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HomeMy WebLinkAboutSR - Revenue Bonds PA3/Res 06-76/Res FA-57/Res 529/PA2 & PA3CITY OF PALM DESERT PALM DESERT FINANCING AUTHORITY PALM DESERT REDEVELOPMENT AGENCY STAFF REPORT REQUEST: APPROVAL OF RESOLUTION NO. 06- 76 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 REVENUE BONDS (PROJECT AREA NO. 3), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES B, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES C APPROVAL OF RESOLUTION NO. FA- 57 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 REVENUE BONDS (PROJECT AREA NO. 3), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES B, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES C, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO APPROVAL OF RESOLUTION NO. 529 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 REVENUE BONDS (PROJECT AREA NO. 3), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES B, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES C, 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 76 (2) PALM DESERT FINANCING AUTHORITY RESOLUTION NO. FA-57 (3) PALM DESERT REDEVELOPMENT AGENCY RESOLUTION NO.529 (4) INDENTURE OF TRUST (SENIOR BONDS) (5) PROJECT AREA NO.3 LOAN AGREEMENT (2006 SENIOR LOANS) (6) INDENTURE OF TRUST (SUBORDINATE BONDS) (7) PROJECT AREA NO. 3 LOAN AGREEMENT (2006 SUBORDINATE LOAN) (8) PRELIMINARY OFFICIAL STATEMENT (9) BOND PURCHASE AGREEMENT Staff Report Approval of AgencylPDFA Resolutions — PA#3 Tax Allocation Revenue Bonds 2006 Series A, B and C Page 2 of 4 June 8, 2006 (10) CONTINUING DISCLOSURE AGREEMENT Recommendation: By Minute Motion: That the City Council approve Resolution No. 06-76 , making (i) findings of significant public benefit in connection with the issuance and sale of three series of bonds (the "Bonds") by the Palm Desert Financing Authority: (A) Tax Allocation Revenue Bonds (Project Area No. 3), 2006 Series A (the "Series 2006A Bonds"), (B) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3), 2006 Series B (the "Series 2006E Bonds"), and (C) Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3), 2006 Series C (the "Series 2006C 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-57 , 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. 529 , 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. Background and discussion: Staff recommends the issuance of three series of Bonds relating to the financing of projects for the Agency's Project Area No. 3. The Bonds will be issued as tax-exempt bonds. Net proceeds of the Bonds will be used to pay all or a portion of the costs of certain Agency projects benefiting Project Area No. 3. Based on current estimates by the Financing Advisor and the Underwriter, the sale of the three series of Bonds is expected to generate approximately $14,150,000 of net proceeds to be available for Agency projects. The proposed projects are outlined in the attached City Council resolution and are also described in a Summary Report, which was made available to the public for inspection in connection with the City Council public hearing. The repayment of the Bonds will be primarily secured by tax increments generated with respect to Project Area No. 3. The Series 2006A Bonds and the Series 2006B Bonds will rank on a parity with the outstanding bonds previously issued for Project Area No. 3, and will rank senior to the Series 2006C Bonds. The Series 2006A Bonds will be current interest bonds. The Series 2006E Bonds Staff Report Approval of Agency/PDFA Resolutions — PA#3 Tax Allocation Revenue Bonds 2006 Series A,Band C Page 3 of 4 June 8, 2006 and the Series 2006C Bonds will be capital appreciation bonds. 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 Lofton & Jennings, 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 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 and the Series 2006B Bonds, and the other for the Series 2006C 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 also may 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 and the Series 2006E Bonds, and the other for the Series 2006C Bonds. Pursuant to the Loan Agreements, the Authority agrees to lend the Agency funds that would be used by the Agency to fund capital projects for benefit to Project Area No. 3. 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 Aareement 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 Staff Report Approval of Agency/PDFA Resolutions — PA#3 Tax Allocation Revenue Bonds 2006 Series A, B and C Page 4 of 4 June 8, 2006 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. The Annual Report contains the Agency's audited financial statements and other pertinent information relating to Project Area No. 3. 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. 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 rel ted documents. AQ16 BY FIN ALITH S bmitted y: WAl av Yrigoyen Dire for of Redeve pmen Housing A provaI A/ Jus in McCarthy, ACM RedVelopment Carlos Ao/lretega, City Manager/CqA/Executive Director BY RDA ON l a `•Uli� VERIFIED BY C&� Original on file with City Clerk's Office ON 11�`R•W VERIFIED BY:_� Original on file City lerk'S Office PJ C Paul S. Gibitth, D rof Finance/Treasurer CITY COUNCILyACTION: APPROVED ✓ DENIED RECEIVED OTHERI, MELTING DATE . .()(G AYES NOES: ABSENT: ►�� fMQ ABSTAIN:_&LoyV4, VERIFIED BY: �,JJC ly Original on File wzrCity Clerk's Office RESOLUTION NO. 06- 76 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 REVENUE BONDS (PROJECT AREA NO. 3), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES B, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES C RECITALS: WHEREAS, the Palm Desert Financing Authority (the "Authority") has proposed to sell and issue three series of bonds (collectively, "the Bonds"): (i) Tax Allocation Refunding Revenue Bonds (Project Area No. 3), 2006 Series A, (ii) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3), 2006 Series B; and (iii) Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3), 2006 Series C; and WHEREAS, proceeds of the Bonds are to be applied for the purpose of making three loans to the Palm Desert Redevelopment Agency (the "Agency") for the object and purpose of, among other things, assisting in the financing of certain public capital improvements (the "Projects") of benefit to Project Area No. 3, of the Agency (the "Project Area"), including: (A) civic center park improvements, including the construction and improvements of public recreational buildings, (B) construction of a parking structure to accommodate a hotel and related development at the Desert Willow Golf Resort, (C) construction of on- and off -ramps at Portola Avenue and Interstate 10, (D) undergrounding of utilities throughout the Project Area; and 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, a 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 P6402.1056\.893634.1 purpose for which such taxes are being used to pay for the installation and construction; 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 of public capital improvements described above through the issuance by the Authority of the Bonds will result in significant public benefits to the constituents of the 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 Findings. The City Council hereby finds and determines that based upon the "Summary Report Regarding Payment by the Palm Desert Redevelopment Agency for All or A Portion of the Installation and Construction of Certain Other Public Capital Improvements of Benefit to Project Area No. 3," 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 neighborhoods 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 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 Pavment by Aaencv. 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. 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. P6402.1056\893634.1 2 Section 6. 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: Rachelle D. Klassen, City Clerk P6402.1056\893634.1 3 RESOLUTION NO. FA-57 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 REVENUE BONDS (PROJECT AREA NO. 3), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES B, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES C, 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 three series of bonds: (i) Tax Allocation Refunding Revenue Bonds (Project Area No. 3), 2006 Series A (the "Series 2006A Bonds"), (ii) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3), 2006 Series B (the "Series 2006B Bonds," and together with the Series 2006A Bonds, the "Senior Bonds"), and (iii) Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3), 2006 Series C (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 three loans to the Agency pursuant to two loan agreements for the object and purpose of, among other things, assisting in the financing of certain public capital improvements of benefit to Project Area No. 3, of the Agency; 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; P6402.1057\893635.1 1 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.Acknowledgment of Citv Council Findinqs. 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 $14,000,000, and the Series 2006B Bonds in an aggregate initial principal amount not exceeding $1,500,000, pursuant to the Senior Indenture is hereby approved. Subject to Section 11 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 $4,500,000, pursuant to the Subordinate Indenture is hereby approved. Subject to Section 11 below, 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 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.ADDointment of Trustee. The appointment of Wells Fargo Bank, National Association, as trustee (the "Trustee") under the Senior Indenture and the Subordinate Indenture is hereby approved. Section 6.Senior Loan Agreement. The Project Area No. 3 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 P6402.1057',893635.1 2 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 Aqreement. The Project Area No. 3 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. 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 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 9. 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 10. 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 11 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 11 hereof (such approval to be conclusively evidenced by such Authorized Officer's execution and delivery thereof). P6402.1057\893635.1 3 Section 11. 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 $14,000,000, (ii) with respect to the Series 2006B Bonds shall not exceed $1,500,000, and (iii) with respect to the Subordinate Bonds shall not exceed $4,500,000; (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, and (iii) 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 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, and (iii) 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 11 shall be valid for a period of 120 days from the date of adoption of this Resolution. Section 12. 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 Purchase Agreement and the Official Statement, and any such actions previously taken by such officers are hereby ratified and confirmed. Section 13. Effective Date. This Resolution shall take effect immediately upon adoption. P6402.1057\1893635.1 4 APPROVED AND ADOPTED this 8th day of June 2006 by following vote to wit: AYES: NOES: ABSENT: ABSTAIN: ATTEST: Rachelle D. Klassen, Secretary Jim Ferguson, President P6402.1057\893635.1 5 RESOLUTION NO. 529 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 REVENUE BONDS (PROJECT AREA NO. 3), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES B, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT AREA NO. 3), 2006 SERIES C, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO RECITALS: WHEREAS, the Palm Desert Financing Authority (the "Authority") has determined to sell and issue three series of bonds: (i) Tax Allocation Revenue Bonds (Project Area No. 3), 2006 Series A (the "Series 2006A Bonds"), (ii) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3), 2006 Series B (the "Series 2006B Bonds," and together with the Series 2006A Bonds, the "Senior Bonds") and (iii) Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3), 2006 Series C (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 three 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, assisting in the financing of certain public capital improvements of benefit to Project Area No. 3, of the Agency; and 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. Section 2. Senior Loan Agreement. The Project Area No. 3 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 P6402.1056,,893643.1 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 Aareement. The Project Area No. 3 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. Continuinq Disclosure Agreement. 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 5. Purchase Agreement. 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 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 6. 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 7. 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 P6402.10W893643.1 2 necessary or advisable in order to effectuate the purposes of this Resolution, the Senior Loan Agreement, the Subordinate Loan Agreement, the Continuing Disclosure Agreement and the Purchase Agreement, and any such actions previously taken by such officers are hereby ratified and confirmed. Section 8. 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 P6402.1056\893643.1 3 Indcnturc of Trust «ith rcfcrcncc to � Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. �) 2006 Scrics A � Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics B P6—Ic�2.lc�;6\x7�1�—I.; RWG DRAFT: �/2-4/200G TABLE OF CONTENTS ARTICLE I DEFINITIONS: AUTHORIZATION AND PURPOSE OF BONDS: EQUAL SECURITY.................................................................................................... ScctionI.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 ................................................................................ Scction2.01. 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: ISSUANCEOF 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 �.Oi. 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 ............................................................................... Scction 6.07. Rcsignation b� Trustcc .......................................................................... Scction 6.08. Appointmcnt of Succcssor Trustcc ........................................................ Scction 6.09. Mcrgcr or Consolidation ....................................................................... Pagc .2 .2 .9 .9 .9 .9 .9 .9 II I� I �4 I �4 I �4 I �4 I� I� I� I� I� 16 16 16 16 17 ix ix ix ix ix 19 19 19 19 20 21 21 21 21 2�4 2�4 2�4 2� 2� 2� 2� -�- P6—Ic�2. I c�;6\x7� I �—I. � Scction 6.10. Conccrning am Succcssor Trustcc .............................................. Scction 6. I I. Appointmcnt of Co-Trustcc ......................................................... Scction 6.12. Indcmnification: Limitcd Liabilit� ofTrustcc .............................. 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 .................................................................... SECTION 10.01 Book-Entr� S�stcm: Limitcd Obligation of Authorit� ............ SECTION 10.02 Rcprescntation Lcttcr ............................................................ SECTION I 0.0 � Transfcrs Outsidc Book-Entr� S� stcm ................................... SECTION 10.0�4 Pa� mcnts to thc Nomincc ...................................................... SECTION IO.Oi Initial Dcpositor� 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 2� 2� 26 26 26 27 27 zx zx zx 29 ;0 ;0 �0 �I �I �I �2 �2 �2 �2 ;; >> ;; >> >> >> ��4 ;�4 �i �i �i �i �i �6 �6 ;6 �7 �7 -ii- P6—Ic�2. I c�;6\x7� I �—I. � INDENTURE 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. � 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 t«o loans (thc "Loans��} to thc Agcnc� undcr and pursuant to thc Projcct Arca No. � 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 its Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. �). 2006 Scrics A. in thc aggregatc principal amount of `f (thc "Scrics 2006A Bonds��). and its Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �). 2006 Scrics B. in thc aggrcgatc initial principal amount of `f (togcthcr «itl� thc Scrics 2006A Bonds. 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�;6\x7� I�—I. ; — 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 April I and Octobcr 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 rcnc�.. 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 April 2 in onc calcndar � car to April 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 April I. 2007. "Bonds�� mcans thc Scrics 2006A Bonds and thc Scrics 2006B Bonds. "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�;6\x7� I �—I. ; —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(pro� idcd that strippcd sccuritics arc onl� permittcd if thc� ha� c bccn strippcd b� thc U.S. Trcasur� itscl� or paragraph B(c�cluding thc obligations dcscribcd in subparagraphs B.�4 and B.6) of thc dcfinition of "Pcrmittcd In� cstmcnts�� sct forth in this Scction. (b) bonds. dcbcntures. notcs or othcr c� idcnccs of indcbtcdncss issucd or guarantccd b� thc non-fiill faith and crcdit U.S. go� crnmcnt agcnc� Rcsolution Funding Corp. (REFCORP) (pro� idcd strippcd sccuritics and intcrest componcnts thcrcof arc onl� permittcd if thc� ha� c bccn strippcd b� rcqucst to thc Fcdcral Rcscr� c Bank of Nc« York in book cntr� form). or (c) prc-rcfiindcd municipal bonds ratcd "Aaa�� b� Mood� �s and "AAA�� b� Sc�.P. pro� idcd if thc issuc is onl� ratcd b� Sc�.P. thc prc-rcfiindcd bonds must ha� c bccn prc-rcfiindcd «ith cash. dircct U.S. or U.S. guarantccd obligations. or AAA ratcd prc-rcfiindcd municipal obligations. "Dcuositor��� 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. "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� Strcct. 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 P6—Ic �2. I c �;6\x7� I �—I. ; — � — 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 succcssors undcr thc Insurancc Polic�. or its "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 I . 2006. "Intcrest Pa� mcnt Datc�� mcans April I and Octobcr I of cach � car. commcncing Octobcr "Loan A�rccmcnt�� mcans thc Projcct Arca No. � 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 and thc Scrics 2006B Loan Fund. "Loans�� mcans thc Scrics 2006A Loan and thc Scrics 2006B Loan. "Maturit� Amount.�� «ith respcct to am Scrics 2006B Bond. mcans thc Accrctcd Valuc thcrcof at maturit� . "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� . "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 P6—Ic�2. I c�;6\x7� I �—I. ; —�4— 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�: U.S. 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 Fcdcral Housin� Administration Dcbcntures (FHA) �. Gcncral Scr� iccs Administration Participation ccrtificatcs Go� crnmcnt National Mort�a�c Association (GNMA or "Ginnic Mac") - - GNMA - guarantccd mortgagc-backcd bonds GNMA - guarantccd pass-through obligations U.S. Maritimc Administration Guarantccd Titic XI financing U.S. Dcuartmcnt of Housin� and Urban Dc� clonmcnt (HUD) Projcct Notcs Local Authorit� Bonds Nc« Communitics Dcbcntures - U.S. go� crnmcnt guarantccd dcbcntures U.S. Public Housing Notcs and Bonds - U.S. go� crnmcnt guarantccd public housing notcs and bonds C. Bonds. dcbcntures. notcs or othcr c� idcncc of indebtedness issucd or guarantccd b� am of thc follo« ing non-fiill faith and crcdit U.S. go� crnmcnt agcncics (pro� idcd that strippcd sccuritics arc onl� per►nittcd if thc� ha� c bccn strippcd b� thc agcncti itscl�: P6—Ic�2. I c�;6\x7� I �—I. ; —�— Fcdcral Homc Loan Bank S� stcm Scnior dcbt obligations �4 6. 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 Studcnt Loan Markctin� Association (SLMA or "Sallic Mac��) Scnior dcbt obligations Rcsolution Fundin� Coru. (REFCORP) obligations Farm Crcdit S� stcm Consolidatcd s� stcm« idc bonds and notcs 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. fon�ard purchasc agrccmcnts and rescr� c fiind 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 P6—Ic�2. I c�;6\x7� I �—I. ; —6— part� custodian. as thc casc ma� bc (bu� cr/Icndcr). and thc transfcr of cash from thc Tnistcc 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 im 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. 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.6i2. - - "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)( �). "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. 