcnc� shall not amcnd thc Rcdc� clopmcnt Plan or am of thc Pass-Through Agrccmcnts. or cntcr into am agrccmcnt «ith thc Count� or am othcr go� crnmcntal unit. «hich «ould ha� c thc cffcct of rcducing thc amount of Ta� Rc� cnucs a� ailablc to thc Agcnc� for pa� mcnt of thc Loans. unlcss thc Agcnc� shall first obtain (i) thc Rcport of an Indcpcndcnt Rcdc� clopmcnt Consultant stating that thc amount of Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar (calculatcd on thc assumption that such rcduction of Ta� Rc� cnucs «as in cffcct throughout such Fiscal Ycar). plus at thc option of thc Agcnc� thc Additional Rc� cnucs. shall mcct thc co� cragc tcst sct forth in Scction 2.9 (calculatcd on thc assumption that no amounts rcmain on dcposit in thc Spccial Escro« Fund). and (ii) as long as thc Insurancc Polic� is thcn in fiill forcc and cffcct. thc «rittcn conscnt of thc Insurcr. Nothing hcrcin is intcndcd or shall bc construcd in am «a� to prohibit or imposc am limitations on thc cntcring into b� thc Agcnc� of am such agrccmcnt. amcndmcnt or supplcmcnt «hich b� its tcrm is subordinatc to thc pa� mcnt of thc Loans and all Parit� Dcbt. Scction �4.10. Pa� mcnt of E�ucnscs: Indcmnification. Thc Agcnc� shall pa� to thc Trustcc from timc to timc all compcnsation for all scr� iccs rcndcrcd undcr this Loan Agrccmcnt and thc Indcnturc. including but not limitcd to all rcasonablc c�pcnscs. chargcs. Icgal and consulting fccs and ►>�,-�c �z. � c �;;�x7z; ;x. x 16 othcr disburscmcnts and thosc of its attornc� s. agcnts and cmplo� ccs. incurrcd in and about thc performancc of its po« crs and dutics hcrcundcr and thcrcundcr. Upon thc occurrcncc of an E� cnt of Dcfault. thc Trustcc shall ha� c a first licn on thc fiinds hcld b� it undcr thc Indcnturc to sccurc thc pa� mcnt to thc Trustcc of all fccs. costs and c�pcnscs. including rcasonablc compcnsation to its c�perts. attornc� s and counscl (including thc allocatcd costs and disburscmcnts of in-housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl) incurrcd in performing its dutics undcr thc Indcnturc and this Loan Agrccmcnt. Thc Agcnc� fiirthcr co� cnants and agrccs to indcmnif�. dcfcnd and sa� c thc Trustcc and its officcrs. dircctors. agcnts and cmplo�ccs. harmlcss against am losscs. c�pcnscs and liabilitics «hich it ma� incur arising out of or in thc c�crcisc and performancc of its po« crs and dutics in accordancc «ith thc Indcnturc and this Loan Agrccmcnt. including thc costs and c�pcnscs of dcfcnding against am claim of liabilit�. but c�cluding am and all losscs. c�pcnscs and liabilitics «hich arc duc to thc ncgligcncc or intcntional misconduct of thc Trustcc. its officcrs. dircctors. agcnts or cmplo� ccs. Thc obligations of thc Agcnc� undcr this paragraph shall sur� i� c thc resignation or rcmo� al of thc Trustcc undcr thc Indcnturc. this Loan Agrccmcnt and pa� mcnt of thc Loans and thc dischargc of this Loan Agrccmcnt. Scction �4. I I. Ta� Co� cnants. To thc c�tcnt that bond counscl rcndcrs an opinion that intcrest on thc Bonds (or am of thcm) is ta�-c�cmpt undcr fcdcral ta� la« : (a) Thc Agcnc� co� cnants that. in ordcr to maintain thc c�clusion from gross incomc for Fcdcral incomc ta� purposcs of thc intcrest on thc Bonds. and for no othcr purposc. thc Agcnc� «ill satisfi. or takc such actions as arc ncccssan to causc to bc satisficd. cach pro� ision of thc Codc ncccssan to maintain such c�clusion. In fiirthcrancc of this co� cnant thc Agcnc� agrccs to compl� «ith such «rittcn instructions as ma� bc pro� idcd b� Bond Counscl. (b) Thc Agcnc� co� cnants that no part of thc procccds of thc Bonds shall bc uscd. dircctl� or indircctl�. to acquirc am In� cstmcnt Propert� «hich «ould causc thc Bonds to bccomc arbitragc bonds as that tcrm is dcfincd in Scction I�48 of thc Codc. or undcr applicablc Ta� Rcgulations. In ordcr to assurc compliancc «ith thc rcbatc rcquircmcnts of Scction 1�48 of thc Codc. thc Agcnc� fiirthcr co� cnants that it «ill pa� or causc to bc paid to thc Unitcd Statcs thc amounts ncccssar� to satisfi thc rcquircmcnts of Scction 1�48(� of thc Codc. and that it «ill cstablish such accounting proccdures as arc ncccssar� to adcquatcl� dctcrminc. account for and pa� o� cr am such amount rcquircd to bc paid thcrcundcr in a manncr consistcnt «ith thc rcquircmcnts of Scction I�48 of thc Codc. such co� cnants to sur� i� c thc dcfcasancc of thc Bonds. (c) Thc Agcnc� co� cnants that it «ill not takc am action or omit to takc am action. «hich action or omission. if rcasonabl� c�pcctcd on thc datc of initial c�ccution and dcli� cr� of thc Bonds. «ould result in a loss of c�clusion from gross incomc for purposcs of Fcdcral incomc ta�ation. undcr Scction I 0� of thc Codc. of intcrest on thc Bonds. (d) Thc Agcnc� co� cnants that it «ill not usc or permit thc usc of am propert� financcd «ith thc procccds of thc Bonds b� am person (othcr than a statc or local go� crnmcntal unit) in such manncr or to such c�tcnt as «ould result in a loss of c�clusion of thc intcrest on thc Bonds from gross incomc for Fcdcral incomc ta� purposcs undcr Scction I 0� of thc Codc. (c) E�ccpt as pro� idcd bclo«. thc Agcnc� co� cnants that nonc of thc monc� s containcd in am of thc fiinds or accounts «ith respcct to thc Bonds shall bc: (i) uscd in making loans guarantccd b� thc Unitcd Statcs (or am agcnc� or instrumcntalit� thcrco�. (ii) in� cstcd dircctl� or indircctl� in a dcposit or account insurcd b� thc Fcdcral Dcposit Insurancc Corporation. National Crcdit Union Administration or am othcr similar Fcdcrall� chartcrcd corporation. or (iii) othcr« isc in� cstcd PG—Icl2.lclii\872i;8.8 17 dircctl� or indircctl� in obligations guarantccd (in «holc or in part) b� thc Unitcd Statcs (or am agcnc� or instrumcntalit� thcrco�: pro� idcd. ho« c� cr. that thc abo� c restrictions do not appl� to: (a) thc im cstmcnt on monc� s hcld in thc Rc� cnuc Fund or am othcr "bona fidc dcbt scr� icc fiind�� as dcfincd for purposcs of Scction I�48 of thc Codc. (b) in� cstmcnt in dircct obligations of thc Unitcd Statcs Trcasur�. (c) in� cstmcnt in obligations guarantccd b� thc Fcdcral National Mortgagc Association. Go� crnmcnt National Mortgagc Association. or thc Fcdcral Homc Loan Mortgagc Corporation. (d) in� cstmcnt in obligations issucd pursuant to Scction 2 I B(d)( �) of thc Fcdcral Homc Loan Bank Act. as amcndcd b� Scction � I I(a) of thc Financial Institutions Rcform. Rcco� cr�. and Enforccmcnt Act of 1989. (c) in� cstmcnts permittcd undcr rcgulations issucd pursuant to Scction 1�49(b)( �)(B) of thc Codc. or (� such othcr in� cstmcnts permittcd undcr thc Indcnturc as. in thc opinion of Bond Counscl. do not jcopardizc thc c�clusion from gross incomc for Fcdcral incomc ta� purposcs of intcrest on thc Bonds. Scction �4.12. Rcdc� cloumcnt of Proicct Arca. Thc Agcnc� shall cnsurc that all acti� itics undcrtakcn b� thc Agcnc� «ith respcct to thc rcdc� clopmcnt of thc Projcct Arca arc undcrtakcn and accomplishcd in conformit� «ith all applicablc rcquircmcnts of thc Rcdc� clopmcnt Plan and thc Rcdc� clopmcnt La« . Thc Agcnc� shall managc and operatc all propertics o« ncd b� thc Agcnc� and comprising am part of thc Rcdc� clopmcnt Projcct in a sound and busincss-likc maiu�cr and in conformit� «ith all � alid requircmcnts of am go� crnmcntal authorit�. and «ill kccp such propertics insurcd at all timcs in conformit� �� ith sound busincss practicc. Scction �4. I�. Lo« and Modcratc Incomc Housin� Fund. Thc Agcnc� co� cnants and agrccs to usc thc monc� s in thc Lo« and Modcratc Incomc Housing Fund in accordancc «ith Scctions >;>>�4.2 and >;>>�4. � of thc Rcdc� clopmcnt La«. and furthcr co� cnants and agrccs to disbursc. c�pcnd or cncumbcr am "c�ccss surplus�� (as dcfincd in Scction >;>>�4. I 2 of thc Rcdc� clopmcnt La« ) in thc Lo« and Modcratc Incomc Housing Fund at such timcs and in such manncr that thc Agcnc� shall not bc subjcct to sanctions pursuant to subdi� ision (c) of said Scction >;>>�4.12. Scction �4.1 �4. Annual Rc� ic« of Ta� Rc� cnucs. Thc Agcnc� hcrcb� co� cnants that it «ill annuall� causc an Indcpcndcnt Rcdc� clopmcnt Consultant to rc� ic« thc total amount of Ta� Rc� cnucs rcmaining a� ailablc to bc rccci� cd b� thc Agcnc� undcr thc Rcdc� clopmcnt Plan�s cumulati� c ta� incrcmcnt limitation. as «cll as firturc cumulati� c annual dcbt scr� icc «ith respcct to thc Loans and all Parit� Dcbt. Thc Agcnc� «ill not acccpt Ta� Rc� ciuics grcatcr than such annual dcbt scr� icc in am � car. if such acccptancc «ill causc thc amount rcmaining undcr thc ta� incrcmcnt limit to fall bclo« rcmaining cumulati� c annual dcbt scr� icc «ith respcct to thc Loans and all Parit� Dcbt. c�ccpt for thc purposc of dcpositing such rc� cnucs in cscro« for thc pa� mcnt of such dcbt scr� icc or for thc prcpa� mcnt or rcdcmption of thc Loans or am Parit� Dcbt. Oncc it is dctcrmincd that Ta� Rc� cnucs a� ailablc to bc rccci� cd b� thc Agcnc� undcr thc aforcmcntioncd ta� incrcmcnt limitation in an upcoming � car «ill not c�cccd I 10 perccnt of aggrcgatc rcmaining dcbt scr� icc on thc Loans and all outstanding Parit� Dcbt. thc Agcnc� shall cscro« all currcnt and firturc Ta� Rc� cnucs and usc such amounts solcl� for thc purposc of pa� ing (or prcpa� ing) dcbt scr� icc on thc Loans and all Parit� Dcbt. Scction �4. I�. Furthcr Assuranccs. Thc Agcnc� «ill adopt. makc. cxccutc and dcli� cr am and all such fiirthcr resolutions. instrumcnts and assuranccs as ma� bc rcasonabl� ncccssar� or proper to carr� out thc intcntion or to facilitatc thc performancc of this Loan Agrccmcnt and for thc bcttcr assuring and confirming unto thc Trustcc. thc Authorit� and thc O« ncrs of thc Bonds of thc rights and bcncfits pro� idcd in this Loan Agrccmcnt. PG—Icl2.lclii\872i;8.8 18 ARTICLE V EVENTS OF DEFAULT AND REMEDIES Scction �. I. E� cnts of Dcfault and Acccicration of Maturitics. Thc follo« ing c� cnts shall constitutc E� cnts of Dcfault hcrcundcr: (a) Failurc b� thc Agcnc� to pa� thc principal of or intcrest or prcpa� mcnt prcmium. if am . on thc Loans or am Parit� Dcbt «hcn and as thc samc shal l bccomc duc and pa� ablc. (b) Failurc b� thc Agcnc� to obscr� c and perform am of thc co� cnants. agrccmcnts or conditions on its part containcd in this Loan Agrccmcnt. othcr than as rcfcrrcd to in thc prcccding Paragraph (a). for a period of 60 da� s aftcr «rittcn noticc spccifi ing such failurc and requcsting that it bc rcmcdicd has bccn gi� cn to thc Agcnc� b� thc Trustcc: uro� idcd. ho« c� cr. that if thc failure statcd in such noticc can bc corrcctcd. but not «ithin such 60 da� period. such failure shall not constitutc an E� cnt of Dcfault if corrccti� c action is institutcd b� thc Agcnc� «ithin such 60 da� period and thcrcaftcr is diligcntl� pursucd until such failurc is corrcctcd. (c) Thc filing b� thc Agcnc� of a pctition or ans«cr sccking rcorganization or arrangcmcnt undcr thc fcdcral bankruptc� la« s or am othcr applicablc la« of thc Unitcd Statcs of Amcrica. or if a court of compctcnt jurisdiction shall appro� c a pctition. filcd «ith or «ithout thc conscnt of thc Agcnc�. sccking rcorganization undcr thc fcdcral bankruptc� la«s or am othcr applicablc la« of thc Unitcd Statcs of Amcrica. or if. undcr thc pro� isions of am othcr la« for thc rclicf or aid of dcbtors. am court of compctcnt jurisdiction shall assumc custod� or control of thc Agcnc� or of thc «holc or am substantial part of its propert� . If an E� cnt of Dcfault has occurrcd and is continuing. thc Authorit� or thc Trustcc ma�. and at thc «rittcn dircction of thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds thc Authorit� or thc Trustcc shalL (i) dcclarc thc principal of thc Loans togcthcr «ith thc accrucd intcrest on all unpaid installmcnts thcrcof. to bc duc and pa�ablc immcdiatcl�. and upon am such dcclaration thc samc shall bccomc immcdiatcl� duc and pa�ablc. amthing in this Loan Agrccmcnt to thc contrar� not« ithstanding. and (ii) subjcct to thc rcccipt of indcmnit� as pro� idcd in thc Indcnturc. c�crcisc am othcr rcmcdics a�ailablc to thc Trustcc at la« or in cquit�. Immcdiatcl� upon bccoming a«arc of thc occurrcncc of an E� cnt of Dcfault. thc Authorit�. or thc Trustcc as assigncc of thc Authorit�. shall gi� c noticc of such E� cnt of Dcfault to thc Agcnc� b� tcicphonc. tciccopicr or othcr tciccommunication dc� icc. promptl� confirmcd in «riting. This pro� ision. ho« c� cr. is subjcct to thc condition that if. at am timc aftcr thc principal of thc Loans shall ha� c bccn so dcclarcd duc and pa� ablc. and bcforc am judgmcnt or dccrcc for thc pa� mcnt of thc monc� s duc shall ha� c bccn obtaincd or cntcrcd. thc Agcnc� shall dcposit «ith thc Trustcc a sum sufficicnt to pa� all installmcnts of principal of thc Loans maturcd prior to such dcclaration and all accrucd intcrest thcrcon. «ith intcrest on such o� crduc installmcnts of principal and intcrest at thc nct cffccti� c ratc thcn bornc b� thc Outstanding Bonds. and thc rcasonablc c�pcnscs of thc Trustcc (including but not limitcd to attornc� s fccs). and am and all othcr dcfaults kno« n to thc Trustcc (othcr than in thc pa� mcnt of principal of and intcrest on thc Loans duc and pa� ablc solcl� b� rcason of such dcclaration) shall ha� c bccn madc good or curcd to thc satisfaction of thc Trustcc or pro� ision dccmcd b� thc Trustcc to bc adcquatc shall ha� c bccn madc thcrcfor. thcn. and in c� cr� such casc. thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds ma�. b� «rittcn noticc to thc Trustcc and thc Agcnc�. rescind and annul such dcclaration and its conscqucnccs. Ho«c� cr. no such rescission and annulmcnt shall c�tcnd to or shall affcct am subscqucnt dcfault. or shall impair or c�haust am right or po«cr conscqucnt thcrcon. ►��,-�c �z. � c �;;�x7z; ;x. x 19 Scction �.2. Auulication of Funds Upon Dcfault. All amounts rccci� cd b� thc Trustcc. pursuant to am right gi� cn or action takcn b� thc Trustcc undcr thc pro� isions of this Loan Agrccmcnt. shall bc applicd b� thc Trustcc in thc follo« ing ordcr: First. to thc pa� mcnt of thc fccs. costs and c�pcnscs of thc Trustcc. including rcasonablc compcnsation to its agcnts. attornc� s and counscl (including thc allocatcd costs and disburscmcnts of in- housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl): and Sccond. to thc pa� mcnt of thc «holc amount of intcrest on and principal of thc Loans thcn duc and unpaid. �� ith intcrest on o� crduc installmcnts of principal. and such intcrest to thc c�tcnt permittcd b� la« at thc nct cffccti� c ratc of intcrest thcn bornc b� thc Outstanding Bonds: pro� idcd. ho« c� cr. that in thc c� cnt such amounts shall bc insufficicnt to pa� in fiill thc fiill amount of such intcrest and principal. thcn such amounts shall bc applicd in thc follo« ing ordcr of priorit� : (i) first. to thc pa� mcnt of all installmcnts of intcrest on thc Loans thcn duc and unpaid. on a pro rata basis in thc c� cnt that thc a� ailablc amounts arc insufficicnt to pa� all such intcrest in fiill. (ii) sccond. to thc pa� mcnt of all installmcnts of principal of thc Loans thcn duc and pa� ablc. on a pro rata basis in thc c� cnt that thc a� ailablc amounts arc installmcnts of principal in fiill. and (iii) third. to thc pa� mcnt of intcrest on o� crduc installmcnts of principal and intcrest. on a pro rata basis in thc c� cnt that thc a� ailablc amounts arc insufficicnt to pa� all such intcrest in fiill. Scction �. �. No Wai� cr. Nothing in this Articic V or in am othcr pro� ision of this Loan Agrccmcnt. shall affcct or impair thc obligation of thc Agcnc�. «hich is absolutc and unconditional. to pa� from thc Ta� Rc� cnucs and othcr amounts plcdgcd hcrcundcr. thc principal of and intcrest and prcmium. if am. on thc Loans to thc Trustcc «hcn duc. as hcrcin pro� idcd. or affcct or impair thc right of action. «hich is also absolutc and unconditional. of thc Trustcc to institutc suit to cnforcc such pa� mcnt b� � irtuc of thc contract cmbodicd in this Loan Agrccmcnt. A«ai� cr of am dcfault b� thc Trustcc shall not affcct am subscqucnt dcfault or impair am rights or rcmcdics on thc subscqucnt dcfault. No dcla� or omission of thc Trustcc to c�crcisc am right or po«cr accruing upon am dcfault shall impair am such right or po«cr or shall bc construcd to bc a«ai� cr of am such dcfault or an acquicsccncc thcrcin. and c� cr� po« cr and remcd� confcrrcd upon thc Trustcc b� thc Rcdc� clopmcnt La« or b� this Articic V ma� bc cnforccd and c�crciscd from timc to timc and as oftcn as shall bc dccmcd c�pcdicnt b� thc Trustcc. If a suit. action or procccding to cnforcc am right or c�crcisc am rcmcd� shall bc abandoncd or dctcrmincd ad� crscl� to thc Trustcc. thc Agcnc�. thc Authorit� and thc Trustcc shall bc restorcd to thcir formcr positions. rights and remcdics as if such suit. action or procccding had not bccn brought or takcn. Scction �.�4. A�rccmcnt to Pa� Attornc� s� Fccs and E�ucnscs. In thc c� cnt thc Agcnc� or thc Authorit� should dcfault undcr am of thc pro� isions hcrcof and thc nondcfaulting part� or thc Trustcc should cmplo� attornc� s or incur othcr c�pcnscs for thc collcction of monc� s or thc cnforccmcnt or performancc or obscr� ancc of am obligation or agrccmcnt on thc part of thc dcfaulting part� hcrcin containcd. thc dcfaulting part� agrccs that it «ill on dcmand thcrcfor pa� to thc nondcfaulting part� or thc Trustcc. as thc casc ma� bc. thc rcasonablc fccs of such attornc� s and such othcr c�pcnscs so incurrcd P6—Ic �2. I c�;;\x72; ; x. x 20 (including thc allocatcd costs and disburscmcnts of in-housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl). Scction �.�. Rcmcdics Not E�clusi� c. No rcmcd� hcrcin confcrrcd upon or rescr� cd to thc Trustcc is intcndcd to bc c�clusi� c of am othcr rcmcd� . E� cr� such rcmcd� shall bc cumulati� c and shall bc in addition to c� cr� othcr rcmcd� gi� cn hcrcundcr or no« on c�rcaftcr c�isting. at la« or in cquit� or b� statutc or othcr« isc. and ma� bc c�crciscd «ithout c�hausting and «ithout rcgard to am othcr rcmcd� confcrrcd b� thc Rcdc� clopmcnt La« or am othcr la« . Scction �.6. Control of Rcmcdics b� Insurcr . Not« ithstanding thc pro� isions of Scction �. I and subjcct to am rights hcrctoforc grantcd b� thc Authorit� or thc Agcnc� to am insurcr of Parit� Dcbt. as long as Insurancc Polic� is in fiill forcc and cffcct and thc Insurcr has not dcfaultcd «ith respcct to its pa� mcnt obligations thcrcundcr. upon thc occurrcncc and continuancc of an E� cnt of Dcfault. thc Insurcr shall bc cntiticd to control and dircct thc cnforccmcnt of all rights and remcdics grantcd to thc O« ncrs or thc Trustcc for thc bcncfit of thc O« ncrs undcr this Loan Agrccmcnt. Am acccicration of thc Loans or annulmcnt thcrcof pursuant to Scction �. I shall bc subjcct to thc prior «rittcn conscnt of thc Insurcr. No «ai� cr of a dcfault shall bc cffccti� c«ithout thc «rittcn conscnt of thc Insurcr. ARTICLE VI MISCELLANEOUS Scction 6. I. Bcncfits Limitcd to Partics. Nothing in this Loan Agrccmcnt. c�presscd or implicd. is intcndcd to gi� c to am person othcr than thc Agcnc�. thc Tnistcc. thc Insurcr and thc Authorit�. am right. rcmcd� or claim undcr or b� rcason of this Loan Agrccmcnt. All co� cnants. stipulations. promiscs or agrccmcnts in this Loan Agrccmcnt containcd b� and on bchalf of thc Agcnc� shall bc for thc solc and c�clusi� c bcncfit of thc Authorit�. thc Trustcc acting as trustcc for thc bcncfit of thc O« ncrs of thc Bonds. and thc Insurcr so long as thc Insurancc Polic� rcmains in fiill forcc and cffcct. Scction 6.2. Succcssor is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor. Whcnc� cr in this Loan Agrccmcnt. thc Agcnc�. thc Authorit�. thc Trustcc or thc Insurcr is namcd or rcfcrrcd to. such rcfcrcncc shall bc dccmcd to includc thc succcssors or assigns thcrcof. and all thc co� cnants and agrccmcnts in this Loan Agrccmcnt containcd b� or on bchalf of thc Agcnc�. thc Authorit�. thc Trustcc or thc Insurcr shall bind and inurc to thc bcncfit of thc respccti� c succcssors and assigns thcrcof «hcthcr so c�presscd or not. Scction 6. �. Dischar�c of Loan A�rccmcnt. If thc Agcnc� shall pa� and dischargc thc indcbtcdncss on thc Loans or am portion thcrcof in am onc or morc of thc follo« ing «a� s: (a) b� «cll and trul� pa� ing or causing to bc paid thc principal of and intcrest and prcpa� mcnt prcmiums. if am. on thc Loans or such portion thcrcof. as and «hcn thc samc bccomc duc and pa� ablc: (b) b� irrc� ocabl� dcpositing «ith thc Trustcc. in trust. at or bcforc maturit�. cash in an amount «hich. togcthcr «ith thc a� ailablc amounts thcn on dcposit in am of thc fiinds and accounts cstablishcd pursuant to thc Indcnturc or this Loan Agrccmcnt. in thc opinion or rcport of an Indcpcndcnt Accountant is fiill� sufficicnt to pa� all principal of and intcrest and prcpa� mcnt prcmiums. if am. on thc Loans or such portion thcrcof: or (c) b� irrc� ocabl� dcpositing «ith thc Trustcc or am othcr fiduciar�. in trust. non- callablc Dcfcasancc Obligations in such amount as an Indcpcndcnt Accountant shall dctcrminc «ill. P6—Ic �2. I c�;;\x72; ; x. x 21 togcthcr «ith thc intcrest to accruc thcrcon and a� ailablc monc� s thcn on dcposit in thc fiinds and accounts cstablishcd pursuant to thc Indcnturc or this Loan Agrccmcnt. bc fiill� sufficicnt to pa� and dischargc thc indcbtcdncss on thc Loans or such portion thcrcof (including all principal. intcrest and prcpa�mcnt prcmiums) at or bcforc maturit�: thcn. at thc cicction of thc Agcnc� but onl� if all othcr amounts thcn duc and pa� ablc hcrcundcr shall ha� c bccn paid or pro� ision for thcir pa� mcnt madc. thc plcdgc of and licn upon thc Ta� Rc� cnucs and othcr fiinds pro� idcd for in this Loan Agrccmcnt and all othcr obligations of thc Trustcc. thc Authorit� and thc Agcnc� undcr this Loan Agrccmcnt «ith respcct to thc Loans or such portion thcrcof shall ccasc and tcrminatc. c�ccpt onl� thc obligation of thc Agcnc� to pa� or causc to bc paid to thc Trustcc. from thc amounts so dcpositcd «ith thc Trustcc or such othcr fiduciar�. all sums duc «ith respcct to thc Loans or such portion thcrcof. and to pa� all c�pcnscs and costs of thc Trustcc «hcn and as such c�pcnscs and costs bccomc duc and pa�ablc. Noticc of such cicction shall bc filcd «ith thc Authorit� and thc Trustcc. Am fiinds thcrcaftcn c�ld b� thc Trustcc hcrcundcr. «hich arc not rcquircd for said purposc. shall bc paid o� cr to thc Agcnc� . Scction 6.�4. Amcndmcnt. This Loan Agrccmcnt ma� bc amcndcd b� thc partics hcrcto but onl� undcr thc circumstanccs sct forth in. and in accordancc «ith. thc pro� isions of Scction �.08 of thc Indcnturc. Thc Authorit� and thc Trustcc co� cnant that thc Indcnture shall not bc amcndcd. nor shall thc Authorit� agrcc or conscnt to am amcndmcnt of thc Indcnturc. «ithout thc prior «rittcn conscnt of thc Agcnc� (c�ccpt that such conscnt shall not bc rcquircd in thc c� cnt that an E� cnt of Dcfault shall ha� c occurrcd and bc continuing hcrcundcr). Scction 6.�. Wai� cr of Pcrsonal Liabilit� . No mcmbcr. officcr. agcnt or cmplo� cc of thc Agcnc� shall bc indi� iduall� or personall� liablc for thc pa� mcnt of thc principal of or intcrest on thc Loans: but nothing hcrcin containcd shall rclic� c am such mcmbcr. officcr. agcnt or cmplo� cc from thc performancc of am official dut� pro� idcd b� la« . Scction 6.6. Pa� mcnt on Busincss Da� s. Whcnc� cr in this Loan Agrccmcnt am amount is rcquircd to bc paid on a da� «hich is not a Busincss Da�. such pa� mcnt shall bc rcquircd to bc madc on thc Busincss Da� immcdiatcl� follo« ing such da�. pro� idcd that intcrest on such pa� mcnt shall not accruc from and aftcr such da� . Scction 6.7. Noticcs. Am noticc. rcqucst. complaint. dcmand or othcr communication undcr this Loan Agrccmcnt shall bc gi� cn in thc samc manncr as pro� idcd in Scction I I. I� of thc Indcnturc. «hich is hcrcb� incorporatcd. Scction 6.8. Surct� Bond. �to comc� Scction 6.9. Partial Im alidit� . If am Scction. paragraph. scntcncc. clausc or phrasc of this Loan Agrccmcnt shall for am rcason bc hcld illcgal. in� alid or uncnforccablc. such holding shall not affcct thc � alidit� of thc rcmaining portions of this Loan Agrccmcnt. Thc Agcnc� hcrcb� dcclares that it «ould ha� c adoptcd this Loan Agrccmcnt and cach and c� cr� othcr Scction. paragraph. scntcncc. clausc or phrasc hcrcof and authorizcd thc Loans irrespccti� c of thc fact that am onc or morc Scctions. paragraphs. scntcnccs. clauscs. or phrascs of this Loan Agrccmcnt ma� bc hcld illcgal. im alid or uncnforccablc. Scction 6.10. Articic and Scction Hcadin�s and Rcfcrcnccs. Thc hcadings or titics of thc sc� cral Articics and Scctions hcrcof. and am tablc of contcnts appcndcd to copics hcrcof. shall bc solcl� for con� cnicncc of rcfcrcncc and shall not affcct thc mcaning. construction or cffcct of this Loan Agrccmcnt. All rcfcrcnccs hcrcin to "Articics.�� "Scctions�� and othcr subdi� isions arc to thc P6—Ic �2. I c�;;\x72; ; x. x 22 corresponding Articics. Scctions or subdi� isions of this Loan Agrccmcnt: thc «ords "hcrcin.�� "hcrcof.�� "hcrcb�.�� "hcrcundcr � and othcr «ords of similar import rcfcr to this Loan Agrccmcnt as a«holc and not to am particular Articic. Scction or subdi� ision hcrcof: and «ords of thc masculinc gcndcr shall mcan and includc «ords of thc fcmininc and ncutcr gcndcrs. Scction 6. I I. E�ccution of Countcruarts. This Loan Agrccmcnt ma� bc c�ccutcd in am numbcr of countcrparts. cach of «hich shall for all purposcs bc dccmcd to bc an original and all of «hich shall togcthcr constitutc but onc and thc samc instrumcnt. Scction 6.12. Go� crnin� La« . This Loan Agrccmcnt shall bc construcd and go� crncd in accordancc «ith thc la« s of thc Statc. Scction 6. I�. Thc Trustcc. Thc Trustcc is cntcring into this Loan Agrccmcnt solcl� in its capacit� as Trustcc undcr thc Indcnturc and all pro� isions of thc Indcnturc rclating to thc rights. pri� ilcgcs. po« crs and protcctions of thc Trustcc shall appl� «ith cqual forcc and cffcct to all actions takcn b� thc Trustcc in conncction «ith this Loan Agrccmcnt. Thc Trustcc shall bc responsiblc onl� for thc dutics of thc Trustcc c�pressl� sct forth hcrcin. IN WITNESS WHEREOF. thc AGENCY. thc AUTHORITY and thc TRUSTEE ha� c causcd this Loan Agrccmcnt to bc signcd b� thcir respccti� c officcrs. all as of thc da� and � car first abo� c «rittcn. - - PALM DESERT REDEVELOPMENT AGENCY I� E�ccuti� c Dircctor PALM DESERT FINANCING AUTHORITY I� Chicf Administrati� c Officcr WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc I� Authorizcd Officcr PG—Icl2.lclii\872i;8.8 2� EXHIBIT A SCHEDULE OF SERIES 2006A LOAN PAYMENTSy Datc Princival Intcrest Total Pa�ablc scmiannuall� on thc fifth Busincss Da� prcccding cach Intcrest Pa�mcnt Datc P6—Ic �2. I c�;;\x72; ; x. x A— I ��►y:��:��r:� SCHEDULE OF SERIES 2006B LOAN PAYMENTS Datc Total Pa� mcnt PG—Icl2. I clii\872i ;8.8 B— I EXHIBIT C SCHEDULE OF SERIES 2006C LOAN PAYMENTSy Datc Princival Intcrest Total Pa� mcnt Datc Pa�ablc scmiannuall� on thc fifth Busincss Da� prcccding cach Intcrest P6—Ic �2. I c�;;\x72; ; x. x C— I Pa�ablc on thc fifth Busincss Da� prcccding cach August Ist P6—Ic �2. I c�;;\x72; ; x. x A-2 Indcnturc of Trust «ith rcfcrcncc to � Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2) 2006 Scrics D P6—Icl2.lcl;;\xxl;xcl.; RW(� UR�FI: �/22/2cu16 TABLE OF CONTENTS ARTICLE I DEFINITIONS: AUTHORIZATION AND PURPOSE OF BONDS: EQUALSECURITY ........................................................................ Scction I.01. Dcfinitions .......................................................................... Scction I.02. Rulcs of Construction .............................................................. Scction I.0 �. Authorization and Purposc of Bonds ....................................... Scction I.0�4. Equal Sccurit� ........................................................................ ARTICLE II ISSUANCE OF BONDS ..................................... Scction 2.01. Dcsignation ................................................ Scction 2.02. Tcrms of Bonds ......................................... Scction 2.0 �. Rcdcmption of Bonds ................................. Scction 2.0�4. Form of Bonds ........................................... Scction 2.Oi. E�ccution of Bonds .................................... Scction 2.06. Transfcr of Bonds ...................................... Scction 2.07. E�changc of Bonds .................................... Scction 2.08. Tcmporar� Bonds ...................................... Scction 2.09. Rcgistration Books ..................................... Scction 2.10. Bonds Mutilatcd. Lost. Dcstro� cd or Stolcn ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS: ISSUANCE OF BONDS ........................................................... Scction ;.01. Issuancc of Bonds ............................................................ Scction �.02. Loan Fund: Application of Procccds of Salc of Bonds ...... Scction ;.0;. Validit� of Bonds ............................................................. ARTICLE IV REVENUES: FLOW OF FUNDS ........................... Scction �4.01. Plcdgc of Rc� cnucs: Assignmcnt of Rights .... Scction �4.02. Rcccipt. Dcposit and Application of Rc� cnucs Scction �4.0;. In� cstmcnts .................................................... Scction �4.0�4. Valuation and Disposition of In� cstmcnts ...... ARTICLE V COVENANTS OF THE AUTHORITY ................................... Scction �.01. Punctual Pa� mcnt .......................................................... Scction �.02. E�tcnsion of Pa� mcnt of Bonds ...................................... Scction �.0�. Against Encumbranccs ................................................... Scction �.0�4. Po«cr to Issuc Bonds and Makc Plcdgc and Assignmcnt Scction �.0�. Accounting Rccords and Financial Statcmcnts ............... Scction �.06. No Additional Indcbtcdncss ........................................... Scction �.07. Ta� Co� cnants ............................................................... Scction �.08. Loan Agrccmcnt ............................................................ Scction �.09. Furthcr Assuranccs ........................................................ ARTICLE VI THE TRUSTEE ........................................... Scction 6.01. Appointmcnt of Trustcc ...................... Scction 6.02. Acccptancc of Tnists ........................... Scction 6.0 �. Fccs. Chargcs and E�pcnscs of Trustcc Scction 6.0�4. Noticc to O« ncrs of Dcfault ................ Pagc 2 2 y y y I� I� I� I� I� I� I �4 I �4 I� I� I� I� I� 16 16 16 16 17 ix ix ix ix 21 21 P6—Ic�2. I c�;;�xx I ;xc�. ; —�— Scction 6.0� Scction 6.06 Scction 6.07 Scction 6.08 Scction 6.09 Scction 6.10 Scction 6. I I Scction 6.12 Intcr� cntion b� Trustcc ................................. Rcmo� al of Trustcc ....................................... Rcsignation b� Trustcc .................................. Appointmcnt of Succcssor Trustcc ................ Mcrgcr or Consolidation ............................... Conccrning am Succcssor Trustcc ................ Appointmcnt of Co-Trustcc ........................... Indcmnification: Limitcd Liabilit� of Trustcc ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE Scction 7.01. Amcndmcnt Hcrcof ............................................................ Scction 7.02. Effcct of Supplcmcntal Indcnturc ....................................... Scction 7.0 �. Endorscmcnt or Rcplaccmcnt of Bonds Aftcr Amcndmcnt . ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES .......................... Scction 8.01. E� cnts of Dcfault .......................................................... Scction 8.02. Rcmcdics Upon E� cnt of Dcfault .................................. Scction 8.0 �. Application of Rc� cnucs and Othcr Funds Aftcr Dcfault Scction 8.0�4. Po« cr of Trustcc to Control Procccdings ....................... Scction 8.Oi. Appointmcnt of Rccci� crs ............................................. Scction 8.06. Non-Wai�cr .................................................................. Scction 8.07. Limitation on Rights and Rcmcdics of O« ncrs .............. Scction 8.08. Tcrmination of Procccdings .......................................... ARTICLE IX BOND INSURANCE ARTICLE X BOOK-ENTRY SYSTEM ................................................... Scction 10.01 Book-Entr� S� stcm: Limitcd Obligation of Authorit� Scction I 0.02 Rcprescntation Lcttcr ................................................ Scction 10.0 � Transfcrs Outsidc Book-Entr� S� stcm ....................... Scction 10.0�4 Pa�mcnts to thc Nomincc .......................................... Scction I O.Oi Initial Dcpositon and Nomincc ................................. ARTICLE XI MISCELLANEOUS ............................................................................. Scction I I.01. Limitcd Liabilit� of Authorit� ................................................... Scction I I.02. Bcncfits of Indcnturc Limitcd to Partics .................................... Scction I I.O�. Dischargc of Indcnturc .............................................................. Scction I 1.0�4. Succcssor Is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor Scction I I.0;. Contcnt of Ccrtificatcs .............................................................. Scction I I.06. E�ccution of Documcnts b� O« ncrs .......................................... Scction I 1.07. Disqualificd Bonds .................................................................... Scction I I.08. Wai� cr of Pcrsonal Liabilit� ...................................................... Scction I I.09. Partial In� alidit� ....................................................................... Scction I I.10. Dcstruction of Canccllcd Bonds ................................................ Scction I I. I I. Funds and Accounts .................................................................. Scction I I.12. Pa� mcnt on Busincss Da� s ........................................................ ScctionI I.I;. Noticcs ...................................................................................... Scction I 1.1 �4. Unclaimcd Monc� s ................................................................... Scction I I. I�. Go� crning La« ......................................................................... EXHIBIT A— FORM OF BOND 21 21 22 22 22 22 22 2� 2� 2� 2�4 2�4 2� 2� 2� 26 27 27 27 27 zx zx zx zx 29 29 29 29 29 29 �0 �0 �I �I �I �I �2 �2 �2 �2 �2 �2 ;; >> P6—Ic �2. I c �;;�xx I ;xc �. ; —>>— Indcnturc of Trust This Indcnturc of Trust (this "Indcnturc��) is madc and cntcrcd into as of Jul� I. 2006. b� and bct«ccn thc Palm Dcscrt Financing Authorit�. a joint po«crs authorit� dul� organizcd and �alidl� c�isting undcr thc la« s of thc Statc of California (thc "Authorit� ��) and Wclls Fargo Bank. National Association. a national banking association dul� organizcd and � alidl� c�isting undcr thc la«s of thc Unitcd Statcs of Amcrica. ha� ing a corporatc trust officc in Los Angcics. California. and bcing qualificd to acccpt and administcr thc trusts hcrcb� crcatcd (thc "Trustcc��). Rccitals A. Thc Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Agcnc� ��) is a rcdc� clopmcnt agcnc�. a public bod�. corporatc and politic. dul� crcatcd. cstablishcd and authorizcd to transact busincss and c�crcisc its po« crs. all undcr and pursuant to thc Rcdc� clopmcnt La«. and thc po« crs of thc Agcnc� includc thc po«cr to borro« monc� for am of its corporatc purposcs. B. A Rcdc� clopmcnt Plan for Projcct Arca No. 2 of thc Agcnc� (thc "Projcct Arca��) has bccn dul� appro� cd and adoptcd b� thc Cit� . C. Thc Authorit� is authorizcd to borro« monc� for thc purposc of making loans to thc Agcnc� to pro� idc financing for public capital impro� cmcnts of thc Agcnc� . D. For thc purposc of aiding in thc financing of rcdc� clopmcnt projccts for thc Projcct Arca. thc Authorit� has dctcrmincd to makc a loan (thc "Loan��) to thc Agcnc� undcr and pursuant to thc Projcct Arca No. 2 Loan Agrccmcnt (2006 Subordinatc Loan). datcd as of Jul� I. 2006 (thc "Loan Agrccmcnt��). b� and among thc Authorit�. thc Agcnc� and thc Trustcc. E. To pro� idc thc monc� s rcquircd to makc thc Loan undcr thc Loan Agrccmcnt. thc Authorit� has dctcrmincd to issuc its Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics D. in thc aggrcgatc initial principal amount of `f (thc "Bonds��). pursuant to and sccurcd b� this Indcnturc in thc manncr pro� idcd hcrcin. F. To pro� idc for thc authcntication and dcli� cr� of thc Bonds. to cstablish and dcclarc thc tcrms and conditions upon «hich thc Bonds arc to bc issucd and to sccurc thc pa� mcnt of thc principal thcrcof. prcmium. if am. and intcrest thcrcon. thc Authorit� has authorizcd thc c�ccution and dcli� cr� of this Indcnturc. NOW. THEREFORE. THIS INDENTURE WITNESSETH. that in ordcr to sccurc thc pa� mcnt of thc principal of. prcmium. if am. and intcrest on thc Bonds at am timc issucd and Outstanding undcr this Indcnturc. according to thcir tcnor. and to sccurc thc performancc and obscr� ancc of all thc co� cnants and conditions thcrcin and hcrcin sct forth. and to dcclarc thc tcrms and conditions upon and subjcct to «hich thc Bonds arc to bc issucd and recci� cd. and in considcration of thc prcmiscs and of thc mutual co� cnants hcrcin containcd and of thc purchasc and acccptancc of thc Bonds b� thc O« ncrs thcrcof. and for othcr � aluablc considcrations. thc rcccipt «hcrcof is hcrcb� ackno« Icdgcd. thc Authorit� hcrcb� co� cnants and agrccs «ith thc Trustcc. for thc bcncfit of thc O« ncrs of thc Bonds. as follo« s: P6—Ic �2. I c �;;\xx I ;xc �. ; — I — ARTICLE I DEFINITIONS: AUTHORIZATION AND PURPOSE OF BONDS: EQUAL SECURITY Scction I.01. Dcfinitions. Thc follo« ing tcrms shall for all purposcs of this Indcnturc and of am Supplcmcntal Indcnturc and of am ccrtificatc. opinion. rcqucst or othcr documcnts hcrcin mcntioncd ha� c thc mcanings ascribcd thcrcb� . In addition. thc tcrms dcfincd in Scction I.01 of thc Loan Agrccmcnt and not othcr« isc dcfincd in this Scction I.01 shall ha� c thc mcanings ascribcd thcrcb� in thc Loan Agrccmcnt. "Accrctcd Valuc�� mcans. «ith respcct to am Bond. as of am datc of calculation. thc sum of thc Initial Principal Amount thcrcof and thc intcrest accrucd thcrcon to such datc of calculation. compoundcd from thc Closing Datc at thc statcd � icld to maturit� thcrcof on cach Fcbruar� I and August I. assuming in am such scmiannual period that such Accrctcd Valuc incrcascs in cqual dail� amounts on thc basis of a�60-da� � car of t« cl� c�0-da� months. "Act�� mcans Articics I through �4 (commcncing «ith Scction 6�00) of Chaptcr �. Di� ision 7. Titic I of thc Go� crnmcnt Codc of thc Statc. as in c�istcncc on thc Closing Datc or as thcrcaftcr amcndcd from timc to timc. ..A r��.. mcans thc Palm Dcscrt Rcdc�clopmcnt Agcnc�. a rcdc�clopmcnt agcnc�. a public bod� corporatc and politic. dul� crcatcd. cstablishcd and authorizcd to transact busincss and c�crcisc its po«crs all undcr and pursuant to thc Rcdc� clopmcnt La«. and am succcssor to its dutics and fiinctions. "Authorit�� mcans thc Palm Dcscrt Financing Authorit�. a joint po«crs authorit� dul� organizcd and c�isting undcr thc Joint E�crcisc of Po«crs Agrccmcnt. datcd Januar� 26. 1989. b� and bct« ccn thc Cit� and thc Agcnc� . and undcr thc la« s of thc Statc. "Authorit� Commission�� mcans thc go� crning bod� of thc Authorit� . "Bond Counscl�� mcans Richards. Watson c�. Gcrshon. A Profcssional Corporation. Los Angcics. California. or a firm of attornc� s of fa� orablc rcputation in thc ficld of municipal bond la« . "Bond La«�� mcans thc Marks-Roos Local Bond Pooling Act of 198�. bcing Articic �4 of thc Act (commcncing «ith Scction 6�8�4). as in c�istcncc on thc Closing Datc or as thcrcaftcr amcndcd from timc to timc. "Bond Ycar � mcans cach t« cl� c-month period c�tcnding from August 2 in onc calcndar � car to August I of thc succccding calcndar � car. both datcs inclusi� c. c�ccpt that thc first Bond Ycar shall bcgin on thc Closing Datc and c�tcnd to and includc August I. 2006. "Bonds�� mcans thc Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics D. "Busincss Da� �� mcans am da� othcr than (i) a Saturda� or a Sunda� or (ii) am othcr da� on «hich thc Nc« York Stock E�changc or banks arc authorizcd or obligatcd b� la« or c�ccuti� c ordcr to closc in Nc« York. Nc« York. San Francisco. California. Los Angcics. California or am cit� in «hich thc Trust Officc is locatcd. P6—Ic �2. I c �;;\xx I ;xc �. ; —2— "Ccrtificatc�� mcans a ccrtificatc in «riting signcd b� am officcr of thc dcsignatcd public cntit�. dul� authorizcd b� its Icgislati� c bod� for that purposc. "Cit� �� mcans thc Cit� of Palm Dcscrt. a chartcr cit� and municipal corporation dul� organizcd and � alidl� c�isting undcr thc la« s of thc Statc. purchascr. "Closin� Datc�� mcans thc datc of dcli� cr� of thc Bonds to thc Undcr« ritcr as thc original "Codc�� mcans thc Intcrnal Rc� cnuc Codc of 1986. as a�ncndcd. "Count� �� mcans thc Count� of Ri� crsidc. "Dcfcasancc Obli�ations�� mcans (a) am obligations dcscribcd in paragraph A or B of thc dcfinition of "Pcrmittcd In� cstmcnts�� sct forth in this Scction or (b) collatcralizcd in� cstmcnt agrccmcnts. pro�idcd that (i) thc countcrpart� to am such agrccmcnt shall bc a domcstic bank or forcign bank «ith a scnior unsccurcd dcbt rating of AAA b� Sc�.P and Aaa b� Mood� �s: a domcstic or Canadian lifc insurancc compam «ith a claims-pa� ing or financial strcngth rating of AAA and Aaa b� Sc�.P and Mood� �s. respccti�cl�: a«holl�-o«ncd and guarantccd financial institution subsidiar� of onc of thc abo� c mcntioncd institutions: an insurancc holding compam. ratcd AAA and Aaa. b� Sc�.P and Mood� �s respccti� cl� : or a domcstic financial guarant� insurancc compam or an affiliatc of a domcstic financial guarant� insurancc compam. «hosc obligations arc fiill� guarantccd b� an affiliatc or thc parcnt compam «hich has a rating of AAA and Aaa b� Sc�.P and Mood� �s. respccti� cl� : (ii) am such agrccmcnt shall bc collatcralizcd b� sccuritics issucd or guarantccd b� thc Unitcd Statcs go� crnmcnt. thc Go� crnmcnt National Mortgagc Association. thc Fcdcral Homc Loan Mortgagc Corporation or thc Fcdcral National Mortgagc Association. or municipal. corporatc. assct-backcd and mortgagc-backcd obligations ratcd AAA and Aaa b� Sc�.P and Mood� �s. respccti� cl� : thc countcrpart� must grant to thc Trustcc or thc agcnt holding thc collatcral for thc Trustcc a first perfcctcd sccurit� intcrest in all collatcral dcli� crcd pursuant to thc agrccmcnt and in all procccds of thc collatcral: and thc collatcral must bc dcli� crcd frcc and cicar of claims of am third partics and must bc rcgistcrcd in thc namc of thc Trustcc or agcnt: and (iii) thc � aluc of thc collatcral. «hich shall bc � alucd b� thc Trustcc or thc collatcral agcnt «cckl�. must bc cqual to at Icast 10� perccnt of thc amount of cash transfcrrcd b� or on bchalf of thc Authorit� to thc countcrpart� plus accrucd intcrest. "Dcpositor�� mcans Thc Dcpositor� Trust Compam. Nc« York. Nc« York. and its succcssors and assigns as sccuritics dcpositor� for thc Bonds. or am othcr sccuritics dcpositor� acting as Dcpositor� undcr Articic X. "E� cnt of Dcfault�� mcans am of thc c� cnts dcscribcd in Scction 8.01. P6—Ic�2. I c�;;\xx I ;xc�. ; —;— "Fiscal Ycar � mcans am t« cl� c-month period c�tcnding from Jul� I in onc calcndar � car to Junc �0 of thc succccding calcndar � car. both datcs inclusi� c. or am othcr t« cl� c-month period scicctcd and dcsignatcd b� thc Authorit� as its official fiscal � car period. "Indcnturc�� mcans this Indcnturc of Trust. as ma� from timc to timc bc supplcmcntcd. modificd or amcndcd b� am Supplcmcntal Indcnturc pursuant to thc pro� isions hcrcof. "Indcucndcnt Accountant�� mcans am ccrtificd public accountant or firm of ccrtificd public accountants appointcd and paid b� thc Authorit�. and «ho. or cach of «hom (i) is in fact indcpcndcnt and not undcr domination of thc Authorit�. thc Cit� or thc Agcnc�: (ii) docs not ha� c am substantial intcrest. dircct or indircct. in thc Authorit�. thc Cit� or thc Agcnc�: and (iii) is not conncctcd «ith thc Authorit�. thc Cit� or thc Agcnc� as an officcr or cmplo� cc of thc Authorit�. thc Cit� or thc Agcnc� but «hom ma� bc rcgularl� rctaincd to makc annual or othcr audits of thc books of or rcports to thc Authorit� . thc Cit� or thc Agcnc� . "Information Scr� iccs�� mcans Financial Information. Inc. �s "Dail� Callcd Bond Scr� icc. �0 Montgomcr� Strcet. IOth Floor. Jcrsc� Cit�. Nc« Jcrsc� 07�02. Attcntion: Editor: Mcrgcnt�s "Municipal and Go� crnmcnt.�� 2�0 77 Ccntcr Dri� c. Suitc I�0. Charlottc. North Carolina 28217. Attcntion: Callcd Bond Dcpartmcnt: and Kcnm Sc�.P. �� Watcr Strcct. �4� Floor. Nc« York. Nc« York 100�41. Attcntion: Notification Dcpartmcnt: or. in accordancc «ith thcn-currcnt guidclincs of thc Sccuritics and E�changc Commission. such othcr addresscs and/or such othcr scr� iccs pro� iding information «ith respcct to callcd bonds as thc Agcnc� ma� dcsignatc to thc Trustcc in «riting. "Initial Princival Amount.�� «ith respcct to am Bond. mcans thc initial principal amount thcrcof as of thc Closing Datc. ..Insurancc Pa� in� A�cnt�� mcans or its succcssors undcr thc Insurancc Polic�. "Insurancc Polic�� mcans thc municipal bond insurancc polic� issucd b� thc Insurcr insuring thc pa� mcnt «hcn duc of thc principal of and intcrest on thc Bonds. ..Insurcr � mcans "Loan A�rccmcnt�� mcans thc Projcct Arca No. 2 Loan Agrccmcnt (2006 Subordinatc Loan). datcd as of Jul� I. 2006. b� and among thc Authorit�. thc Agcnc� and thc Trustcc. rclating to thc Loan. as ma� from timc to timc bc supplcmcntcd. modificd or amcndcd. Agcnc� . to Scction �.02. maturit� . "Loan�� mcans thc Loan. as dcfincd in thc Loan Agrccmcnt. madc b� thc Authorit� to thc "Loan Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant "Maturit� Amount.�� «ith respcct to am Bond. mcans thc Accrctcd Valuc thcrcof at "Mood� �s�� mcans Mood� �s In� cstors Scr� icc. its succcssors and assigns. "Nomincc�� mcans thc nomincc of thc Dcpositor�. «hich ma� bc thc Dcpositor�. as dctcrmincd from timc to timc pursuant to Articic X. P6—Icl2.lclii\xxl ;xcl.; —.�— "Outstandin�.�� «hcn uscd as of am particular timc «ith rcfcrcncc to Bonds. mcans (subjcct to thc pro� isions of Scction I I.07) all Bonds thcrctoforc c�ccutcd. issucd and dcli� crcd b� thc Autl�orit� undcr this Indcnturc c�ccpt (i) Bonds thcrctoforc canccllcd b� thc Trustcc or surrcndcrcd to thc Trustcc for canccllation. (ii) Bonds paid or dccmcd to ha� c bccn paid «ithin thc mcaning of Scction I I.0 �. and (iii) Bonds in licu of or in substitution for «hich othcr Bonds shall ha� c bccn c�ccutcd. issucd and dcli� crcd pursuant to this Indcnturc. "O« ncr � mcans thc person in «hosc namc thc o« ncrship of am Bond or Bonds shall bc rcgistcrcd on thc Rcgistration Books. "Particivants�� mcans thosc brokcr-dcalcrs. banks and othcr financial institutions from timc to timc for «hich thc Dcpositor� holds Bonds as sccuritics dcpositor� . ..Pa� in� A�cnt�� mcans thc Trustcc. "Pcrmittcd In� cstmcnts�� mcans am of thc follo« ing «hich at thc timc of im cstmcnt arc Icgal in� cstmcnts undcr thc la« s of thc Statc for thc monc� s proposcd to bc in� cstcd thcrcin: A. Dircct obligations of thc Unitcd Statcs of Amcrica (including obligations issucd on c�ld in book-cntn form on thc books of thc Dcpartmcnt of thc Trcasun. and CATS and TIGRS) or obligations thc principal of and intcrest on «hich arc unconditionall� guarantccd b� thc Unitcd Statcs of Amcrica. For purposcs of this paragraph A. "obligations thc principal of and intcrest on «hich arc unconditionall� guarantccd b� thc Unitcd Statcs of Amcrica�� includc «ithout limitation ta� c�cmpt obligations of a statc or a political subdi� ision thcrcof «hich ha� c bccn dcfcascd undcr irrc� ocablc cscro« instructions «ith non-callablc obligations for «hich thc fiill faith and crcdit of thc Unitcd Statcs of Amcrica arc plcdgcd for thc pa� mcnt of principal and intcrest and «hich arc ratcd "Aaa�� b� Mood� �s and "AAA�� b� Sc�'.P. B. Bonds. dcbcntures. notcs or othcr c� idcncc of indcbtcdncss issucd or guarantccd b� am of thc follo« ing fcdcral agcncics. pro� idcd such obligations arc backcd b� thc fiill faith and crcdit of thc Unitcd Statcs of Amcrica (pro� idcd that strippcd sccuritics arc onl� permittcd if thc� ha� c bccn strippcd b� thc agcnc� itscl�: Unitcd Statcs E�uort-Imuort Bank (E�imbank) Dircct obligations or fiill� guarantccd ccrtificatcs of bcncficial o« ncrship - Farmcrs Homc Administration (FmHA) Ccrtificatcs of bcncficial o« ncrship Fcdcral Financin� Bank �4. Fcdcral Housin� Administration Dcbcntures (FHA) Gcncral Scr� iccs Administration Participation ccrtificatcs 6. Go� crnmcnt National Mort�a�c Association (GNMA or "Ginnic Mac") GNMA - guarantccd mortgagc-backcd bonds GNMA - guarantccd pass-through obligations P6—Ic�2. I c�;;\xx I ;xc�. ; —�— Unitcd Statcs Maritimc Administration Guarantccd Titic XI financing Unitcd Statcs Dcuartmcnt of Housin� and Urban Dc� clonmcnt (HUD) Projcct Notcs Local Authorit� Bonds Nc« Communitics Dcbcntures - Unitcd Statcs go� crnmcnt guarantccd dcbcntures Unitcd Statcs Public Housing Notcs and Bonds - Unitcd Statcs go� crnmcnt guarantccd public housing notcs and bonds C. Bonds. dcbcntures. notcs or othcr c� idcncc of indcbtcdncss issucd or guarantccd b� am of thc follo« ing non-fiill faith and crcdit Unitcd Statcs go� crnmcnt agcncics (pro� idcd that strippcd sccuritics arc onl� permittcd if thc� ha� c bccn strippcd b� thc agcnc� itscl�: Fcdcral Homc Loan Bank S� stcm Scnior dcbt obligations Fcdcral Homc Loan Mort�a�c Coruoration (FHLMC or "Frcddic Mac") - - - Participation Ccrtificatcs Scnior dcbt obligations Fcdcral National Mort�a�c Association (FNMA or "Fa��nic Mac") - - Mortgagc-backcd sccuritics and scnior dcbt obligations �4. Studcnt Loan Markctin� Association (SLMA or "Sallic Mac��) Scnior dcbt obligations Rcsolution Fundin� Coru. (REFCORP) obligations D. Monc� markct fiinds. including fiinds for «hich thc Tnistcc or its affiliatcs pro� idc in� cstmcnt ad� isor� or othcr managcmcnt scr� iccs. rcgistcrcd undcr thc In� cstmcnt Compam Act of 19�40. «hosc shares arc rcgistcrcd undcr thc Sccuritics Act of 19>;. and ha� ing a rating b� Sc�.P of AAAm-G. AAAm. or AAm and. if ratcd b� Mood� �s. ratcd Aaa. Aa I or Aa2. E. Ccrtificatcs of dcposit sccurcd at all timcs b� collatcral dcscribcd in A and/or B abo� c: pro� idcd that such ccrtificatcs must bc issucd b� commcrcial banks (including thc Trustcc and its affiliatcs). sa� ings and loan associations or mutual sa� ings banks and pro� idcd fiirthcr that thc collatcral must bc hcld b� a third part� and thc Trustcc on bchalf of thc O« ncrs must ha� c a perfcctcd first sccurit� intcrest in thc collatcral. F. Ccrtificatcs of dcposit. sa� ings accounts. dcposit accounts or monc� markct dcposits «hich arc fiill� insurcd b� thc Fcdcral Dcposit Insurancc Corporation. including thosc of thc Trustcc and its affiliatcs. G. In� cstmcnt agrccmcnts. including guarantccd in� cstmcnt contracts (GICs). Fon�ard Purchasc Agrccmcnts and Rcscr� c Fund Put Agrccmcnts acccptablc to thc Insurcr. P6—Ic �2. I c �;;\xx I ;xc �. ; —6— H. Commcrcial paper ratcd. at thc timc of purchasc. "Primc - I�� b� Mood� �s and "A- I" or bcttcr b� Sc�.P. I. Bonds or notcs issucd b� am statc or municipalit� «hich arc ratcd b� Mood� �s and Sc�.P in onc of thc t« o highcst rating catcgorics assigncd b� such agcncics. J. Fcdcral fiinds or bankcrs acccptanccs «ith a ma�imum tcrm of onc � car of am bank (including thc Trustcc and its affiliatcs) «hich has an unsccurcd. uninsurcd and unguarantccd obligation rating of "Primc - I�� or "A �� or bcttcr b� Mood� �s and "A- I�� or "A�� or bcttcr b� Sc�.P. K. Rcpurchasc Agrccmcnts. «hich arc appro� cd b� thc Insurcr. and «hich pro� idc for thc transfcr of sccuritics from a dcalcr bank or sccuritics firm (scllcr/borro« cr) to thc Trustcc or third part� custodian. as thc casc ma� bc (bu� cr/Icndcr). and thc transfcr of cash from thc Trustcc to thc dcalcr bank or sccuritics firm «ith an agrccmcnt that thc dcalcr bank or sccuritics firm «ill rcpa� thc cash plus a� icld to thc Trustcc in c�changc for thc sccuritics at a spccificd datc. L. Thc Local Agcnc� In� cstmcnt Fund in thc Statc Trcasur� or am similar poolcd in� cstmcnt fiind administcrcd b� thc Statc. to thc c�tcnt such in� cstmcnt is hcld in thc namc and to thc crcdit of thc Trustcc. M. Mcdium-tcrm notcs issucd b� corporations organizcd and operating «ithin thc Unitcd Statcs or b� dcpositor� institutions liccnscd b� thc Unitcd Statcs or am statc and operating «ithin thc Unitcd Statcs. Such notcs shall ha� c a minimum crcdit rating of "Aa �� b� Mood� �s and "AA-�� b� Sc�.P at timc of purchasc. and shall maturc «ithin thrcc � cars or Icss. N. Shares of bcncficial intcrest issucd b� thc California Assct Managcmcnt Trust. a common la« trust cstablishcd undcr thc la« s of thc Statc. "Princival Account�� mcans thc account b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �4.02(b)(2). "Principal Amount�� mcans. as of am datc of calculation. «ith respcct to am portion of thc Bonds. thc Accrctcd Valuc thcrcof. "Proicct Arca�� mcans. unlcss thc contc�t cicarl� rcquires othcr« isc. thc projcct arca dcscribcd and dcfincd in thc Rcdc� clopmcnt Plan appro� cd and adoptcd b� thc Cit� b� its Ordinancc No. �09. - - "Rcdcmution Account�� mcans thc account b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �4.02(b)( �). "Rcdc� cloumcnt La« �� mcans thc Communit� Rcdc� clopmcnt La«. bcing California Hcalth and Safct� Codc Scction >;000. ct scq.. and all firturc acts supplcmcntal thcrcto or amcndator� thcrcof. "Rcdc� cloumcnt Plan�� mcans thc Rcdc� clopmcnt Plan for thc Projcct Arca. appro� cd and adoptcd b� thc Cit� b� its Ordinancc No. �09 and includcs am amcndmcnt of thc Rcdc� clopmcnt Plan hcrctoforc on c�rcaftcr madc pursuant to la«. "Rc�istration Books�� mcans thc rccords maintaincd b� thc Trustcc pursuant to Scction 2.09 for thc rcgistration and transfcr of o« ncrship of thc Bonds. P6—Icl2.lclii\xxl ;xcl.; —7— ..Rcport•• mcans a documcnt in «riting signcd b� an Indcpcndcnt Rcdc� clopmcnt Consultant and including: (i) a statcmcnt that thc person or firm making or gi� ing such Rcport has rcad thc pertincnt pro� isions of thc documcnt or documcnts to «hich such Rcport rclatcs: (ii) a bricf statcmcnt as to thc naturc and scopc of thc c�amination or in� cstigation upon «hich thc Rcport is bascd: and (iii) a statcmcnt that. in thc opinion of such person or firm. sufficicnt c�amination or in� cstigation «as madc as is ncccssan to cnablc said consultant to c�press an informcd opinion «ith respcct to thc subjcct mattcr rcfcrrcd to in thc Rcport. "Rcurescntation Lcttcr � mcans thc Blankct Issucr Lcttcr of Rcprescntations. datcd Jul� I. 1997. from thc Authorit� to thc Dcpositor�. qualif� ing bonds issucd b� thc Authorit� for thc Dcpositor� �s book-cntn s� stcm. "Rc ucst�� mcans a rcqucst in «riting signcd b� am officcr of thc dcsignatcd public cntit� dul� authorizcd b� its Icgislati� c bod� for that purposc. "Rc� cnuc Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �4.02(a). "Rc� cnucs�� mcans (i) all amounts pa� ablc b� thc Agcnc� pursuant to Scction 2. � or Scction 2.�4 of thc Loan Agrccmcnt: (ii) am procccds of thc Bonds originall� dcpositcd «ith thc Trustcc and all monc�s dcpositcd and hcld from timc to timc b� thc Trustcc in thc fiinds and accounts cstablishcd hcrcundcr: and (iii) incomc and gains «ith respcct to thc in� cstmcnt of amounts on dcposit in thc fiinds and accounts cstablishcd hcrcundcr. othcr than amounts pa�ablc to thc Unitcd Statcs of Amcrica pursuant to Scction �.07. "Sc�.P�� mcans Standard c�. Poor�s Ratings Scr� iccs and its succcssors and assigns. "Sccuritics Dcuositorics�� mcans Thc Dcpositor� Tnist Compam. �� Watcr Strcct. �0`�' Floor. Nc« York. Nc« York. 100�41. Attn: Call Notification Dcpartmcnt. Fa� (212) 8��-72 �2: and. in accordancc «ith thcn currcnt guidclincs of thc Sccuritics and E�changc Commission. such othcr addresscs or such othcr sccuritics dcpositorics as thc Authorit� ma� dcsignatc in a Ccrtificatc of thc Authorit� dcli� crcd to thc Trustcc. "Statc�� mcans thc Statc of California. "Suuulcmcntal Indcnturc�� mcans am indcnturc. agrccmcnt or othcr instrumcnt hcrcaftcr dul� c�ccutcd b� thc Authorit� and thc Trustcc in accordancc «ith thc pro� isions of Scction 7.01. "Ta� Rc�ulations�� mcans tcmporar� and permancnt rcgulations promulgatcd undcr or «ith respcct to Scction I 0� and Scctions I�4 I through I�0. inclusi� c. of thc Codc. "Trust Officc�� mcans thc corporatc trust officc of thc Trustcc at thc address sct forth in Scction I I. I� or such othcr officcs as ma� bc spccificd to thc Authorit� b� thc Trustcc in «riting. With respcct to prescntation of Bonds for pa� mcnt or for rcgistration of transfcr and c�changc such tcrm shall mcan thc officc or agcnc� of thc Trustcc at «hich. at am particular timc. its corporatc trust busincss shall bc conductcd. "Trustcc�� mcans Wclls Fargo Bank. National Association. and its succcssors and assigns. and am othcr corporation or association «hich ma� at am timc bc substitutcd in its placc as pro� idcd in Articic VI. "Undcr« ritcr � mcans Citigroup Global Markcts Inc. P6—Icl2.lclii\xxl ;xcl.; —8— Scction I.02. Rulcs of Construction. All rcfcrcnccs in this Indcnturc to "Articics.�� "Scctions.�� and othcr subdi� isions. unlcss indicatcd othcr« isc. arc to thc corresponding Articics. Scctions or subdi� isions of this Indcnturc: and thc «ords "hcrcin.�� "hcrcof.�� "hcrcundcr.�� and othcr «ords of similar import rcfcr to this Indcnturc as a«holc and not to am particular Articic. Scction or subdi� ision hcrcof. Scction I.0 �. Authorization and Puruosc of Bonds. Thc Authorit� has rc� ic« cd all procccdings hcrctoforc takcn rclati� c to thc authorization of thc Bonds and has found. as a result of such rc� ic«. and hcrcb� finds and dctcrmincs that all things. conditions. and acts rcquircd b� la« to c�ist. happcn and bc performcd prcccdcnt to and in thc issuancc of thc Bonds do c�ist. ha� c happcncd and ha� c bccn performcd in duc timc. form and manncr as rcquircd b� la«. and thc Authorit� is no« authorizcd undcr thc Bond La« and cach and c� cr� rcquircmcnt of la«. to issuc thc Bonds in thc manncr and form pro� idcd in this Indcnturc. Thc Authorit� hcrcb� authorizcs thc issuancc of thc Bonds pursuant to thc Bond La« and this Indcnturc for thc purposc of pro� iding fiinds to makc thc Loan to thc Agcnc� pursuant to thc Loan Agrccmcnt. Scction I.0�4. Equal Sccurit� . In considcration of thc acccptancc of thc Bonds b� thc O«ncrs thcrcof. this Indcnture shall bc dccmcd to bc and shall constitutc a contract among thc Authorit�. thc Trustcc and thc O« ncrs of thc Bonds: and thc co� cnants and agrccmcnts hcrcin sct forth to bc performcd on bchalf of thc Authorit� shall bc for thc cqual and proportionatc bcncfit. sccurit� and protcction of all O« ncrs of thc Bonds «ithout prcfcrcncc. priorit� or distinction as to sccurit� or othcn� isc of am of thc Bonds o� cr am of thc othcrs b� rcason of thc numbcr or datc thcrcof or thc timc of salc. c�ccution or dcli� cn thcrcof. or othcr« isc for a�� causc «hatsoc� cr. c�ccpt as c�pressl� pro�idcd thcrcin on c�rcin. ARTICLE II ISSUANCE OF BONDS Scction 2.01. Dcsi�nation. Thc Bonds shall bc dcsignatcd thc Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics D and shall bc issucd in thc aggrcgatc Initial Principal Amount of `f . Scction 2.02. Tcrms of Bonds. (a) Thc Bonds shall bc issucd in fiill� rcgistcrcd form in am dcnominations of Initial Principal Amount but shall rcflcct dcnominations of `f �.000 Maturit� Amount or am intcgral multiplc thcrcof. No Bond shall ha� c morc than onc maturit� datc. Thc Bonds shall bc datcd thc Closing Datc. shall maturc on August I in cach of thc � cars and in thc Maturit� Amounts sct forth in thc follo« ing schcdulc. Thc Bonds shall bc dcli� crcd on thc Closing Datc in thc aggrcgatc Initial Principal Amounts sct forth bclo«. Intcrest on thc Initial Principal Amount of thc Bonds shall accruc and compound at thc � icld to thcir maturit� sct forth bclo« (such intcrest bcing cqual to thc diffcrcncc bct«ccn thc Maturit� Amounts and thc Initial Principal Amounts thcrco�: Maturit� Datc (Au�ust I ) Maturit� Amount Initial Initial Principal Yicld to Principal Amount per `f �.000 Maturit� Amount Maturit� Amount Datc P6—Icl2.lclii\xxl ;xcl.; —9— Intcrest on cach Bond shall bc compoundcd scmi-annuall� at thc � icld sct forth abo� c from thc Closing Datc on cach Fcbruar� I and August I. commcncing August I. 2006. until maturit� or carlicr rcdcmption thcrcof. computcd using a� car of �60 da� s of t« cl� c�0-da� months and shall bc pa�ablc (i) at maturit� as part of thc Maturit� Amount. or (ii) at rcdcmption as part of thc Accrctcd Valuc to thc rcdcmption datc. Thc Maturit� Amount. or thc Accrctcd Valuc and redcmption prcmium (if am ). as applicablc. «ith respcct to am Bond shall bc paid upon prescntation and surrcndcr thcrcof. at maturit� or thc prior rcdcmption thcrcof. at thc Trust Officc. in la« fiil monc� of thc Unitcd Statcs of Amcrica Scction 2.0 �. Rcdcmution of Bonds. (a) Outional Rcdcmution. In thc c� cnt that thc Agcnc� shall c�crcisc its option to prcpa� installmcnts of thc Loan pursuant to Scction 2.