6�2 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. ..Rc ort�� 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. P6—Ic�2. I c�;6\x7� I �—I. ; —7— "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. "Scrics 2006A Bonds�� mcans thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. �). 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 and hcld b� thc Trustcc pursuant to Scction �.02. "Scrics 2006B Bonds�� mcans thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �). 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. "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. P6—Icl2. I cli(,\x7� I �—I. ; —8— "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 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 Rc� cnuc Bonds (Projcct Arca No. �). 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. �). 2006 Scrics B and shall bc issucd in thc aggrcgatc Initial Principal Amount of `f . Scction 2.02. Tcrms of Bonds. P6—Ic�2. I c�;6\x7� I �—I. ; —9— (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 April 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 (Auril I) Amount Ratc (Auril 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. w�lcss (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. 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. ifam. on thc Scrics 2006A Bonds shall bc pa�ablc in la«fiil monc� ofthc Unitcd Statcs ofAmcrica. (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 April 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�: P6—Ic�2. I c�;6\x7� I�—I. ; — I 0— Maturit� Initial Initial Principal Yicld to Datc Maturit� Principal Amount per `f �.000 Maturit� (Auril I) Amount 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 April I and Octobcr I. commcncing Octobcr 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. 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 April 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 April 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 Rcdcmption Datcs Pricc April I. 20_ and Octobcr I. 20_ 10_`%� April I. 20_ and Octobcr I. 20_ 10_ April I. 20_ and thcrcaftcr 100 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 2006A Bonds maturing on April I. 20_ and April I. 20_ shall also bc subjcct to mandator� rcdcmption b� lot. on April I in cach �car commcncing April I. 20 and April 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 April 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 April 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 Januar� I�. and (ii) if somc but all of thc Scrics 2006A Bonds of a maturit� ha� c bccn P6—Ic �2. I c�;6\x7� I�—I. ; — I I— 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� Auril I. 20 Sinking Fund Rcdcmption Datc Principal Amount (Auril I ) to bc Rcdccmcd tMaturit� . Scrics 2006A Bonds Maturin� Auril I. 20 Sinking Fund Rcdcmption Datc Principal Amount (Auril I ) to bc Rcdccmcd +Maturit� . (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 April 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 Octobcr I or April I on or aftcr April 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): Rcdcmption Rcdcmption Datcs Pricc April I. 20_ and Octobcr I. 20_ 10_`%� April I. 20_ and Octobcr I. 20_ 10_ April I. 20_ and thcrcaftcr 100 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. (2) No Mandator� Sinkin� Fund Rcdcmution. Thc Scrics 2006B Bonds arc not subjcct to mandator� sinking fiind redcmption prior to maturit� . P6—Icl2. I cli(,\x7� I�—I. ; — I 2— (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 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. (2) Scicction of Bonds for Rcdcmution. With respcct to thc rcdcmption of Bonds of cithcr 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 2006A Bonds «ithin a maturit� for rcdcmption. all Scrics 2006A Bonds 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. P6—Icl2.lcli(,\x7�1�—I.; —I �— 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 or E�hibit B. 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 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 P6—Ic�2. I c�;6\x7� I�—I. ; — I�4— 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 Amount 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. 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 Trustec 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 ain 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. P6—Ic �2. I c �;6\x7� I �—I. ; — I � — (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 `.6 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. 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 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� : P6—Ic l2. I c li(,\x7� I�—I. ; — I 6— ( 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 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 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 as it shall bccomc duc and pa�ablc (including accrucd intcrest on am Scrics 2006A Bonds 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 pa� am intcrest thcn ha� ing comc duc and pa�ablc on thc Outstanding Scrics 2006A 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). 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 rcdcmption 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� confinncd 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�;6\x7� I�—I. ; — I 7— 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 im 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 cttcnt 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 lcast annuall�. on or bcforc Jul� l. 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 P6—Ic�2. I c�;6\x7� I�—I. ; — I 8— 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� 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 accow�ting 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�;6\x7� I�—I. ; — I 9— 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 affcctcd 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�;6\x7� I �—I. ; —20— (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 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 Cow�scl 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 carr� out thc intcntion or to facilitatc thc performancc of this Indcnturc. and for thc bcttcr assuring and confirming unto thc 0« 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 c�amination 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. if am. on thc Bonds «hcn dul� prescntcd for pa� mcnt at maturit�. or on rcdcmption prior to maturit�. and to canccl all Bonds upon pa� mcnt thcrcof. Thc Trustcc shall kccp accuratc rccords of all fiinds 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 P6—Ic�2. I c�;6\x7� I�—I. ; —2 I— 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 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 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. P6—Ic�2. I c�;6\x7� I �—I. ; —22— (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 fiirnishcd 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� 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. P6—Ic�2. I c�;6\x7� I �—I. ; —2 �— (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. P6—Icl2. I cli(,\x7� I �—I. ; —2�4— 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 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 Successor 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 compain 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� cn 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 P6—Ic �2. I c �;6\x7� I �—I. ; —2 � — 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 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 P6—Ic�2. I c�;6\x7� I �—I. ; —26— 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 (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—Ic l2. I c li(,\x7� I�—I. ; —2 7— 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 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 �0 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 �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 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 P6—Ic�2. I c�;6\x7� I �—I. ; —28— 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 «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 P6—Ic�2. I c�;6\x7� I �—I. ; —29— 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. 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. 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 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 P6—Ic �2. I c�;6\x7� I�—I. ; —� 0— 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� w�dcr 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 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) P6—Ic �2. I c �;6\x7� I �—I. ; — � I — 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 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 P6—Ic �2. I c�;6\x7� I�—I. ; —� 2— 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 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 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: P6—Ic�2. I c�;6\x7� I �—I. � —> ;— (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 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 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 mailcd pursuant to Scction 2.0 � or pro� ision satisfactor� to thc Trustcc shall ha� c bccn madc for thc mailing 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 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. P6—Ic�2. I c�;6\x7� I �—I. ; — ��4— 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. 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 P6—Ic �2. I c �;6\x7� I �—I. � — � � — 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. 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: P6—Icl2. Icli(,\x7� I �—I. ; — �6— 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: uro� 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�;6\x7� I�—I. ; —� 7— 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 I� Chicf Administrati� c Officcr WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc I� Authorizcd Officcr P6—Icl2. Icli(,\x7� I �—I. ; — �8— 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 REVENUE BOND (PROJECT AREA NO. �) 2006 SERIES A RATE OF INTEREST MATURITY DATE ORIGINAL ISSUE DATE CUSIP April 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 Scptcmbcr I�. 2006. in «hich c� cnt it shall bcar intcrest from thc Original Issuc Datc idcntificd abo� c: pro� 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 April I and Octobcr I in cach � car. commcncing Octobcr 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. P6—Ic�2. I c�;6\x7� I�—I. ; A— I California or such othcr location as thc Trustcc shall dcsignatc (thc "Tnist 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 2006A 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. �). 2006 Scrics A (thc "Scrics 2006A Bonds��). limitcd in principal amount to `f . Thc Authorit� has issucd anothcr scrics of bonds dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �). 2006 Scrics B(thc "Scrics 2006B Bonds.�� and togcthcr «ith thc Scrics 2006A Bonds. thc "Bonds��). limitcd in initial principal amount to `f . concurrcntl� «ith thc issuancc of thc Scrics 2006A Bonds. Both thc Scrics 2006A Bonds and thc Scrics 2006B 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 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«ncr hcrcof. 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 ccrtain public capital impro� cmcnts «ith respcct to a rcdc� clopmcnt projcct kno« n and dcsignatcd as Projcct Arca No. �. Thc Scrics 2006A Loan has bccn madc b� thc Authorit� to thc Agcnc� pursuant to a Projcct Arca No. � 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 April 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 April I. 20_. at thc follo« ing P6—Ic�2. I c�;6\x7� I�—I. ; A-2 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: Rcdcmution Datcs April I. 20_ and Octobcr I. 20_ April I. 20_ and Octobcr I. 20_ April I. 20_ and thcrcaftcr Rcdcmution Pricc `%� I� Thc Scrics 2006A Bonds maturing on April I. 20 and April I. 20 arc also subjcct to mandator� sinking fiind redcmption b� lot. on April I in cach � car commcncing April I. 20_ and April 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: uro� 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 P6—Ic�2. I c�;6\x7� I�—I. ; A— � 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 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 I� Attcst: Sccrctar� STATEMENT OF INSURANCE �to comc� Presidcnt P6—Ic�2. I c�;6\x7� I�—I. ; 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 ta� 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: 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. 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. I cli(,\x7� I�—I. ; 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. �) 2006 SERIES B YIELD TO MATURITY MATURITY DATE ORIGINAL ISSUE DATE CUSIP April 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 April I and Octobcr I. commcncing Octobcr 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 B-1 I �6—Ic �2. I c �;6�x7� I �—I. � "Trustcc��) in Los Angcics. California or such othcr location as thc Trustcc shall dcsignatc (thc "Trust Officc��). 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. �). 2006 Scrics B(thc "Scrics 2006B Bonds��). limitcd in initial principal amount to `f . Thc Authorit� has issucd anothcr scrics of bonds dcsignatcd thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. �). 2006 Scrics A(thc "Scrics 2006A Bonds.�� and togcthcr «ith thc Scrics 2006B Bonds. thc "Bonds��). limitcd in principal amount to `f . concurrcntl� «ith thc issuancc of thc Scrics 2006B Bonds. Both thc Scrics 2006A Bonds and thc Scrics 2006B 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 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«ncr hcrcof. 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. �. Thc Scrics 2006B Loan has bccn madc b� thc Authorit� to thc Agcnc� pursuant to a Projcct Arca No. � 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 April 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 April I or Octobcr I on or aftcr April 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): B-2 I �6—Ic �2. I c �;6�x7� I �—I. � Rcdcmution Datcs April I. 20_ and Octobcr I. 20 April I. 20_ and Octobcr I. 20 April I. 20_ and thcrcaftcr Rcdcmution Pricc I 0_`%� 10 100 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 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 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. - - - B-3 I �6—Ic �2. I c �;6�x7� I �—I. � 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. 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 B-4 I �6—Ic �2. I c �;6�x7� I �—I. � �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 ta� 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: 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. 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-1cJ2. I cJiG\87� I �—I. � C Proicct Arca No. � Loan A�rccmcnt (2006 Scnior Loans) «ith rcfcrcncc to � Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. �) 2006 Scrics A � Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics B P6—Ic�2.c� I�6\x7� 167. ; RWG DRAFT: �/2-4/200G TABLE OF CONTENTS ARTICLEI DEFINITIONS ........................................................................................ ScctionI . 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 ...................................................... 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 Subordinatc Dcbt ......................................... Scction 2.10. 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 ....................................................... P� ; 6 7 ........................ I 0 ........................ I 0 ........................ I 0 ........................ I 0 ........................ I 0 ........................ I I ........................ I I 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 ................................................. ARTICLE VI MISCELLANEOUS ......................................................................... Scction 6.1. 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 ............................................................................... .12 .12 .12 .12 .12 .I� .I� .I� .I� .I� . I �4 . I �4 .I� .I� .I� .16 .16 .16 .17 .17 .ix .ix .ix .ix .ix .ix .ix .19 P6—Icl2.cl I �6\x7� 167. � Scction 6.�. Wai� cr of Pcrsonal Liabilit� ................................................................... 19 Scction 6.6. Pa� mcnt on Busincss Da� s ..................................................................... 19 Scction6.7. Noticcs ................................................................................................... 19 Scction6.8. Surct� Bond ........................................................................................... 19 Scction6.9. Partialln�alidit� .....................................................................................19 Scction 6.10. Articic and Scction Hcadings and Rcfcrcnccs .......................................20 Scction 6. I I. E�ccution of Countcrparts .................................................................... 20 Scction 6.12. Go� crning La« ..................................................................................... 20 Scction6. I�. Thc Trustcc .......................................................................................... 20 EXHIBIT A— Schcdulc of Scrics 2006A Loan Pa�mcnts EXHIBIT B— Schcdulc of Scrics 2006B Loan Pa� mcnts P6—Icl2.cl I �6\x7� 167. ; 11 PROJECT AREA NO. � LOAN AGREEMENT (2006 Scnior Loans) This Projcct Arca No. � 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. � of thc Agcnc� (thc "Projcct Arca��) has bccn dul� appro� cd and adoptcd b� thc Cit� . C. Thc Agcnc� has dctcrmincd to incur t«o loans (thc "Loans��) 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 Ta� Allocation Rc� cnuc Bonds (Projcct Arca No. �). 2006 Scrics A. in thc principal amount of `f and its Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �). 2006 Scrics B. in thc initial principal amount of `f (togcthcr. 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 Loans to thc Agcnc� . E. Thc Authorit� has 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 ofthc 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—Icl2.cl I �6\x7� 167. ; 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 � zluation�� 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 Scrics 2006A Bonds and thc Scrics 2006B Bonds. "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 finzncial 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� . "Loans�� mcans thc Scrics 2006A Loan and thc Scrics 20Q6B Loan. "Loan A�rccmcnt�� mcans this Projcct Arca No. � Loan Agrccmcnt (2006 Scnior Loans). as ma� from timc to timc bc amcndcd. modificd or supplcmcntcd. P6—Ic�2.c� I �6\x7� 167. ; 2 "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 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). "Parit� Dcbt�� mcans 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 2.8. "Parit� Dcbt Instrumcnt�� mcans thc 200 � Loan Agrccmcnt and 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 or appro� cd b� thc Agcnc� on or prior to thc datc hcrcof pursuant to Scction >>�40 I of thc Rcdc� clopmcnt La« «ith (i) thc Count� of Ri� crsidc. (ii) thc Coachclla Vallc� Mosquito Abatcmcnt District. (iii) thc Coachclla Vallc� Rccrcation and Park District. (i� ) thc Coachclla Vallc� Watcr District. (� ) thc Dcscrt Communit� Collcgc District. (� i) thc Dcscrt Sands Unificd School District and (� ii) 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 loans. ad� anccs and indcbtcdncss pa� ablc from Ta� Rc� cnucs. to Scction 2.7. "Proicct Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant "Oualificd Rcscr� c Fund Crcdit Instrumcnt�� mcans a surct� bond issucd b� an 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 claims pa� ing abilit� of such insurancc compam is ratcd «ithin thc highcst rating catcgor� b� Mood� �s and Sc�.P. and if ratcd b� A.M. Bcst c�. Compam. «ithin thc highcst rating catcgor� b� A.M. Bcst c�. Compam. at thc timc of dcli� cr� of such 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� cr� of such surct� bond «ill not. of itsclf. causc a rcduction or «ithdra«al of am rating thcn assigncd to thc Bonds: (ii) such surct� bond has a tcrm of at Icast 12 months: (iii) such 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 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. � Rcdc� clopmcnt Fund. hcrctoforc cstablishcd and hcld b� thc Agcnc�. P6—Icl2.cl I �6\x7� 167. � "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 fiind b� that namc hcld b� thc Trustcc pursuant to Scction 2.�. "Rcscr� c Rcauircmcnt.�� 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 Rc� cnuc Bonds (Projcct Arca No. �). 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. �). 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 � . "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 2.9. «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 loan madc b� thc Authorit� to thc Agcnc� pursuant to thc 200 � Loan Agrccmcnt. "20O � Loan A�rccmcnt�� mcans thc Projcct Arca No. � Loan Agrc�mcnt dat�d as of Juh I. 200�. b� and among thc Agcnc�. thc Authorit� and BNY Wcstcrn Trust Compain. as prior trustcc (as succccdcd b� Wclls Fargo Bank. National Association. as trustcc). P6—Icl2.cl I �6\x7� 167. ; 4 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« . (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 amount of `f undcr and subjcct to thc tcrms of this Loan Agrccmcnt. thc Bond La« and thc Rcdc� clopmcnt La« . (c) 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 `f to thc Scrics 2006A Account of thc Costs of Issuancc Fund. (ii) 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 a 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. P6—Icl2.cl I �6\x7� 167. ; 5 (ii) 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 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 April 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 April 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 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 April 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 of thc 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 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 III. 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 April I in am � car in «hich am Bonds are subjcct to mandaton 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 mandator� sinking fiind rcdcmption on such April I. and tcndcr such Bonds for canccllation. pro� idcd that such tcndcr shall bc madc bcforc thc prcccding Januar� I�. P6—Icl2.cl I �6\x7� 167. ; 6 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) 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. �). (d) 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. Pursuant to thc 200 � Loan Agrccmcnt. thcrc has hcrctoforc bccn cstablishcd a fiind kno« n as thc "Projcct Arca No. � 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) on or bcforc thc third Busincss Da� prcccding am Intcrest Pa� mcnt Datc. 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 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 P6—Icl2.cl I �6\x7� 167. ; 7 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 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 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 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 2006A 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). 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 Tnistcc shall transfcr all rcmaining amounts in thc accounts of 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 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 P6—Icl2.cl I �6\x7� 167. ; 8 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 pzid: (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. Each such Rcqucst of thc Agcnc� shall statc and shall bc sufficicnt c� idcncc to thc Trustcc: (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 2.8. Parit� Dcbt. From timc to timc. thc Agcnc� ma� issuc or incur additional Parit� Dcbt in such principal amount as shall bc dctcnnincd 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) 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) I�0 perccnt of Ma�imum Annual Dcbt Scr� icc so long as thc asscsscd � aluc of propert� «ithin thc Projcct Arca is Icss than `f �60.000.000. (ii) I�� perccnt of Ma�imum Annual Dcbt Scr� icc so P6—Icl2.cl I �6\x7� 167. ; 9 long as thc asscsscd � aluc of propert� «ithin thc Projcct Arca is cqual to or grcatcr than ��60.000.000 and Icss than ��9�.000.000. and (iii) 12� perccnt of Ma�imum Annual Dcbt Scr� icc so long as thc asscsscd � aluc of propert� «ithin thc Projcct Arca is cqual to or grcatcr than ��9�.000.000. (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 April I and Octobcr 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 ofthc Loans 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 ha� c bccn satisficd. Scction 2.9. 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 thc issuancc of such Subordinatc Dcbt shall not causc thc Agcnc� to c�cccd am applicablc Plan Limitations. Scction 2.10. 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 Fund: Dcuosit of 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 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 �. � 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 thc Loans and all P6—Icl2.cl I �6\x7� 167. ; 10 Parit� Dcbt and thc pa� mcnt in fiill of all othcr amow�ts pa� ablc hcrcundcr and undcr 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 in am Parit� Dcbt Instrumcnt. 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 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 amow�ts 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 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 April 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«ful purposcs ofthc 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: pro� 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 ►��,-�c�z.c� � ��,�x7� ��,7. ; 1 1 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 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 w�paid. 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. P6—Icl2.cl I �6\x7� 167. ; 12 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 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 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 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. 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 (c�ccpt for thc purposc of c�tcnding or climinating thc timc limit on thc cstablishmcnt of loans. ad� anccs. and indcbtcdncss. c�tcnding thc timc limit on thc cffccti� cncss of thc Rcdc� clopmcnt Plan. c�tcnding thc timc limit on thc pa� mcnt of indcbtcdncss. c�tcnding thc timc limit for thc rcccipt of ta� incrcmcnt. or incrcasing thc limitation on thc numbcr of dollars of ta�cs to bc allocatcd to thc Agcnc� ) 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 P6—Icl2.cl I �6\x7� 167. ; 13 (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(b) and (ii). as long as thc Insurancc Polic� is 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 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. (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. ►��,-�c�z.c� � ��,�x7� ��,7. ; 14 (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 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 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 Ta� 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� w�dcr 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� 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 debt 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. ►��,-�c�z.c� � ��,�x7� ��,7. ; 15 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 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 �0 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: pro� idcd. ho« c� cr. that if 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 Agcnc� «ithin such �0 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�z.c� � ��,�x7� ��,7. ; 16 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. Scction �.2. Auulication of Funds Uuon 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 fi�ll. 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. P6—Icl2.cl I �6\x7� 167. ; 17 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 (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 P6—Icl2.cl I �6\x7� 167. ; 18 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. 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. ►��,-�c�z.c� � ��,�x7� ��,7. ; 19 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 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. ��lt'191CllilL%C'/' Uf ��Clf,Tt' �illt'illlUilCl��j' �,C'fl %3�Clil�(� PG-IO2.O I �G\87� IG7. i 20 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 : Authorizcd Officcr P6—Icl2.cl I �6\x7� 167. ; 21 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—Icl2.cl I�6\x7� 167. ; A— I ��►y:��:��r:� SCHEDULE OF SERIES 2006B LOAN PAYMENTS Datc Total Pa� mcnt Pa�ablc on thc fifth Busincss Da� prcccding cach April Ist P6—Icl2.cl I �6\x7� 167. ; B-1 Indcnturc of Trust «ith rcfcrcncc to � Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics C P(,-Ic�2.lc��(,\xx��x�x.2 RWG DRAFT: �/2-4/200G TABLE OF CONTENTS Pagc ARTICLE I DEFINITIONS: AUTHORIZATION AND PURPOSE OF BONDS: EQUALSECURITY ......................................................................................................2 Section1.01. Definitions ...............................................................................................2 Section 1.02. Rules of Construction ................................................................................8 Section 1.03. Authorization and Purpose of Bonds ..........................................................9 Section1.04. Equal Security ...........................................................................................9 ARTICLE II ISSUANCE OF BONDS ................................................................................................9 Section2.01. Designation ...............................................................................................9 Section 2.02. Terms of Bonds .........................................................................................9 Section 2.03. Redemption of Bonds .............................................................................. 10 Section 2.04. Form of Bonds .........................................................................................1 1 Section 2.05. Execution of Bonds .................................................................................1 1 Section 2.06. Transfer of Bonds ....................................................................................1 1 Section 2.07. Exchange of Bonds ..................................................................................12 Section 2.08. Temporary Bonds ....................................................................................12 Section 2.09. Registration Books ..................................................................................12 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen .............................................12 ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS: ISSUANCEOF BONDS .............................................................................................. I; Section 3.01. Issuance of Bonds .................................................................................... 13 Section 3.02. Loan Fund; Application of Proceeds of Sale of Bonds .............................13 Section 3.03. Validity of Bonds ....................................................................................13 ARTICLE IV REVENUES: FLOW OF FUNDS ................................................................................ I� Section 4.01. Pledge of Revenues; Assignment of Rights ..............................................13 Section 4.02. Receipt, Deposit and Application of Revenues .........................................13 Section 4.03. Investments .............................................................................................14 Section 4.04. Valuation and Disposition of Investments ................................................15 ARTICLE V COVENANTS OF THE AUTHORITY ........................................................................ I� Section 5.01. Punctual Payment ....................................................................................15 Section 5.02. Extension of Payment of Bonds ...............................................................15 Section 5.03. Against Encumbrances ............................................................................15 Section 5.04. Power to Issue Bonds and Make Pledge and Assignment .........................16 Section 5.05. Accounting Records and Financial Statements .........................................16 Section 5.06. No Additional Indebtedness .....................................................................16 Section 5.07. Tax Covenants .........................................................................................16 Section 5.08. Loan Agreement ......................................................................................17 Section 5.09. Further Assurances ..................................................................................18 ARTICLEVI THE TRUSTEE ........................................................................................................... 18 Section 6.01. Appointment of Trustee ...........................................................................18 Section 6.02. Acceptance of Trusts ...............................................................................18 Section 6.03. Fees, Charges and Expenses of Trustee ....................................................21 Section 6.04. Notice to Owners of Default ....................................................................21 Section 6.05. Intervention by Trustee ............................................................................21 -�- ►�6—Ic�2. I c�;6�xx��x;x.2 Section 6.06. Removal of Trustee .................................................................................22 Section 6.07. Resignation by Trustee ............................................................................22 Section 6.08. Appointment of Successor Trustee ...........................................................22 Section 6.09. Merger or Consolidation ..........................................................................22 Section 6.10. Concerning any Successor Trustee ...........................................................22 Section 6.1 1. Appointment of Co-Trustee .....................................................................22 Section 6.12. Indemnification; Limited Liability of Trustee ..........................................23 ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE ................................ 2� Section 7.01. Amendment Hereof ...............................................................................23 Section 7.02. Effect of Supplemental Indenture ............................................................24 Section 7.03. Endorsement or Replacement of Bonds After Amendment ......................24 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ................................................................ 2� Section 8.01. Events of Default .....................................................................................25 Section 8.02. Remedies Upon Event of Default .............................................................25 Section 8.03. Application of Revenues and Other Funds After Default .........................26 Section 8.04. Power of Trustee to Control Proceedings .................................................27 Section 8.05. Appointment of Receivers .......................................................................27 Section8.06. Non-Waiver .............................................................................................27 Section 8.07. Limitation on Rights and Remedies of Owners ........................................27 Section 8.08. Termination of Proceedings ..................................................................28 ARTICLE IX BOND INSURANCE ...................................................................................................28 ARTICLE X BOOK-ENTRY SYSTEM ............................................................................................ 28 SECTION 10.01 Book-Entry System; Limited Obligation of Authority ........................28 SECTION 10.02 Representation Letter .........................................................................29 SECTION 10.03 Transfers Outside Book-Entry System ...............................................29 SECTION 10.04 Payments to the Nominee ...................................................................29 SECTION 10.05 Initial Depository and Nominee .........................................................29 ARTICLE XI MISCELLANEOUS .....................................................................................................;0 Section 1 1.O l. Limited Liability of Authority ...............................................................30 Section 1 1.02. Benefits of Indenture Limited to Parties .................................................30 Section 1 1.03. Discharge of Indenture ..........................................................................30 Section 1 1.04. Successor Is Deemed Included in All References to Predecessor ...........31 Section 1 1.05. Content of Certificates ...........................................................................31 Section 1 1.06. Execution of Documents by Owners ......................................................31 Section 1 1.07. Disqualified Bonds ................................................................................32 Section 1 1.08. Waiver of Personal Liability ..................................................................32 Section 11.09. Partial Invalidity ....................................................................................32 Section 1 1.10. Destruction of Cancelled Bonds .............................................................32 Section 1 1.1 1. Funds and Accounts ..............................................................................32 Section 1 1.12. Payment on Business Days ....................................................................33 Section1 1.13. Notices ..................................................................................................33 Section 1 1.14. Unclaimed Moneys ................................................................................33 Section 1 1.15. Governing Law ......................................................................................34 EXHIBIT A- FORM OF BOND -ii- ►�6—Ic�2. I c�;6�xx��x;x.2 INDENTURE 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. � 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. � 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. �). 2006 Scrics C. 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.lc�;6\xx��x;x.2 —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 April I and Octobcr 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 rcnc�.. 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 April 2 in onc calcndar � car to April 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 April I. 2007. "Bonds�� mcans thc Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �). 2006 Scrics C. "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. Ic�;6\xx��x;x.2 —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(pro� idcd that strippcd sccuritics arc onl� permittcd if thc� ha� c bccn strippcd b� thc U.S. Trcasur� itscl� or paragraph B(c�cluding thc obligations dcscribcd in subparagraphs B.�4 and B.6) of thc dcfinition of "Pcrmittcd In� cstmcnts�� sct forth in this Scction. (b) bonds. dcbcntures. notcs or othcr c� idcnccs of indcbtcdncss issucd or guarantccd b� thc non-fiill faith and crcdit U.S. go� crnmcnt agcnc� Rcsolution Funding Corp. (REFCORP) (pro� idcd strippcd sccuritics and intcrest componcnts thcrcof arc onl� permittcd if thc� ha� c bccn strippcd b� rcqucst to thc Fcdcral Rcscr� c Bank of Nc« York in book cntr� form). or (c) prc-rcfiindcd municipal bonds ratcd "Aaa�� b� Mood� �s and "AAA�� b� Sc�.P. pro� idcd if thc issuc is onl� ratcd b� Sc�.P. thc prc-rcfiindcd bonds must ha� c bccn prc-rcfiindcd «ith cash. dircct U.S. or U.S. guarantccd obligations. or AAA ratcd prc-rcfiindcd municipal obligations. "Dcuositor��� 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. "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� Strcct. 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 P6—Ic�2. I c�;6\xx��x;x.2 — �— 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 succcssors undcr thc Insurancc Polic�. or its "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 account b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction �4.02(b)( I ). "Loan A�rccmcnt�� mcans thc Projcct Arca No. � 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. "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. P6—Ic �2. I c �;6\xx��x ; x.2 —�4— "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�: U.S. 