�4(a) of thc Loan Agrccmcnt. thc Rc� cnucs dcri� cd from such prcpa� mcnt shall bc applicd to thc rcdcmption of thc Bonds maturing on or aftcr August I. 20 . as a«holc. or in part among maturitics as dcsignatcd in «riting b� thc Authorit� and b� lot «ithin a maturit�. in intcgral multiplcs of `f �.000 of Maturit� Amount. on am Fcbruar� I or August I on or aftcr August I. 20 . at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc Accrctcd Valuc of thc callcd Bonds on thc datc fi�cd for rcdcmption): Rcdcmption Rcdcmption Datcs Pricc August I. 20_ and Fcbruar� I. 20_ '%� August I. 20_ and Fcbruar� I. 20_ August I. 20_ and thcrcaftcr Thc Authorit� shall pro� idc «rittcn noticc to thc Trustcc of am rcdcmption pursuant to this Scction 2.0 �(b)( I) at Icast �4� but not morc than 90 da� s prior to thc datc fi�cd for such rcdcmption. (b) � Rcscr� cd�. (c) Gcncral Rcdcmution Pro� isions ( I) Noticc of Rcdcmution. Thc Tnistcc on bchalf and at thc c�pcnsc of thc Authorit� shall mail (b� first class mail) noticc of am rcdcmption to thc respccti� c O« ncrs of am Bonds dcsignatcd for rcdcmption at thcir respccti� c addresscs appcaring on thc Rcgistration Books and. b� such mcans acccptablc to thc follo« ing institutions. to thc Sccuritics Dcpositorics and to onc or morc Information Scr� iccs. at Icast �0 but not morc than 60 da� s prior to thc datc fi�cd for rcdcmption: uro� idcd. ho« c� cr. that ncithcr failurc to rccci� c am such noticc so mailcd nor am dcfcct thcrcin shall affcct thc � alidit� of thc procccdings for thc rcdcmption of such Bonds or thc ccssation of thc accrual of intcrest thcrcon. Such noticc shall statc thc datc of thc noticc. thc rcdcmption datc. thc rcdcmption placc and thc rcdcmption pricc and shall dcsignatc thc CUSIP numbcrs. thc Bond numbcrs (but onl� if Icss than all of thc Outstanding Bonds arc to bc rcdccmcd) and thc maturit� or maturitics of thc Bonds (in thc c� cnt of rcdcmption of all of thc Bonds of such maturit� or maturitics in «holc) to bc rcdccmcd. and shall rcquire such Bonds bc thcn surrcndcrcd at thc Trust Officc of thc Trustcc in Los Angcics. California (or such othcr location as dcsignatcd b� thc Trustcc) for rcdcmption at thc rcdcmption pricc. gi� ing noticc also that fiirthcr intcrest on such Bonds «ill not accruc from and aftcr thc rcdcmption datc. P6—Ic �2. I c�;;\xx I;xc �. ; — I 0— (2) Scicction of Bonds for Rcdcmution. Whcnc� cr pro� ision is madc in this Indcnturc for thc rcdcmption of Icss than all of such Bonds of am maturit�. thc Trustcc shall scicct thc Bonds to bc rcdccmcd from all Bonds of such maturit� not prc� iousl� callcd for rcdcmption. b� lot in am manncr «hich thc Trustcc in its solc discrction shall dccm appropriatc undcr thc circumstanccs. For purposcs of sciccting Bonds «ithin a maturit� for rcdcmption. all Bonds shall bc dccmcd to bc compriscd of scparatc ��.000 Maturit� Amount portions and such portions shall bc trcatcd as scparatc bonds «hich ma� bc scparatcl� rcdccmcd. (�) Partial Rcdcmution of Bonds. In thc c� cnt onl� a portion of am Bond is callcd for rcdcmption. thcn upon surrcndcr of such Bond thc Authorit� shall c�ccutc and thc Trustcc shall authcnticatc and dcli� cr to thc O« ncr thcrcof. at thc c�pcnsc of thc Authorit�. a nc« Bond or Bonds of thc likc tcnor and maturit� datc. of authorizcd dcnominations in aggrcgatc Maturit� Amount cqual to thc unrcdccmcd portion of thc Bond to bc rcdccmcd. (�4) Effcct of Rcdcmution. From and aftcr thc datc fi�cd for rcdcmption. if fiinds a� ailablc for thc pa� mcnt of thc principal of. intcrest on and prcmium. if am. on thc Bonds so callcd for rcdcmption shall ha� c bccn dul� pro� idcd. such Bonds so callcd shall ccasc to bc cntiticd to am bcncfit undcr this Indcnturc othcr than thc right to rccci� c pa� mcnt of thc rcdcmption pricc. and no intcrest shall accruc thcrcon from and aftcr thc rcdcmption datc spccificd in such noticc. All Bonds rcdccmcd pursuant to this Scction shall bc dcstro� cd. Scction 2.0�4. Form of Bonds. Thc Bonds. thc Trustcc�s ccrtificatc of authcntication. and thc form of assignmcnt to appcar thcrcon shall bc substantiall� in thc respccti� c forms sct forth in E�hibit A attachcd hcrcto and b� this rcfcrcncc incorporatcd hcrcin. «ith ncccssar� or appropriatc �ariations. omissions and inscrtions. as permittcd or rcquircd b� this Indcnturc. Scction 2.0�. E�ccution of Bonds. Thc Bonds shall bc signcd in thc namc and on bchalf of thc Authorit� «ith thc manual or facsimilc signatures of its Presidcnt and attcstcd «ith thc manual or facsimilc signaturc of its Sccrctar� or am dcput� dul� appointcd b� thc Authorit� Commission. and shall bc dcli� crcd to thc Trustcc for authcntication b� it. In casc am officcr of thc Authorit� «ho shall ha� c signcd am of thc Bonds shall ccasc to bc such officcr bcforc thc Bonds so signcd shall ha� c bccn authcnticatcd or dcli� crcd b� thc Trustcc or issucd b� thc Authorit�. such Bonds ma� nc� crthcicss bc authcnticatcd. dcli� crcd and issucd and. upon such authcntication. dcli� cr� and issuc. shall bc as binding upon thc Authorit� as though thc indi� idual «ho signcd thc samc had continucd to bc such officcr of thc Authorit� . Also. am Bond ma� bc signcd on bchalf of thc Authorit� b� am indi� idual «ho on thc actual datc of thc c�ccution of such Bond shall bc thc proper officcr although on thc nominal datc of such Bond such indi� idual shall not ha� c bccn such officcr. Onl� such of thc Bonds as shall bcar thcrcon a ccrtificatc of authcntication in substantiall� thc form sct forth in E�hibit A manuall� c�ccutcd b� thc Trustcc. shall bc �alid or obligator� for am purposc or cntiticd to thc bcncfits of this Indcnturc. and such ccrtificatc of thc Trustcc shall bc conclusi� c c� idcncc that thc Bonds so authcnticatcd ha� c bccn dul� authcnticatcd and dcli� crcd hcrcundcr and arc cntiticd to thc bcncfits of this Indcnturc. Scction 2.06. Transfcr of Bonds. Am Bond ma�. in accordancc «ith its tcrms. bc transfcrrcd. upon thc Rcgistration Books. b� thc person in «hosc namc it is rcgistcrcd. in person or b� thc O« ncr's dul� authorizcd attornc�. upon surrcndcr of such Bond for canccllation. accompanicd b� dcli� cr� of a«rittcn instrumcnt of transfcr in a form acccptablc to thc Trustcc. dul� c�ccutcd. Whcnc� cr am Bond shall bc surrcndcrcd for transfcr. thc Authorit� shall c�ccutc and thc Trustcc shall thcrcupon authcnticatc and dcli� cr to thc transfcrcc a nc« Bond or Bonds of thc samc scrics and of likc tcnor. maturit� and aggrcgatc principal amount. Thc cost of printing am Bonds and am scr� iccs rcndcrcd or c�pcnscs incurrcd b� thc Trustcc in conncction «ith am such transfcr shall bc paid b� thc Authorit�. P6—Ic�2.lc��\xxl �xc�.; —I I— c�ccpt that thc Trustcc shall rcquirc thc pa� mcnt b� thc O« ncr rcqucsting such transfcr of am ta� or othcr go� crnmcntal chargc rcquircd to bc paid «ith respcct to such transfcr. Thc Trustcc shall not bc rcquircd to transfcr. pursuant to this Scction 2.06. cithcr (i) am Bond during thc period cstablishcd b� thc Trustcc for thc scicction of Bonds for rcdcmption. or (ii) am Bond scicctcd for rcdcmption pursuant to Scction 2.0 �. Scction 2.07. E�chan�c of Bonds. Bonds ma� bc c�changcd at thc Trust Officc for thc samc aggrcgatc Maturit� Amount of Bonds of thc samc tcnor and maturit� and of othcr authorizcd dcnominations. Thc cost of printing am Bonds and am scr� iccs rcndcrcd or c�pcnscs incurrcd b� thc Trustcc in conncction «ith am such c�changc shall bc paid b� thc Authorit�. c�ccpt that thc Trustcc shall rcquirc thc pa� mcnt b� thc O« ncr rcqucsting such c�changc of am ta� or othcr go� crnmcntal chargc rcquircd to bc paid «ith respcct to such c�changc. Thc Trustcc shall not bc rcquircd to c�changc. pursuant to this Scction 2.07. cithcr (i) am Bond during thc period cstablishcd b� thc Trustcc for thc scicction of Bonds for rcdcmption. or (ii) am Bond scicctcd for rcdcmption pursuant to Scction 2.0 �. Scction 2.08. Tcmuorar� Bonds. Thc Bonds ma� bc issucd initiall� in tcmporar� form c�changcablc for dcfiniti� c Bonds «hcn rcad� for dcli� cr� . Thc tcmporar� Bonds ma� bc printcd. lithographcd or t� pc« rittcn. shall bc of such dcnominations as ma� bc dctcrmincd b� thc Authorit� and ma� contain such rcfcrcncc to am of thc pro� isions of this Indcnturc as ma� bc appropriatc. E� cr� tcmporar� Bond shall bc c�ccutcd b� thc Authorit� and bc rcgistcrcd and authcnticatcd b� thc Trustcc upon thc samc conditions and in substantiall� thc samc manncr as thc dcfiniti� c Bonds: uro� idcd that am tcmporar� Bond nccd onl� bc signcd in thc namc and on bchalf of thc Authorit� «ith thc manual or facsimilc signaturc of thc Sccrctar�. or am dcput� dul� appointcd b� thc Authorit� Commission. and nccd not bc attcstcd. If thc Authorit� issucs tcmporar� Bonds. it «ill c�ccutc and fiirnish dcfiniti� c Bonds «ithout dcla�. and thcrcupon thc tcmporar� Bonds shall bc surrcndcrcd. for canccllation. in c�changc thcrcfor at thc Trust Officc of thc Trustcc in Los Angcics. California (or such othcr location dcsignatcd b� thc Trustcc). and thc Trustcc shall authcnticatc and dcli� cr in c�changc for such tcmporar� Bonds dcfiniti� c Bonds of likc tcrm. maturit� and aggrcgatc Maturit� Amount in authorizcd dcnominations. Until so c�changcd. thc tcmporar� Bonds shall bc cntiticd to thc samc bcncfits undcr this Indcnturc as dcfiniti� c Bonds authcnticatcd and dcli� crcd hcrcundcr. Scction 2.09. Rc�istration Books. Thc Trustcc «ill kccp or causc to bc kcpt at its Trust Officc sufficicnt rccords for thc rcgistration and transfcr of thc Bonds. «hich shall at all timcs during rcgular busincss hours bc opcn to inspcction b� thc Authorit� «ith rcasonablc prior noticc: and. upon prescntation for such purposc. thc Trustcc shall. undcr such rcasonablc rcgulations as it ma� prescribc. rcgistcr or transfcr or causc to bc rcgistcrcd or transfcrrcd. on such rccords. Bonds as hcrcinbcforc pro�idcd. Scction 2.10. Bonds Mutilatcd. Lost. Dcstro� cd or Stolcn. If am Bond shall bccomc mutilatcd. thc Authorit�. at thc c�pcnsc of thc O« ncr of such Bond. shall c�ccutc. and thc Trustcc shall thcrcupon authcnticatc and dcli� cr. a nc« Bond of likc tcnor. maturit� and aggrcgatc Maturit� Amount in authorizcd dcnominations in c�changc and substitution for thc Bond so mutilatcd. but onl� upon surrcndcr to thc Trustcc of thc Bond so mutilatcd. E� cr� mutilatcd Bond so surrcndcrcd to thc Trustcc shall bc canccllcd b� it and dcstro� cd. If am Bond issucd hcrcundcr shall bc lost. dcstro� cd or stolcn. c� idcncc of such loss. dcstruction or thcft ma� bc submittcd to thc Trustcc and. if such c� idcncc bc satisfactor� to thc Trustcc and indcmnit� satisfactor� to thc Trustcc shall bc gi� cn. thc Authorit�. at thc c�pcnsc of thc O« ncr. shall c�ccutc. and thc Trustcc shall thcrcupon authcnticatc and dcli� cr. a nc« Bond of likc tcnor in licu of and in substitution for thc Bond so lost. dcstro� cd or stolcn (or if am such Bond shall ha� c maturcd or shall ha� c bccn callcd for rcdcmption. instcad of issuing a substitutc Bond thc Trustcc ma� pa� thc samc «ithout surrcndcr thcrcof upon rcccipt of indcmnit� satisfactor� to thc Trustcc). Thc Trustcc ma� rcquirc pa� mcnt of a rcasonablc fcc for cach nc« Bond issucd undcr this Scction 2.10 and of thc c�pcnscs «hich ma� bc incurrcd b� thc Authorit� and thc Trustcc. Am Bond P6—Ic �2. I c�;;\xx I;xc �. ; — I 2— issucd undcr thc pro� isions of this Scction 2.10 in licu of am Bond allcgcd to bc lost. dcstro� cd or stolcn shall constitutc an original contractual obligation on thc part of thc Authorit� «hcthcr or not thc Bond allcgcd to bc lost. dcstro� cd or stolcn bc at am timc cnforccablc b� am onc. and shall bc cquall� and proportionatcl� cntiticd to thc bcncfits of this Indcnturc «ith all othcr Bonds sccurcd b� this Indcnturc. ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS: ISSUANCE OF BONDS Scction �.01. Issuancc of Bonds. Upon thc c�ccution and dcli� cr� of this Indcnturc. thc Authorit� shall c�ccutc and dcli� cr thc Bonds in thc respccti� c aggrcgatc Initial Principal Amounts sct forth hcrcin and shall dcli� cr thc Bonds to thc Trustcc for authcntication and dcli� cr� to thc original purchascr thcrcof upon thc Rcqucst of thc Authorit� . Scction �.02. Loan Fund: Auulication of Procccds of Salc of Bonds. Thc Trustcc shall cstablish and maintain a scparatc fiind to bc kno« n as thc "Loan Fund.�� Upon thc rcccipt of pa� mcnt for thc Bonds on thc Closing Datc. thc Trustcc shall dcposit thc procccds of salc thcrcof in thc amount of � in thc Loan Fund. Thc Trustcc shall disbursc all amounts in thc Loan Fund pursuant to Scction 2.2 of thc Loan Agrccmcnt. Scction �.0 �. Validit� of Bonds. Thc � alidit� of thc authorization and issuancc of thc Bonds shall not bc affcctcd in am «a� b� am procccdings takcn b� thc Agcnc� «ith respcct to thc application of thc procccds of thc Loan. and thc rccital containcd in thc Bonds that thc samc arc issucd pursuant to thc Bond La« shall bc conclusi� c c� idcncc of thcir � alidit� and of thc rcgularit� of thcir issuancc. ARTICLE IV REVENUES: FLOW OF FUNDS Scction �4.01. Plcd�c of Rc� cnucs: Assi�nmcnt of Ri�hts. Subjcct to thc pro� isions of Scction 6.0�. thc Bonds shall bc sccurcd b� a first licn on and plcdgc («hich shall bc cffcctcd in thc manncr and to thc c�tcnt hcrcinaftcr pro� idcd) of all of thc Rc� cnucs. Thc Bonds shall bc cquall� sccurcd b� a plcdgc. chargc and licn upon thc Rc� cnucs «ithout priorit� for scrics. numbcr. datc of Bonds. datc of c�ccution or datc of dcli� cn : and thc pa� mcnt of thc Principal Amount of thc Bonds and am prcmiums upon thc rcdcmption of am thcrcof shall bc and are sccurcd b� an c�clusi� c plcdgc. chargc and licn upon thc Rc� cnucs. So long as am of thc Bonds arc Outstanding. thc Rc� cnucs shall not bc uscd for am othcr purposc: c�ccpt that out of thc Rc� cnucs thcrc ma� bc apportioncd such sums. for such purposcs. as arc c�pressl� permittcd b� Scction �4.02. Thc Authorit� hcrcb� transfcrs in trust and assigns to thc Trustcc. for thc bcncfit of thc O« ncrs from timc to timc of thc Bonds. all of thc Rc� cnucs and all of thc right. titic and intcrest of thc Authorit� in thc Loan Agrccmcnt (othcr than thc rights of thc Authorit� undcr Scction �.0�4 thcrco�. Thc Trustcc shall bc cntiticd to and shall rccci� c all of thc Rc� cnucs. and am Rc� cnucs collcctcd or rccci� cd b� thc Authorit� shall bc dccmcd to bc hcld. and to ha� c bccn collcctcd or rccci� cd. b� thc Authorit� as thc agcnt of thc Trustcc and shall forth« ith bc paid b� thc Authorit� to thc Trustcc. Thc Trustcc also shall bc cntiticd to and. subjcct to thc pro� isions hcrcof. shall takc all stcps. actions and procccdings rcasonabl� ncccssar� in its judgmcnt to cnforcc. cithcr jointl� «ith thc Authorit� or scparatcl�. all of thc rights of thc Authorit� and all of thc obligations of thc Agcnc� undcr thc Loan Agrccmcnt. P6—Ic�2.lc�;;\xxl;xc�.; —I �— Scction �4.02. Rccciut. Dcuosit and Auulication of Rc� cnucs. (a) Dcuosit of Rc� cnucs. Rc� cnuc Fund. All Rc� cnucs dcscribcd in clausc (i) of thc dcfinition thcrcof in Scction I.01 shall bc promptl� dcpositcd b� thc Trustcc upon rcccipt thcrcof in a spccial fiind dcsignatcd as thc "Rc� cnuc Fund�� «hich thc Trustcc shall cstablish. maintain and hold in trust hcrcundcr. (b) Auulication of Rc� cnucs: Accounts. At thc timcs prescribcd bclo«. thc Trustcc shall transfcr from thc Rc� cnuc Fund and dcposit into thc follo« ing respccti� c accounts (cach of «hich thc Trustcc shall cstablish and maintain «ithin thc Rc� cnuc Fund). thc follo« ing amounts in thc follo« ing ordcr of priorit�. thc rcquircmcnts of cach such account (including thc making up of am dcficicncics in am such account resulting from lack of Rc� cnucs sufficicnt to makc am carlicr rcquircd dcposit) at thc timc of dcposit to bc satisficd bcforc am transfcr is madc to am account subscqucnt in priorit� : ( I ) � Rcscr� cd�. (2) Princival Account. On or bcforc cach maturit� datc of thc Bonds. thc Trustcc shall dcposit in thc Principal Account an amount rcquircd to causc thc aggrcgatc amount on dcposit in thc Principal Account to cqual thc Maturit� Amount of thc thcn Outstanding Bonds coming duc and pa�ablc on such datc pursuant to Scction 2.02. All monc� s in thc Principal Account shall bc uscd and «ithdra« n b� thc Trustcc solcl� for thc purposc of pa� ing thc Maturit� Amount of thc Bonds at thc maturit� thcrcof. All amounts on dcposit in thc Principal Account on thc first da� of am Bond Ycar. to thc c�tcnt not rcquircd to pa� thc Maturit� Amount of am Outstanding Bonds thcn ha� ing comc duc and pa�ablc. shall bc «ithdra«n thcrcfrom and transfcrrcd to thc Agcnc� to bc uscd for am la«fiil purposcs of thc Agcnc� . (�) Rcdcmution Account. Thc Trustcc. at am timc that thc Agcnc� shall c�crcisc its option to prcpa� installmcnts of thc Loan pursuant to Scction 2.�4 of thc Loan Agrccmcnt. shall dcposit thc Rc� cnucs dcri� cd from such prcpa� mcnt in thc Rcdcmption Account («hich thc Tnistcc shall also cstablish and maintain «ithin thc Rc� cnuc Fund). to bc uscd and «ithdra« n b� thc Trustcc solcl� for thc purposc of pa� ing thc Principal Amount and redcmption prcmiums. if an�. on thc Bonds to bc rcdccmcd on thcir respccti� c rcdcmption datcs. as dircctcd b� thc Authorit� . Scction �4.0 �. In� cstmcnts. All monc� s in am of thc fiinds or accounts cstablishcd «ith thc Trustcc pursuant to this Indcnturc or pursuant to thc Loan Agrccmcnt shall bc in� cstcd b� thc Trustcc solcl� in Pcrmittcd In� cstmcnts pursuant to thc «rittcn dircction of thc Authorit� gi� cn to thc Trustcc t«o Busincss Da� s in ad� ancc of thc making of such in� cstmcnts (and promptl� confirmcd in «riting. as to am such dircction gi� cn orall� ): pro� idcd that monc� s in thc Rcscr� c Fund cstablishcd pursuant to thc Loan Agrccmcnt shall bc in� cstcd in Pcrmittcd In� cstmcnts «hich maturc not morc than fi� c� cars from thc datc of such in� cstmcnt. In thc abscncc of am such dircction from thc Authorit�. thc Tnistcc shall in� cst am such monc� s in Pcrmittcd In� cstmcnts dcscribcd in Paragraph D of thc dcfinition thcrcof. Obligations purchascd as an im cstmcnt of monc� s in am fiind shall bc dccmcd to bc part of such fiind or account. All intcrest or gain dcri� cd from thc in� cstmcnt of amounts in am of thc fiinds or accounts cstablishcd hcrcundcr shall bc dcpositcd in thc fiind or account from «hich such in� cstmcnt «as madc. For purposcs of acquiring am im cstmcnts hcrcundcr. thc Trustcc ma� comminglc fiinds hcld b� it hcrcundcr. Thc Tnistcc ma� (but shall not bc obligatcd to) act as principal or agcnt in thc acquisition or disposition of am im cstmcnt. Thc Trustcc shall incur no liabilit� for losscs arising from am in� cstmcnts madc at thc dircction of thc Authorit�. or othcr« isc madc pursuant to this Scction. P6—Ic �2. I c �;;\xx I ;xc �. ; — I �4— Thc Trustcc shall bc cntiticd to rcl� conclusi� cl� upon thc «rittcn instructions of thc Authorit� dirccting in� cstmcnts in Pcrmittcd In� cstmcnts as to thc fact that cach such in� cstmcnt is permittcd b� thc la« s of thc Statc. and shall not bc rcquircd to makc fiirthcr in� cstigation «ith respcct thcrcto. With respcct to am restrictions sct forth in thc dcfinition of Pcrmittcd In� cstmcnts sct forth in Scction I.01 «hich cmbod� Icgal conclusions (c.g.. thc c�istcncc. � alidit� and perfcction of sccurit� intcrests in collatcral). thc Trustcc shall bc cntiticd to rcl� conclusi� cl� on an opinion of counscl or upon a rcprescntation of thc pro� idcr of such Pcrmittcd In� cstmcnt obtaincd at thc Authorit� �s or thc Agcnc� �s c�pcnsc. E�ccpt as spccificall� pro� idcd in this Indcnturc. thc Tnistcc shall not bc liablc to pa� intcrest on am monc� s rccci� cd b� it. but shall bc liablc onl� to account to thc Authorit� and thc Agcnc� for carnings dcri� cd from fiinds that ha� c bccn in� cstcd. Thc Authorit� ackno« Icdgcs that to thc c�tcnt rcgulations of thc Comptrollcr of thc Currcnc� or othcr applicablc rcgulator� cntit� grant thc Authorit� thc right to rccci� c brokcragc confirmations of sccurit� transactions as thc� occur. thc Authorit� spccificall� «ai� cs rcccipt of such confirmations to thc c�tcnt permittcd b� la«. Thc Trustcc «ill fiirnish thc Authorit� periodic cash transaction statcmcnts «hich includc dctail for all in� cstmcnt transactions madc b� thc Trustcc hcrcundcr. Thc Trustcc or am of its affiliatcs ma� act as sponsor. ad� isor or managcr in conncction «ith am in� cstmcnts madc b� thc Trustcc hcrcundcr. Scction �4.0�4. Valuation and Disuosition of In� cstmcnts. For thc purposc of dctcrmining thc amount in am fiind or account cstablishcd hcrcundcr or undcr thc Loan Agrccmcnt. am in� cstmcnts crcditcd to such fiind or account shall bc � alucd at Icast annuall�. on or bcforc Jul� I. at thc markct � aluc thcrcof. In making am � aluations hcrcundcr thc Trustcc ma� utilizc computcrizcd sccuritics pricing scr� iccs that ma� bc a� ailablc to it. including thosc a� ailablc through its rcgular accounting s� stcm. ARTICLE V COVENANTS OF THE AUTHORITY Scction �.01. Punctual Pa� mcnt. Thc Authorit� shall punctuall� pa� or causc to bc paid thc principal. intcrest and prcmium. if am. to bccomc duc in respcct of all thc Bonds. in strict conformit� «ith thc tcrms of thc Bonds and of this Indcnturc. according to thc truc intcnt and mcaning thcrcof. but onl� out of Rc� cnucs and othcr asscts plcdgcd for such pa� mcnt as pro� idcd in this Indcnturc. Scction �.02. E�tcnsion of Pa� mcnt of Bonds. Thc Authorit� shall not dircctl� or indircctl� c�tcnd or asscnt to thc c�tcnsion of thc maturit� of am of thc Bonds or thc timc of pa� mcnt of am claims for intcrest b� thc purchasc of such Bonds or b� am othcr arrangcmcnt. and in casc thc maturit� of am of thc Bonds or thc timc of pa� mcnt of am such claims for intcrest shall bc c�tcndcd. such Bonds or claims for intcrest shall not bc cntiticd. in casc of am dcfault hcrcundcr. to thc bcncfits of this Indcnturc. c�ccpt subjcct to thc prior pa� mcnt in fiill of thc principal of all of thc Bonds thcn Outstanding and of all claims for intcrest thcrcon «hich shall not ha� c bccn so c�tcndcd. Nothing in this Scction �.02 shall bc dccmcd to limit thc right of thc Authorit� to issuc bonds or othcr obligations for thc purposc of rcfiinding am Outstanding Bonds. and such issuancc shall not bc dccmcd to constitutc an c�tcnsion of maturit� of thc Bonds. Scction �.0 �. A�ainst Encumbranccs. Thc Authorit� shall not crcatc. or permit thc crcation of. am plcdgc. licn. chargc or othcr cncumbrancc upon thc Rc� cnucs and othcr asscts plcdgcd or assigncd undcr this Indcnturc «hilc am of thc Bonds arc Outstanding. c�ccpt thc plcdgc and assignmcnt crcatcd b� this Indcnturc. Subjcct to this limitation. thc Authorit� c�pressl� rescr� cs thc right to cntcr P6—Ic �2. I c �;;\xx I ;xc �. ; — I � — into onc or morc othcr indcntures for am of its corporatc purposcs. including othcr programs undcr thc Bond La«. and rescr� cs thc right to issuc othcr obligations for such purposcs. Scction �.0�4. Po«cr to Issuc Bonds and Makc Plcd�c and Assi�nmcnt. Thc Authorit� is dul� authorizcd pursuant to la« to issuc thc Bonds and to cntcr into this Indcnturc and to plcdgc and assign thc Rc� cnucs. thc Loan Agrccmcnt and othcr asscts purportcd to bc plcdgcd and assigncd. respccti� cl�. undcr this Indcnturc in thc manncr and to thc c�tcnt pro� idcd in this Indcnturc. Thc Bonds and thc pro� isions of this Indcnturc arc and «ill bc thc Icgal. � alid and binding spccial obligations of thc Authorit� in accordancc «ith thcir tcrms. and thc Authorit� shall at all timcs. to thc c�tcnt permittcd b� la«. dcfcnd. prescr� c and protcct said plcdgc and assignmcnt of Rc� cnucs and othcr asscts and all thc rights of thc O« ncrs undcr this Indcnturc against all claims and dcmands of all persons «homsoc� cr. Scction �.0�. Accountin� Rccords and Financial Statcmcnts. Thc Trustcc shall at all timcs kccp. or causc to bc kcpt. proper books of rccord and account. prcparcd in accordancc «ith corporatc trust industr� standards. in «hich complctc and accuratc cntrics shall bc madc of all transactions madc b� thc Trustcc rclating to thc procccds of Bonds. thc Rc� cnucs. thc Loan Agrccmcnt and all fiinds and accounts cstablishcd pursuant to this Indcnturc. Such books of rccord and account shall bc a� ailablc for inspcction b� thc Authorit� and thc Agcnc�. during rcgular busincss hours «ith rcasonablc prior noticc. Scction �.06. No Additional Indcbtcdncss. E�ccpt for thc Bonds. thc Authorit� shall not incur am indcbtcdncss pa� ablc out of thc Rc� cnucs. (For clarification. this pro� ision docs not prohibit thc Agcnc� from incurring additional dcbt sccurcd b� Ta� Rc� cnucs. so long as thc incurrcncc of such dcbt is in compliancc «ith thc Loan Agrccmcnt.) Scction �.07. Ta� Co� cnants. (a) Thc Authorit� co� cnants that. in ordcr to maintain thc c�clusion from gross incomc for Fcdcral incomc ta� purposcs of thc Accrctcd Valuc of thc Bonds «hich constitutcs thc intcrest thcrcon. and for no othcr purposc. thc Authorit� «ill satisfi. or takc such actions as arc ncccssan to causc to bc satisficd. cach pro� ision of thc Codc ncccssan to maintain such c�clusion. In fiirthcrancc of this co� cnant thc Authorit� agrccs to compl� «ith such «rittcn instructions as ma� bc pro� idcd b� Bond Counscl. (b) Thc Authorit� co� cnants that no part of thc procccds of thc Bonds shall bc uscd. dircctl� or indircctl�. to acquirc am In� cstmcnt Propert� «hich «ould causc thc Bonds to bccomc arbitragc bonds. as that tcrm is dcfincd in Scction I�48 of thc Codc. or undcr applicablc Ta� Rcgulations. In ordcr to assurc compliancc «ith thc rcbatc rcquircmcnts of Scction 1�48 of thc Codc. thc Authorit� fiirthcr co� cnants that it «ill pa� or causc to bc paid to thc Unitcd Statcs thc amounts ncccssar� to satisfi thc rcquircmcnts of Scction 1�48(� of thc Codc. and that it «ill cstablish such accounting proccdures as arc ncccssar� to adcquatcl� dctcrminc. account for and pa� o� cr am such amount rcquircd to bc paid thcrcundcr in a manncr consistcnt «ith thc rcquircmcnts of Scction I�48 of thc Codc. such co� cnants to sur� i� c thc dcfcasancc of thc Bonds. (c) Thc Authorit� co� cnants that it «ill not takc am action or omit to takc am action. «hich action or omission. if rcasonabl� c�pcctcd on thc datc of initial c�ccution and dcli� cn of thc Bonds. «ould result in a loss of c�clusion from gross incomc for purposcs of Fcdcral incomc ta�ation. undcr Scction I 0� of thc Codc. of intcrest on thc Bonds. (d) Thc Authorit� co� cnants that it «ill not usc or permit thc usc of am propert� financcd «ith thc procccds of thc Bonds b� am person (othcr than a statc or local go� crnmcntal unit) in P6—Ic �2. I c�;;\xx I;xc �. ; — I 6— such manncr or to such c�tcnt as «ould result in a loss of c�clusion of thc intcrest on thc Bonds from gross incomc for Fcdcral incomc ta� purposcs undcr Scction I 0� of thc Codc. (c) Not« ithstanding am pro� ision of this Indcnturc. and c�ccpt as pro� idcd bclo«. thc Authorit� co� cnants that nonc of thc monc� s containcd in am of thc fiinds or accounts crcatcd pursuant to this Indcnturc «ith respcct to thc Bonds shall bc: (i) uscd in making loans guarantccd b� thc Unitcd Statcs (or am agcnc� or instrumcntalit� thcrco�. (ii) in� cstcd dircctl� or indircctl� in a dcposit or account insurcd b� thc Fcdcral Dcposit Insurancc Corporation. National Crcdit Union Administration or am othcr similar Fcdcrall� chartcrcd corporation. or (iii) othcr« isc in� cstcd dircctl� or indircctl� in obligations guarantccd (in «holc or in part) b� thc Unitcd Statcs (or am agcnc� or instrumcntalit� thcrco�: pro� idcd. ho« c� cr. that thc abo� c restrictions do not appl� to: (a) thc in� cstmcnt on monc� s hcld in thc Rc� cnuc Fund or am othcr "bona fidc dcbt scr� icc fiind�� as dcfincd for purposcs of Scction I�48 of thc Codc. (b) in� cstmcnt in dircct obligations of thc Unitcd Statcs Trcasur�. (c) in� cstmcnt in obligations guarantccd b� thc Fcdcral National Mortgagc Association. Go� crnmcnt National Mortgagc Association. or thc Fcdcral Homc Loan Mortgagc Corporation. (d) in� cstmcnt in obligations issucd pursuant to Scction 2 I B(d)( �) of thc Fcdcral Homc Loan Bank Act. as amcndcd b� Scction � I I(a) of thc Financial Institutions Rcform. Rcco� cr�. and Enforccmcnt Act of 1989. (c) in� cstmcnts permittcd undcr rcgulations issucd pursuant to Scction 1�49(b)( �)(B) of thc Codc. or (� such othcr in� cstmcnts permittcd undcr this Indcnturc as. in thc opinion of Bond Counscl. do not jcopardizc thc c�clusion from gross incomc for Fcdcral incomc ta� purposcs of intcrest on thc Bonds. Scction �.08. Loan A�rccmcnt. Thc Trustcc. as assigncc of thc Authorit� �s rights pursuant to Scction �4.01. shall rccci� c all amounts duc from thc Agcnc� pursuant to thc Loan Agrccmcnt and. upon an E� cnt of Dcfault. shall diligcntl� cnforcc. and takc all stcps. actions and procccdings rcasonabl� ncccssar� for thc cnforccmcnt of all of thc rights of thc Authorit� thcrcundcr and for thc cnforccmcnt of all of thc obligations of thc Agcnc� thcrcundcr. Thc Loan Agrccmcnt ma� bc amcndcd or modificd pursuant to thc applicablc pro� isions thcrcof. but onl� «ith thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct) and onl� :(i) if thc Authorit�. thc Agcnc� or thc Trustcc first obtains thc «rittcn conscnt of thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding to such amcndmcnt or modification. pro� idcd. ho« c� cr. that no such amcndmcnt or modification shall (a) c�tcnd thc maturit� of or rcducc thc amount of intcrest or principal pa� mcnts on a Loan. or othcn� isc altcr or impair thc obligation of thc Agcnc� to pa� thc principal. intcrest or prcpa� mcnt prcmiums on a Loan at thc timc and placc and at thc ratc and in thc currcnc� pro� idcd thcrcin. «ithout thc c�press «rittcn conscnt of thc O« ncr of cach affcctcd Bond. (b) rcducc thc perccntagc of thc Bonds rcquircd for thc «rittcn conscnt to am such modification or amcndmcnt thcrcof on c�rcof. or (c) «ithout its «rittcn conscnt thcrcto. modif� am of thc rights or obligations of thc Trustcc: or (ii) «ithout thc conscnt of am of thc O« ncrs. if such amcndmcnt or modification docs not modif� thc rights or obligations of thc Trustcc «ithout its prior «rittcn conscnt. and is for am onc or morc of thc follo« ing purposcs: (a) to add to thc co� cnants and agrccmcnts of thc Agcnc� containcd in thc Loan Agrccmcnt othcr co� cnants and agrccmcnts thcrcaftcr to bc obscr� cd. or to limit or surrcndcr am rights or po« cr thcrcin rescr� cd to or confcrrcd upon thc Agcnc� so long as such limitation or surrcndcr of such rights or po« crs shall not matcriall� ad� crscl� affcct thc O« ncrs of thc Bonds: (b) to makc such pro� isions for thc purposc of curing am ambiguit�. or of curing. corrccting or supplcmcnting am dcfccti� c pro� ision containcd in thc Loan Agrccmcnt. or in am othcr respcct «hatsoc� cr as thc Agcnc� and thc Authorit� ma� dccm ncccssar� or dcsirablc. pro� idcd undcr am circumstanccs that such modifications or amcndmcnts shall not matcriall� ad� crscl� affcct thc intcrests of thc O« ncrs of thc Bonds: P6—Ic �2. I c�;;\xx I;xc �. ; — I 7— (c) to amcnd am pro� ision thcrcof rclating to thc Codc. to am c�tcnt «hatsoc� cr but onl� if and to thc c�tcnt such amcndmcnt «ill not ad� crscl� affcct thc c�clusion from gross incomc for fcdcral incomc ta� purposcs of intcrest on am of thc Bonds undcr thc Codc. in thc opinion of Bond Counscl: or (d) to pro� idc for thc issuancc of Parit� Dcbt undcr and in accordancc �� ith thc pro� isions of thc Loan Agrccmcnt. Nothing in this Scction �.08 shall prc� cnt thc Agcnc� and thc Authorit�. «ith thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in full forcc and cffcct). from cntcring into am amcndmcnt or modification of thc Loan Agrccmcnt «hich solcl� affccts a particular Bond or Bonds all of thc O« ncrs of «hich shall ha� c conscntcd to such amcndmcnt or modification: pro� idcd. ho« c� cr. no such amcndmcnt or modification shall affcct thc rights or obligations of thc Trustcc «ithout its prior «rittcn conscnt. Thc Tnistcc shall bc cntiticd to rcl� upon thc opinion of Bond Counscl stating that thc rcquircmcnts of this Scction �.08 ha� c bccn mct «ith respcct to am amcndmcnt or modification of thc Loan Agrccmcnt. Scction �.09. Furthcr Assuranccs. Thc Authorit� «ill adopt. makc. c�ccutc and dcli� cr am and all such fiirthcr resolutions. instrumcnts and assuranccs as ma� bc rcasonabl� ncccssar� or proper to carn out thc intcntion or to facilitatc thc performancc of this Indcnturc. and for thc bcttcr assuring and confirming unto thc O« ncrs of thc Bonds thc rights and bcncfits pro� idcd in this Indcnturc. ARTICLE VI THETRUSTEE Scction 6.01. Auuointmcnt of Trustcc. Wclls Fargo Bank. National Association. a national banking association organizcd and c�isting undcr and b� � irtuc of thc la« s of thc Unitcd Statcs of Amcrica. «ith a corporatc trust officc in Los Angcics. California. is hcrcb� appointcd Trustcc b� thc Authorit� for thc purposc of rccci� ing all monc� s rcquircd to bc dcpositcd «ith thc Trustcc hcrcundcr and to allocatc. usc and appl� thc samc as pro� idcd in this Indcnturc. Thc Authorit� agrccs that it «ill maintain a Trustcc «hich shall bc a financial institution ha� ing a corporatc trust officc in thc Statc. �� ith a combincd capital and surplus of at Icast �7�.000.000. and subjcct to super� ision or czamination b� fcdcral or Statc authorit�. so long as am Bonds arc Outstanding. If such financial institution publishcs a rcport of condition at Icast annuall� pursuant to la« or to thc rcquircmcnts of am super� ising or c�amining authorit� abo� c rcfcrrcd to. thcn for thc purposc of this Scction 6.01 thc combincd capital and surplus of such financial institution shall bc dccmcd to bc its combincd capital and surplus as sct forth in its most rcccnt rcport of condition so publishcd. Thc Trustcc is hcrcb� authorizcd to pa� thc principal of and intcrest and redcmption prcmium. ifam. on thc Bonds «hcn dul� prescntcd for pa�mcnt at maturit�. or on rcdcmption or purchasc prior to maturit�. and to canccl all Bonds upon pa� mcnt thcrcof. Thc Trustcc shall kccp accuratc rccords of all funds administcrcd b� it and of all Bonds paid and dischargcd. Scction 6.02. Acccutancc of Tnists. Thc Trustcc hcrcb� acccpts thc trusts imposcd upon it b� this Indcnturc. and agrccs to perform said trusts. but onl� upon and subjcct to thc follo« ing c�press tcrms and conditions: (a) Thc Trustcc. prior to thc occurrcncc of an E� cnt of Dcfault and aftcr curing of all E� cnts of Dcfault «hich ma� ha� c occurrcd. undcrtakcs to perform such dutics and onl� such dutics as are spccificall� sct forth in this Indcnturc and no implicd co� cnants. dutics or obligations shall bc rcad into this Indcnturc against thc Trustcc. In casc an E� cnt of Dcfault hcrcundcr has occurrcd («hich has not P6—Ic�2.lc��\xxl �xc�.; —18— bccn curcd or «ai� cd). thc Trustcc ma� c�crcisc such of thc rights and po« crs � cstcd in it b� this Indcnturc. and shall usc thc samc dcgrcc of carc and skill and diligcncc in thcir c�crcisc. as a prudcnt person «ould usc in thc conduct of its o« n affairs. (b) Thc Trustcc ma� c�ccutc am of thc trusts or po« crs hcrcof and perform thc dutics rcquircd of it hcrcundcr b� or through attornc� s. agcnts. or rccci� crs. and shall bc cntiticd to ad� icc of counscl conccrning all mattcrs of trust and its dut� hcrcundcr. Thc Trustcc ma� conclusi� cl� rcl� on an opinion of counscl as fiill and complctc protcction for am action takcn or suffcrcd b� it hcrcundcr. (c) Thc Trustcc shall not bc responsiblc for am rccital hcrcin. in thc Loan Agrccmcnt or in thc Bonds. or for am of thc supplcmcnts hcrcto or thcrcto or instrumcnts of fiirthcr assurancc. or for thc � alidit� of this Indcnturc or thc Loan Agrccmcnt. or for thc sufficicnc� of thc sccurit� for thc Bonds issucd hcrcundcr or intcndcd to bc sccurcd hcrcb�. or thc ta� status of thc intcrest on thc Bonds. and thc Trustcc shall not bc bound to asccrtain or inquirc as to thc obscr�ancc or performancc of am co� cnants. conditions or agrccmcnts on thc part of thc Authorit� hcrcundcr. (d) Thc Trustcc (including its officcrs and cmplo� ccs) ma� bccomc thc O« ncr of Bonds sccurcd hcrcb� «ith thc samc rights «hich it «ould ha� c if not thc Trustcc: ma� acquirc and disposc of othcr bonds or c� idcnccs of indcbtcdncss of thc Authorit� «ith thc samc rights it «ould ha� c if it «crc not thc Trustcc: and ma� act as a dcpositar� for and permit am of its officcrs or dircctors to act as a mcmbcr of. or in am othcr capacit� «ith respcct to. a�� committcc formcd to protcct thc rights of O« ncrs of Bonds. «hcthcr or not such committcc shall rcprescnt thc O« ncrs of thc majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding. Thc Trustcc. cithcr as principal or agcnt. ma� cngagc in or bc intcrestcd in am financial or othcr transaction «ith thc Authorit� . (c) Thc Trustcc shall bc protcctcd in acting upon am Rcport. noticc. rcqucst. conscnt. ccrtificatc. ordcr. affida� it. Icttcr. dircction. tcicgram. facsimilc transmission. cicctronic mail or othcr paper or documcnt bclic� cd b� it to bc gcnuinc and corrcct and to ha� c bccn signcd or scnt b� thc proper person or persons and nccd not makc am in� cstigation into thc facts or mattcrs containcd thcrcin. Am action takcn or omittcd to bc takcn b� thc Trustcc pursuant to this Indcnturc upon thc rcqucst or authorit� or conscnt of am person «ho at thc timc of making such rcqucst or gi� ing such authorit� or conscnt is thc O« ncr of am Bond. shall bc conclusi� c and binding upon all firturc O« ncrs of thc samc Bond and upon Bonds issucd in c�changc thcrcfor or in placc thcrcof. Thc Trustcc shall not bc bound to rccognizc am person as an O« ncr of am Bond or to takc am action at his rcqucst unlcss thc o« ncrship of such Bond b� such person shall bc rcflcctcd on thc Rcgistration Books. (� As to thc c�istcncc or non-c�istcncc of am fact or as to thc sufficicnc� or � alidit� of am instrwncnt. paper or procccding. thc Trustcc shall bc cntiticd to rcl� upon a Ccrtificatc of thc Authorit� as sufficicnt c� idcncc of thc facts thcrcin containcd and prior to thc occurrcncc of an E� cnt of Dcfault hcrcundcr of «hich thc Trustcc has bccn gi� cn noticc or is dccmcd to ha� c noticc. as pro� idcd in Scction 6.02(h). shall also bc at libcrt� to acccpt a Ccrtificatc of thc Authorit� to thc cffcct that am particular dcaling. transaction or action is ncccssar� or c�pcdicnt. but ma� at its discrction sccure such fiirthcr c� idcncc dccmcd b� it to bc ncccssar� or ad� isablc. but shall in no casc bc bound to sccurc thc samc. (g) Thc permissi� c right of thc Trustcc to do things cnumcratcd in this Indcnturc shall not bc construcd as a dut� and it shall not bc ans«crablc for othcr than its ncgligcncc or «illfiil misconduct. Thc immunitics and c�ccptions from liabilit� of thc Trustcc shall c�tcnd to its officcrs. dircctors. cmplo� ccs and agcnts. In thc abscncc of ncgligcncc or «illfiil misconduct. thc Trustcc shall not bc liablc for am crror of judgmcnt. P6—Ic �2. I c�;;\xx I;xc �. ; — I y— (h) Thc Trustcc shall not bc rcquircd to takc noticc or bc dccmcd to ha� c noticc of am E� cnt of Dcfault hcrcundcr c�ccpt failurc b� thc Authorit� to makc am of thc pa� mcnts to thc Trustcc rcquircd to bc madc b� thc Authorit� pursuant hcrcto. unlcss thc Trustcc shall bc spccificall� notificd in «riting of such dcfault b� thc Authorit� . thc Insurcr or b� thc O« ncrs of at Icast 2� perccnt in aggrcgatc principal amount of thc Bonds thcn Outstanding and all noticcs or othcr instrumcnts rcquircd b� this Indcnturc to bc dcli� crcd to thc Trustcc must. in ordcr to bc cffccti� c. bc dcli� crcd at thc Trust Officc of thc Trustcc in Los Angcics. California. and in thc abscncc of such noticc so dcli� crcd thc Trustcc ma� conclusi� cl� assumc thcrc is no E� cnt of Dcfault hcrcundcr c�ccpt as aforesaid. (i) At am and all rcasonablc timcs thc Trustcc. and its dul� authorizcd agcnts. attornc� s. c�perts. accountants and represcntati� cs. shall ha� c thc right. but not thc obligation. fiill� to inspcct all books. papers and records of thc Authorit� pertaining to thc Bonds. and to makc copics of am of such books. papers and records such as ma� bc dcsircd but «hich is not pri� ilcgcd b� statutc or b� la« . (j) Thc Trustcc shall not bc rcquircd to gi� c am bond or surct� in respcct of thc c�ccution of thc said trusts and po« crs or othcr« isc in respcct of thc prcmiscs hcrcof. (k) Not«ithstanding amthing clsc«hcrc in this Indcnturc «ith respcct to thc c�ccution of am Bonds. thc «ithdra«al of am cash. thc rcicasc of am propert�. or am action «hatsoc� cr «ithin thc pur� ic« of this Indcnturc. thc Trustcc shall ha� c thc right. but shall not bc rcquircd. to dcmand am sho« ings. ccrtificatcs. opinions. appraisals or othcr information. or corporatc action or c� idcncc thcrcof. as ma� bc dccmcd dcsirablc for thc purposc of cstablishing thc right of thc Authorit� to thc c�ccution of am Bonds. thc «ithdra«al of am cash. or thc taking of am othcr action b� thc Trustcc. (I) Bcforc taking action rcfcrrcd to in Scction 6.0�. Scction 8.02 or thc first paragraph of Scction �.08. thc Trustcc ma� rcquirc that a satisfactor� indcmnit� bond bc fi►rnishcd for thc rcimburscmcnt of all c�pcnscs to «hich it ma� bc put and to protcct it against all liabilit�. c�ccpt liabilit� «hich is adjudicatcd to ha� c resultcd from its ncgligcncc or «illfiil misconduct in conncction «ith am such action. (m) All monc� s rccci� cd b� thc Trustcc shall. until uscd or applicd or in� cstcd as hcrcin pro� idcd. bc hcld in trust for thc purposcs for «hich thc� «crc rccci� cd but nccd not bc scgrcgatcd from othcr fiinds c�ccpt to thc c�tcnt rcquircd b� la«. (n) Thc Trustcc shall ha� c no liabilit� or obligation to thc Bond O« ncrs «ith respcct to thc pa� mcnt of dcbt scr� icc b� thc Authorit� or «ith respcct to thc obscr� ancc or performancc b� thc Authorit� of thc othcr conditions. co� cnants and tcrms containcd in this Indcnturc. or «ith respcct to thc in� cstmcnt of am monc� s in am fiind or account cstablishcd. hcld or maintaincd b� thc Authorit� pursuant to this Indcnturc or othcr« isc. (o) Thc Trustcc makcs no co� cnant. rcprescntation or «arrant� conccrning thc currcnt or fiiturc ta� stntus of intcrest on thc Bonds. Thc Trustcc nccd onl� kccp accuratc rccords of all in� cstmcnts and fiinds. and scnd rebatc pa� mcnts to thc Unitcd Statcs in accordancc «ith c�plicit instructions from thc Authorit� . (p) Thc Trustcc shall ha� c no responsibilit� «ith respcct to am information. statcmcnt. or rccital in am official statcmcnt. offcring mcmorandum or am othcr disclosurc matcrial prcparcd or distributcd «ith respcct to thc issuancc of thc Bonds. (q) Thc Trustcc in its capacit� as Trustcc is authorizcd and dircctcd to c�ccutc thc Loan Agrccmcnt. P6—Ic �2. I c �;;\xx I ;xc �. ; —20— (r) Thc Trustcc shall not bc considcrcd in brcach of or in dcfault in its obligations hcrcundcr or progress in respcct thcrcto in thc c� cnt of cnforccd dcla� ("una� oidablc dcla� ��) in thc performancc of such obligations duc to unforesccablc causcs bc� ond its control and «ithout its fault or ncgligcncc. including. but not limitcd to. Acts of God or of thc public cncm� or tcrrorists. acts of a go� crnmcnt. acts of thc othcr part�. fires. floods. cpidcmics. quarantinc restrictions. strikcs. frcight cmbargocs. carthquakcs. c�plosion. mob � iolcncc. riot. inabilit� to procurc or gcncral sabotagc or rationing of labor. cquipmcnt. facilitics. sourccs of cncrg�. matcrial or supplics in thc opcn markct. litigation or arbitration im ol� ing a part� or othcrs rclating to zoning or othcr go� crnmcntal action or inaction pertaining to thc projcct. malicious mischicf. condcmnation. and unusuall� sc� crc «cathcr or dcla� s of supplicrs or subcontractors duc to such causcs or am similar c� cnt and/or occurrcnccs bc� ond thc control of thc Trustcc: pro� idcd that. in thc c� cnt of am such una� oidablc dcla� undcr this paragraph 6.02(r). thc Tnistcc notif� thc Authorit� and thc Agcnc� in «riting «ithin fi� c busincss da� s aftcr (i) thc occurrcncc of thc c� cnt gi� ing risc to thc una� oidablc dcla�. (ii) thc Trustcc�s actual kno« Icdgc of thc impcnding una� oidablc dcla�. or (iii) thc Trustcc�s kno« Icdgc of sufficicnt facts undcr «hich a rcasonablc person «ould concludc thc una� oidablc dcla� «ill occur. (s) Thc Trustcc agrccs to acccpt and act upon facsimilc transmission of «rittcn instructions and/or dircctions pursuant to this Indcnturc. pro� idcd. ho« c� cr. that: (i) subscqucnt to such facsimilc transmission of «rittcn instructions and/or dircctions thc Trustcc shall forth« ith rccci� c thc originall� c�ccutcd instructions and/or dircctions. (ii) such originall� c�ccutcd instructions and/or dircctions shall bc signcd b� a person as ma� bc dcsignatcd and authorizcd to sign for thc part� signing such instructions and/or dircctions. and (iii) thc Trustcc shall ha� c rccci� cd a currcnt incumbcnc� ccrtificatc containing thc spccimcn signaturc of such dcsignatcd person. Scction 6.0 �. Fccs. Char�cs and E�ucnscs of Trustcc. Thc Trustcc shall bc cntiticd to pa� mcnt and reimburscmcnt for rcasonablc fccs for its scr� iccs rcndcrcd hcrcundcr and all ad� anccs (« ith intcrest on such ad� anccs at thc ma�imum ratc allo« cd b� la« ). counscl fccs and c�pcnscs (including thosc of in-housc counscl to thc c�tcnt thc� arc for scr� iccs not duplicati� c of othcr counscls� «ork) and othcr c�pcnscs rcasonabl� and ncccssaril� madc or incurrcd b� thc Trustcc in conncction «ith such scr� iccs. «hich pa� mcnt and reimburscmcnt shall not bc limitcd b� am pro� ision of la« in rcgard to thc compcnsation of a trustcc of an c�press trust. Upon thc occurrcncc of an E� cnt of Dcfault hcrcundcr. but onl� upon an E� cnt of Dcfault. thc Trustcc shall ha� c a first licn «ith right of pa� mcnt prior to pa� mcnt of am Bond upon thc amounts hcld hcrcundcr for thc forcgoing fccs. chargcs and c�pcnscs incurrcd b� it respccti� cl�. «hich right to pa� mcnt shall sur� i� c thc resignation or rcmo� al of thc Trustcc. Scction 6.0�4. Noticc to O« ncrs of Dcfault. If an E� cnt of Dcfault hcrcundcr occurs «ith respcct to am Bonds of «hich thc Trustcc has bccn gi� cn or is dccmcd to ha� c noticc. as pro� idcd in Scction 6.02(h). thcn thc Trustcc shall promptl� gi� cn «rittcn noticc thcrcof b� first-class mail to thc O« ncr of cach such Bond. unlcss such E� cnt of Dcfault shall ha� c bccn curcd bcforc thc gi� ing of such noticc: pro� idcd. ho« c� cr. that unlcss such E� cnt of Dcfault consists of thc failurc b� thc Authorit� to makc am pa� mcnt «hcn duc. thc Trustcc ma� cicct not to gi� c such noticc if and so long as thc Trustcc in good faith dctcrmincs that such E� cnt of Dcfault docs not matcriall� ad� crscl� affcct thc intcrests of thc O« ncrs or that it is othcn� isc not in thc bcst intcrests of thc O« ncrs to gi� c such noticc. Scction 6.0�. Intcr� cntion b� Trustcc. In am judicial procccding to «hich thc Authorit� is a part� «hich. in thc opinion of thc Trustcc. has a substantial bcaring on thc intcrests of O« ncrs of am of thc Bonds. thc Trustcc ma� intcr� cnc on bchalf of such O« ncrs. and subjcct to Scction 6.02(I). shall do so if rcqucstcd in «riting b� thc O« ncrs of a majorit� in aggrcgatc Principal Amount of such Bonds thcn Outstanding. Scction 6.06. Rcmo� al of Trustcc. Thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds ma� at am timc. and thc Authorit� ma� (and at thc rcqucst of thc P6—Ic �2. I c �;;\xx I ;xc �. ; —2 I — Agcnc� shall) so long as no E� cnt of Dcfault shall ha� c occurrcd and thcn bc continuing. rcmo� c thc Trustcc initiall� appointcd. and am succcssor thcrcto. b� an instrumcnt or concurrcnt instrumcnts in «riting dcli� crcd to thc Tnistcc. «hcrcupon thc Authorit� or such O« ncrs. as thc casc ma� bc. shall appoint a succcssor or succcssors thcrcto: pro� idcd that am such succcssor shall bc a financial institution mccting thc rcquircmcnts sct forth in Scction 6.01. Scction 6.07. Rcsi�nation b� Trustcc. Thc Trustcc and am succcssor Trustcc ma� at am timc gi� c«rittcn noticc of its intcntion to resign as Trustcc hcrcundcr. such noticc to bc gi� cn to thc Authorit� and thc Agcnc� b� rcgistcrcd or ccrtificd mail. Upon rccci� ing such noticc of resignation. thc Authorit� shall promptl� appoint a succcssor Trustcc. Am resignation or rcmo� al of thc Trustcc and appointmcnt of a succcssor Trustcc shall bccomc cffccti� c upon acccptancc of appointmcnt b� thc succcssor Trustcc. Upon such acccptancc. thc Authorit� shall causc noticc thcrcof to bc gi� cn b� first class mail. postagc prcpaid. to thc Bond O« ncrs at thcir respccti� c addresscs sct forth on thc Rcgistration Books. Scction 6.08. Auuointmcnt of Succcssor Trustcc. In thc c� cnt of thc rcmo� al or resignation of thc Trustcc pursuant to Scctions 6.06 or 6.07. respccti� cl�. «ith thc prior «rittcn conscnt of Agcnc�. thc Authorit� shall promptl� appoint a succcssor Trustcc. In thc c� cnt thc Authorit� shall for am rcason «hatsoc� cr fail to appoint a succcssor Trustcc «ithin 60 da� s follo« ing thc dcli� cr� to thc Trustcc of thc instrumcnt dcscribcd in Scction 6.06 or «ithin 60 da� s follo« ing thc rcccipt of noticc b� thc Authorit� pursuant to Scction 6.07. thc Trustcc ma�. at thc c�pcnsc ofthc Authorit�. appl� to a court of compctcnt jurisdiction for thc appointmcnt of a succcssor Trustcc mccting thc rcquircmcnts of Scction 6.01. Am such succcssor Trustcc appointcd b� such court shall bccomc thc succcssor Trustcc hcrcundcr not« ithstanding am action b� thc Authorit� purporting to appoint a succcssor Trustcc follo« ing thc c�piration of such si�t� -da� period. Scction 6.09. Mcr�cr or Consolidation. Am bank or tnist compam into «hich thc Trustcc ma� bc mcrgcd or con� crtcd or «ith «hich cithcr of thcm ma� bc consolidatcd or am bank or trust compam resulting from am mcrgcr. con� crsion or consolidation to «hich it shall bc a part� or am bank or trust compam to «hich thc Trustcc ma� scll or transfcr all or substantiall� all of its corporatc trust busincss. pro� idcd such bank or trust compam shall bc cligiblc undcr Scction 6.01. shall bc thc succcssor to such Trustcc «ithout thc c�ccution or filing of am paper or fiirthcr act. c�ccpt as pro� idcd in Scction 6.10. Scction 6.10. Conccrnin� am Succcssor Trustcc. E� cr� succcssor Trustcc appointcd hcrcundcr shall c�ccutc. ackno« Icdgc and dcli� cr to its prcdcccssor and also to thc Authorit� an instrumcnt in «riting acccpting such appointmcnt hcrcundcr and thcrcupon such succcssor. «ithout am fiirthcr act. dccd or con� c� ancc. shall bccomc fiill� � cstcd «ith all thc cstatcs. propertics. rights. po« crs. trusts. dutics and obligations of its prcdcccssors: but such prcdcccssor shall. nc� crthcicss. on thc Rcqucst of thc Authorit�. or of thc Trustcc�s succcssor. c�ccutc and dcli� cr an instrumcnt transfcrring to such succcssor all thc cstatcs. propertics. rights. po« crs and trusts of such prcdcccsson c�rcundcr: and c� cr� prcdcccssor Trustcc shall dcli� cr all sccuritics and monc� s hcld b� it as thc Trustcc hcrcundcr to its succcssor. Should am instrumcnt in «riting from thc Authorit� bc rcquircd b� am succcssor Trustcc for morc fiill� and ccrtainl� � csting in such succcssor thc cstatc. rights. po« crs and dutics hcrcb� � cstcd or intcndcd to bc � cstcd in thc prcdcccssor Trustcc. am and all such instrumcnts in «riting shall. on rcqucst. bc c�ccutcd. ackno« Icdgcd and dcli� crcd b� thc Authorit� . Scction 6. I I. Auuointmcnt of Co-Trustcc. It is thc purposc of this Indcnturc that thcrc shall bc no � iolation of am la« of am jurisdiction (including particularl� thc la« of thc Statc) dcm ing or restricting thc right of banking corporations or associations to transact busincss as Trustcc in such jurisdiction. It is rccognizcd that in thc casc of litigation undcr this Indcnturc. and in particular in casc of thc cnforccmcnt of thc rights of thc Trustcc on dcfault. or in thc casc thc Trustcc or thc Authorit� dccros P6—Ic �2. I c �;;\xx I ;xc �. ; —22— that b� rcason of am prescnt or firturc la« of am jurisdiction it ma� not c�crcisc am of thc po« crs. rights or rcmcdics hcrcin grantcd to thc Trustcc or hold titic to thc propertics. in trust. as hcrcin grantcd. or takc am othcr action «hich ma� bc dcsirablc or ncccssar� in conncction thcrc« ith. it ma� bc ncccssar� that thc Trustcc or thc Authorit� appoint an additional indi� idual or institution as a scparatc co-trustcc. Thc follo« ing pro� isions of this Scction 6. I I arc adoptcd to thcsc cnds. In thc c� cnt that thc Trustcc or thc Authorit� appoints an additional indi� idual or institution as a scparatc or co-trustcc. cach and c� cr� rcmcd�. po«cr. right. claim. dcmand. causc of action. immunit�. cstatc. titic. intcrest and licn c�presscd or intcndcd b� this Indcnturc to bc c�crciscd b� or � cstcd in or con� c� cd to thc Trustcc «ith respcct thcrcto shall bc c�crcisablc b� and � cst in or con� c� cd to thc Trustcc «ith respcct thcrcto shall bc c�crcisablc b� and � cst in such scparatc or co-trustcc but onl� to thc c�tcnt ncccssan to cnablc such scparatc or co-trustcc to c�crcisc such po«crs. rights and rcmcdics. and c� cr� co� cnant and obligation ncccssan to thc c�crcisc thcrcof b� such scparatc or co- trustcc shall run to and bc cnforccablc b� cithcr of thcm. Thc Trustcc shall not bc liablc for thc acts or omissions of am scparatc or co-trustcc appointcd hcrcundcr. Should am instrumcnt in «riting from thc Authorit� bc rcquircd b� thc scparatc trustcc or co-trustcc so appointcd b� thc Trustcc for morc fiill� and ccrtainl� � csting in and conforming to it such propertics. rights. po«crs. trusts. dutics and obligations. am and all such instrumcnts in «riting shall. on rcqucst. bc c�ccutcd. ackno« Icdgcd and dcli� crcd b� thc Authorit� . In casc am scparatc trustcc or co- trustcc. or a succcssor to cithcr. shall bccomc incapablc of acting. resign or bc rcmo� cd. all thc cstatcs. propertics. rights. po«crs. trusts. dutics and obligations of such scparatc trustcc or co-trustcc. so far as permittcd b� la«. shall � cst in and bc c�crciscd b� thc Trustcc until thc appointmcnt of a nc« trustcc or succcssor to such scparatc trustcc or co-trustcc. Scction 6.12. Indcmnification: Limitcd Liabilit� of Trustcc. Thc Authorit� fiirthcr co� cnants and agrccs to indcmnif�. dcfcnd and sa� c thc Trustcc and its officcrs. dircctors. agcnts and cmplo� ccs. harmlcss against am loss. c�pcnsc and liabilitics «hich it ma� incur arising out of or in thc c�crcisc and performancc of its po« crs and dutics hcrcundcr. including thc costs of c�pcnscs of dcfcnding against am claim of liabilit�. but c�cluding am and all losscs. c�pcnscs and liabilitics «hich arc duc to thc ncgligcncc or intcntional misconduct of thc Trustcc. its officcrs. dircctors or cmplo� ccs. No pro� ision in this Indcnture shall rcquirc thc Trustcc to risk or c�pcnd its o« n fiinds or othcr« isc incur am financial liabilit� hcrcundcr if it shall ha� c rcasonablc grounds for bclic� ing rcpa� mcnt of such fiinds or adcquatc indcmnit� against such liabilit� or risk is not assurcd to it. Thc Trustcc shall not bc liablc for am action takcn or omittcd to bc takcn b� it in accordancc «ith thc dircction of thc Insurcr or thc O« ncrs of at Icast a majorit� in aggrcgatc Principal Amount of Bonds Outstanding rclating to thc timc. mcthod and placc of conducting am procccding or rcmcd� a� ailablc to thc Trustcc undcr this Indcnturc in c�crcising am trust or po«cr confcrrcd on thc Tnistcc b� this Indcnturc. T7�c obligations of thc Authorit� undcr this Scction shall sur� i� c thc pa� mcnt and dischargc of thc Bonds or thc resignation or rcmo� al of thc Trustcc undcr this Indcnturc. ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE Scction 7.01. Amcndmcnt Hcrcof. This Indcnturc and thc rights and obligations of thc Authorit� and of thc O« ncrs of thc Bonds ma� bc modificd or amcndcd at am timc b� a Supplcmcntal Indcnturc «hich shall bccomc binding upon adoption. «ith thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct) but «ithout conscnt of am Bond O« ncrs. to thc c�tcnt permittcd b� la« but onl� for am onc or morc of thc follo« ing purposcs: P6—Ic �2. I c �;;\xx I ;xc �. ; —2 � — (a) To add to thc co� cnants and agrccmcnts of thc Authorit� in this Indcnturc containcd. othcr co� cnants and agrccmcnts thcrcaftcr to bc obscr� cd. or to limit or surrcndcr am rights or po« crs hcrcin rescr� cd to or confcrrcd upon thc Authorit� so long as such limitation or surrcndcr of such rights or po« crs shall not matcriall� ad� crscl� affcct thc O« ncrs of thc Bonds: or (b) To makc such pro� isions for thc purposc of curing am ambiguit�. or of curing. corrccting or supplcmcnting am dcfccti� c pro� ision containcd in this Indcnturc. or in am othcr respcct «hatsoc� cr as thc Authorit� ma� dccm ncccssar� or dcsirablc. pro� idcd undcr am circumstanccs that such modifications or amcndmcnts shall cithcr (i) conform to thc original intcntion of thc Authorit�. or (ii) not matcriall� ad� crscl� affcct thc intcrests of thc O« ncrs of thc Bonds in thc rcasonablc judgmcnt of thc Authorit� : or (c) To amcnd am pro� ision hcrcof rclating to thc Codc. to am c�tcnt «hatsoc� cr but onl� if and to thc c�tcnt such amcndmcnt «ill not ad� crscl� affcct thc c�clusion from gross incomc of intcrest on am of thc Bonds undcr thc Codc. in thc opinion of Bond Counscl. E�ccpt as sct forth in thc prcccding paragraphs of this Scction 7.01. this Indcnturc and thc rights and obligations of thc Authorit� and of thc O« ncrs of thc Bonds ma� onl� bc modificd or amcndcd at am timc b� a Supplcmcntal Indcnturc «hich shall bccomc binding «hcn thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct) and of thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding arc filcd «ith thc Trustcc. No such modification or amcndmcnt shall (i) c�tcnd thc maturit� of or rcducc thc intcrest ratc on am Bond or othcn� isc altcr or impair thc obligation of thc Authorit� to pa� thc principal. intcrest or prcmiums. if am. at thc timc and placc and at thc ratc and in thc currcnc� pro� idcd thcrcin of am Bond «ithout thc c�press «rittcn conscnt of thc O« ncr of such Bond or (ii) rcducc thc perccntagc of Bonds rcquircd for thc «rittcn conscnt to am such amcndmcnt or modification. In no c� cnt shall am Supplcmcntal Indcnturc modif� am of thc rights or obligations of thc Trustcc «ithout its prior «rittcn conscnt. Scction 7.02. Effcct of Suuulcmcntal Indcnturc. From and aftcr thc timc am Supplcmcntal Indcnturc bccomcs cffccti� c pursuant to this Articic VII. this Indcnture shall bc dccmcd to bc modificd and amcndcd in accordancc thcrc« ith. thc respccti� c rights. dutics and obligations of thc partics hcrcto or thcrcto and all O« ncrs of Outstanding Bonds. as thc casc ma� bc. shall thcrcaftcr bc dctcrmincd. c�crciscd and cnforccd hcrcundcr subjcct in all respccts to such modification and amcndmcnt. and all thc tcrms and conditions of am Supplcmcntal Indcnture shall bc dccmcd to bc part of thc tcrms and conditions of this Indcnturc for am and all purposcs. Scction 7.0 �. Endorscmcnt or Rculaccmcnt of Bonds Aftcr Amcndmcnt. Aftcr thc cffccti� c datc of am action takcn as hcrcinabo� c pro� idcd. thc Authorit� ma� dctcrminc that thc Bonds shall bcar a notation. b� cndorscmcnt in form appro� cd b� thc Authorit�. as to such action. and in that casc upon dcmand of thc O« ncr of am Bond Outstanding at such cffccti� c datc and prescntation of his bond for that purposc at thc Trust Officc of thc Trustcc. a suitablc notation as to such action shall bc madc on such Bond at thc c�pcnsc of thc Authorit� . If thc Authorit� shall so dctcrminc. nc« Bonds so modificd as. in thc opinion of thc Authorit�. shall bc ncccssan to conform to such Bond O« ncrs� action shall bc prcparcd and c�ccutcd. and in that casc upon dcmand of thc O« ncr of am Bond Outstanding at such cffccti� c datc such nc« Bonds shall bc c�changcd at thc Trust Officc of thc Trustcc. at thc c�pcnsc of thc Authorit�. for Bonds thcn Outstanding. upon surrcndcr of such Outstanding Bonds. P6—Icl2.lclii\xxl ;xcl.; —2�4— ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN. SO LONG AS THE INSURANCE POLICY REMAINS IN EFFECT AND THE INSURER HAS NOT DEFAULTED WITH RESPECT TO ITS PAYMENT OBLIGATIONS UNDER THE INSURANCE POLICY. ALL PROVISIONS OF THIS ARTICLE VIII SHALL BE SUBJECT TO. AND QUALIFIED BY. THE PROVISIONS SET FORTH IN ARTICLE IX. INCLUDING. WITHOUT LIMITATION. THE INSURER�S RIGHT TO CONSENT TO ACCELERATION OF THE BONDS. AND THE INSURER�S RIGHT TO CONSENT TO OR DIRECT CERTAIN AUTHORITY. TRUSTEE OR OWNER ACTIONS. hcrcundcr: Scction 8.01. E� cnts of Dcfault. Thc follo« ing c� cnts shall bc E� cnts of Dcfault (a) Dcfault in thc duc and punctual pa� mcnt of thc Principal Amount of am Bond «hcn and as thc samc shall bccomc duc and pa�ablc. «hcthcr at maturit� as thcrcin c�presscd. b� procccdings for rcdcmption. b� dcclaration or othcr« isc. (b) I Rcscr� cd� (c) Failurc b� thc Authorit� to obscr� c and perform am of thc co� cnants. agrccmcnts or conditions on its part in this Indcnturc or in thc Bonds containcd. othcr than as rcfcrrcd to in thc prcccding Paragraph (a). for a period of �0 da� s aftcr «rittcn noticc. spccif� ing such a failurc and rcqucsting that it bc rcmcdicd has bccn gi� cn to thc Authorit� b� thc Trustcc. or to thc Authorit� and thc Trustcc b� thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds: pro� idcd. ho« c� cr. that if in thc rcasonablc opinion of thc Authorit� thc failure statcd in such noticc can bc corrcctcd. but not «ithin such �0 da� period. such failure shall not constitutc an E� cnt of Dcfault if corrccti� c action is institutcd b� thc Authorit� «ithin such �0 da� period and diligcntl� pursucd until such failurc is corrcctcd. (d) Thc filing b� thc Authorit� of a pctition or ans«cr sccking rcorganization or arrangcmcnt undcr thc fcdcral bankruptc� la« s or am othcr applicablc la« of thc Unitcd Statcs of Amcrica. or if a court of compctcnt jurisdiction shall appro� c a pctition. filcd «ith or «ithout thc conscnt of thc Authorit�. sccking rcorganization undcr thc fcdcral bankruptc� la«s or am othcr applicablc la« of thc Unitcd Statcs of Amcrica. or if. undcr thc pro� isions of am othcr la« for thc rclicf or aid of dcbtors. am court of compctcnt jurisdiction shall assumc custod� or control of thc Authorit� or of thc ��holc or am substantial part of its propert� . (c) Thc occurrcncc of am E� cnt of Dcfault undcr. and as that tcrm is dcfincd in. thc Loan Agrccmcnt. Scction 8.02. Rcmcdics Uuon E� cnt of Dcfault. Subjcct to thc pro� isions of Articic IX. if am E� cnt of Dcfault shall occur. thcn. and in cach and c� cn such casc during thc continuancc of such E� cnt of Dcfault. thc Trustcc ma�. and at thc «rittcn dircction of thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Bonds at thc timc Outstanding shall. upon noticc in «riting to thc Authorit� and thc Agcnc�. dcclarc thc Principal Amount ofall ofthc Bonds thcn Outstanding. to bc duc and pa�ablc immcdiatcl�. and upon am such dcclaration thc samc shall bccomc and shall bc immcdiatcl� duc and pa�ablc. amthing in this Indcnturc or in thc Bonds containcd to thc contrar� not«ithstanding. Am such dcclaration is subjcct to thc condition that if. at am timc aftcr such dcclaration and bcforc am judgmcnt or dccrcc for thc pa� mcnt of thc monc� s duc shall ha� c bccn obtaincd or P6—Ic �2. I c �;;\xx I ;xc �. ; —2 � — cntcrcd. thc Authorit� or thc Agcnc� shall dcposit «ith thc Trustcc a sum sufficicnt to pa� thc Accrctcd Valuc of thc Bonds of «hich pa� mcnts arc o� crduc (such Accrctcd Valuc. to thc c�tcnt permittcd b� la«. bcing calculatcd to but not including thc datc of pa� mcnt b� thc Authorit� or thc Agcnc� to thc Trustcc). and thc chargcs and c�pcnscs of thc Trustcc and its counscl (including thc allocatcd costs and disburscmcnts of in-housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl). and am and all othcr E� cnts of Dcfault kno« n to thc Trustcc (othcr than in thc pa� mcnt of Principal Amount of thc Bonds duc and pa� ablc solcl� b� rcason of such dcclaration) shall ha� c bccn madc good or curcd to thc satisfaction of thc Trustcc or pro� ision dccmcd b� thc Trustcc to bc adcquatc shal l ha� c bccn madc thcrcfor. thcn. and in c� cr� such casc. thc O« ncrs of not Icss than a majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding. b� «rittcn noticc to thc Authorit�. thc Agcnc� and thc Trustcc. or thc Trustcc if such dcclaration «as madc b� thc Trustcc. ma�. on bchalf of thc O« ncrs of all of thc Bonds. rescind and annul such dcclaration and its conscqucnccs and «ai� c such E� cnt of Dcfault: but no such rescission and annulmcnt shall c�tcnd to or shall affcct am subscqucnt E� cnt of Dcfault. or shall impair or c�haust am right or po« cr conscqucnt thcrcon. In addition. upon thc occurrcncc and during thc continuancc of an E� cnt of Dcfault. thc Trustcc ma� pursuc am a� ailablc rcmcd� at la« or in cquit� to cnforcc thc pa� mcnt of thc Principal Amount of and prcmium. if am. on thc Bonds. and to cnforcc am rights of thc Trustcc undcr or «ith respcct to thc Loan Agrccmcnt and this Indcnturc. If an E� cnt of Dcfault shall ha� c occurrcd and bc continuing and if rcqucstcd so to do b� thc O« ncrs of a majorit� in aggrcgatc Principal Amount of Outstanding Bonds and indcmnificd as pro� idcd in Scction 6.02(I). thc Trustcc shall bc obligatcd to c�crcisc such onc or morc of thc rights and po«crs confcrrcd b� this Articic VIII. as thc Tnistcc. bcing ad� iscd b� counscl. shall dccm most c�pcdicnt in thc intcrest of thc Bond O« ncrs. No rcmcd� b� thc tcrms of this Indcnturc confcrrcd upon or rescr� cd to thc Trustcc (or to thc O« ncrs) is intcndcd to bc c�clusi� c of am othcr rcmcd� . but cach and c� cr� such rcmcd� shall bc cumulati� c and shall bc in addition to am othcr rcmcd� gi� cn to thc Trustcc or to thc O« ncrs hcrcundcr or no« on c�rcaftcr c�isting at la« or in cquit� . No dcla� or omission to c�crcisc am right or po« cr accruing upon am E� cnt of Dcfault shall impair am such right or po« cr or shall bc construcd to bc a«ai� cr of am such E� cnt of Dcfault or acquicsccncc thcrcin: such right or po«cr ma� bc c�crciscd from timc to timc as oftcn as ma� bc dccmcd c�pcdicnt. - - Scction 8.0 �. Auulication of Rc� cnucs and Othcr Funds Aftcr Dcfault. All amounts rccci� cd b� thc Trustcc pursuant to am right gi� cn or action takcn b� thc Trustcc undcr thc pro� isions of this Indcnture shall bc applicd b� thc Trustcc in thc follo« ing ordcr upon prescntation of thc sc� cral Bonds. and thc stamping thcrcon of thc amount of thc pa� mcnt if onl� partiall� paid. or upon thc surrcndcr thcrcof if fiill� paid - First. to thc pa� mcnt of thc fccs. costs and c�pcnscs of thc Trustcc. including rcasonablc compcnsation to its agcnts. attornc� s and counscl (including thc allocatcd costs and disburscmcnts of in- housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl): and Sccond. to thc pa� mcnt of thc amount of Principal Amount of thc Bonds thcn duc and unpaid (such Principal Amount bcing Accrctcd Valuc of such Bonds calculatcd to but not including thc datc of pa� mcnt b� thc Authorit� or thc Agcnc� to thc Trustcc. to thc c�tcnt permittcd b� la« ): pro� idcd. ho« c� cr. that in thc c� cnt such amounts shall bc insufficicnt to pa� thc fiill amount. thcn such amounts P6—Ic �2. I c �;;\xx I ;xc �. ; —26— shall bc applicd to thc pa� mcnt of thc Principal Amount of all installmcnts of thc Bonds thcn duc and pa� ablc on a pro rata basis. Scction 8.0�4. Po« cr of Trustcc to Control Procccdin�s. Subjcct to thc pro� isions of Articic IX. in thc c� cnt that thc Trustcc. upon thc happcning of an E� cnt of Dcfault. shall ha� c takcn am action. b� judicial procccdings or othcr« isc. pursuant to its dutics hcrcundcr. «hcthcr upon its o« n discrction or upon thc rcqucst of thc O« ncrs of at Icast a majorit� in aggrcgatc Principal Amount of thc Bonds thcn Outstanding. it shall ha� c fiill po«cr. in thc c�crcisc of its discrction for thc bcst intcrests of thc O«ncrs. «ith respcct to thc continuancc. discontinuancc. «ithdra«al. compromisc. sctticmcnt or othcr disposal of such action: pro� idcd. ho« c� cr. that thc Trustcc shall not. unlcss thcrc no longcr continucs an E� cnt of Dcfault. discontinuc. «ithdra«. compromisc or scttic. or othcn� isc disposc of am litigation pcnding at la« or in cquit�. if at thc timc thcrc has bccn filcd «ith it a«rittcn rcqucst signcd b� thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds hcrcundcr opposing such discontinuancc. «ithdra«al. compromisc. sctticmcnt or othcr disposal of such litigation. Am suit. action or procccding «hich am O« ncr shall ha� c thc right to bring to cnforcc am right or rcmcd� hcrcundcr ma� bc brought b� thc Trustcc for thc cqual bcncfit and protcction of all O« ncrs similarl� situatcd and thc Trustcc is hcrcb� appointcd (and thc succcssi� c respccti� c O« ncrs hcrcundcr. b� taking and holding thc samc. shall bc conclusi� cl� dccmcd so to ha� c appointcd it) thc truc and la« fiil attornc� -in-fact of thc respccti� c O« ncrs for thc purposc of bringing am such suit. action or procccding and to do and perform am and all acts and things for an on bchalf of thc respccti� c O« ncrs as a class or classcs. as ma� bc ncccssar� or ad� isablc in thc opinion of thc Trustcc as such attornc� -in-fact. Scction 8.0�. Auuointmcnt of Rccci� crs. Upon thc occurrcncc of an E� cnt of Dcfault hcrcundcr. and upon thc filing of a suit or othcr commcnccmcnt of judicial procccdings to cnforcc thc rights of thc Trustcc and of thc O« ncrs undcr this Indcnturc. thc Trustcc shall bc cntiticd. as a mattcr or right. to thc appointmcnt of a rccci� cr or rccci� crs of thc Rc� cnucs and othcr amounts plcdgcd hcrcundcr. pcnding such procccdings. «ith such po«crs as thc court making such appointmcnt shall confcr. Scction 8.06. Non-Wai� cr. Nothing in this Articic VI I I or in am othcr pro� ision of this Indcnturc. or in thc Bonds. shall affcct or impair thc obligation of thc Authorit�. «hich is absolutc and unconditional. to pa� thc intcrest on and principal of thc Bonds to thc respccti� c O« ncrs of thc Bonds at thc respccti� c datcs of maturit�. as hcrcin pro� idcd. out of thc Rc� cnucs and othcr monc� s hcrcin plcdgcd for such pa� mcnt. A«ai� cr of am dcfault or brcach of dut� or contract b� thc Trustcc or am O« ncrs shall not affcct am subscqucnt dcfault or brcach of dut� or contract. or impair am rights or rcmcdics on am such subscqucnt dcfault or brcach. No dcla� or omission of thc Trustcc or am O« ncr to c�crcisc am right or po«cr accruing upon am dcfault shall impair am such right or po«cr or shall bc construcd to bc a«ai� cr of am such dcfault or am acquicsccncc thcrcin: and c� cr� po« cr and remcd� confcrrcd upon thc Trustcc or O«ncrs b� thc