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 U.S. Maritimc Administration Guarantccd Titic XI financing U.S. Dcuartmcnt of Housin� and Urban Dc� cloumcnt (HUD) Projcct Notcs Local Authorit� Bonds Nc« Communitics Dcbcntures - U.S. go� crnmcnt guarantccd dcbcntures U.S. Public Housing Notcs and Bonds - U.S. go� crnmcnt guarantccd public housing notcs and bonds C. Bonds. dcbcntures. notcs or othcr c� idcncc of indebtedness issucd or guarantccd ►�6—Ic�2. Ic�;6�xx��x;x.2 —�— b� am of thc follo« ing non-fiill faith and crcdit U.S. go� crnmcnt agcncics (pro� idcd that strippcd sccuritics arc onl� permittcd if thc� ha� c bccn strippcd b� thc agcnc� itscl�: �4 6. 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 Studcnt Loan Markctin� Association (SLMA or "Sallic Mac Scnior dcbt obligations Rcsolution Fundin� Coru. (REFCORP) obligations Farm Crcdit S� stcm Consolidatcd s� stcm« idc bonds and notcs 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. 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. P6—Ic �2. I c �;6\xx��x ; x.2 —6— 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 Tnistcc 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 im 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 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.6i2. - - "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. 6�2 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. ..Rc ort�� 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. P6—Ic�2. Ic�;6\xx��x;x.2 —7— "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. 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. P6—Ic�2. Ic�;6\xx��x;x.2 —8— 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� Ta� Allocation Subordinatc Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �). 2006 Scrics C and shall bc issucd in thc aggrcgatc Initial Principal Amount of `f . Scction 2.02. Tcrms of Bonds. 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 April 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 ofthc 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 Maturit� (Auril I ) Amount Initial Initial Principal Yicld to Principal Amount per `f �.000 Maturit� Amount Maturit� Amount Datc Intcrest on cach Bond shall bc compoundcd scmi-annuall� at thc � icld sct forth abo� c from thc Closing Datc on cach April I and Octobcr I. commcncing Octobcr 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. P6—Ic �2. I c �;6\xx��x ; x.2 —9— 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 April 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 Octobcr I or April I on or aftcr April 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 April I. 20_ and Octobcr I. 20_ 10_`%� April I. 20_ and Octobcr I. 20_ 10_ April I. 20_ and thcrcaftcr 100 Thc Authorit� shall pro� idc «rittcn noticc to thc Trustcc of am rcdcmption pursuant to this Scction 2.0 �(a) at Icast �4� but not morc than 90 da� s prior to thc datc fi�cd for such rcdcmption. (b) (c) � Rcscr� cd�. 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. (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. ►�6—Ic�2.lc�;6�xx��x;x.2 —10— (�) 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�. 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 �. ►�6—Ic�2.lc�;6�xx��x;x.2 —I I— 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 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. P6—Ic�2.lc�;6\xx��x;x.2 —12— 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. 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 PG-1cJ2.IcJiG\8898;8.2 —I �— 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 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 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. 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 P6—Ic �2. I c�;6\xx��x ; x.2 — I�4— 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 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. P6—Ic�2. I c�;6\xx��x;x.2 — I �— 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 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. PG-1cJ2. I cJiG\8898;8.2 — I 6— (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: (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 P6—Ic�2.lc�;6\xx��x;x.2 —17— 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 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 carr� 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 c�amination 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 fiinds 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 P6—Ic�2.lc�;6\xx��x;x.2 —18— 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 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. P6—Ic�2.lc�;6\xx��x;x.2 —19— (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 fiirnishcd 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� 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. P6—Ic�2. Ic�;6\xx��x;x.2 —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. PG-1cJ2. I cJiG\8898;8.2 —2 I — 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 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 Successor 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 compain 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� cn 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 P6—Ic�2. Ic�;6\xx��x;x.2 —22— 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 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 ►�6—Ic�2.lc�;6�xx��x;x.2 —2 �— 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 (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. PG-1cJ2. I cJiG\8898;8.2 —2�— 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. Scction 8.01. E� cnts of Dcfault. Thc follo« ing c� cnts shall bc E� cnts of Dcfault hcrcundcr: (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) � 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. PG-1cJ2. I cJiG\8898;8.2 —2 �— 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� 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 b�rt not including thc datc of pa� mcnt b� thc Authorit� or thc Agcnc� to thc Trustcc). and thc chargcs and cxpcnscs 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 cxisting 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 P6—Ic�2. Ic�;6\xx��x;x.2 —26— 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 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 PG-1cJ2. I cJiG\8898;8.2 —27— 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 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 w�dcrstood 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 PG-1cJ2. I cJiG\8898;8.2 —28— 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 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 satisf� 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 A�rthorit� fails to idcntif� anothcr qualificd sccuritics dcpositon 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 contran. 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. P6—Ic�2. Ic�;6\xx��x;x.2 —29— 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 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 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 Dcfcasancc Obligations in such amount as an Indcpcndcnt Accountant 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 P6—Ic�2.lc�;6\xx��x;x.2 —�0— 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 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 l l.Q�. 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 lcgal mattcrs. upon a ccrtificatc or opinion of or rcprescntations b� cow�scL w�lcss 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�� lcdgcd to him thc cticcution thcrcof. Thc o« ncrship of Bonds shall bc pro� cd b� thc Rcgistration Books. Am rcqucst. conscnt or � otc of thc 0« 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 PG-1cJ2.IcJiG\8898;8.2 —� I— 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. 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. P6—Ic�2.lc�;6\xx��x;x.2 —�2— 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. 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 P6—Ic�2. I c�;6\xx��x;x.2 —> ;— Bonds: uro� 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�;6\xx��x;x.2 — ��4— 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 I� Chicf Administrati� c Officcr WELLS FARGO BANK. NATIONAL ASSOCIATION. as Trustcc I� Authorizcd Officcr PG-1cJ2. I cJiG\8898;8.2 — � �— 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. �) 2006 SERIES C YIELD TO MATURITY MATURITY DATE ORIGINAL ISSUE DATE CUSIP April 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 April I and Octobcr I. commcncing Octobcr 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 A-1 I�6—Ic�2. I c�;6�xx��x;x.2 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. �). 2006 Scrics C(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. �(thc "Projcct Arca��). Thc Loan has bccn madc b� thc Authorit� to thc Agcnc� pursuant to a Projcct Arca No. � 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 April 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 April I or Octobcr I on or aftcr April 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): Rcdcmution Datcs April I. 20_ and Octobcr I. 20 April I. 20_ and Octobcr I. 20 Rcdcmution Pricc I 0_`%� 10 A-2 I�6—Ic�2. I c�;6�xx��x;x.2 April I. 20_ and thcrcaftcr 100 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: 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 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 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. A-3 I�6—Ic�2. I c�;6�xx��x;x.2 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�cc�rtcd 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 A-4 I�6—Ic�2. I c�;6�xx��x;x.2 �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 unto «hosc ta� idcntification numbcr is . thc «ithin-mcntioncd registcrcd 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 Bond in c� cr� particular «ithout altcration or cnlargcmcnt or am changc «hatsoc� cr. A-5 I�6—Ic�2. I c�;6�xx��x;x.2 Proicct Arca No. � Loan A�rccmcnt (2006 Subordinatc Loan) «ith rcfcrcncc to � Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics C P(,-Ic�2.c�1�(,\xx������1.2 RWG DRAFT: �/2-4/200G TABLE OF CONTENTS ARTICLE I DEFINITIONS ......................................................................................... ScctionI . I . Dcfinitions ........................................................................................ Scction I.2. Rulcs of Construction ........................................................................ ARTICLE II THE LOAN: APPLICATION OF LOAN PROCEEDS: INCURRENCE 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 ......................................................................... Scction2.�. Rcscr� c Fund .................................................................................... Scction 2.6. Costs of Issuancc Fund ...................................................................... Scction2.7. Projcct Fund ...................................................................................... Scction2.8. Parit� Dcbt ........................................................................................ Scction 2.10. Issuancc of Additional Scnior Dcbt .................................................. Scction 2.10. Issuancc of Subordinatc Dcbt ........................................................... Scction 2. I I. Validit� of Loan .............................................................................. ARTICLE III PLEDGE AND APPLICATION OF SUBORDINATE TAX REVENUES Scction �. I. Plcdgc of Subordinatc Ta� Rc� cnucs ................................................. Scction ;.2. Spccial Fund: Dcposit of Ta� Rc� cnucs ............................................. Scction �. �. Transfcr of Subordinatc 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 ......................................................... ARTICLE VI MISCELLANEOUS ................................................................................. Scction 6. I. Bcncfits Limitcd to Partics ................................................................ Scction 6.2. Succcssor is Dccmcd Includcd in All Rcfcrcnccs to Prcdcccssor........ P� 2 2 i .� .� .� .6 .6 .7 .x .x .9 .9 10 10 10 10 10 10 II 12 12 12 12 12 12 I� I� I� I� I �4 I �4 I� I� I� I� 16 16 17 17 17 17 ix ix ix ix ►�6—Ic�2.c� I �6�xx������ I .2 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.... Scction 6.7. Noticcs ......................................................... Scction6.8. Partialln�alidit� ........................................... Scction 6.9. Articic and Scction Hcadings and Rcfcrcnccs Scction 6.10. E�ccution of Countcrparts .......................... Scction 6. I I. Go� crning La« ........................................... Scction 6.12. Thc Trustcc ................................................ EXHIBIT A— Schcdulc of Loan Pa� mcnts ix 19 19 19 19 19 19 19 19 20 P6—Ic�2.c�1�6�xx������1.2 ii PROJECT AREA NO. � LOAN AGREEMENT (2006 SUBORDINATE LOAN) This Projcct Arca No. � Loan Agrccmcnt (2006 Subordinatc Loan) (this "Loan Agrccmcnt��) is madc and cntcrcd into as of Jul� I. 200C. 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. � 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�cc�rtion and dcli� cr� of this Loan Agrccmcnt. thc Authorit� has issucd its Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �). 2006 Scrics C. 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: P6—Icl2.cl I �6\xx�)�)�)1.2 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. �). 2006 Scrics C. "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 � . P6—Icl2.cl I �6\xx�)�)�)1.2 2 "Loan A�rccmcnt�� mcans this Projcct Arca No. � 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 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 or appro� cd b� thc Agcnc� on or prior to thc datc hcrcof pursuant to Scction >>�40 I of thc Rcdc� clopmcnt La« «ith (i) thc Count� of Ri� crsidc. (ii) thc Coachclla Vallc� Mosquito Abatcmcnt District. (iii) thc Coachclla Vallc� Rccrcation and Park District. (i� ) thc Coachclla Vallc� Watcr District. (� ) thc Dcscrt Communit� Collcgc District. (� i) thc Dcscrt Sands Unificd School District and (� ii) 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 loans. ad� anccs and indcbtcdncss pa� ablc from Ta� Rc� cnucs. P6—Ic�2.c� I �6\xx�)�)�) I .2 3 "Proicct Fund�� mcans thc fiind b� that namc cstablishcd and hcld b� thc Trustcc pursuant to Scction 2.7. "Oualificd Rcscr� c Fund Crcdit Instrumcnt�� mcans a surct� bond issucd b� an 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 claims pa� ing abilit� of such insurancc compam is ratcd «ithin thc highcst rating catcgor� b� Mood� �s and Sc�.P. and if ratcd b� A.M. Bcst c�. Compam. «ithin thc highcst rating catcgor� b� A.M. Bcst c�. Compam. at thc timc of dcli� cr� of such 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� cr� of such surct� bond «ill not. of itsclf. causc a rcduction or «ithdra«al of am rating thcn assigncd to thc Bonds: (ii) such surct� bond has a tcrm of at Icast 12 months: (iii) such 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 surct� bond to dra« thcrcundcr an amount cqual to am dcficicncics «hich ma� cxist from timc to timc «ith respcct to dcposits rcquircd pursuant to Scction �.;(a). "Rcdc� clou�»cnt Fund�� mcans thc Projcct Arca No. � 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. � 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. 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 � . "Scnior Dcbt�� mcans 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 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 fi�nd relating to am Scnior Dcbt in licu of cash pursuant to thc agrccmcnts bct«ccn thc Agcnc� and such issucrs. P6—Icl2.cl I �6\xx�)�)�)1.2 4 "Scnior 2006 Loans�� mcans thc outstanding balancc of thc loans madc b� thc Authorit� to thc Agcnc� pursuant to thc Scnior 2006 Loan Agrccmcnt. "Scnior 2006 Loan A�rccmcnt�� mcans thc Projcct Arca No. � Loan Agrccmcnt (2006 Scnior Loans). datcd as of Jul� I. 2006. b� and among thc Agcnc�. thc Authorit� and Wclls Fargo Bank. National Association. as 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 No. � Loan Agrccmcnt datcd as of Jul� I. 200 �. 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 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« . 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 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. Scction 2.2. Disburscmcnt and Auulication of Loan Procccds. P6—Icl2.cl I �6\xx�)�)�)1.2 5 amount of `f Issuancc Fund. On thc Closing Datc. thc Authorit� shall causc to bc dcpositcd into thc Loan Fund thc «hich shall bc hcld b� thc Trustcc and «hich shall bc disburscd as follo«s: (�) Thc Trustcc shall transfcr thc amount of � to thc Costs of (��) Thc Trustcc shall transfcr thc amount of � (iii) Thc Trustcc shall transfcr thc amount of `f («hich amount shall cqual thc initial Rcscr�c Rcquircmcnt). to thc Projcct Fund to thc Rcscr� c Fund On thc Closing Datc. thc Authorit� shall also causc 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 accow�t 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 April 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 April 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 Indcnturc 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 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 ). P6—Icl2.cl I �6\xx�)�)�)1.2 6 (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: 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 on thc rcdcmption datc dcsignatcd b� thc Agcnc� : pro� 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. � 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) on or bcforc thc third Busincss Da� prcccding am schcdulcd rcpa� mcnt datc «ith respcct to thc Loan. 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 amow�t 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 datc of rcpa� mcnt of 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 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 Loan 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—Icl2.cl I �6\xx�)�)�)1.2 7 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 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. Each such Rcqucst of thc Agcnc� shall statc and shall bc sufficicnt c� idcncc to thc Trustcc: (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 P6—Icl2.cl I �6\xx�)�)�)1.2 8 (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) 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 10� perccnt of Ma�imum Combincd Annual Dcbt Scr� icc. (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 April I and Octobcr 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 ofthc 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 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: P6—Icl2.cl I �6\xx�)�)�)1.2 9 (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 dcli� crcd thc Trustcc a Ccrtificatc of thc Agcnc� «hich ccrtif� ing that 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 Ma�imum Combincd Annual Dcbt Scr� icc. (c) Thc Agcnc� shall ha� c filcd «ith thc Trustcc a rcport of an Indcpcndcnt Rcdc� clopmcnt Consultant «hich sho« s that thc projcctcd Ta� Rc� cnucs a� ailablc to bc rccci� cd b� thc Agcnc� undcr thc Plan Limitations in cach upcoming � car «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 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� 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 in am Scnior Dcbt Instrumcnt. this Loan Agrccmcnt and am Parit� Dcbt Instrumcnt. 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 P6—Icl2.cl I �6\xx�)�)�)1.2 10 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 rcplcnishmcnt 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 April 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 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: pro� 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. ►��,-�c�z.c� � ��,�xx������ �.z 1 1 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«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 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 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 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� P6—Icl2.cl I �6\xx�)�)�)1.2 12 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 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 Project 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 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 (c�ccpt for thc purposc of c�tcnding or climinating thc timc limit on thc cstablishmcnt of loans. ad� anccs. and indcbtcdncss. c�tcnding thc timc limit on thc cffccti� cncss of thc Rcdc� clopmcnt Plan. c�tcnding thc timc limit on thc pa� mcnt of indcbtcdncss. c�tcnding thc timc limit for thc rcccipt of ta� incrcmcnt. or incrcasing thc limitation on thc numbcr of dollars of ta�cs to bc allocatcd to thc Agcnc� ) 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 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(b) and (ii). as long as thc Insurancc Polic� is 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 PG-1cJ2.cJ I �G\889991.2 13 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. (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) 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�z.c� � ��,�xx������ �.z 14 (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 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 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 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 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 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. ►��,-�c�z.c� � ��,�xx������ �.z 15 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 am 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 �0 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: pro� idcd. ho�� c� cr. that if 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 Agcnc� «ithin such �0 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 pz� 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 (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 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 Tn�stcc 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� � ��,�xx������ �.z 16 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 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 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 of 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 (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« . P6—Icl2.cl I �6\xx�)�)�)1.2 17 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. 