Bond La« or b� this Articic VIII ma� bc cnforccd and c�crciscd. upon an E� cnt of Dcfault. from timc to timc and as oftcn as shall bc dccmcd c�pcdicnt b� thc Trustcc or thc O« ncrs. as thc casc ma� bc. Scction 8.07. Limitation on Ri�hts and Rcmcdics of O« ncrs. No O« ncr shall ha� c thc right to institutc am suit. action or procccding at la« or in cquit�. for am rcmcd� undcr or upon this Indcnturc. unlcss (i) such O« ncr shall ha� c prc� iousl� gi� cn to thc Trustcc «rittcn noticc of thc occurrcncc of an E� cnt of Dcfault: (ii) thc O« ncrs of a majorit� in aggrcgatc Principal Amount of all thc Bonds thcn Outstanding shall ha� c madc «rittcn rcqucst upon thc Trustcc to c�crcisc thc po« crs hcrcinbcforc grantcd or to institutc such action. suit or procccding in its o« n namc: (iii) said O« ncrs shall ha� c tcndcrcd to thc Trustcc indcmnit� rcasonabl� acccptablc to thc Trustcc against thc costs. c�pcnscs and liabilitics to bc incurrcd in compliancc «ith such rcqucst: and (i� ) thc Trustcc shall ha� c rcfiiscd or P6—Ic �2. I c�;;\xx I;xc �. ; —2 7— omittcd to compl� «ith such rcqucst for a period of 60 da� s aftcr such «rittcn rcqucst shall ha� c bccn rccci� cd b�. and said tcndcr of indcmnit� shall ha� c bccn madc to. thc Trustcc. Such notification. rcqucst. tcndcr of indcmnit� and refiisal or omission arc hcrcb� dcclarcd. in c� cr� casc. to bc conditions prcccdcnt to thc c�crcisc b� am O« ncr of am rcmcd� hcrcundcr: it bcing undcrstood and intcndcd that no onc or morc O« ncrs shall ha� c am right in am manncr «hatc� cr b� thc O« ncr�s or O« ncrs� action to cnforcc am right undcr this Indcnturc. c�ccpt in thc manncn c�rcin pro� idcd. and that all procccdings at la« or in cquit� to cnforcc am pro� ision of this Indcnture shall bc institutcd. had and maintaincd in thc manncn c�rcin pro� idcd and for thc cqual bcncfit of all O« ncrs. Thc right of am O« ncr of am Bond to rccci� c pa� mcnt of thc principal of and intcrest and prcmium. if am. on such Bond as hcrcin pro� idcd or to institutc suit for thc cnforccmcnt of am such pa� mcnt. shall not bc impaircd or affcctcd «ithout thc «rittcn conscnt of such O« ncr. not« ithstanding thc forcgoing pro� isions of this Scction or am othcr pro� ision of this Indcnturc. Scction 8.08. Tcrmination of Procccdin�s. In casc thc Trustcc shall ha� c procccdcd to cnforcc am right undcr this Indcnturc b� thc appointmcnt of a rccci� cr or othcn� isc, and such procccdings shall ha� c bccn discontinucd or abandoncd for am rcason. or shall ha� c bccn dctcrmincd ad� crscl� . thcn and in c� cr� such casc. thc Authorit� . thc Trustcc and thc O« ncrs shall bc restorcd to thcir formcr positions and rights hcrcundcr. respccti� cl�. «ith rcgard to thc propert� subjcct to this Indcnturc. and all rights. rcmcdics and po« crs of thc Tnistcc shall continuc as if no such procccdings had bccn takcn. ARTICLE IX BONDINSURANCE (to comc) ARTICLE X BOOK-ENTRY SYSTEM Scction 10.01 Book-Entr� S� stcm: Limitcd Obli�ation of Authorit� . Thc Bonds shall bc initiall� dcli� crcd in thc form of a scparatc singlc fiill� rcgistcrcd Bond (« hich ma� bc t� pc« rittcn) for cach of thc maturitics of thc Bonds. Upon initial dcli� cr�. thc o« ncrship of cach such Bond shall bc rcgistcrcd in thc rcgistration books kcpt b� thc Trustcc in thc namc of thc Nomincc as nomincc of thc Dcpositor� . E�ccpt as pro� idcd in Scction 10.0 �. all of thc Outstanding Bonds shall bc rcgistcrcd in thc rcgistration books kcpt b� thc Trustcc in thc namc of thc Nomincc. With respcct to Bonds rcgistcrcd in thc rcgistration books kcpt b� thc Trustcc in thc namc of thc Nomincc. thc Authorit� and thc Trustcc shall ha� c no responsibilit� or obligation to am Participant or to am person on bchalf of «hich such a Participant holds an intcrest in thc Bonds. Without limiting thc immcdiatcl� prcccding scntcncc. thc Authorit� and thc Trustcc shall ha� c no responsibilit� or obligation «ith respcct to (i) thc accurac� of thc rccords of thc Dcpositon. thc Nomincc. or am Participant «ith respcct to am o« ncrship intcrest in thc Bonds. (ii) thc dcli� cr� to am Participant or am othcr person. othcr than an O« ncr as sho« n in thc rcgistration books kcpt b� thc Trustcc. of am noticc «ith respcct to thc Bonds. including am noticc of rcdcmption. (iii) thc scicction b� thc Dcpositor� and its Participants of thc bcncficial intcrests in thc Bonds to bc rcdccmcd in thc c� cnt thc Bonds arc rcdccmcd in part. or (i� ) thc pa� mcnt to am Participant or am othcr person. othcr than an O« ncr as sho« n in thc rcgistration books kcpt b� thc Trustcc. of am amount «ith respcct to principal of. prcmium. if am. or P6—Ic �2. I c�;;\xx I;xc �. ; —2 8— intcrest duc «ith respcct to thc Bonds. Thc Authorit� and thc Trustcc ma� trcat and considcr thc person in «hosc namc cach Bond is rcgistcrcd in thc rcgistration books kcpt b� thc Tnistcc as thc holdcr and absolutc o« ncr of such Bond for thc purposc of pa� mcnt of principal. prcmium. if am. and intcrest «ith respcct to such Bond. for thc purposc of gi� ing noticcs of rcdcmption and othcr mattcrs «ith respcct to such Bond. for thc purposc of rcgistcring transfcrs «ith respcct to such Bond. and for all othcr purposcs «hatsoc� cr. Thc Trustcc shall pa� all principal of. prcmium. if am. and intcrest duc «ith respcct to thc Bonds onl� to or upon thc ordcr of thc respccti� c O« ncrs. as sho« n in thc rcgistration books kcpt b� thc Trustcc. or thcir respccti� c attornc� s dul� authorizcd in «riting. and all such pa� mcnts shall bc � alid and cffccti� c to satisfi and dischargc fiill� thc Authorit� �s obligations «ith respcct to pa� mcnt of thc principal. prcmium. if am. and intcrest duc «ith respcct to thc Bonds to thc c�tcnt of thc sum or sums so paid. No person othcr than an O« ncr. as sho« n in thc rcgistration books kcpt b� thc Trustcc. shall rccci� c a Bond c� idcncing thc obligation of thc Authorit� to makc pa� mcnts of principal. prcmium. if am. and intcrest pursuant to this Indcnturc. Upon dcli� cr� b� thc Dcpositor� to thc Trustcc and thc Authorit� of «rittcn noticc to thc cffcct that thc Dcpositor� has dctcrmincd to substitutc a nc« nomincc in placc of thc Nomincc. and subjcct to thc pro� isions hcrcin «ith respcct to Rccord Datcs. thc «ord Nomincc in this Indcnture shall rcfcr to such nc« nomincc of thc Dcpositor� . Scction 10.02 Rcurescntation Lcttcr. In ordcr to qualif� thc Bonds for thc Dcpositor� �s book cntr� s� stcm. thc Authorit� has hcrctoforc c�ccutcd and dcli� crcd to such Dcpositor� thc Rcprescntation Lcttcr. Thc c�ccution and dcli� cr� of a Rcprescntation Lcttcr shall not in am «a� imposc upon thc Authorit� or thc Tnistcc am obligation «hatsoc� cr «ith respcct to persons ha� ing intcrests in thc Bonds othcr than thc O« ncrs. as sho« n on thc rcgistration books kcpt b� thc Trustcc. Thc Trustcc agrccs to takc all action ncccssan to continuousl� compl� «ith thc Rcprescntation Lcttcr to thc c�tcnt that such action is not inconsistcnt «ith this Indcnturc. In addition to thc c�ccution and dcli� cr� of thc Rcprescntation Lcttcr. thc officcrs of thc Authorit� arc hcrcb� authorizcd to takc am othcr actions. not inconsistcnt «ith this Indcnturc. to qualif� thc Bonds for thc Dcpositor� �s book cntr� program. Scction 10.0 � Transfcrs Outsidc Book-Entr� S� stcm. In thc c� cnt (a) thc Dcpositor� dctcrmincs not to continuc to act as sccuritics dcpositor� for thc Bonds. or (b) thc Authorit� dctcrmincs that thc Dcpositor� shall no longcr so act. thcn thc Authorit� «ill discontinuc thc book-cntr� s� stcm «ith thc Dcpositor� . If thc Authorit� fails to idcntif� anothcr qualificd sccuritics dcpositor� to rcplacc thc Dcpositor�. thcn thc Bonds so dcsignatcd shall no longcr bc restrictcd to bcing rcgistcrcd in thc rcgistration books kcpt b� thc Trustcc in thc namc of thc Nomincc. but shall bc rcgistcrcd in «hatc� cr namc or namcs persons transfcrring or c�changing Bonds shall dcsignatc. in accordancc «ith thc pro� isions of Scction 2.09. Scction 10.0�4 Pa� mcnts to thc Nomincc. Not« ithstanding am othcr pro� isions of this Indcnturc to thc contrar�. so long as am Bond is rcgistcrcd in thc namc of thc Nomincc. all pa� mcnts «ith respcct to principal. prcmium. if am. and intcrest duc «ith respcct to such Bond and all noticcs «ith respcct to such Bond shall bc madc and gi� cn. respccti� cl�. as pro� idcd in thc Rcprescntation Lcttcr or as othcn� isc instructcd b� thc Dcpositor� . Scction 10.0� Initial Dcuositor� and Nomincc. Thc initial Dcpositor� undcr this Articic shall bc Thc Dcpositor� Trust Compam. Nc« York. Nc« York. Thc initial Nomincc shall bc Ccdc c�. Co.. as Nomincc ofThc Dcpositor� Trust Compam. Nc« York. Nc« York. ARTICLE XI MISCELLANEOUS Scction I I.01. Limitcd Liabilit� of Authorit�. Not«ithstanding amthing in this Indcnturc containcd. thc Authorit� shall not bc rcquircd to ad� ancc am monc� s dcri� cd from am sourcc P6—Ic �2. I c �;;\xx I ;xc �. ; —29— of incomc othcr than thc Rc� cnucs for thc pa� mcnt of thc principal of or intcrest on thc Bonds. or am prcmiums upon thc rcdcmption thcrcof. or for thc performancc of am co� cnants hcrcin containcd (c�ccpt to thc c�tcnt am such co� cnants arc c�pressl� pa� ablc hcrcundcr from thc Rc� cnucs or othcr« isc from amounts pa�ablc undcr thc Loan Agrccmcnt). Thc Authorit� ma�. ho«c�cr. ad�ancc fiinds for am such purposc. pro� idcd that such fiinds arc dcri� cd from a sourcc Icgall� a� ailablc for such purposc and ma� bc uscd b� thc Authorit� for such purposc «ithout incurring indcbtcdncss. Thc Bonds shall bc rc� cnuc bonds. pa� ablc c�clusi� cl� from thc Rc� cnucs and othcr fiinds as in this Indcnturc pro� idcd. Thc gcncral fiind of thc Authorit� is not liablc. and thc crcdit of thc Airthorit� is not plcdgcd. for thc pa� ►ncnt of thc intcrest and prc►niu►n. if an�. on or principal of thc Bonds. Thc O« ncrs of thc Bonds shall nc� cr ha� c thc right to compcl thc forfciturc of am propert� of thc Authorit� . Thc principal of and intcrest on thc Bonds. and am prcmiums upon thc rcdcmption of am thcrcof. shall not bc a Icgal or cquitablc plcdgc. chargc. licn or cncumbrancc upon am propert� of thc Authorit� or upon am of its incomc. rcccipts or rc� cnucs c�ccpt thc Rc� cnucs and othcr fiinds plcdgcd to thc pa� mcnt thcrcof as in this Indcnturc pro� idcd. Scction I I.02. Bcncfits of Indcnturc Limitcd to Partics. Nothing in this Indcnturc. c�presscd or implicd. is intcndcd to gi� c to am person othcr than thc Authorit�. thc Trustcc. thc Agcnc�. thc Insurcr. and thc O�� ncrs of thc Bonds. am right. rcmcd� or claim undcr or b� rcason of this Indcnturc. Am co� cnants. stipulations. promiscs or agrccmcnts in this Indcnturc containcd b� and on bchalf of thc Authorit� shall bc for thc solc and csclusi� c bcncfit of thc Trustcc. thc Agcnc�. thc Insurcr. and thc O« ncrs of thc Bonds. Scction I I.0 �. Dischar�c of Indcnturc. If thc Authorit� shall pa� and dischargc am or all of thc Outstanding Bonds in am onc or morc of thc follo« ing «a� s: (a) B� �� cll and trul� pa� ing or causing to bc paid thc principal of and intcrest and prcmium. ifam. on such Bonds. as and «hcn thc samc bccomc duc and pa�ablc: (b) B� irrc� ocabl� dcpositing «ith thc Trustcc. in trust. at or bcforc maturit�. monc� «hich. togcthcr «ith thc a� ailablc amounts thcn on dcposit in thc fiinds and accounts cstablishcd «ith thc Trustcc pursuant to this Indcnturc and thc Loan Agrcc►ncnt. is fiilh sufficicnt to pa� such Bonds. including all principal. intcrest and prcmiums. ifam: or (c) B� irrc� ocabl� dcpositing «ith thc Trustcc or am othcr fiduciar�. in trust. non-callablc Dcfcasancc Obligations in such amount as an Indcpcndcnt Accow�tant shall dctcrminc «ill. togcthcr «ith thc intcrest to accruc thcrcon and a� ailablc monc� s thcn on dcposit in thc fiinds and accow�ts cstablishcd «ith thc Trustcc pursuant to this Indcnturc and thc Loan Agrccmcnt. bc fiill� sufficicnt to pa� and dischargc thc indcbtcdncss on such Bonds (including all principal. intcrest and rcdcmption prcmiums) at or bcforc thcir respccti� c maturit� datcs: and if such Bonds arc to bc rcdccmcd prior to thc maturit� thcrcof noticc of such rcdcmption shall ha� c bccn scnt pursuant to Scction 2.0 � or pro� ision satisfactor� to thc Trustcc shall ha� c bccn madc for thc scnding of such noticc. thcn. at thc Rcqucst of thc Airthorit� . and not« ithstanding that am of such Bonds shall not ha� c bccn surrcndcrcd for pa� mcnt. thc plcdgc of thc Rc� cnucs and othcr fiinds pro� idcd for in this Indcnturc «ith respcct to such Bonds. and all othcr pccuniar� obligations of thc Authorit� undcr this Indcnturc «ith respcct to all such Bonds. shall ccasc and tcrminatc. c�ccpt onl� thc obligation of thc Authorit� to pa� or causc to bc paid to thc O« ncrs of such Bonds not so surrcndcrcd and paid all sums duc thcrcon from amounts sct asidc for such purposc as aforesaid. and all c�pcnscs and costs of thc Trustcc. Am fiinds hcld b� thc Trustcc. follo« ing am pa� mcnt or dischargc of thc Outstanding Bonds pursuant to this Scction I I.0 � and thc pa� mcnt of thc Tnistcc�s and thc Insurcr�s c�pcnscs and costs. shall bc paid o� cr to thc Authorit� . P6—Ic�2. I c�;;\xx I ;xc�. ; —;p— Scction I 1.0�4. Succcssor Is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor. Whcnc� cr in this Indcnturc or am Supplcmcntal Indcnturc thc Authorit� is namcd or rcfcrrcd to. such rcfcrcncc shall bc dccmcd to includc thc succcssor to thc po«crs. dutics and fiinctions. «ith respcct to thc managcmcnt. administration and control of thc affairs of thc Authorit�. that arc prescntl� � cstcd in thc Authorit�. and all thc co� cnants. agrccmcnts and pro� isions containcd in this Indcnturc b� or on bchalf of thc Authorit� shall bind and inurc to thc bcncfit of its succcssors «hcthcr so c�presscd or not. Scction I I.0�. Contcnt of Ccrtificatcs. E� cr� Ccrtificatc of thc Authorit� «ith respcct to compliancc «ith a condition or co� cnant pro� idcd for in this Indcnture shall includc (i) a statcmcnt that thc person or persons making or gi� ing such Ccrtificatc ha� c rcad such co� cnant or condition and thc dcfinitions hcrcin rclating thcrcto: (ii) a bricf statcmcnt as to thc naturc and scopc of thc c�amination or in� cstigation upon «hich thc statcmcnts or opinions containcd in such Ccrtificatc arc bascd: (iii) a statcmcnt that. in thc opinion of thc signcrs. thc� ha� c madc or causcd to bc madc such c�amination or in� cstigation as is ncccssar� to cnablc thcm to c�press an informcd opinion as to «hcthcr or not such co� cnant or condition has bccn complicd «ith: and (i� ) a statcmcnt as to «hcthcr. in thc opinion of thc signcrs. such condition or co� cnant has bccn complicd «ith. Am such ccrtificatc madc or gi� cn b� an officcr of thc Authorit� ma� bc bascd. insofar as it rclatcs to Icgal mattcrs. upon a ccrtificatc or opinion of or rcprescntations b� counscl. unlcss such officcr kno«s that thc ccrtificatc or opinion or rcprescntations «ith respcct to thc mattcrs upon «hich his ccrtificatc ma� bc bascd. as aforesaid. arc crroncous. or in thc c�crcisc of rcasonablc care should ha� c kno« n that thc samc �� crc crroncous. Am such ccrtificatc or opinion or rcprescntation madc or gi� cn b� counscl ma� bc bascd. insofar as it rclatcs to factual mattcrs. on information «ith respcct to «hich is in thc posscssion of thc Authorit�. or upon thc ccrtificatc or opinion of or rcprescntations b� an officcr or officcrs of thc Authorit�. unlcss such counscl kno«s that thc ccrtificatc or opinion or rcprescntations «ith respcct to thc mattcrs upon «hich his ccrtificatc. opinion or rcprescntation ma� bc bascd. as aforesaid. arc crroncous. Scction I I.06. E�ccution of Documcnts b� O« ncrs. Am rcqucst. conscnt or othcr instrumcnt rcquircd b� this Indcnturc to bc signcd and c�ccutcd b� Bond O«ncrs ma� bc in am numbcr of concurrcnt «ritings of substantiall� similar tcnor and ma� bc signcd or c�ccutcd b� such Bond O« ncrs in person or b� thcir agcnt or agcnts dul� appointcd in «riting. Proof of thc c�ccution of am such rcqucst. conscnt or othcr instrumcnt or of a«riting appointing am such agcnt. shall bc sufficicnt for am purposc of this Indcnturc and shall bc conclusi� c in fa� or of thc Trustcc and of thc Authorit� if madc in thc manncr pro� idcd in this Scction I I.06. Thc fact and datc of thc c�ccution b� am person of am such rcqucst. conscnt or othcr instrumcnt or «riting ma� bc pro� cd b� thc affida� it of a«itncss of such c�ccution or b� thc ccrtificatc of am notan public or othcr officcr of am jurisdiction, authorizcd b� thc la« s thcrcof to takc ackno« Icdgmcnts of dccds. ccrtif� ing that thc person signing such rcqucst. conscnt or othcr instrumcnt or «riting ackno« Icdgcd to him thc c�ccution thcrcof. Thc o« ncrship of Bonds shall bc pro� cd b� thc Rcgistration Books. Am rcqucst. conscnt or � otc of thc O« ncr of am Bond shal l bind c� cr� firturc O« ncr of thc samc Bond and thc O« ncr of am Bond issucd in c�changc thcrcfor or in licu thcrcof. in respcct of am thing donc or suffcrcd to bc donc b� thc Trustcc or thc Authorit� in pursuancc of such rcqucst. conscnt or � otc. In licu of obtaining am dcmand. rcqucst, dircction. conscnt or «ai� cr in «riting. thc Trustcc ma� call and hold a mccting of thc Bond O«ncrs upon such noticc and in accordancc «ith such rulcs and obligations as thc Trustcc considcrs fair and reasonablc for thc purposc of obtaining am such action. Scction I I.07. Disqualificd Bonds. In dctcrmining «hcthcr thc O« ncrs of thc rcquisitc aggrcgatc principal amount of Bonds ha� c concurrcd in am dcmand. rcqucst. dircction. conscnt or «ai� cr P6—Ic �2. I c �;;\xx I ;xc �. ; — � I — undcr this Indcnturc. Bonds «hich arc o« ncd on c�ld b� or for thc account of thc Agcnc� or thc Authorit� (but c�cluding Bonds hcld in am cmplo� ccs� rctircmcnt fiind) shall bc disrcgardcd and dccmcd not to bc Outstanding for thc purposc of am such dctcrmination. pro� idcd. ho« c� cr. onl� Bonds «hich a responsiblc officcr of thc Trustcc actuall� kno« s to bc so o« ncd on c�ld shall bc disrcgardcd. Scction I I.08. Wai� cr of Pcrsonal Liabilit� . No officcr. agcnt or cmplo� cc of thc Authorit� shall bc indi� iduall� or personall� liablc for thc pa� mcnt of thc intcrest on or principal of thc Bonds: but nothing hcrcin containcd shall rclic� c am such officcr. agcnt or cmplo� cc from thc performancc of am official dut� pro� idcd b� la« . Scction I I.09. Partial In� alidit� . If am onc or morc of thc co� cnants or agrccmcnts. or portions thcrcof. pro� idcd in this Indcnturc on thc part of thc Authorit� (or of thc Trustcc) to bc performcd should bc contran to la«. thcn such co� cnant or co� cnants. such agrccmcnt or agrccmcnts. or such portions thcrcof. shall bc null and � oid and shall bc dccmcd scparablc from thc rcmaining co� cnants and agrccmcnts or portions thcrcof and shall in no «a� affcct thc � alidit� of this Indcnturc or of thc Bonds: but thc Bond O« ncrs shall rctain all rights and bcncfits accordcd to thcm undcr thc Bond La« or am othcr applicablc pro� isions of la« . Thc Authorit� hcrcb� dcclares that it «ould ha� c cntcrcd into this Indcnturc and cach and c� cr� othcr scction. paragraph. subdi� ision. scntcncc. clausc and phrasc hcrcof and «ould ha� c authorizcd thc issuancc of thc Bonds pursuant hcrcto irrespccti� c of thc fact that am onc or more scctions. paragraphs. subdi� isions. scntcnccs. clauscs or phrascs of this Indcnturc or thc application thcrcof to am person or circumstancc ma� bc hcld to bc unconstitutional. uncnforccablc or in� alid. - - Scction I I.10. Dcstruction of Canccllcd Bonds. Whcnc� cr in this Indcnturc pro� ision is madc for thc surrcndcr to thc Trustcc of am Bonds «hich ha� c bccn paid or canccllcd pursuant to thc pro� isions of this Indcnturc. thc Trustcc shall. as permittcd b� la«. dcstro� such canccllcd Bonds and. upon Rcqucst of thc Authorit�. pro� idc to thc Authorit� a ccrtificatc of dcstruction dul� c�ccutcd b� thc Trustcc. and thc Authorit� shall bc cntiticd to rcl� upon am statcmcnt of fact containcd in such ccrtificatc «ith respcct to thc dcstruction of am such Bonds thcrcin rcfcrrcd to: pro� idcd. ho« c� cr. thc Authorit� shall rcimbursc thc Trustcc for thc Trustcc�s costs incurrcd in conncction «ith thc microfilming or thc rcquircd permancnt rccording. if am. rclatcd thcrcto. Scction I I. I I. Funds and Accounts. Am fiind or account rcquircd b� this Indcnturc to bc cstablishcd and maintaincd b� thc Authorit� or thc Trustcc ma� bc cstablishcd and maintaincd in thc accounting rccords of thc Authorit� or thc Trustcc. as thc casc ma� bc. cithcr as a fiind or an account. and ma�. for thc purposc of such rccords. am audits thcrcof and am rcports or statcmcnts «ith respcct thcrcto. bc trcatcd cithcr as a fiind or as an account. All such rccords «ith respcct to all such fiinds and accounts hcld b� thc Authorit� shall at all timcs bc maintaincd in accordancc «ith gcncrall� acccptcd accounting principlcs and all such rccords «ith respcct to all such fiinds and accounts hcld b� thc Trustcc shall bc at all timcs maintaincd in accordancc «ith corporatc trust industr� practiccs. Am fiind or account rcquircd b� this Indcnturc to bc cstablishcd and maintaincd b� thc Authorit� or thc Trustcc ma� bc cstablishcd and maintaincd in thc form of multiplc funds. accounts or sub-accounts thcrcin. Scction I I.12. Pa� mcnt on Busincss Da� s. Whcnc� cr in this Indcnturc am amount is rcquircd to bc paid on a da� «hich is not a Busincss Da�. such pa� mcnt shall bc rcquircd to bc madc on thc Busincss Da� immcdiatcl� follo« ing such da�. pro� idcd that intcrest shall not accruc from and aftcr such da�. - - - Scction I I. I�. Noticcs. Am noticc. rcqucst. complaint. dcmand or othcr communication undcr this Indcnture shall bc gi� cn b� first class mail or personal dcli� cr� to thc part� cntiticd thcrcto at its address sct forth bclo«. or b� tciccop� or othcr form of tciccommunication. confirmcd b� tcicphonc at its numbcr sct forth bclo« . Noticc shall bc cffccti� c cithcr (i) upon transmission b� tciccop� or othcr P6—Ic �2. I c �;;\xx I ;xc �. ; — � 2— form of tciccommunication. (ii) �48 hours aftcr dcposit in thc Unitcd Statcs mail. postagc prcpaid. or (iii) in thc casc of personal dcli� cr� to am person. upon actual rcccipt. Thc Authorit�. thc Agcnc� or thc Trustcc ma�. b� «rittcn noticc to thc othcr partics. from timc to timc modif� thc address or numbcr to «hich communications arc to bc gi� cn hcrcundcr. If to thc Authorit� : Palm Dcscrt Financing Authorit� 7�-� I 0 Frcd Waring Dri� c Palm Dcscrt. California 92260 Attcntion: Chicf Administrati� c Officcr Facsimilc: (760) ��40-Oi7�4 If to thc Agcnc� : Palm Dcscrt Rcdc� clopmcnt Agcnc� 7�-� I 0 Frcd Waring Dri� c Palm Dcscrt. California 92260 Attcntion: E�ccuti� c Dircctor Facsimilc: (760) ��40-Oi7�4 If to thc Trustcc: Wclls Fargo Bank. National Association 707 Wilshirc Boulc�ard. 17th Floor Los Angcics. California 90017 Attcntion: Corporatc Trust Dcpartmcnt Facsimilc: (21 �) 61�4->>ii If to thc Insurcr: Attcntion: Facsimilc: ( ) Thc Authorit�. thc Agcnc�. thc Trustcc and thc Insurcr ma� dcsignatc am fiirthcr or diffcrcnt addresscs to «hich subscqucnt noticcs. ccrtificatcs or othcr communications shall bc scnt. Noticcs to thc Insurcr shall bc go� crncd b� Scction 9.02. Scction I I.1�4. Unclaimcd Monc�s. Amthing in this Indcnturc to thc contrar� not« ithstanding. am monc� s hcld b� thc Trustcc in trust for thc pa� mcnt and dischargc of am of thc Bonds or thc intcrest thcrcon «hich rcmain unclaimcd for t«o � cars aftcr thc datc «hcn such Bonds or thc intcrest thcrcon ha� c bccomc duc and pa� ablc. cithcr at thcir statcd maturit� datcs or b� call for carlicr rcdcmption. if such monc� s«crc hcld b� thc Trustcc at such datc. or for t« o� cars aftcr thc datc of dcposit of such monc� s if dcpositcd «ith thc Trustcc aftcr said datc «hcn such Bonds or thc intcrest thcrcon bccomc duc and pa� ablc. shall. at thc Rcqucst of thc Authorit� . bc rcpaid b� thc Trustcc to thc Authorit�. as its absolutc propert� and frcc from trust. and thc Trustcc shall thcrcupon bc rcicascd and dischargcd «ith respcct thcrcto and thc O« ncrs shall look onl� to thc Authorit� for thc pa� mcnt of such Bonds: pro� idcd. ho«c� cr. that bcforc making am such pa� mcnt to thc Authorit�. thc Trustcc shall. at thc Rcqucst and at thc c�pcnsc of thc Authorit� . causc to bc mailcd to thc O« ncrs of all such Bonds. at thcir respccti� c addresscs appcaring on thc Rcgistration Books. a noticc that said monc� s rcmain unclaimcd and that. aftcr a datc namcd in said noticc. «hich datc shall not bc Icss than �0 da� s aftcr thc datc of mailing of such noticc. thc balancc of such monc� s thcn unclaimcd «ill bc rcturncd to thc Authorit� . Scction I I. I�. Go� crnin� La« . This Agrccmcnt shall bc construcd and go� crncd in accordancc «ith thc la« s of thc Statc of California. P6—Ic �2. I c �;;\xx I ;xc �. ; —> ; — PG-IO2. I Oii\881 ;8O. ; - ��- IN WITNESS WHEREOF. thc PALM DESERT FINANCING AUTHORITY has causcd this Indcnturc to bc signcd in its namc b� its dul� authorizcd officcr and WELLS FARGO BANK. NATIONAL ASSOCIATION. in tokcn of its acccptancc of thc trust crcatcd hcrcundcr. has causcd this Indcnturc to bc signcd in its corporatc namc b� its officcr idcntificd bclo«. all as of thc da� and � car first abo� c «rittcn. PALM DESERT FINANCING AUTHORITY : Chicf Administrati� c Officcr WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc : Authorizcd Officcr P6—Icl2.lclii\xxl ;xcl.; —��— EXHIBIT A �FORM OF BOND� Unlcss this ccrtificatc is prescntcd b� an authorizcd represcntati� c of Thc Dcpositor� Trust Compam. a Nc« York corporation ("DTC��). to thc Authorit� or its agcnt for rcgistration of transfcr. c�changc. or pa� mcnt. and am ccrtificatc issucd is rcgistcrcd in thc namc of Ccdc c�. Co. or in such othcr namc as is rcqucstcd b� an authorizcd represcntati� c of DTC (and am pa� mcnt is madc to Ccdc c�. Co. or to such othcr cntit� as is rcqucstcd b� an authorizcd represcntati� c of DTC). ANY TRANSFER. PLEDGE. OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as thc rcgistcrcd o« ncn c�rcof. Ccdc c�. Co.. has an intcrest hcrcin. No. Maturit� Amount: `f PALM DESERT FINANCING AUTHORITY SUBORDINATE TAX ALLOCATION REVENUE CAPTIAL APPRECIATION BOND (PROJECT AREA NO. 2) 2006 SERIES D YIELD TO MATURITY MATURITY DATE ORIGINAL ISSUE DATE CUSIP August I. 20_ REGISTERED OWNER: CEDE c�'. CO. INITIAL PRINCIPAL AMOUNT: MATURITY AMOUNT: Thc PALM DESERT FINANCING AUTHORITY. a joint po«crs authorit� organizcd and c�isting undcr thc la« s of thc Statc of California (thc "Authorit� ��). for � aluc rccci� cd. hcrcb� promiscs to pa� (but onl� out of thc Rc� cnucs. as dcfincd in thc Indcnturc hcrcinaftcr rcfcrrcd to. and ccrtain othcr monc� s) to thc Rcgistcrcd O« ncr idcntificd abo� c or rcgistcrcd assigns (thc "Rcgistcrcd O« ncr'�). in la« fiil monc� of thc Unitcd Statcs of Amcrica. cithcr thc Maturit� Amount idcntificd abo� c on thc Maturit� Datc or thc Accrctcd Valuc. plus am applicablc rcdcmption prcmium. upon rcdcmption prior to maturit� ."Accrctcd Valuc.�� «ith respcct to am Bond. mcans as of am datc of calculation. thc sum of thc Initial Principal Amount thcrcof and thc intcrest accrucd thcrcon to such datc of calculation. compoundcd from thc Original Issuc Datc at thc statcd Yicld to Maturit� thcrcof on cach Fcbruar� I and August I. commcncing August I. 2006. Intcrest on cach Bond shall bc computcd using a� car of �60 da� s of t«cl�c �0-da� months and shall bc pa�ablc (i) at maturit� as part ofthc Maturit� Amount. or (ii) at rcdcmption as part of thc Accrctcd Valuc to thc rcdcmption datc. Thc Maturit� Amount. or thc Accrctcd Valuc and redcmption prcmium (if am ). as applicablc. «ith respcct to am Bond shall bc paid upon prescntation and surrcndcr thcrcof. at maturit� or thc prior rcdcmption thcrcof. at thc corporatc trust officc P6—Ic�2.lc��\xxl �xc�.; A—I of Wclls Fargo Bank. National Association (thc "Trustcc��) in Los Angcics. California or such othcr location as thc Trustcc shall dcsignatc (thc "Trust Officc��). This Bond is onc of a dul� authorizcd scrics of bonds of thc Authorit� dcsignatcd thc Palm Dcscrt Financing Authorit�. Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics D(thc "Bonds��). limitcd in initial principal amount to `f . Thc Bonds arc sccurcd b� an Indcnturc of Trust. datcd as of Jul� I. 2006 (thc "Indcnturc��). b� and bct« ccn thc Authorit� and thc Trustcc. Unlcss thc contc�t cicarl� rcquires othcr«isc. capitalizcd tcrms uscd but not dcfincd hcrcin ha� c thc mcanings ascribcd to thcm in thc Indcnturc. Rcfcrcncc is hcrcb� madc to thc Indcnturc and all indcntures supplcmcntal thcrcto for a dcscription of thc rights thcrcundcr of thc o« ncrs of thc Bonds. of thc naturc and c�tcnt of thc Rc� cnucs. of thc rights. dutics and immunitics of thc Trustcc and of thc rights and obligations of thc Authorit� thcrcundcr: and all of thc tcrms of thc Indcnturc arc hcrcb� incorporatcd hcrcin and constitutc a contract bct«ccn thc Authorit� and thc Rcgistcrcd O«ncn c�rcof. and to all of thc pro� isions of «hich Indcnturc thc Rcgistcrcd O« ncn c�rcof. b� acccptancc hcrcof. asscnts and agrccs. Thc Bonds arc authorizcd to bc issucd pursuant to thc pro� isions of thc Marks-Roos Local Bond Pooling Act of 198�. constituting Articic �4. Chaptcr �. Di� ision 7. Titic I of thc Go� crnmcnt Codc of thc Statc of California (thc "Act��). Thc Bonds are spccial obligations of thc Authorit� and. as and to thc c�tcnt sct forth in thc Indcnturc. arc pa�ablc solcl� from and sccurcd b� a first licn on and plcdgc ofthc Rc� cnucs and ccrtain othcr monc� s and sccuritics hcld b� thc Trustcc as pro� idcd in thc Indcnturc. All of thc Bonds arc cquall� sccurcd b� a plcdgc of. and chargc and licn upon. all of thc Rc� cnucs and such othcr monc� s and sccuritics. and thc Rc� cnucs and such othcr monc� s and sccuritics constitutc a tnist fiind for thc sccurit� and pa� mcnt of thc principal of and intcrest on thc Bonds. Thc fiill faith and crcdit of thc Authorit� is not plcdgcd for thc pa� mcnt of thc principal of or intcrest or prcmium (if am ) on thc Bonds. Thc Bonds arc not sccurcd b� a Icgal or cquitablc plcdgc of. or chargc. licn or cncumbrancc upon. am of thc propert� of thc Authorit� or am of its incomc or rcccipts. c�ccpt thc Rc� cnucs and such othcr monc� s and sccuritics as pro� idcd in thc Indcnturc. Thc Bonds ha� c bccn issucd for thc purposc of making a loan (thc "Loan��) to thc Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Agcnc� ��) to financc ccrtain public capital impro� cmcnts «ith respcct to a rcdc� clopmcnt projcct kno« n and dcsignatcd as Projcct Arca No. 2(thc "Projcct Arca��). Thc Loan has bccn madc b� thc Authorit� to thc Agcnc� pursuant to a Projcct Arca No. 2 Loan Agrccmcnt (2006 Subordinatc Loan). datcd as of Jul� I. 2006 (thc "Loan Agrccmcnt��). b� and among thc Agcnc�. thc Authorit� and thc Trustcc. Rcpa� mcnt of thc Loan is sccurcd b� Subordinatc Ta� Rc� cnucs (as dcfincd in thc Loan Agrccmcnt). consisting of ccrtain ta� rc� cnucs rccci� cd b� thc Agcnc� «ith respcct to thc Projcct Arca. Icss thc amount rcquircd to pa� ccrtain obligations of thc Agcnc� «hich rank scnior to thc Loan. Thc Bonds maturing on or aftcr August I. 20_ are subjcct to rcdcmption prior to thcir respccti� c maturit� datcs as a«holc. or in part among maturitics as dcsignatcd b� thc Authorit� and b� lot «ithin a maturit�. from prcpa� mcnts of thc Loan madc at thc option of thc Agcnc� pursuant to thc Loan Agrccmcnt. on am August I or Fcbruar� I on or aftcr August I. 20 . at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc Accrctcd Valuc of thc callcd Bonds on thc datc fi�cd for rcdcmption): P6—Icl2.lclii\xxl ;xcl.; A-2 Rcdcmution Datcs Rcdcmution Pricc August I. 20_ and Fcbruar� I. 20_ '%� August I. 20_ and Fcbruar� I. 20_ August I. 20_ and thcrcaftcr Thc Trustcc on bchalf and at thc c�pcnsc of thc Authorit� shall mail (b� first class mail) noticc of am rcdcmption to thc respccti� c o« ncrs of am Bonds dcsignatcd for rcdcmption. at thcir respccti� c addresscs appcaring on thc rcgistration books maintaincd b� thc Trustcc. and b� such mcans as acccptablc to thc follo« ing institutions. to thc Sccuritics Dcpositorics and to onc or morc Information Scr� iccs. at Icast �0 but not morc than 60 da� s prior to thc rcdcmption datc: pro� idcd. ho« c� cr. that ncithcr failurc to rccci� c am such noticc so mailcd nor am dcfcct thcrcin shall affcct thc � alidit� of thc procccdings for thc rcdcmption of such Bonds or thc ccssation of thc accrual of intcrest thcrcon. Such noticc shall statc thc datc of thc noticc. thc rcdcmption datc. thc rcdcmption placc and thc rcdcmption pricc and shall dcsignatc thc CUSIP numbcrs. thc scrial numbcrs of cach maturit� or maturitics (c�ccpt that if thc c� cnt of rcdcmption is of all of thc Bonds of such maturit� or maturitics in «holc. thc Trustcc shall dcsignatc such maturitics or thc maturit� in «holc «ithout rcfcrcncing cach indi� idual numbcr) of thc Bonds to bc rcdccmcd. and shall rcquirc that such Bonds bc thcn surrcndcrcd at thc Trust Officc for rcdcmption at thc rcdcmption pricc. gi� ing noticc also that fiirthcr intcrest on such Bonds «ill not accruc from and aftcr thc rcdcmption datc. Subjcct to thc limitations and upon pa� mcnt of thc chargcs. if am. pro� idcd in thc Indcnturc. this Bond ma� bc c�changcd at thc Trust Officc for a likc aggrcgatc Maturit� Amount and maturit� of fiill� rcgistcrcd Bonds of othcr authorizcd dcnominations. This Bond is transfcrablc b� thc Rcgistcrcd O« ncn c�rcof. in person or b� thc Rcgistcrcd O« ncr�s attornc� dul� authorizcd in «riting. at thc Trust Officc. but onl� in thc manncr. subjcct to thc limitations and upon pa� mcnt of thc chargcs pro� idcd in thc Indcnturc. and upon surrcndcr and canccllation of this Bond. Upon such transfcr a nc« fiill� rcgistcrcd Bond or Bonds. of authorizcd dcnomination or dcnominations. for thc samc aggrcgatc Maturit� Amount and of thc samc maturit� «ill bc issucd to thc transfcrcc in c�changc thcrcfor. Thc Trustcc shall not bc rcquircd to rcgistcr thc transfcr or c�changc of am Bond during thc I�-da� period prcccding thc scicction of Bonds for rcdcmption or am Bond scicctcd for rcdcmption. Thc Authorit� and thc Trustcc ma� trcat thc Rcgistcrcd O« ncn c�rcof as thc absolutc o« ncn c�rcof for all purposcs. and thc Authorit� and thc Trustcc shall not bc affcctcd b� am noticc to thc contran . Thc Indcnturc and thc rights and obligations of thc Authorit� and of thc o« ncrs of thc Bonds and of thc Trustcc ma� bc modificd or amcndcd from timc to timc and at am timc in thc manncr. to thc c�tcnt. and upon thc tcrms pro� idcd in thc Indcnturc: pro� idcd that no such modification or amcndmcnt shall (a) c�tcnd thc maturit� of or rcducc thc intcrest ratc on am Bond or othcn� isc altcr or impair thc obligation of thc Authorit� to pa� thc principal. intcrest or prcmiums at thc timc and placc and at thc ratc and in thc currcnc� pro� idcd thcrcin of am Bond «ithout thc c�press «rittcn conscnt of thc O« ncr of such Bond. (b) rcducc thc perccntagc of Bonds rcquircd for thc «rittcn conscnt to am such amcndmcnt or modification. or (c) «ithout its «rittcn conscnt thcrcto. modif� am of thc rights or obligations of thc Trustcc. all as morc fiill� sct forth in thc Indcnturc. It is hcrcb� ccrtificd that all things. conditions and acts rcquircd to c�ist. to ha� c happcncd and to ha� c bccn performcd prcccdcnt to and in thc issuancc of this Bond do c�ist. ha� c happcncd and ha� c bccn performcd in duc timc. form and manncr as rcquircd b� thc Constitution and statutcs of thc Statc of P6—Ic �2. I c�;;\xx I;xc �. ; A— � California and b� thc Act and thc amount of this Bond. togcthcr «ith all othcr indcbtcdncss of thc Authorit�. docs not c�cccd am limit prescribcd b� thc Constitution or statutcs of thc Statc of California or b� thc Act. This Bond shall not bc cntiticd to am bcncfit undcr thc Indcnturc. or bccomc � alid or obligator� for am purposc. until thc ccrtificatc of authcntication hcrcon shall ha� c bccn signcd b� thc Trustcc. IN WITNESS WHEREOF. thc Authorit� has causcd this Bond to bc c�ccutcd in its namc and on its bchalf b� thc manual or facsimilc signatures of its Presidcnt and Sccrctar� all as of thc Original Issuc Datc idcntificd abo� c. PALM DESERT FINANCING AUTHORITY : Attcst: Sccrctar� Presidcnt STATEMENT OF INSURANCE �to comc� P6—Ic �2. I c�;;\xx I;xc �. ; A—�4 �FORM OF TRUSTEE�S CERTIFICATE OF AUTHENTICATION� This is onc of thc Bonds dcscribcd in thc «ithin-mcntioncd Indcnturc and registcrcd on thc Bond Rcgistration Books. WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc Datc: : Authorizcd Signator� �FORM OF ASSIGNMENT� For � aluc rccci� cd thc undcrsigncd do(cs) hcrcb� scll. assign and transfcr w�to «hosc ta� idcntification numbcr is . thc �� ithin-mcntioncd registcrcd Bond and hcrcb� irrc� ocabl� constitutc(s) and appoint(s) attorncti to transfcr thc samc on thc books of thc Trustcc �� ith fiill po« cr of substitution in thc prcmiscs. Datcd: Signaturc guarantccd: NOTE: Thc signaturc(s) on this Assignmcnt must correspond «ith thc namc(s) as «rittcn on thc facc of thc «ithin Bond in c� cr� particular «ithout altcration or cnlargcmcnt or am changc «hatsoc� cr. NOTE: Signaturc(s) must bc guarantccd b� a mcmbcr of an institution «hich is a participant in thc Sccuritics Transfcr Agcnt Mcdallion Program (STAMP) or othcr similar program. P6—Icl2.lclii\xxl ;xcl.; A—i Projcct Arca No. 2 Loan Agrccmcnt (2006 Subordinatc Loan) «ith rcfcrcncc to � Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2) 2006 Scrics D P(,—Ic�2.lc��\xxl��l(,.� RWG DRAFT: �/22/200G TABLE OF CONTENTS P� ARTICLE I DEFINITIONS ................ Scction I . I . Dcfinitions ............... Scction I.2. Rulcs of Construction ARTICLE II THE LOAN: APPLICATION OF LOAN PROCEEDS OF ADDITIONAL DEBT .............................. Scction 2. I . Authorization ...................................................... Scction 2.2. Disburscmcnt and Application of Loan Procccds . Scction 2. �. Rcpa� mcnt of Loan ............................................. Scction 2.�4. Optional Prcpa� mcnt ........................................... Scction 2.�. Rcscr� c Fund ...................................................... Scction 2.6. Costs of Issuancc Fund ........................................ Scction 2.7. Projcct Fund ........................................................ Scction 2.8. Parit� Dcbt .......................................................... Scction 2.9. Issuancc of Additional Scnior Dcbt ...................... Scction 2.10. Issuancc of Subordinatc Dcbt ............................. Scction 2. I I. Validit� of Loan ................................................ 2 2 i : INCURRENCE ..................................... � ..................................... � ..................................... 6 ..................................... 6 ..................................... 6 ..................................... 7 ..................................... 8 ..................................... 8 ..................................... 9 ................................... I 0 ................................... I 0 ................................... I 0 ARTICLE III PLEDGE AND APPLICATION OF SUBORDINATE TAX REVENUES..... 10 Scction �. I. Plcdgc of Subordinatc Tax Rc� cnucs ...................................................... 10 Scction �.2. Spccial Fund: Dcposit of Subordinatc Ta� Rc� cnucs .............................. 10 Scction �. �. Transfcr of Subordinatc Ta� Rc� cnucs From Spccial Fund ..................... I I Scction �.�4. Im cstmcnt of Monc� s: Valuation of In� cstmcnts .................................... I I ARTICLE IV OTHER COVENANTS OF THE AGENCY ..... Scction �4. I. Punctual Pa� mcnt: E�tcnsion of Pa� mcnts. Scction �4.2. Limitation on Additional Indcbtcdncss ...... Scction �4. �. Pa� mcnt of Claims .................................... Scction �4.�4. Books and Accounts: Financial Statcmcnts Scction �4.�. Protcction of Sccurit� and Rights ............... Scction �4.6. Pa� mcnts of Ta�cs and Othcr Chargcs ....... Scction �4.7. Ta�ation of Lcascd Propert� ...................... Scction �4.8. Disposition of Propert� .............................. Scction �4.9. Maintcnancc of Ta� Rc� cnucs ................... Scction �4.10. Pa� mcnt of E�pcnscs: Indcmnification .... Scction �4. I I. Ta� Co� cnants ......................................... Scction �4.12. Rcdc� clopmcnt of Projcct Arca ............... Scction �4. I�. Lo« and Modcratc Incomc Housing Fund Scction �4. I�4. Annual Rc� ic« of Ta� Rc� cnucs ............. Scction �4. I �. Furthcr Assuranccs .................................. ARTICLE V EVENTS OF DEFAULT AND REMEDIES .............. Scction �. I. E� cnts of Dcfault and Acccicration of Maturitics Scction �.2. Application of Funds Upon Dcfault .................... Scction �.;. No Wai� cr .......................................................... Scction �.�4. Agrccmcnt to Pa� Attornc� s' Fccs and E�pcnscs Scction �.�. Rcmcdics Not E�clusi�c ..................................... 12 12 12 12 12 I� I� I� I� I� I �4 I �4 I� I� I� 16 16 16 17 17 17 ix ►�6—Ic �2. I c�;;�xx I�� I 6. ; Scction �.6. Control of Rcmcdics b� Insurcr ix ARTICLE VI MISCELLANEOUS ...................................................................................... 18 Scction 6. I. Bcncfits Limitcd to Partics ..................................................................... 18 Scction 6.2. Succcssor is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor ............. 18 Scction 6. �. Dischargc of Loan Agrccmcnt ................................................................ I 8 Scction6.�4. Amcndmcnt ............................................................................................ 19 Scction 6.�. Wai� cr of Pcrsonal Liabilit� ................................................................... 19 Scction 6.6. Pa� mcnt on Busincss Da� s ..................................................................... 19 Scction6.7. Noticcs ................................................................................................... 19 Scction6.8. Partialln�alidit� .....................................................................................19 Scction 6.9. Articic and Scction Hcadings and Rcfcrcnccs ......................................... 19 Scction 6.10. E�ccution of Countcrparts .................................................................... 20 Scction 6. I I. Go� crning La« ..................................................................................... 20 Scction6.12. Thc Trustcc .......................................................................................... 20 EXHIBIT A— Schcdulc of Loan Pa� mcnts ii P6—Ic �2. I c�;;\xx I�� I 6. � PROJECT AREA NO. 2 LOAN AGREEMENT (2006 Subordinatc Loan) This Projcct Arca No. 2 Loan Agrccmcnt (2006 Subordinatc Loan) (this "Loan Agrccmcnt��) is madc and cntcrcd into as of Jul� I. 2006. b� and among thc Palm Dcscrt Rcdc� clopmcnt Agcnc�. a public bod�. corporatc and politic. dul� organizcd and �alidl� c�isting undcr thc la«s ofthc Statc of California (thc "Agcnc��). thc Palm Dcscrt Financing Authorit�. a joint po«crs authorit� dul� organizcd and � alidl� c�isting undcr thc la« s of thc Statc of California (thc "Authorit� ��). and Wclls Fargo Bank. National Association. a national banking association dul� organizcd and �alidl� c�isting undcr thc la« s of thc Unitcd Statcs of Amcrica (thc "Tnistcc��). Rccitals A. Thc Agcnc� is a rcdc� clopmcnt agcnc�. a public bod�. corporatc and politic. dul� crcatcd. cstablishcd and authorizcd to transact busincss and c�crcisc its po«crs. all undcr and pursuant to thc Rcdc� clopmcnt La«. and thc po«crs of thc Agcnc� includc thc po«cr to borro« monc� for am of its corporatc purposcs. B. A Rcdc� clopmcnt Plan for Projcct Arca No. 2 of thc Agcnc� (thc "Projcct Arca��) has bccn dul� appro� cd and adoptcd b� thc Cit� . C. Thc Agcnc� has dctcrmincd to incur a loan (thc "Loan��) hcrcundcr for thc objcct and purposc of assisting in thc financing of public capital impro� cmcnts and redc� clopmcnt acti� itics for thc bcncfit of thc Projcct Arca. pursuant to thc Rcdc� clopmcnt La« and thc Marks-Roos Local Bond Pooling Act of 198�. Articic �4. Chaptcr �. Di� ision 7. Titic I of thc Go� crnmcnt Codc of thc Statc of California (thc "Bond La«��). D. Concurrcntl� «ith thc c�ccution and dcli� cr� of this Loan Agrccmcnt. thc Authorit� has issucd its Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics D. in thc initial principal amount of `f (thc "Bonds��) pursuant to thc Bond La« and an Indcnturc of Trust. datcd as of Jul� I. 2006 (thc "Indcnturc��). b� and bct« ccn thc Authorit� and thc Trustcc. for thc purposc of pro� iding fiinds to makc thc Loan to thc Agcnc� E. Thc Authorit� has found and dctcrmincd that thcrc «ill bc significant public bcncfits accruing from such borro« ing. consisting of dcmonstrablc sa� ings in cffccti� c intcrest ratcs and financing costs associatcd «ith thc issuancc of thc Bonds pursuant to thc Bond La«. F. Thc Agcnc� and thc Authorit� ha� c dctcrmincd that all acts and procccdings rcquircd b� la« ncccssar� to makc this Loan Agrccmcnt. «hcn c�ccutcd b� thc Agcnc�. thc Authorit� and Trustcc. thc �alid. binding and Icgal obligation ofthc Agcnc� and thc Authorit�. and to constitutc this Loan Agrccmcnt a� alid and binding agrccmcnt for thc uscs and purposcs hcrcin sct forth in accordancc «ith its tcrms. ha� c bccn donc and takcn. and thc c�ccution and dcli� cr� of this Loan Agrccmcnt ha� c bccn in all respccts dul� authorizcd. NOW. THEREFORE. in considcration of thc prcmiscs and thc mutual agrccmcnts hcrcin containcd. thc partics hcrcto do hcrcb� agrcc as follo«s: PG—Ic l2. I c li i\88 I 9 I G. ; 1 ARTICLE I DEFINITIONS Scction I. I. Dcfinitions. Unlcss thc contc�t cicarl� rcquires or unlcss othcn� isc dcfincd hcrcin. thc capitalizcd tcrms in this Loan Agrccmcnt shall ha� c thc respccti� c mcanings «hich such tcrms arc gi� cn in thc Indcnturc. In addition. thc follo« ing tcrms dcfincd in this Scction I. I shall. for all purposcs of this Loan Agrccmcnt. ha� c thc respccti� c mcanings hcrcin spccificd. "Additional Rc� cnucs�� mcans. as of thc datc of calculation. thc amount of Ta� Rc� cnucs «hich. as sho« n in thc Rcport of an Indcpcndcnt Rcdc� clopmcnt Consultant. arc cstimatcd to bc rccci� ablc b� thc Agcnc� «ithin thc Fiscal Ycar follo« ing thc Fiscal Ycar in «hich such calculation is madc as a result of incrcascs in thc asscsscd � aluation of ta�ablc propert� in thc Projcct Arca duc to cithcr (i) construction «hich has bccn complctcd but «hich is not thcn rcflcctcd on thc ta� rolls. or (ii) transfcr of o« ncrship or am othcr intcrest in rcal propert� «hich has bccn rccordcd but «hich is not thcn rcflcctcd on thc ta� rolls. For purposcs of this dcfinition. thc tcrm "incrcascs in thc asscsscd � aluation�� mcans thc amount b� «hich thc asscsscd � aluation of ta�ablc propert� in thc Projcct Arca is cstimatcd to incrcasc abo� c thc asscsscd � aluation of ta�ablc propert� in thc Projcct Arca (as rcportcd b� an appropriatc official of thc Count� ) as of thc datc on «hich such calculation is madc. "Bonds�� mcans thc Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. 2). 2006 Scrics D. "Costs of Issuancc�� mcans all c�pcnscs incurrcd in conncction «ith thc authorization. issuancc. salc and dcli� cr� of thc Bonds and thc making of thc Loan pursuant to this Loan Agrccmcnt. including but not limitcd to all compcnsation. fccs and c�pcnscs (including but not limitcd to fccs and c�pcnscs for Icgal counscl) of thc Authorit� and am trustcc. compcnsation to am financial ad� isors or undcn� ritcrs and thcir counscl. Icgal fccs and c�pcnscs. filing and recording costs. rating agcnc� fccs. crcdit cnhanccmcnt fccs (including insurancc. surct� bonds and Icttcrs of crcdit). costs of prcparation and rcproduction of documcnts and costs of printing. "Costs of Issuancc Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction 2.6. "E� cnt of Dcfault�� mcans am of thc c� cnts dcscribcd in Scction �. I. "Indcnturc�� mcans thc Indcnturc of Trust. datcd as of Jul� I. 2006. b� and bct« ccn thc Authorit� and thc Trustcc. authorizing thc issuancc of thc Bonds. as ma� from timc to timc bc supplcmcntcd. modificd or amcndcd. "Indcucndcnt Rcdc� cloumcnt Consultant�� mcans am consultant or firm of such consultants appointcd b� or acccptablc to thc Agcnc�. a��d «ho. or cach of «hom: (i) is judgcd b� thc Agcnc� to ha� c c�pericncc in mattcrs rclating to thc collcction of Ta� Rc� cnucs or othcr« isc «ith respcct to thc financing of rcdc� clopmcnt projccts: (ii) is in fact indcpcndcnt and not undcr thc domination of thc Agcnc�: (iii) docs not ha� c am substantial intcrest. dircct or indircct. «ith thc Agcnc�. othcr than as original purchascr of am obligations of thc Agcnc� : and (i� ) is not conncctcd «ith thc Agcnc� as an officcr or cmplo� cc of thc Agcnc�. but «ho ma� bc rcgularl� rctaincd to makc rcports to thc Agcnc� . "Loan�� mcans thc loan madc b� thc Authorit� to thc Agcnc� pursuant to Scction 2. I from thc procccds of thc Bonds in thc initial principal amount of � . PG—Ic l2. I c li i\88 I 9 I G. ; 2 "Loan A�rccmcnt�� mcans this Projcct Arca No. 2 Loan Agrccmcnt (2006 Subordinatc Loan). as ma� from timc to timc bc amcndcd. modificd or supplcmcntcd. "Ma�imum Annual Dcbt Scr� icc�� mcans. as of thc datc of calculation. thc largcst amount obtaincd b� totaling. for thc currcnt or am fiiturc Bond Ycar. thc sum of (i) thc amount of intcrest pa�ablc on thc Loan and all outstanding Parit� Dcbt in such Bond Ycar. assuming that principal thcrcof is paid as schcdulcd and that am mandator� sinking fiind pa� mcnts arc madc as schcdulcd. and (ii) thc amount of principal pa�ablc on thc Loan and all outstanding Pariri Dcbt in such Bond Ycar. including am principal rcquircd to bc prcpaid b� operation of mandator� sinking fiind pa� mcnts. For purposcs of such calculation. thcre shall bc c�cludcd a pro rata portion of cach installmcnt of principal of am Parit� Dcbt. togcthcr «ith thc intcrest to accruc thcrcon. in thc c� cnt and to thc c�tcnt that thc procccds of such Parit� Dcbt arc dcpositcd in an cscro« fiind from «hich amounts ma� not bc rcicascd to thc Agcnc� unlcss thc Ta� Rc� cnucs for thc currcnt Fiscal Ycar. plus at thc option of thc Agcnc� thc Additional Rc� cnucs. mcct thc co� cragc tcst sct forth in Scction 2.8(b). "Ma�imum Combincd Annual Dcbt Scr� icc�� mcans. as of thc datc of calculation. thc largcst amount obtaincd b� totaling. for thc currcnt or am firturc Bond Ycar. thc sum of (i) thc amount of intcrest pa�ablc on thc Loan. all outstanding Parit� Dcbt and all outstanding Scnior Dcbt in such Bond Ycar. assuming that principal thcrcof is paid as schcdulcd and that am mandator� sinking fiind pa� mcnts arc madc as schcdulcd. and (ii) thc amount of principal pa�ablc on thc Loan. all outstanding Parit� Dcbt and all outstanding Scnior Dcbt in such Bond Ycar. including am principal rcquircd to bc prcpaid b� operation of mandaton sinking fiind pa� mcnts. For purposcs of such calculation. thcre shall bc c�cludcd a pro rata portion of cach installmcnt of principal of am Scnior Dcbt or Parit� Dcbt. togcthcr «ith thc intcrest to accruc thcrcon. in thc c� cnt and to thc c�tcnt that thc procccds of such Scnior Dcbt or Parit� Dcbt arc dcpositcd in an cscro« fiind from «hich amounts ma� not bc rcicascd to thc Agcnc� unlcss thc Ta� Rc� cnucs for thc currcnt Fiscal Ycar. plus at thc option of thc Agcnc� thc Additional Rc� cnucs. mcct thc co� cragc tcst sct forth in (a) «ith respcct to thc rcicasc of Scnior Dcbt procccds from am such cscro« fiind. Scction 2.9(b) or (b) «ith respcct to thc rcicasc of Parit� Dcbt procccds from am such cscro« fiind. Scction 2.8(b). "Parit� Dcbt�� mcans am loans. bonds. notcs. ad� anccs. or indcbtcdncss pa� ablc from Subordinatc Ta� Rc� cnucs on a parit� «ith thc Loan. issucd or incurrcd pursuant to and in accordancc «ith thc pro� isions of Scction 2.8. "Parit� Dcbt Instrumcnt�� mcans am resolution. indcnturc of trust. trust agrccmcnt or othcr instrumcnt authorizing thc issuancc of am Parit� Dcbt. "Pass-Throu�h A�rccmcnts�� mcans. collccti� cl�. thc agrccmcnts cntcrcd into b� thc Agcnc� on or prior to thc datc hcrcof pursuant to Scction >>�401 of thc Rcdc� clopmcnt La« «ith (i) thc Count� of Ri� crsidc. (ii) thc Coachclla Vallc� Communit� Collcgc District. (iii) thc Coachclla Vallc� Mosquito Abatcmcnt District. (i� ) thc Dcscrt Sands Unificd School District. (� ) thc Palm Springs Unificd School District and (� i) thc Ri� crsidc Count� Superintcndcnt of Schools. "Plan Limitations�� mcans thc limitations containcd or incorporatcd in thc Rcdc� clopmcnt Plan on (i) thc aggrcgatc principal amount of bondcd indcbtcdncss pa� ablc from Ta� Rc� cnucs «hich ma� bc outstanding at am timc. (ii) thc aggrcgatc amount of ta�cs «hich ma� bc di� idcd and allocatcd to thc Agcnc� pursuant to thc Rcdc� clopmcnt Plan. and (iii) thc period of timc for establishing or rcpa� ing loans. ad� anccs and indcbtcdncss pa� ablc from Ta� Rc� cnucs. "Proicct Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction 2.7. PG—Icl2.lclii\88191G. � "Oualificd Rcscr� c Fund Crcdit Instrumcnt�� mcans an irrc� ocablc standb� or dircct-pa� Icttcr of crcdit or surct� bond issucd b� a commcrcial bank or insurancc compam and dcpositcd «ith thc Trustcc pursuant to Scction 2.�. pro� idcd that all of thc follo« ing rcquircmcnts arc mct at thc timc of dcposit «ith thc Trustcc: (i) cithcr (a) thc long-tcrm crcdit rating of such bank is �� ithin onc of thc t��o highcst rating catcgorics b� Mood� �s or Sc�.P. or thc claims pa� ing abilit� of such insurancc compam is ratcd «ithin onc of thc t« o highcst rating catcgorics b� Mood� �s or Sc�.P. at thc timc of dcli� cr� of such Icttcr of crcdit or surct� bond. or (b) thc Authorit� shall causc to bc filcd «ith thc Trustcc «rittcn c� idcncc from Mood� �s and Sc�.P that thc dcli� cn of such Icttcr of crcdit or surct� bond «ill not. of itsclf. causc a rcduction or «ithdra«al of am rating thcn assigncd to thc Bonds: (ii) such Icttcr of crcdit or surct� bond has a tcrm of at Icast 12 months: (iii) such Icttcr of crcdit or surct� bond has a statcd amount at Icast cqual to thc portion of thc Rcscr� c Rcquircmcnt «ith respcct to «hich fiinds zrc proposcd to bc rcicascd pursuant to Scction 2.�: and (i� ) thc Trustcc is authorizcd pursuant to thc tcrms of such Icttcr of crcdit or surct� bond to dra« thcrcundcr an amount cqual to am dcficicncics «hich ma� c�ist from timc to timc «ith respcct to dcposits rcquircd pursuant to Scction �. �(a). "Rcdc� cloumcnt Fund�� mcans thc Projcct Arca No. 2 Rcdc� clopmcnt Fund. hcrctoforc cstablishcd and hcld b� thc Agcnc�. "Rcdc� cloumcnt Prolcct�� mcans thc undcrtaking of thc Agcnc� pursuant to thc Rcdc� clopmcnt Plan and thc Rcdc� clopmcnt La« for thc rcdc� clopmcnt of thc Projcct Arca. "Rcscr� c Fund�� mcans thc "Projcct Arca No. 2 Subordinatc Rcscr� c Fund�� hcld b� thc Trustcc pursuant to Scction 2.�. "Rcscr� c Rcquircmcnt�� mcans thc Icast of (i) Ma�imum Annual Dcbt Scr� icc. (ii) 12� perccnt of a� cragc annual dcbt scr� icc on thc Loans and all outstanding Parit� Dcbt. znd (iii) 10 perccnt of thc procccds of thc Loans (i.c.. thc original Principal Amount of thc Bonds) and of thc procccds of am Parit� Dcbt. Thc amount of thc Rcscr� c Rcquircmcnt on am datc is subjcct to confirmation b� thc Authorit� to thc Trustcc upon thc Trustcc�s «rittcn rcqucst. At thc Closing Datc. thc Rcscr� c Rcquircmcnt shall bc � . "Scnior Dcbt�� mcans thc Scnior 2002 Loan. thc Scnior 200 � Loan and thc Scnior 2006 Loans and am othcr loans. bonds. notcs. ad� anccs. or indcbtcdncss pa� ablc from Ta� Rc� cnucs «hich rank scnior to thc Loan and thc Parit� Dcbt. issucd or incurrcd pursuant to and in accordancc «ith thc pro� isions of Scction 2.9. "Scnior Dcbt Instrumcnt�� mcans thc Scnior 2002 Loan Agrccmcnt. thc Scnior 200 � Loan Agrccmcnt. thc Scnior 2006 Loan Agrccmcnt and am othcr resolution. indcnturc of trust. trust agrccmcnt or othcr instrumcnt authorizing thc issuancc of am Scnior Dcbt. "Scnior Dcbt Scr� icc�� mcans. for am period of timc. thc sum of (i) thc amount of intcrest pa�ablc during such period on all outstanding Scnior Dcbt. assuming that principal thcrcof is paid as schcdulcd and that am mandator� sinking fiind pa� mcnts arc madc as schcdulcd. (ii) thc amount of principal pa�ablc during such period on all outstanding Scnior Dcbt. including am principal rcquircd to bc prcpaid b� operation of mandator� sinking fiind pa�mcnts. and (iii) amounts. ifam. rcquircd to bc dcpositcd in thc dcbt scr� icc rescr� c fiinds maintaincd undcr thc Scnior Dcbt Instrumcnts or paid to thc issucrs of surct� bonds (or othcr qualificd rescr� c fiind instrumcnts) dcpositcd in thc rescr� c fiind relating to am Scnior Dcbt in licu of cash pursuant to thc agrccmcnts bct«ccn thc Agcnc� and such issucrs. "Scnior 2006 Loans�� mcans thc outstanding balancc of thc loans madc b� thc Authorit� to thc Agcnc� pursuant to thc Scnior 2006 Loan Agrccmcnt. PG—Ic l2. I c li i\88 I 9 I G. ; 4 "Scnior 2006 Loan A�rccmcnt�� mcans thc Loan Agrccmcnt datcd as of Jul� I. 2006. b� and among thc Agcnc�. thc Authorit� and Wclls Fargo Bank. National Association. zs trustcc. "Scnior 200 � Loan�� mcans thc outstanding balancc of thc loan madc b� thc Authorit� to thc Agcnc� pursuant to thc Scnior 200 � Loan Agrccmcnt. "Scnior 200 � Loan A�rccmcnt�� mcans thc Projcct Arca No. 2 Loan Agrccmcnt. datcd as Janua►-� I. 200 �. b� and bct« ccn thc Authorit� and thc Agcnc� . "Scnior 2002 Loan�� mcans thc outstanding balancc of thc loan madc b� thc Authorit� to thc Agcnc� pursuant to thc Scnior 2002 Loan Agrccmcnt. "Scnior 2002 Loan A�rccmcnt�� mcans thc Loan Agrccmcnt datcd as of Junc I. 2002. b� and among thc Agcnc�. thc Authorit� and BNY Wcstcrn Trust Compam. as prior trustcc. as succccdcd b� Wclls Fargo Bank. National Association. as trustcc. "Succial Fund�� mcans thc fiind b� that namc hcld b� thc Agcnc� pursuant to Scction �.2. "Subordinatc Dcbt�� mcans am loans_ ad� anccs or indcbtcdncss issucd or incurrcd b� thc Agcnc� in accordancc «ith thc rcquircmcnts of Scction 2.10. «hich arc cithcr: (i) pa�ablc from. but not sccurcd b� a plcdgc of or licn upon. thc Ta� Rc� cnucs: or (ii) sccurcd b� a plcdgc of or licn upon thc Subordinatc Ta� Rc� cnucs «hich is subordinatc to thc plcdgc of and licn upon thc Subordinatc Ta� Rc� cnucs hcrcundcr for thc sccurit� of thc Loan and am Parit� Dcbt. "Subordinatc Ta� Rc� cnucs�� mcans. for am period of timc. thc Ta� Rc� cnucs for such period. Icss thc Scnior Dcbt Scr� icc pa�ablc during such period. "Ta� Rc� cnucs�� mcans that portion of thc ta�cs Ic� icd upon ta�ablc propert� in thc Projcct Arca allocatcd and paid into a spccial fiind of thc Agcnc� pursuant to Articic 6 of Chaptcr 6 of thc Rcdc� clopmcnt La« and Scction 16 of Articic XVI of thc California Constitution. c�clusi� c of amounts placcd into thc Lo« and Modcratc Incomc Housing Fund ofthc Agcnc� pursuant to Scctions >;>>�4.2 and >;>;�4. � of thc Rcdc� clopmcnt La«. and cticluding amounts pa�ablc to affcctcd ta�ing agcncics pursuant to thc Pass-Through Agrccmcnts or pursuant to Scction >;607. � or >;607.7 of thc Rcdc� clopmcnt La« . Scction I.2. Rulcs of Construction. All rcfcrcnccs hcrcin to "Articics.�� "Scctions�� Znd othcr subdi� isions arc to thc corresponding Articics. Scctions or subdi� isions of this Loan Agrccmcnt. and thc «ords "hcrcin.�� "hcrcof.�� "hcrcundcr � and othcr «ords of similar import rcfcr to this Loan Agrccmcnt as a«holc and not to am particular Articic. Scction or subdi� ision hcrcof. ARTICLE II THE LOAN: APPLICATION OF LOAN PROCEEDS: INCURRENCE OF ADDITIONAL DEBT Scction 2. I. Authorization. Thc Authorit� hcrcb� agrccs to Icnd to thc Agcnc�. from thc procccds of thc salc of thc Bonds dcpositcd in thc Loan Fund cstablishcd undcr thc Indcnturc. thc initial principal amount of `f undcr and subjcct to thc tcrms of this Loan Agrccmcnt. thc Bond La« and thc Rcdc� clopmcnt La«. This Loan Agrccmcnt constitutcs a continuing agrccmcnt to sccurc thc fiill and final pa� mcnt of thc Loan. subjcct to thc co� cnants. agrccmcnts. pro� isions and conditions hcrcin containcd P6—Ic�2.lc��\xxl�)16. � Scction 2.2. Disburscmcnt and Auulication of Loan Procccds. On thc Closing Datc. thc Authorit� shall causc to bc dcpositcd into thc Loan Fund thc amount of `f «hich shall bc hcld b� thc Trustcc and «hich shall bc disburscd as follo«s: (i) Thc Trustcc shall transfcr thc amount of `f to thc Scrics thc Costs of Issuancc Fw�d. (ii) Thc Trustcc shall transfcr thc amount of `f to thc Rcscr� c Fund («hich amount shall cqual thc initial Rcscr�c Rcquircmcnt). (iii) Thc Trustcc shall transfcr thc rcmaining amount of y� to thc Projcct Fund. On thc Closing Datc. thc Authorit� shall also causc thc amount of `f and thc amount of � to bc paid to thc Insurcr for thc costs of thc prcmium for thc Insurancc Polic� . Thc Trustcc ma�. in its discrction. cstablish a tcmporan fiind or account to facilitatc or account for thc forcgoing transfcrs. Scction 2. �. Rcua� mcnt of Loan. Thc Agcnc� shall. subjcct to prcpa� mcnt as pro� idcd in Scction 2.�4(a). rcpa� thc Loan in installmcnts on August I in cach of thc � cars and in thc amounts sct forth in E�hibit A attachcd hcrcto and b� this rcfcrcncc incorporatcd hcrcin. Intcrest on cach installmcnt of thc Loan shall accruc in thc samc manncr as thc intcrest accrucs on thc Bonds pursuant to thc Indcnturc. Thc installmcnts pa�ablc on thc Loan on cach August I sct forth in E�hibit A correspond «ith thc aggrcgatc Maturit� Amount of thc Bonds coming duc and pa�ablc on such datc. Am installmcnt of thc Loan «hich is not paid «hcn duc shall continuc to accruc intcrest from and including thc datc on «hich such installmcnt is pa� ablc to but not including thc datc of actual pa� mcnt. In thc c� cnt am unpaid installmcnts of thc Loan shall bc prcpaid pursuant to Scction 2.�4(a). or in thc c� cnt thc Bonds shall bc rcdccmcd pursuant to Scction 2.0 �(a) of thc Indcnturc. thc schcdulc of installmcnts sct forth in E�hibit A hcrcto shall bc rcduccd as dircctcd b� thc Agcnc� to thc Trustcc. Thc obligation of thc Agcnc� to rcpa� thc Loan is. subjcct to Scction �. I. absolutc and unconditional. and such pa� mcnts shall not bc subjcct to rcduction «hcthcr b� offsct or othcr« isc and shall not bc conditional upon thc performancc or nonperformancc b� am part� to am agrccmcnt for am causc «hatsoc� cr. - - - - Installmcnts of thc Loan shall bc pa� ablc b� thc Agcnc� to thc Trustcc. as assigncc of thc Authorit� undcr thc Indcnturc in la« fiil monc� of thc Unitcd Statcs. Pa� mcnt of such installmcnts shall bc sccurcd. and amounts for thc pa� mcnt thcrcof shall bc dcpositcd «ith thc Trustcc at thc timcs. as sct forth in Articic III. Scction 2.�4. Outional Prcua� mcnt (a) Thc Agcnc� shall ha� c thc right to prcpa� installmcnts of thc Loan on am datc on «hich thc Bonds are subjcct to rcdcmption pursuant to Scction 2.0 �(a) of thc Indcntur� and cffcct a corresponding rcdcmption of thc Bonds. Such prcpa� mcnt shall bc allocatcd among such installmcnts of thc Loan as thc Agcnc� ma� dctcrminc upon Rcqucst to thc Authorit� and thc Trustcc pro� idcd not Icss PG—Ic l2. I c li i\88 I 9 I G. ; 6 than �4� da� s prior to thc prcpa� mcnt datc: uro� idcd that such prcpa� mcnt shall causc rcdcmption of Bonds in intcgral multiplcs of ��.000 Maturit� Amount. To cffcct such prcpa� mcnt. thc Agcnc� shall dcposit «ith thc Trustcc no latcr than thc rcdcmption datc an amount sufficicnt to rcdccm thc callcd Bonds (« hich amount shall includc thc Accrctcd Valuc of thc callcd Bonds as of thc datc of rcdcmption and thc applicablc rcdcmption prcmium. if am ). (b) Bcforc making am prcpa� mcnt pursuant to this Scction. thc Agcnc� shall gi� c «rittcn noticc to thc Authorit� and thc Trustcc dcscribing such c� cnt and spccif� ing thc datc on «hich thc prcpa� mcnt «ill bc paid and thc ordcr thcrcof. «hich datc shall bc not Icss than �4� da� s from thc datc such noticc is gi� cn: uro� idcd. that not« ithstanding am such prcpa� mcnt. thc Agcnc� shall not bc rclic� cd of its obligations «ith respcct to a Loan hcrcundcr. including spccificall� its obligations undcr this Articic. until such Loan shall ha� c bccn fiill� paid (or pro� ision for pa� mcnt thcrcof shall ha� c bccn madc pursuant to Scction 6. �). (c) Thc Authorit� agrccs that upon pa� mcnt b� thc Agcnc� to thc Trustcc of such amount. thc Authorit� shall takc or causc to bc takcn am and all stcps rcquircd undcr thc Indcnturc to rcdccro such Outstanding Bonds on thc rcdcmption datc dcsignatcd b� thc Agcnc� : uro� idcd. ho« c� cr. that such datc shall bc a datc of rcdcmption of such Bonds. for «hich noticc has bccn timcl� gi� cn pursuant to thc Indcnturc. Scction 2.�. Rcscr�c Fund. Thcrc is hcrcb� cstablishcd a scparatc fiind kno«n as thc "Projcct Arca No. 2 Subordinatc Rcscr� c Fund.�� «hich shall bc hcld b� thc Trustcc in trust for thc bcncfit of thc Authorit� and thc O« ncrs of thc Bonds and thc rcgistcrcd o« ncrs of all othcr bonds issucd b� thc Authorit� in conncction «ith am Parit� Dcbt. Thc Agcnc� hcrcb� plcdgcs and grants a licn and a sccurit� intcrest in thc Rcscr� c Fund to thc Trustcc in ordcr to sccurc thc Agcnc� �s pa� mcnt obligations undcr Scctions 2. � and �. �(a). Thc amount on dcposit in thc Rcscr� c Fund shall bc maintaincd at thc Rcscr� c Rcquircmcnt at all timcs. c�ccpt to thc c�tcnt rcquircd for thc purposcs sct forth in this Scction. In thc c� cnt that thc Agcnc� shall fail to dcposit «ith thc Trustcc thc fiill amount rcquircd to bc dcpositcd pursuant to Scction �. �(a). thc Trustcc shall «ithdra« from thc Rcscr� c Fund and transfcr to thc Principal Account an amount cqual to thc diffcrcncc bct«ccn (i) thc amount rcquircd to bc dcpositcd pursuant to Scction �. �(a) and (ii) thc amount actuall� dcpositcd b� thc Agcnc� . In thc c� cnt that thc amount on dcposit in thc Rcscr� c Fund shall at am timc bc Icss than thc Rcscr� c Rcquircmcnt. thc Trustcc shall notif� thc Agcnc� as soon as practicablc of thc amount rcquircd to bc dcpositcd thcrcin to restorc thc balancc to thc Rcscr� c Rcquircmcnt. such noticc to bc gi� cn b� tcicphonc. tcicfa� or othcr form of tciccommunications promptl� confirmcd in «riting. and thc Agcnc� shall thcrcupon transfcr to thc Trustcc thc amount nccdcd to restorc thc Rcscr� c Fund to thc Rcscr� c Rcquircmcnt. In thc c� cnt that thc amount on dcposit in thc Rcscr� c Fund on thc I�th calcndar da� prcccding am rcpa� mcnt datc «ith respcct to thc Loan (othcr than thc final pa� mcnt datc) — pro� idcd that thc dcposits rcquircd b� Scction �. �(a) ha� c bccn madc — c�cccds thc Rcscr� c Rcquircmcnt. thc Tnistcc shall «ithdra« from thc Rcscr� c Fund all amounts in c�ccss of thc Rcscr� c Rcquircmcnt and appl� such amounts to«ard thc prcpa� mcnt of thc Loan pursuant to Scction 2.�4 or thc prcpa� mcnt of am Parit� Dcbt. unlcss thc Trustcc shall ha� c rccci� cd prior Rcqucst of thc Agcnc� to pa� such amounts to thc Agcnc� to bc uscd for am la«fiil purposc rclating to thc Projcct Arca. as spccificd in such Rcqucst of thc Agcnc� . Not« ithstanding thc forcgoing pro� isions of this paragraph. ho« c� cr. no amounts shall bc «ithdra« n from thc Rcscr� c Fund and transfcrrcd to thc Agcnc� pursuant to this paragraph during am period in «hich an E� cnt of Dcfault shall ha� c occurrcd and bc continuing hcrcundcr. With thc «rittcn conscnt of thc Insurcr (as long as thc Insurancc Polic� is in fiill forcc and cffcct) and of thc insurcr of am Parit� Dcbt (as long as thc polic� insuring such Parit� Dcbt is in fiill PG—Ic l2. I c li i\88 I 9 I G. ; 7 forcc and cffcct). thc Rcscr� c Rcquircmcnt ma� bc satisficd b� crcditing to thc Rcscr� c Fund monc� s or a Qualificd Rcscr� c Fund Crcdit Instrumcnt or am combination thcrcof. «hich in thc aggrcgatc makc fiinds a� ailablc in thc Rcscr� c Fund in an amount cqual to thc Rcscr� c Rcquircmcnt. Upon thc dcposit «ith thc Trustcc of such Qualificd Rcscr� c Fund Crcdit Instrumcnt. thc Trustcc shall rcicasc monc� s thcn on hand in thc Rcscr� c Fund to thc Agcnc�. to bc uscd for am la«fiil purposc rclating to thc Projcct Arca. in an amount cqual to thc facc amount of thc Qualificd Rcscr� c Fund Crcdit Instrumcnt. If at am timc thc amount on dcposit in. or crcditcd to. thc Rcscr� c Fund includcs both cash and a dcbt scr� icc rescr� c surct� bond. am dra« on such surct� bond shall bc madc onl� aftcr all cash in thc Rcscr� c Fund has bccn c�pcndcd. If at am timc thc amount crcditcd to thc Rcscr� c Fund includcs morc than onc Qualificd Rcscr� c Fund Crcdit Instrumcnts. am dra« on thc Qualificd Rcscr� c Fund Crcdit Instrumcnt shall bc on a pro rata basis bascd on thc rclati� c amounts of dcbt scr� icc co� crcd b� such Qualificd Rcscr� c Fund Crcdit Instrumcnts in such Fiscal Ycar. Scction 2.6. Costs of Issuancc Fund. Thcrc is hcrcb� cstablishcd a fiind to bc hcld b� thc Trustcc kno« n as thc "Costs of Issuancc Fund.�� A portion of thc procccds of thc Loan shall bc dcpositcd in thc Costs of Issuancc Fund pursuant to Scction 2.2. Thc monc� s in thc Costs of Issuancc Fund shall bc uscd to pa� Costs of Issuancc of thc Bonds from timc to timc upon rcccipt of a Rcqucst of thc Agcnc� . On thc 90th da� aftcr thc Closing Datc (or thc first Busincss Da� thcrcaftcr). or upon thc carlicr rcccipt b� thc Trustcc of a Rcqucst of thc Agcnc� stating that all Costs of Issuancc ha� c bccn paid. thc Trustcc shall transfcr all rcmaining amounts in thc Costs of Issuancc Fund to thc Rc� cnuc Fund. Scction 2.7. Proicct Fund. Thcrc is hcrcb� cstablishcd a fiind to bc kno« n as thc "Projcct Fund��. «hich shall bc hcld and maintaincd b� thc Trustcc. Amounts on dcposit in such fiind shall bc dcri� cd solcl� from thc portion of thc procccds of thc Loan transfcrrcd thcrcto and from carnings on thc in� cstmcnt of amounts thcrcin. E�ccpt as pro� idcd in this Scction. thc monc� s sct asidc and placcd in thc Projcct Fund shall rcmain thcrcin until c�pcndcd from timc to timc for thc purposc of pa� ing am portion of thc costs of thc Rcdc� clopmcnt Projcct. and othcr costs rclatcd thcrcto. «hich othcr costs ma� includc. but arc not limitcd to. (a) thc cost of impro� cmcnts and othcr costs «hich ma� not bcncfit thc Rcdc� clopmcnt Projcct c�clusi� cl� but «hich arc ncccssar� to thc rcdc� clopmcnt of thc Projcct Arca and thc disposition of land thcrcin: (b) thc rcpa� mcnt of am ad� anccs madc b� thc Cit� for thc Rcdc� clopmcnt Projcct: and (c) to thc c�tcnt not paid from thc Costs of Issuancc Fund. thc ncccssan c�pcnscs in conncction «ith thc issuancc and salc of thc Bonds. Bcforc am pa� mcnt of monc� is madc from thc Projcct Fund. thc Agcnc� shall filc �� ith thc Trustcc a Rcqucst of thc Agcnc� sho« ing «ith respcct to cach pa� mcnt of monc� to bc madc: (a) thc namc and address of thc person to «hom pa� mcnt is duc: (b) thc amount of monc� to bc paid: (c) thc purposc for «hich thc obligation to bc paid «as incurrcd: and (d) that such amount has not bccn paid prc� iousl� for such purposc from thc Projcct Fund. Trustcc: Each such Rcqucst of thc Agcnc� shall statc and shall bc sufficicnt c� idcncc to thc PG—Icl2.lclii\88191G. � (i) that an obligation in thc statcd amount has bccn properl� incurrcd undcr and pursuant to this Loan Agrccmcnt and that such obligation is a proper chargc against thc Projcct Fund: and (ii) that thcrc has not bccn filcd «ith or scr� cd upon thc Agcnc� a stop noticc or am othcr noticc of am licn. right to licn or attachmcnt upon. or claim affccting thc right to rccci� c pa� mcnt of. am of thc monc� pa� ablc to thc person namcd in such Rcqucst of thc Agcnc� «hich has not bccn rcicascd or «ill not bc rcicascd simultancousl� «ith thc pa� mcnt of such obligation. othcr than licns accruing b� mcrc operation of la«. Upon rcccipt of cach such Rcqucst of thc Agcnc�. thc Trustcc shall pa� thc amount sct forth in such Rcqucst of thc Agcnc� as dircctcd b� thc tcrms thcrcof «ithin thrcc Busincss Da� s. If am monc� s dcpositcd in thc Projcct Fund remain thcrcin aftcr thc fiill accomplishmcnt of thc objccts and purposcs for «hich thc Loan «as madc. said monc� s shall bc transfcrrcd to thc Spccial Fund. - - Scction 2.8. Parit� Dcbt. From timc to timc. thc Agcnc� ma� issuc or incur additional Parit� Dcbt in such principal amount as shall bc dctcrmincd b� thc Agcnc�. subjcct to thc follo« ing spccific conditions «hich arc hcrcb� madc conditions prcccdcnt to thc issuancc and dcli� cr� of such Parit� Dcbt issucd undcr this Scction 2.8: (a) No E� cnt of Dcfault shall ha� c occurrcd and bc continuing. and thc Agcnc� shall othcn� isc bc in compliancc «ith all co� cnants sct forth in this Loan Agrccmcnt. (b) (i) Thc amount of Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar. as sct forth in a Ccrtificatc of thc Agcnc�. bascd on asscsscd � aluation of propert� in thc Projcct Arca as c� idcnccd in thc «rittcn rccords of thc Count�. plus at thc option of thc Agcnc� thc Additional Rc� cnucs. shall bc at Icast cqual to 100 perccnt of thc Ma�imum Combincd Annual Dcbt Scr� icc cffccti� c aftcr thc issuancc of thc proposcd Parit� Dcbt: and (ii) thc amount of Subordinatc Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar. as sct forth in a Ccrtificatc of thc Agcnc�. bascd on asscsscd � aluation of propert� in thc Projcct Arca as c� idcnccd in thc «rittcn rccords of thc Count�. plus at thc option of thc Agcnc� thc Additional Rc� cnucs. shall bc at Icast cqual to I 10 perccnt of thc Ma�imum Annual Dcbt Scr� icc cffccti� c aftcr thc issuancc of thc proposcd Parit� Dcbt. (c) Thc rclatcd Parit� Dcbt Instrumcnt shall pro� idc that thc balancc of thc Rcscr� c Fund shall bc incrcascd to thc nc« Rcscr� c Rcquircmcnt cffccti� c aftcr thc incurrcncc of such Parit� Dcbt. (d) Thc rclatcd Parit� Dcbt Instrumcnt shall pro� idc that: ( I) With respcct to am Parit� Dcbt «hich bcars currcnt intcrest. intcrest on such Parit� Dcbt shall not bc pa� ablc on a datc othcr than Fcbruar� I and August I of am � car. and (2) Thc principal of such Parit� Dcbt shall not bc pa� ablc on am datc othcr than thc datc on «hich principal of thc Loan is pa�ablc. (c) Thc issuancc of such Parit� Dcbt shall not causc thc Agcnc� to c�cccd am applicablc Plan Limitations. (� Thc Agcnc� shall dcli� cr to thc Trustcc a Ccrtificatc of thc Agcnc� ccrtif� ing that thc conditions prcccdcnt to thc issuancc of such Parit� Dcbt sct forth in Paragraphs (a) through (c) abo� c PG—Ic l2. I c li i\88 I 9 I G. ; 9 ha� c bccn satisficd. Thc Agcnc� shall also fiirnish a cop� of an Indcpcndcnt Rcdc� clopmcnt Consultant�s rcport c� idcncing compliancc «ith thc condition sct forth in Paragraph (b). Scction 2.9. Issuancc of Additional Scnior Dcbt. From timc to timc. thc Agcnc� ma� issuc or incur additional Scnior Dcbt in such principal amount as shall bc dctcrmincd b� thc Agcnc�. but solcl� if thc follo« ing conditions are satisficd: (a) Thc incurrcncc of such proposcd Scnior Dcbt shall not causc thc Agcnc� to bc in � iolation of am Scnior Dcbt Instrumcnt. (b) Thc Agcnc� shall ha� c filcd «ith thc Trustcc a rcport of an Indcpcndcnt consultant «hich sho«s that - ( I) Thc amount of Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar. bascd on asscsscd � aluation of propert� in thc Projcct Arca as c� idcnccd in thc «rittcn rccords of thc Count�. plus at thc option of thc Agcnc� thc Additional Rc� cnucs. shall bc at Icast cqual to perccnt of thc Ma�imum Combincd Annual Dcbt Scr� icc cffccti� c aftcr thc issuancc of thc proposcd Scnior Dcbt: (2) So long as thc Scrics 2006C Bonds shall rcmain outstanding. projcctcd Subordinatc Ta� Rc� cnucs for cach Fiscal Ycar shall bc at Icast cqual to 100 perccnt of thc schcdulcd dcbt scr� icc for thc Loan and am outstanding Parit� Dcbt for such Fiscal Ycar: and (�) Thc projcctcd Ta� Rc� cnucs a� ailablc to bc rccci� cd b� thc Agcnc� undcr thc Plan Limitations in cach upcoming Fiscal Ycar «ill bc at Icast I 10 perccnt of aggrcgatc rcmaining dcbt scr� icc on thc Loan and all outstanding Parit� Dcbt and Scnior Dcbt. Scction 2.10. Issuancc of Subordinatc Dcbt. From timc to timc thc Agcnc� ma� issuc or incur Subordinatc Dcbt in such principal amount as shall bc dctcrmincd b� thc Agcnc�. pro� idcd that thc issuancc of such Subordinatc Dcbt shall not causc thc Agcnc� to c�cccd am applicablc Plan Limitations. Scction 2. I I. Validit� of Loan. Thc � alidit� of thc Loan shall not bc dcpcndcnt upon thc complction of thc Rcdc� clopmcnt Projcct or upon thc performancc b� am person of am obligation «ith respcct to thc Rcdc� clopmcnt Projcct. ARTICLE III PLEDGE AND APPLICATION OF SUBORDINATE TAX REVENUES Scction �. I. Plcd�c of Subordinatc Ta� Rc� cnucs. Thc Loan and all Parit� Dcbt shall bc cquall� sccurcd b� a first plcdgc of and licn on all of thc Subordinatc Ta� Rc� cnucs and all of thc monc� s on dcposit in thc Spccial Fund to thc c�tcnt that such monc� s arc not rcquircd to pa� Scnior Dcbt Scr� icc. «ithout prcfcrcncc or priorit� for scrics. issuc. numbcr. datcd datc. salc datc. datc of c�ccution or datc of dcli� cr� . E�ccpt for thc Subordinatc Ta� Rc� cnucs and othcr fiinds plcdgcd hcrcundcr. no fiinds or propertics of thc Agcnc� shall bc plcdgcd to. or othcn� isc liablc for. thc pa� mcnt of principal of or intcrest on or prcpa� mcnt prcmium. if am. on thc Loan. Scction �.2. Succial Fund: Dcuosit of Subordinatc Ta� Rc� cnucs. Thc Agcnc� has hcrctoforc cstablishcd a spccial fiind kno« n as thc "Spccial Fund.�� «hich is and shall continuc to bc hcld b� thc Agcnc� as a scparatc fiind apart from all othcr fiinds and accounts of thc Agcnc� . Thc Agcnc� shall dcposit all Ta� Rc� cnucs in thc Spccial Fund promptl� upon thc rcccipt thcrcof. E�ccpt as ma� bc othcn� isc pro� idcd in am Scnior Dcbt Instrumcnt or Parit� Dcbt Instrumcnt. am Subordinatc Ta� PG—Ic l2. I c li i\88 I 9 I G. ; 10 Rc� cnucs rccci� cd during thc Bond Ycar in c�ccss of amounts rcquircd to bc transfcrrcd to thc Trustcc pursuant to Scction �. � shall bc rcicascd from thc plcdgc and licn hcrcundcr and ma� bc uscd for am la« fiil purposcs of thc Agcnc� . Prior to thc pa� mcnt in fiill of thc principal of and intcrest and prcpa� mcnt prcmium. if am. on all Scnior Dcbt. thc Loan and all Parit� Dcbt and thc pa� mcnt in fiill of all othcr amounts pa�ablc undcr am Scnior Dcbt Instrumcnt. this Loan Agrccmcnt and am Parit� Dcbt Instrumcnt. thc Agcnc� shall not ha� c am bcncficial right or intcrest in thc monc� s on dcposit in thc Spccial Fund. c�ccpt onl� as pro� idcd in am Scnior Dcbt Instrumcnt. this Loan Agrccmcnt and am Parit� Dcbt Instrumcnt. and such monc� s shall bc uscd and applicd as sct forth hcrcin and thcrcin. Scction �. �. Transfcr of Subordinatc Ta� Rc� cnucs From Succial Fund. Thc Agcnc� shall «ithdra« Subordinatc Ta� Rc� cnucs to makc transfcrs. as rcquircd to bc madc pursuant to am Parit� Dcbt Instrumcnt and to thc Trustcc thc follo« ing amounts at thc follo« ing timcs and in thc follo« ing ordcr of priorit� : (a) Intcrest and Princival Dcuosits. No latcr than thc fifth Busincss Da� prcccding cach datc on «hich an installmcnt on thc Loan (in accordancc «ith E�hibit A) or thc principal of or intcrest on am Parit� Dcbt shall bccomc duc and pa�ablc. including but not limitcd to thc installmcnt of thc Loan to bc prcpaid hcrcundcr togcthcr «ith am prcpa� mcnt prcmium thcrcon (pro� idcd that thc transfcrs from thc Spccial Fund for pa� mcnt of principal. intcrest. prcpa� mcnt prcmium. and replcnishmcnt of rescr� c fiind. if am. «ith respcct to all Scnior Dcbt shall ha� c bccn madc pursuant to thc Scnior Dcbt Instrumcnts). thc Agcnc� shall «ithdra« from thc Spccial Fund and transfcr to thc Trustcc an amount «hich. togcthcr «ith thc amounts thcn hcld on dcposit in thc Principal Account and thc Rc� cnuc Fund. is cqual to thc aggrcgatc amount of thc installmcnt of thc Loan (in accordancc «ith E�hibit A). thc principal of and intcrest on thc Parit� Dcbt and prcpa� mcnt prcmium «ith respcct to thc Loan and thc Parit� Dcbt coming duc. - - (b) Rcscr� c Fund Dcuosits. In thc c� cnt that thc Trustcc shall notif� thc Agcnc� pursuant to Scction 2.� that thc amount on dcposit in thc Rcscr� c Fund is Icss than thc Rcscr� c Rcquircmcnt. thc Agcnc� shall immcdiatcl� «ithdra« from thc Spccial Fund and transfcr to thc Tnistcc for dcposit in thc Rcscr� c Fund an amount of monc� ncccssar� to maintain thc Rcscr� c Rcquircmcnt in thc Rcscr� c Fund (including rcpa� mcnt of am dra« madc undcr a Qualificd Rcscr� c Fund Crcdit Instrumcnt prior to rcplcnishing am cash in thc Rcscr� c Fund). (c) Sur lus. E�ccpt as ma� bc othcr« isc pro� idcd in am Scnior Dcbt Instrumcnt or am Parit� Dcbt Instrumcnt. thc Agcnc� shall not bc obligatcd to dcposit in thc Spccial Fund in am Bond Ycar an amount of Subordinatc Ta� Rc� cnucs «hich. togcthcr «ith othcr a� ailablc amounts in thc Spccial Fund. c�cccds thc amounts rcquircd in such Bond Ycar pursuant to this Scction �. �. All Subordinatc Ta� Rc� cnucs «hich arc rccci� cd b� thc Agcnc� during am Bond Ycar in c�ccss of thc amounts rcquircd to bc dcpositcd in thc Spccial Fund in such Bond Ycar pursuant to thc Scnior Dcbt Instrumcnts. this Loan Agrccmcnt and Parit� Dcbt Instrumcnts shall bc rcicascd from thc plcdgc thcrcof and licn thcrcon «hich is cstablishcd pursuant hcrcto. In thc c� cnt that for am rcason «hatsoc� cr am amounts shall rcmain on dcposit in thc Spccial Fund on am August 2 aftcr making all of thc transfcrs thcrctoforc rcquircd to bc madc pursuant to thc prcccding Paragraphs (a) and (b) and pursuant to am Scnior Dcbt Instrumcnt or Parit� Dcbt Instrumcnt. thc Agcnc� ma� «ithdra« such amounts from thc Spccial Fund. to bc uscd for am la«fiil purposcs of thc Agcnc�. including but not limitcd to thc pa� mcnt of am Subordinatc Dcbt or thc pa� mcnt of am amounts duc and o« ing to thc Unitcd Statcs pursuant to Scction �4. I I. Scction �.�4. In� cstmcnt of Monc� s: Valuation of Im cstmcnts. Subjcct to Scction �4.0 � of thc Indcnturc. all monc� s in thc Spccial Fund. thc Projcct Fund. thc Rcscr� c Fund and thc Costs of Issuancc Fund shall bc in� cstcd in Pcrmittcd In� cstmcnts. Abscnt am prior «rittcn instruction from thc Agcnc� or thc Authorit�. monc� s in am fiind hcld b� thc Trustcc hcrcundcr or undcr thc Indcnture shall ►��,-�c �z. � c�;;�xx �� ,. ; 1 1 bc in� cstcd in Pcrmittcd In� cstmcnts dcscribcd in clausc D of thc dcfinition thcrcof. Obligations purchascd as an in� cstmcnt of monc� s in am fiind or account cstablishcd hcrcundcr shall bc crcditcd to and dccmcd to bc part of such fiind or account. Thc Agcnc� or thc Trustcc. as thc casc ma� bc. ma� comminglc am amow�ts in am of thc funds and accounts hcld hcrcundcr «ith am othcr amounts hcld b� thc Agcnc� or thc Trustcc for purposcs of making am in� cstmcnt. uro� idcd that thc Agcnc� and thc Trustcc shall maintain scparatc accounting proccdures for thc in� cstmcnt of all fiinds and accounts hcld hcrcundcr. All intcrest. profits and othcr incomc rccci� cd from thc in� cstmcnt of monc� s in am fiind or account cstablishcd hcrcundcr shall bc crcditcd to such fiind or account. Not« ithstanding amthing to thc contrar� containcd in this Scction. an amount of intcrest rccci� cd «ith respcct to am in� cstmcnt cqual to thc amount of accrucd intcrest. if am. paid as part of thc purchasc pricc of such in� cstmcnt shall bc crcditcd to thc fiind or account from «hich such accrucd intcrest «as paid. For thc purposc of dctcrmining thc amount in am fiind or account cstablishcd hcrcundcr. am in� cstmcnts crcditcd to such fiind shall bc � alucd at Icast annuall� at thc markct � aluc thcrcof. ARTICLE IV OTHER COVENANTS OF THE AGENCY Scction �4. I. Punctual Pa� mcnt: E�tcnsion of Pa� mcnts. Thc Agcnc� shall punctuall� pa� or causc to bc paid thc installmcnts and prcpa� mcnt prcmium. if am. on thc Loan in strict conformit� «ith thc tcrms of this Loan Agrccmcnt. and it «ill faithfiill� obscr� c and perform all of thc conditions. co� cnants and requircmcnts of this Loan Agrccmcnt. T7�c Agcnc� shall not dircctl� or indircctl� c�tcnd or asscnt to thc c�tcnsion of thc maturit� of am installmcnt of or prcpa� mcnt prcmium. if am. on thc Loan. and in casc thc installmcnt or prcmium. if am. on thc Loan or thc timc of pa� mcnt of am such claims thcrcfor shall bc c�tcndcd. such principal. intcrest. prcmium or claims for intcrest shall not bc cntiticd. in casc of am E� cnt of Dcfault hcrcundcr. to thc bcncfits of this Loan Agrccmcnt c�ccpt for pa� mcnt of all amounts «hich shall not ha� c bccn so c�tcndcd. Scction �4.2. Limitation on Additional Indcbtcdncss. Thc Agcnc� hcrcb� co� cnants that it shall not issuc am bonds. notcs or othcr obligations. cntcr into am agrccmcnt or othcn� isc incur am indcbtcdncss. «hich is in am casc pa� ablc from all or am part of thc Ta� Rc� cnucs. c�ccpting onl� thc Loan. am Parit� Dcbt. am Scnior Dcbt and am Subordinatc Dcbt. and am othcr obligations permittcd b� this Loan Agrccmcnt. Scction �4. �. Pa� mcnt of Claims. Thc Agcnc� shall pa� and dischargc. or causc to bc paid and dischargcd. am and all la«fi�l claims for labor. matcrials or supplics ��hich. if unpaid. might bccomc a licn or chargc upon thc propertics o« ncd b� thc Agcnc� or upon thc Ta� Rc� cnucs or am part thcrcof. or upon am fiinds in thc hands of thc Trustcc. or «hich might impair thc sccurit� of thc Loan. Nothing hcrcin containcd shall rcquirc thc Agcnc� to makc am such pa� mcnt so long as thc Agcnc� in good faith shall contcst thc � alidit� of said claims. Scction �4.�4. Books and Accounts: Financial Statcmcnts. Thc Agcnc� shall kccp. or causc to bc kcpt. proper books of rccord and accounts. scparatc from all othcr rccords and accounts of thc Agcnc� and thc Cit�. in «hich complctc and corrcct cntrics shall bc madc of all transactions rclating to thc Rcdc� clopmcnt Projcct. thc Ta� Rc� cnucs. thc Spccial Fund. thc Rcscr� c Fund. thc Lo« and Modcratc Incomc Housing Fund and thc Rcdc� clopmcnt Fund. Such books of rccord and accounts shall at all timcs during busincss hours bc subjcct. upon prior �� rittcn rcqucst. to thc rcasonzblc inspcction of thc Authorit�. thc Trustcc and thc O« ncrs of not Icss than tcn perccnt in aggrcgatc Principal Amount of a scrics of Bonds thcn Outstanding. or thcir rcprescntati� cs authorizcd in «riting. PG—Ic l2. I c li i\88 I 9 I G. ; 12 Thc Agcnc� «ill causc to bc prcparcd annuall�. «ithin I80 da� s aftcr thc closc of cach Fiscal Ycar so long as am of thc Bonds arc Outstanding. complctc auditcd financial statcmcnts «ith respcct to such Fiscal Ycar sho« ing thc Ta� Rc� cnucs. all disburscmcnts from thc Spccial Fund and thc Rcdc� clopmcnt Fund and thc financial condition of thc Rcdc� clopmcnt Projcct. including thc balanccs in all fiinds and accounts rclating to thc Rcdc� clopmcnt Projcct. as of thc cnd of such Fiscal Ycar. Thc Agcnc� «ill fiirnish a cop� of such statcmcnts. upon rcasonablc rcqucst. to am O« ncr. Scction �4.�. Protcction of Sccurit� and Ri�hts. Thc Agcnc� «ill prescr� c and protcct thc sccurit� of thc Loan and thc rights of thc Trustcc and thc O« ncrs «ith respcct to thc Loan. From and aftcr thc Closing Datc. thc Loan shall bc incontcstablc b� thc Agcnc� . Thc Loan and thc pro� isions of this Loan Agrccmcnt arc and «ill bc thc Icgal. � alid and binding spccial obligations of thc Agcnc� cnforccablc in accordancc «ith thcir tcrms. and thc Agcnc� shall at all timcs. to thc c�tcnt permittcd b� la«. dcfcnd. prescr� c and protcct all thc rights of thc Authorit�. thc Trustcc and thc O«ncrs undcr this Loan Agrccmcnt against all claims and dcmands of all persons «homsoc� cr. Thc Agcnc� �s obligations to thc Trustcc undcr this Scction �4.� shall sur� i� c thc pa� mcnt of thc Bonds and thc dischargc of thc Indcnturc. thc rcmo� al or resignation of thc Tnistcc pursuant to thc Indcnturc or thc pa� mcnt of thc Loan and thc dischargc of this Loan Agrccmcnt. Scction �4.6. Pa� mcnts of Ta�cs and Othcr Char�cs. Thc Agcnc� «ill pa� and dischargc. or causc to bc paid and dischargcd. all ta�cs. scr� icc chargcs. asscssmcnts and othcr go� crnmcntal chargcs «hich ma� hcrcaftcr bc la« fiill� imposcd upon thc Agcnc� or thc propertics thcn o« ncd b� thc Agcnc� in thc Projcct Arca «hcn thc samc shall bccomc duc. Nothing hcrcin containcd shall rcquirc thc Agcnc� to makc am such pa� mcnt so long as thc Agcnc� in good faith shall contcst thc � alidit� of such ta�cs. asscssmcnts or chargcs. Thc Agcnc� «ill dul� obscr� c and compl� «ith all � alid requircmcnts of am go� crnmcntal authorit� rclati� c to thc Rcdc� clopmcnt Projcct or am part thcrcof. Scction �4.7. Ta�ation of Lcascd Proucrt� . All ad � alorcm propert� ta�cs dcri� cd b� thc Agcnc� pursuant to Scction >;67 � of thc Rcdc� clopmcnt La« «ith respcct to thc Icasc of propert� for rcdc� clopmcnt shall bc trcatcd as Ta� Rc� cnucs for all purposcs of this Loan Agrccmcnt. and shall bc dcpositcd b� thc Agcnc� in thc Spccial Fund promptl� upon rcccipt. S�ction �.8. Disposition of Prou�rt� . Th� Agcnc� «ill not participat� in thc disposition of am land or rcal propert� in thc Projcct Arca to am onc «hich «ill result in such propert� bccoming c�cmpt from ta�ation bccausc of public o« ncrship or usc or othcr« isc (c�ccpt propert� dcdicatcd for public right-of-«a� and c�ccpt propert� planncd for public o« ncrship or usc b� thc Rcdc� clopmcnt Plan in cffcct on thc datc of this Loan Agrccmcnt) so that such disposition shall. «hcn takcn togcthcr «ith othcr such dispositions. aggrcgatc morc than tcn perccnt of thc land arca in thc Projcct Arca unlcss such disposition is permitted as hcrcinaftcr pro� idcd in this Scction. If thc Agcnc� proposcs to participatc in such a disposition. it shall thcrcupon appoint an Indcpcndcnt Rcdc� clopmcnt Consultant to rcport on thc cffcct of said proposcd disposition. If thc Rcport of thc Indcpcndcnt Rcdc� clopmcnt Consultant concludcs that thc sccurit� of thc Loan or thc rights of thc Authorit� . thc O« ncrs and thc Tnistcc hcrcundcr «ill not bc matcriall� impaircd b� said proposcd disposition. thc Agcnc� ma� thcrcaftcr makc such disposition. If such Rcport concludcs that such sccurit� «ill bc matcriall� impaircd b� such proposcd disposition. thc Agcnc� shall disappro� c said proposcd disposition. Scction �4.9. Maintcnancc of Ta� Rc� cnucs. Thc Agcnc� shall compl� «ith all rcquircmcnts of thc Rcdc� clopmcnt La« to insurc thc allocation and pa� mcnt to it of thc Ta� Rc� cnucs. including «ithout limitation thc timcl� filing of am ncccssar� statcmcnts of indcbtcdncss «ith appropriatc officials of thc Count� and (in thc casc of supplcmcntal rc� cnucs and othcr amounts pa� ablc b� thc Statc) appropriatc officials of thc Statc. Thc Agcnc� shall not amcnd thc Rcdc� clopmcnt Plan or am of thc Pass-Through Agrccmcnts, or cntcr into am agrccmcnt «ith thc Count� or am othcr PG—Ic l2. I c li i\88 I 9 I G. ; 1 � go� crnmcntal unit. «hich «ould ha� c thc cffcct of rcducing thc amount of Subordinatc Ta� Rc� cnucs a� ailablc to thc Agcnc� for pa� mcnt of thc Loan. unlcss thc Agcnc� shall first obtain (i) thc Rcport of an Indcpcndcnt Rcdc� clopmcnt Consultant stating that thc amount of Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar (calculatcd on thc assumption that such rcduction of Ta� Rc� cnucs «as in cffcct throughout such Fiscal Ycar). plus at thc option of thc Agcnc� thc Additional Rc� cnucs. shall mcct thc co� cragc tcst sct forth in Scction 2.8. and (ii) as long as thc Insurancc Polic� is thcn in fiill forcc and cffcct. thc «rittcn conscnt of thc Insurcr. Nothing hcrcin is intcndcd or shall bc construcd in am «a� to prohibit or imposc am limitations on thc cntcring into b� thc Agcnc� of am such agrccmcnt. amcndmcnt or supplcmcnt «hich b� its tcrm is subordinatc to thc pa� mcnt of thc Loan and all Parit� Dcbt. Scction �4.10. Pa� mcnt of E�ucnscs: Indcmnification. Thc Agcnc� shall pa� to thc Trustcc from timc to timc all compcnsation for all scr� iccs rcndcrcd undcr this Loan Agrccmcnt and thc Indcnturc. including but not limitcd to all rcasonablc c�pcnscs. chargcs. Icgal and consulting fccs and othcr disburscmcnts and thosc of its attornc� s. agcnts and cmplo� ccs. incurrcd in and about thc performancc of its po« crs and dutics hcrcundcr and thcrcundcr. Upon thc occurrcncc of an E� cnt of Dcfault. thc Trustcc shall ha� c a first licn on thc fiinds hcld b� it undcr thc Indcnturc to sccurc thc pa� mcnt to thc Trustcc of all fccs. costs and c�pcnscs. including rcasonablc compcnsation to its c�perts. attornc� s and counscl (including thc allocatcd costs and disburscmcnts of in-housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl) incurrcd in performing its dutics undcr thc Indcnturc and this Loan Agrccmcnt. Thc Agcnc� fiirthcr co� cnants and agrccs to indcmnif�. dcfcnd and sa� c thc Trustcc and its officcrs. dircctors. agcnts and cmplo�ccs. harmlcss against am losscs. c�pcnscs and liabilitics «hich it ma� incur arising out of or in thc c�crcisc and performancc of its po« crs and dutics in accordancc «ith thc Indcnturc and this Loan Agrccmcnt. including thc costs and c�pcnscs of dcfcnding against am claim of liabilit�. but c�cluding am and all losscs. c�pcnscs and liabilitics «hich arc duc to thc ncgligcncc or intcntional misconduct of thc Trustcc. its officcrs. dircctors. agcnts or cmplo� ccs. Thc obligations of thc Agcnc� undcr this paragraph shall sur� i� c thc resignation or rcmo� al of thc Trustcc undcr thc Indcnturc. this Loan Agrccmcnt and pa� mcnt of thc Loan and thc dischargc of this Loan Agrccmcnt. Scction �4. I I. Ta� Co� cnants. To thc c�tcnt that bond counscl rcndcrs an opinion that intcrest on thc Bonds (or am of thcm) is ta�-c�cmpt undcr fcdcral ta� la« : (a) Thc Agcnc� co� cnants that. in ordcr to maintain thc c�clusion from gross incomc for Fcdcral incomc ta� purposcs of thc portion of thc Accrctcd Valuc of thc Bonds «hich constitutc intcrest thcrcon. and for no othcr purposc. thc Agcnc� «ill satisfi. or takc such actions as arc ncccssan to causc to bc satisficd. cach pro� ision of thc Codc ncccssan to maintain such c�clusion. In fiirthcrancc of this co� cnant thc Agcnc� agrccs to compl� «ith such «rittcn instructions as ma� bc pro� idcd b� Bond Counscl. (b) Thc Agcnc� co� cnants that no part of thc procccds of thc Bonds shall bc uscd. dircctl� or indircctl�. to acquirc am In� cstmcnt Propert� «hich «ould causc thc Bonds to bccomc arbitragc bonds as that tcrm is dcfincd in Scction I�48 of thc Codc. or undcr applicablc Ta� Rcgulations. In ordcr to assurc compliancc «ith thc rcbatc rcquircmcnts of Scction 1�48 of thc Codc. thc Agcnc� fiirthcr co� cnants that it «ill pa� or causc to bc paid to thc Unitcd Statcs thc amounts ncccssar� to satisfi thc rcquircmcnts of Scction 1�48(� of thc Codc. and that it «ill cstablish such accounting proccdures as arc ncccssar� to adcquatcl� dctcrminc. account for and pa� o� cr am such amount rcquircd to bc paid thcrcundcr in a manncr consistcnt «ith thc rcquircmcnts of Scction I�48 of thc Codc. such co� cnants to sur� i� c thc dcfcasancc of thc Bonds. ►��,-�c �z. � c�;;�xx �� ,. ; 14 (c) Thc Agcnc� co� cnants that it «ill not takc am action or omit to takc am action. «hich action or omission. if rcasonabl� c�pcctcd on thc datc of initial c�ccution and dcli� cr� of thc Bonds. «ould result in a loss of c�clusion from gross incomc for purposcs of Fcdcral incomc ta�ation. undcr Scction I 0� of thc Codc. of intcrest on thc Bonds. (d) Thc Agcnc� co� cnants that it «ill not usc or permit thc usc of am propert� financcd «ith thc procccds of thc Bonds b� am person (othcr than a statc or local go� crnmcntal unit) in such manncr or to such c�tcnt as «ould result in a loss of c�clusion of thc intcrest on thc Bonds from gross incomc for Fcdcral incomc ta� purposcs undcr Scction 10 � of thc Codc. (c) E�ccpt as pro� idcd bclo«. thc Agcnc� co� cnants that nonc of thc monc� s containcd in am of thc fiinds or accounts «ith respcct to thc Bonds shall bc: (i) uscd in making loans guarantccd b� thc Unitcd Statcs (or am agcnc� or instrumcntalit� thcrco�. (ii) in� cstcd dircctl� or indircctl� in a dcposit or account insurcd b� thc Fcdcral Dcposit Insurancc Corporation. National Crcdit Union Administration or am othcr similar Fcdcrall� chartcrcd corporation. or (iii) othcn� isc in� cstcd dircctl� or indircctl� in obligations guarantccd (in «holc or in part) b� thc Unitcd Statcs (or am agcnc� or instrumcntalit� thcrco�: pro� idcd. ho« c� cr. that thc abo� c restrictions do not appl� to: (a) thc in� cstmcnt on monc� s hcld in thc Rc� cnuc Fund or am othcr "bona fidc dcbt scr� icc fiind�� as dcfincd for purposcs of Scction I�48 of thc Codc. (b) in� cstmcnt in dircct obligations of thc Unitcd Statcs Trcasur�. (c) in� cstmcnt in obligations guarantccd b� thc Fcdcral National Mortgagc Association. Go� crnmcnt National Mortgagc Association. or thc Fcdcral Homc Loan Mortgagc Corporation. (d) in� cstmcnt in obligations issucd pursuant to Scction 2 I B(d)( �) of thc Fcdcral Homc Loan Bank Act. as amcndcd b� Scction � I I(a) of thc Financial Institutions Rcform. Rcco� cr�. and Enforccmcnt Act of 1989. (c) in� cstmcnts permittcd undcr rcgulations issucd pursuant to Scction 1�49(b)( �)(B) of thc Codc. or (� such othcr in� cstmcnts permittcd undcr thc Indcnturc as. in thc opinion of Bond Counscl. do not jcopardizc thc c�clusion from gross incomc for Fcdcral incomc ta� purposcs of intcrest on thc Bonds. Scction �4.12. Rcdc� cloumcnt of Proicct Arca. Thc Agcnc� shall cnsurc that all acti� itics undcrtakcn b� thc Agcnc� «ith respcct to thc rcdc� clopmcnt of thc Projcct Arca arc undcrtakcn and accomplishcd in conformit� «ith all applicablc rcquircmcnts of thc Rcdc� clopmcnt Plan and thc Rcdc� clopmcnt La« . Thc Agcnc� shall managc and operatc all propertics o« ncd b� thc Agcnc� and comprising am part of thc Rcdc� clopmcnt Projcct in a sound and busincss-likc manncr and in conformit� «ith all � alid requircmcnts of am go� crnmcntal authorit�. and «ill kccp such propertics insurcd at all timcs in conformit� «ith sound busincss practicc. Scction �4. I�. Lo« and Modcratc Incomc Housin� Fund. Thc Agcnc� co� cnants and agrccs to usc thc monc� s in thc Lo« and Modcratc Incomc Housing Fund in accordancc «ith Scctions >;>>�4.2 and >;>>�4. � of thc Rcdc� clopmcnt La«. and furthcr co� cnants and agrccs to disbursc. c�pcnd or cncumbcr am "c�ccss surplus�� (as dcfincd in Scction >;>>�4. I 2 of thc Rcdc� clopmcnt La« ) in thc Lo« and Modcratc Incomc Housing Fund at such timcs and in such manncr that thc Agcnc� shall not bc subjcct to sanctions pursuant to subdi� ision (c) of said Scction >;>>�4.12. Scction �4.1 �4. Annual Rc� ic« of Tas Rc� cnucs. Thc Agcnc� hcrcb� co� cnants that it «ill annuall� causc an Indcpcndcnt Rcdc� clopmcnt Consultant to rc� ic« thc total amow�t of Ta� Rc� cnucs rcmaining a� ailablc to bc rccci� cd b� thc Agcnc� undcr thc Rcdc� clopmcnt Plan�s cumulati� c ta� incrcmcnt limitation. as «cll as firturc cumulati� c aiu�ual dcbt scr� icc «ith respcct to all Scnior Dcbt. thc Loan and all Parit� Dcbt. Subjcct to am limitations sct forth in thc Scnior Dcbt Instrumcnts. thc Agcnc� «ill not acccpt Ta� Rc� cnucs grcatcr than such annual dcbt scr� icc in am � car. if such acccptancc «ill causc thc amount rcmaining undcr thc ta� incrcmcnt limit to fall bclo« rcmaining cumulati� c annual dcbt scr� icc «ith respcct to all Scnior Dcbt. thc Loan and all Parit� Dcbt. c�ccpt for thc purposc of dcpositing ►��,-�c �z. � c�;;�xx �� ,. ; 15 such rc� cnucs in cscro« for thc pa� mcnt of such dcbt scr� icc or for thc prcpa� mcnt or rcdcmption of am Scnior Dcbt. thc Loan and am Parit� Dcbt. Scction �4. I�. Furthcr Assuranccs. Thc Agcnc� «ill adopt. makc. c�ccutc and dcli� cr am and all such fiirthcr resolutions. instrumcnts and assuranccs as ma� bc rcasonabl� ncccssar� or proper to carr� out thc intcntion or to facilitatc thc performancc of this Loan Agrccmcnt and for thc bcttcr assuring and confirming unto thc Trustcc. thc Authorit� and thc O« ncrs of thc Bonds of thc rights and bcncfits pro� idcd in this Loan Agrccmcnt. ARTICLE V EVENTS OF DEFAULT AND REMEDIES Scction �. I. E� cnts of Dcfault and Acccicration of Maturitics. Thc follo« ing c� cnts shall constitutc E� cnts of Dcfault hcrcundcr: (a) Failurc b� thc Agcnc� to pa� thc principal of or intcrest or prcpa� mcnt prcmium. if am. on thc Loan. am Parit� Dcbt or Scnior Dcbt «hcn and as thc samc shall bccomc duc and pa�ablc. (b) Failurc b� thc Agcnc� to obscr� c and perform am of thc co� cnants. agrccmcnts or conditions on its part containcd in this Loan Agrccmcnt. othcr than as rcfcrrcd to in thc prcccding Paragraph (a). for a period of 60 da� s aftcr «rittcn noticc spccifi ing such failurc and requcsting that it bc rcmcdicd has bccn gi� cn to thc Agcnc� b� thc Trustcc: uro� idcd. ho« c� cr. that if thc failure statcd in such noticc can bc corrcctcd. but not «ithin such 60 da� period. such failure shall not constitutc an E� cnt of Dcfault if corrccti� c action is institutcd b� thc Agcnc� «ithin such 60 da� period and thcrcaftcr is diligcntl� pursucd until such failurc is corrcctcd. (c) Thc filing b� thc Agcnc� of a pctition or ans«cr sccking rcorganization or arrangcmcnt undcr thc fcdcral bankruptc� la« s or am othcr applicablc la« of thc Unitcd Statcs of Amcrica. or if a court of compctcnt jurisdiction shall appro� c a pctition. filcd «ith or «ithout thc conscnt of thc Agcnc�. sccking rcorganization undcr thc fcdcral bankruptc� la«s or am othcr applicablc la« of thc Unitcd Statcs of Amcrica. or if. undcr thc pro� isions of am othcr la« for thc rclicf or aid of dcbtors. am court of compctcnt jurisdiction shall assumc custod� or control of thc Agcnc� or of thc «holc or am substantial part of its propert� . If an E� cnt of Dcfault has occurrcd and is continuing. thc Authorit� or thc Trustcc ma�. and at thc «rittcn dircction of thc O« ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds thc Authorit� or thc Trustcc shalL (i) dcclarc thc Loan (in thc amount cqual to thc corresponding Principal Amount of thc Bonds bcing dcclarcd duc and pa� ablc undcr thc Indcnturc) to bc duc and pa�ablc immcdiatcl�. and upon am such dcclaration thc samc shall bccomc immcdiatcl� duc and pa�ablc. amthing in this Loan Agrccmcnt to thc contrar� not«ithstanding. and (ii) subjcct to thc rcccipt of indcmnit� as pro� idcd in thc Indcnturc. c�crcisc am othcr rcmcdics a� ailablc to thc Trustcc at la« or in cquit� . Immcdiatcl� upon bccoming a«arc of thc occurrcncc of an E� cnt of Dcfault. thc Authorit�. or thc Trustcc as assigncc of thc Authorit�. shall gi� c noticc of such E� cnt of Dcfault to thc Agcnc� b� tcicphonc. tciccopicr or othcr tciccommunication dc� icc. promptl� confirmcd in «riting. This pro� ision. ho« c� cr. is subjcct to thc condition that if. at am timc aftcr thc Loan shall ha� c bccn so dcclarcd duc and pa� ablc. and bcforc am judgmcnt or dccrcc for thc pa� mcnt of thc monc� s duc shall ha� c bccn obtaincd or cntcrcd. thc Agcnc� shall dcposit «ith thc Trustcc a sum sufficicnt to pa� all unpaid installmcnts of thc Loan maturcd prior to such dcclaration (such sum bcing cqual to thc Accrctcd Valuc. calculatcd to but not including thc datc of pa� mcnt b� thc Agcnc� to thc Trustcc. of thc corresponding portion of thc Outstanding Bonds that maturcd prior to such dcclaration). and thc rcasonablc c�pcnscs of thc Trustcc ►��,-�c �z. � c�;;�xx �� ,. ; 16 (including but not limitcd to attornc� s fccs). and am and all othcr dcfaults kno« n to thc Trustcc (othcr than in thc pa� mcnt of thc installmcnts of thc Loan duc and pa� ablc solcl� b� rcason of such dcclaration) shall ha� c bccn madc good or curcd to thc satisfaction of thc Trustcc or pro� ision dccmcd b� thc Trustcc to bc adcquatc shal l ha� c bccn madc thcrcfor. thcn. and in c� cr� such casc. thc O�� ncrs of a majorit� in aggrcgatc Principal Amount of thc Outstanding Bonds ma�. b< «rittcn noticc to thc Tnistcc and thc Agcnc�. rescind and annul such dcclaration and its conscqucnccs. Ho«c�cr. no such rescission and annulmcnt shall c�tcnd to or shall affcct am subscqucnt dcfault. or shall impair or c�haust am right or po« cr conscqucnt thcrcon. Scction �.2. Auulication of Funds Uuon Dcfault. Subjcct to thc pa� mcnt of fiinds «ith respcct to thc Scnior Dcbt undcr thc Scnior Dcbt Instrumcnts. all amounts rccci� cd b� thc Trustcc pursuant to am right gi� cn or action takcn b� thc Trustcc undcr thc pro� isions of this Loan Agrccmcnt. shall bc applicd b� thc Trustcc in thc follo« ing ordcr: First. to thc pa� mcnt of thc fccs. costs and c�pcnscs of thc Trustcc. including rcasonablc compcnsation to its agcnts. attornc� s and counscl (including thc allocatcd costs and disburscmcnts of in- housc counscl to thc cztcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl): and Sccond. to thc pa� mcnt of thc installmcnts of thc Loan thcn duc and unpaid (bcing cqual to thc Accrctcd Valuc of thc Bonds dcclarcd duc and pa�ablc calculatcd to but not including thc datc of pa� mcnt b� thc Authorit� or thc Agcnc� to thc Trustcc. to thc c�tcnt permittcd b� la« ): pro� idcd. ho« c� cr. that in thc c� cnt such amounts shall bc insufficicnt to pa� thc fiill amount. thcn such amounts shall bc applicd to thc pa� mcnt of all installmcnts of thc Loan thcn duc and pa� ablc on a pro rata basis. Scction �. �. No Wai� cr. Nothing in this Articic V or in am othcr pro� ision of this Loan Agrccmcnt. shall affcct or impair thc obligation of thc Agcnc�. «hich is absolutc and unconditional. to pa� from thc Subordinatc Ta� Rc� cnucs and othcr amounts plcdgcd hcrcundcr. thc installmcnts and prcmium. if am. on thc Loan to thc Trustcc «hcn duc_ as hcrcin pro� idcd. or affcct or impair thc right of action. «hich is also absolutc and unconditional. of thc Trustcc to institutc suit to cnforcc such pa� mcnt b� � irtuc of thc contract cmbodicd in this Loan Agrccmcnt. A«ai� cr of am dcfault b� thc Trustcc shall not affcct am subscqucnt dcfault or impair am rights or rcmcdics on thc subscqucnt dcfault. No dcla� or omission of thc Trustcc to c�crcisc am right or po«cr accruing upon am dcfault shall impair am such right or po«cr or shall bc construcd to bc a«ai� cr of am such dcfault or an acquicsccncc thcrcin. and c� cr� po« cr and remcd� confcrrcd upon thc Trustcc b� thc Rcdc� clopmcnt La�� or b� this Articic V ma� bc cnforccd and c�crciscd from timc to timc and as oftcn as shall bc dccmcd c�pcdicnt b� thc Trustcc. If a suit. action or procccding to cnforcc am right or c�crcisc am rcmcd� shall bc abandoncd or dctcrmincd ad� crscl� to thc Trustcc. thc Agcnc�. thc Authorit� and thc Trustcc shall bc restorcd to thcir formcr positions. rights and remcdics as if such suit. action or procccding had not bccn brought or takcn. Scction �.�4. A�rccmcnt to Pa� Attornc� s� Fccs and E�ucnscs. In thc c� cnt thc Agcnc� or thc Authorit� should dcfault undcr am of thc pro� isions hcrcof and thc nondcfaulting part� or thc Trustcc should cmplo� attornc� s or incur othcr c�pcnscs for thc collcction of monc� s or thc cnforccmcnt or performancc or obscr� ancc of am obligation or agrccmcnt on thc part of thc dcfaulting part� hcrcin containcd. thc dcfaulting part� agrccs that it «ill on dcmand thcrcfor pa� to thc nondcfaulting part� or thc Trustcc. as thc casc ma� bc. thc rcasonablc fccs of such attornc� s and such othcr c�pcnscs so incurrcd PG—Ic l2. I c li i\88 I 9 I G. ; 1 7 (including thc allocatcd costs and disburscmcnts of in-housc counscl to thc c�tcnt thc scr� iccs of such counscl arc not duplicati� c of scr� iccs pro� idcd b� outsidc counscl). Scction �.�. Rcmcdics Not E�clusi� c. No rcmcd� hcrcin confcrrcd upon or rescr� cd to thc Trustcc is intcndcd to bc c�clusi� c of am othcr rcmcd� . E� cr� such rcmcd� shall bc cumulati� c and shall bc in addition to c� cr� othcr rcmcd� gi� cn hcrcundcr or no« on c�rcaftcr c�isting. at la« or in cquit� or b� statutc or othcr« isc. and ma� bc c�crciscd «ithout c�hausting and «ithout rcgard to am othcr rcmcd� confcrrcd b� thc Rcdc� clopmcnt La« or am othcr la« . Scction �.6. Control of Rcmcdics b� Insurcr . Not« ithstanding thc pro� isions of Scction �. I and subjcct to am rights hcrctoforc grantcd b� thc Authorit� or thc Agcnc� to am insurcr of Parit� Dcbt. as long as Insurancc Polic� is in fiill forcc and cffcct and thc Insurcr has not dcfaultcd «ith respcct to its pa� mcnt obligations thcrcundcr. upon thc occurrcncc and continuancc of an E� cnt of Dcfault. thc Insurcr shall bc cntiticd to control and dircct thc cnforccmcnt of all rights and remcdics grantcd to thc O« ncrs or thc Trustcc for thc bcncfit of thc O« ncrs undcr this Loan Agrccmcnt. Am acccicration of thc Loan or annulmcnt thcrcof pursuant to Scction �. I shall bc subjcct to thc prior «rittcn conscnt of thc Insurcr. No «ai� cr of a dcfault shall bc cffccti� c«ithout thc «rittcn conscnt of thc Insurcr. ARTICLE VI MISCELLANEOUS Scction 6. I. Bcncfits Limitcd to Partics. Nothing in this Loan Agrccmcnt. c�presscd or implicd. is intcndcd to gi� c to am person othcr than thc Agcnc�. thc Tnistcc. thc Insurcr and thc Authorit�. am right. rcmcd� or claim undcr or b� rcason of this Loan Agrccmcnt. All co� cnants. stipulations. promiscs or agrccmcnts in this Loan Agrccmcnt containcd b� and on bchalf of thc Agcnc� shall bc for thc solc and c�clusi� c bcncfit of thc Authorit�. thc Trustcc acting as trustcc for thc bcncfit of thc O« ncrs of thc Bonds. and thc Insurcr so long as thc Insurancc Polic� rcmains in fiill forcc and cffcct. Scction 6.2. Succcssor is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor. Whcnc� cr in this Loan Agrccmcnt. thc Agcnc�. thc Authorit�. thc Trustcc or thc Insurcr is namcd or rcfcrrcd to. such rcfcrcncc shall bc dccmcd to includc thc succcssors or assigns thcrcof. and all thc co� cnants and agrccmcnts in this Loan Agrccmcnt containcd b� or on bchalf of thc Agcnc�. thc Authorit�. thc Trustcc or thc Insurcr shall bind and inurc to thc bcncfit of thc respccti� c succcssors and assigns thcrcof «hcthcr so c�presscd or not. Scction 6. �. Dischar�c of Loan A�rccmcnt. If thc Agcnc� shall pa� and dischargc thc indcbtcdncss on thc Loan or am portion thcrcof in am onc or morc of thc follo« ing «a� s: (a) b� «cll and trul� pa� ing or causing to bc paid thc principal of and intcrest and prcpa� mcnt prcmiums. if am. on thc Loan or such portion thcrcof. as and «hcn thc samc bccomc duc and pa� ablc: (b) b� irrc� ocabl� dcpositing «ith thc Trustcc. in trust. at or bcforc maturit�. cash in an amount «hich. togcthcr «ith thc a� ailablc amounts thcn on dcposit in am of thc fiinds and accounts cstablishcd pursuant to thc Indcnturc or this Loan Agrccmcnt. in thc opinion or rcport of an Indcpcndcnt Accountant is fiill� sufficicnt to pa� all principal of and intcrest and prcpa� mcnt prcmiums. if am. on thc Loan or such portion thcrcof: or (c) b� irrc� ocabl� dcpositing «ith thc Trustcc or am othcr fiduciar�. in trust. non- callablc Dcfcasancc Obligations in such amount as an Indcpcndcnt Accountant shall dctcrminc «ill. PG—Ic l2. I c li i\88 I 9 I G. ; 1 8 togcthcr «ith thc intcrest to accruc thcrcon and a� ailablc monc� s thcn on dcposit in thc fiinds and accounts cstablishcd pursuant to thc Indcnturc or this Loan Agrccmcnt. bc fiill� sufficicnt to pa� and dischargc thc indcbtcdncss on thc Loan or such portion thcrcof (including all principal. intcrest and prcpa�mcnt prcmiums) at or bcforc maturit�: thcn. at thc cicction of thc Agcnc� but onl� if all othcr amounts thcn duc and pa� ablc hcrcundcr shall ha� c bccn paid or pro� ision for thcir pa� mcnt madc. thc plcdgc of and licn upon thc Subordinatc Ta� Rc� cnucs and othcr fiinds pro� idcd for in this Loan Agrccmcnt and all othcr obligations of thc Trustcc. thc Authorit� and thc Agcnc� undcr this Loan Agrccmcnt «ith respcct to thc Loan or such portion thcrcof shall ccasc and tcrminatc. c�ccpt onl� thc obligation of thc Agcnc� to pa� or causc to bc paid to thc Trustcc. from thc amounts so dcpositcd «ith thc Trustcc or such othcr fiduciar�. all sums duc «ith respcct to thc Loan or such portion thcrcof. and to pa� all c�pcnscs and costs of thc Trustcc «hcn and as such c�pcnscs and costs bccomc duc and pa�ablc. Noticc of such cicction shall bc filcd «ith thc Authorit� and thc Trustcc. Am fiinds thcrcaftcn c�ld b� thc Trustcc hcrcundcr. «hich arc not rcquircd for said purposc. shal l bc paid o� cr to thc Agcnc� . Scction 6.�4. Amcndmcnt. This Loan Agrccmcnt ma� bc amcndcd b� thc partics hcrcto but onl� undcr thc circumstanccs sct forth in. and in accordancc «ith. thc pro� isions of Scction �.08 of thc Indcnturc. Thc Authorit� and thc Trustcc co� cnant that thc Indcnture shall not bc amcndcd. nor shall thc Authorit� agrcc or conscnt to am amcndmcnt of thc Indcnturc. «ithout thc prior «rittcn conscnt of thc Agcnc� (c�ccpt that such conscnt shall not bc rcquircd in thc c� cnt that an E� cnt of Dcfault shall ha� c occurrcd and bc continuing hcrcundcr). Scction 6.�. Wai� cr of Pcrsonal Liabilit� . No mcmbcr. officcr. agcnt or cmplo� cc of thc Agcnc� shall bc indi� iduall� or personall� liablc for thc rcpa� mcnt of thc Loan: but nothing hcrcin containcd shall rclic� c am such mcmbcr. officcr. agcnt or cmplo� cc from thc performancc of am official dut� pro� idcd b� la« . Scction 6.6. Pa� mcnt on Busincss Da� s. Whcnc� cr in this Loan Agrccmcnt am amount is rcquircd to bc paid on a da� «hich is not a Busincss Da�. such pa� mcnt shall bc rcquircd to bc madc on thc Busincss Da� immcdiatcl� follo« ing such da�. pro� idcd that intcrest on such pa� mcnt shall not accruc from and aftcr such da� . Scction 6.7. Noticcs. Am noticc. rcqucst. complaint. dcmand or othcr communication undcr this Loan Agrccmcnt shall bc gi� cn in thc samc manncr as pro� idcd in Scction I I. I� of thc Indcnturc. «hich is hcrcb� incorporatcd. Scction 6.8. Partial Im alidit� . If am Scction. paragraph. scntcncc. clausc or phrasc of this Loan Agrccmcnt shall for am rcason bc hcld illcgal. in� alid or uncnforccablc. such holding shall not affcct thc � alidit� of thc rcmaining portions of this Loan Agrccmcnt. Thc Agcnc� hcrcb� dcclares that it «ould ha� c adoptcd this Loan Agrccmcnt and cach and c� cr� othcr Scction. paragraph. scntcncc. clausc or phrasc hcrcof and authorizcd thc Loan irrespccti� c of thc fact that am onc or morc Scctions. paragraphs. scntcnccs. clauscs. or phrascs of this Loan Agrccmcnt ma� bc hcld illcgal. im alid or uncnforccablc. Scction 6.9. Articic and Scction Hcadin�s and Rcfcrcnccs. Thc hcadings or titics of thc sc� cral Articics and Scctions hcrcof. and am tablc of contcnts appcndcd to copics hcrcof. shall bc solcl� for con� cnicncc of rcfcrcncc and shall not affcct thc mcaning. construction or cffcct of this Loan Agrccmcnt. All rcfcrcnccs hcrcin to "Articics.�� "Scctions�� and othcr subdi� isions arc to thc corresponding Articics. Scctions or subdi� isions of this Loan Agrccmcnt: thc «ords "hcrcin.�� "hcrcof.�� "hcrcb�.�� "hcrcundcr � and othcr «ords of similar import rcfcr to this Loan Agrccmcnt as a«holc and not ►��,-�c �z. � c�;;�xx �� ,. ; 19 to am particular Articic. Scction or subdi� ision hcrcof: and «ords of thc masculinc gcndcr shall mcan and includc «ords of thc fcmininc and ncutcr gcndcrs. Scction 6.10. E�ccution of Countcruarts. This Loan Agrccmcnt ma� bc c�ccutcd in am numbcr of countcrparts. cach of «hich shall for all purposcs bc dccmcd to bc an original and all of «hich shall togcthcr constitutc but onc and thc samc instrumcnt. Scction 6. I I. Go� crnin� La« . This Loan Agrccmcnt shall bc construcd and go� crncd in accordancc «ith thc la« s of thc Statc. Scction 6.12. Thc Trustcc. Thc Trustcc is cntcring into this Loan Agrccmcnt solcl� in its capacit� as Trustcc undcr thc Indcnturc and all pro� isions of thc Indcnturc rclating to thc rights. pri� ilcgcs. po« crs and protcctions of thc Trustcc shall appl� «ith cqual forcc and cffcct to all actions takcn b� thc Trustcc in conncction «ith this Loan Agrccmcnt. Thc Trustcc shall bc responsiblc onl� for thc dutics of thc Trustcc c�pressl� sct forth hcrcin. IN WITNESS WHEREOF. thc AGENCY. thc AUTHORITY and thc TRUSTEE ha� c causcd this Loan Agrccmcnt to bc signcd b� thcir respccti� c officcrs. all as of thc da� and � car first abo� c «rittcn. - - PALM DESERT REDEVELOPMENT AGENCY I� E�ccuti� c Dircctor PALM DESERT FINANCING AUTHORITY I� Chicf Administrati� c Officcr WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc I� Authorizcd Officcr PG—Ic l2. I c li i\88 I 9 I G. ; 20 EXHIBIT A SCHEDULE OF LOAN PAYMENTS Datc Total Pa� mcnt Pa�ablc on thc fifth Busincss Da� prcccding cach August Ist P6—Ic�2. I c��\xx I�)16. � A— I ESCROW AGREEMENT (PROJECT AREA NO. 2) by and among PALM DESERT FINANCING AUTHORITY and PALM DESERT REDEVELOPMENT AGENCY and WELLS, FARGO BANK, N.A. as Escrow Agent Dated as of July 1, 2006 Relating to the Refunding of Palm Desert Financing Authority Tax Allocation Refunding Revenue Bonds (Project Area No. 2) Series 1995 116402.1055\992127.3 RWG DRAFT: 5/22/2006 TABLE OF CONTENTS Pam Section1. Definitions.................................................................................................................2 Section 2. Appointment of Escrow Agent...................................................................................2 Section3. Escrow Fund..............................................................................................................3 Section4. Deposit to Escrow Fund.............................................................................................3 Section 5. Investment of Escrow Fund........................................................................................3 Section 6. Reinvestment, Payment of Refunding Requirements..................................................4 Section7. Verification................................................................................................................4 Section 8. Compliance with Agreement......................................................................................4 Section9. Tax Covenant............................................................................................................4 Section10. Notices....................................................................................................................4 Section 11. Defeasance of Prior Bonds.......................................................................................5 Section12. Nature of Lien..........................................................................................................5 Section13. Amendments............................................................................................................5 Section 14. Compensation of Escrow Agent...............................................................................6 Section 15. Resignation or Removal of Escrow Agent, Appointment of Successor.....................6 Section 16. Limitation of Powers and Duties..............................................................................7 Section17. Indemnification........................................................................................................7 Section18. Limitation of Liability..............................................................................................8 Section19. Termination.............................................................................................................9 Section20. Governing Law........................................................................................................9 Section21. Severability..............................................................................................................9 Section22. Counterparts............................................................................................................9 SCHEDULE A REFUNDING REQUIREMENTS SCHEDULE B ESCROW SECURITIES EXHIBIT A FORM OF DEFEASANCE NOTICE 116402. 1055\992127.3 ESCROW AGREEMENT (Project Area No. 2) This Escrow Agreement (Project Area No. 2) (this "Agreement") is made and entered into as of July 1, 2006, by and among the Palm Desert Financing Authority, a joint powers authority duly organized and existing pursuant to the laws of the State of California (the "Authority"), the Palm Desert Redevelopment Agency, a public body corporate and politic organized and existing pursuant to the laws of the State of California (the "Agency"), and Wells Fargo Bank, National Association, a national banking association duly organized and existing under the laws of the United States of America, as Escrow Agent (together with any successors and assigns, the "Escrow Agent"). RECITALS: A. The Authority has heretofore issued its Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 2), Series 1995, of which $3,870,000 in principal amount remain outstanding (the "Prior Bonds"), pursuant to the Indenture of Trust, dated as of June 1, 1995 (the "Prior Indenture"), by and between the Authority and Bank of America National Trust and Savings Association, as succeeded by Wells Fargo Bank, National Association, as trustee (the "Prior Bonds Trustee"). B. The Prior Bonds were secured by revenues consisting of amounts payable to the Authority by the Agency with respect to a loan (the "Prior Loan") pursuant to the Loan Agreement (Project Area No. 2), dated as of June 1, 1995 (the "Prior Loan Agreement"), by and among the Agency, the Authority and the Prior Bonds Trustee. C. The Agency and the Authority have determined that, by refunding the Prior Bonds, costs to the Agency and the Authority will be reduced. D. The Authority has determined to issue its Tax Allocation Refunding Revenue Bonds (Project Area No. 2) 2006 Series A (the "Series 2006A Bonds"), pursuant to the Indenture of Trust, dated as of even date herewith (the -2006 Indenture"), by and between the Authority and Wells Fargo Bank, National Association, as trustee (together with any successors and assigns, the -2006 Trustee"). E. A portion of the proceeds from the sale of the Series 2006A Bonds will be used to make a loan (the "Series 2006A Loan") to the Agency pursuant to the Loan Agreement (2006 Senior Loans), dated as of event date herewith (the "2006 Loan Agreement") (the -2006 Loan Agreement"), by and among the Agency, the Authority and the 2006 Trustee. F. Pursuant to the 2006 Loan Agreement, a portion of the proceeds derived from the Series 2006A Loan will be deposited in escrow with the Escrow Agent and applied to the purchase of noncallable direct obligations of, or noncallable obligations guaranteed by, the United States of America. 116402. 1055\992127.3 G. In accordance with the Prior Indenture, if the Authority will pay or cause to be paid, or will have made provisions to pay, or there will have been set aside in trust funds to pay, to the holders of Prior Bonds, the principal and interest and premium, if any, to become due thereon, then with respect to such Prior Bonds the lien of the Prior Indenture will thereupon cease, terminate and become void and be discharged and satisfied. H. In order to provide for the proper and timely application of the moneys deposited in said escrow to the payment of the Prior Bonds, it is necessary to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows: Section 1. Definitions. Unless the context clearly requires otherwise, capitalized terms used in this Agreement shall have the meanings ascribed to them in the introductory paragraph and the Recitals hereof. In addition, as used herein, the following terms shall have the following meanings: Code" means the Internal Revenue Code of 1986, as amended. "Escrow Fund" means the Escrow Fund established and held by the Escrow Agent pursuant to Section 3. Escrow Securities" means the Investment Securities set forth in Schedule B hereto. "Investment Securities" means noncallable direct obligations of the United States of America, or bonds or other obligations which are noncallable and for which the full faith and credit of the United States of America are pledged for the payment of principal and interest, to mature or be withdrawable, as the case may be, not later than the time when needed for the payment or redemption of the Prior Bonds in order to discharge the pledge and lien securing the Prior Bonds. "Refunding-, Reauirements" means an amount sufficient to pay all installments of, principal, interest and the redemption premium of the Prior Bonds on their earliest available optional redemption date, as set forth in Schedule A attached hereto. Section 2. Appointment of Escrow A,-,ent. The Authority and the Agency hereby appoint Wells Fargo Bank, National Association, as Escrow Agent under this Agreement for the benefit of the holders of the Prior Bonds. The Escrow Agent hereby accepts the duties and obligations of Escrow Agent under this Agreement and agrees that the irrevocable instructions to the Escrow Agent herein provided are in a form satisfactory to it. The applicable and necessary provisions of the Prior Indenture, including particularly redemption provisions set forth in Article II thereof, are incorporated herein by reference. Reference herein to, or citation herein of, any provisions of the Prior Indenture shall be deemed to incorporate the same as a part hereof in the same manner and with the same effect as if the same were fully set forth herein. 116402. 1055\992127.3 2 Section 3. Escrow Fund. There is hereby created and established with the Escrow Agent a special and irrevocable trust fund designated the "Escrow Fund" (the "Escrow Fund") to be held by the Escrow Agent separate and apart from all other funds of the Agency, the Authority or the Escrow Agent and used only for the purposes and in the manner provided in this Agreement. Section 4. Dea_ osit to Escrow Fund. Upon the issuance of the Series 2006A Bonds, the Authority and the Agency shall cause a portion of the sale proceeds of the Series 2006A Bonds, in the amount of $ , to be transferred to the Escrow Agent, for deposit in the Escrow Fund. Moneys on deposit in the Escrow Fund shall be held in irrevocable trust by the Escrow Agent and applied solely as provided in this Escrow Agreement. Section 5. Investment of Escrow Fund. The Escrow Agent, upon receipt of the moneys described in Section 4, shall immediately invest $ of such moneys in the Escrow Securities, to deposit such Escrow Securities in the Escrow Fund and to deposit the remaining $ in the Escrow Fund to hold uninvested. The Escrow Agent is hereby authorized and empowered to deposit uninvested monies held hereunder from time to time in demand deposit accounts, without payment for interest thereon as provided hereunder, established at commercial banks that are corporate affiliates of the Escrow Agent. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, at the written request of the Agency and upon compliance with the conditions hereinafter set forth, the Escrow Agent shall have the power to sell, transfer, request the redemption of or otherwise dispose of some or all of the Escrow Securities in the Escrow Fund and to substitute Investment Securities. The foregoing may be effected only if. (a) the substitution of Investment Securities for the substituted Escrow Securities occurs simultaneously, (b) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the Prior Bonds Trustee for the payment of the principal of, premium and/or interest on the Prior Bonds will not be diminished or postponed thereby, as shown in the certification (described below) of an independent certified public accountant, (c) the Escrow Agent shall receive the unqualified opinion of nationally recognized bond counsel to the effect that (i) such disposition and substitution would not cause any of the Prior Bonds or the Series 2006A Bonds to be an "arbitrage bond" within the meaning of Section 148 of the Code and the regulations thereunder in effect on the date of such disposition and substitution and applicable to obligations issued on the respective issue dates of the Prior Bonds and the Series 2006A Bonds, such disposition or substitution would not be inconsistent with the tax covenants of the Authority and the Agency contained in the 2006 Indenture and the 2006 Loan Agreement and that the conditions of this Section as to the disposition and substitution have been satisfied and (ii) the Agency has the right and power to effect such disposition and substitution; and (d) the Escrow Agent shall receive from an independent certified public accountant a certification that, immediately after such transaction, the principal of and interest on the Investment Securities in the Escrow Fund will, together with other moneys available for such purpose, be sufficient to pay the Refunding Requirements. Any cash received from the disposition and substitution of Escrow Securities pursuant to this Section to the extent that, as shown in such certification, such cash will not be required, in accordance with the Prior Indenture and this Agreement, at any time for the payment when due as provided in Section 6, shall be transferred to the Agency. 116402.1055\992127.3 Section 6. Reinvestment; Pavment of Refunding-, Reauirements. As the principal of the Escrow Securities shall mature and be paid, and the investment income and earnings thereon are paid, the Escrow Agent shall reinvest such moneys in accordance with the written instructions of the Agency. On the redemption date of the Prior Bonds as set forth Schedule A, the Escrow Agent shall transfer an amount sufficient to pay the Refunding Requirements from the Escrow Fund to the Prior Bonds Trustee. Such amounts shall be applied by the Prior Bonds Trustee to the payment of the Refunding Requirements for the equal and ratable benefit of the holders of the Prior Bonds. Section 7. Verification. The Agency has caused schedules to be prepared relating to the sufficiency of the anticipated receipts from the Escrow Securities to pay the Refunding Requirements. The Agency shall furnish the Escrow Agent with the report of Grant Thornton LLP, verifying the mathematical accuracy of the computations contained in such schedules. Section 8. Compliance with A,-,reement and Prior Indenture. The Authority and the Agency hereby direct, and the Escrow Agent, in its capacities as escrow agent hereunder and as the Prior Bonds Trustee, hereby agrees that the Escrow Agent will take all the actions required to be taken by it hereunder, including the timely transfer of moneys for the payment of principal, interest and redemption premium with respect to the Prior Bonds, in order to effectuate this Agreement. The liability of the Escrow Agent for the payment of the Refunding Requirements, pursuant to this Section and, in its capacity as Prior Bonds Trustee, the Prior Indenture, shall be limited to the application, in accordance with this Agreement, of moneys and the Escrow Securities in the Escrow Fund (including interest earnings thereon, if any) available for the purposes of and in accordance with this Agreement. Section 9. Tax Covenant. Notwithstanding any other provision of this Agreement, the Authority and the Agency hereby covenant that no part of the proceeds of the Series 2006A Loan or of the moneys or funds held by the Escrow Agent hereunder shall be used, and that it shall not direct the Escrow Agent to use any of such moneys or funds at any time, directly or indirectly, in a manner that would cause any of the Series 2006A Bonds to be an "arbitrage bond" under Section 148 of the Code and the regulations of the Treasury Department thereunder proposed or in effect at the time of such use and applicable to obligations issued on the date of issuance of the Series 2006A Bonds. None of the Authority, the Agency nor the Escrow Agent shall, except as permitted by Sections 5 and 6, sell, transfer or otherwise dispose of the Escrow Securities, except that the Escrow Agent may effectuate the transfer of such Escrow Securities to a successor escrow agent in accordance with the provisions of Section 15 relating to the transfer of rights and property to successor escrow agents. Section 10. Notices. The Authority hereby instructs the Escrow Agent, in its capacity as the Prior Bonds Trustee, to mail to the registered owners of the Prior Bonds, as soon as practicable upon receipt of the deposit of moneys in the Escrow Fund pursuant to Section 4, a notice substantially in the form set forth in Exhibit A attached hereto. The Authority also hereby instructs the Escrow Agent, in its capacity as the Prior Bonds Trustee, to send redemption notices, at least 30 days but no more than 60 days before the redemption date set forth in Schedule A, to the registered owners of the Prior Bonds, the Securities Depositories and to one 116402. 