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 P6—Icl2.cl I �6\xx�)�)�)1.2 18 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 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. ►��,-�c�z.c� � ��,�xx������ �.z 19 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. ��lt'191CllilL%C'/' Uf ��Clf,Tt' �illt'illlUilCl��j' �,C'fl %3�Clil�(� PG-IO2.O I �G\889991.2 20 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 : Authorizcd Officcr PG-1cJ2.cJ I �G\889991.2 2 1 EXHIBIT A SCHEDULE OF LOAN PAYMENTS Datc Pa� mcnt Pa�ablc on thc fifth Busincss Da� prcccding cach April Ist ►��,-�c�z.c� � ��,�xx������ �.z A-1 i.�,.� uiinr r a; c �;/2 ;/c �6 PRELIMINARY OFFICIAL STATEMENT DATED JUNE , 20(K� NEW ISSUE - BOOK-ENTRY ONLY INSURED RATINCS: ti�,l': UNINSURED RATINCS: ti�,l': I �cc "R.� i i�, �s" hcrcinl ltt tltc� oE�itti<ut «('KieltcuzCti. !t tiLtiott <Yr (ir�sJton. :1 !'ro/i�ssiona! ('oi7�orutio�i. Los. l�igeles, ['tili/i»�iici. /3e» id ('oa�ttic�l. bcised on ctri.stiii�; lcnr cuid ci.s.s�u��iii�; complicuicr u id� crriciiii corriicuii.s .sri_/in•d� iii du� doc�u�u�iii.s prriciiiiiii�; io du� ?00G .Srrir.s /3oiirls cuid rrqt�irrmriiis o/ du� /iiirnicd Krrrinu� ('�xlr o/ ! I�SG, cis cu�u�iidrd (du� ..( •�xlr ../ us drscribrd J�rrriii. iiiirrrsi oii d�c ?00< .Srrirs /3oiirls is iioi iiu•h�drd iii �;ross ii�conu� o/ du� ouiu�ns du�rro%/in'./i�drizd iiicomr ici.t p�u/�o.sr.s. /ii du� opiiiio�� o/ /3oiid ('o�ucsrl. iiiirrr.si oii ilu� ?00G .Srrir.s /3oiirls i.s iioi irrcdrd ci.s cui iic'm o/ ici.t prr/i�rriicr iii ccdc�dcdiii�; du� /i�drizd cdirnicdirr miiiim�u�� ici.tciblc� iiicomr o/ iiidirid��cd.s cuid coi/�oizdioi�s. /iiirrr.si oii d�r ?00G .Srrir.s /3oiirls mcrt' br .s��bjrci io crriciiii_/i�drizd ici.tr.s imposrd oii coi��oizdioiis, iiu•h�diii�; d�r coi��oizdr ed�rnicdirr miiiinnu�� �ci.� o�� ci por�ioii o/ d�cd iii�rrrs�. bi d�r./iu•d�rr opiiiioii o/73oiid ('o�uisrl. iii�rrrs� oii du� /3oiirls i.s cttrmpi_/i•om prnsoiicd ii�comr ici.tr.s impo.srd bt' du�.Sicdr o/('cdi/imiici. .Srr .`I .�� M.�ri I.Izs" lu�rriii. $ * Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 3) 2006 Series A $ * Palm Desert Financing Authority Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series B $ * Palm Desert Financing Authority Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series C Da�tcd: Da�tc of Dcli� cn Dur. April 1, a�s sho�� n on thc insidc co� cr pa�;;c l7�i.s corrr pci�;r coiiiciiics crriciiii iii/inmcdioii_/in• q��ick rr/i�rriicr o�dt'. /i i.s not ci .s�u�u��cu1' o/ d�i.s i.s.s�u�. /�n'r.sions cu•r cidri.srd io rrcid d�r riiiirr O/%icicd .S�cdrmrii� �o ob�ciiii iii/bimcdioii rssrii�icd �o d�r mcdciii�; o/cui iii/binu�d iimrsm�rii� dreisioii. Ilic Palm I k�rt I inancing nuthorih I thc "I inancing /�uthorih ";I is issuing `� * principal amowit ot� Palm I k�rt I inancing nuthorit� Ias /�llocation Rc�enuc 13oncls IProject /�rca No. ;1 2OOG Scrics /� Ithc "Cwrent Intcrest 13oncls"1 ancl `� * principal amowit ot� Palm Ik�ri r�„<<„��„�_ n«a,<»;�� r��� nu<>�<���<», Rc�enuc Capital /�ppreciation 13oncls IProject /�rca No. ;;12OOG Scrics 13 Ithc "Capital /�ppreciation 13oncls" ancl togethcr ��ith thc Cturent Intcrest 13oncls. thc "2e)e)G Senior Parih 13oncls"1 to makc t��o loans. onc ��ith res}�ct to cach Scrics ot�2e)e)G Senior Parih 13oncls Icollecti�ch. thc "2OOG Senior Parit� Loans";I. to thc Palm Ik�ri Recic�clopment /�genc� Ithc "Recic�clopment /�genc�"1 p«rsikmt to thc tenns ot�a Project /�rca No. ; Loan /�grcement cl�itecl as ot�.luh I. 2OOG Ithc "2OOG Senior Parih Loan /�grcement";I b� ancl among thc Financing /�uthorih. thc Recic�clopment /�genc� ancl \Nclls Fargo 13ank. National nssociation Ithc "Inistcc";I. Ilic Recic�clopment /�genc� ��ill apph thc proccecls o��thc 2OOG Senior Parih Loans to: I"i;! tinancc �anous recic�clopmciit acti�itics ��iQliii Ql� Palm Ik�s�ri Recic�clopment /�genc� Project 1�rca No. � Ithc "Proje�t I�r�<i';1: I iil p«rcha� a rc�r�c timcl sw-ch polic� tirr a cleposit into thc Senior Parih Rc�r�c r��,a: ��„a i»>> ����, thc costs associatecl ��ith thc issikmcc ot� thc 2e)e)G Senior Parih 13oncls. I hc 2c)c)G Senior Parih 13oncls arc issuccl pursuant to an Inclenturc ot� l rust. cl�itecl as ot�.luh I. 2c)c)G I thc "2c)c)G Senior Parih Inclenturc";I. b� ancl l�t��cen thc Financing nuthorih ancl thc I rustcc. . . Ilic Financing /�uthorih is also issuing `� * principal amowit ot� Palm I k�rt Financing nuthorih Suborclinatc I as /�llocation Rc� enuc Capital /�ppreciation 13oncls I Project /�rca No. ;;I 2OOG Scrics C I thc "2OOG Suborclinatc Capital /�ppreciation 13oncls" ancl togethcr ��ith thc 2OOG Senior Parih 13oncls. thc "2c)c)G Scrics 13oncls") to makc a loan I thc "2c)c)G SuYxrrclinatc Loan" ancl togethcr ��ith thc 2c)c)G Senior Parih Loans. thc "2c)c)G Loans";I to thc Recic�clopment /�genc� pttrstkmt to thc tenns ot�a Project /�rca No. � Loan /�grcement I�ttborclinatc Loan;l cl�itecl as ot�.ltth I. 2OOG Ithc "2OOG Suborclinatc Loan /�grcement" ancl togethcr ��ith thc 2c)c)G Senior Parih Luan /�grcement. thc "2c)c)G Loan /�grcements") b� ancl among thc I inancin.= /�uthorih. thc Recic�clopment /�genc� ancl thc Inistcc. Ilic Recic�clopment /�genc� ��ill apph thc proccecls ot�thc 2e)e)G Suborclinatc Loan to: Ii;l tinancc �arious recic�clopment acti�itics ��ithin thc Project /�rca: I ii;l timcl a cic}x>sit into thc Suborclinatc Rc�r�c r��,a: <<„a i»>> ����> thc costs associatecl ��ith thc issikmcc ot� thc 2OOG Suborclinatc Capital /�ppreciation 13oncls. Ilic 2OOG SuYxrrclinatc Capital /�ppreciation 13oncls arc issuccl pw-sikmt to a�paratc i„a�„<<�-� <>r i n«�. a����a as ot�.luh I. 2c)c)G I thc "2c)c)G Suborclinatc Inclentw-��� ancl togethcr ��ith thc 2c)c)G Senior Parih Inclentw-c. thc "2c)c)G Inclentw-es";I. b� ancl l�h�cen thc Financins J�uthorih ancl the I n�st��. Ilic 2e)e)G Scrics 13oncls ��ill l� issuccl in book-entn timn. initialh registcrecl in thc namc ot�Cecic c�, Co. as nomincc ot�thc Ikpositon Inist Compam. Nc�� York. Nc�� York j••I) I C..;I. ��ho ��ill act as �ctuitics cic}x>siton �irr thc 2OOG Scrics 13oncls. Incli� icltkil pttrcha�s o��thc 2OOG Scrics 13oncls ��ill l� in book-entn �<»,,, <»,�,. <<„a �„ a�„<»„�„����<»,� <>e i>> ��.c�c�c� <>r am integral multiplc thcrcot���ith res}�ct to thc Cwrent Intcrest 13oncls ancl lii;l `��.e)e)e) Matwih nmowit las cletinecl hcrcinl or am integral multiplc thcrcot���ith res}�ct to thc Capital nppreciation 13oncls ancl thc 2e)e)G Suborclinatc Capital /�ppreciation 13oncls. Nw-chascrs ��ill not recci�c ph�sical ccrtiticates reprc�nting thcir intcrests in thc 2e)e)G Scrics 13oncls. 1'rincipal ot: intcrest on ancl reclemption premiwn. it�am. on thc Cwrent Intcrest 13oncls ancl /�ccretecl Valuc ot�thc Capital /�ppreciation 13oncls ancl thc 2e)e)G Suborclinatc Capital /�ppreciation 13oncls ��ill l� paicl b� thc I nistcc clirecth to U"I C. ��hich in twii is obligatecl to remit such principal. intcrest, nccretecl Valuc ancl reclemption premiwn. it�am. to U I C Pariicipants ti>r sub�yucnt clisbw-�ment to thc 13eneticial O��»crs ot�thc applic<iblc 2OOG Scrics 13oncls. Scc /������.�ni� G—..0 I C. ��I) IIu.13cx�I:—I:�IIzl (hl.l S1sI7.�1... Intcrest on thc Cwrent Intcrest 13oncls ��ill l� pa�ablc on cach /�pril I ancl Octol�r I ot�cach �car. conmicncing Octol�r I. 2e)e)G at thc res}�cti�c rates �t timh on thc insicic co�cr pagc. ancl principal ot�thc Cwrent Intcrest 13oncls is pa�ablc on npril I ot�cach �car. conmicncing npril I. 2e) in thc amotmts �t fimh on thc insicic co�cr pagc. llic Capital /�ppreciation 13oncls ancl thc 2e)e)G Suborclinatc Capital /�ppreciation 13oncls ��ill accretc in �aluc irom thc Uatc ot� Ikli�en at thc res}�cti�c /�ccretecl Valuc Ratc �t ti>rih on thc insicic co� cr pagc. compowulecl �miann�kilh. on /�pril I ancl Octol�r I ot� cach �car. commencing Octol�r I. 2e)e)G to thc res}�cti�c matwih cl�ites thcr�oC No pa�ments ��ill l� macic on thc 2e)e)G Capital /�ppreciation 13oncls prior to thc res}�cti�c matwih cl�itc thcrcoC Thc Currcnt Intcrest &mds a�re subjcct to optiona�l amd sinkin;; a�ccount rcdcmption a�s dcscribcd hcrcin. Scr "TttN:200G SN:tttNs &��ns— Current Interest &mds—Kedenrption 1'�oizsions." The Ca�pita�l Appreciation &�nds amd the 20(Ki Subordina�te Ca�pita�l Apprecia�tion &�nds a�re subject to optiona�l redemption a�s described herein. Scr "—Ca�pita�l Apprecia�tion &�nds—Kedenrption 1'�oizsions" amd "-20(Ki Subordina�te Ca�pita�l Apprecia�tion &mds—Kedenrption 1'�oizsions." For a cliscussion ot�somc ot�thc risks associatecl ��ith thc pw-cha� ot�thc 2c)c)G Scrics 13oncls. �c "Ci.izi.�i� Ris�;s ic� 13c��nnc�i.ni.izs... Ilic 2e)e)G Senior Parih 13oncls are s}�cial obligations ot�thc Financing /�uthorih pa�ablc irom ancl �cw-ecl b� Rc�enucs las cletinecl hcrcin;l. consisting primarih ot�amowits pa�ablc b� thc Recic�clopment /�genc� wulcr thc 2OOG Senior Parih Loan ngrcement. Ilic 2OOG Senior Parih Loan ngrcement is �cw-ecl b� ancl p�i�ablc irom tas increment rc�enucs cicri�ecl irom pro}�m in thc Project nrca ancl allocatecl to thc Recic�clopment ngenc� pw-sikmt to thc Recic�clopment La��. Ilic 2OOG Senior Parih Loan /�grcement is pa�ablc on a parih basis ��ith thc obligations ot�thc Recic�clopment /�genc� I thc "2OO; i.<><<,,.. �,,,��a� ��,a�r a loan agrcement entcrecl into in 2OO; j thc "2OO; Loan ngrcement..l. Ilic Recic�clopment ngenc� ma�. pw-sikmt to thc tenns ot�thc 2c)c)G Senior Parih Loan ngrcement ancl thc 2c)c)G Senior Parih Inclentw-c �cw-c ��aa���<»,��i <>r>>�_����<»,� <», a parih ��ith thc 2c)c)G Loans ancl thc 2OO; Loan. No timcls or pro}�riics ot� thc Recic�clopment /�genc�. othcr than thc Ias Rc�enucs �cw-c pa�ment ot� thc 2OOG Senior Parih Loan /�ercemenL Scc"S�:c�� �ziiti .��i�Scx �zc��.sc�� P.�ti�u.�i �c��z i�u.13c��i�s—Parih IkbtanclSuborclinatclkbt." Ilic 2e)e)G Suborclinatc Capital /�ppreciation 13oncls are s}�cial obligations ot� thc Financing /�uthorih irom ancl �cw-ecl b� Suborclinatc Rc� enucs las cletinecl hcrcin;l. consisting primarih ot�amounts pa�ablc b� thc Recic�clopment ngenc� wulcr thc 2e)e)G Suborclinatc Loan ngrcement. Ilic 2e)e)G Suborclinatc Loan ngrcement is �cw-ecl b� ancl pa�ablc irom suborclinatc tas increment rc�enucs cicri�ecl irom pro}�rt� in thc Project nrca ancl allocatecl to thc Recic�clopment /�genc� pw-sikmt to thc Recic�clopment La��. Ilic 2e)e)G Suborclinatc Loan /�grcement is pa�ablc on a suborclinatc basis to thc obligations ot�thc Recic�clopment /�genc� uncicr thc 2OOG Senior Parih Loan /�grcement ancl thc 2OO; Loan /�grcemenL No tiincls or pro}�riics ot�thc Recic�clopment /�genc�. othcr than thc Suborclinatc Ias Rc�enucs �cw-c pa�ment ot� thc 2e)e)G Suborclinatc Loan /�grcemenL Scc "Si:c�� iziiti .��n Scx �zc��.sc�� P.�ti�i�.�i �c��z i�u.13c��i�s—SuborclinatcRc�enucs... Ilic scheclulecl pa�ment ot� thc principal ancl nccretecl Valuc ot� ancl intcrest on thc 2e)e)G Scrics 13oncls ��hen cluc ��ill hc g�kirantcecl wulcr a tinancial g�kiranh insw-ancc polic� to l� issuccl concwrenth ��ith thc cicli�en ot�thc 2e)e)G Scrics 13oncls b� �Insttrcr Logo� I�I II: 2c)c)G SI:RII:S 13ONUS nRl: NO"I n UI:131 OF I�I II: CI IY OF PnI,M UI:SI:R I I I I II:'•CI I Y..I. I�I II: S"I n l�l: OF CnI,IFORNIn I I�I II: ..�Inll:..l OR nNY OF IIS POI,II ICnI, SUI3UIVISIONS. O"IIII:R I�IInN I�III: FINnNCING nU"IIIORIIY. nNU NONI: OF IIII: CIIY. I�III: Slnll: OR nNY OF IIS POI,II1Cnl, SUI3UIVISIONS. O"IIII:R I�IInN I�III: FINnNCING nU"I�IIORIIY. IS I,Inl31,1: I�III:RI:FOR. I�III: 2c)c)G LOnNS nRl: NO"I n UI:131 O1 I�I II: I INnNCING nU"I I IORI IY OR I I II: S"I n l l: OR nNY O1 I I S POI,I I1Cnl, SUI3UIVISIONS. nNU NONI: O1 I�III: I INnNCING nU"I�IIRO"IIY OR I�III: S"Inl�l: OR nNY O1 I�IS POI,II1Cnl, SUI3UIVISIONS. IS I,Inl31,1: IIII:RI:1OR. NONI: O1 IIII: MI:M131:RS OF I I II: FINnNCING nU"I I IORI I Y. I�I II: CI IY COUNCII,. I I II: RI:UI:VI:LOPMI:N�I nGI:NCY OR nNY PI:RSONS I:XI:CU"I ING I�I II: 2c)c)G SI:RII:S 13ONUS OR I�I II: 2c)c)G LOnN nGRI:I:MI:N�I S nRl: I,Inl31,1: PI:RSONnI,I,Y \NI I I I RI:SPI:C I IO "I�I II: 2c)c)G SI:RII:S 13ONUS OR I�I II: 2c)c)G LOnNS. I�I II: O131,IGn 11ONS O1 I�I II: RI:UI:VI:LOPMI:N�I nGI:NCY \NI I I I RI:SPI:C I IO "I�I II: 2c)c)G SI:NIOR PnRI I Y LOnNS nRl: PnYnl3l,l: SOI,I:I,Y IROM I�III: InX RI:VI:NUI:S InS UI:I INI:U III:RI:INI nS SI�I 1ORI�II IN I�III: 2c)c)G SI:NIOR PnRIIY LOnN nGRI:I:MI:N l. I I II: O131,IGn 11ONS OF I I II: RI:UI:VI:LOPMI:N�I nGI:NCY \NI I�I I RI:SPI:C I IO "I I II: 2c)c)G SU13ORUINn l�l: CnPI l nl, nPPRI:CIn llON 13ONUS nRl: PnYnl3l,l: SOI,I:I,Y FROM I�I II: SU13ORUINn l l: I nX RI:VI:NUI:S InS UI:FINI:U I II:RI:INI nS SI� I FOR I I I IN I�I II: 2c)c)G SU13ORUINn l�l: LOnN nGRI:I:MI:N�I. NI:I I I II:R I I II: FINnNCING nU"I I IORI I Y NOR I�I II: RI:UI:VI:LOPMI:N�I nGI:NCY I InS InXING PO\NI:R. Ilic 2e)e)G Scrics 13oncls arc ot�tcrecl ��hen. as ancl it�issuccl b� thc Financing /�uthorih ancl recci�ecl b� thc l lncicr��ritcr. subject to thc appro�al as to thcir legalih b� Richarcls. Watson �, Gcrshon. n Protessional Co��oration Los nngcles. Caliti>mia. 13onc1 Coun�L Ccrtain legal mattcrs ��ill hc pas�cl u}xm tirr thc Financing /�uthorih b� thc Cih /�ttomc� ancl b� Lotton c�, .Icnnings. San Francisco. Caliti>mia. Uisclosw-c Cowi�l. It is anticipatecl that thc 2OOG Scrics 13oncls in Yx>ok-entn onh timn ��ill l� a�ailablc tirr cicli�en throueh thc tiicilitics ot�U I C in Nc�� York. Nc�� York on or about .luh . 2OOG. CITIGROUP I )atecl: . 2c u 16 * Prcliminan. subject to changc. $ * Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 3) 2006 Series A $ * Palm Desert Financing Authority Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series B $ * Palm Desert Financing Authority Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series C Matw•ity Schedule $ * Cw•rent Interest Bonds, 2006 Series A Maturit� CUSIP Datc Principal Intcrest Pricc or No.+ A ril I Amount* Ratc Yicld (696617) � � � Maturit� Datc (Auril I ) Maturit� CUSIP Datc Principal Intcrest Pricc or No.+ (Auril I ) Amount* Ratc Yicld (696617) *- `%� Tcrm Bonds duc April I. 20_ - Pricc: `%rCUSIP No.+ 696617 *- `%� Tcrm Bonds duc April I. 20_ - Pricc: `%rCUSIP No.+ 696617 *- `%� Tcrm Bonds duc April I. 20_ - Pricc: _`%rCUSIP No.+ 696617 $ * Capital Appreciation Bonds, 2006 Series B Issuc Yicld to Accrctcd Valuc CUSIP No.+ Amount* Maturit� at Maturit� (696617) + Cop�right 2ciclG. nmcrican 13ankcrs nssociation. Cl1SIP cl�ita hcrcin is pro�iclecl b� Stancl�ircl ancl Poor's. Cl1SIP Scr�icc 13w-cau. a cli�ision ot� lhc McGra��-I lill Companics. Inc. Iliis cl�ita is not intenclecl to crcatc a cl�itaba� ancl cicws not �r�c in am ��a� as a substitutc tirr thc CUSIP Scr�icc. CUSII' numl�rs arc pro�iclecl tirr con�enicncc ot� retcrencc onh. Nonc ot� thc Financing nuthorih. thc Recic�clopment ngenc� or thc Unclen�ritcr takc am res}x>nsibilih ti>r thc accw-ac� ot�such CUSII' numl�rs. Ilic CUSII' numl�r tirr a s}�citic matwih is subject to l�ing changecl attcr thc issikmcc ot�thc 2c)c)G Scrics 13oncls as a result ot��arious sub�yucnt actions inclucling. but not limitecl to. a retiincling in ��holc or in part ot�such matwih. * Prcliminan. subject to changc. OG012 pu�-3 $ * 2006 Subordinate Capital Appreciation Bonds, 2006 Series C Maturit� Datc Issuc Yicld to Accrctcd Valuc CUSIP No.+ (Auril I) Amount Maturit� at Maturit� (696617) Cop�right 2ciclG. nmcrican 13ankcrs nssociation. Cl1SIP cl�ita hcrcin is pro�iclecl b� Stancl�ircl ancl Poor's. Cl1SIP Scr�icc 13w-cau. a cli�ision ot� lhc McGra��-I lill Companics. Inc. Iliis cl�ita is not intenclecl to crcatc a cl�itaba� ancl cicws not �r�c in am ��a� as a substitutc tirr thc CUSIP Scr�icc. CUSII' numl�rs arc pro�iclecl tirr con�enicncc ot� retcrencc onh. Nonc ot� thc Financing nuthorih. thc Recic�clopment �genc� or thc Uncicn�ritcr t�ikc am res}x>nsibilit� ti>r dic accin-�ic� of�such CUSIP numYxrrs. Ili� CUSII' numl�r tirr a s}�citic matwih is subject to l�ing changecl attcr thc issikmcc ot�thc 2c)c)G Scrics 13oncls as a result ot��arious sub�yucnt actions inclucling. but not limitecl to. a retiincling in ��holc or in part ot�such matwih. Prcliminan. subject to changc. OG012 pu�-3 No dcalcr. brokcr. salcsperson or othcr person has bccn authorizcd to gi� c am information or to makc am rcprescntations in conncction «ith thc offcr or salc of thc 2006 Scrics Bonds b� thc Financing Authorit�. thc Rcdc� clopmcnt Agcnc� or thc Undcn� ritcr. othcr than thosc containcd in this Official Statcmcnt. and. if gi� cn or madc. such othcr information or rcprescntations must not bc rclicd upon as ha� ing bccn authorizcd b� thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� . T7�is Official Statcmcnt docs not constitutc an offcr to scll or thc solicitation of an offcr to bu�. nor shall thcrc bc am salc of thc 2006 Scrics Bonds b� am person in am jurisdiction in «hich it is unla«fiil for such person to makc such an offcr. solicitation or salc. T7�c information sct forth h�r�in has b��n fiirnishcd b� th� Financing Authorit�. th� R�d��clopm�nt Agcnc� and thc Cit� and includcs information «hich has bccn obtaincd from othcr sourccs «hich arc bclic� cd to bc rcliablc. T7�c information and c�pressions of opinion containcd hcrcin are subjcct to changc «ithout noticc and ncithcr thc dcli� cr� of this Official Statcmcnt nor am salc madc hcrcundcr shall undcr am circumstanccs crc;atc am implication that thcrc has bccn no changc in thc affairs of thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� sincc thc datc hcrcof. Am statcmcnt madc in this Official Statcmcnt in� ol� ing am forccast or mattcr of cstimatcs or opinion. «hcthcr or not c�pressl� so statcd. is intcndcd solcl� as such and not as a rcprescntation of fact. Ccrtain statcmcnts includcd or incorporatcd b� rcfcrcncc in this Official Statcmcnt constitutc "for«ard- looking statcmcnts�� «ithin thc mcaning of thc Unitcd Statcs Pri� atc Sccuritics Litigation Rcform Act of 199�. Scction 2 I E of thc Unitcd Statcs Sccuritics E�changc Act of 19 ��. as amcndcd. and Scction 27A of thc Unitcd Statcs Sccuritics Act of 19>;. as amcndcd (thc "Sccuritics Act��). Such statcmcnts arc gcncrall� idcntifiablc b� thc tcrminolog� uscd. such as "plan.�� "c�pcct.�� "cstimatc.�� "budgct�� or othcr similar «ords. Such for«ard-looking statcmcnts includc. but arc not limitcd to. ccrtain statcmcnts containcd in thc information undcr thc caption "Ti n: Piu�.ii:c r Aiii:n" and containcd in APPI:NUIX A—"RI:Pc�R I c�F I111: FISCnI, CONSU1,"I nN l .