1055\992127.3 4 or more Information Services (as defined in the Prior Indenture) in the form and manner prescribed by Section 2.02(e) of the Prior Indenture. The Escrow Agent shall provide copies of the notices described in this Section 10 to MBIA Insurance Corporation, the insurer of Prior Bonds. Section 11. Defeasance of Prior Bonds. The Agency and the Authority represent and agree that, concurrently with the initial deposit of the Escrow Securities pursuant to Section 5, (i) the Prior Bonds will no longer be deemed to be outstanding and unpaid within the meaning and with the effect expressed in the Prior Indenture, and (ii) the Prior Loan will no longer be deemed to be outstanding and unpaid within the meaning and with the effect expressed in the Prior Loan Agreement. Section 12. Nature of Lien. The trust hereby created shall be irrevocable and the holders of the Prior Bonds shall have an express lien on all moneys and Escrow Securities in the Escrow Fund, including the interest earnings thereon, until paid out, used and applied in accordance with this Agreement. Section 13. Amendments. This Agreement is made pursuant to and in furtherance of the Prior Indenture and the 2006 Loan Agreement and for the benefit of the Agency, the Authority and the holders from time to time of the Prior Bonds and it shall not be repealed, revoked, altered, amended or supplemented without the written consent of all such holders and the written consent of the Escrow Agent, the Authority and the Agency, provided, however, that the Agency, the Authority and the Escrow Agent may, without the consent of, or notice to, such holders, enter into such agreement supplemental to this Agreement as shall not materially adversely affect the rights of such holders and as shall not be inconsistent with the terms and provisions of this Agreement, for any one or more of the following purposes: (a) To cure any ambiguity or formal defect or omission in this Agreement; (b) To grant to, or confer upon, the Escrow Agent for the benefit of the holders of the Prior Bonds, any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Agent, (c) To transfer to the Escrow Agent and make subject to this Agreement additional funds, securities or properties, (d) To conform the Escrow Agreement to the provisions of any law or regulations governing the tax-exempt status of the Prior Bonds and the Series 2006A Bonds in order maintain their tax-exempt status, and (e) To make any other change determined by the Authority and the Agency to be not materially adverse to the holders of the Prior Bonds. The Escrow Agent shall be entitled to rely exclusively upon an unqualified opinion of nationally recognized bond counsel with respect to compliance with this Section, including the extent, if any, to which any change, modification or addition affects the rights of 116402. 1055\992127.3 5 the holders of the Prior Bonds, or that any instrument executed hereunder complies with the conditions and provisions of this Section. Section 14. Compensation of Escrow A,-,ent. In consideration of the services rendered by the Escrow Agent under this Agreement, the Agency agrees to and shall pay to the Escrow Agent its proper fees and expenses in accordance with the agreement therefor reached by the Escrow Agent and the Agency, including all reasonable expenses, charges, counsel fees and other disbursements incurred by it or by its attorneys, agents and employees in and about the performance of their powers and duties hereunder, from any moneys of the Agency lawfully available therefor and the Escrow Agent shall have no lien whatsoever upon any of the moneys or Escrow Securities in the Escrow Fund for the payment of such proper fees and expenses. Section 15. Resin(nation or Removal of Escrow A(-Yent, Ap_ pointment of Successor. The Escrow Agent at the time acting hereunder may at any time resign and be discharged from the trusts hereby created by giving written notice to the Agency, the Authority and the Prior Bonds Trustee (if different from the Escrow Agent) specifying the date when such resignation will take effect, but no such resignation shall take effect unless a successor Escrow Agent shall have been appointed by the holders of the Prior Bonds or by the Agency as hereinafter provided and such successor Escrow Agent shall have accepted such appointment, in which event such resignation shall take effect immediately upon the appointment and acceptance of a successor Escrow Agent. The Escrow Agent may be removed at any time by an instrument or concurrent instruments in writing, delivered to the Escrow Agent and to the Agency and the Authority and signed by the registered holders of a majority in principal amount of each series of the Prior Bonds. The Escrow Agent may also be removed at any time by the Agency with not less than 30 days' written notice to the Escrow Agent, the Authority, the Prior Bonds Trustee (if different from the Escrow Agent) and the registered holders of the Prior Bonds. In the event the Escrow Agent hereunder shall resign or be removed, or be dissolved, or shall be in the course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case the Escrow Agent shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor Escrow Agent may be appointed by the holders of a majority in principal amount of the Prior Bonds, by an instrument or concurrent instruments in writing, signed by such holders, or by their attorneys in fact, duly authorized in writing, provided, nevertheless, that in any such event, the Agency shall appoint a temporary Escrow Agent to fill such vacancy until a successor Escrow Agent shall be appointed by the holders of a majority in principal amount of each series of the Prior Bonds, and any such temporary Escrow Agent so appointed by the Agency shall immediately and without further act be superseded by the Escrow Agent so appointed by such holders. The Agency shall give written notice of any such appointment made by it to the Authority and the Prior Bonds Trustee. In the event that no appointment of a successor Escrow Agent or a temporary successor Escrow Agent shall have been made by such holders or the Agency pursuant to the foregoing provisions of this Section within 60 days after written notice of the removal or resignation of the Escrow Agent has been given to the Agency, the holder of any of the Prior Bonds or any retiring Escrow Agent may apply to any court of competent jurisdiction for the appointment of a successor Escrow Agent, and such court may thereupon, after such notice, if 116402. 1055\992127.3 6 any, as it shall deem proper, appoint a successor Escrow Agent. No successor Escrow Agent shall be appointed unless such successor Escrow Agent shall be a corporation with trust powers organized under the banking laws of the United States or any state, and shall have at the time of appointment capital and surplus of not less than $75,000,000. Every successor Escrow Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Agency, an instrument in writing accepting such appointment hereunder and thereupon such successor Escrow Agent without any further act, deed or conveyance, shall become fully vested with all the rights, immunities, powers, trusts, duties and obligations of its predecessor, but such predecessor shall, nevertheless, on the written request of such successor Escrow Agent or the Agency execute and deliver an instrument transferring to such successor Escrow Agent all the estates, properties, rights, powers and trusts of such predecessor hereunder, and every predecessor Escrow Agent shall deliver all securities and moneys held by it to its successor. Should any transfer, assignment or instrument in writing from the Agency be required by any successor Escrow Agent for more fully and certainly vesting in such successor Escrow Agent the estates, rights, powers and duties hereby vested or intended to be vested in the predecessor Escrow Agent, any such transfer, assignment and instrument in writing shall, on request, be executed, acknowledged and delivered by the Agency. Any entity into which the Escrow Agent, or any successor to it in the trusts created by this Agreement, may be merged or converted or with which it or any successor to it may be consolidated, or any entity resulting from any merger, conversion, consolidation or tax- free reorganization to which the Escrow Agent or any successor to it shall be a party, shall, if it meets the qualifications set forth in the fifth paragraph of this Section, and if it is otherwise satisfactory to the Agency, be the successor Escrow Agent under this Agreement without the execution or filing of any paper or any other act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 16. Limitation of Powers and Duties. The Escrow Agent shall have no power or duty to invest any funds held under this Agreement except as provided in Sections 5 and 6. The Escrow Agent shall have no power or duty to transfer or otherwise dispose of the moneys held hereunder except as provided in this Agreement. Section 17. Indemnification. To the extent permitted by law, the Agency hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Agent and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Agent at any time (whether or not also indemnified against the same by the Agency or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of 116402. 1055\992127.3 7 any securities to be purchased pursuant thereto, the retention of such securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Agreement, provided, however, that the Agency shall not be required to indemnify the Escrow Agent against the Escrow Agent's own negligence or willful misconduct or the negligence or willful misconduct of the Escrow Agent's employees. In no event shall the Authority, the Agency or the Escrow Agent be liable to any person by reason of the transactions contemplated hereby other than as set forth in this Section. The indemnities contained in this Section shall survive the termination of this Agreement and removal or resignation of the Escrow Agent. Section 18. Limitation of Liability. The Escrow Agent and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or any securities deposited therein, the purchase of the securities to be purchased pursuant hereto, the retention of such securities or the proceeds thereof, the sufficiency of the securities or any uninvested moneys held hereunder to accomplish the payment and redemption of the Prior Bonds, or any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Agreement or by reason of any non -negligent act, non -negligent omission or non -negligent error of the Escrow Agent made in good faith in the conduct of its duties. The recitals of fact contained in the Recitals of this Agreement shall be taken as the statements of the Agency or the Authority, and the Escrow Agent assumes no responsibility for the correctness thereof. The Escrow Agent makes no representation as to the sufficiency of the securities to be purchased pursuant hereto and any uninvested moneys to accomplish the payment and redemption of the Prior Bonds pursuant to the Prior Indenture or to the validity of this Agreement as to the Agency or the Authority and, except as otherwise provided herein, the Escrow Agent shall incur no liability in respect thereof. The Escrow Agent shall not be liable in connection with the performance of its duties under this Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Agent shall be determined by the express provisions of this Agreement. The Escrow Agent may consult with counsel, who may or may not be counsel to the Agency, and in reliance upon the written opinion or advice of such counsel shall have full authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of nationally recognized bond counsel) may be deemed to be conclusively established by a written certification of the Agency or the Authority, as applicable. Whenever the Escrow Agent shall deem it necessary or desirable that a matter specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of nationally recognized bond counsel be proved or established prior to taking, suffering, or omitting any such action, such matter may be established only by such a certificate or such an opinion. No provision of this Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties in accordance with this Agreement, or in the exercise of its rights or powers. 116402. 1055\992127.3 8 Section 19. Termination. This Agreement shall terminate when moneys have been transferred pursuant to Section 6 to the Prior Bonds Trustee sufficient to pay all Prior Bonds. Upon such termination, all moneys remaining in the Escrow Fund after payment of any amounts due the Escrow Agent hereunder shall be released to the Agency. Section 20. Governing( Law. This Agreement shall be governed by the law of the State of California. Section 21. Severability. If any one or more of the covenants or agreements provided in this Agreement on the part of the Agency, the Authority or the Escrow Agent to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. All the covenants, promises and agreements in this Agreement contained by or on behalf of the Agency, the Authority or the Escrow Agent shall bind and inure to the benefit of their respective successors and assigns, whether so expressed or not. Section 22. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. 116402. 1055\992127.3 9 (Isci•oir I)eI)osil cuid I)-usl Af,Ti-eelnenl) IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers and appointed or elected officials as of the date first written above. PALM DESERT FINANCING AUTHORITY Chief Administrative Officer PALM DESERT REDEVELOPMENT AGENCY Executive Director WELLS FARGO BANK, NATIONAL ASSOCIATION, as Escrow Agent M. Authorized Officer 116402. 1055\992127.3 10 SCHEDULE A REFUNDING REQUIREMENTS Redemption Redemption Escrow Date Principal Interest Premium Requirement August 1, 2006 $3,870,000 $ $ $ * Consists of the folloxN ing Prior Bonds to be paid or optionalIN redeemed on August I. 2006: MaturitN Date Interest Redemption (August 1) Principal Rate Price 2024 $ 80.000** 5.950`%o 100`%) 2024 2.410.000 5.950 101 2025 1.380.000 6.250 101 $3.870.000 scheduled 2006 mandatory sinking fund redemption P6402. 105 5\882127.3 Schedule A-1 SCHEDULE B ESCROW SECURITIES 116402. 1055\992127.3 Schedule 13-1 EXHIBIT A [FORM OF DEFEASANCE NOTICE] PALM DESERT FINANCING AUTHORITY Notice to the Holders of Palm Desert Financing Authority Tax Allocation Refunding Revenue Bonds (Project Area No. 2) Series 1995 CUSIP No. NOTICE IS HEREBY GIVEN on behalf of the Palm Desert Financing Authority (the "Authority"), that pursuant to Section 10.03 of the Indenture of Trust, dated as of June 1, 1995 (the "Indenture"), pertaining to the above -captioned Bonds, the lien of such Indenture has been discharged through the irrevocable deposit in escrow of cash and Federal Securities. DATED this day of , 2006 WELLS FARGO BANK, NATIONAL ASSOCIATION, as Escrow Agent 116402. 1055\992127.3 Exhibit A Jones Hall Draft 5/22/06 PRELIMINARY OFFICIAL STATEMENT DATED _____________, 2006 NEW ISSUE Senior Bonds Ratings (___ Insured): Moody’s: ___ FULL BOOK ENTRY S&P: ___ (See “RATINGS” herein) In the opinion of Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel, under existing law, the interest on the Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the tax covenants described herein, interest on the Bonds is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986, as amended, from the gross income of the owners thereof for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax. See, however, “CONCLUDING INFORMATION — Tax-Exempt Status of the Bonds” herein regarding certain other tax considerations. $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2) 2006 SERIES A $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE CAPITAL APPRECIA TION BONDS (PROJEC T AREA NO. 2) 2006 SERIES B $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2) 2006 SERIES C $__________ PALM DESERT FINANCING AUTHORITY SUBORDINATE TAX ALLOC ATION R EVENUE CAPITAL APPRECIATION BONDS (PROJEC T AREA NO. 2) 2006 SERIES D Dated: Date of Delivery Due: August 1, as shown on the inside cover hereof The captioned bonds (the “Series 2006A Bonds”, the “Series 2006B Bonds”, and the “Series 2006C Bonds”, and collectively, the “Senior Bonds”) will be issued by the Palm Desert Financing Authority (the “Authority”) under an Indenture of Trust, dated as of July 1, 2006 (the “Senior Indenture”), by and between the Authority and Wells Fargo Bank, National Association, Los Angeles, California as trustee for the Bonds (the “Trustee”). The captioned Series 2006D Bonds (the “Subordinate Bonds”, and together with the Senior Bonds, the “Bonds”) will be issued by the Authority under an Indenture of Trust, dated as of July 1, 2006 (the “Subordinate Indenture”), by and between the Authority and the Trustee. The proceeds of the Senior Bonds will be used to make three loans (together, the “Senior Loans”) to the Palm Desert Redevelopment Agency (the “Agency”) pursuant to a loan agreement, dated as of July 1, 2006 (the “Senior Loan Agreement”) by and among the Authority, the Agency and the Trustee. The proceeds of the Subordinate Bonds will be used to make a loan (the “Subordinate Loan”, and together with the Senior Loan, the “Loans”) to the Agency pursuant to a loan agreement, dated as of July 1, 2006 (the “Subordinate Loan Agreement”) by and among the Authority, the Agency and the Trustee. The Agency will use proceeds of the Loans to (i) refinance the Agency’s obligations under a loan agreement entered into in 1995, (ii) finance certain redevelopment activities within or of benefit to its Project Area No. 2 (the “Project Area”), (iii) make a deposit into a special escrow fund to be released to the Agency if and when certain conditions are met, and (iv) pay costs of issuance of the Bonds. The Series 2006A Bonds and the Series 2006C Bonds are being issued as Current Interest Bonds. The Series 2006B Bonds and the Series 2006D Bonds are being issued as Capital Appreciation Bonds. The Current Interest Bonds will be issued as fully registered instruments without coupons, in the denomination of $5,000 or any integral multiple thereof, in book-entry form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Interest on the Current Interest Bonds will be payable on August 1 and February 1 of each year (the “Interest Payment Dates”), commencing August 1, 2006. Purchasers will not receive physical certificates representing their interest in the Bonds. The Capital Appreciation Bonds are dated their date of delivery and accrete interest from such date, compounded semiannually on February 1 and August 1 of each year, commencing August 1, 2006. The Capital Appreciation Bonds will be issued in denominations of $5,000 Maturity Value or any integral multiple thereof. For so long as the Bonds are registered in the name of Cede & Co., all payments of principal and interest or Maturity Value on the Bonds will be made to DTC, which, in turn, is obligated to remit such principal and interest to DTC Participants (defined herein) for subsequent disbursement to the Beneficial Owners (defined herein) of the Bonds. See “THE BONDS — Book-Entry Only System” herein. The Bonds are subject to optional redemption and mandatory sinking fund redemption as described herein. The Series 2006C Bonds are also subject to extraordinary redemption from unreleased escrow funds, as described herein. The Senior Bonds are special obligations of the Authority payable from and secured by Revenues, as defined herein, consisting primarily of amounts payable by the Agency under the Senior Loan Agreements, and the Subordinate Bonds are special obligations of the Authority payable from and secured by Subordinate Revenues, as defined herein, consisting primarily of amounts payable by the Agency under the Subordinate Loan Agreement. The Senior Loan Agreement is secured by and payable from Tax Revenues, as defined herein, derived from the Project Area. The Subordinate Loan Agreement is secured by and payable from Subordinate Tax Revenues, as defined herein, which are Tax Revenues pledged on a subordinate basis to the Agency’s obligations under loan agreements entered into in 2002 and 2003, the Senior Loan Agreement, and any future obligations secured on a parity to such loan agreements. The Agency may issue, pursuant to the terms of the Senior Loan Agreement and the Senior Indenture, additional obligations secured by Tax Revenues on a parity with the Senior Loan (the “Senior Parity Debt”), or, pursuant to the terms of the Subordinate Loan Agreement and the Subordinate Indenture, additional obligations secured by Subordinate Tax Revenues on a parity with the Subordinate Loan (the “Subordinate Parity Debt”), . See “SECURITY FOR THE BONDS” herein. Payment of the principal of and interest on the Senior Bonds when due will be insured by a municipal bond insurance policy to be issued by __________________ simultaneously with the delivery of the Senior Bonds. See “SENIOR BONDS MUNICIPAL BOND INSURANCE” herein. The Subo rdinate Bonds are not insured. [INSURER LOGO] The Bonds are not a debt of the City of Palm Desert (the “City”) or of the State of California or any of its political subdivisions (other than the Authority), and are not a liability of the City, the State of California or any of its political subdivisions (other than the Authority). The Loans are not a debt of the Authority or of the State of California or any of its political subdivisions (other than the Agency), and neither the Authority nor the State of California nor any of its political subdivisions (other than the Agency) is liable therefor. Neither the Bonds nor the Loans constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The members of the Authority, the Agency or any persons executing the Bonds or the Loan Agreements are not personally liable with respect to the Bonds or Loans. In no event will the obligations of the Agency under the Loan Agreements be payable out of any funds or properties of the Agency other than Tax Revenues or Subordinate Tax Revenues (as the case may be) set forth in the applicable Loan Agreement. 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 and the Agency by Jones Hall, A Professional Law Corporation, San Francisco, California, as Disclosure Counsel. It is anticipated that the Bonds will be available for delivery in New York, New York through the facilities of DTC on or about ___________, 2006. CITIGROUP The date of this Official Statement is ______________, 2006. *Preliminary, subject to change. $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REFUNDING REVENUE BONDS (PROJEC T AREA NO. 2) 2006 SERIES A (CUSIP Base: ______________) Maturity Date (August 1) Principal Amount Interest Rate Yield CUSIP $____________ _______% Term Bond due August 1, _______, Yield _______% (CUSIP: _______) $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJEC T AREA NO. 2) 2006 SERIES B (CUSIP Base: ______________) Maturity Date (August 1) Principal Amount Interest Rate Yield CUSIP $____________ _______% Term Bond due August 1, _______, Yield _______% (CUSIP: _______) $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (PROJEC T AREA NO. 2) 2006 SERIES C (CUSIP Base: ______________) Maturity Date (August 1) Principal Amount Interest Rate Yield CUSIP $____________ _______% Term Bond due August 1, _______, Yield _______% (CUSIP: _______) $________________* PALM DESERT FINANCING AUTHORITY SUBORDINATE TAX ALLOCATION REVENUE BONDS CAPITAL APPRECIATION BONDS (PROJEC T AREA NO. 2) 2006 SERIES D (CUSIP Base: ______________) Maturity Date (August 1) Principal Amount Interest Rate Yield CUSIP $____________ _______% Term Bond due August 1, _______, Yield _______% (CUSIP: _______) PALM DESERT FINANCING AUTHORITY PALM DESERT REDEVELOPMENT AGENCY CITY OF PALM DESERT PALM DESERT FINANCING AUTHORITY COMMISSION MEMBERS AND STAFF James Ferguson, President Richard S. Kelly, Vice President Jean M. Benson, Commissioner Buford A. Crites, Commissioner Robert A. Spiegel, Commissioner Carlos L. Ortega, City Manager CITY COUNCIL/AGENCY MEMBERS James Ferguson, Mayor/Chairman Richard S. Kelly, Mayor Pro Tem/Vice Chairman Jean M. Benson, Councilmember/Member Buford A. Crites, Councilmember/Member Robert A. Spiegel, Councilmember/Member AGENCY STAFF Carlos L. Ortega, City Manager/Executive Director Stephen Aryan, Assistant to the City Manager Homer Croy, Assistant City Manager Development Services Justin McCarthy, Assistant City Manager/Redevelopment Sheila R. Gilligan, Assistant City Manager Community Services Paul S. Gibson, Finance Director/Treasurer David L. Yrigoyen, Director of Redevelopment/Housing Rachelle Klassen, City Clerk Arla K. Scott, Senior Financial Analyst Veronica Tapia, Redevelopment Accountant SPECIAL SERVICES Bond Counsel Richards, Watson & Gershon, A Professional Corporation Los Angeles, California Disclosure Counsel Jones Hall, A Professional Law Corporation San Francisco, California Financial Advisor Del Rio Advisors, LLC Modesto, California Fiscal Consultant Rosenow Spevacek Group Inc. Santa Ana, California Trustee Wells Fargo Bank, National Association Los Angeles, California GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Bonds and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the Agency in any press release and in any oral statement made with the approval of an authorized officer of the Agency or any other entity described or referenced in this Official Statement, the words or phrases “will likely result,” “are expected to”, “will continue”, “is anticipated”, “estimate”, “project,” “forecast”, “expect”, “intend” and similar expressions identify “forward looking statements.” Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any subsequent sale under any circumstances, give rise to any implication that there has been no change in the affairs of the Authority or the Agency or any other entity described or referenced herein since the date of this Official Statement. The information and expressions of opinions in this Official Statement are subject to change without notice and neither delivery of this Official Statement nor any subsequent sale shall, under any circumstances, create any implication that there has been no change in the affairs of the Agency any other entity described or referenced in this Official Statement since its date. All summaries of the documents referred to in this Official Statement 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. Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the Authority or the Agency to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained in this Official Statement and if given or made, such other information or representation must not be relied upon as having been authorized by the Authority, the Agency or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Involvement of Underwriter. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain 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. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the public offering prices set forth on the cover page hereof and said public offering prices may be changed from time to time by the Underwriter. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. i TABLE OF CONTENTS INTRODUCTION ................................................2 PLAN OF FINANCE ...........................................5 SOURCES AND USES OF FUNDS..................6 DEBT SERVICE SCHEDULES .........................8 THE BONDS .....................................................11 Description of the Bonds ..............................11 Redemption of the Bonds .............................12 SENIOR BONDS MUNICIPAL BOND INSURANCE .........................................15 SECURITY FOR THE BONDS ........................16 Revenues and Loan Agreement ..................16 Tax Allocation Financing ..............................17 Allocation of Taxes ........................................17 Tax Revenues and Subordinate Tax Revenues.......................................................18 Special Escrow Fund for Series 2006C Bonds .............................................................20 Pass-Through Agreements and Housing Set-Aside .......................................................21 Parity Debt and Existing Parity Lien ............22 Issuance of Additional Parity Debt ...............22 Issuance of Additional Subordinate Debt ....25 Reserve Funds ..............................................25 RISK FACTORS ...............................................26 Bonds Are Limited Obligations .....................26 Reduction of Tax Revenues .........................26 Reduction in Inflationary Rate ......................27 Concentration of Ownership .........................27 Assessment Appeals ....................................27 Proposition 8 Adjustments ............................28 Subordinate Nature of Series 2006B Bonds28 No Rating of Series 2006B Bonds ...............28 Development Risks .......................................29 Seismic Factors .............................................29 Flood Risk Considerations ...........................29 Levy and Collection.......................................29 State Budget; ERAF Shift .............................30 Assumptions an d Projections .......................30 Bankruptcy and Foreclosure ........................30 Loss of Tax Exemption on the Bonds ..........31 PROPERTY TAXATION IN CALIFORNIA ....................................................31 Constitutional Amendments Affecting Tax Revenues.......................................................31 Implementing Legislation .............................32 Constitutional Challenges to Property Tax System ...................................................32 Property Tax Collection Procedures ...........33 Supplemental Assessments ........................33 Tax Collection Fees .....................................33 Unitary Property Tax ....................................34 Business Inventory and Replacement Revenue ........................................................34 Proposition 8 .................................................34 Future Initiatives ...........................................35 THE PROJECT AREA .....................................35 Establishment of the Project Area ...............35 Limitations and Requirements of the Redevelopment Plan ....................................36 SB211............................................................37 SUBORDINATE TAX REVENUES .................37 Pass-Through Agreements ..........................38 Schedule of Historical Tax Revenues .........38 Top Ten Taxpayers ......................................41 Filing of Statement of Indebtedness ...........41 Housing Set-Aside Requirements ...............42 PALM DESERT FINANCING AUTHORITY ....................................................43 PALM DESERT REDEVELOPMENT AGENCY ..........................................................43 Authority and Management .........................43 Agency Powers.............................................45 Financial Information ....................................46 Redevelopment Project Areas.....................46 Pass-Through Agreements ..........................46 Regulatory Issues.........................................46 VERIFICATION OF MATHEMATICAL COMPUTATIONS .............46 CONCLUDING INFORMATION .....................47 Continuing Disclosure ..................................47 Underwriting ..................................................47 Legal Opinion................................................47 Tax-Exempt Status of the Bonds ................47 No Litigation ..................................................49 Ratings ..........................................................49 Miscellaneous ...............................................50 APPENDIX A - FISCAL CONSULTANT’S REPORT APPENDIX B - FORM OF OPINION OF BOND COUNSEL APPENDIX C - AGENCY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2005 APPENDIX D - CITY OF PALM DESERT GENERAL INFORMATION APPENDIX E - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS APPENDIX F - FORM OF MUNICIPAL BOND INSURANCE POLICY FOR SENIOR BONDS APPENDIX G - FORM OF CONTINUING DISCLOSURE AGREEMENT APPENDIX H - BOOK-ENTRY SYSTEM APPENDIX I - TABLES OF ACCRETED VALUES 1 OFFICIAL STATEMENT $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2) 2006 SERIES A $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 2) 2006 SERIES B $________________* PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2) 2006 SERIES C $__________ PALM DESERT FINANCING AUTHORITY SUBORDINATE TAX ALLOC ATION R EVENUE CAPITAL APPRECIATION BONDS (PROJEC T AREA NO. 2) 2006 SERIES D This Official Statement, including the cover page, is provided to furnish information in connection with the sale by the Palm Desert Financing Authority (the “Authority”) of: • $________________* aggregate principal amount of Palm Desert Financing Authority, Tax Allocation Refunding Revenue Bonds (Project Area No. 2) 2006 Series A (the “Series 2006A Bonds”), • $________________* aggregate principal amount of Palm Desert Financing Authority, Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2) 2006 Series B (the “Series 2006B Bonds”), • $________________* aggregate principal amount of Palm Desert Financing Authority, Tax Allocation Revenue Bonds (Project Area No. 2) 2006 Series B (the “Series 2006C Bonds”), and • $________________* aggregate principal amount of Palm Desert Financing Authority, Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2) 2006 Series D (the “Series 2006D Bonds”, or the “Subordinate Bonds”). *Preliminary, subject to change. The Series 2006A Bonds, the Series 2006B Bonds and the Series 2006C Bonds are collectively referred to as the “Senior Bonds”. For the definitions of certain capitalized terms used and not otherwise defined, see “APPENDIX E – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so 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. Definitions of 2 certain terms used herein and not defined herein have the meaning set forth in the Indenture. See “APPENDIX E – Summary of Principal Legal Documents." INTRODUCTION This Introduction contains a brief summary of certain information contained in this Official Statement. It is not intended to be complete and is qualified by the more detailed information contained elsewhere in this Official Statement. Authorization. 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 of Trust, dated as of July 1, 2006 (the “Indenture”), by and between the Authority and Wells Fargo Bank, National Association, as trustee thereunder (the “Trustee”). Use of Proceeds. The proceeds of each series of Senior Bonds will be used by the Authority to fund three loans (the “Series A Loan”, the “Series B Loan”, and the “Series C Loan”, and together, the “Senior Loans”) to the Palm Desert Redevelopment Agency (the “Agency”) pursuant to a Loan Agreement (the “Seni or Loan Agreement”), dated as of July 1, 2006 by and among the Authority, the Agency and the Trustee for the benefit of the Agency’s Project Area No. 2 (the “Project Area”). The proceeds of the Series A Loan will be used: • to refund the indebtedness of the Agency under a Loan Agreement dated as of June 1, 1995 (the "1995 Loan Agreement"); • to finance certain redevelopment activities within or of benefit to the Project Area; and • to pay costs of issuance of the Series 2006A Bonds (including the premium for a reserve fund surety bond). The proceeds of the Series B Loan will be used: • to finance certain redevelopment activities within or of benefit to the Project Area; and • to pay costs of issuance of the Series 2006B Bonds (including the premium for a reserve fund surety bond). The proceeds of the Series C Loan will be used: • to deposit funds into a special escrow fund, to be released to the Agency if and when certain conditions are met; and • to pay costs of issuing the Series 2006C Bonds (including the premium for a reserve fund surety bond). The refunding of the obligations under the 1995 Loan Agreement will effect a refunding of the Authority’s corresponding Subordinate Tax Allocation Refunding Revenue Bonds (Project Area No. 2), Series 1995 (the "1995 Bonds"). See “PLAN OF FINANCE — The 3 Redevelopment Project.” Proceeds of the Senior Bonds will also be used to establish a parity Reserve Fund (described herein) for the Senior Bonds and to pay costs of issuance. The proceeds of the Series 2006D Bonds will be used by the Authority to fund a loan (the “Subordinate Loan” to the Agency pursuant to a Loan Agreement (the “Subordinate Loan Agreement”), dated as of July 1, 2006 by and among the Authority, the Agency and the Trustee for the benefit of the Project Area. The proceeds of the Subordinate Loan will be used: • to finance certain redevelopment activities within or of benefit to the Project Area; and • to pay costs of issuance of the Series 2006D Bonds (including a reserve fund surety bond). Security. The Senior Bonds are special obligations of the Authority secured by a parity pledge of Revenues, as defined in the Senior Indenture and described herein, consisting primarily of the amounts paid by the Agency under the Senior Loan Agreement. The pledge of Revenues under the Senior Loan Agreement is on a parity with the Agency’s pledge of Revenues under loan agreements entered into in 2002 and 2003 (the “Prior Loan Agreements”, as described below. The Subordinate Bonds are special obligations of the Authority secured by a parity pledge of Subordinate Revenues, as defined in the Subordinate Indenture. The Subordinate Tax Revenues securing the Series D Bonds consist of the Tax Revenues remaining after payment of the Senior Loan and the Prior Loans. Amounts payable under each respective Loan Agreement are calculated to be sufficient to pay in full when due the principal of and interest and premium (if any) on the related Bonds. In California, the financing and refinancing of redevelopment projects may be provided by the issuance of tax allocation bonds. Such bonds are payable from property taxes collected within a redevelopment project area attributable to the increase in assessed valuation of property over the valuation as of the date of establishment of the project area, as explained in greater detail herein. Tax Revenues is defined in the Indenture and generally includes certain ad valorem property taxes attributable to increases in the assessed valuation of certain property (except public property and property exempt from taxation) in the Project Area (described herein) over that shown on the assessment rolls for the adjusted base year. Such taxes are eligible for allocation to the Agency pursuant to the Redevelopment Law in connection with the Project Area. The fiscal year 2005-06 total assessed value of the Project Area is approximately $1.5 billion, of which tax increment revenue is generated from the incremental assessed value of approximately $13.8 million, representing the excess of the value of the Project Area over the base year value of approximately $102 million. Tax Revenues and Subordinate Tax Revenues are more fully described under the caption “SECURITY FOR THE BONDS – Revenues and the Loan Agreements.” In addition to the 1995 Loan Agreement to be refunded, the Agency currently has outstanding its (i) Project Area No. 2, Loan Agreement, dated as of March 1, 2002 (the “Senior 2002 Loan Agreement”), by and among the Agency, the Authority and BNY Western Trust Company, as prior trustee (the “Prior Trustee”), and (ii) Project Area No. 2, Loan Agreement, dated as of July 1, 2003 (the “Senior 2003 Loan Agreement” and together with the Senior 2002 Loan Agreement, the “Prior Loan Agreements”), by and among the Agency, the Authority and the Prior Trustee. Each loan under the Prior Loan Agreements (the “Senior 2002 Loan” and “Senior 2003 Loan” and together, the “Prior Loans”) is secured by Tax Revenues on a parity with the pledge of Tax Revenues pledged to pay the Senior Loans and on senior 4 priority to the pledge of Subordinate Tax Revenues pledged to pay the Subordinate Loan. The Agency may, pursuant to the terms of the Senior Loan Agreement and the Senior Indenture, issue additional obligations secured by Tax Revenues on a parity with the Senior Loans and the Prior Loans, and may under the Prior Loan Agreements, issue additional obligations secured by Tax Revenues on a parity with the obligations under the Prior Loan Agreements. See “SECURITY FOR THE BONDS — Existing Parity Debt” and “-- Issuance of Additional Parity Debt” herein. In addition, the Agency may, pursuant to the terms of the Subordinate Loan Agreement and the Subordinate Indenture, issue additional obligations secured by Subordinate Tax Revenues on a parity with the Subordinate Loan. Payment of the principal of and interest on the Senior Bonds when due will be insured by a municipal bond insurance policy to be issued by _____________________ (the “Insurer”) simultaneously with the delivery of the Bonds. See “SENIOR BONDS MUNICIPAL BOND INSURANCE” herein. The Subordinate Bonds are not insured. The Project Area. The Agency’s Project Area No. 2 (the “Project Area”) consists of the territory described and defined as such in the Redevelopment Plan of the City of Palm Desert (the “City”) approved and adopted by the City by its Ordinance No. 509 on July 15, 1987. See “THE PROJECT AREA.” Risk Factors. Risks of investment in the Bonds include the possibility of future decreases in the taxable valuation in the Project Area or in the applicable tax rates, which could reduce the Tax Revenues allocated to the Agency and correspondingly could have an adverse impact on the ability of the Agency to pay debt service on the Bonds. See “RISK FACTORS” herein. The City. The City of Palm Desert (the “City”), is located in 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 was incorporated on November 26, 1973, as a general law city. In 1997 the City became a charter city. The estimated City population as of January 1, 2006 was approximately 49,539, The City occupies an area of 24.75 square miles. For certain information regarding the City, see “APPENDIX D - City of Palm Desert General Information.” The Bonds are not an obligation of the City. The Agency. The Agency is a redevelopment agency existing under the Community Redevelopment Law of the State of California (the “State”), constituting Part 1 of Division 24 (commencing with Section 33000) of the California Health and Safety Code, as amended (the “Redevelopment Law”). The Agency was established by ordinance of the City Council adopted in 1974. See “PALM DESERT REDEVELOPMENT AGENCY” below. Miscellaneous. There follows in this Official Statement, which includes the cover page and Appendices hereto, a brief description of the Bonds, the Indentures, the Loan Agreements, the Tax Revenues and Subordinate Tax Revenues, the Project Area, security for the Bonds, risk factors, limitations on Revenues and Subordinate Revenues and certain other information relevant to the issuance of the Bonds. All references herein to the Indentures are qualified in their entirety by reference to the definitive form thereof, and all references to the Bonds are further qualified by references to the information with respect thereto contained in the respective Indentures. A summary of certain provisions of the Indentures is included in APPENDIX E. The most recent audited financial statements of the Agency are included in APPENDIX C. The 5 information set forth herein and in the Appendices hereto has been furnished by the Agency and includes information which has been obtained from other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Underwriter. All capitalized terms used herein and not normally capitalized have the meanings assigned thereto in the Indenture, unless otherwise stated herein. The information and expressions of opinion herein speak only as of the date of this Official Statement and are subject to change without notice. Neither delivery of this Official Statement nor any sale made hereunder nor any future use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the Agency since the date hereof. All financial and other information presented in this Official Statement has been provided by the Agency or the City from their records, except for information expressly attributed to other sources. The presentation of information, including the table of receipts from tax increment revenues, is intended to show recent historic information and is not intended to indicate future or continuing trends in the financial or other affairs of the Agency or the City. No representation is made that past experience, as it might be shown by such financial and other information, will necessarily continue or be repeated in the future. PLAN OF FINANCE The proceeds of the Bonds will be used by the Authority to make the Loans to the Agency. A portion of the proceeds of the Series A Loan will be used to refund indebtedness of the Agency under the 1995 Loan Agreement, and proceeds of the Series A Loan, the Series B Loan and the Series D Loan will be used to finance certain redevelopment activities within or of benefit to the Project Area. The proceeds of the Series C Loan will be deposited into a special escrow fund, to be released to the Agency if and when certain conditions are met, whereupon the money released will be used to finance additional redevelopment activities. Upon receipt of payment for the Bonds on the date of their initial delivery, the Trustee is required to deposit the net proceeds of the Bonds into the Loan Funds created under the Indentures and disbursed by the Trustee pursuant to the respective Loan Agreements. The amounts in each Loan Fund are to be transferred by the Trustee pursuant to the Loan Agreement to the appropriate Project Fund, Escrow Fund, Special Escrow Fund and/or Costs of Issuance Fund. Proceeds of the Loans will also be used to establish a Reserve Fund (described herein) for each series of Bonds and to pay costs of issuance. Refunding of 1995 Loan. In 1997, the Authority issued its $4,090,000 original principal amount of Subordinate Tax Allocation Refunding Revenue Bonds (Project Area No. 2), Series 1995 (the "1995 Bonds"), of which $3,870,000 remain outstanding, for the purpose of funding a loan (the “1995 Loan”) to the Agency pursuant to a Loan Agreement dated as of June 1, 1995 (the "1995 Loan Agreement"). A portion of the proceeds of the Series A Loan will be used by the Agency to refund the 1995 Loan. The proceeds of the 1995 Loan were primarily used to finance certain redevelopment activities within or of benefit to the Project Area. The refunding of the obligations under the 1995 Loan Agreement will effect a refunding of the 1995 Bonds. The Agency and Wells Fargo Bank, National Association, as escrow bank (the “Escrow Agent”) will enter into an Escrow Agreement (the “Escrow Agreement”) dated as of July 1, 2006 under which the Escrow Agent will establish an Escrow Fund (the "Escrow Fund"), into which a portion of the Loan and other available funds held for the 1995 Bonds will be deposited 6 concurrent with the original delivery of the Bonds. Amounts in the Escrow Fund will be invested in certain United States Treasury securities, the principal of and interest on which, together with any uninvested cash therein, will be sufficient to pay and redeem, on August 1, 2006, the outstanding 1995 Bonds to be refunded. Sufficiency of the deposits and investment earnings for those purposes will be verified by Grant Thornton, Minneapolis, Minnesota. See “VERIFICATION OF MATHEMATICAL COMPUTATIONS” below. Amounts on deposit in the Escrow Fund are not available for payment of the Bonds or the Loan. New Money Component. Proceeds of the Loans deposited into the Project Fund are to be disbursed pursuant to the Loan Agreements from time to time by the Trustee for the purpose of paying any portion of the costs of the Agency for the redevelopment of the Project Area (the “Redevelopment Project”). The Agency anticipates using the proceeds of the Loans deposited into the Project Fund primarily for the financing of ____________________ in the City and include __________________________________________________. [to come from Agency – new money projects…] SOURCES AND USES OF FUNDS The estimated sources and uses of Bond proceeds is summarized as follows. All of the proceeds of each series of Bonds are used to fund the respective Loans. The uses of funds shown below represent the estimated use of the proceeds of the Series 2006A Bonds pursuant to the provisions of the Senior Loan Agreement. Sources: Principal amount of Series 2006A Bonds [Series 2006A Bonds Premium/Discount] Total Sources Uses: Deposit to Escrow Fund Deposit to Project Fund Series A Costs of Issuance* Total Uses ____________________ * Includes underwriters’ discount, municipal bond insurance premium and reserve fund surety bond premium, fees and expenses of Bonds Counsel and Disclosure Counsel, and any other expenses incurred in connection with the issuance of the Series 2006A Bonds and the making of the Series A Loan. 7 The uses of funds shown below represent the estimated use of the proceeds of the Series 2006B Bonds pursuant to the provisions of the Senior Loan Agreement. Sources: Principal amount of Series 2006B Bonds [Series 2006B Bonds Premium/Discount] Total Sources Uses: Deposit to Project Fund Series B Costs of Issuance* Total Uses ____________________ * Includes underwriters’ discount, municipal bond insurance premium and reserve fund surety bond premium, fees and expenses of Bonds Counsel and Disclosure Counsel, and any other expenses incurred in connection with the issuance of the Series 2006B Bonds and the making of the Series B Loan. The uses of funds shown below represent the estimated use of the proceeds of the Series 2006C Bonds pursuant to the provisions of the Senior Loan Agreement. Sources: Principal amount of Series 2006C Bonds [Series 2006C Bonds Premium/Discount] Total Sources Uses: Deposit to Special Escrow Fund Series C Costs of Issuance* Total Uses ____________________ * Includes underwriters’ discount, reserve fund surety bond premium, fees and expenses of Bonds Counsel and Disclosure Counsel, and any other expenses incurred in connection with the issuance of the Series 2006C Bonds and the making of the Series C Loan. The uses of funds shown below represent the estimated use of the proceeds of the Series 2006B Bonds pursuant to the provisions of the Subordinate Loan Agreement. Sources: Principal amount of Series 2006D Bonds [Series 2006D Bonds Premium/Discount] Total Sources Uses: Deposit to Project Fund Series D Costs of Issuance* Total Uses ____________________ * Includes underwriters’ discount, municipal bond insurance premium and reserve fund surety bond premium, fees and expenses of Bonds Counsel and Disclosure Counsel, and any other expenses incurred in connection with the issuance of the Series 2006D Bonds and the making of the Series D Loan. 8 DEBT SERVICE SCHEDULES Annual debt service for the Series 2006A Bonds is set forth below. Bond Year Ending August 1 Series A Principal Series A Interest Series A Total Annual debt service for the Series 2006B Bonds is set forth below. Bond Year Ending August 1 Series B Principal Series B Interest Series B Total 9 Annual debt service for the Series 2006C Bonds is set forth below. Bond Year Ending August 1 Series C Principal Series C Interest Series C Total Annual debt service for the Series 2006D Bonds is set forth below. Bond Year Ending August 1 Series D Principal Series D Interest Series D Total The following table shows the aggregate debt service for the Senior Bonds, the Prior Loans, and the Subordinate Bonds. 10 Bond Year Ending August 1 Series A Total Debt Service Series B Total Debt Service Series C Total Debt Service Parity Prior Loans Debt Service Total Senior Debt Service Subordinate Series D Debt Service 11 THE BONDS Description of the Bonds The Series 2006A Bonds and the Series 2006C Bonds will be issued as current interest bonds (the “Current Interest Bonds”). The Seri es 2006B Bonds and the Series 2006D Bonds will be issued as capital appreciation bonds (the “Capital Appreciation Bonds”). Current Interest Bonds. The Current Interest Bonds will be issued in the form of fully registered bonds without coupons and in the denomination of $5,000 or any integral multiple thereof. The Current Interest Bonds will be dated their date of initial delivery, and will bear interest at the rates per annum and will mature, subject to redemption provisions set forth below, on the dates and in the principal amounts, all as set forth on the inside front cover page hereof. The Current Interest Bonds will be issued only as one fully registered Bond for each maturity, in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), as registered owner of all Bonds. See “APPENDIX H - Book-Entry System.” Ownership may be changed only upon the registration books maintained by the Trustee as provided in the Indenture. The Authority may decide to discontinue use of the system of book- entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. Each Current Interest Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (i) it is authenticated during the period from the day after the Record Date for an Interest Payment Date to and including such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) it is authenticated on or prior to the Record Date for the first Interest Payment Date, in which event it shall bear interest from the date of delivery of the Bonds (the “Closing Date”); provided, however, that if, at the time of registration of any Current Interest Bond interest with respect to such Current Interest Bond is in default, such Current Interest Bond shall bear interest from the Interest Payment Date to which interest has been paid or made available for payment with respect to such Current Interest Bond. Interest on the Current Interest Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Registration Books as the Owner thereof as of the close business on the Record Date, such interest to be paid by check or draft of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owner at the address of such Owner as it appears on the Registration Books on such Record Date; provided, however, that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding Current Interest Bonds filed with the Trustee prior to any Record Date, interest on such Current Interest Bonds shall be paid to such Owner on each succeeding Interest Payment Date by wire transfer of immediately available funds to an account in the United States designated in such written request (unless and until such request has been revoked in writing). Principal of and premium, if any, on any Current Interest Bond shall be paid upon presentation and surrender thereof, at maturity or the prior redemption thereof, at the Trust Office. The principal of and interest and premium, if any, on the Current Interest Bonds shall be payable in lawful money of the United States of America. Capital Appreciation Bonds. The Capital Appreciation Bonds shall be issued in fully registered form in any denominations of Initial Principal Amount but shall reflect denominations of $5,000 Maturity Amount or any integral multiple thereof. No Capital Appreciation Bond shall 12 have more than one maturity date. The Capital Appreciation Bonds shall be dated the Closing Date, shall mature on August 1 in each of the years and in the Maturity Amounts set forth in the following schedule. The Capital Appreciation Bonds shall be delivered on the Closing Date in the aggregate Initial Principal Amounts set forth below. Interest on the Initial Principal Amount of the Capital Appreciation Bonds shall accrue and compound at the yield to their maturity set forth in “APPENDIX I – ACCRETED VALUE TABLES”. Interest on each Capital Appreciation Bond shall be compounded semi-annually at the yield set forth above from the Closing Date on each February 1 and August 1, commencing August 1, 2006, until maturity or earlier redemption thereof, computed using a year of 360 days of twelve 30-day months and shall be payable (i) at maturity as part of the Maturity Amount, or (ii) at redemption as part of the Accreted Value to the redemption date. The Maturity Amount, or the Accreted Value and redemption premium (if any), as applicable, with respect to any Capital Appreciation Bond shall be paid upon presentation and surrender thereof, at maturity or the prior redemption thereof, at the Trust Office, in lawful money of the United States of America The principal or redemption price, or Maturity Amounts of the Bonds will be payable at the maturity or earlier redemption upon presentation and surrender of the Bonds at the corporate trust office of the Trustee in Los Angeles, California and interest on the Current Interest Bonds will be payable by check or draft, mailed on the Interest Payment Date to each Owner of the Bonds (an “Owner”) as of the Record Date preceding such Interest Payment Date. While the Bonds are held in the book-entry only system of DTC, all such payments will be made to Cede & Co., as the registered Owner of the Bonds. Redemption of the Bonds Series 2006A Bonds Redemption From Optional Senior Loan Prepayments. Under the Senior Loan Agreement, the Agency is given the option to prepay principal installments of the Senior Loan. The Revenues derived from such prepayment shall be applied to the redemption of the Series 2006A Bonds, as a whole, or in part among maturities as designated in writing by the Authority and by lot within a maturity, in integral multiples of $5,000 principal amount, on any Interest Payment Date on or after August 1, 20__, at the following respective redemption prices (expressed as percentages of the principal amount of the Series 2006A Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price August 1, 20__ and February 1, 20__ August 1, 20__ and February 1, 20__ August 1, 20__ and thereafter Series 2006A Bonds Mandatory Sinking Fund Redemption. The Series 2006A Bonds due August 1, 20_ and August 1, 20_ shall be subject to mandatory redemption by lot, on August 1 in each year as shown on the tables below, from sinking fund payments made by the Authority, at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest to the date of redemption as shown in the following table; provided, however, that (i) in lieu of redemption thereof on August 1 in any year, such Series 2006A Bonds may be purchased by the Agency pursuant to the Loan Agreement and tendered to the Trustee for cancellation not later than the preceding May 15, and (ii) if some but not all of such Series 2006A Bonds have been redeemed pursuant to the paragraph above entitled “Redemption From Optional Loan Prepayments,” the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of such Series 2006A Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis. 13 Term Series 2006A Bonds Due August 1, 20____ Sinking Fund Redemption Date (August 1) Principal Amount to be Redeemed or Purchased Term Series 2006A Bonds Due August 1, 20____ Sinking Fund Redemption Date (August 1) Principal Amount to be Redeemed or Purchased Series 2006B Bonds Redemption From Optional Series B Loan Prepayments. Under the Series B Loan Agreement, the Agency is given the option to prepay principal installments of the Series B Loan. The Revenues derived from such prepayment shall be applied to the redemption of the Series 2006B Bonds, as a whole, or in part among maturities as designated in writing by the Authority and by lot within a maturity, in integral multiples of Five Thousand Dollars ($5,000) Maturity Amount, on any February 1or August 1 on or after August 1, 20__, at the following respective redemption prices (expressed as percentages of the Accreted Value of the called Series 2006B Bonds on the date fixed for redemption: Redemption Dates Redemption Price August 1, 20__ and February 1, 20__ 102% August 1, 20__ and February 1, 20__ 101 August 1, 20__ and thereafter 100 No Series 2006B Bonds Mandatory Sinking Fund Redemption. The Series 2006B Bonds are not subject to mandatory sinking fund redemption prior to maturity. Series 2006C Bonds Redemption From Optional Series C Loan Prepayments. Under the Series C Loan Agreement, the Agency is given the option to prepay principal installments of the Series C Loan. The Revenues derived from such prepayment shall be applied to the redemption of the Series 2006C Bonds, as a whole, or in part among maturities as designated in writing by the Authority and by lot within a maturity, in integral multiples of $5,000 principal amount, on any Interest Payment Date on or after August 1, 20__, at the following respective redemption prices (expressed as percentages of the principal amount of the Series 2006C Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price August 1, 20__ and February 1, 20__ 102% August 1, 20__ and February 1, 20__ 101 August 1, 20__ and thereafter 100 Series 2006C Bonds Mandatory Sinking Fund Redemption. The Series 2006C Bonds due August 1, 20_ and August 1, 20_ shall be subject to mandatory redemption by lot, on August 1 in each year as shown on the tables below, from sinking fund payments made by the Authority, at a redemption price equal to the principal amount thereof to be redeemed, without 14 premium, plus accrued interest to the date of redemption as shown in the following table; provided, however, that (i) in lieu of redemption thereof on August 1 in any year, such Series 2006C Bonds may be purchased by the Agency pursuant to the Loan Agreement and tendered to the Trustee for cancellation not later than the preceding May 15, and (ii) if some but not all of such Series 2006C Bonds have been redeemed pursuant to the paragraph above entitled “Redemption From Optional Loan Prepayments,” the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of such Series 2006C Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis. Term Series 2006C Bonds Due August 1, 20____ Sinking Fund Redemption Date (August 1) Principal Amount to be Redeemed or Purchased Term Series 2006C Bonds Due August 1, 20____ Sinking Fund Redemption Date (August 1) Principal Amount to be Redeemed or Purchased Extraordinary Redemption From Unreleased Special Escrow Fund. The Series 2006C Bonds are subject to extraordinary redemption in whole or in part among maturities and by lot within each maturity as designated in writing by the Authority from amounts transferred from the Special Escrow Fund to the Principal Account for such purpose pursuant to the Senior Loan Agreement, on August 1, ____, at a redemption price equal to ____% of the principal amount thereof to be redeemed, together with the accrued interest thereof to the redemption date. Notice of Redemption. The Trustee on behalf and at the expense of the Authority will mail (by first class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, and to the Securities Depositories and to one or more Information Services, at least 30 but not more than 60 days prior to the date fixed for redemption; provided, however, that neither failure to receive any such notice so mailed nor any defect therein will affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice will state the date of the notice, the redemption date, the redemption place and the redemption price and will designate the CUSIP numbers, the series designation, the Bond numbers (but only if less than all of the Outstanding Bonds of each series are to be redeemed) and the maturity or maturities (in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds of such series to be redeemed, and will require that such Bonds be then surrendered at the trust office of the Trustee for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. Partial Redemption of Bonds. I n the ev ent only a portion of any Bond is called for redemption, then upon surrender of such Bond the Authority shall execute and the Trustee shall 15 authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same series, tenor and maturity date, of authorized denominations in aggregate Principal Amount or Maturity Amount, as the case may be, equal to the unredeemed portion of the Bond to be redeemed. Selection of Bonds for Redemption. Whenever provision is made in the Indenture for less than all of the Bonds of a series of any maturity to be redeemed, the Trustee will select the Bonds of such series and maturity to be redeemed from all Bonds not previously called for redemption, by lot in any manner which the Trustee in its sole discretion shall deem appropriate under the circumstances. For purposes of such selection, all Bonds will be deemed to be comprised of separate $5,000 portions and such portions will be treated as separate bonds which may be separately redeemed. Effect of Redemption. From and after the date fixed for redemption, if notice of redemption shall have been duly mailed and funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption shall have been duly provided, such Bonds so called shall cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price, and no interest shall accrue thereon from and after the redemption date specified in such notice. SENIOR BONDS MUNICIPAL BOND INSURANCE The information relating to the Insurer set forth in this section entitled “SENIOR BONDS MUNICIPAL BOND INSURANCE,” and the specimen Insurance Policy set forth in Appendix F hereto, has been furnished by the Insurer. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. The Subordinate Bonds are not insured. [to come from Insurer…] 16 SECURITY FOR THE BONDS Revenues and Loan Agreement Senior Bonds. The Senior Bonds are secured by a first lien on and pledge of the Revenues, which are defined in the Senior Indenture to include (i) all amounts payable by the Agency as payments or prepayments for the respective Senior Loans pursuant to the Senior Loan Agreement; (ii) any proceeds of the Senior Bonds originally deposited with the Trustee and all moneys deposited and held from time to time in the funds and accounts established under the Senior Indenture; and (iii) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under the Senior Indenture, other than amounts payable to the United States of America pursuant to the tax covenants contained in the Senior Indenture. The primary security for the Senior Bonds, therefore, consists of amounts payable by the Agency under the Senior Loan Agreement, amounts held in the Reserve Fund and amounts held by the Trustee under the Senior Indenture. The Senior Loans are secured by a parity (to the Prior Loans, plus any future obligations secured by a parity pledge of Tax Revenues) pledge of and lien on the Tax Revenues, as more fully described under “SECURITY FOR THE BONDS — Tax Revenues.” The Agency may, pursuant to the terms of the Senior Loan Agreement and the Senior Indenture, issue additional obligations secured by Tax Revenues on a parity with the Senior Loan. See “SECURITY FOR THE BONDS — Issuance of Additional Parity Debt.” Subordinate Bonds. The Subordinate Bonds are secured by a first lien on and pledge of the Subordinate Revenues, which are defined in the Subordinate Indenture to include (i) all amounts payable by the Agency as payments or prepayments for the Subordinate Loan pursuant to the Subordinate Loan Agreement; (ii) any proceeds of the Subordinate Bonds originally deposited with the Trustee and all moneys deposited and held from time to time in the funds and accounts established under the Subordinate Indenture; and (iii) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under the Subordinate Indenture, other than amounts payable to the United States of America pursuant to the tax covenants contained in the Subordinate Indenture. The primary security for the Subordinate Bonds, therefore, consists of amounts payable by the Agency under the Subordinate Loan Agreement, amounts held in the Reserve Fund and amounts held by the Trustee under the Subordinate Indenture. The Subordinate Loan defines “Subordinate Tax Revenues” as, for any period of time, the Tax Revenues for such period, less the Senior Debt Service payable during such period, where “Senior Debt Service” generally means all payments due on the Senior Bonds and the Parity Loans, and any other loans, bonds, notes, advances, or indebtedness payable from Tax Revenues which rank senior to the Subordinate Loan. The Subordinate Loan is secured by a subordinate (to the Senior Bonds, the Prior Loans, plus any future obligations secured by a parity pledge of Tax Revenues) pledge of and lien on the Tax Revenues, as more fully described under “SECURITY FOR THE BONDS — Tax Revenues.” The Agency may, pursuant to the terms of the Subordinate Loan Agreement and the Subordinate Indenture, issue additional obligations secured by Subordinate Tax Revenues on a parity with the Subordinate Loan. See “SECURITY FOR THE BONDS — Issuance of Additional Parity Debt.” 17 Tax Allocation Financing The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a project area. The taxable valuation of a project area last equalized prior to adoption of the redevelopment plan, or base roll, is established. Thereafter, except for any period during which the taxable valuation drops below the base roll, the state and local governments for the benefit of which taxes are levied and collected on property within the project area receive the taxes produced by the levy of the then current tax rate upon the base roll. Taxes collected upon any increase in taxable valuation over the base roll are allocated to a redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies themselves have no authority to levy property taxes and must look specifically to the allocation of taxes produced as above indicated. Further, the Redevelopment Law requires that certain amounts of tax increment be used by a redevelopment agency for low and moderate income housing projects, and places certain limits on the tax increment which a redevelopment agency is authorized to receive. See “TAX REVENUES — Housing Set-Aside Requirements” and “THE PROJECT AREA — Limitations and Requirements of the Redevelopment Plan” herein. Allocation of Taxes As provided in the Redevelopment Plan, and pursuant to Article 6 of Chapter 6 of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State of California, taxes levied upon taxable property in the Project Area, each year by or for the benefit of the State of California and any city, county, city and county, district or other public corporation (herein collectively referred to as “taxing agencies”) for fiscal years beginning after the effective date of the Project Area, are divided as follows: (1) To Taxing Agencies: That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of said taxing agencies upon the total sum of the assessed value of the taxable property in the Project Area, as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to the effective date of the ordinance approving the Redevelopment Plan shall be allocated to, and when collected shall be paid into, the funds of the respective taxing agencies as taxes by or for said taxing agencies on all other property are paid; and (2) To the Agency: Except for taxes which are attributable to a tax rate levy by a taxing agency for the purpose of producing revenues to repay bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989, which shall be allocated to and when collected shall be paid to such taxing agency, that portion of said levied taxes each year in excess of the amounts provided for in (1) above, shall be allocated to, and when collected shall be paid into, a special fund of the Agency to pay the principal of and interest on bonds, loans, moneys advanced to, or indebtedness (whether funded, refunded, assumed, or otherwise) incurred by the Agency to finance or refinance, in whole or in part, the Project Area. Unless and until the total assessed valuation of the taxable property in the Project Area exceeds the total assessed value of the taxable property in the Project Area as shown by the last equalized assessment roll referred to in paragraph (1) above, all of the taxes levied and collected upon the taxable property in the Project Area, shall be paid into the funds of the respective taxing agencies. When said bonds, loans, advances, and indebtedness, if any, and interest thereon, have been paid, all moneys thereafter received from taxes upon the taxable property in the Project Area, shall be paid into the funds of the respective taxing agencies as taxes on all other property are paid. 18 The Agency is authorized to make pledges of the portion of taxes allocated to it as described in paragraph (2) above to repay specific advances, loans and indebtedness as appropriate in carrying out the Redevelopment Plan. Teeter Plan In 1949, the California Legislature enacted an alternative method for the distribution of secured property taxes to local agencies. This method, known as the Teeter Plan, is now set forth in Sections 4701-4717 of the California Revenue and Taxation Code. Upon adoption and implementation of this method by a county board of supervisors, local agencies for which the county acts as “bank” and certain other public agencies and taxing areas located in the county receive annually the full amount of their share of property taxes on the secured roll, including delinquent property taxes which have yet to be collected. While the county bears the risk of loss on delinquent taxes which go unpaid, it also benefits from the penalties associated with these delinquent taxes when they are paid. In turn, the Teeter Plan provides participating local agencies with stable cash flow and the elimination of collection risk. To implement a Teeter Plan, the board of supervisors of a county generally must elect to do so by July 15 of the fiscal year in which it is to apply. As a separate election, a county may elect to have the Teeter Plan procedures also apply to assessments on the secured roll. The Board of Supervisors of Riverside County adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan") in 1993-94, and the City is a participant under the Teeter Plan. Once adopted, a county’s Teeter Plan will remain in effect in perpetuity unless the board of supervisors orders its discontinuance or unless, prior to the commencement of a fiscal year, a petition for discontinuance is received and joined in by resolutions of the governing bodies of not less than two-thirds of the participating districts in the county. An electing county may, however, opt to discontinue the Teeter Plan with respect to any levying agency in the county if the board of supervisors, by action taken not later than July 15 of a fiscal year, elects to discontinue the procedure with respect to such levying agency and the rate of secured tax delinquencies in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll by that agency. Upon making a Teeter Plan election, a county must initially provide a participating local agency with 95% of the estimated amount of the then-accumulated tax delinquencies (excluding penalties) for that agency. After the initial distribution, each participating local agency receives annually 100% of the secured property tax levies to which it is otherwise entitled, regardless of whether the county has actually collected the levies. If any tax or assessment which was distributed to a Teeter Plan participant is subsequently changed by correction, cancellation or refund, a pro rata adjustment for the amount of the change is made on the records of the treasurer and auditor of the county. Such adjustment for a decrease in the tax or assessment is treated by the County as an interest-free offset against future advances of tax levies under the Teeter Plan. Tax Revenues and Subordinate Tax Revenues Tax Revenues Pledged to Senior Bonds. The “Tax Revenues” which the Agency has pledged, on a parity (to the Prior Loans, plus any future obligations secured by a parity pledge of Tax Revenues) basis, to the payment of the Senior Loans are defined in the Senior Loan Agreement as that portion of the taxes levied upon taxable property in the Project Area, 19 allocated and paid into a special fund of the Agency (the “Special Fund”), pursuant to Article 6 of Chapter 6 of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State, exclusive of (i) amounts placed into the Low and Moderate Income Housing Fund of the Agency pursuant to Sections 33334.2 and 33334.3 of the Redevelopment Law, and (ii) amounts payable to affected taxing agencies pursuant to the Pass-Through Agreements (hereinafter described), or pursuant to sections 33607.5 and 33607.7 of the Redevelopment Law. See “SECURITY FOR THE BONDS — Pass-Through Agreements and Housing Set-Aside” and “APPENDIX A — Fiscal Consultant’s Report.” Tax Revenues Pledged to Subordinate Bonds. The pledge for payment of the Subordinate Loan is of “Subordinate Tax Revenues” which is defined as Tax Revenues available after payment of “Senior Debt Service.” Senior Debt Service is defined in the Loan Agreement as, for any period of time, the sum of (i) the amount of interest payable during such period on all outstanding Senior Debt, assuming that principal thereof is paid as scheduled and that any mandatory sinking fund payments are made as scheduled, (ii) the amount of principal payable during such period on all outstanding Senior Debt, including any principal required to be prepaid by operation of mandatory sinking fund payments, and (iii) amounts, if any, required to be deposited in the debt service reserve funds maintained under the Senior Debt Instruments (as defined in the Subordinate Loan Agreement) or paid to the issuers of surety bonds (or other qualified reserve fund instruments) deposited in the reserve fund relating to any Senior Debt in lieu of cash pursuant to the agreements between the Agency and such issuers. The Senior Loans, together with the Prior Loans and all Parity Debt, shall be equally secured by a first pledge of and lien on all of the Tax Revenues and all of the moneys on deposit in the Special Fund, without preference or priority for series, issue, number, dated date, sale date, date of execution or date of delivery. Except for the Tax Revenues and other funds pledged under the Senior Loan Agreement, no funds or properties of the Agency shall be pledged to, or otherwise liable for, the payment of principal of or interest on or prepayment premium, if any, on the Senior Loans In connection with the Prior Loans, the Agency has established a “Special Fund,” which is and will continue to be held by the Agency as a separate fund apart from all other funds and accounts of the Agency. The Agency is required to deposit all Tax Revenues in the Special Fund promptly upon the receipt thereof. Except as may be otherwise provided in any Parity Debt Instrument, any Tax Revenues received during the Bond Year in excess of amounts required to be transferred to the Trustee to meet the Agency’s obligations with regard to the Senior Loans and Prior Loans (as well as any future Parity Debt) shall be released from the pledge and lien for such obligations and may be used for any lawful purposes of the Agency. Prior to the payment in full of the principal of and interest and prepayment premium, if any, on the Loans and all Parity Debt and the payment in full of all other amounts payable under the Senior Loan Agreement and any Parity Debt Instrument, the Agency shall not have any beneficial right or interest in the moneys on deposit in the Special Fund, except only as provided in the Senior Loan Agreement and any Parity Debt Instrument. In addition to the transfers required to be made pursuant to any Parity Debt Instrument, the Agency will withdraw from the Special Fund and transfer to the Trustee the following amounts at the following times and in the following order of priority: (a) Interest and Principal Deposits. No l ater than the fifth Business Day preceding each date on which the principal of or interest on the Loans or any Parity Debt shall become due and payable, including but not limited to the principal amounts of the Loans to be prepaid 20 together with any prepayment premium thereon, the Agency shall withdraw from the Special Fund and transfer to the Trustee an amount which, together with the amounts then held on deposit in the Interest Account, the Principal Account and the Revenue Fund, is equal to the aggregate amount of such principal, interest and prepayment premium. (b) Reserve Fund Deposits. In the event that the Trustee shall notify the Agency that the amount on deposit in the Reserve Fund is less than the Reserve Requirement, the Agency shall immediately withdraw from the Special Fund and transfer to the Trustee for deposit in the Reserve Fund an amount of money necessary to maintain the Reserve Requirement in the Reserve Fund (including repayment of any draw made under a Qualified Reserve Fund Credit Instrument, including the Surety Bond, prior to replenishing any cash in the Reserve Fund). (c) Surplus. All Tax Revenues which are received by the Agency during any Bond Year in excess of the amounts required to be deposited in the Special Fund in such Bond Year pursuant to the Senior Loan Agreement shall be released from the pledge and lien thereof. In the event that for any reason whatsoever any amounts shall remain on deposit in the Special Fund on any August 2 after making all of the transfers theretofore required to be made pursuant to the preceding Paragraphs (a) and (b) and pursuant to any Parity Debt Instrument, the Agency may withdraw such amounts from the Special Fund, to be used for any lawful purposes of the Agency, including but not limited to the payment of the Subordinate Loan any other Subordinate Debt. The Agency has no power to levy and collect property taxes, and any property tax limitation, Legislative measure, voter initiative or provisions of additional sources of income to taxing agencies having the effect of reducing the property tax rate, could reduce the amount of Tax Revenues that would otherwise be available to pay a Loan and, consequently, the principal of, and interest on, the related Bonds. Likewise, broadened property tax exemptions could have a similar effect. See “RISK FACTORS” herein. For information on Tax Revenues and Subordinate Tax Revenues available for payment of the Loans, see “TAX REVENUES” below. THE BONDS ARE NOT A DEBT OF THE CITY OF PALM DESERT, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AUTHORITY), AND NEITHER THE CITY NOR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AUTHORITY) IS LIABLE THEREON. NEITHER THE AUTHORITY NOR THE AGENCY HAS ANY TAXING POWER. THE BONDS ARE REVENUE BONDS, PAYABLE EXCLUSIVELY FROM THE REVENUES AND OTHER FUNDS AS PROVIDED IN THE INDENTURE, INCLUDING PAYMENTS TO BE MADE BY THE AGENCY UNDER THE LOAN AGREEMENT. THE OBLIGATIONS OF THE AGENCY UNDER THE LOAN AGREEMENTS AND ANY PARITY DEBT OF THE AGENCY ARE PAYABLE SOLELY FROM TAX REVENUES OR SUBORDINATE TAX REVENUES ALLOCATED TO THE AGENCY FROM THE PROJECT AREA. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION. Special Escrow Fund for Series 2006C Bonds There is established under the Senior Loan Agreement a separate fund to be known as the “Special Escrow Fund,” and an account therein to be known as the “Escrow Interest Account” which shall be held by the Trustee in trust. On the Closing Date, the Trustee shall transfer money from the Series 2006C Loan Fund to the Escrow Interest Account and the Special Escrow Fund in accordance with the Senior Loan Agreement. Amounts in the Special 21 Escrow Fund and the Escrow Interest Account shall be applied as follows (for certain defined terms, see Appendix E): (a) On each Interest Payment Date, the Trustee shall transfer from the Escrow Interest Account to the Interest Account, an amount equal to the interest payable on such date with respect to the Deemed Escrow Portion of the Series 2006C Bonds (where, generally, the “Deemed Escrow Portion” is the aggregate principal balance of Series 2006C Bonds in the Special Escrow Fund). (b) On or before [January] 1 of each year up to and including [January] 1, 20[09], the Agency shall file with the Trustee a Certificate accompanied by a Report of an Independent Redevelopment Consultant which identifies (i) the amounts, if any, proposed to be released from the Special Escrow Fund and the Escrow Interest Account, and (ii) the Reserve Requirement which results from such release. If an amount is proposed to be released from the Special Escrow Fund, such Report shall conclude that the amount of Tax Revenues received or to be received for the then current Fiscal Year, as set forth in a Certificate of the Agency, based on assessed valuation of property in the Project Area, as evidenced in the records of the County, plus at the option of the Agency the Additional Revenue, shall be at least equal to 120 percent of the amount of the Maximum Annual Debt Service identified in such Report. The Agency’s Certificate shall also be accompanied by a schedule showing that the balance remaining in the Escrow Interest Account [plus the anticipated interest earnings thereon] will be sufficient to pay interest on the Deemed Escrow Portion of the Series 2006C Bonds after the proposed transfer on each future Interest Payment Date to and including the Escrow Redemption Date. Promptly following receipt of any such Report, the Trustee shall withdraw from the Special Escrow Fund and the Escrow Interest Account the amounts identified in such Report and (subject to the provisions of Paragraph (c) below) transfer such amount as follows: (1) The Trustee shall deposit into the Reserve Fund an amount required to cause the balance therein to equal the Reserve Requirement; (2) The Trustee shall transfer the amount indicated in the Agency’s Certificate to the Interest Account; and (3) The Trustee shall transfer the remainder of such amounts to the Agency for deposit in the Project Fund. (c) On [June 1, 2009], the Trustee shall (i) transfer amounts then on deposit in the Special Escrow Fund to the Principal Account, to be applied to the extraordinary redemption of the largest principal amount of Series 2006C Bonds which can be called pursuant to the Indenture, and (ii) transfer amounts then on deposit in the Escrow Interest Account to the Interest Account, to be applied to pay accrued interest on the Series 2006C Bonds being redeemed pursuant to the Indenture on Escrow Redemption Date. If the balance in the Special Escrow Fund exceeds the amount required to call and redeem all Outstanding Series 2006C Bonds, such excess shall be transferred to the Agency for deposit in the Project Fund. Notwithstanding the foregoing, if the balance in the Special Escrow Fund on [June 1, 2009] is less than $5,000, then the Trustee shall transfer all of such balance to the Project Fund and transfer all remaining money in the Special Interest Account to the Interest Account. Pass-Through Agreements and Housing Set-Aside Pass-Through Agreements. The Agency has entered into several agreements (the “Pass-Through Agreements”) in connection with the Project Area, whereby portions of the tax increment revenues which would otherwise be received by the Agency as described above are 22 paid to certain other taxing entities. Amounts paid under the Pass-Through Agreements are not Tax Revenues and, therefore, are not pledged to secure the Loans. See “TAX REVENUES — Projected Taxable Valuation and Tax Revenues” herein, and see “APPENDIX A — Fiscal Consultant’s Report” for a description of the Pass-Through Agreements. Statutory Pass-Throughs. Certain provisions were added to the Redevelopment Law by the adoption of AB 1290 in 1994. Under Section 33607.5 of the Law, any new project area formed after 1994 is required to share in tax increment revenues generated pursuant to a statutory formula (“Statutory Tax Sharing”). Although the Project Area has existing tax-sharing agreements with the majority of its taxing agencies there are an additional 10 agencies without agreements. Commencing in fiscal year 2008-09, the Agency will begin making payments to these agencies pursuant to Section 33607.7 of the Redevelopment Law. The projections prepared by the Fiscal Consultant incorporated those expected payments. Housing Set-Aside. Excluded from the Tax Revenues are those amounts received by the Agency and placed into the Low and Moderate Income Housing Fund of the Agency pursuant to Sections 33334.2 and 33334.3 of the Redevelopment Law (the “Housing Set- Aside”). For a discussion of Housing Set-Aside requirements, see “TAX REVENUES — Housing Set-As ide Requirements.” Parity Debt and Existing Parity Lien The Agency’s obligations on the Senior Loans are repayable on a parity with the Prior Loans, as well as possible future Parity Debt, which consists of any indebtedness payable from Tax Revenues on a parity with the Senior Loans. The Senior 2002 Loan is currently outstanding in the aggregate principal amount of $_____________ and the Senior 2003 Loan is currently outstanding in the aggregate principal amount of $_____________. See “DEBT SERVICE SCHEDULES” herein for the scheduled payments due on the Prior Loans. Other than the Senior Loans, the Senior 2002 Loan and the Senior 2003 Loan, there is currently no existing senior Parity Debt. In addition, the Agency’s obligations on the Subordinate Loan is repayable on a parity with possible future Parity Subordinate Debt, which consists of any indebtedness payable from Subordinate Tax Revenues on a parity with the Subordinate Loan which includes Subordinate Parity Debt issued in the future. See “TAX REVENUES - Projected Taxable Valuation and Tax Revenue” herein. See “SECURITY FOR THE BONDS — Issuance of Additional Parity Debt.” Issuance of Additional Parity Debt The Authority has covenanted in each of the Indentures that except for the Bonds, it will not incur any other indebtedness payable out of Revenues (where “Revenues” are the amounts payable to the Authority under the respective Loan Agreements). So long as the Senior 2002 Loan or the Senior 2003 Loan remains outstanding, any additional Parity Debt must also meet the requirements thereunder for issuance of additional Parity Debt. The Agency has covenanted in the Senior Loan Agreement that it will not incur any indebtedness which is payable from all or any part of the Tax Revenues, other than: (i) the Senior Loans; (ii) additional Parity Debt subject to the conditions described below; and (iii) any debt secured by a pledge of Tax Revenues which is subordinate to the pledge of Tax Revenues created by the Senior Loan Agreement. Similarly, the Agency has covenanted in the Subordinate Loan Agreement that it will not incur any indebtedness which is payable from all or 23 any part of the Subordinate Tax Revenues, other than: (i) the Subordinate Loan; (ii) additional Parity Debt subject to the conditions described below; and (iii) any debt secured by a pledge of Subordinate Tax Revenues which is subordinate to the pledge of Subordinate Tax Revenues created by the Subordinate Loan Agreement The Agency has further covenanted in each Loan Agreement that it will not amend the Redevelopment Plan (except for the purpose of extending or eliminating the time limit on the establishment of loans, advances, and indebtedness, extending the time limit on the effectiveness of the Redevelopment Plan, extending the time limit on the payment of indebtedness, extending the time limit for the receipt of tax increment, or increasing the limitation on the number of dollars of taxes to be allocated to the Agency) or any of the Pass- Through Agreements, or enter into any agreement with the County or any other governmental unit, which would have the effect of reducing the amount of Tax Revenues (or Subordinate Tax Revenues in the case of the Subordinate Loan) available to the Agency for payment of such Loan, unless the Agency shall first obtain (a) the Report of an Independent Redevelopment Consultant stating that the amount of Tax Revenues for the then current Fiscal Year (calculated on the assumption that such reduction of Tax Revenues (or Subordinate Tax Revenues) was in effect throughout such Fiscal Year), shall be at least equal to 120 percent (in the case of the Senior Loans) or ___% (in the case of the Subordinate Loan) of Maximum Annual Debt Service and (b), as long as the Insurance Policy is in full force and effect, the written consent of the Insurer. Issuance of Senior Parity Debt. Pursuant to the Senior Loan Agreement, the Agency may issue or incur additional Parity Debt subject to the following specific conditions: (a) No Event of Default shall have occurred and be continuing, and the Agency shall otherwise be in compliance with all covenants set forth in the Senior Loan Agreement. (b) The amount of Tax Revenues for the then current Fiscal Year as set forth in a Certificate of the Agency, based on assessed valuation of property in the Project Area as evidenced in the written records of the County, plus at the option of the Agency the Additional Revenues, shall be at least equal to (i) 120 percent of Maximum Annual Debt Service, and (ii) 100 percent of the sum of Maximum Annual Debt Service (of the Senior Loans and Parity Debt) and maximum annual debt service on all outstanding Subordinate Debt that is secured by a pledge of or lien upon the Tax Revenues. (c) The balance in the Reserve Fund shall be increased to an amount which equals the Reserve Requirement. (d) All amounts held in the Special Escrow Fund shall have been transferred to the Agency or otherwise applied in accordance with the Loan Agreement; provided that this condition shall not limit the authority of the Agency to issue or incur Parity Debt for the purpose of refunding the Loans or other Parity Debt so long as either (i) the total amount of principal and interest payable with respect to such proposed refunding Parity Debt shall be less than the total amount of principal and interest remaining to be paid with respect to the Loan or the Parity Debt to be refunded, or (ii) the total amount of principal and interest payable with respect to such proposed refunding Parity Debt reflects a present value savings when compared with the total amount of principal and interest remaining to be paid with respect to the Loan or the Parity Debt to be refunded. (e) The related Parity Debt Instrument shall provide that: 24 (i) With respect to any Parity Debt which bears current interest, interest on such Parity Debt shall not be payable on a date other than February 1 and August 1 of any year and (ii) The principal of such Parity Debt shall not be payable on any date other than the date on which principal of the Loan is payable. (f) The issuance of such Parity Debt shall not cause the Agency to exceed any applicable Plan Limitations. (g) The Agency shall deliver to the Trustee a Certificate of the Agency certifying that the conditions precedent to the issuance of such Parity Debt set forth in subparagraphs (a) through (e), above, have been satisfied. The Agency shall also furnish a copy of an Independent Redevelopment Consultant’s report evidencing compliance with the conditions set forth in subparagraph (b) above. Issuance of Subordinate Parity Debt. Pursuant to the Subordinate Loan Agreement, the Agency may issue or incur additional Parity Subordinate Debt subject to the following specific conditions: (a) No Event of Default shall have occurred and be continuing, and the Agency shall otherwise be in compliance with all covenants set forth in the Subordinate Loan Agreement. (b) The amount of Subordinate Tax Revenues for the then current Fiscal Year as set forth in a Certificate of the Agency, based on assessed valuation of property in the Project Area as evidenced in the written records of the County, plus at the option of the Agency the Additional Revenues, shall be at least equal to ______ percent of Maximum Combined Annual Debt Service (as defined in the Subordinate Loan Agreement). (c) The balance in the Reserve Fund shall be increased to an amount which equals the Reserve Requirement. (d) The related Parity Debt Instrument shall provide that: (i) With respect to any Parity Debt which bears current interest, interest on such Parity Debt shall not be payable on a date other than February 1 and August 1 of any year and (ii) The principal of such Parity Debt shall not be payable on any date other than the date on which principal of the Subordinate Loan is payable. (e) The issuance of such Parity Debt shall not cause the Agency to exceed any applicable Plan Limitations. (f) The Agency shall deliver to the Trustee a Certificate of the Agency certifying that the conditions precedent to the issuance of such Parity Subordinate Debt set forth in subparagraphs (a) through (e), above, have been satisfied. The Agency shall also furnish a copy of an Independent Redevelopment Consultant’s report evidencing compliance with the conditions set forth in subparagraph (b) above. 25 Issuance of Additional Subordinate Debt Issuance of Additional Debt Subordinate to the Senior Loans. In addition to the Senior 2002 Loan, the Senior 2003 Loan, the Senior Loans and any Parity Senior Debt, from time to time the Agency may issue or incur Subordinate Debt in such principal amount as shall be determined by the Agency, provided that (i) the issuance of such Subordinate Debt shall not cause the Agency to exceed any applicable Plan Limitations, and (ii), with respect to any Subordinate Debt that is to be secured by a pledge or lien upon Tax Revenues, the amount of Tax Revenues for the then current Fiscal Year, as set forth in a Certificate of the Agency, based on assessed valuation of property in the Project Area as evidenced in the written records of the County, plus at the option of the Agency the Additional Revenues, shall be at least equal to 100 percent of the sum of Maximum Annual Debt Service (of the Senior Loans and Parity Senior Debt) and maximum annual debt service on all Outstanding Subordinate Debt that is secured by a pledge of or lien upon the Tax Revenues. Issuance of Additional Debt Subordinate to the Subordinate Loan. From time to time the Agency may issue or incur debt which is subordinate to the Subordinate Loan, in such principal amount as shall be determined by the Agency, provided that (i) the issuance of such subordinate debt shall not cause the Agency to exceed any applicable Plan Limitations. Reserve Funds In order to further secure the payment of principal of and interest on the Bonds, the Agency is required by the Loan Agreements to maintain an amount equal to the respective Reserve Requirement for the respective Senior Bonds and Subordinate Bonds in a separate respective “Senior Reserve Fund” and “Subordinate Reserve Fund”held by the Trustee. The Reserve Requirement for the respective Senior Loans and Subordinate Loan is the least of (i) Maximum Annual Debt Service, (ii) 125 percent of average annual debt service on the Loans and all outstanding Parity Debt, and (iii) 10 percent of the proceeds of the Loans (i.e., the original Principal Amount of the Bonds) and of the proceeds of any Parity Debt. The amount of the Reserve Requirement on any date is subject to confirmation by the Authority to the Trustee upon the Trustee’s written request. Amounts in each Reserve Fund are to be held by the Trustee for the benefit of the Authority, the respective Bondowners, and the owners of any Parity Debt pursuant to the corresponding Loan Agreement, and are pledged by the Agency to secure the Agency’s payment obligations under such Loan Agreement. The Agency is required to set aside from the Special Fund and deposit in the Reserve Fund an amount sufficient to maintain the Reserve Requirements on deposit in the Reserve Funds at all times so long as any Bonds remain outstanding. The Loan Agreements permit the Agency to fund all or a portion of a Reserve Requirement by means of a “Qualified Reserve Fund Credit Instrument” which is 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, provided that all of the following requirements are met at the time of deposit with the Trustee: (i) either (a) the long-term credit rating of such bank is within one of the two highest rating categories by Moody’s or S&P, or the claims paying ability of such insurance company is rated within one of the two highest rating categories by Moody’s or S&P, at the time of delivery of such letter of credit or surety bond, or (b) the Authority shall cause to be filed with the Trustee written evidence from Moody’s and S&P that the delivery of such letter of credit or surety bond will not, of itself, cause a reduction or withdrawal of any rating then assigned to the Bonds; (ii) such letter of credit or surety bond has a term of at least 12 months; (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; 26 and (iv) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time with respect to deposits required pursuant to the applicable Indenture. On the date of issuance of the Bonds, the Reserve Requirement for the Senior Loans will be met with a Qualified Reserve Fund Credit Instrument in the form of a _____________________ issued by ____________________. RISK FACTORS The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability of the Agency to make the payments required to repay the Bonds and their interest on a timely manner. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the Project Area. Bonds Are Limited Obligations The Bonds and the interest thereon are limited obligations of the Agency and do not constitute a general obligation of the Agency. See “SECURITY FOR THE BONDS” herein. No Owner of the Bonds may compel exercise of the taxing power of the State of California or any of its political subdivisions or agencies to pay the principal of, premium, if any, or interest due on the Bonds. The Bonds do not evidence a debt of the Agency within the meaning of any constitutional or statutory debt limitation provision. Reduction of Tax Revenues Tax Revenues (which constitute the source of repayment of the Loans and indirectly of the Bonds, as discussed herein) are a portion of the taxes allocated to the Agency each year which are determined by the amount of incremental valuation of taxable property in the Project Area, the current rate or rates at which property in the Project Area, is taxed and the percentage of taxes collected in the Project Area. Neither the Agency nor the Authority has taxing power, nor does the Agency have the power to affect the rate at which property is taxed. Events beyond the control of the Agency could cause a reduction in Tax Revenues, thereby impairing the ability of the Agency to make payments under the Loan Agreement sufficient to pay principal of and interest and premium (if any) when due on the Bonds. A reduction of taxable values of property or tax rates in the Project Area or a reduction of the rate of increase in taxable values of property in the Project Area caused by economic or other factors beyond the Agency’s control (such as a relocation out of the Project Area by one or more major property owners, successful appeals by property owners for a reduction in a property’s assessed value, a reduction of the general inflationary rate, a reduction in transfers of property, reduction of property values, events that permit reassessment of property at lower values, or the destruction of property caused by natural or other disasters, including earthquake) could occur, thereby causing a reduction in Tax Revenues. The California electorate or legislature could adopt limitations with the effect of reducing Tax Revenues. Such limitation already exists under Article XIIIA of the California Constitution, which was adopted pursuant to the initiative process. For a further description of Article XIIIA, 27 see “PROPERTY TAXATION IN CALIFORNIA — Constitutional Amendments Affecting Tax Revenues,” herein. A reduction in the tax rate applicable to property in the Project Area by reason of discontinuation of certain override tax levies in excess of the 1% basic levy will reduce tax increment revenues. Such override tax levies can be expected to decline over time until the tax rate in the Project Area reaches the 1% basic levy. Such overrides may be discontinued at any time, which may cause a reduction in Tax Revenues. The Agency does not receive any Tax Revenues attributable to tax override levies. The current practice of the County under the Teeter Plan is to calculate 100% of the gross tax increment payable annually to the Agency and to retain any penalties or delinquencies collected to offset such gross payment. There can be no assurances that the County will continue this practice in the future, or that the County will not discontinue the Teeter Plan or remove the Agency from the Teeter Plan in the future. Other events beyond the control of the Agency could also cause a reduction in Tax Revenues. Tax increment revenues allocated to the Agency are distributed throughout the year in installments. The payments are adjusted to reflect actual collections. Any reduction in tax increment revenues, whether for any of the foregoing reasons or any other reason, could have an adverse effect on the Agency’s ability to make payments under the Loan Agreement sufficient to pay the principal of and interest on the Bonds. Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the California Constitution provides that the full cash value basis of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. The Agency has projected Tax Revenues to be received by it based, among other things, upon such 2% inflationary increases. Should the assessed value of real property not increase at the allowed annual rate of 2%, the Agency’s receipt of future Tax Revenues may be adversely affected. See “PROPERTY TAXATION IN CALIFORNIA - Constitutional Amendments Affecting Tax Revenues” herein. Concentration of Ownership The largest secured local taxpayer in the Project Area (constituting approximately 16.17% of the Fiscal Year 2005-06 secured assessed value in the Project Area) is Desert Spring Hotel/Marriott. See “THE PROJECT AREA - Largest Taxable Property Owners” above. While the Agency believes that Desert Spring Hotel/Marriott to be a viable and profitable enterprise, its business, by nature, is dependent upon various unpredictable economic and market forces. The impact of various other risks described in this section could be exaggerated should any such risk negatively impact Desert Spring Hotel/Marriott. Assessment Appeals Property taxable values may be reduced as a result of a successful appeal of the taxable value determined by the County Assessor. An appeal may result in a reduction to the County Assessor’s original taxable value and a tax refund to the applicant property owner. Appeal and 28 refund activity within the Project Area may result in resolved appeals which reduce the assessed value of parcels within the Project Area. See APPENDIX A - “Fiscal Consultant’s Report - Assessment Appeals.” An assessee may contest either (i) the original determination of the “base assessment value” of a parcel (i.e., the value assigned after a change of ownership or completion of new construction), or (ii) the “current assessment value” (i.e., the value as determined by the County Assessor, which may be no more than the base assessment value plus the compounded 2% annual inflation factor) when specified factors have caused the market value of the parcel to drop below current assessment value. At the time of reassessment, after a change of ownership or completion of new construction, the assessee may appeal the base assessment value of the property. Under an appeal of a base assessment value, the assessee appeals the actual underlying market value of the sales transaction or the recently completed improvement. A successful appeal of the base assessment value of a parcel has significant future revenue impacts, because a reduced base year assessment will reduce the compounded future value of the property prospectively. Except for the two percent inflation factor, the value of the property cannot be increased until a change in ownership occurs or additional improvements are added. Assessment appeals are currently pending in the Project Area, and the Agency cannot predict whether such appeals, or any future appeals, will be successful. Future reductions in taxable values in the Project Area resulting from successful appeals by property owners will reduce the amount of Tax Revenues available to pay the principal of and interest on the Bonds. Proposition 8 Adjustments Proposition 8, approved in 1978 (California Revenue and Taxation Code Section 51(b)), provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions based on Proposition 8 do not establish new base year values, and the property may be reassessed on a following lien date up to the lower of the then-current fair market value or the factored base year value. Properties in the Project Area have not been subject to Proposition 8 adjustments made by the County Assessor in any significant amount. Subordinate Nature of Series 2006D Bonds The Series 2006D Bonds are subordinate to the Senior Bonds in priority and right of payment. Subordinate Revenues will be available to pay obligations on the Series 2006D Bonds only after all payments and deposits in respect of the Senior Bonds have been made as set forth herein and in the Senior Indenture. In the event of delinquencies in the payment of the Senior Loans, there may not be sufficient Subordinate Revenues available to pay interest or principal due on any or all of the Series 2006D Bonds then Outstanding. No Rating of Series 2006D Bonds The Series 2006D Bonds are not rated by any rating agency, and the Authority does not presently intend to seek any rating of the Series 2006D Bonds [[[nor does the Authority anticipate that the Series 2006D Bonds would qualify for an investment grade rating due to the structure and size of the Senior Bonds.]]] 29 Development Risks Generally, the Agency’s ability to make payments under the Loan Agreements will be dependent upon the economic strength of the Project Area. The general economy of the Project Area will be subject, in part, to the development risks generally associated with real estate development projects. Projected development within the Project Area may be subject to unexpected delays, disruptions and changes. For example, real estate development operations may be adversely affected by changes in general economic conditions, fluctuations in the real estate market, fluctuations in interest rates, unexpected increases in development costs and by other factors. Further, real estate development operations within the Project Area could be adversely affected by future governmental policies, including governmental policies to restrict or control development. If projected development in the Project Area is delayed or halted, the economy of the Project Area could be adversely affected, causing a reduction of the Tax Revenues available ultimately to pay debt service on the Bonds. Seismic Factors The assessed valuation of properties in the Project Area could be substantially reduced as a result of a major earthquake proximate to the Project Area. The area in and surrounding the Project Area, like much of California, may be subject to unpredictable seismic activity. If there were to be an occurrence of severe seismic activity in the Project Area, there could be a negative impact on assessed values of taxable values of property in the Project Area, and a corresponding reduction in Tax Revenues. Such reduction of Tax Revenues could have an adverse effect on the Agency’s ability to make timely payments of principal of and interest on a Loan. Flood Risk Considerations In and around the City, flooding caused by river overflow or heavy rainfall could cause possible damage to property in the City, including property in the Project Area. Levy and Collection Neither the Agency nor the Authority has any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverse impact on the ability of the Agency to make payments under the Loan Agreements sufficient to pay debt service on the Bonds. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the Agency’s ability to make timely payments. The County currently allocates to the Agency 100% of tax increment revenues without regard to delinquencies. However, there is no assurance that the County will continue to allocate Tax Revenues in this manner. To estimate the Tax Revenues available to pay debt service on the Bonds, the Agency has made certain assumptions with regard to the assessed valuation of property within the Project Area and future tax rates. The Agency believes these assumptions to be reasonable, but to the extent that the assessed valuation and the tax rates are less than the Agency’s assumptions, the Tax Revenues available to pay debt service on the Bonds may be less than those projected herein. 30 State Budget; ERAF Shift In connection with its approval of the budget for the 1992-93, 1993-94 and 1994-95 fiscal years, the State Legislature enacted legislation which, among other things, reallocated funds from redevelopment agencies to school districts by shifting a portion of each agency’s tax increment, net of amounts due to other taxing agencies, to school districts for such fiscal years for deposit in the Education Revenue Augmentation Fund (“ERAF”). The amount required to be paid by a redevelopment agency under such legislation was apportioned among all of its redevelopment project areas on a collective basis, and was not allocated separately to individual project areas. Faced with a projected $23.6 billion budget gap for Fiscal Year 2002- 03, the State Legislature adopted and sent to the Governor of the State as urgency legislation, AB 1768 requiring redevelopment agencies to pay into ERAF in Fiscal Year 2002-03 an aggregate amount of $75 million. In 2003, the State Legislature adopted SB 1045 which required redevelopment agencies to make ERAF transfers in Fiscal Year 2003-04, based on a statewide aggregate transfer by redevelopment agencies of $135 million. Due to continuing state budget problems, the State Legislature adopted SB 1096, Chapter 211, Statutes of 2004 (“SB 1096”), which required an ERAF shift of $250 million for 2004-05 and 2005-06. As with previous ERAF shifts, SB 1096 requires that half of the shift be calculated on the basis of the gross tax increment of a project area and the other half on net revenues after tax sharing payments. The Agency’s ERAF payment for 2004-05 was $3,887,133, and the proportionate share for Project Area was $788,700. The Agency’s estimated ERAF payments for 2005-06 are $3,995,041, with the Project Area’s proportionate share being $871,272 SB 1096 provides that the Agency’s ERAF payment obligations are subordinate to the payment of debt service on the Bonds. The Agency cannot predict whether the State Legislature will adopt legislation requiring other shifts of redevelopment property tax increment revenues in future fiscal years beyond 2005-06 to the State and/or to schools, whether by the ERAF mechanism or by other arrangement. Should such legislation be enacted, Tax Revenues available for payment of the Bonds may, in the future, be substantially reduced and the Agency’s ability to pay debt service on the Bonds may be impaired. Assumptions and Projections To estimate the total Tax Revenues available to pay debt service on the Bonds, the Agency’s Fiscal Consultant has made certain assumptions with regard to the assessed valuation in the Project Area, future tax rates, the percentage of taxes collected, the likelihood of appeals, the amount of funds available for investment and the interest rate at which those funds will be invested. See APPENDIX A — “FISCAL CONSULTANT’S REPORT” for a full discussion of the assumptions underlying the projections set forth herein and therein with respect to Tax Revenues. The Agency believes these assumptions to be reasonable, but to the extent that the payment of any revenues that constitute Tax Revenues is less than such assumptions, the total Tax Revenues available may be less than those projected herein. See “SECURITY AND SOURCE OF PAYMENT FOR THE BONDS” herein. Bankruptcy and Foreclosure On July 30, 1992 the United States Court of Appeals for the Ninth Circuit issued an opinion in a bankruptcy case entitled In re Glasply Marine Industries holding that ad valorem property taxes levied by a county in the State of Washington after the date that the property owner filed a petition for bankruptcy would not be entitled to priority over the claims of a secured 31 creditor with a prior lien on the property. Similar results were reached by several circuit courts in other circuits. Subsequently, however, section 362(b)(18) of the Bankruptcy Code was enacted, effectively overturning this line of decisions and providing that local governments may rely on statutory property tax liens to secure payment of property taxes after the filing of a bankruptcy petition. Loss of Tax Exemption on the Bonds In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Agency has covenanted in the Loan Agreement to comply with each applicable requirement of Section 103 and Sections 141 through 150 of the Internal Revenue Code of 1986, as amended. The interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of the Bonds, as a result of acts or omissions of the Agency in violation of covenants in the Loan Agreement. Should such an event of taxability occur, the Bonds are not subject to acceleration, redemption or any increase in interest rates and will remain Outstanding until maturity or until redeemed under one of the redemption provisions contained in the Indenture. See “CONCLUDING INFORMATION — Tax-Exempt Status of the Bonds” herein. PROPERTY 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 County 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 inflationary 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. 32 Section 33678 of the Redevelopment Law provides that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances or indebtedness incurred for redevelopment activity shall not be deemed the receipt by such agency of proceeds of taxes within the meaning of Article XIIIB, nor shall such portion of taxes be deemed receipt of proceeds of taxes by, or any appropriation subject to the limitation of, any other public body within the meaning or the purpose of the Constitution and laws of the State, including Section 33678 of the Redevelopment Law. Two California appellate court decisions have upheld the constitutionality of Section 33678, and in the one case in which a petition for review was filed in the California Supreme Court, such petition was denied. 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. Effective as of the 1981-82 Fiscal Year, assessors in California no longer record property values in the tax rolls at the assessed value of 25% of market values. All taxable property value is shown at full market value. In conformity with this change in procedure, all taxable property value included in this Official Statement (except as noted) is shown at 100% of market value and all general tax rates reflect the $1 per $100 of taxable value. 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 growth 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 Agency 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. Recently, 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 Agency 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. 33 Property Tax Collection Procedures In California, property that is subject to ad valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which any property tax levied by a county becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. Every tax levied by a county that becomes a lien on secured property has priority over all present and future private liens arising pursuant to State law on the secured property, regardless of the time of the creation of the other liens. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on other property owned by the taxpayer. Secured and unsecured property are entered on separate parts of the assessment roll maintained by the county assessor. The payment of delinquent taxes with respect to property on the secured roll may be enforced only through the sale of the property securing the taxes to the State for the amount of taxes that are delinquent. Such property may thereafter be redeemed by payment of the delinquent taxes and penalties. Unsecured personal property taxes may be collected, in the absence of timely payment by the taxpayer, through (1) a civil action against the taxpayer; (2) filing a certificate of delinquency for record in the county recorder’s office, in order to obtain a lien on property of the taxpayer; (3) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the taxpayer; and (4) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer. The valuation of taxable property is determined as of January 1 each year, and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due on the lien date and become delinquent August 31, and such taxes are levied at the prior year’s secured tax rate. Supplemental Assessments A bill enacted in 1983, SB 813 (Statutes of 1983, Chapter 498), provides for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next tax lien date following the change, and thus delayed the realization of increased property taxes from the new assessments for up to 14 months. As enacted, Chapter 498 provides increased revenue to redevelopment agencies to the extent that supplemental assessments as a result of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the lien date. To the extent such supplemental assessments occur within the Project Area, Tax Revenues may increase. Collection of taxes based on supplemental assessments will occur throughout the year. Taxes due will be pro-rated according to the amount of time remaining in the tax year, with the exception of tax bills dated the lien date through May 31, which will be calculated on the basis of the remainder of the current fiscal year and the full twelve months of the next fiscal year. Tax Collection Fees County auditors are authorized to determine property tax administration costs proportionately attributable to local jurisdictions, including redevelopment agencies, and to submit invoices to the jurisdictions for such costs. The projections of tax revenues take such administrative costs into account. 34 Unitary Property Tax AB 454 (Statutes of 1987, Chapter 921) provides a revised method of reporting and allocating property tax revenues generated from most State-assessed unitary properties commencing with Fiscal Year 1988-89. Under AB 454, the State reports to each county auditor- controller only the county-wide unitary taxable value of each utility, without an indication of the distribution of the value among tax rate areas. AB 454 provides two formulas for auditor- controllers to use in order to determine the allocation of unitary property taxes generated by the county-wide unitary value, which are: (i) for revenue generated from the 1% tax rate, each jurisdiction is to receive up to 102% of its prior year unitary property tax increment revenue; however, if county-wide revenues generated from unitary properties are greater than 102% of prior year revenues, each jurisdiction receives a percentage share of the excess unitary revenues equal to the percentage of each jurisdiction’s share of secured property taxes; (ii) for revenue generated from the application of the debt service tax rate to county-wide unitary taxable value, each jurisdiction is to receive a perc entage share of revenue based on the jurisdiction’s annual debt service requirements and the percentage of property taxes received by each jurisdiction from unitary property taxes. The provisions of AB 454 apply to all State-assessed property, except railroads and non- unitary properties the valuation of which will continue to be allocated to individual tax rate areas. The provisions of AB 454 do not constitute an elimination or a revision of the method of assessing utilities by the State Board of Equalization. AB 454 allows, generally, valuation growth or decline of State-assessed unitary property to be shared by all jurisdictions within a county. Business Inventory and Replacement Revenue Prior to 1979, the State reimbursed cities, counties, special districts and redevelopment agencies that portion of taxes which would have been generated by the exempted portion of business inventory value (50%). In 1979, the California Legislature enacted AB 66 (Statutes of 1979, Chapter 1150), eliminating the assessment and taxation of business inventory property and providing for replacement revenue for local agencies, except redevelopment agencies. In 1980, the California Legislature enacted AB 1994 (Statutes of 1980, Chapter 610), providing partial replacement revenue for the loss of business inventory revenues by redevelopment agencies. In 1990, the California Legislature amended Section 16112.7 of the California Government Code (Chapter 449, Statutes of 1990) which precludes redevelopment agencies from pledging special subvention revenues toward the payment of debt service for bonded indebtedness incurred after July 31, 1990 (the effective date of the legislation). The 1992-93 State Budget reduced the State’s funding for the special subvention. As enacted under AB 222 (Chapter 188, Statutes of 1991), the Budget Act eliminated 1991-92 subvention payments for most redevelopment projects, including the Project Area. Additionally, the 1992-93 State Budget implemented further cuts in funding for the State’s special subvention to redevelopment agencies. As a result, these revenues are not included in the projections of estimated tax revenues. Proposition 87 Under prior State law, if a taxing entity increased its tax rate to obtain revenues to repay general obligation bonds approved by two-thirds of the voters, the redevelopment agency with a 35 project area which includes property affected by the tax rate increase would realize a proportionate increase in tax increment. Proposition 87, approved by the voters of the State on November 8, 1988, requires that all revenues produced by a tax rate increase (approved by the voters on or after January 1, 1989) go directly to the taxing entity which increases the tax rate to repay the general obligation bonded indebtedness. As a result, redevelopment agencies no longer receive an increase in tax increment when taxes on property in the project area are increased to repay voter approved general obligation debt. Future Initiatives Article XIIIA, Article XIIIB and Proposition 87 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 Agency or the Agency’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the Authority or Agency. THE PROJECT AREA In connection with the issuance of the Bonds, the Agency caused Rosenow Spevacek Group Inc., Santa Ana, California, to prepare a Fiscal Consultant’s Report dated April 10, 2006, which sets forth current financial and other information on the Project Area. The information below and under the caption “SUBORDINATE TAX REVENUES” includes information contained in the Fiscal Consultant’s Report. The Fiscal Consultant’s Report is included herein as APPENDIX A. Establishment of the Project Area On July 7, 1987, the Planning Commission approved the preliminary plan for the redevelopment of Project Area No. 2. The Agency’s report to the City Council requesting the proposed redevelopment plan indicated that the area had been selected because of the existence of lots of inadequate size for proper usefulness and development; inadequate traffic circulation; numerous obsolete and dilapidated residential structures subject to mixed character and shifting of land uses; above ground voltage transmission lines which are not only unsightly, but because of high winds in the area, a threat to public safety. Following Agency meetings and hearings on the Redevelopment Plan, a joint public hearing was held with the City Council on July 9, 1987. On July 15, 1987, the Redevelopment Plan (the “Redevelopment Plan”) for Project Area No. 2 was adopted by the City of Palm Desert pursuant to the adoption of Ordinance No. 509 (“Project Area No. 2”). The Redevelopment Plan was adopted in order to eliminate conditions of blight existing in Project Area No. 2 and to prevent their recurrence by undertaking appropriate redevelopment projects pursuant to the Redevelopment Law. The primary objectives of the Redevelopment Plan include the improvement of traffic circulation; the undergrounding of utilities and the elimination of drainage deficiencies; the elimination of irregularly shaped and inadequate sized parcels of land and the rehabilitation or removal of substandard buildings. The Redevelopment Plan also provides for the expansion of recreational facilities and open space and other public improvements. 