�� Thc achic�cmcnt of ccrtain results or othcr c�pcctations containcd in such fon�ard-looking statcmcnts in� ol� cs kno« n and unkno« n risks. unccrtaintics and othcr factors «hich ma� causc actual results. performancc or achic� cmcnts dcscribcd to bc matcriall� diffcrcnt from am firturc results. performancc or achic�cmcnts c�presscd or implicd b� such fon�ard-looking statcmcnts. Thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� docs not plan to issuc am updatcs or rc� isions to thosc for«ard-looking statcmcnts if or «hcn thcir c�pcctations. or c� cnts. conditions or circumstanccs on «hich such statcmcnts arc bascd occur. T7�c Undcn� ritcr has pro� idcd thc follo« ing scntcncc for inclusion in this Official Statcmcnt: T7�c Undcn� ritcr has rc� ic�� cd thc information in this Official Stntcmcnt in accordancc i� ith. and as pnrt of. its responsibilitics to im cstors undcr thc fcdcral sccuritics la«s as applicd to thc facts and circumstanccs of this tra��saction. but thc Undcn� ritcr docs not guara��t� thc accurac� or complctcncss of such information. T7�c 2006 Scrics Bonds ha�c not bccn rcgistcrcd undcr thc Sccuritics Act of 19>;. as amcndcd. in rcliancc upon an c�cmption from thc rcgistration rcquircmcnts containcd in such Act. Thc 2006 Scrics Bonds ha� c not bccn rcgistcrcd or qualificd undcr thc sccuritics la« s of am statc. In conncction «ith thc offcring of thc 2006 Scrics Bonds. thc Undcn� ritcr ma� o� crallot or cffcct transactions that stabilizc or maintain thc markct pricc of thc 2006 Scrics Bonds at a Ic� cl abo� c that «hich might othcn� isc prc� ail in thc opcn markct. Such stabilizing. if commcnccd. ma� bc discontinucd at am t1111C. TI1C Undcn� ritcr mati offcr and scll thc 2006 Scrics Bonds to ccrtnin dcalcrs and othcrs at priccs lo« cr than thc public offcring priccs sct forth on thc insidc co� cr pagc hcrcof and said public offcring priccs ma� bc changcd from timc to timc b� thc Undcn� ritcr. o�,o � z r�,�-� ii PALM DESERT FINANCING AUTHORITY PALM DESERT REDEVELOPMENT AGENCY and CITY OF PALM DESERT Riverside County, California FINANCING AUTHORITY COMMISSION Jim Fcrguson. l'i�e.sic%nt Richard S. Kcll� . G �ce l'i�e.sic%nt Jc;an M. Bcnson. ('ummi.,�.,�iunei� Buford A. Critcs. ('ummi.s.siunei� Robcrt A. SpicgcL ('ummi.s.siunei� REDEVELOPMENT AGENCY BOARD AND CITY COUNCIL Jim Fcrguson. ('l�aii�man Mm�ui� Richard S. Kcll� . G �ce ( 7urii�man Mm�ui� l'i�u 7em Je;an M. Bcnson. Memhei� ('ui�ncilmemhei� Buford A. Critcs. Memhei� ('ui�ncilmemhei� Robcrt A. Spicgcl. Memhei� ('ui�ncilmemhei� FINANCING AUTHORITY, REDEVELOPMENT AGENCY AND CITY STAFF Carlos L. Ortcga. ('ih� Mana,��ei� l::reci�tive l)ii�ec7ui� Justin McCarth�. A.,�.,�i.,�ranr ('ih� Mana,��ei� Rec%velupment Shcila R. Gilligan. A.,�.,�i.,�tant ('ih�Mana,��ei� ('ummi�nih�.5'eivice.s Paul S. Gibson. l'!YlCfYlCL' l)ii�ectui� 7i�ea.siu�ei� Da� id L. Yrigo� cn. l)ii�ec7ui� uf'Rec%velupment in Hui�.sin,�� Da� id J. En� in. ('ih� Auui�ne�� Rachcllc D. Klasscn. ('ih� (7ei�k Arla Scott..S'eniui• l'!YlCfYlClCf�AYlCf�l�.st Vcronica Tapia. Rec%velupment Accui�ntant SPECIAL SERVICES Richards. Watson c�. Gcrshon Lofton c�. Jcnnings Los Anglcs. California San Francisco. California Runcl ('ut�n.sel l)i.sclu.stu'e ('utin.sel Wclls Fargo Bank. National Association Los Angcics. California 7i7�.stee Dcl Rio Ad� isors. LLC Modcsto. California l�lYlCfYlClCf� AL%Vl.1'Ul' Roscno« Spc� acck Group Inc. Santa Ana. California %'I.S'CCI� i �Ul9.S'1f�IC!!11 OG012 pu�-3 III TABLE OF CONTENTS INTRODUCTION ............................. Gcncral: Authorit� for Issuancc.... Purposc....................................... ThcCit� ...................................... Thc Financing Authorit� .............. Thc Rcdc� clopmcnt Agcnc� ........ Thc Projcct Arca .......................... Sccurit� for thc 2006 Scrics Bonds Bond Insurancc ............................ Rcport of thc Fiscal Consultant..... Ccrtain Risks to Bondholdcrs ....... Continuing Disclosurc .................. Additional Information ................. ESTIMATED SOURCES AND USES OF FUNDS ............................................ THE 2006 SERIES BONDS ...................... Tcrms Applicablc to all 2006 Scrics Bonds........................................... Currcnt Intcrest Bonds ........................ Capital Apprcciation Bonds ................. 2006 Subordinatc Capital Apprcciation Bonds........................................... Rcdcmption Proccdures ...................... DEBT SERVICE SCHEDULE SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ... Rc� cnucs and Loan Agrccmcnts..... Ta� Rc� cnucs and Subordinatc Ta� Rc� cnucs ................................. Ta� Allocation Financing ............... Rcdc� clopmcnt Plan Limitations .... sBizo�� ........................................ Allocation of Ta�cs ........................ Rcscr� c Funds ............................... Parit� Dcbt and Subordinatc Dcbt... Im cstmcnt of Funds ....................... BONDINSURANCE LIMITATIONS ON TAX REVENUES...... Articic XI I I A of Statc Constitution ...... Articic XIII B ofthc Statc Constitution: Appropriation Limitations .............. o�,o � z r�,�-� PAG E I I I 2 2 2 ; ; i ; ; i 6 Articics XIII C and XIII D ofthc Statc Constitution ...................................... Ta�ation of Unitar� Propert� .................. Propert� Ta� Collcction Proccdures ........ Propert� Ta� Administrati� c Costs.......... Housing Sct-Asidc ................................. Ccrtification of Rcdc� clopmcnt Agcnc� I ndcbtcdncss ..................................... Pass-Through Agrccmcnts and Ta� Sharing Pa� mcnts ............................. Limitation of Ta� Rc� cnucs from Ccrtain Incrcascd Ta� Ratcs .......................... Ballot Initiati� cs and Lcgislati� c Mattcrs. THE FINANCING AUTHORITY PAG E .... 27 .... 27 .... 27 .... zx .... 29 .... 29 .... �0 .... ; I .... ; I .... ;2 7 THE REDEVELOPMENT AGENCY .................. �2 Authorit�. Mcmbcrs and Pcrsonncl ................ �2 8 Po«crs ..........................................................;�4 Rcdc� clopmcnt Agcnc� Financcs .................. ��4 .x .x 10 � I� 16 16 16 ix ix i �� 20 21 21 2�4 2�4 2�4 2�4 26 i� THE PROJECT AREA ........................... Gcncral............................................ Rcdc� clopmcnt Plan Limits .............. Controls. Land Usc and Building Rcstrictions ................................ Summar� of Dc� clopmcnt ................ Principal Ta�pa�crs .......................... Ta� Ratcs ......................................... Historical. Currcnt and Projcctcd Ta� Rc� cnucs ................................... Dcbt Scr� icc Co� cragc Projcctions ... Asscssmcnt Appcals ......................... Ta� Lc� ics. Collcctions and Dclinqucncics ............................. CERTAIN RISKS TO BONDHOLDERS Accurac� of Assumptions ................. Rcduction of Ta� Rc� cnucs .............. Rcductions in Unitar� Valucs ........... Appcals to Asscsscd Valucs .............. Rcduction in Inflation Ratc ............... Bankniptc� and Forcclosurc ............. Dclinqucncics .................................. Statc Budgct ..................................... Natural Disastcrs .............................. Hazardous Substanccs ...................... ;; ;; ;; �6 �7 �x �x �9 �42 �4�4 �4 � �46 �46 �46 �47 �47 �tx �tx �tx �tx �0 �I Loss of Ta� E�cmption ........................ Risk of Ta� Audit ................................ Sccondan Markct ................................ TAX MATTERS ....................................... APPROVAL OF LEGAL PROCEEDINGS ABSENCE OF MATERIAL LITIGATION Gcncral............................................... Othcr Mattcrs ...................................... FINANCIAL ADVISOR ............................ �I �I ;2 ;2 ;.� ;.� ;.� ;.� ;.� CONTINUING DISCLOSURE ................ UNDERWRITING ................................... Currcnt Intcrest Bonds ........................ Capital Apprcciation Bonds ................ 2006 Subordinatc Capital Apprcciation Bonds.......................................... RATINGS................................................ FINANCIAL STATEMENTS .................. MISCELLANEOUS ................................. Cit� Location Map ................................................................................................. ProjcctArca Map ................................................................................................. Tablc I- Summan of Rcdc� clopmcnt Plan Limit Amcndmcnts .............................. Tablc 2- Land Uscs b� Catcgon ............................................................................ Tablc � - Principal Ta�pa� crs ................................................................................. Tablc �4 - Brcakdo« n of Ta� Ratc ........................................................................... Tablc �- Historical and Currcnt Valucs .................................................................. Tablc 6- Projcction of Incrcmcntal Ta�ablc Valuc and Ta� Incrcmcnt Ta� Rc� cnucs Tablc 7- Dcbt Scr� icc Co� cragc Projcctions ........................................................... Tablc 8 - Asscssmcnt Appc;als ................................................................................ Tablc 9- Outstanding Appcals b� thc Top Tcn Ta�pa�crs ....................................... ;; ;; ii ;; ii �6 �6 ;7 �i � ii �i ;6 �7 �x �40 �4 I �42 �4�4 �4 � APPENDIX A- REPORT OF THE FISCAL CONSULTANT ...................................................... A-I APPENDIX B- REDEVELOPMENT AGENCY AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE �0. 200� ............................................. B-I APPENDIX C- GENERAL INFORMATION CONCERNING THE CITY OF PALM DESERT .. C-I APPENDIX D- SUMMARY OF CERTAIN PROVISIONS OF THE 2006 INDENTURES .......... D-I APPENDIX E- PROPOSED FORM OF BOND COUNSEL OPINION .........................................E-I APPENDIX F- FORM OF CONTINUING DISCLOSURE AGREEMENT ................................... F-I APPENDIX G- DTC AND THE BOOK-ENTRY ONLY SYSTEM .............................................. G-I APPENDIX H— SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY ........................ H-I APPENDIX I— SPECIMEN RESERVE FUND SURETY POLICY .............................................. H-I APPENDIX J— TABLE OF ACCRETED VALUES .......................................................................I-I o�,o � z r�,�-� � City Location Map o�,o � z r�,�-� �i Project Area Map o�,o � z r�,�-� � ii $ * $ * $ Palm Desert Financing Authority Palm Desert Financing Authority Palm Desert Financing Authority Tax Allocation Revenue Bonds Tax Allocation Revenue Subordinate Tax Allocation Revenue (Project Area No. 3) Capital Appreciation Bonds Capital Appreciation Bonds 2006 Series A (Project Area No. 3) (Project Area No. 3) 2006 Series B 2006 Series C INTRODUCTION I�9l.1' !Yl1PUL%1lC!!U/9 CU/91CflYl.1' U/9/1� a hi�ief�.siunnuo�r uf'cei7ain uf't/�e tei�m.s uf't/�e ?00< .S'ei�ie.s Runcls hein,�� uffei'ecL ancl a fiill i'evietir .sl�ut�lcl he mac% uf'tl�e entii'e Of'ficial .S'tatement incltaltn,�� tl�e cuvei' pa,��e. tl�e tah/e uf'cuntent.s anc/ t/�e appenc/ice.s fui' a mui'e cump/ete c%.sci'iptiun uf't/�e tei'nzs uf't/�e ?00< .S'ei'ie.s Runcls. A�� .1'1Cf1L'/77L'Yl1.1' CU/91CflYlL'L% !Y! 1�1l.1' !Yl1PUL%11C1lU/9 CfPL' L�1lCf�l f!L'L% !Y! 1�1L'!P L'Y!1lPL'h' %71' PL'fL'PL'YlCL' lU 1�1L' L'Y!1lPL' i)f f!ClCf� .S�1Cf1L'/77L'Yl1. RL'fL'PL'YlCL'.1' lU. CfYlL% .1'1l/77/77CO7L'.1' Uf �)/'UVl.17UYl.1' Uf CfYl1' U1�1L'/' L%UCtI/77L'Yl1.1' PL'fC/7'L'L% lU �1L'PL'!Y! L%U /9U1 pt�ipui7 tu he cumplete ancl .st�c% i'efei'ence.s ai'e yt�alifiecl in tl�eii' entii'eh� h�� i�efei�ence tu tl�e cumplete �)l'UVl.1YUli.1' Uf .1'11C�1 L%UCtIl77L'1i1.1'. . . General; Authority for Issuance T7�c purposc of this Official Statcmcnt. including thc co� cr pagc and thc appcndiccs hcrcto. is to fiirnish information in conncction «ith thc salc and dcli�cn b� thc Palm Dcscrt Financing Authorit� (thc "Financing Authorit� ��) of `f * aggrcgatc principal amount of Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Bonds (Projcct Arc;a No. �) 2006 Scrics A(thc "Currcnt Intcrest Bonds��) and `f * principal amount of Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arc;a No. �) 2006 Scrics B(thc "Capital Apprcciation Bonds�� and togcthcr «ith thc Currcnt Intcrest Bonds. thc "2006 Scnior Parit� Bonds��): and `f * principal amount of Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arc;a No. �) 2006 Scrics C(thc "2006 Subordinatc Capital Apprcciation Bonds�� and togcthcr «ith thc 2006 Scnior Parit� Bonds. thc "2006 Scrics Bonds��). T7�c 2006 Scrics Bonds arc issucd pursuant to thc pro� isions of thc Mark-Roos Local Bond Pooling Act of 198�. consisting of Articic �4 of Chaptcr � of Di� ision 7 of Titic I(commcncing «ith Scction 6�8�4) of thc California Go� crnmcnt Codc (thc "Bond La« ��). 200<.Sei7ior Pnrit�� Boizds. T7�c 2006 Scnior Parit� Bonds «ill bc issucd pursuant to an Indcnturc of Tnist. dntcd as ofJul� 1. 2006 (thc "2006 Scnior Parit� Indcnturc��). b� and bct«ccn thc Financing Authorit� a��d Wclls Fargo Bank. National Association (thc "Tnistcc��). 200<.Suborclii7nte (.'apitnlApprecintioi7 Boi7ds. T7�c 2006 Subordinatc Capital Apprcciation Bonds arc issucd pursuant to a scparatc Indcnturc of Tnist. datcd as of Jul� I. 2006 (thc "2006 Subordinatc Indcnturc�� and togcthcr «ith thc 2006 Scnior Parit� Indcnturc. thc "2006 Indcntures��). b� and bct«ccn thc Financing Authorit� and thc Tnistcc. Pw•pose 200< .Sei7ior Pnrit�� Boi7ds Thc procccds of thc 2006 Scrics Bonds «ill bc uscd b� thc Financing Authoritti to makc ri�o loans. onc ��ith respcct to cnch Scrics of 2006 Scnior Parit� Bonds (thc "2006 Scrics A Loan�� and thc "2006 Scrics B Loan�� and collccti�cl�. "2006 Scnior Parit� Loans��). to Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Rcdc� clopmcnt Agcnc� ��) pursuant to a Projcct Arca No. � Loan * Prcliminan. subject to changc. OG012 pu�-3 Agrccmcnt madc and cntcrcd into as of Jul� I. 2006 b� and among thc Financing Authorit�. thc Rcdc� clopmcnt Agcnc� and thc Trustcc (thc "2006 Scnior Parit� Loan Agrccmcnt��). Thc Rcdc� clopmcnt Agcnc� «ill appl� thc procccds of thc 2006 Scnior Parit� Loans to: (i) financc ccrtain rcdc� clopmcnt acti� itics «ithin or of bcncfit to thc Projcct Arca: (ii) purchasc a rescr� c fiind surct� polic� for a dcposit into thc Scnior Parit� Rcscr� c Fund (dcfincd bclo« ): and (iii) pa� costs of issuancc of thc 2006 Scnior Parit� Bonds. 200< .Suborclii7nte (.'apitn! Apprecintioiz Boi7ds. T7�c procccds of thc 2006 Subordinatc Capital Apprcciation Bonds «ill bc uscd b� thc Financing Authorit� to makc a loan (thc "2006 Subordinatc Loan�� and togcthcr «ith thc 2006 Scnior Parit� Loans. thc "2006 Loans��) to thc Rcdc� clopmcnt Agcnc� pursuant to thc tcrms of a Projcct Arca No. � Loan Agrccmcnt (Subordinatc Loan) madc and cntcrcd into as of Jul� I. 2006 (thc "2006 Subordinatc Loan Agrccmcnt�� and togcthcr «ith thc 2006 Scnior Parit� Loan Agrccmcnt. thc "2006 Loan Agrccmcnts��) b� and among thc Financing Authorit�. thc Rcdc�clopmcnt Agcnc� andthc Tnistcc. T7�c Rcdc� clopmcnt Agcnc� «ill appl� thc procccds of thc 2006 Subordinatc Loan to: (i) financc � arious rcdc� clopmcnt acti� itics «ithin thc Projcct Arca: (ii) fiind a dcposit into thc Subordinatc Rcscr� c Fund (dcfincd bclo« ): and (iii) pa� thc costs associatcd «ith thc issuancc of thc 2006 Subordinatc Capital Apprcciation Bonds. Scc "Es I IMn i�►:u Sc�uRc►:s nNu Us►:s c�i FuNus" and "TI II: PRc�.il:c i AR►:n-Summan of Dc�clopmcnt.�� Thc 2006 Scrics Bonds «ill maturc in thc �cars and amounts and bc;ar intcrest at thc ratcs sct forth on thc insidc co� cr pagc. The City T7�c Cit� of Palm Dcscrt (thc "Cit� ��) is locatcd in thc Coachclla Vallc� and is appro�imatcl� mid- «a� bct«ccn thc citics of Indio and Palm Springs. I 17 milcs cast of Los Angcics. I 18 milcs northcast of San Dicgo and � I� milcs southcast of San Francisco. According to thc Statc Dcpartmcnt of Financc. thc Cit� population as of Januan I. 2006 «as appro�imatcl� �49.� �9. The Series 2006 Bonds are not an obligation of the City. For ccrtain information rcgarding thc Cit�. scc Ai�i�i:Nuix C—"Gi:Ni:iini. INFORMn llON CONCI:RNING I I II: CI IY OF PnI,M DI:SI:R I.�� The Financing Authority T7�c Financing Authorit� is a joint c�crcisc of po« crs agcnc� organizcd undcr thc la« s of thc Statc of California (thc "Statc��) and composcd of thc Cit� and thc Rcdc� clopmcnt Agcnc� . T7�c Financing Authorit� «as formcd pursuant to a Joint E�crcisc of Po«crs Agrccmcnt. datcd Januar� 26. 1989 b� and bct«ccn thc Cit� and thc Rcdc� clopmcnt Agcnc� to assist in thc financing of public capital impro� cmcnts. Scc "TI II: FINnNCING AU"I I IORI"I Y.�� The Redevelopment Agency T7�c Rcdc� clopmcnt Agcnc� «as acti� atcd b� thc Cit� in 197�4 and is authorizcd to c�crcisc thc po«crs grantcd b� thc Communit� Rcdc�clopmcnt La« of thc Statc of California (constituting Part I of Di� ision 2�4 of thc Hcalth and Safct� Codc of thc Statc of California. commcncing «ith Scction >;000) (thc "Rcdc�clopmcnt La«") and. b� an ordinancc. thc Cit� Council of thc Cit� (thc "Cit� Council") dcclarcd itsclf to bc thc Rcdc� clopmcnt Agcnc� . Although thc Rcdc� clopmcnt Agcnc� is an cntit� distinct from thc Cit�. ccrtain Cit� personncl pro� idc staff support for thc Rcdc� clopmcnt Agcnc� . Scc "TI II: RI:UI:VI:LOPMI:N�I AGI:NCY... OG012 pu�-3 The Project Area T7�c Projcct Arca «as formall� cstablishcd «ith thc adoption b� thc Cit� Council of a rcdc� clopmcnt plan for appro�imatcl� 76�4 acres b� Ordinancc No. 6�2. adoptcd on Jul� 17. 1991. as amcndcd (thc ..Rcdc� clopmcnt Plan��). Scc "Ti u: Piic�.ii:c r Aiii:n." Secw•ity for the 2006 Series Bonds �n.rA!locntioi7 Fii7cn7cii7�;. Thc Rcdc� clopmcnt La« pro� idcs a mcans for financing rcdc� clopmcnt projccts bascd upon an allocation of propert� ta�cs collcctcd «ithin a projcct arc;a. Subjcct to thc morc dctailcd discussion containcd undcr thc caption "SI:CURI I Y nNU Sc�URCI:s c�F PnYMI:N�i Fc�R I111: Bc�NUs." thc ta�ablc � aluation of a projcct arc;a last cqualizcd prior to adoption of thc rcdc� clopmcnt plan. or basc roll. is cstablishcd and. c�ccpt for am period during «hich thc ta�ablc � aluation drops bclo« thc basc � car Ic� cl. or as ma� othcn� isc bc agrccd to among ta�ing agcncics. thc ta�ing agcncics thcrc;aftcr rccci� c thc ta�cs produccd b� thc Ic� � of thc thcn currcnt ta� ratc upon thc basc roll. Ta�cs collcctcd upon am incrc;asc in ta�ablc � aluation o� cr thc basc roll (c�ccpt such portion gcncratcd b� ratcs Ic� icd to pa� � otcr-appro� cd bondcd indcbtcdncss aftcr Januar� I. 1989 for thc acquisition or impro� cmcnt of rc;al propert� ). gcncrall� rcfcrrcd to as ta� incrcmcnt rc� cnucs. arc allocatcd to a rcdc� clopmcnt agcnc� and ma� bc plcdgcd b� a rcdc� clopmcnt agcnc� to thc rcpa� mcnt of am indcbtcdncss incurrcd in financing or rcfinancing a rcdc�clopmcnt projcct. Scc "SI:CURIIY �NU Sc)URCI:S c)F P�YMI:N�I Fc)R IIII: Bc)NUS.. Rcdc�clopmcnt agcncics thcroscl� cs ha� c no authorit� to Ic� � propert� ta�cs and must look spccificall� to thc allocation of ta�cs dcscribcd abo� c. Am firturc dccrc;asc in thc ta�ablc �aluation in thc Projcct Arc;a or in thc applicablc ta� ratcs «ill rcducc thc Ta� Rc� cnucs and Subordinatc Ta� Rc� cnucs allocatcd to thc Rcdc� clopmcnt Agcnc� from thc Projcct Arc;a and conscqucntl� ma� ha� c an ad� crsc impact on thc abilit� of thc Rcdc� clopmcnt Agcnc� to pa� dcbt scr� icc on thc 2006 Scrics Bonds. Scc "CI:R I �IN RISKS "I O BONUI IOI,UI:RS .. Plecl�;e of �nx Revei7ues. Thc 2006 Scrics Bonds arc limitcd obligations of thc Rcdc� clopmcnt Agcnc� pa�ablc solcl� from and sccurcd solcl� b� a plcdgc of Rc� cnucs consisting primaril� of amounts paid b� thc Rcdc� clopmcnt Agcnc� to thc Financing Authorit� pursuant to thc 2006 Loan Agrccmcnt and ccrtain othcr fiinds hcld b� thc Tnistcc pursuant to thc applicablc 2006 Indcnturc. Thc Rcdc� clopmcnt Agcnc� is obligatcd undcr thc 2006 Scnior Parit� Loan Agrccmcnt and undcr a loan agrccmcnt madc and cntcrcd into as of Jul� I. 200 �(thc "200 � Loan Agrccmcnt��) «ith respcct to thc loan madc thcrcundcr (thc "200 � Loan��) to pa� from Ta� Rc� cnucs (dcfincd bclo« ) thc amounts sct forth in thc 2006 Scrics Parit� Loan Agrccmcnt and thc 200 � Loan Agrccmcnt. T7�c Rcdc� clopmcnt Agcnc� is obligatcd undcr thc 2006 Subordinatc Loan Agrccmcnt to pa� from Subordinatc Ta� Rc� cnucs (dcfincd bclo« ) thc amounts sct forth in thc 2006 Subordinatc Loan Agrccmcnt. Scc "SI:CURI I Y �NU Sc)URCI:S c)F P�YMI:N�I Fc)R I�I II: Bc)NUS .. 2006 Scnior Parit� Bonds. Thc obligations of thc Rcdc� clopmcnt Agcnc� undcr thc 2006 Scnior Parit� Loan Agrccmcnt arc on a parit� «ith thc obligations undcr thc 200 � Loan Agrccmcnt. T7�c 200 � Loan sccures rcpa�mcnt of `f�4.�410.000 outstanding principal amount of Palm Dcscrt Financing Authorit� Ta� Allocation Bonds (Projcct Arc;a No. �). Scrics 200 �(thc "Scrics 200 � Bonds��). «hich «crc issucd pursuant to an Indcnturc of Tnist datcd as of Jul� I. 200 �(thc "200 � Indcnturc��) b� and bct« ccn thc Financing Authorit� and thc Tnistcc. No fiinds or propertics of thc Rcdc�clopmcnt Agcnc�. othcr than thc Ta� Rc� cnucs sccurc pa� mcnt of thc obligations undcr thc 2006 Scnior Parit� Loan Agrccmcnt or thc 200 � Loan Agrccmcnt. Thc 2006 Scnior Parit� Loan Agrccmcnt and thc 200 � Loan Agrccmcnt arc rcfcrrcd to collccti� cl� as thc "Scnior Parit� Loan Agrccmcnts��). T7�c 2006 Scnior Parit� Loans and thc 200 � Loan arc rcfcrrcd to collccti� cl� as thc "Scnior Parit� Loans.