36 Adopted on July 15, 1987, the Project Area encompasses approximately 2,927 acres (6,195 parcels) of residential, hotel/resort, office and undeveloped uses. The Project Area is generally bounded by the Palm Desert city limits and Interstate 10 to the north, portions of the City limits to the east, Country Club Drive and Hovely Lane to the south and Portola and Monterey Avenues to the west. There are three other project areas of the Agency. The table below shows land use by assessed value for the parcels in the Project Area. The majority of land in the Project Area is used for residential purposes. PALM DESERT REDEVELOPMENT AGENCY Project Area No. 2 Summary of Land Use in 2005-06 Land Use No. of Parcels Secured Value % of Total Assessed Value Commercial 17 $253,735,686 26.3% Institutional 1 2,992,024 0.3 Professional/Office 10 16,135,679 1.7 Recreational 17 38,187,084 4.0 Residential 1,695 536,001,080 55.5 Vacant Land 490 119,221,517 12.3 Unknown 15 279,353 0.0 Total 2,245 $966,552,423 100.0% Source: Rosenow Spevacek Group Inc.; derived from Metroscan TRW Database based on County of Riverside Assessor information, does not include possessory interest. Limitations and Requirements of the Redevelopment Plan The Redevelopment Plan limits the amount of tax revenues which can be divided and allocated to the Agency from Project Area No. 2 pursuant to the Redevelopment Law to a maximum of $800,000,000 (in 1987 dollars), and limits the amount of bonded indebtedness (to be repaid in whole or in part from such allocation of taxes) which can be outstanding at one time to $150,000,000 (in 1987 dollars). Each of the foregoing maximum amounts is expressed in 1987 dollars and adjusted annually thereafter in accordance with changes in the Consumer Price Index for the nearest area to Project Area No. 2, as maintained by the Bureau of Labor Statistics, United States Department of Labor. The total gross tax increment revenue collected in Project Area No. 2 through 2004-05 is $109,686,684. The cap limitation, when adjusted by the CPI is $1.36 billion for fiscal year 2005-06. Based upon the growth projections utilized in the Fiscal Consultant’s Report, Project Area No. 2 will not reach its limit through the end of its term to collect tax increment (fiscal year 2037-38). Pursuant to City Ordinance No. 766, adopted December 8, 1994, the Redevelopment Plan also establishes the following limitations: 1. time limit to issue or incur debt has been eliminated by the adoption of Ordinance 1036 on February 27, 2003; 2. the term of the effectiveness of the Redevelopment Plan of July 15, 2028; and 3. the time limit to receive tax increment generated from the Project Area at ten (10) years beyond the effectiveness date of the Redevelopment Plan, which is July 15, 2037, except that the Agency may continue to receive such necessary tax increment to pay indebtedness or 37 other obligations issued or incurred prior to January 1, 1994 and for the financing of required housing attributable to housing set-aside funds. SB211 SB 211 (Statutes of 2001 Chapter 741) amended the Redevelopment Law by providing cities and redevelopment agencies with an alternative method of determining certain limitations of their redevelopment plans. First, a city may eliminate the time limit to establish indebtedness in project areas adopted prior to January 1, 1994 by ordinance. If a redevelopment plan is so amended, existing tax sharing agreements will continue and certain statutory tax sharing for entities without tax sharing agreements will commence in the year the former limitation would have taken effect. Second, an agency may extend the time limit for plan effectiveness and repayment of debt for up to ten years if it can make certain specified findings. Project areas that have been adopted after January 1, 1994 may only extend the limitation on incurring new debt by making specific findings. On February 27, 2003 the City adopted Ordinance No. 1036, amending the Redevelopment Plan to adopt the plan limitations permitted under SB 211. The ordinance is subject to a 30-day referendum perio d, after which it will become law. If it becomes law, the ordinance is expected to result in a slight reduction in Tax Revenues beginning in 2008. For further information on the impact that SB 211 would have on the tax increment receipts of the Project Area, see “APPENDIX A – Fiscal Consultant’s Report.” TAX REVENUES Tax Revenues (as described in the section “SECURITY FOR THE BONDS” herein) derived each year from the levy and collection of taxes on any increase in the taxable valuation of land, improvements, personal property and public utility property in the Project Area, over and above the base year valuation for such property are to be deposited in the Special Fund, administered by the Agency and applied to the payment of the principal of and interest on the Loan. On May 15, 1991, the Riverside County Superior Court entered a final judgment incorporating a Stipulation for Entry of Judgment (the “Stipulation”) among the Agency, the Western Center on Law and Poverty, Inc. and California Rural Legal Assistance in connection with litigation filed over the adoption of the Redevelopment Plan for Project Area No. 2 (City of Palm Springs v. All Persons Interested, etc., Case No. Indio 51143). On June 18, 1997 and again on September 20, 2002, the Court entered amendments to its 1991 judgment, incorporating Stipulations Amending Stipulation for Entry of Judgment. Under the terms of the Stipulation, as amended, the Agency has generally agreed to use its 20 percent set aside funds, and other tax increment revenues, if necessary, to develop, rehabilitate, or otherwise financially assist a certain number of affordable housing units and to meet certain housing needs of the City. See “TAX REVENUES - Housing Set-Aside Requirements.” The Stipulation, as amended, provides that future indebtedness incurred by the Agency will be payable on a basis which is prior to the obligations imposed by the Stipulation, as amended, if the Agency makes a finding by resolution, based upon a report, that the Agency will have sufficient revenues to meet that indebtedness as well as its obligations under the Stipulation, as amended. Under the terms of the Stipulation, as amended, notwithstanding its other terms, the Agency may incur indebtedness and pledge tax increment revenues to refinance its obligations, so long as (i) the total amount of debt service payable in connection with such refinancing is less than the total amount of debt service remaining to be paid on the refunded obligations, or (ii) the total amount of debt service payable in connection with such refinancing reflects a present value savings 38 when compared with the total amount of debt service remaining to be paid on the refunded obligations. Pass-Through Agreements Pursuant to Section 33607.7 of the Redevelopment Law, a redevelopment agency that extends the original time limit to incur debt becomes required to share certain tax increment revenues with any taxing agency having territory located within the redevelopment project area for which the Agency has not previously entered into pass-through agreements.(“Statutory Tax Sharing”). In the Project Area, the Agency has entered into six tax sharing agreements (each, a “Cooperative Agreement”), the provisions of which are summarized in “APPENDIX A – FISCAL CONSULTANT’S REPORT – Payments to Project Area Taxing Agencies.” [Add further discussion if Cooperative Agreements are revenues for coverage purposes] Schedule of Historical Tax Revenues The following tables provide a schedule of the historical tax increment revenues attributable to the Project Area for the fiscal years shown. For further information regarding the historical tax increment revenues for the Project Area see “APPENDIX A — Fiscal Consultant’s Report.” PALM DESERT REDEVELOPMENT AGENCY Project Area No. 2 Historical Tax Increment Revenues Fiscal Years 2001-02 through 2005-06 2001-02 2002-03 2003-04 2004-05 2005-06 Secured Valuation $948,228023 $1,134,005,914 $1,257974,957 $1,347,408,182 $1,451,555,514 Unsecured Valuation 11,464,203 10,426,145 15,969,361 17,745,052 16,317,319 Total Valuation 959,692,226 1,144,432,059 1,273,944,318 1,365,153,234 1,467,872,833 Incremental Valuation 857,534,779 1,042,274,612 1,171,786,871 1,262,995,787 1,365,715,386 Total Estimated Revenue(1) 8,459,376 10,289,020 11,574,903 12,486,136 $13,510,987 Actual Receipts $8,717,272 $10,681,120 $12,387,750 $13,490,609 N/A _____________________ (1) Before payment of Pass-Through Agreements, Housing Set-Aside; after payment of County administration charge. Source: Rosenow Spevacek Group Inc. 39 Current and Planned Development The Fiscal Consultant’s Report identified development currently approved and/or underway in the Project Area, indicating the use, square footage, projected value, and projected approximate completion time of the new development. The Fiscal Consultant identified the planned projects as shown in the following table. PALM DESERT REDEVELOPMENT AGENCY Project Area No. 2 Projected New Development 2007-08 2008-09 2009-10 Residential $14,698,200 $35,448,100 $173,606,913 Commercial 18,312,140 42,593,000 0 Industrial 6,582,000 3,913,000 0 Total $39,592,340 $81,954,100 $173,606,913 Source: Rosenow Spevacek Group Inc. See APPENDIX A – “FISCAL CONSULTANT’S REPORT – Future Tax Increment Projections” attached hereto. Projected Taxable Valuation and Tax Revenue The Agency has retained Rosenow Spevacek Group Inc., Santa Ana, California to provide projections of tax increment revenues in the Project Area. Projections of tax increment growth are based upon: • Proposition 13 inflationary adjustments of 2% annually; • Valuation increases based on ownership changes; • Valuation increases caused by new construction. The Agency believes the assumptions (set forth in APPENDIX A) upon which the projections are based are reasonable; however, some assumptions may not materialize and unanticipated events and circumstances may occur (see “RISK FACTORS”). Therefore, the actual tax increment revenues received during the forecast period may vary from the projections and the variations may be material. A summary of the projected tax increment revenues for the Project Area and the debt service coverage on the Parity Debt (the Loan, the Senior 2002 Loan, and the Senior 2003 Loan) is set forth in the following table. For additional information regarding projected tax increment revenues see “APPENDIX A — Fiscal Consultant’s Report. ” 40 PALM DESERT REDEVELOPMENT AGENCY Project Area No. 2 Projected Tax Increment Revenues And Debt Service Coverage- Bonds Fiscal Years 2005-06 through 2012-13 Fiscal Year Ending June 30 Total Project Area Net Tax Increment (1) Existing Parity Debt Service (2) Senior Loan Debt Service Total Parity Debt Service (3) Senior Loan Coverage Ratio Subordinate Loan Debt Service Subordinate Loan Coverage Ratio 2006 $5,596,977 $2,413,989 2007 6,269,216 2,070,339 2008 6,539,590 2,072,084 2009 6,916,638 2,075,859 2010 7,598,670 2,071,874 2011 7,730,926 2,070,504 2012 7,876,824 2,077,644 2013 8,126,125 2,073,769 2014 8,266,469 2,076,359 (1) Amounts are net of pass-through agreement payments and low and moderate income housing fund payments. (2) Combined debt service on the Senior 2002 Loan and the Senior 2003 Loan. (3) Combined debt service on the Loan, the Senior 2002 Loan and the Senior 2003 Loan. Sources: Rosenow Spevacek Group Inc., and Citigroup. 41 Top Ten Taxpayers The following table lists the ten largest property tax payers in the Project Area, based on combined secured and unsecured assessed valuation. The top ten taxpayers account for 27.31% of the total property tax roll in the Project Area. For tables showing the top ten taxpayers based on secured value only and the top ten taxpayers based on unsecured value only see “APPENDIX A –Fiscal Consultant’s Report – Top Ten Taxpayers”. PALM DESERT REDEVELOPMENT AGENCY Project Area No. 2 Top Ten Taxpayers in Fiscal Year 2005-06 Owner Assessed Value Percentage of Total Roll 1. Desert Spring Hotel/Marriott $237,366,747 16.17% 2. Marriott Ownership Resorts Inc. 55,540,166 3.78 3. Ashford Ruby Palm Desert I 30,267,496 2.06 4. Palm Desert Funding Co 18,403,763 1.25 5. Desert Falls County Club 11,934,000 0.81 6. Sinatra/Cook Project LLC 11,102,261 0.76 7. Resort Ventures 11,042,983 0.75 8. BNY Western Trust 9,086,716 0.62 9. Manor Healthcare Corp 8,672,821 0.59 10. Villas At Desert Dalls 7,519,695 0.51 Total $400,936,648 27.31% ____________________ Fiscal Year 2005-06 Total Assessed Value: $1,467,872,833. Source: Rosenow Spevacek Group Inc. Filing of Statement of Indebtedness Section 33675 of the Redevelopment Law requires that the Agency file, not later than the first day of October of each year with the county auditor, a statement of indebtedness certified by the chief financial officer of the Agency for each redevelopment project for which the redevelopment plan provides for the division of taxes pursuant to section 33670 of the Redevelopment Law. The statement of indebtedness is required to contain, among other things, the date on which the bonds were delivered, the principal amount, term, purpose, interest rate and total interest of the bonds, the principal amount and the interest due in the fiscal year in which the statement of indebtedness is filed and the outstanding balance and amount due on the bonds. Similar information must be given for each loan, advance or indebtedness that the Agency has incurred or entered into which is payable from tax increment. Section 33675(g) has been amended by AB 1290 to provide that payments of tax increment revenues from the county auditor to a redevelopment agency may not exceed the redevelopment agency’s aggregate total outstanding debt service obligations minus the available revenues of the redevelopment agency, and establishes certain procedures under which a county auditor may, in certain cases, dispute the amount of indebtedness shown on the statement of indebtedness. Payments to a trustee under a bond resolution or indenture or payments to a public agency in connection with payments by such public agency pursuant to a bond issue may not be disputed in any action under Section 33675. 42 The Agency has determined that the amendments to Section 33675 limiting the payment of tax revenues to an amount not greater than the difference between a redevelopment agency’s total outstanding debt obligations and total available revenues, as reported on the redevelopment agency’s reconciliation statement, will not have an adverse impact on the Agency’s ability to meet its debt service obligations. Housing Set-Aside Requirements In accordance with Section 33334.2 of the Redevelopment Law, not less than twenty percent (20%) of all taxes which are allocated to the Agency shall be used by the Agency for purposes of improving, increasing and preserving the City’s supply of housing for persons and families of low or moderate income (including the payment of indebtedness issued or incurred for such purposes). This requirement is applicable unless the Agency makes the finding that: 1. No need for such housing exists in the City; 2. Less than twenty percent (20%) is sufficient to meet such housing needs of the City; or 3. A substantial effort is presently being carried out with other funds (either l ocal, State or federal) and that such efforts are equivalent in impact to twenty percent (20%) of all taxes which are allocated to the Agency. Both the “no need” finding (item 1 above) and the “less than 20% finding” (item 2 above) must apply to very low income as well as low and moderate income households, must be consistent with the housing element of the community’s general plan and the annual report of its planning agency, and do not become effective until after certain filings have been made with the State Department of Housing and Community Development (“HCD”). Neither finding can be made unless the housing element is in proper form and up to date and has been filed with HCD. The “equivalent effort” finding (item 3 above) must apply to the community’s share of regional housing needs as well as its own existing and projected needs. After June 30, 1993, no agency may make this finding unless it can show evidence that it is required in order to meet contractual obligations to bondholders or other private entities incurred prior to May 1, 1991 and made in reliance on the on the ability to make the finding. The Agency has made no such findings. Funds available from the twenty percent (20%) requirement may be used outside the Project Area on a finding by the Agency and the City Council that such use will be of benefit to the Project Area. The Redevelopment Law also permits agencies with more than one project area to set aside less than twenty percent (20%) of the taxes allocated to the agency from one project area if the difference is made up from another project area in the same year and if the agency and the legislative body of the community find that such use of funds will benefit such other project area. 43 PALM DESERT FINANCING AUTHORITY The Authority is a joint powers authority whose members are the City and the Agency. The Authority is duly organized and existing under a Joint Exercise of Powers Agreement dated January 26, 1989, by and between the City and the Agency, and under the provisions of Chapter 5 of Division 7 of Title 1 of the California Government Code. The officers of the City and the Agency serve as the officers of the Authority. The Authority has no taxing power, and has no source of revenue other than the Revenues for paying the debt service on the Bonds. PALM DESERT REDEVELOPMENT AGENCY Authority and Management The Agency was established pursuant to the Redevelopment Law. The City Council adopted Ordinance No. 53 on October 24, 1974, which activated the Agency. The Agency is governed by a five-member board which consists of all members of the City Council of the City of Palm Desert. The Mayor who acts as Chairperson of the Agency is appointed by the City Council. City Council members, their occupations and term expiration dated are as follows: Board Member Ter m Ex pir es Occupation James C. Ferguson, Chairman November, 2006 Attorney at Law Richard S. Kelly, Vice Chairman November, 2008 Retired Businessman Jean M. Benson, Commissioner November, 2006 Retired Businesswoman Buford A. Crites, Commissioner November, 2008 College Professor Robert A. Spiegel, November, 2008 Retired Businessman The professional staff of the Agency presently includes the following: Carlos L. Ortega was appointed City Manager in August 2000. He has also served as Executive Director of the Agency, a position he has held since 1983. Mr. Ortega has also served as Assistant City Manager from 1980 until 1995, and Assistant to the City Manager from 1977 to 1980. Prior to 1977, he served as Interim City Manager (one year) and Assistant City Manager/Finance Director (five years) for the City of Coachella, California. Mr. Ortega received a Bachelor of Science degree in Economics from University of California, Riverside, and has completed graduate studies in Public Administration and Management at University of California, Riverside and the University of Redlands. Justin McCarthy has served as the Assistant City Manager for Redevelopment since November, 2001. Mr. McCarthy began his career as an analyst in the City of Long Beach implementing redevelopment projects in the downtown central business district, the port industrial area and Long Beach Airport. He served for two years as the Redevelopment Manager for the San Diego Southeast Economic Development Corporation managing industrial and commercial projects. For the last thirteen years Mr. McCarthy served as the Deputy Executive Director and Community Development Director for the City of Commerce. During his career he has implemented millions of square feet of public/private projects valued at approximately $1 billion. 44 Aria K. Scott serves as the Senior Financial Analyst for Redevelopment. Ms. Scott was previously with JPMorgan Chase Bank. She began her tenure there in the Trust Operations Department, and later moved on to a Relationship Manger position in their Treasury and Security Services Department. Within Treasury and Security Services, she worked in their Municipal and Corporate Debt Department, where she worked with various municipalities and corporations serving as their bond trustee. Later she moved into the Trust Compliance Department where she dealt with mitigating risk to JPMorgan Chase on a daily basis, by reviewing documents, laws and regulations. She received her BBA in Finance from University of Houston. Veronica Tapia has been with the City for over nine years, and for the last two years has served as the Accountant for the Agency. She is responsible for compiling the federal and state mandated reports for the Agency, the administration of the Agency’s outstanding bond issues of approximately $245 million, and the overall accounting duties for both the Agency and the Housing Department. Ms. Tapia received a Bachelor of Science degree, graduating Summa Cum Laude, in Business and Management from the University of Redlands and currently is completing graduate studies in Management at the University of Redlands. Homer Croy serves as the Assistant City Manager for Development Services. The Development Services Division is comprised of three departments: Building and Safety, Community Development and Public Works. Mr. Croy has been employed by the City since 2000, when he was hired to serve as the Director of Building and Safety. Mr. Croy has been employed in city government service since 1985, having served in the cities of Pomona, San Gabriel, and Simi Valley. During his tenure in government service, Mr. Croy has had direct experience with earthquake disaster recovery, project design and construction, FEMA floodplain management, and construction management. Sheila R. Gilligan serves as the Assistant City Manager for Community Services, a position she has held since 2000. She is responsible for the areas of Administration (including grants and franchise agreements), Human Resources, City Clerk, Civic Arts, Marketing and Promotion, Public Information, the Visitor’s Information Center, and special events for the City. Prior to her current position, Ms. Gilligan served as the Director of Community Affairs while also serving as the City Clerk. Ms. Gilligan served as City Clerk from 1976 to June, 2001. Ms. Gilligan has been active in the civic affairs for the City, and, is the Past President of Soroptimist International of Palm Desert and also served on the Board of Directors of the Family Y.M.C.A., the Palm Desert Youth Center, the Haymen Center, and is currently President of the Desert Cancer Foundation. Paul S. Gibson serves as Treasurer/Finance Director of the Agency and the City of Palm Desert, a position he has held since 1988. Prior to this position, Mr. Gibson served for three years as the Accounting Supervisor for the City. Subsequent to this date, Mr. Gibson spent five years with Imperial County as the Accountant-Auditor for the Auditor Controller’s office. Mr. Gibson holds a Bachelor of Science degree in Accounting from San Diego State University. David L. Yrigoyen serves as the Director of Redevelopment/Housing with the Agency. Prior to his current position and beginning in 1985, Mr. Yrigoyen served as the Senior Administrative Assistant to the Agency and then as Redevelopment Manager. Prior service includes work with the City of Coachella, California, as the Economic Development Coordinator, a position he held since 1982. Mr. Yrigoyen received a Bachelor of Arts degree in Political Science from University of California, Berkeley, and a Master of Arts degree in Management from National University, San Diego. 45 Rachelle D. Klassen started with the City’s Finance Department in June, 1995. Since 1997 she has worked in the City Clerk’s Office; initially as the Records Technician, appointed Deputy City Clerk in 1998, and City Clerk on July 1, 2002. She received Certified Municipal Clerk status from the International Institute of Municipal Clerks in October, 2001. As City Clerk, she also serves as Secretary to the Redevelopment Agency, Housing and Financing Authorities, with responsibilities of preparing and presenting all agendas and minutes for same, maintaining all official City/Agency/Authority records, as well as the related duties of City elections and being available to the public for information on legislative and administrative actions. Her background includes an Associate in Arts Degree, with honors, from Waldorf College, Forest City, Iowa, with continuing units obtained at College of the Desert since relocating to the Coachella Valley. For the 12 years before relocating to California, she was administrative assistant to both the president and vice president of the world’s largest manufacturer of grain drying and handling equipment. Agency Powers The Agency is charged with the responsibility of eliminating blight within its redevelopment project areas through the process of redevelopment. Generally, this process culminates when the Agency disposes of land for development by the private sector. Before this can be accomplished, the Agency must complete the process of acquiring and assembling the necessary sites, relocating residents and businesses, demolishing the deteriorated improvements, grading and preparing the sites for purchase by developers and providing for ancillary offsite improvements. All powers of the Agency are vested in its five members. The Agency exercises all of the governmental functions authorized under the Redevelopment Law in carrying out projects and has sufficient broad authority to acquire, develop, administer and sell or lease property, including the right of eminent domain and the right to issue bonds, notes and other evidences of indebtedness and expend their proceeds. The Agency can clear buildings and other improvements and develop as a building site any real property owned or acquired, and in connection with such development, cause streets, highways and sidewalks to be constructed or reconstructed and public utilities to be installed. Redevelopment in the State of California may be carried out pursuant to the Redevelopment Law. Section 33020 of the Redevelopment Law defines redevelopment as the planning, development, replanning, redesign, clearance, reconstruction or rehabilitation, or any combination of these, of all or part of a survey area and the provision of such residenti al, commercial, industrial, public or other structures or spaces as may be appropriate or necessary in the interest of the general welfare, including recreational and other facilities incidental or appurtenant to them. The Agency may, out of the funds available to it for such purposes, pay for all or part of the cost of land and buildings, facilities, structures or other improvements to be publicly owned, to the extent that such improvements are of benefit to the relevant project area or the immediate neighborhood in which the project is located no other reasonable means of financing is available and the payment of funds will assist in the elimination of one or more blighting conditions inside the project area or provide housing for low and moderate income persons and is consistent with the implementation plan adopted pursuant to section 33490 of the Redevelopment Law. The Agency must sell or lease remaining property within a project area for redevelopment by others in strict conformity with the applicable r edevelopment plan, and may specify a period within which such redevelopment must begin and be completed. 46 Financial Information Included in this Official Statement, as APPENDIX C, are the audited financial statements of the Agency for the Fiscal Year ended June 30, 2005. Redevelopment Project Areas The Agency is presently charged with the responsibility of the ongoing administration and implementation of four redevelopment project areas within the City. Pass-Through Agreements The Agency has entered into several agreements to pay tax increment revenues to certain taxing agencies entitled to receive ad valorem taxes from property located within the Project Area in an amount which in the Agency’s determination is appropriate to alleviate any financial burden or detriment caused by redevelopment activities within the Project Area. These agreements normally provide for a pass-through of tax increment revenues directly to the affected taxing agency, and therefore are commonly referred to as “pass-through agreements” or “tax-sharing agreements.” See “APPENDIX A — Fiscal Consultant’s Report” for a description of these pass-through agreements. Regulatory Issues The Agency is in compliance with the provisions of the California Environmental Quality Act, constituting Division 13 (commencing with Section 21000) of the California Public Resources Code with respect to the Project Area. VERIFICATION OF MATHEMATICAL COMPUTATIONS The arithmetical accuracy of certain computations included in the schedules provided by the Agency or the Authority relating to (a) computation of forecasted receipts of principal and interest on amounts deposited with the trustee for the 1995 Bonds and the forecasted payments of principal and interest to redeem the 1995 Bonds, and (b) computation of the yields on the Bonds will be examined by Grant Thornton, Minneapolis, Minnesota (the “Verification Agent”). Such computations are based solely upon assumptions and information supplied by the Agency or the Authority. The Verification Agent has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information upon which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. 47 CONCLUDING INFORMATION Continuing Disclosure The Agency will undertake all responsibilities for continuing disclosure to Owners of the Bonds as described below. The Insurer as a provider of municipal bond insurance is not subject to the continuing disclosure requirements of Securities and Exchange Commission Rule 15c2- 12, and the Agency will not provide any ongoing disclosure with respect to the Insurer. The Agency will covenant for the benefit of Bondholders to provide certain financial information and operating data relating to the Agency and the Project Area by not later than six months after the end of the Fiscal Year to which such information pertains, commencing with the 2005-06 Fiscal Year (the “Annual Report”), and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed with each Nationally Recognized Municipal Securities Information Repository and with any then existing State Repository (collectively, the “Repositories”). Currently, there is no State Repository. The notices of material events will be filed with the Municipal Securities Rulemaking Board. The specific nature of the information to be contained in the Annual Report or the notices of material events is described in “APPENDIX G - FORM OF CONTINUING DISCLOSURE AGREEMENT” attached hereto. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). The Agency has not failed to comply in any material respect with any of its other continuing disclosure undertakings under Rule 15c2-12(b)(5). Underwriting The Underwriter expects to purchase the Bonds at a purchase price of $______________, representing the principal amount of the Bonds, less an Underwriter’s discount of $______________, plus an initial issue premium of $______________. The Underwriter intends to offer the Bonds to the public initially at the prices set forth on the inside front cover page of this Official Statement, which prices may subsequently change without any requirement of prior notice. 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. Legal Opinion The Bond Counsel firm of Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, will render its final approving legal opinion with respect to the Bonds substantially in the form set forth in APPENDIX B hereto. The legal opinion is only as to legality of the Bonds and is not intended to be nor is it to be interpreted or relied upon as a disclosure document or an express or implied recommendation as to the investment quality of the Bonds. Tax-Exempt Status of the Bonds In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under existing law interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and is not an item of tax preference for purposes of the federal alternative 48 minimum tax imposed on individuals and corporations. Bond Counsel will express no opinion as to any other federal tax consequences regarding the Bonds. The opinion on federal tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants, of the Agency and the Authority that are intended to assure the foregoing, including that the Bonds are and will remain obligations, the interest on which is excluded from gross income for federal income tax purposes. Bond Counsel will not independently verify the accuracy of those representations and certifications. The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and to remain excluded from gross income for federal income tax purposes. Some of these qualifications and conditions require future or continued compliance after issuance of the obligations for the interest to be and to continue to be excluded from the date of issuance. Noncompliance with these qualifications and conditions by the Authority or the Agency may cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. The Authority and the Agency have covenanted to take the actions required of them for the interest on the Bonds to be and to remain excluded from gross income for federal income tax purposes, and not to take any actions that would adversely affect that exclusion. Under the Code, a portion of the interest on the Bonds earned by certain corporations may be subject to a corporate alternative minimum tax. In addition, interest on the Bonds may be subject to a branch profits tax imposed on certain foreign corporations doing business in the United States and to a tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owners of the Bonds. Bond Counsel will express no opinion regarding those consequences. Any excess of the stated redemption price at maturity of the Bonds over the initial offering price to the public of the Bonds set forth on the inside cover of this Official Statement is “original issue discount.” Such original issue discount accruing on a Bond is treated as interest excluded from the gross income of the owner thereof for federal income tax purposes and exempt from California personal income tax. Original issue discount on any Bond purchased at such initial offering price and pursuant to such initial offering will accrue on a semiannual basis over the term of the Bond on the basis of a constant yield method and, within each semiannual period, will accrue on a ratable daily basis. The amount of original issue discount on such a Bond accruing during each period is added to the adjusted basis of such Bond to determine taxable gain upon disposition (including sale, redemption or payment on maturity) of such Bond. The Code incl udes certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds other than at the initial offering price and pursuant to the initial offering. Any person considering purchasing a Bond should consult his or her own tax advisors with respect to the tax consequences of ownership of bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering and the original offering price, the allowance of a deduction for any loss on a 49 sale or other disposition, and the treatment of accrued original issue discount on such bonds under federal individual and corporate alterative minimum taxes. If the Bonds were offered and sold to the public at a price in excess of their stated redemption price (the principal amount) at maturity, that excess constitutes “premium.” For federal income tax purposes, that premium is amortized over the period to maturity of the Bonds, based on the yield to maturity of the Bonds, compounded semiannually. No portion of that premium is deductible by the owner of a Bond. For purposes of determining the owner’s gain or loss on the sale, redemption (including redemption at maturity) or other disposition of a Bond, the owner’s tax basis in the Bond is reduced by the amount of premium that accrues during the period of ownership. As a result, an owner may realize taxable gain for federal income tax purposes from the sale or other disposition of a Bond for an amount equal to or less than the amount paid by the owner for that Bond. A purchaser of a Bond in the initial public offering at the price for that Bond stated on the inside cover of this Official Statement who holds that Bond to maturity will realize no gain or loss upon the retirement of that Bond. Owners of the Bonds should consult their own tax advisers as to the determination for federal income tax purposes of the amount of premium properly accruable in any period with respect to the Bonds and as to other federal tax consequences and the treatment of premium for purposes of state and local taxes on, or based on, income. Purchasers of the Bonds at other than their original issuance at the respective prices indicated on the inside cover of this Official Statement should consult their own tax advisers regarding other tax considerations such as the consequences of market discount or premium. In the further opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State of California. A copy of the proposed form of Bond Counsel’s final approving opinion with respect to the Bonds is attached hereto as APPENDIX B. No 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 or the Indenture 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. Ratings The Bonds are rated “________” by Moody’s Investors Service and “________” by Standard & Poor’s Ratings Group and “_________” by Fitch Ratings. The ratings reflect the coverage of payment when due of principal of and interest on the Bonds by a municipal bond insurance policy to be issued by the Insurer simultaneously with the issuance of the Bonds. The ratings reflect only the views of the rating organizations, and explanations of the significance of the ratings may be obtained from Moody’s Inv estors Service, Inc., 99 Church Street, New York, New York 10007 and Standard & Poor’s Ratings Group, 55 Water Street, New York, New York, 10041. There is no assurance that the ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of the rating agencies circumstances so warrant. Any such downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Bonds. 50 Miscellaneous All of the preceding summaries of the Loan Agreement, the Indenture, the Bond Law, the Redevelopment Law, other applicable legislation, the Redevelopment Plan for the Project Area, 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 Chief Administrative Officer of the Authority have been duly authorized by the Authority. PALM DESERT FINANCING AUTHORITY Chief Administrative Officer A-1 APPENDIX A FISCAL CONSULTANT’S REPORT B-1 APPENDIX B FORM OF OPINION OF BOND COUNSEL [Closing Date] Palm Desert Financing Authority 73-519 Fred Waring Drive Palm Desert, California 92260 Opinion of Bond Counsel with reference to $________________* Palm Desert Financing Authority Subordinate Tax Allocation Refunding Revenue Bonds (Project Area No. 2) 2006 Series A Ladies and Gentlemen: We have examined (i) a record of proceedings relating to the issuance of the above- captioned bonds (the “Bonds”) of the Palm Desert Financing Authority, a public entity of the State of California (the “Authority”); (ii) the Indenture of Trust, dated as of July 1, 2006 (the “Indenture”), by and between the Authority and Wells Fargo Bank, National Association, as trustee (the “Trustee”); (iii) the Project Area No. 2, Loan Agreement, dated as of July 1, 2006 (the “Loan Agreement”), by and among the Authority, the Palm Desert Redevelopment Agency (the “Agency”) and the Trustee; and (iv) such other matters of law as we have deemed necessary to enable us to render the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon such certificates and documents without undertaking to verify the same by independent investigation. The Bonds are issued under and pursuant to the Indenture and the provisions relating to the joint exercise of powers found in Chapter 5 of Division 7 of Title 1 of the Government Code of California, as amended (the “Act”), including the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of the Act. The Bonds are issued for the purpose of making a Loan to the Agency to finance certain public capital improvements for the benefit of the Project Area. Capitalized terms used herein which are not defined herein shall have the meanings given such terms in the Indenture. We are of the opinion that: 1. The Authority is duly created and validly existing under the provisions of the Act. 2. The Authority has the right and power to enter into and carry out its obligations under the Loan Agreement and has duly authorized, executed and delivered the Loan B-2 Agreement, which (assuming due authorization, execution and delivery by the Trustee) constitutes a valid and binding agreement of the Authority enforceable in accordance with its terms. 3. The Authority has the right and power to enter into the Indenture, and the Indenture has been duly and lawfully authorized, executed and delivered by the Authority, and (assuming due authorization, execution and delivery by the Trustee) is in full force and effect in accordance with its terms and is valid and binding upon the Authority and enforceable in accordance with its terms, and no other authorization for the Indenture is required. The Indenture creates the valid pledge which it purports to create of (i) the Revenues (as defined in the Indenture) and (ii) certain funds established by the Indenture, including the investments, if any, thereof; subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture. 4. The Authority is duly authorized and entitled to issue the Bonds, and the Bonds have been duly and validly authorized and issued by the Authority in accordance with the Constitution and statutes of the State of California, including the Act, and in accordance with the Indenture. The Bonds constitute the valid and binding obligations of the Authority as provided in the Indenture, are enforceable in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Act and the Indenture. The Bonds are not an obligation of the State of California, any public agency thereof (other than the Authority), or any member of the Authority and neither the faith and credit nor the taxing power of the State of California or any public agency thereof or any member of the Authority is pledged for the payment of the Bonds. The Authority has no taxing power. 5. The Agency has the right and power to enter into and carry out its obligations under the Loan Agreement and has duly authorized, executed and delivered the Loan Agreement, which (assuming due authorization, execution and delivery by the Trustee) constitutes a valid and binding agreement of the Agency enforceable in accordance with its terms. The Loan Agreement creates the valid pledge which it purports to create of the Tax Revenues (as defined in the Loan Agreement) and the Reserve Fund, subject only to the provisions of the Loan Agreement permitting the application thereof for the purposes and on the terms and conditions set forth in the Loan Agreement. 6. Interest on the Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the covenant described below, is excluded from gross income for Federal income tax purposes. The Bonds are not “specified private activity bonds” within the meaning of Section 57(a)(5) of the Internal Revenue Code of 1986, as amended (the “Code”) and, therefore, the interest on the Bonds will not be treated as a preference item for purposes of computing the alternative minimum tax imposed by Section 55 of the Code. However, we note a portion of the interest on Bonds owned by corporations may be subject to the Federal alternative minimum tax, which is based in part on adjusted current earnings. The Code sets forth certain requirements which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from gross income for Federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in gross income retroactive to the date of issue of the Bonds. The Authority has covenanted in the Indenture to satisfy, or take such actions as may be necessary to cause to be satisfied, each provision of the Code necessary to maintain the exclusion of the interest on the Bonds from gross income for Federal income tax purposes pursuant to Section 103(a) of the Code. B-3 Certain requirements and procedures contained or referred to in the Indenture and other relevant documents may be changed and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. We express no opinion as to any Bond, or the interest thereon, if any change occurs or action is taken upon the advice or approval of other bond counsel. Except as stated in the foregoing paragraph numbered 6 and the paragraph immediately following paragraph 6, we express no opinion as to any Federal or state tax consequences of the ownership or disposition of the Bonds. The opinions expressed in the paragraphs numbered 2, 3, 4 and 5 hereof are qualified to the extent that the enforceability of the Loan Agreement, the Indenture and the Bonds may be limited by any applicable bankruptcy, insolvency, debt adjustment, moratorium, reorganization or other similar laws affecting creditors’ rights generally or as to the availability of any particular remedy. Respectfully submitted, C-1 APPENDIX C AGENCY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2005 D-1 APPENDIX D CITY OF PALM DESERT GENERAL INFORMATION The following information concerning the City of Palm Desert, the County of Riverside and surrounding areas is included only for the purpose of supplying general information regarding the community. The Bond and the Loan are not an obligation of the City. The following information concerning the City and surrounding areas are included only for the purpose of supplying general information regarding the community. The Local Obligations and the Bonds are not a debt of the City, the State, or any of its political subdivisions and neither said City, said State, nor any of its political subdivisions is liable therefor. See the section herein entitled "SECURITY FOR THE BONDS AND SOURCES OF PAYMENT THEREFOR." General Descri ption and Background The City of Palm Desert (the “City”) is located in 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 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. According to State Department of Finance estimates, the City population as of January 1, 2005 was 49,280. The City covers an area of 24.75 square miles. Population The following sets forth the City, the County and the State population estimates as of January 1 for the years 2002 to 2006: CITY OF PALM DESERT, RIVERSIDE COUNTY AND STATE OF CALIFORNIA Estimated Population Year (January 1) City of Palm Desert Riverside County State of California 2002 43,129 1,654,220 35,088,671 2003 44,490 1,726,754 35,691,442 2004 45,604 1,807,624 36,245,016 2005 49,595 1,888,311 36,728,196 2006 49,539 1,953,330 37,172,015 Source: State of California Department of Finance, Demographic Research Unit. Commerce Total taxable sales reported during calendar year 2004 in the City were reported to be $1,433,296,000, a 10.5% increase over the total taxable sales of $1,296,730,000 reported during the first quarter calendar year 2003. The number of establishments selling merchandise D-2 subject to sales tax and the valuation of taxable transactions in the City is presented in the following table. CITY OF PALM DESERT Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in thousands) Retail Stores Total All Outlets Number of Permits Taxable Transactions % Change Number of Permits Taxable Transactions % Change 2000 1,376 $1,020,025 -- 2,627 $1,217,986 -- 2001 1,529 1,015,932 -0.4% 2,833 1,211,069 -0.6% 2002 1,532 1,019,327 0.3% 2,979 1,209,385 -0.1% 2003 1,538 1,103,689 8.3% 3,146 1,296,730 7.2% 2004 1,684 1,228,411 11.3% 3,254 1,433,296 10.5% Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions within the County is presented in the following table. COUNTY OF RIVERSIDE Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in thousands) Retail Stores Total All Outlets Number of Permits Taxable Transactions % Change Number of Permits Taxable Transactions % Change 2000 16,309 $12,190,474 -- 36,117 $16,979,449 -- 2001 17,403 13,173,281 8.1% 38,011 18,231,555 7.4% 2002 17,646 14,250,733 8.2% 38,767 19,498,994 7.0% 2003 18,300 16,030,952 12.5% 40,833 21,709,135 11.3% 2004 20,642 18,715,949 16.7% 42,826 25,237,148 16.3% Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). D-3 Employment and Industry The City is included in the Riverside-San Bernardino labor market area. The unemployment rate in Riverside County was 4.7 percent in February 2006, up from a revised 4.5 percent in January 2006, and below the year-ago estimate of 5.5 percent. This compares with an unadjusted unemployment rate of 5.4 percent for California during the same period. The following table shows the average annual estimated numbers of wage and salary workers by industry. Does not include proprietors, the self-employed, unpaid volunteers or family workers, domestic workers in households, and persons in labor management disputes. RIVERSIDE-SAN BERNARDINO METROPOLITAN STATISTICAL AREA (RIVERSIDE COUNTY) Civilian Labor Force, Employment and Unemployment (Annual Averages) 2001 2002 2003 2004 2005 Civilian Labor Force (1) 1,562,300 1,639,700 1,688,300 1,650,500 1,714,000 Employment 1,484,100 1,543,400 1,588,700 1,556,100 1,627,700 Unemployment 78,200 96,300 99,600 94,400 86,300 Unemployment Rate 5.0% 5.9% 5.9% 5.7% 5.0% Wage and Salary Employment: (2) Agriculture 20,900 20,300 20,300 18,700 18,200 Natural Resources and Mining 1,200 1,200 1,200 1,200 1,300 Construction 88,400 90,900 99,000 111,800 122,200 Manufacturing 118,600 115,400 116,100 120,100 120,200 Wholesale Trade 41,600 41,900 43,500 45,600 49,200 Retail Trade 132,200 137,500 142,700 153,800 165,000 Transportation, Warehousing and Utilities 45,600 46,800 50,100 55,500 59,700 Information 14,600 14,100 13,900 14,000 14,400 Finance and Insurance 22,900 23,500 25,700 28,000 29,900 Real Estate and Rental and Leasing 15,300 15,900 16,900 17,700 18,700 Professional and Business Services 101,700 106,800 115,400 125,500 132,500 Educational and Health Services 106,000 112,400 115,800 118,400 120,000 Leisure and Hospitality 104,400 107,200 109,000 116,700 122,400 Other Services 37,100 38,100 38,400 39,300 41,200 Federal Government 16,900 16,900 17,000 17,300 18,600 State Government 25,800 26,600 26,600 26,500 27,000 Local Government 157,600 169,300 167,900 168,700 174,800 Total All Industries 1,050,700 1,084,800 1,119,400 1,178,700 1,235,400 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. Source: State of California Employment Development Department. D-4 Major Employers The following table lists the largest employers within the County, listed alphabetically: COUNTY OF RIVERSIDE Major Employers (As of January 2006) Employer Name Location Industry C A State Transportation Lake Elsinore Government Offices-State Casino Morongo Cabazon Tourist Attractions Chase Manhattan Mortgage Corp Moreno Valley Real Estate Loans Crossroads Truck Dismantling Mira Loma Automobile Dismantling/Recycling (Whol) Desert Regional Medical Ctr Palm Springs Hospitals Eisenhower Medical Ctr Rancho Mirage Clinics Guidant Corp Temecula Physicians & Surgeons Equip & Supls-Mfrs Jw Marriott Desert Springs Rst Palm Desert Hotels & Motels La Quinta Resort & Club La Quinta Hotels & Motels Labtechniques Rancho Mirage Laboratories-Medical Mountain & Dunes Golf Courses La Quinta Golf Courses-Private Oasis Distributing Thermal Fruits & Vegetables-Growers & Shippers Parkview Community Hospital Riverside Hospitals Pechanga Resort & Casino Temecula Casinos Riverside Community College Riverside Schools-Universities & Colleges Academic Riverside Community Hospital Riverside Hospitals Riverside County Regional Med Moreno Valley Hospitals Signatures Perris Mail Order & Catalog Shopping Spa Resort Casino Palm Springs Casinos Starcrest Perris Mail Order & Catalog Shopping Starcrest Products Of Ca Perris Mail Order & Catalog Shopping Sun World Intl Inc Coachella Fruits & Vegetables-Growers & Shippers University Of California Riverside Schools-Universities & Colleges Academic Valley Health System Hemet Hospitals Watson Pharmaceuticals Inc Corona Drug Millers Source: California Employment Development Department, extracted from The America's Labor Market Information System (ALMIS) Employer Database. D-5 Construction Activity The following is 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) 2001 2002 2003 2004 2005 Permit Valuation New Single-family $82,145.0 $60,526.9 $65,066.1 $81,436.8 $46,917.6 New Multi-family 28,885.0 27,001.6 11,992.5 11,198.0 17,553.1 Res. Alterations/Additions 9,043.2 12,957.5 9,328.9 11,103.3 13,660.2 Total Residential 120,073.2 100,486.0 86,387.6 103,738.2 78,130.9 New Commercial 11,177.0 14,707.5 7,272.6 19,863.5 60,005.2 New Industrial 5,438.4 3,012.0 712.6 3,005.1 13,495.5 New Other 1,264.2 1,160.0 1,249.8 7,896.1 5,278.0 Com. Alterations/Additions 18,439.4 22,534.2 10,888.0 12,347.4 13,756.7 Total Nonresidential 36,319.0 41,413.7 20,123.0 43,112.1 92,535.4 New Dwelling Units Single Family 255 221 237 325 100 Multiple Family 411 310 101 111 135 TOTAL 666 531 338 436 235 Source: Construction Industry Research Board, Building Permit Summary. COUNTY of Riverside Building Permit Valuation (Valuation in Thousands of Dollars) 2001 2002 2003 2004 2005 Permit Valuation New Single-family $3,051,190.4 $3,670,371.4 $4,665,675.7 $5,997,513.2 $6,243,791.7 New Multi-family 174,628.0 165,413.0 406,483.0 404,615.9 407,432.1 Res. Alterations/Additions 70,849.7 87,842.9 106,855.8 135,176.6 164,312.5 Total Residential 3,296,668.2 3,923,627.4 5,179,014.5 6,537,305.6 6,815,536.3 New Commercial 287,068.6 297,963.6 360,707.4 580,057.8 552,666.9 New Industrial 74,766.3 80,881.6 112,706.6 203,311.9 120,367.6 New Other 152,854.0 187,510.6 261,793.6 334,001.0 344,703.2 Com. Alterations/Additions 143,351.7 174,785.7 173,165.5 222,495.5 274,337.7 Total Nonresidential 658,040.6 741,141.5 908,373.1 1,339,866.1 1,292,075.4 New Dwelling Units Single Family 16,556 20,591 25,137 29,478 29,994 Multiple Family 2,458 2,073 5,224 4,748 4,140 TOTAL 19,014 22,664 30,361 34,226 34,134 Source: Construction Industry Research Board, Building Permit Summary. D-6 Effective Buying Income “Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor's income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.” CITY OF PALM DESERT; COUNTY OF RIVERSIDE Effective Buying Income 2000 through 2004 Year Area Total Effective Buying Income (000’s Omitted) Median Household Effective Buying Income 2000 City of Palm Desert $ 1,109,327 $46,046 Riverside County 25,144,120 39,293 California 652,190,282 44,464 United States 5,230,824,904 39,129 2001 City of Palm Desert $ 1,008,568 $37,975 Riverside County 23,617,301 37,480 California 650,521,407 43,532 United States 5,303,481,498 38,365 2002 City of Palm Desert $ 1,184,128 $42,299 Riverside County 25,180 ,040 38,691 California 647,879,427 42,484 United States 5,340,682,818 38,035 2003 City of Palm Desert $ 1,238,323 $41,699 Riverside County 27,623 ,743 39,321 California 674,721,020 42,924 United States 5,466,880,008 38,201 2004 City of Palm Desert $ 1,295,785 $42,769 Riverside County 29,468 ,208 40,275 California 705,108,410 43,915 United States 5,692,909,567 39,324 Source: Sales & Marketing Management Survey of Buying Power D-7 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 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 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. E-1 APPENDIX E SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following is a brief summary of the provisions of the Indenture and the Loan Agreement. Such summary is not intended to be definitive, and reference is made to the complete documents for the complete terms thereof. F-1 APPENDIX F FORM OF MUNICIPAL BOND INSURANCE POLICY G-1 APPENDIX G FORM OF CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the “Disclosure Agreement”) is executed and delivered by the Palm Desert Redevelopment Agency (the “Agency”) and Wells Fargo Bank, National Association, as Trustee (the “Trustee”) and MuniFinancial, Inc. (the “Dissemination Agent”) in connection with the issuance of $______________ Palm Desert Financing Authority, Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A, $______________ Palm Desert Financing Authority, Tax Allocation Capital Appreciation Revenue Bonds (Project Area No. 2), 2006 Series B, $______________ Palm Desert Financing Authority, Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C, and $______________ Palm Desert Financing Authority, Subordinate Tax Allocation Capital Appreciation Revenue Bonds (Project Area No. 2), 2006 Series D (together, the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust dated as of July 1, 2006, between the Palm Desert Financing Authority (the “Issuer”) and the Trustee (the “Indenture”). The proceeds of the Bonds are being loaned by the Issuer to the Agency pursuant to a Loan Agreement (as defined in the Indenture). The parties agree as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the parties for the benefit of the Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (defined below). The Agency acknowledges that the Issuer has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Agreement, and has no liability to any person, including any Owner of Bonds, with respect to any such reports, notices or disclosures. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” shall mean any Annual Report provided by the Agency pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Disclosure Representative” shall mean the Executive Director of the Agency or his or her designee, or such other person as the Agency shall designate in writing to the Trustee and Dissemination Agent from time to time. “Dissemination Agent” shall mean MuniFinancial, Inc., acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Agency and which has filed with the Trustee a written acceptance of such designation. “Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. “National Repository” shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. “Official Statement” shall mean the final Official Statement with respect to the Bonds. G-2 “Owners” shall mean the registered owners of the Bonds or, if the Bonds are registered in the name of a depository, the beneficial owners of the Bonds. “Participating Underwriter” shall mean the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds. “Repository” shall mean each National Repository and each State Repository. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934. “State Repository” shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule. As of the date of this Agreement, there is no State Repository. SECTION 3. Provision of Annual Reports. (a) The Agency shall, or upon written direction shall cause the Dissemination Agent to, not later than six months after the end of the Agency’s Fiscal Year (which currently would be December 31 of each year), commencing with the report for the 2005-2006 Fiscal Year, provide to each Reposit ory an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) Business Days prior to said date, the Agency shall provide the Annual Report to the Dissemination Agent and the Trustee. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Agency may be submitted separately from the balance of the Annual Report. The Agency shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Trustee to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Agency hereunder. The Dissemination Agent and Trustee may conclusively rely upon such certification of the Agency. (b) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to each National Repository or to the Municipal Securities Rulemaking Board and to the appropriate State Repository, if any, in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Annual Report has been furnished to the Dissemination Agent, file a report with the Agency, the Issuer and the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided, and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Reports. The Agency’s Annual Report shall contain or incorporate by reference the following: G-3 (i) the audited financial statements of the Agency, prepared in accordance with generally accepted accounting principles in effect from time to time. If the Agency’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (ii) An update of the tabular information set forth in the Official Statement under the captions “SUBORDINATE TAX REVENUES -- Schedule of Historical Tax Revenues” and “-- Top Ten Taxpayers.” Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Agency or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Agency shall clearly identify each such other document so incorporated by reference. SECTION 5. Reporting of Material Events. (a) Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; and (6) adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; (7) modifications to rights of security holders; (8) unscheduled bond calls; (9) defeasances; (10) release, substitution or sale of property securing repayment of the securities; and (11) rating changes. (b) The Trustee shall, promptly upon obtaining actual knowledge of the occurrence of any of the Listed Events contact the Disclosure Representative, inform such person of the event, and request that the Agency promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f) and promptly notify the Trustee in writing whether or not to report the event to the Owners (unless notice to the Owners is required by either of the Indentures). For purposes of this Disclosure Agreement, “actual knowledge” of the occurrence of such Listed Events shall mean actual knowledge by the officer at the Trust Office of the Trustee with regular responsibility for the administration of the Indenture. G-4 (c) Whenever the Agency obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the Agency shall as soon as possible determine if such event is material under applicable federal securities laws. (d) If the Agency has determined that knowledge of the occurrence of a Listed Event is material, the Agency shall promptly notify the Dissemination Agent and the Trustee in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f) and shall instruct the Trustee to report the occurrence to Owners. (e) If in response to a request under subsection (b), the Agency determines that the Listed Event is not material, the Agency shall so notify the Dissemination Agent and the Trustee in writing and instruct the Dissemination Agent and the Trustee not to report the occurrence. (f) If the Dissemination Agent has been instructed by the Agency to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository, with a copy to the Agency. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Indenture. SECTION 6. Termination of Reporting Obligation. The obligations of the Agency, the Trustee and the Dissemination Agent under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds; provided that the obligations of the Trustee and the Dissemination Agent hereunder shall also terminate upon the resignation or removal of such Trustee or Dissemination Agent. SECTION 7. Dissemination Agent. The Agency may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any suc h Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be MuniFinancial, Inc. The Dissemination Agent may resign its duties hereunder at any time upon written notice to the Agency. SECTION 8. Amendment. Notwithstanding any other provision of this Disclosure Agreement, the parties may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the Agency provided that neither the Trustee nor the Dissemination Agent shall be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder) only if: (a) the amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the Agency, or type of business conducted; (b) this Disclosure Agreement, as amended, would have complied with the requirements of the Rule at the time of sale of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; G-5 (c) the amendment does not materially impair the interests of Owners, as determined by parties unaffiliated with the Agency (such as, but without limitation, the Agency’s bond counsel) or by Owners’ consent pursuant to Section 7.01 of the Indenture; and (d) the annual financial information containing (if applicable) the amended operating data or financial information will explain, in narrative form, the reasons for the amendment and the “impact” (as that word is used in the letter from the staff of the Securities and Exchange Commission to the National Association of Bond Lawyers dated June 23, 1995) of the change in the type of operating data or financial information being provided. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Agency chooses to include any information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Disclosure Agreement, the Agency shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Agency to comply with any provision of this Disclosure Agreement, the Trustee shall, at the written direction of any Participating Underwriter or the Owners of a majority in aggregate principal amount of Outstanding Bonds (but only to the extent funds have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges of the Trustee whatsoever, including, without limitation, fees and expenses of its attorneys), or any Owner may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Agency, the Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement; provided that any such action may be instituted only in the Federal or State Court located in the County of Los Angeles, State of California and no remedy other than specific performance may be sought or granted. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture or the Loan Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Agency, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Agency agrees to indemnify and save the Dissemination Agent and the Trustee, their officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s or Trustee’s negligence or wilful misconduct. The Dissemination Agent may rely on and shall be protected in acting or refraining from acting upon any direction from the Issuer or an opinion of nationally recognized bond counsel. The Dissemination Agent and the Trustee shall be paid compensation by the Agency for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent and the Trustee shall have no duty or obligation to review any information G-6 provided to them by the Agency hereunder and shall not be deemed to be acting in any fiduciary capacity for the Authority, the Agency, the Owners, or any other party. The obligations of the Agency under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach of this Agreement. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Agency, the Trustee, the Dissemination Agent, the Participating Underwriter and Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 13. Notices. Notices should be sent in writing to the following addresses. The following information may be conclusively relied upon until changed in writing. Agency: Palm Desert Redevelopment Agency 73-510 Fred Waring Drive Palm Desert, California 92260 (760) 346-0611 (760) 346-0574 Fax Dissemination Agent: MuniFinancial, Inc. 27368 Via Industria, Suite 110 Temecula, California 92590 (909) 587-3500 (909) 587-3510 fax Trustee: Wells Fargo Bank, National Association 707 Wilshire Boulevard, 17th Floor Los Angeles, CA 90017 (213) 614-3353 (213) 614-3355 Fax G-7 SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. PALM DESERT REDEVELOPMENT AGENCY By Executive Director WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By Authorized Officer MUNIFINANCIAL, INC., as Dissemination Agent By Authorized Officer G-8 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligated Party: Palm Desert Redevelopment Agency (the “Agency”) Name of Bond Issue: Palm Desert Financing Authority $__________ Series 2006 A Bonds $__________ Series 2006 B Bonds $__________ Series 2006 C Bonds $__________ Series 2006 D Bonds Date of Delivery: ______________, 2006 NOTICE IS HEREBY GIVEN that the Agency has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement dated as of July 1, 2006 between the Agency and Wells Fargo Bank, National Association. [The Agency anticipates that the Annual Report will be filed by ________________.] Dated: MuniFinancial, Inc. on behalf of the Agency cc: Executive Director, Palm Desert Redevelopment Agency H-1 APPENDIX H BOOK-ENTRY SYSTEM The information set forth below has been provided by DTC. The Authority and the Underwriters make no representation as to the accuracy or the completeness of such information. All Beneficial Owners should confirm the following information with DTC or the DTC Participants. 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 certificate 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 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 two million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly- owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC, and EMCC, are also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of 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 (“Benefi cial 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, but Beneficial Owners are 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 Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive H-2 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 Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority 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). Principal and interest 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 the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC (nor its nominee), the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede &Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates 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, Bond certificates will be printed and delivered. I-1 APPENDIX I TABLES OF ACCRETED VALUES Jones Hall Draft 5/25/06 $________________ PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 2) 2006 SERIES A $________________ PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE CAPTIAL APPRECIATION BONDS (PROJECT AREA NO. 2) 2006 SERIES B $________________ PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2) 2006 SERIES C $________________ PALM DESERT FINANCING AUTHORITY SUBORDINATE TAX ALLOCATION REVENUE CAPTIAL APPRECIATION BONDS (PROJECT AREA NO. 2) 2006 SERIES D BOND PURCHASE AGREEMENT ____________, 2006 Palm Desert Financing Authority 73-510 Fred Waring Drive Palm Desert, CA 92260-2578 Ladies and Gentlemen: The undersigned (the “Underwriter”) offers to enter into this bond purchase agreement (this “Purchase Agreement”) with the Palm Desert Financing Authority (the “Authority”) and the Palm Desert Redevelopment Agency (the “Agency”) which will be binding upon the Authority, the Agency and the Underwriter upon the acceptance hereof by the Authority and the Agency. This offer is made subject to its acceptance by the Authority and the Agency by execution of this Purchase Agreement and its delivery to the Underwriter on or before 11:59 p.m., California time, on the date hereof. All terms used herein and not otherwise defined shall have the respective meanings given to such terms in the Indentures (as hereinafter defined). Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter hereby agrees to purchase from the Authority for offering to the public, and the Authority hereby agrees to sell to the Underwriter for such purpose, all (but not less than all) of the (collectively referred to herein as the “Bonds”): Series 2006A Bonds: $________________ principal amount of the Authority’s Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A (the “2006A Bonds”) at a purchase price for the 2006A Bonds of $________________ (being the aggregate principal amount thereof, less an underwriter’s discount of $________________ and plus a net original issue premium of $________________); -2- Series 2006B Bonds: $________________ principal amount of the Authority’s Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series B (the “2006B Bonds”) at a purchase price for the 2006B Bonds of $________________ (being the aggregate principal amount thereof, less an underwriter’s discount of $________________ and plus a net original issue premium of $________________); Series 2006C Bonds: $________________ principal amount of the Authority’s Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C (the “2006C Bonds”) at a purchase price for the 2006C Bonds of $________________ (being the aggregate principal amount thereof, less an underwriter’s discount of $________________ and plus a net original issue premium of $________________); and Series 2006D Bonds: $________________ principal amount of the Authority’s Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series D (the “2006D Bonds”) at a purchase price for the 2006D Bonds of $________________ (being the aggregate principal amount thereof, less an underwriter’s discount of $________________ and plus a net original issue premium of $________________). Section 2. Description of 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 2006A Bonds, 2006B Bonds and 2006C Bonds will be issued pursuant to an Indenture of Trust, dated as of July 1, 2006 (the “Senior Indenture”), by and between the Authority and Wells Fargo Bank, National Association, as trustee thereunder (the “Trustee”) The 2006D Bonds will be issued pursuant to an Indenture of Trust, dated as of July 1, 2006 (the “Subordinate Indenture” and together with the Senior Indenture, the “Indentures”), by and between the Authority the Trustee. The 2006A Bonds and 2006C Bonds are issued as current interest bonds and the 2006B Bonds and 2006D Bonds are issued as capital appreciation bonds. The Bonds shall mature and shall be subject to redemption on the dates and in the amounts and shall bear interest at the rates set forth in the Indenture and the Official Statement dated the date hereof relating to the Bonds (which, together with all exhibits and appendices included therein or attached thereto and such amendments or supplements thereto which shall be approved by the Underwriter, is hereinafter called the “Official Statement”). The proceeds of the 2006A Bonds, 2006B Bonds and 2006C Bonds (the “Senior Bonds”) will be used by the Authority to make three loans (collectively, the “Senior Loan”) to the Palm Desert Redevelopment Agency (the “Agency”) pursuant to a Loan Agreement (the “Senior Loan Agreement”), dated as of July 1, 2006 by and among the Authority, the Agency and the Trustee for the benefit of the Agency’s Project Area No. 2 (the “Project Area”). The proceeds of the 2006D Bonds (the “Subordinate Bonds”) will be used by the Authority to make a loan (the “Subordinate Loan” and together with the Senior Loan”, the “Loans”) to the Agency pursuant to a Loan Agreement (the “Subordinate Loan Agreement”), dated as of July 1, 2006 by and among the Authority, the Agency and the Trustee for the benefit of the Project Area. A portion of the proceeds of the 2006A Loan will be used to refund the indebtedness of the Agency under a Loan Agreement dated as of June 1, 1995 (the "1995 Loan Agreement"), to finance certain redevelopment activities within or of benefit to the Project Area and a portion of the proceeds of all the Loans will be used to finance certain redevelopment activities within or of benefit to the Project Area, provided that proceeds of the loan related to the 2006C Bonds is subject to release from an escrow if and when the conditions for release set forth in the Senior -3- Loan Agreement are met. The refunding of the obligations under the 1995 Loan Agreement will effect a refunding of the corresponding portion of the Authority’s Subordinate Tax Allocation Refunding Revenue Bonds (Project Area No. 2), Series 1995 (the "1995 Bonds"). The Senior Bonds are secured by a pledge of and lien on all of the Tax Revenues (as defined in the Senior Indenture) allocated to the Agency with respect to the Project Area. The Subordinate Bonds are secured by a pledge of and lien on surplus Tax Revenues after payment of the Senior Bonds. The Agency currently has outstanding its (i) Project Area No. 2, Loan Agreement, dated as of March 1, 2002 (the “Senior 2002 Loan Agreement”), by and among the Agency, the Authority and BNY Western Trust Company, as prior trustee (the “Prior Trustee”), and (ii) Project Area No. 2, Loan Agreement, dated as of July 1, 2003 (the “Senior 2003 Loan Agreement” and together with the Senior 2002 Loan Agreement, the “Prior Loan Agreements”), by and among the Agency, the Authority and the Prior Trustee. Each loan under the Prior Loan Agreements is secured by Tax Revenues on parity with the pledge of Tax Revenues pledged to pay the Senior Loan. The scheduled payment of principal of and interest on the Senior Bonds will be insured by ____________________ (the “Insurer”) by the issuance of a bond insurance policy (the “Policy”). Section 3. Public Offering. The Underwriter agrees to make a bona fide public offering of all the Bonds initially at the public offering prices (or yields) set forth on Appendix A attached hereto and incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds, provided that the Underwriter shall not change the interest rates set forth on Appendix A. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. Section 4. Delivery of Official Statement. The Agency has delivered or caused to be delivered to the Underwriter prior to the execution of this Purchase Agreement, copies of the Preliminary Official Statement relating to the Bonds (the “Preliminary Official Statement”). Such Preliminary Official Statement is the official statement deemed final by the Agency for purposes of Rule 15c2-12 under the Securities Exchange Act of 1934 (the “Rule”) and approved for distribution by resolution of the Agency. The Agency hereby ratifies, approves and confirms the distribution of the Preliminary Official Statement in connection with the public offering and sale of the Bonds by the Underwriter. The Agency shall have executed and delivered to the Underwriter a certification to such effect in the form attached hereto as Appendix B and hereby ratifies the information contained therein. Within seven (7) business days from the date hereof, the Agency shall deliver to the Underwriter a final Official Statement, executed on behalf of the Agency by an authorized representative of the Agency and dated the date hereof, which shall include information permitted to be omitted by paragraph (b) (1) of the Rule and with such other amendments or supplements as shall have been approved by the Agency and the Underwriter. The Agency also agrees to deliver to the Underwriter, at the Agency’s’ sole cost and at such address as the Underwriter shall specify, as many copies of the Official Statement as the Underwriter shall reasonably request as necessary to comply with paragraph (b) (4) of the Rule and with Rule C- 32 and all other applicable rules of the Municipal Securities Rulemaking Board. The Agency shall undertake, pursuant to the Indentures and a Continuing Disclosure Agreement (the “Continuing Disclosure Agreement”), to provide certain annual financial -4- information and notices of the occurrence of certain events, if material. The form of the Continuing Disclosure Agreement is appended to the Official Statement. Section 5. The Closing. At 8:00 a.m., California time, on ____________, 2006, (the “Closing”), or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Agency and the Underwriter, the Authority and the Agency shall deliver (i) the Bonds in definitive form (one bond for each maturity) for the Underwriter to the Trustee at the Closing or to The Depository Trust Company (“DTC”) in New York, New York, or such other location as may be specified by the Underwriter, with CUSIP identification numbers thereon, in fully registered form and registered in the name of Cede & Co., and (ii) the closing documents hereinafter mentioned at the offices of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel (the “Bond Counsel”) in Los Angeles, California, or another place to be mutually agreed upon by the Agency and the Underwriter. The Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof by federal funds wire payable to the order of the Trustee on behalf of the Agency. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.” Section 6. Agency Representations, Warranties and Covenants. The Agency represents, warrants and covenants to the Underwriter that: (a) Due Organization and Existence of Agency. The Agency is a public body corporate and politic, organized and existing under the laws of the State, including the Community Redevelopment Law of the State, constituting Part 1 of Division 24 of the Health and Safety Code (the “Redevelopment Law”), with full right, power and authority to execute, deliver and perform its obligations under this Purchase Agreement, the Continuing Disclosure Agreement, and the Loan Agreement (collectively, the “Agency Documents”) and to carry out and consummate the transactions contemplated by the Agency Documents and the Official Statement. (b) Due Authorization and Approval. By all necessary official action of the Agency, the Agency has duly authorized and approved the execution and delivery of, and the performance by the Agency of the obligations contained in, the Agency Documents and as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered, the Agency Documents will constitute the legally valid and binding obligations of the Agency enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors’ rights generally. The Agency has complied, and will at the Closing be in compliance in all respects, with the terms of the Agency Documents. The Agency has duly authorized and approved the Preliminary Official Statement and the Official Statement. (c) Official Statement Accurate and Complete. The Preliminary Official Statement was as of its date, and the final Official Statement will be, and at all times subsequent to the date of the final Official Statement up to and including the Closing will be, true and correct in all material respects, and the Preliminary Official Statement contains and the final Official Statement will contain, and up to and including the Closing will contain, no misstatement of any material fact and do not, and up to and including the Closing will not, omit any statement necessary to make the statements contained -5- therein, in the light of the circumstances in which such statements were made, not misleading. (d) Underwriter’s Consent to Amendments and Supplements to Official Statement. The Agency covenants with the Underwriter that during the period of 25 days after the end of the “underwriting period” (as defined in the Rule), if an event occurs, of which the Agency has knowledge, which might or would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Agency shall notify the Underwriter, 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 Agency shall cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, and all printing expenses thereby incurred shall be paid for by the Agency. The Agency will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. (e) No Breach or Default. As of the time of acceptance hereof and as of the time of the Closing, except as otherwise disclosed in the Official Statement, the Agency is not and will not be in breach of or in default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Agency is a party or is otherwise subject which breach or default would materially adversely affect the Agency’s ability to perform under the Agency Agreements, 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, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Agency Documents and the Official Statement and compliance with the provisions of each of such agreements or instruments do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Agency (or any of its officers in their respective capacities as such) is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery 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 its assets or properties or under the terms of any such law, regulation or instrument, except as may be provided by the Agency Documents. (f) No Litigation. As of the time of acceptance hereof and the Closing, except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or threatened (i) in any way questioning the corporate existence of the Agency or the titles of the officers of the Agency to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be -6- pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Agency Documents, the power of the Agency to execute and deliver the Agency Documents or the Official Statement or the consummation of the transactions contemplated thereby, or contesting the exclusion of the interest on the Bonds from taxation or contesting the powers of the Agency and its authority to pledge the Subordinate Tax Revenues; (iii) which may result in any adverse change relating to the Agency which would materially adversely affect the Agency’s ability to perform under the Agency Documents; or (iv) contesting the completeness or accuracy of the Preliminary Official Statement or the final Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement or the final Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) Preliminary Official Statement. For purposes of the Rule, the Agency has heretofore deemed final the Preliminary Official Statement prior to its use and distribution by the Underwriter, except for the information specifically permitted to be omitted by paragraph (b) (1) of the Rule. The Agency has never failed to comply timely with any filing requirements under the Rule. (h) Excess Surplus. The Agency’s Low and Moderate Income Housing Fund established pursuant to Section 33334.3 of the Law does not, on the date hereof, contain an “excess surplus” (within the meaning of Section 33334.12 of the Law) that would cause the Agency to be subject to the sanctions contained in Section 33334.12(e) (1) of the Law. (i) Arbitrage Certificate. The Agency has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certificates may not be relied upon. (j) No Required Consents. All approvals, consents and orders of any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to the execution and delivery by the Agency of the Agency Documents and the Official Statement have been obtained or will be obtained prior to the Closing (provided the Agency shall not be responsible for state blue sky filings). (k) Certificates of the Agency. Any certificate signed by an authorized officer of the Agency and delivered to the Underwriter shall be deemed a representation and warranty of the Agency to the Underwriter as to the statements made therein. (l) Tax Exemption. The Agency covenants that it will not take any action which would cause interest on the Bonds to be subject to federal income taxation or California personal income taxes (other than to the extent the Bonds will be subject to federal income taxation as described under the caption “Tax Matters” in the Official Statement). (m) Compliance with Rule. There has been no instance in which the Agency has failed to comply in all respects with any undertakings with regard to the Rule. -7- Section 7. Authority Representations, Warranties and Covenants. The Authority represents, warrants and covenants to the Underwriter that: (a) Due Organization and Existence of Authority. The Authority is a joint exercise of powers authority, duly organized and existing, and authorized to transact business and exercise of powers under and pursuant to the provisions of the laws of the State of California and the joint exercise of powers agreement pursuant to which the Authority was created and has, and on Closing Date for each respective series of Bonds will have, full legal right, power and authority to enter into this Purchase Agreement, and to carry out and to consummate the transactions contemplated by this Purchase Agreement and the Official Statement. (b) Due Authorization and Approval. By all necessary official action of the Authority, the Authority has duly authorized and approved the execution and delivery of, and performance by the Authority of the obligations contained in, this Purchase Agreement and as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered, this Purchase Agreement will constitute the legally valid and binding obligation of the Authority enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors’ rights generally. The Authority has complied, and will at the Closing be in compliance in all respects, with the terms of this Purchase Agreement. (c) Official Statement Accurate and Complete. The information relating to the Authority contained in the Preliminary Official Statement and the final Official Statement as amended or supplemented, is correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. (d) Purchase and Sale of Bonds. The Bonds will be purchased and sold by the Authority pursuant to the Mark-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5, Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the “JPA Act”). (e) Compliance with Law and Joint Exercise of Powers Agreement. The Authority has complied, and will on the Cl osing Date for each respective series of Bonds be in compliance, in all respects, with the JPA Act and all other applicable laws of the State of California and the joint exercise of powers agreement pursuant to which the Authority was created. (f) No Breach or Default. As of the time of acceptance hereof and as of the time of the Closing, except as otherwise disclosed in the Official Statement, the Authority is not and will not be in breach of or in default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is a party or is otherwise subject which breach or default would materially adversely affect the Agency’s ability to perform under the Indentures or this Purchase Agreement, and no event has occurred and is continuing which, with the passage of time or the giving of -8- notice, or both, would constitute such a default or event of default under any such instrument; and, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of this Purchase Agreement and compliance with the provisions hereof do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority (or any of its officers in their respective capacities as such) is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery 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 its assets or properties or under the terms of any such law, regulation or instrument, except as may be provided by this Purchase Agreement. (g) No Litigation. As of the time of acceptance hereof and the Closing, except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or threatened (i) in any way questioning the corporate existence of the Authority or the titles of the officers of the Authority to their respective offices; (ii) seeking to restrain or enjoin the sale of the Bonds or in any way contesting or affecting the validity of this Purchase Agreement, the power of the Authority to execute and deliver this Purchase Agreement or the consummation of the transactions contemplated hereby; or (iii) which may result in any adverse change relating to the Authority which would materially adversely affect the Authority’s ability to perform under the Indentures and this Purchase Agreement. (h) No Required Consents. All approvals, consents and orders of any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to the execution and delivery by the Authority of this Purchase Agreement have been obtained. (i) Certificates of the Authority. Any certificate signed by an authorized officer of the Authority and delivered to the Underwriter shall be deemed a representation and warranty of the Authority to the Underwriter as to the statements made therein. Section 8. Closing Conditions. The Underwriter has entered into this Purchase Agreement in reliance upon the representations, warranties and covenants herein and the performance by the Agency of their respective obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter’s obligations under this Purchase Agreement to purchase, accept delivery of, and pay for the Bonds on the Closing Date for each respective series of Bonds are subject to the performance by the Agency and the Authority of their respective obligations hereunder at or prior to the Closing. The Underwriter’s obligations under this Purchase Agreement to purchase and pay for the Bonds shall be subject to the following additional conditions: (a) Bring-Down Representation. The representations, warranties and covenants of the Authority and the Agency contained herein shall be true, complete and correct at the date hereof and at the time of the Closing, as if made on the date of the Closing. -9- (b) Executed Agreements and Performance Thereunder. At the time of the Closing (i) the Agency Documents shall be in full force and effect, and shall not have been amended, modified or supplemented except with the written consent of the Underwriter and (ii) there shall be in full force and effect such resolutions of the Agency and the Authority (the “Resolutions”) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions contemplated by this Purchase Agreement, the Official Statement and the Agency Documents. (c) Closing Documents. At or prior to the Closing, the Underwriter shall receive each of the documents identified in Section 9, such documents shall be in full force and effect and shall not have been amended, modified or supplemented, except as therein permitted or as may have been agreed to in writing by the Underwriter. Section 9. Closing Documents. In addition to the other conditions to the Underwriter’s obligations under this Purchase Agreement to purchase and pay for the Bonds, at or before the Closing of each series of Bonds the Underwriter shall receive each of the following documents as to each respective series, provided the Underwriter may in its sole discretion waive one or more of the conditions imposed by this Purchase Agreement for the protection of the Underwriter and proceed with the Closing. (a) Bond Counsel Opinion. An approving opinion of Bond Counsel dated the date of the Closing and substantially in the form appended to the Official Statement, together with a letter from such counsel, dated the date of the Closing and addressed to the Underwriter, to the effect that the foregoing opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to it. (b) Supplemental Opinion. A supplemental opinion or opinions of Bond Counsel addressed to the Underwriter, in form and substance acceptable to the Underwriter, and dated the date of the Closing substantially to the following effect: (i) This Purchase Agreement has been duly authorized, executed and delivered by the Agency and the Authority, as applicable, and constitute the valid, legal and binding agreements of the Agency and the Authority, as applicable, enforceable in accordance with its terms. (ii) The statements contained in the Official Statement under the captions “INTRODUCTION”, “THE BONDS”, “SECURITY FOR THE BONDS”, CONCLUDING INFORMATION – “Tax-Exempt Status of the Bonds” and Appendices B and E, insofar as such statements purport to summarize certain provisions of the Bonds, the Indentures or federal tax law, accurately summarize the information presented therein; provided that Bond Counsel need not express any opinion with respect to any financial or statistical information contained therein. (iii) The Agency’s obligations under the Indentures are exempt from registration under the Securities Act of 1933, as amended, and the Indentures are exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. -10- (c) Agency Counsel Opinion. An opinion of Counsel to the Agency, dated the date of the Closing and addressed to the Underwriter, in form and substance acceptable to the Underwriter substantially to the following effect: (i) The Agency is a duly organized and validly existing public body, corporate and politic, organized and existing under the Community Redevelopment Law (Part 1 of Division 24 of the Health and Safety Code of the State of California) with full legal right, power and authority to perform all of its obligations under the Loan Agreement and this Purchase Agreement (collectively, the "Legal Documents”). The Agency has duly authorized executed and delivered the Legal Documents and assuming due authorization execution and delivery by the other parties thereto, as necessary, the Legal Documents constitute legal, valid and binding agreements of the Agency enforceable against the Agency in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, moratorium, insolvency, equitable remedies and other laws affecting creditors' rights or remedies. (ii) To the best of our knowledge, there is no action, suit or proceeding before or by a court, public board of body pending or threatened wherein an unfavorable decision, ruling or finding would ( a) affect the creation, organization existence or powers of the Agency 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 Purchase Contract or the transactions contemplated thereby, or any other agreement or instrument related to the issuance of the Bonds to which the Agency is a party. (iii) The execution and delivery of the Legal Documents 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 Agency is a party or is otherwise subject or bound in a manner which would materially adversely affect the Agency s performance under the Legal Documents. (iv) Any approvals, cons ents, 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, the absence of which would materially adversely affect, the performance by the Agency of its obligations under the Legal Documents have been obtained and are in full force and effect. (d) Authority Counsel Opinion. An opinion of Counsel to the Authority, dated the date of the Closing and addressed to the Underwriter, in form and substance acceptable to the Underwriter substantially to the following effect: (i) The Agency is a duly organized and validly existing public body, corporate and politic, organized and existing under the Community Redevelopment Law (Part 1 of Division 24 of the Health and Safety Code of the State of California) with full legal right, power and authority to perform all of its -11- obligations under the Loan Agreement and this Purchase Contract (collectively, the "Legal Documents). The Agency has duly authorized executed and delivered the Legal Documents and assuming due authorization execution and delivery by the other parties thereto, as necessary, the Legal Documents constitute legal, valid and binding agreements of the Agency enforceable against the Agency in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, moratorium, insolvency, equitable remedies and other laws affecting creditors' rights or remedies. (ii) To the best of our knowledge, there is no action, suit or proceeding before or by a court, public board of body pending or threatened wherein an unfavorable decision, ruling or finding would ( a) affect the creation, organization existence or powers of the Agency 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 Purchase Contract or the transactions contemplated thereby, or any other agreement or instrument related to the issuance of the Bonds to which the Agency is a party. (iii) The execution and delivery of the Legal Documents 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 Agency is a party or is otherwise subject or bound in a manner which would materially adversely affect the Agency s performance under the Legal Documents. (iv) Any 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, the absence of which would materially adversely affect, the performance by the Agency of its obligations under the Legal Documents have been obtained and are in full force and effect. (e) Trustee Counsel Opinion. The opinion of counsel to the Trustee, dated the date of the Closing, addressed to the Underwriter, to the effect that: (i) The Trustee is a banking corporation, duly organized and validly existing under the laws of the State of California, having full power to enter into, accept and administer the trust created under the Indentures. (ii) The Indentures have been duly authorized, executed and delivered by the Trustee and each Indenture constitutes the legal, valid and binding obligation of the Trustee enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally and by the application of equitable principles, if equitable remedies are sought. (iii) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has -12- not been obtained is or will be required for the execution and delivery of the Indentures by the Trustee or the consummation by the Trustee of the transactions contemplated by the Indentures. (f) The opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Counsel to the Underwriter, dated the Closing date, addressed to the Agency, and to the Underwriter, to the effect that based upon an examination which they have made, and without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, they have no reason to believe that the Official Statement (other than financial statements and other statistical and financial data and information relating to The Depository Trust Company, New York, New York, and its book-entry system contained therein and incorporated therein by reference, and information regarding the municipal bond insurance policy and the issuer thereof, as to which no view need be expressed) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) Agency Certificate. A certificate of the Agency, dated the date of the Closing, signed on behalf of the Agency by the Executive Director or other duly authorized officer of the Agency to the effect that: (i) The representations, warranties and covenants of the Agency contained herein are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing and the Agency has complied with all of the terms and conditions of this Purchase Agreement required to be complied with by the Agency at or prior to the date of the Closing. (ii) No event affecting the Agency, of which the Agency has actual knowledge, has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (iii) The Agency Documents are in full force and effect and none has been amended in any respect, except as approved in writing by the Underwriter. (iv) Except as otherwise disclosed in the Official Statement and to the best knowledge of such signing officer after due inquiry, there is no litigation, proceeding, action, suit, or investigation at law or in equity before or by any court, governmental agency or body, pending and served on the Agency or threatened against the Agency, challenging the creation, organization or existence of the Agency, or the validity of the Agency Documents or seeking to restrain or enjoin the repayment of the Bonds or in any way contesting or affecting the validity of the Agency Documents or contesting the authority of the Agency to enter into or perform its obligations under any of the Agency Documents, or under which a determination adverse to the Agency would have a material adverse effect upon the financial condition or the revenues of the Agency, or which, in any manner, questions the right of the Agency to use the Subordinate Tax Revenues for -13- repayment of the Loan or affects in any manner the right or ability of the Agency to collect or pledge the Subordinate Tax Revenues. (h) Authority Certificate. A certificate of the Authority, dated the date of the Closing, signed on behalf of the Authority by the Executive Director or other duly authorized officer of the Authority to the effect that: (i) The Authority is a joint exercise of powers agency, duly organized and existing under the laws of the State, including the JPA Act. (ii) The resolution of the Authority approving and authorizing the execution and delivery of this Purchase Agreement (the “Authority Resolution”) was duly adopted at a meeting of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the Authority Resolution is in full force and effect and has not been modified, amended or rescinded. (iii) The representations, warranties and covenants of the Authority contained herein are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing and the Authority has complied with all of the terms and conditions of this Purchase Agreement required to be complied with by the Authority at or prior to the date of the Closing. (iv) There is no litigation, proceeding, action, suit, or investigation at law or in equity before or by any court, governmental Authority or body, pending and served on the Authority or, to the best of such signing officer’s knowledge after due inquiry, threatened against the Authority, challenging the creation, organization or existence of the Authority, or the validity of this Purchase Agreement or contesting the authority of the Authority to enter into or perform its obligations under this Purchase Agreement. (i) Trustee’s Certificate. A certificate of the Trustee, dated the date of Closing, in form and substance acceptable to counsel for the Underwriter, to the following effect: (i) The Trustee is duly organized and existing as a banking corporation in good standing under t he laws of the State of California, having the full power and authority to accept the trusts and to enter into and perform its duties under the Indentures. (ii) The Trustee is duly authorized to enter into the Indentures. (iii) Compliance with the provisions on the Trustee’s part contained in the Indentures will not conflict with or constitute a breach of or default under any judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Trustee is a party or is otherwise subject, or, to the best knowledge of the Trustee, any material law or administrative regulation to which the Trustee is subject, as a result of which the Trustee’s ability to perform its obligations under the Indentures would be impaired, nor will any such 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 -14- properties or assets held by the Trustee pursuant to the lien created by the Indentures under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Indentures. (iv) There is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body that has been served upon the Trustee or to the best knowledge after due inquiry, threatened against the Trustee which in the reasonable judgment of the Trustee would affect the existence of the Trustee or in any way contesting or affecting the validity or enforceability of the Indentures or contesting the powers of the Trustee or its authority to enter into and perform its obligation under the Indentures. (j) A certificate of Rosenow Spevacek Group, Inc., dated the date of Closing, signed by an authorized representative thereof, to the effect that that the Tax Revenues coverage test for the issuance of additional bonds secured by Subordinate Tax Revenues, as required in connection with the Prior Loan Agreements, has been met. (k) Documents. An original executed copy of each of the Agency Documents, the Official Statement and a certified copy of each of the Resolutions, except that it shall be sufficient to provide a copy of the Bonds marked “specimen. (l) Municipal Bond Insurance Policy. A copy of the Policy, as duly executed and delivered by the Insurer. (m) Insurer Counsel Opinion. The opinion of counsel to the Insurer, in form and substance acceptable to the Underwriter. (n) Insurer Certificate. A certificate of the Insurer, in form and substance acceptable to the Underwriter. (o) Ratings. Evidence that the Bonds have been rated “AAA” by S&P and “AAA” by Fitch Ratings. (p) Fiscal Consultant Consent and Certificate. The consent of Rosenow Spevacek Group, Inc. to the use of their report entitled “Fiscal Consultant Report” dated May 26, 2006, in the Preliminary Official Statement and the Official Statement and their affirmation of the accuracy of the data in the tables in the Official Statement which reference such fiscal consultant report. (q) Additional Documents. Such additional certificates, instruments and other documents as Bond Counsel, the Agency or the Underwriter may reasonably deem necessary. If the Agency or the Authority shall be unable to satisfy the conditions contained in this Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Underwriter nor the Agency or the Authority shall be under further obligation hereunder. Section 10. Termination Events. The Underwriter has entered into this Purchase Agreement in reliance upon the representations, warranties and agreements of the Agency and -15- the Authority contained herein and upon the accuracy of the statements to be contained in the documents, opinions, and instruments to be delivered at the Closing. Accordingly, the Underwriter’s obligations under this Purchase Agreement to purchase, accept delivery of, and pay for the Bonds on the Closing Date for each respective series of Bonds is subject to the performance by the Agency and the Authority of their respective obligations hereunder at or prior to the Closing. The Underwriter shall have the right to terminate this Purchase Agreement, without liability therefor, by notification to the Agency and the Authority if at any time between the date hereof and prior to the Closing: (a) any event shall occur which causes any statement contained in the Official Statement to be materially misleading or results in a failure of the Official Statement to state a material fact necessary to make the statements in the Official Statement, in the light of the circumstances under which they were made, not misleading; or (b) the marketability of the Bonds or the market price thereof, in the reasonable opinion of the Underwriter, has been materially adversely affected by an amendment to the Constitution of the United States or by any legislation in or by the Congress of the United States or by the State, or the amendment of legislation pending as of the date of this Purchase Agreement in the Congress of the United States, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee or by any member thereof, or the presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States, or the favorable reporting for passage of legislation to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or any decision of any federal or State court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States Treasury Department, the Internal Revenue Service or other federal or State authority materially adversely affecting the federal or State tax status of the Agency, or the interest on bonds or notes or obligations of the general character of the Bonds; or (c) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency of the State, or a decision by any court of competent jurisdiction within the State or any court of the United States shall be rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the market price of the Bonds; or (d) legislation shall be enacted by 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 any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of -16- the Bonds, or the Bonds, are not exempt from registration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Indentures need to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (e) additional material restrictions including without limitation those relating to the extension of credit by, or the charge to the net capital requirements of, 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 which restrictions materially adversely affect the Underwriter’s ability to trade the Bonds; or (f) a general banking moratorium shall have been established by federal or State authorities; or (g) the United States has become engaged in hostilities which have resulted in a declaration of war or a national emergency or there has occurred any other outbreak of hostilities or a national or international calamity or crisis, or there has occurred any escalation of existing hostilities, calamity or crisis, financial or otherwise, the effect of which on the financial markets of the United States being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds or enforce contracts for sale of the Bonds; or (h) any rating of the Bonds shall have been downgraded, suspended or withdrawn by a national rating service, which, in the Underwriter’s reasonable opinion, materially adversely affects the marketability or market price of the Bonds; or (i) the commencement of any action, suit or proceeding described in Section 6(1) hereof which, in the reasonable judgment of the Underwriter, materially adversely affects the market price of the Bonds; or (j) there shall be in force a general suspension of trading on the New York Stock Exchange, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange, whether by virtue of determination by that Exchange or by order of the Securities and Exchange Commission of the United States or any other governmental authority having jurisdiction; or (k) there shall have been any materially adverse change in the affairs of the Authority or the Agency which in the Underwriter’s reasonable judgment materially adversely affects the market for the Bonds. Section 11. Expenses. Subject to the immediately following paragraph, the Underwriter shall be under no obligation to pay and the Agency shall pay or cause to be paid the expenses incident to the performance of the obligations of the Agency and the Authority hereunder including but not limited to (a) the costs of the preparation and printing, or other reproduction (for distribution on or prior to the date hereof) of the Agency Documents and the cost of preparing, printing, issuing and delivering the definitive Bonds, (b) the fees and disbursements of any counsel, financial advisors, accountants or other experts or consultants retained by the Agency; (c) the fees and disbursements of Bond Counsel; (d) the cost of printing the Preliminary Official Statement and any supplements and amendments thereto and the cost of printing the Official Statement, including the requisite number of copies thereof for distribution -17- by the Underwriter; (e) charges of rating agencies for the rating of the Bonds; (f) the premium payable to the Insurer in consideration of the issuance by the Insurer of the Policy; and (g) the fees and disbursements of the Trustee, including but not limited to, fee and disbursements of its counsel, travel and other expenses. The Underwriter shall pay all expenses incurred by it in connection with the public offering and distribution of the Bonds, travel, and miscellaneous fees of the California Debt and Investment Advisory Commission, the fees of Underwriter’s counsel and the CUSIP Service Bureau charge for the assignment of CUSIP numbers to the Bonds. Such amounts will be billed separately by the Underwriter and will be payable from the proceeds of the Bonds. Section 12. Notice. Any notice or other communication to be given to the Agency and the Authority under this Purchase Agreement may be given by delivering the same in writing to such entity at the address set forth above. Any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to: Citigroup Global Markets Inc. 350 California Street, 21st Floor San Francisco, California 94104 Section 13. Entire Agreement. This Purchase Agreement, when accepted by the Agency and the Authority, shall constitute the entire agreement between the Agency, the Authority and the Underwriter and is made solely for the benefit of the Agency, the Authority and the Underwriter (including the successors or assigns of any Underwriter). No other person shall acquire or have any right hereunder by virtue hereof, except as provided herein. All the Agency’s and the Authority’s representations, warranties and covenants in this Purchase Agreement shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Underwriter. Section 14. Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 15. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. Section 16. State of California Law Governs. The validity, interpretation and performance of this Purchase Agreement shall be governed by the laws of the State. -18- Section 17. No Assignment. The rights and obligations created by this Purchase Agreement shall not be subject to assignment by the Underwriter, the Authority or the Agency without the prior written consent of the other parties hereto. CI TIGROUP GLOBAL MARKETS INC. By: Vice President Accepted as of the date first stated above: PALM DESERT FINANCING AUTHORITY By: Chief Administrative Officer PALM DESERT REDEVELOPMENT AGENCY By: Executive Director A-1 APPENDIX A MATURITY SCHEDULE 2006 SERIES A Current Interest Bonds Maturity Date (April 1) Principal Amount Interest Rate Yield 2006 SERIES B Capital Appreciation Bonds Maturity Date Initial Principal Amount Approximate Reoffering Yield To Maturity Maturity Value 2006 SERIES C Current Interest Bonds (Escrowed Proceeds) Maturity Date (April 1) Principal Amount Interest Rate Yield 2006 SERIES D Subordinate Capital Appreciation Bonds Maturity Date Initial Principal Amount Approximate Reoffering Yield To Maturity Maturity Value B-1 APPENDIX B RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents to Citigroup Global Markets Inc. (the “Underwriter”) that he is a duly appointed and acting officer of the Palm Desert Redevelopment Agency (the “Agency”), and as such is to execute and deliver this Certificate and further hereby certify and reconfirm on behalf of the Agency to the Underwriter as follows: (1) This Certificate is delivered to enable the Underwriter to comply with Securities and Exchange Commission Rule 15c2- 12 under the Securities Exchange Act of 1934 (the “Rule”) in connection with the offering and sale of the Palm Desert Financing Authority, Tax Allocation Revenue Bonds (Project Area No. 2) 2006 Series A, Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2) 2006 Series B, Tax Allocation Revenue Bonds (Project Area No. 2) 2006 Series C, and Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2) 2006 Series D (collectively, the “Bonds”). (2) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement, setting forth information concerning the Bonds and the issuer of the Bonds (the “Preliminary Official Statement”). (3) As used herein, “Permitted Omissions” shall mean the offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters and the identity of the underwriter(s), all with respect to the Bonds. (4) The Preliminary Official Statement is, except for the Permitted Omissions, deemed final within the meaning of the Rule and has been, and the information therein is accurate and complete except for the Permitted Omissions. (5) If, at any time prior to the execution of the final contract of purchase, the Agency gains actual knowledge of the occurrence of any event as a result of which the Preliminary Official Statement might include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Agency shall promptly notify the underwriter thereof. Dated: _________, 2006. PALM DESERT REDEVELOPMENT AGENCY By: Executive Director CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered by the Palm Desert Redevelopment Agency (the "Agency ) and Wells Fargo Bank National Association , as Trustee (the "Trustee ) and MuniFinancial , Inc. (the "Dissemination Agent") in connection with the issuance of $ Palm Desert Financing Authority,Tax Allocation Refunding Revenue Bonds (Project Area No.2), 2006 Series A, Palm Desert Financing Authority, Tax Allocation Capital Appreciation Revenue Bonds (Project Area No.2), 2006 Series B , $ Palm Desert Financing Authority, Tax Allocation Revenue Bonds (Project Area No.2), 2006 Series C, and Palm Desert Financing Authority, Subordinate Tax Allocation Capital Appreciation Revenue Bonds (Project Area No.2), 2006 Series D (together, the "Bonds ). The Bonds are being issued pursuant to an Indenture of Trust dated as of July 1, 2006 , between the Palm Desert Financing Authority (the "Issuer ) and the Trustee (the "Indenture ). The proceeds of the Bonds are being loaned by the Issuer to the Agency pursuant to a Loan Agreement (as defined in the Indenture). The parties agree as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the parties for the benefit of the Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (defined below). The Agency acknowledges that the Issuer has undertaken no responsibility with respect to any reports , notices or disclosures provided or required under this Agreement , and has no liability to any person , including any Owner of Bonds, with respect to any such reports, notices or disclosures. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture , which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report" shall mean any Annual Report provided by the Agency pursuant to, and as described in , Sections 3 and 4 of this Disclosure Agreement. Disclosure Representative " shall mean the Executive Director of the Agency or his or her designee, or such other person as the Agency shall designate in writing to the Trustee and Dissemination Agent from time to time. Dissemination Agent" shall mean MuniFinancial, Inc., acting in its capacity as Dissemination Agent hereunder , or any successor Dissemination Agent designated in writing by the Agency and which has fied with the Trustee a written acceptance of such designation. Listed Events " shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. National Repository " shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Official Statement" shall mean the final Offcial Statement with respect to the Bonds. Owners " shall mean the registered owners of the Bonds or , if the Bonds are registered in the name of a depository, the beneficial owners of the Bonds. Participating Underwriter" shall mean the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds. Repository " shall mean each National Repository and each State Repository. Rule " shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934. State Repository " shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule. As of the date of this Agreement, there is no State Repository. SECTION 3. Provision of Annual Reports. (a) The Agency shall , or upon written direction shall cause the Dissemination Agent to, not later than six months after the end of the Agency s Fiscal Year (which currently would be December 31 of each year), commencing with the report for the 2005-2006 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) Business Days prior to said date, the Agency shall provide the Annual Report to the Dissemination Agent and the Trustee. In each case , the Annual Report may be submitted as a single document or as separate documents comprising a package , and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Agency may be submitted separately from the balance of the Annual Report. The Agency shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Trustee to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Agency hereunder. The Dissemination Agent and Trustee may conclusively rely upon such certification of the Agency. (b) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to each National Repository or to the Municipal Securities Rulemaking Board and to the appropriate State Repository, if any, in substantially the form attached as Exhibit (c) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Annual Report has been furnished to the Dissemination Agent, fie a report with the Agency, the Issuer and the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement , stating the date it was provided, and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Reports. The Agency s Annual Report shall contain or incorporate by reference the following: (i) the audited financial statements of the Agency, prepared in accordance with generally accepted accounting principles in effect from time to time. If the Agency s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (ii) An update of the tabular information set forth in the Official Statement under the captions "SUBORDINATE TAX REVENUES -- Schedule of Historical Tax Revenues " and " Top Ten Taxpayers. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Agency or related public entities which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement , it must be available from the Municipal Securities Rulemaking Board. The Agency shall clearly identify each such other document so incorporated by reference. SECTION 5. Reporting of Material Events. (a) Pursuant to the provisions of this Section 5 , the Agency shall give, or cause to be given , notice of the occurrence of any of the following events with respect to the Bonds, if material: (4) (5) (6) (7) (8) (9) (10) (11 ) (1 ) (2) (3) principal and interest payment delinquencies; non-payment related defaults; unscheduled draws on debt service reserves reflecting financial difficulties; unscheduled draws on credit enhancements reflecting financial diffculties; substitution of credit or liquidity providers, or their failure to perform; and adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; modifications to rights of security holders; unscheduled bond calls; defeasances; release, substitution or sale of property securing repayment of the securities; and rating changes. (b) The Trustee shall , promptly upon obtaining actual knowledge of the occurrence of any of the Listed Events contact the Disclosure Representative , inform such person of the event , and request that the Agency promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f) and promptly notify the Trustee in writing whether or not to report the event to the Owners (unless notice to the Owners is required by either of the Indentures). For purposes of this Disclosure Agreement , " actual knowledge " of the occurrence of such Listed Events shall mean actual knowledge by the officer at the Trust Office of the Trustee with regular responsibility for the administration of the Indenture. (c) Whenever the Agency obtains knowledge of the occurrence of a Listed Event whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the Agency shall as soon as possible determine if such event is material under applicable federal securities laws. (d) If the Agency has determined that knowledge of the occurrence of a Listed Event is material , the Agency shall promptly notify the Dissemination Agent and the Trustee in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f) and shall instruct the Trustee to report the occurrence to Owners. (e) If in response to a request under subsection (b), the Agency determines that the Listed Event is not material , the Agency shall so notify the Dissemination Agent and the Trustee in writing and instruct the Dissemination Agent and the Trustee not to report the occurrence. (f) If the Dissemination Agent has been instructed by the Agency to report the occurrence of a Listed Event , the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository, with a copy to the Agency. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Indenture. SECTION 6. Termination of Reporting Obligation. The obligations of the Agency, the Trustee and the Dissemination Agent under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds; provided that the obligations of the Trustee and the Dissemination Agent hereunder shall also terminate upon the resignation or removal of such Trustee or Dissemination Agent. SECTION 7. Dissemination Agent. The Agency may, from time to time , appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement , and may discharge any such Dissemination Agent , with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be MuniFinancial lnc. The Dissemination Agent may resign its duties hereunder at any time upon written notice to the Agency. SECTION 8. Amendment. Notwithstanding any other provision of this Disclosure Agreement , the parties may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the Agency provided that neither the Trustee nor the Dissemination Agent shall be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder) only if: (a) the amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature , or status of the Agency, or type of business conducted; (b) this Disclosure Agreement , as amended, would have complied with the requirements of the Rule at the time of sale of the Bonds, after taking into account any amendments or interpretations of the Rule , as well as any change in circumstances; (c) the amendment does not materially impair the interests of Owners , as determined by parties unaffiliated with the Agency (such as, but without limitation, the Agency bond counsel) or by Owners ' consent pursuant to Section 7.01 of the Indenture; and (d) the annual financial information containing (if applicable) the amended operating data or financial information wil explain , in narrative form, the reasons for the amendment and the "impact" (as that word is used in the letter from the staff of the Securities and Exchange Commission to the National Association of Bond Lawyers dated June 23, 1995) of the change in the type of operating data or financial information being provided. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication , or including any other information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is required by this Disclosure Agreement. If the Agency chooses to include any information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Disclosure Agreement , the Agency shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Agency to comply with any provision of this Disclosure Agreement , the Trustee shall, at the written direction of any Participating Underwriter or the Owners of a majority in aggregate principal amount of Outstanding Bonds (but only to the extent funds have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges of the Trustee whatsoever, including, without limitation , fees and expenses of its attorneys), or any Owner may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Agency, the Trustee or the Dissemination Agent , as the case may be, to comply with its obligations under this Disclosure Agreement; provided that any such action may be instituted only in the Federal or State Court located in the County of Los Angeles, State of California and no remedy other than specific performance may be sought or granted. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture or the Loan Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Agency, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement , and the Agency agrees to indemnify and save the Dissemination Agent and the Trustee , their officers, directors , employees and agents, harmless against any loss expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder , including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's or Trustee s negligence or wilful misconduct. The Dissemination Agent may rely on and shall be protected in acting or refraining from acting upon any direction from the Issuer or an opinion of nationally recognized bond counsel. The Dissemination Agent and the Trustee shall be paid compensation by the Agency for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent and the Trustee shall have no duty or obligation to review any information provided to them by the Agency hereunder and shall not be deemed to be acting in any fiduciary capacity for the Authority, the Agency, the Owners, or any other party. The obligations of the Agency under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach of this Agreement. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer , the Agency, the Trustee, the Dissemination Agent , the Participating Underwriter and Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 13. Notices. Notices should be sent in writing to the following addresses. The following information may be conclusively relied upon until changed in writing. Agency:Palm Desert Redevelopment Agency 73-510 Fred Waring Drive Palm Desert, California 92260 (760) 346-0611 (760) 346-0574 Fax Dissemination Agent:MuniFinancial , Inc. 27368 Via Industria , Suite 110 Temecula, California 92590 (909) 587-3500 (909) 587-3510 fax Trustee:Wells Fargo Bank , National Association 707 Wilshire Boulevard , 1 Floor Los Angeles , CA 90017 (213) 614-3353 (213) 614-3355 Fax SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts , each of which shall be an original and all of which shall constitute but one and the same instrument. PALM DESERT REDEVELOPMENT AGENCY Executive Director WELLS FARGO BANK , NATIONAL ASSOCIATION , as Trustee Authorized Officer MUNIFINANCIAL , INC., as Dissemination Agent Authorized Officer EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligated Party:Palm Desert Redevelopment Agency (the "Agency Name of Bond Issue:Palm Desert Financing Authority Series 2006 A Bonds Series 2006 B Bonds Series 2006 C Bonds Series 2006 D Bonds Date of Delivery:2006 NOTICE IS HEREBY GIVEN that the Agency has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement dated as of July 1 , 2006 between the Agency and Wells Fargo Bank , NationalAssociation. (The Agency anticipates that the Annual Report will be filed by Dated: MuniFinancial, Inc. on behalf of the Agency cc:Executive Director , Palm Desert Redevelopment Agency