�� o�,o � z r�,�-� � � T7�c Rcdc� clopmcnt Agcnc� has plcdgcd for thc rcpa� mcnt of thc 2006 Scnior Parit� Loans and thc 200 � Loan (dcfincd bclo« ) monics allocatcd or paid to thc Rcdc� clopmcnt Agcnc� dcri� cd from: (a) that portion of ta�cs Ic� icd upon asscssablc propert� «ithin thc Projcct Arc;a allocatcd to thc Rcdc� clopmcnt Agcnc� pursuant to thc Rcdc� clopmcnt La« and thc Constitution of thc Statc of California (thc "Statc��). and (b) rcimburscmcnts. sub� cntions. including pa� mcnts to thc Rcdc� clopmcnt Agcnc� «ith respcct to personal propert� «ithin thc Projcct Arc;a pursuant to thc Go� crnmcnt Codc of thc Statc. or othcr pa� mcnts madc b� thc Statc «ith respcct to am propert� ta�cs that «ould othcn� isc bc duc on rc;al or personal propert� but for an c�cmption of such propert� from such ta�cs (collccti� cl�. thc "Ta� Rc� cnucs��). Ta� Rc� cnucs do not includc (�) amounts pa�ablc to thc Unitcd Statcs undcr Scction 1�48 ofthc Codc. (�) ta�cs allocatcd to thc Rcdc� clopmcnt Agcnc� that arc rcquircd b� Scctions >;>>�4.2 or >;>>�4.6 of thc Rcdc� clopmcnt La« to bc uscd b� thc Rcdc� clopmcnt Agcnc� for incrc;asing and impro� ing thc suppl� of lo« and modcratc incomc housing. and (z) amounts pa�ablc b� thc Rcdc�clopmcnt Agcnc� undcr Scction >;607.� of thc Rcdc� clopmcnt La« unlcss such amounts ha� c bccn subordinatcd to thc pa� mcnt of dcbt scr� icc on thc Parit� Bonds (dcfincd bclo« ). Scc "S►:cu►�rry nNu Sc�u►�c►:s c�► Pnvtvt►:N r► c�►� �►►►: Bc�Nus... ..L►tvirrn r►c�Ns ON T�X RI:VI:NUI:S�� And "CI:R I �IN RISKS "I O BONUI IOI,UI:RS .. T7�c Projcct Arca has a�� aggrcgatc Basc Ycar Valuc that «as cstablishcd bascd on thc asscsscd �aluc for 1990-91 Fiscal Ycar. «hich «as last cqualizcd prior to thc cffccti� c datc of thc ordinancc appro� ing thc rcdc� clopmcnt plan and thc amcndmcnt thcrcto. Scc "LIMI I n I Ic�Ns c�N TnX RI:vI:Nul:s—Rcdc� clopmcnt Plan Limitations�� and "Ti u: Piic�.ii:c r Aiii:n—Rcdc� clopmcnt Plan—Ilec%velupmenr l'lan /,imit.s... 2006 Subordinatc Cauital Auurcciation Bonds. Thc Rcdc� clopmcnt Agcnc� has plcdgcd for thc rcpa� mcnt of thc 2006 Subordinatc Loan thc Ta� Rc� cnucs rcmaining aftcr pa� mcnt of all amounts duc «ith respcct to thc 2006 Scrics Loan and thc 200 � Loan (thc "Subordinatc Ta� Rc� cnucs��). No fiinds or propertics of thc Rcdc� clopmcnt Agcnc� . othcr than thc Subordinatc Ta� Rc� cnucs sccurc pa� mcnt of thc obligations undcr thc 2006 Subordinatc Loan Agrccmcnt. Reserve Fui7ds. As additional sccurit� for thc pa� mcnt of thc 200 � Loan and thc 2006 Scnior Parit� Loans b� thc Rcdc� clopmcnt Agcnc� . a rescr� c fiind (thc "Scnior Parit� Rcscr� c Fund��) «as cstablishcd undcr thc 200 � Loan Agrccmcnt. As additional sccurit� for pa� mcnt of thc 2006 Subordinatc Loan. a rescr� c fiind (thc "Subordinatc Rcscr� c Fund��) «as cstablishcd undcr thc 2006 Loan Agrccmcnt. Each such Rcscr� c Fund is rcquircd to bc maintaincd in an amount cqual to thc Rcscr� c Rcquircmcnt (as dcfincd in cach 2006 Loan Agrccmcnt). Amounts on dcposit in cach Rcscr� c Fund «ill bc uscd for thc pa� mcnt of dcbt scr� icc on thc rclatcd 2006 Scrics Bonds in thc c� cnt that amounts on dcposit in thc applicablc Intcrest Account or thc Principal Account hcld undcr thc rclatcd 2006 Indcnturc arc insufficicnt thcrcfor. Scc "SI:�'URI I Y nNU Sc)URCI:S c)F P�YMI:N�I Fc)R IIII: Bc)NUS—Rcscr�c Fw�ds�� and APPI:NUIX I—"SPI:CIMI:N RI:SI:RVI: FUNU SURI � I Y POI,ICY... 2006 Scnior Parit� Bonds. On thc datc of issuancc of thc 2006 Scrics Bonds. thc Rcdc� clopmcnt Agcnc� «ill usc a portion of thc procccds from thc salc of thc 2006 Scnior Parit� Bonds to purchasc. �a rescr� c fiind surct� polic� in thc amount of `f / t«o rescr� c fiind surct� policics in thc aggrcgatc amount of `f � to bc issucd b� (thc "Bond Insurcr �) for dcposit into thc Scnior Parit� Rcscr� c Fund. «hich togcthcr «ith thc amounts on dcposit thcrcin in thc amount of � .«ill cqual thc Rcscr� c Rcquircmcnt of � . 2006 Subordinatc Cauital Auurcciation Bonds. On thc datc of issuancc of thc 2006 Subordinatc Capital Apprcciation Bonds. thc Rcdc� clopmcnt Agcnc� «ill dcposit salc in thc amount of � into thc Rcscr� c Fund. «hich is cqual to thc Rcscr� c Rcquircmcnt. THE 2006 SERIES BONDS ARE NOT A DEBT OF THE CITY. THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS. OTHER THAN THE FINANCING AUTHORITY. AND NONE OF THE CITY. THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS. OTHER THAN THE FINANCING o�,o � z r�,�-� �4 AUTHORITY. IS LIABLE THEREFOR. THE 2006 LOANS ARE NOT A DEBT OF THE FINANCING AUTHORITY OR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS. AND NONE OF THE FINANCING AUTHROTIY OR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS. IS LIABLE THEREFOR. NONE OF THE MEMBERS OF THE FINANCING AUTHORITY. THE CITY COUNCIL. THE REDEVELOPMENT AGENCY OR ANY PERSONS EXECUTING THE 2006 SERIES BONDS OR THE 2006 LOAN AGREEMENTS ARE LIABLE PERSONALLY WITH RESPECT TO THE 2006 SERIES BONDS OR THE 2006 LOANS. THE OBLIGATIONS OF THE REDEVELOPMENT AGENCY WITH RESPECT TO THE 2006 SENIOR PARITY LOANS ARE PAYABLE SOLELY FROM THE TAX REVENUES (AS DEFINED HEREIN) AS SET FORTH IN THE 2006 SENIOR PARITY LOAN AGREEMENT. THE OBLIGATIONS OF THE REDEVELOPMENT AGENCY WITH RESPECT TO THE 2006 SUBORDINATE CAPITAL APPRECIATION BONDS ARE PAYABLE SOLELY FROM THE SUBORDINATE TAX REVENUES (AS DEFINED HEREIN) AS SET FORTH IN THE 2006 SUBORDINATE LOAN AGREEMENT. NEITHER THE FINANCING AUTHORITY NOR THE REDEVELOPMENT AGENCY HAS TAXING POWER. Bondlnsurance Pa� mcnt of thc principal and intcrest on thc 2006 Scrics Bonds «hcn duc «ill bc insurcd b� a Financial Guarant� Insurancc Polic� (thc "Insurancc Polic� ��) to bc issucd simultancousl� «ith thc c�ccution a,�d dcli� cn of thc 2006 Scrics Bonds b� thc Bond Insurcr. Scc "Bc)NU INSUR�NCI:�� and APPI:NUIX H— "SPI:CIMI:N FINnNCInI, GUnRnN�I Y INSURnNCI: POI,ICY.�� Report of the Fiscal Consultant Includcd as Appcndi� A to this Official Statcmcnt is a rcport (thc "Rcport of thc Fiscal Consultant��) prcparcd b� Roscno« Spc� acck Group lnc. (thc "Fiscal Consultant��) «hich. among othcr things. anal� zcs thc Ta� Rc� cnucs gcncratcd from ta�ablc propert� «ithin thc Projcct Arc;a and plcdgcd to thc rcpa� mcnt of thc Bonds. Thc findings and projcctions in thc Rcport of thc Fiscal Consultant are subjcct to a numbcr of assumptions that should bc rc� ic« cd and considcrcd b� prospccti� c im cstors. No assuranccs can bc gi� cn that thc projcctions and c�pcctations discusscd in thc Rcport of thc Fiscal Consultant «ill bc achic� cd. Actual results ma� diffcr matcriall� from thc projcctions dcscribcd thcrcin. Scc APPI:NUIX A—"RI:Pc�I�i c�l n u: Fiscni. Cc�Nsui, rnN�r." Certain Risks to Bondholders Im cstmcnt in thc 2006 Scrics Bonds im ol� cs risk. For a discussion of ccrtain considcrations rcic� ant to an im cstmcnt in thc 2QQ6 Scrics Bonds. scc "C►:R I�IN RISKs t c� Bc�NU11c�I,UI:Rs.�� Continuing Disclosure T7�c Rcdc� clopmcnt Agcnc� has agrccd to pro� idc. or causc to bc pro� idcd. to cach nationall� rccognizcd municipal sccuritics information rcpositor� or thc Municipal Sccuritics Rulcmaking Board and am public or pri�atc rcpositor� or cntit� dcsignatcd b� thc Statc as a statc rcpositor� for purposcs of Rulc I�c2-12(b)(�) adoptcd b� thc Sccuritics and E�changc Commission ccrtain annual financial information and operating data and. in a timcl� manncr. noticc of ccrtain matcrial c� cnts. Thcsc co� cnants ha� c bccn madc in ordcr to assist thc Undcn� ritcr in compl� ing «ith thc Sccuritics and E�changc Commission Rulc I�C2-12(b)(�). SCC "CON I INUING DISCLOSURI:�� And APPI:NUIX F—"FORM OF CON�I INUING DISCLOSURI: Ac�R1:1:M1:N t�� for a dcscription of thc spccific naturc of thc annual rcport and noticcs of matcrial c� cnts and a summar� dcscription of thc tcrms of thc disclosurc agrccmcnt pursuant to «hich such rcports arc to bc madc. T7�c Rcdc� clopmcnt Agcnc� has nc� cr failcd to compl� in all matcrial respccts «ith am prc� ious undcrtakings «ith rcgard to said Rulc to pro� idc annual rcports or noticcs of matcrial c� cnts. o�,o � z r�,�-� i Additional 1 nformation T7�is Official Statcmcnt contains summarics of thc 2006 Scrics Bonds. thc sccurit� for thc 2006 Scrics Bonds. thc 2006 Indcntures. thc 2006 Loan Agrccmcnts. thc Rcdc� clopmcnt La«. thc Rcdc� clopmcnt Agcnc� . thc Projcct Arca and ccrtain othcr information rcic� ant to thc issuancc of thc 2006 Scrics Bonds. All rcfcrcnccs hcrcin to thc 2006 Indcntures arc qualificd in thcir cntirct� b� rcfcrcncc to thc complctc tc�t thcrcof and all rcfcrcnccs to thc 2006 Scrics Bonds arc fiirthcr qualificd b� rcfcrcncc to thc form thcrcof containcd in thc applicablc 2006 Indcnturc. T7�c auditcd financial statcmcnts of thc Rcdc� clopmcnt Agcnc� for thc Fiscal Ycar cndcd Junc �0. 200� arc includcd in APPI:NUIX B. Thc proposcd form of Icgal opinion of Bond Counscl for thc 2006 Scrics Bonds is sct forth in APPI:NUIX E. Scc APPI:NUIX D-"SUMMnRY O1 Ci:ii rniN Piic�visic�Ns c�r n u: 2006 INUI:N�I URI:s" for dcfinitions of ccrtain «ords and tcrms uscd hcrcin. All capitalizcd tcrms uscd in this Official Statcmcnt and not othcn� isc dcfincd hcrcin ha� c thc samc mcanings as in thc applicablc 2006 Indcnturc. T7�c information sct forth hcrcin and in thc Appcndiccs hcrcto has bccn fiirnishcd b� thc Rcdc� clopmcnt Agcnc� and thc Cit� a,�d includcs information «hich has bccn obtaincd from othcr sourccs «hich arc bclic� cd to bc rcliablc but is not guara��tccd as to accurac� or complctcncss b� thc Financing Authorit� or thc Undcn� ritcr and is not to bc constnicd as a rcprescntation b� thc Undcn� ritcr. Copics of documcnts rcfcrrcd to hcrcin and information conccrning thc 2006 Scrics Bonds arc a� ailablc upon «rittcn rcqucst from thc of thc Rcdc� clopmcnt Agcnc�. 7�-� I 0 Frcd Waring Dri� c. Palm Dcscrt. California 92260-2�78: tcicphonc: (760) ��46-061 I. Thc Rcdc� clopmcnt Agcnc� ma� imposc a chargc for cop� ing. mailing and handling. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) o�,o � z r�,�-� ESTIMATED SOURCES AND USES OF FUNDS T7�c anticipatcd sourccs and uscs of fiinds rclating to thc 2006 Scrics Bonds arc as follo« s: 2006 Scnior Parit� Bonds 2006 Subordinatc Currcnt Intcrest Bonds Cauital Auurcciation Bonds Cauital Auurcciation Bonds Total Sow•ces: Principal Amount of thc 2006 Scrics Bonds `f * `f * `f * �/'h�.s: Nct Original Issuc Prcmium� �/,e.s.s: Original Issuc Discount� Tc�rni. Sc�uiici:s � � � Uses: Dcposit to Projcct Fund' �' `f `f `f Dcposit to Costs of Issuancc Fund',' Dcposit to Rcscr� c Fund "' "' Undcn�ritcr�s Discount Tc�rni. U�i:� � � � * Prcliminan. subject to changc. � ��� I o bc usecl to tinancc recic� clopment acti� itics in thc Project /�rca. Scc " Il u. 1'�zc �i�.c � i/��z�..�—Summan ot� Uc� clopment... ''' Incl«cles thc tces ancl espenses ot� 13onc1 Cottnscl. Uisclosttrc Cotmscl ancl Cottn�l to thc Recic�clopment /�genc�. tces ancl espenxts ot� thc I ntstcc. thc Financial ncl�isor ancl thc Fiscal Consultant, printing costs, rating agenc� tces, boncl insurancc ancl rescr�c tiincl sw-ch premiums, ancl othcr costs rclatecl to thc issuancc ot�thc 2OOG Scrics 13oncls. . . ''' Represents thc amount ot�thc rescr�c tiincl sw-ch polic�. THE 2006 SERIES BONDS Terms Applicable to all 2006 Series Bonds T7�c 2006 Scrics Bonds «ill bc datcd thc datc of issuancc and dcli�cn. issucd in fiill� rcgistcrcd form. «ithout coupons. and. «hcn issucd «ill bc rcgistcrcd in thc namc of Ccdc c�. Co.. as nomincc for Thc Dcpositor� Tnist Compam. Nc« York. Nc« York ("DTC��). as rcgistcrcd o«ncr ofall 2006 Scrics Bonds. O« ncrship intcrests in thc 2006 Scrics Bonds ma� bc purchascd in book-cntr� form onl� . Purchascrs «ill not rccci� c ccrtificatcs rcprescnting thcir intcrests in thc 2006 Scrics Bonds purchascd. Pa� mcnts of principal and Accrctcd Valuc of thc intcrest on thc 2006 Scrics Bonds. as applicablc «ill bc paid b� thc Tnistcc to DTC. «hich is obligatcd in turn to rcmit such principal. Accrctcd Valuc and intcrest. as applicablc to its DTC Participants for subscqucnt disburscmcnt to thc bcncficial o« ncrs of thc 2006 Scrics Bonds. Scc APPI:NUIX G—"DTC nNU I111: Bcx�K-EN�I1�Y ONI,Y SYSII:M.�� O«ncrship ma� bc changcd onl� upon thc rcgistration books maintaincd b� thc Tnistcc as pro� idcd in cach 2006 Indcnturc. Cw•rent Interest Bonds (�ei7ernl. Thc 2006 Scrics A Bonds (thc "Currcnt Intcrest Bonds��) «ill bc issucd onl� in fiill� rcgistcrcd form in dcnominations of `f �.000 and am intcgral multiplc thcrcof and shall maturc on thc datcs and in thc principal amounts and bcar intcrest at thc ratcs as sct forth on thc insidc co� cr of this Official Statcmcnt. Intcrest on thc Currcnt Intcrest Bonds shall bc pa�ablc scmiannuall� on April I and Octobcr I of c;ach � car. commcncing I. 2006 (cach. an "Intcrest Pa� mcnt Datc��). Intcrest on thc Currcnt Intcrest Bonds «ill bc pa�ablc on c;ach Intcrest Pa�mcnt Datc to thc person «hosc namc appc;ars 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 Tnistcc mailcd b� first class mail. postagc prcpaid. on c;ach Intcrest Pa� mcnt Datc to thc O« ncr at thc address of such O« ncr as it appc;ars on thc Rcgistration Books on such Rccord Datc: pi�uvic%cL l�utirevei�. that at thc «rittcn rcqucst of thc O« ncr of at Icast `f I.000.000 in aggrcgatc principal amount of Outstanding 2006 Scrics A Bonds filcd «ith thc Tnistcc prior to am Rccord Datc. intcrest on such 2006 Scrics A Bonds shall bc paid to such O« ncr on c;ach 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). Redemptioi7 Provisioi7s. Rcdcmution for Outional Loan Prcua� mcnt. If thc Rcdc� clopmcnt Agcnc� c�crciscs its option to prcpa� principal installmcnts of thc 2006 Scrics A Loan pursuant to thc 2006 Scnior Parit� Loan Agrccmcnt. thc Rc� cnucs dcri� cd from such prcpa� mcnt «ill bc applicd to thc rcdcmption of thc Currcnt Intcrest Bonds maturing on or aftcr April I. 20 . as a«holc. or in part a�nong maturitics as dcsignatcd in «riting b� thc Financing Authorit� and b� lot «ithin a maturit�. in intcgral multiplcs of `f�.000 principal amount. on am Intcrest Pa� mcnt Datc on or aftcr April I. 20_. at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc principal amount of Currcnt Intcrest Bonds to bc rcdccmcd). plus accnicd intcrest thcrcon to thc datc of rcdcmption: Rcdcmption Rcdcmution Datcs Pricc April I. 20_ and Octobcr I. 20_ 10_'%� April I. 20_ and Octobcr I. 20_ 10_ April I. 20_ and thcrcaftcr 100 T7�c Financing Authorit� is rcquircd to pro� idc «rittcn noticc to thc Tnistcc of am Rcdcmption for Optional Loan Prcpa� mcnt at Ic;ast �4� but not morc than 90 da�s prior to thc datc fi�cd for such rcdcmption. o�,o � z r�,�-� Ma��daton Sinkin� Fund Rcdcmution. T7�c Currcnt Intcrest Bonds maturing on April I. 20 � I. April I. 20�6 and April I. 20�41 arc also bc subjcct to mandator� rcdcmption b� lot. on April I in c;ach �c;ar commcncing April I. 2027. April I. 20 �0 and April I. 20 �7. respccti� cl�. from sinking fiind pa� mcnts madc b� thc Financing Authorit� into thc Principal Account. at a rcdcmption pricc cqual to thc principal amount thcrcof to bc rcdccmcd. «ithout prcmium. plus accnicd intcrest to thc datc of rcdcmption. in thc aggrcgatc respccti� c principal amounts and on April I in thc respccti� c� cars as sct forth bclo« : Currcnt Intcrest Bonds Maturin� Auril I. 20 � I* Sinking Fund Rcdcmption Datc (Auril I ) Principal Amount to bc Rcdccmcd* + Matwih. Currcnt Intcrest Bonds Maturin� Auril I. 20 �6* Sinking Fund Rcdcmption Datc (Auril I ) Principal Amount to bc Rcdccmcd* + + Matwih. Currcnt Intcrest Bonds Maturin� Auril I. 20�41 * Sinking Fund Rcdcmption Datc (Auril I ) Principal Amount to bc Rcdccmcd* + +Final M��t�uit�. * Prcliminan. subject to changc. OG012 pu�-3 C) Purchasc in Licu of Rcdcmution. In licu of Mandator� Sinking Fund redcmption of thc Currcnt Intcrest Bonds on April I in am �car. thc Currcnt Intcrest Bonds ma� bc purchascd b� thc Rcdc�clopmcnt Agcnc� pursuant to thc 2006 Scnior Parit� Loan Agrccmcnt and tcndcrcd to thc Tnistcc for canccllation no latcr than thc prcccding Januan I�. and (ii) if somc but all of thc Currcnt Intcrest Bonds of a maturit� ha� c bccn rcdccmcd. thc total amount of all firture sinking fiind pa� mcnts «ith respcct to thc Currcnt Intcrest Bonds of such maturit� shall bc rcduccd b� thc aggrcgatc principal amount of such Currcnt Intcrest Bonds so rcdccmcd. to bc allocatcd among such sinking fiind pa� mcnts on a pi�u i�ata basis. Capital Appreciation Bonds (�ei7ernl. Thc 2006 Scrics B Bonds (thc "Capital Apprcciation Bonds") «ill bc issucd in amounts sho« n on thc insidc co� cr (thc "Initial Principal Amount��) and «ill ha� c a� aluc on thc statcd maturit� datc thcrcof cqual to `f �.000 or am intcgral multiplc thcrcof (thc "Accrctcd Valuc��). T7�c Capital Apprcciation Bonds of c;ach maturit� «ill accrctc in �aluc from thcir Datc of Dcli�cr� and «ill maturc on datcs. all as indicatcd on thc insidc co� cr of this Official Statcmcnt. compoundcd scmi-annuall� on April I and Octobcr I of c;ach �c;ar. commcncing I. 2006 until maturit� or c;arlicr rcdcmption datc. Such compounding «ill bc calculatcd on thc basis ofa �60-da� �carcompriscd oft«cl�c �0-da� months. and thc Accrctcd Valuc shall bc pa�ablc onl� at maturit�. �Thc Accrctcd Valuc on am datc othcr than April I and Octobcr I ofam �car shall bc calculatcd b� straight-linc intcrpolation�. No payments with respect to the Capital Appreciation Bonds will be made prior to the respective matw•ity dates thereof. Scc A►�►�►:Nu►x J— "Tn131,1: c�l AccRI: i�l:u Vnl,ul:s—Capital Apprcciation Bonds�� for thc Accrctcd Valucs as of c;ach April I a��d Octobcr I for cach Maturit� Amount. Such Tablc of Accrctcd Valucs is prescntcd for illustrati� c purposcs onl� . Am Accrctcd Valuc dctcrmincd in accordancc «ith tcrms of thc applicablc 2006 Indcnture shall control o� cr am diffcrcnt Accrctcd Valuc dctcrmincd b� rcfcrcncc to such Tablc. Redemptioi7 Provisioi7s. Outional Rcdcmution. In If thc Rcdc� clopmcnt Agcnc� c�crciscs its option to prcpa� principal installmcnts of thc 2006 Scrics B Loan pursuant to thc 2006 Scnior Parit� Loan Agrccmcnt. thc Rc� cnucs dcri� cd from such prcpa� mcnt shall bc applicd to thc rcdcmption of thc Capital Apprcciation Bonds maturing on or aftcr April I. 20 . as a«holc. or in part among maturitics as dcsignatcd in «riting b� thc Financing Authorit� and b� lot «ithin a maturit�. in intcgral multiplcs of `f �.000 of Maturit� Amount. on am Octobcr I or April I on or aftcr April I. 20_. at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc Accrctcd Valuc of thc callcd 2006 Scrics B Bonds on thc datc fi�cd for rcdcmption): Rcdcmption Rcdcmution Datcs Pricc April I. 20_ and Octobcr I. 20_ 10_'%� April I. 20_ and Octobcr I. 20_ 10_ April I. 20_ and thcrcaftcr 100 T7�c Financing Authorit� is rcquircd to pro� idc «rittcn noticc to thc Tnistcc of am Rcdcmption for Optional Loan Prcpa� mcnt at Ic;ast �4� but not morc than 90 da�s prior to thc datc fi�cd for such rcdcmption. No Mandaton Sinkin� Fund Rcdcmution. T7�c Capital Apprcciation Bonds arc not subjcct to mandator� sinking fiind redcmption prior to maturit� . o�,o � z r�,�-� 10 2006 Subordinate Capital Appreciation Bonds (�ei7ernl. T7�c 2006 Scrics C Bonds (thc "2006 Subordinatc Capital Apprcciation Bonds") «ill bc issucd in amounts sho« n on thc insidc co� cr (thc "Initial Principal Amount��) and «ill ha� c a� aluc on thc statcd maturit� datc thcrcof cqual to `f �.000 or am intcgral multiplc thcrcof (thc "Accrctcd Valuc"). T7�c 2006 Subordinatc Capital Apprcciation Bonds of c;ach maturit� «ill accrctc in �aluc from thcir Datc of Dcli� cr� and «ill maturc on datcs. all as indicatcd on thc insidc co� cr of this Official Statcmcnt. compoundcd scmi-annuall� on April I and Octobcr I of c;ach �car. commcncing I. 2006 w�til maturit� or c;arlicr rcdcmption datc. Such compounding «ill bc calculatcd on thc basis of a�60-da� �car compriscd of t«cl� c �0-da� months. and thc Accrctcd Valuc shall bc pa�ablc onl� at maturit�. �T7�c Accrctcd Valuc on am datc othcr than April I and Octobcr I ofam �c;ar shall bc calculatcd b� straight-linc intcrpolation�. No payments with respect to the 2006 Subordinate Capital Appreciation Bonds will be made prior to the respective matw•ity dates thereof. Scc APPI:NUIX J—"Tn131,1: c�l A�'�'RI:II:U Vnl,Ul:s—Capital Apprcciation Bonds�� for thc Accrctcd Valucs as of c;ach April I and Octobcr I for c;ach Maturit� Amount. Such Tablc of Accrctcd Valucs is prescntcd for illustrati� c purposcs onl� . Am Accrctcd Valuc dctcrmincd in accordancc «ith tcrms of thc applicablc 2006 Indcnture shall control o� cr a�n diffcrcnt Accrctcd Valuc dctcrmincd b� rcfcrcncc to such Tablc. Redemptioi7 Provisioi7s. Outional Rcdcmution. In If thc Rcdc� clopmcnt Agcnc� c�crciscs its option to prcpa� principal installmcnts of thc 2006 Scrics C Loan pursuant to thc 2006 Subordinatc Loan Agrccmcnt. thc Rc� cnucs dcri� cd from such prcpa� mcnt shall bc applicd to thc rcdcmption of thc 2006 Subordinatc Capital Apprcciation Bonds maturing on or aftcr April I. 20_. as a«holc. or in part among maturitics as dcsignatcd in «riting b� thc Financing Authorit� and b� lot «ithin a maturit�. in intcgral multiplcs of `f �.000 of Maturit� Amount. on am Octobcr I or April I on or aftcr April I. 20_. at thc follo« ing respccti� c rcdcmption priccs (c�presscd as a perccntagc of thc Accrctcd Valuc of thc callcd 2006 Subordinatc Capital Apprcciation on thc datc fi�cd for rcdcmption): Rcdcmption Rcdcmution Datcs Pricc April I. 20_ and Octobcr I. 20_ 10_'%� April I. 20_ and Octobcr I. 20_ 10_ April I. 20_ and thcrcaftcr 100 T7�c Financing Authorit� is rcquircd to pro� idc «rittcn noticc to thc Tnistcc of am Rcdcmption for Optional Lonn Prcpa� mcnt at lcast �4� but not morc than 90 da�s prior to thc datc fi�cd for such rcdcmption. No Mandaton Sinkin� Fund Rcdcmution. T7�c 2006 Subordinatc Capital Apprcciation arc not subjcct to mandator� sinking fiind redcmption prior to maturit� . Redemption Procedw•es Notice of Redemptioi7. T7�c Tnistcc on bchalf and at thc c�pcnsc of thc Financing Authorit� «ill mail (b� first class mail) noticc of am rcdcmption to thc respccti�c O«ncrs of am 2006 Scrics Bonds dcsignatcd for rcdcmption at thcir respccti� c addresscs appc;aring on thc Rcgistration Books and. b� such mc;ans 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 datis prior to thc datc fi�cd for rcdcmption: pro� idcd. ho«c� cr. that ncithcr failurc to rccci�c am such noticc so mailcd nor am dcfcct thcrcin «ill affcct thc �alidit� of thc procccdings for thc rcdcmption of such 2006 Scrics Bonds or thc ccssation of thc accnial or accrction of intcrest thcrcon. Such noticc is rcquircd to 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 2006 o�,o � z r�,�-� I� Scrics Bonds. thc 2006 Scrics 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 2006 Scrics 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 require such Bonds to bc surrcndcrcd at thc Tnist Officc of thc Tnistcc in Los Angcics. California (or such othcr location as dcsignatcd b� thc Tnistcc) for rcdcmption at thc rcdcmption pricc. gi� ing noticc also that fiirthcr intcrest on such 2006 Scrics Bonds «ill not accnic or accrctc. as applicablc. from and aftcr thc rcdcmption datc. .Selectioi7 of Boi7ds for Redemptioi7. If Icss than all of thc 2006 Scrics Bonds of a scrics and a maturit� arc callcd for rcdcmption. thc Tnistcc «ill scicct thc 2006 Scrics Bonds to bc rcdccmcd from all 2006 Scrics Bonds of such scrics and maturit� not prc� iousl� callcd for rcdcmption. b� lot in am manncr «hich thc Tnistcc in its solc discrction dccros appropriatc undcr thc circumstanccs. Pnrtin! Redemptioi7 of Boi7ds. In thc c� cnt onl� a portion of am 2006 Scrics Bond is callcd for rcdcmption. thcn upon surrcndcr of such 2006 Scrics Bond thc Financing Authorit� is rcquircd to c�ccutc and thc Tnistcc is rcquircd to authcnticatc and dcli�cr to thc O«ncr thcrcof. at thc c�pcnsc of thc Financing Authorit�. a nc« 2006 Scrics Bond or 2006 Scrics 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 2006 Scrics Bond to bc rcdccmcd. Effect of Redemptioi7. 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. or Accrctcd Valuc. as applicablc. on thc 2006 Scrics Bonds so callcd for rcdcmption shall ha� c bccn dul� pro� idcd. such 2006 Scrics Bonds so callcd «ill cc;asc to bc cntiticd to am bcncfit undcr thc 2006 Scnior Parit� Indcnturc or 2006 Subordinatc Indcnturc. as applicablc. othcr than thc right to rccci� c pa� mcnt of thc rcdcmption pricc. and no intcrest shall accnic thcrcon from and aftcr thc rcdcmption datc spccificd in such noticc. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) o�,o � z r�,�-� 12 DEBT SERVICE SCHEDULE T7�c follo« ing tablc sho« s schcdulcd scmiannual dcbt scn icc on thc 2006 Scrics Bonds. «ithout rcgard to am optional rcdcmption. Scc also "PRc�,il:�`I ARI:n—Dcbt Scr� icc Co� cragc Projcctions—Tablc 7.�� 2OOG Senior Parih 13oncls Suborclinatc Cwrent Intcrest 13oncls Canital /�nnreciation 13oncls Canital /�nnreciation 13oncls ��� Pa� ment I )atc Octol�r 1.2OOG npril I. 2c�c�7 Octol�r 1.2OO7 npril I. 2c�c�x Octol�r 1.2OO8 npril I. 2c�c��� c)ctol�r 1.2c1c19 npril I. 2c� I c� Octol�r 1.2OIO npril I. 2c11 I Octol�r 1.2OI I npril I. 2c112 Octol�r 1.2O12 npril I. 2c11 ; Oclol�r 1.2OI i npril I. 2c11-I Octol�r 1.2OI-I npril I. 2c11 � Octol�r 1.2OI� npril I. 2c11 G Octol�r 1.2OIG /�pril I . 2(117 Octol�r 1.2O17 n��,;� i. zc�ix Octol�r 1.2O18 npril I. 2c119 Octol�r 1.2O19 npril I. 2c�2c� Octol�r 1.2O2O npril I. 2c121 I otal Senior I otal Parih 13onc1 I otal Scrics2OO; 13oncls 1'rincipal* Intcrest 1'rincipal* Intcrest Ucbt Scr�icc Ucbt Scr�icc 1'rincipal* Intcrest Ucbt Scr�icc OG012 pu�-3 � Pa� ment I )atc Octol�r 1.2O21 npril I. 2c122 Octol�r 1.2O22 npril I. 2c12 ; Oclol�r 1.2O2i npril I . 2c 12-I Octol�r 1.2O2-I npril I. 2c12� Octol�r 1.2O2i npril I. 2c12G Octol�r 1.2O2G npril I. 2c127 Octol�r 1.2O27 np,;� �.2c�2x Octol�r 1.2O28 npril I. 2c129 Octol�r 1.2O29 npril I. 2c�;c� c)ctol�r 1.2c1;c1 npril I. 2c1; I Oclol�r 1.2Oil npril I. 2c1;2 Oclol�r 1.2Oi2 npril I. 2c1; ; Oclohr,r 1.2Oii npril I . 2c 1;-I Oclol�r 1.2Oi-I npril I. 2c1;; Oclol�r 1.2Oii npril I. 2c1;G Octol�r 1.2O;G npril I. 2c1;7 Oclol�r 1.2Oi7 n��,;� i. zc�;x OG012 pu�-3 2OOG Senior Parih 13oncls Cwrent Intcrest 13oncls Canital /�nnreciation 13oncls I otal Senior I otal Parih 13onc1 Scrics2OO; 13oncls 1'rincipal* Intcrest 1'rincipal* Intcrest Ucbt Scr�icc Ucbt Scr�icc Suborclinatc Canital /�nnreciation 13oncls I otal 1'rincipal* Intcrest Ucbt Scr�icc 'Ji 2OOG Senior Parih 13oncls Cwrent Intcrest 13oncls Canital /�nnreciation 13oncls Pa�ment Uatc Scrics2OO; 13oncls 1'rincipal* Oclol�r 1.2Oi8 npril I. 2c1;9 Octol�r 1.2O;9 npril I. 2cuc� Octol�r 1.2(�-IO npril I. 2cJ-� I Ic�I.V. `� * * Prcliminan. subject to changc. OG012 pu�-3 Intcrest 1'rincipal* `� * Suborclinatc Canital /�nnreciation 13oncls I otal Senior I otal Parih 13onc1 Intcrest Ucbt Scr� icc Ucbt Scr� icc 1'rincipal* `� * I otal Intcrest Ucbt Scr� icc SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Revenues and Loan Agreements 200<.Sei7ior Pnrit�� Boizds. T7�c 2006 Scnior Parit� Bonds are sccurcd b� a first licn on and plcdgc of thc Rc� cnucs. «hich arc dcfincd in thc 2006 Scnior Parit� Indcnturc to includc (i) all amounts pa�ablc b� thc Rcdc� clopmcnt Agcnc� as pa� mcnts or prcpa� mcnts for thc 2006 Loans pursuant to thc 2006 Scnior Parit� Loan Agrccmcnt and thc 200 � Loan pursuant to thc 200 � Loan Agrccmcnt: (ii) am procccds of thc 2006 Scnior Parit� Bonds originall� dcpositcd «ith thc Tnistcc and all monc� s dcpositcd and hcld from timc to timc in thc fiinds and accounts cstablishcd undcr thc 2006 Scnior Parit� Indcnturc: and (iii) incomc and gains «ith respcct to thc im cstmcnt of amounts on dcposit in thc fiinds and accounts cstablishcd undcr thc 2006 Scnior Parit� Indcnturc. othcr than amounts pa�ablc to thc Unitcd Statcs of Amcrica pursuant to thc ta� co� cnants containcd in thc 2006 Scnior Parit� Indcnturc. T7�c primar� sccurit� for thc 2006 Scnior Parit� Bonds. thcrcforc. consists of amounts pa�ablc b� thc Rcdc� clopmcnt Agcnc� undcr thc 2006 Scnior Parit� Loan Agrccmcnt. amounts hcld in thc Rcscr� c Fund and a�nounts hcld b� thc Tnistcc undcr thc 2006 Scnior Parit� Indcnturc. Thc 2006 Loans are sccurcd b� a first plcdgc of and licn on thc Ta� Rc� cnucs on a parit� «ith thc plcdgc of and licn of thc 200 � Loan. as morc fiill� dcscribcd undcr "—Ta� Rc� cnucs and Subordinatc Ta� Rc� cnucs-7ax Reveni�e.,�.�� T7�c Rcdc� clopmcnt Agcnc� ma�. pursuant to thc tcrms of thc 2006 Scnior Parit� Loan Agrccmcnt. thc 2006 Scnior Parit� Indcnturc. thc 200 � Loan Agrccmcnt and thc 200 � Indcnturc. issuc additional obligations sccurcd b� Ta� Rc� cnucs on a parit� «ith thc 2006 Loans and thc 200 � Loan. Scc "—Parit� Dcbt and Subordinatc Dcbt.�� 200<.Suborclii7nte (.'apitnlApprecintioi7 Boi7ds. T7�c 2006 Subordinatc Capital Apprcciation Bonds are sccurcd b� a licn on and plcdgc of thc Rc� cnucs. «hich arc dcfincd in thc 2006 Subordinatc Indcnturc to includc (i) all amounts pa� ablc b� thc Rcdc� clopmcnt Agcnc� as pa� mcnts or prcpa� mcnts for thc 2006 Subordinatc Loan pursuant to 2006 Subordinatc Loan Agrccmcnt: (ii) am procccds of thc 2006 Subordinatc Capital Apprcciation Bonds originall� dcpositcd «ith thc Tnistcc and all monc� s dcpositcd and hcld from timc to timc in thc fiinds and accounts cstablishcd undcr thc 2006 Subordinatc Indcnturc: and (iii) incomc and gains «ith respcct to thc im cstmcnt of amounts on dcposit in thc fiinds and accounts cstablishcd undcr thc 2006 Subordinatc Indcnturc. othcr than amounts pa�ablc to thc Unitcd Statcs of Amcrica pursuant to thc ta� co� cnants containcd in thc 2006 Subordinatc Indcnturc. T7�c primar� sccurit� for thc 2006 Subordinatc Capital Apprcciation Bonds. thcrcforc. consists of amounts pa� ablc b� thc Rcdc� clopmcnt Agcnc� undcr thc 2006 Subordinatc Loan Agrccmcnt. amounts hcld in thc Rcscr� c Fund and amounts hcld b� thc Tnistcc undcr thc 2006 Subordinatc Indcnturc. T7�c 2006 Subordinatc Loan is sccurcd b� a subordinatc plcdgc of and licn on thc Ta� Rc� cnucs rcmaining aftcr pa� mcnt of all amounts duc undcr thc 2006 Scnior Parit� Loan Agrccmcnt and thc 200 � Loan Agrccmcnt (thc "Subordinatc Ta� Rc� cnucs��). as morc fiill� dcscribcd undcr ..—Ta� Rc� cnucs and Subordinatc Ta� Rc� cnucs—.S'i�hui�clinate 7ax Reveni�e.,�.�� T7�c Rcdc� clopmcnt Agcnc� ma�. pursuant to thc tcrms of thc 2006 Subordinatc Loan Agrccmcnt and thc 2006 Subordinatc Indcnturc. issuc additional obligations sccurcd b� Subordinatc Ta� Rc� cnucs on a parit� «ith thc 2006 Subordinatc Loan. Scc "—Parit� Dcbt and Subordinatc Dcbt.�� Tax Revenues and Subordinate Tax Revenues �n.r Revei7ues. T7�c 2006 Scnior Parit� Bonds arc and «ill bc cquall� sccurcd b� a first plcdgc of. sccurit� intcrest in and licn on all of thc Ta� Rc� cnucs dcri� cd b� thc Rcdc� clopmcnt Agcnc� from thc Projcct Arc;a and monc� s hcld pursuant to thc 2006 Scnior Parit� Indcnturc. and on a parit� «ith thc 200 � Bonds and am Scnior Parit� Dcbt (dcfincd bclo« ) at am timc issucd b� thc Rcdc� clopmcnt Agcnc� . E�ccpt for thc Ta� Rc� cnucs and such monc� s. no othcr fiinds or propertics of thc Rcdc� clopmcnt Agcnc� is plcdgcd to. or othcn� isc liablc for. thc pa� mcnt of principal of or intcrest or rcdcmption prcmium (if am ) on thc 2006 Scnior Parit� Bonds. Undcr thc 2006 Scnior Parit� Indcnturc. thc Rcdc� clopmcnt Agcnc� ma� incur additional loans. ad� anccs or indcbtcdncss issucd or incurrcd b� thc Rcdc� clopmcnt Agcnc� on a parit� «ith thc 2006 Scnior Parit� Bonds and thc 200 � Bonds ("Scnior Parit� Dcbt��). «hich Scnior Parit� Dcbt o�,o � z r�,�-� 16 shall bc cquall� sccurcd. on a parit� «ith thc 2006 Scnior Pariri Bonds and thc 2000 � Bonds. b� a plcdgc of. sccurit� intcrest in and licn on all of thc Ta� Rc� cnucs. Scc "—Parit� Dcbt and Subordinatc Dcbt.�� Scc also APPI:NUIX D-"SUMMnRY OF CI:R I nIN PROVISIONS OF I I II: 2006 INUI:N�I�URI:S .. "Ta� Rc� cnucs�� is dcfincd in thc 2006 Scnior Parit� Loan Agrccmcnt to mcan monics allocatcd or paid to thc Rcdc� clopmcnt Agcnc� dcri� cd from (i) that portion of ta�cs Ic� icd upon ta�ablc propert� «ithin thc Projcct Arc;a allocatcd and paid into thc Spccial Fund of thc Rcdc� clopmcnt Agcnc� pursuant to Articic 6 of Chaptcr 6 of thc Rcdc� clopmcnt La« and Scction 16 of Articic XVI of thc Constitution of thc Statc. c�clusi� c of amounts laccd in thc Lo« and Modcratc Incomc Housing Fund of thc Rcdc� clopmcnt Agcnc� pursuant to Scctions >;>>�4.2 and >;>>�4.6 of thc Rcdc�clopmcnt La«. and c�cluding amounts pa�ablc to affcctcd ta�ing agcncics pursuant thc Pass-T7�rough Agrccmcnts or pursuant to Scction >;607.� or >;607.7 of thc Rcdc� clopmcnt La« . T7�c Rcdc� clopmcnt Agcnc� �s rcccipt of Ta� Rc� cnucs «ith respcct to thc Projcct Arc;a is subjcct to ccrtain limitations (thc "Plan Limitations��) containcd in thc Rcdc� clopmcnt Plan on thc dollar amount of ta�cs «hich ma� bc di� idcd and allocatcd to thc Rcdc� clopmcnt Agcnc� pursuant to thc Rcdc� clopmcnt Plan. as such limitation is prescribcd b� Scction >;>; �.�4 ofthc Rcdc�clopmcnt La«. Scc "LiMrrnric�Ns c�N Tnx Ri:vi:Nui:s." Pursuant to thc 2006 Scnior Parit� Loan Agrccmcnt. thc Rcdc� clopmcnt Agcnc� co� cnants to compl� «ith all rcquircmcnts of thc Rcdc� clopmcnt La« to insurc thc allocation and pa� mcnt to it of thc Ta� Rc� cnucs. and fiirthcr co� cnants not to 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 Rcdc� clopmcnt Agcnc� for pa� mcnt of thc 2006 Scnior Parit� Bonds. unlcss in thc «rittcn opinion of an Indcpcndcnt Rcdc�clopmcnt Consultant �filcd «ith thc Tnistcc.� such rcduction «ill not ad�crscl� affcct thc intcrests hcrcundcr of or thc sccurit� grantcd hcrcundcr to thc Bond O« ncrs. T7�c Rcdc� clopmcnt Agcnc� has no po« cr to Ic� � and collcct propert� ta�cs. and am propert� ta� limitation. Icgislati� c mc;asurc. � otcr initiati� c or pro� isions of additional sourccs of incomc to ta�ing agcncics ha� ing thc cffcct of rcducing thc propert� ta� ratc. could reducc thc amount of Ta� Rc� cnucs that «ould othcn�isc bc a�ailablc to pa� dcbt scr�icc on thc 2006 Scnior Parit� Bonds and. conscqucntl�. thc principal of. and intcrest on. thc 2006 Scnior Parit� Bonds. Likc« isc. broadcncd propert� ta� c�cmptions or succcssfiil asscssmcnt appcals could ha�c a similar cffcct. Scc "LiMrrnric�Ns c�N Tnx Ri:vi:Nui:s" and ..C►:►irn►N R►s►cs rc� Bc�Nu►►c�►.u►:►is .. THE 2006 SERIES BONDS ARE NOT A DEBT OF THE CITY. THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE. AND NONE OF THE CITY. THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS. OTHER THAN THE FINANCING AUTHORITY. IS LIABLE THEREFOR. THE PRINCIPAL OF. PREMIUM. IF ANY. AND INTEREST ON THE 2006 SERIES BONDS ARE PAYABLE SOLELY FROM REVENUES CONSISTING PRIMARILY OF AMOUNTS PAYABLE BY THE REDEVELOPMENT AGENCY UNDER THE 2006 LOAN AGREEMENT. WHICH ARE PAYABLE FROM TAX REVENUES ALLOCATED TO THE FINANCING AUTHORITY. FROM THE PROJECT AREA AND CERTAIN OTHER FUNDS PLEDGED THEREFOR UNDER THE 2006 LOAN AGREEMENTS. NONE OF THE MEMBERS OF THE FINANCING AUTHORITY. THE CITY COUNCIL. OR ANY PERSONS EXECUTING THE 2006 SERIES BONDS. ARE LIABLE PERSONALLY ON THE 2006 SERIES BONDS BY REASON OF THEIR ISSUANCE. NEITHER THE FINANCING AUTHORITY NOR THE REDEVELOPMENT AGENCY HAS TAXING POWER. o�,o � z r�,�-� 17 .Suborclii7nte �n.r Revei7ues. Thc 2006 Subordinatc Capital Apprcciation Bonds arc and «ill bc cquall� sccurcd b� a first plcdgc of. sccurit� intcrest in and licn on all rcmaining Ta� Rc� cnucs follo« ing thc pa� mcnt of thc 2006 Scnior Parit� Loan. thc 200 � Loan and Scnior Parit� Dcbt (such rcmaining amount is rcfcrrcd to as thc "Subordinatc Ta� Rc� cnucs��). Tax Allocation Financing T7�c Rcdc� clopmcnt La« pro� idcs a mcans for financing rcdc� clopmcnt projccts bascd upon an allocation of ta�cs collcctcd «ithin a projcct arc;a. T7�c ta�ablc � aluation of a projcct arc;a last cqualizcd prior to adoption of thc rcdc� clopmcnt plan. or basc roll. is cstablishcd and. c�ccpt for am period during «hich thc ta�ablc � aluation drops bclo« thc basc � car Ic� cl and for ccrtain c�ccptions dcscribcd bclo«. thc ta�ing agcncics thcrc;aftcr rccci� c thc ta�cs produccd b� thc Ic� � of thc thcn currcnt ta� ratc upon thc basc roll. Ta�cs collcctcd upon am incrcasc in ta�ablc � aluation o� cr thc basc roll (c�ccpt such portion gcncratcd b� ratcs Ic� icd to pa� bondcd indcbtcdncss appro� cd b� thc � otcrs on or aftcr Januar� I. 1989. for thc acquisition or impro� cmcnt of rc;al propert� ) arc allocatcd to a rcdc� clopmcnt agcnc� and ma� bc plcdgcd b� a rcdc� clopmcnt agcnc� to thc rcpa� mcnt of am indcbtcdncss incurrcd in financing or rcfinancing a rcdc� clopmcnt projcct. Ta� Rc� cnucs consist of a portion of such ta�cs. Rcdc� clopmcnt agcncics thcroscl� cs ha� c no authorit� to Ic� � propert� ta�cs and must look spccificall� to thc allocation of ta�cs produccd as indicatcd abo� c. Redevelopment Plan Limitations T7�c Statc Lcgislaturc has in thc past cnactcd Icgislation altcring spcnding limitations or establishing minimum fiinding pro� isions for particular acti� itics. T7�c Rcdc� clopmcnt Agcnc� cannot prcdict «hcthcr thc Statc Lcgislaturc «ill cnact othcr Icgislation rcquiring additional or incrcascd firture shifts of ta� incrcmcnt rc� cnucs to thc Statc and/or to schools. «hcthcr through an arrangcmcnt similar to thc local Count� Education Rc� cnuc Augmcntation Funds (thc "ERAF��) or b� othcr arrangcmcnts. and. if so. thc cffcct of such Icgislation on firturc Ta� Rc� cnucs. A dcscription of such Icgislation is summarizcd bclo« . AB 1290. Pursuant to Scction >;607.7 ofthc Statc Hcalth and Safct� Codc addcd b� Asscmbl� Bill ("AB") 1290 (Statutcs of 199 �). Chaptcr 9�42) a rcdc� clopmcnt plan amcndmcnt for am rcdc� clopmcnt plan adoptcd prior to Januan I. 199�4 that incrc;ascs thc limitation on thc numbcr of dollars to bc allocatcd to thc rcdc�clopmcnt agcnc� or thc timc limit on thc cstablishing of loans. ad�anccs and indcbtcdncss. must bcgin making statuton pa� mcnts to affcctcd ta�ing cntitics that do not ha� c c�isting prc-AB 1290 ta� sharing agrccmcnts. Thcsc pa� mcnts arc to bcgin oncc am of thc original rcdc� clopmcnt plan limitations «ould ha� c takcn cffcct. T7�c first limit cncountcrcd or to bc cncountcrcd in thc Projcct Arc;a is thc dcbt cstablishmcnt limit. T7�c AB 1290 pa� mcnts arc computcd using thc incrcasc in rc� cnuc. if am. o� cr thc amount of rc� cnuc gcncratcd b� a projcct arc;a in thc � car that thc dcbt cstablishmcnt limit «ould ha� c bccn rc;achcd. In cffcct. thc �car in «hich thc dcbt cstablishmcnt limit is mct bccomcs a nc« "basc �car� for purposcs of calculating pa� mcnts. AB 1290 pa� mcnts arc paid from rc� cnucs resulting from thc gro«th in thc nc« ta� basc �car. �Scc APPI:NUIX A—"RI:Pc�RI c�F I111: Fls�'nl, Cc�NSUI,InN�I�� for a dctailcd discussion of thc formulas upon «hich calculation of thc AB 1290 pa� mcnts is bascd. � Among othcr amcndmcnts to thc La«. AB 1290 limits thc timc for: (i) cstablishing indcbtcdncss in a projcct arc;a to thc latcr of 20 � cars from thc datc of adoption of thc rcdc� clopmcnt plan or Januar� I. 200�4: (ii) thc lifc of c�isting rcdc� clopmcnt plans to thc latcr of �40 � c;ars from thc datc of adoption or Ja�uian I. 2009: (iii) pa� ing indcbtcdncss «ith ta� incrcmcnt bc� ond 10 � cars aftcr thc c�piration of thc rcdc� clopmcnt plan. c�ccpt to fiind dcfcrrcd Lo« and Modcratc Incomc Housing Fund (thc "Housing Sct-Asidc��) rcquircmcnts and to rcpa� indcbtcdncss incurrcd prior to Januar� I. 199�4. Thc timc limits imposcd b� o�,o � z r�,�-� ix AB 1290 appl� indi� iduall� to c;ach plan as «cll as to spccific tcrritor� addcd b� amcndmcnts to a rcdc� clopmcnt plan. - - - On Fcbnian 27. 200 �. thc Cit� Council adoptcd Ordinancc No. 10 �6 climinating thc timc limit to incur dcbt «ithin thc Projcct Arca. Scc "TIII: PRc�.il;�'I Al�l:n—Rcdc�clopmcnt Plan—Rec%velupment l'lan /,imit.s Tablc I�� for a summar� of thc plan amcndmcnt and limitations. For a summan of thc plan amcndmcnts and limitations. scc "TI II: PRc�.il:c i ARI:n—Rcdc� clopmcnt Plan—Rec%velupment /'lan /,imit.s—Tablc I.�� For additional Icgislation affccting plan limits. scc "—.S%3 ?/ /.. and "—.S'R lOJ<... .SB 211. Scnatc Bill 21 I(Chaptcr 7�41. Statutcs of 2001) ("SB 2 I I") «as adoptcd b� thc California Lcgislaturc and bccamc la« on Januar� I. 2002. Among othcr things. SB 21 I authorizcs a rcdc� clopmcnt agcnc� that adoptcd a rcdc� clopmcnt plan prior to Januan I. 199�4. to amcnd that plan in accordancc «ith spccificd proccdures to c�tcnd its cffccti� cncss and recci� c ta� incrcmcnt rc� cnucs �� ith respcct to thc plan for not morc than I 0� cars if ccrtain spccificd findings arc madc. If a plan is so amcndcd. thc rcquircmcnt for allocating ta� incrcmcnt rc� cnucs to lo« and modcratc incomc housing is incrc;ascd from 20`%� to �0`%�. Ho«c� cr. such climination also triggcrs statutor� ta� sharing «ith thosc ta�ing cntitics that do not ha� c ta� sharing agrccmcnts for thc period commcncing in thc � car thc climinatcd plan limit «ould ha� c takcn cffcct. Ta� sharing «ill bc calculatcd bascd on thc incrcasc in asscsscd �aluation aftcr thc �car in «hich thc timc limit «ould ha� c othcn� isc bccomc cffccti� c. SB 21 I also allo« s rcdc� clopmcnt agcncics to amcnd rcdc�clopmcnt plans to climinatc thc timc limit for thc cstablishmcnt of loans. ad�anccs and indcbtcdncss «ithin projcct arc;as. Ho« c� cr. such an amcndmcnt «ould also rcquirc a rcdc� clopmcnt agcnc� to bcgin making statutor� ta� sharing pa� mcnts to affcctcd ta�ing cntitics. Scc "—AR l?J0." .SB IO;IS. Scnatc Bill 10�4� (Chaptcr 260. Statutcs of 200 �) ("SB 10�4�") «as cnactcd as part of thc Statc Fiscal Ycar 200 �-0�4 budgct Icgislation and requircd redc� clopmcnt agcncics Statc« idc to contributc `f I�� million to thc ERAF in ordcr to rcducc thc amount of Statc fiinding for schools. (Scc also "CI:RInIN RISKS Ic) Bc)NUlic)I.UI:RS—Statc Budgct—/�i.scrr/ r'eco� ?00�-0-i��). In accordancc «ith SB 10�4�. thc Rcdc� clopmcnt Agcnc� transfcrrcd `f to thc Count� b� thc Ma� l0. 200�4 dc;adlinc. In addition. SB 10�4� amcndcd thc Rcdc� clopmcnt La« to permit rcdc� clopmcnt agcncics to usc a simplificd mcthodolog� to amcnd thc rcdc� clopmcnt plans to c�tcnd b� onc � car thc cffccti� cncss of thc plan a,�d thc timc during «hich a rcdc� clopmcnt agcnc� ma� rcpa� dcbt «ith ta� incrcmcnt rc� cnucs. and permittcd a rcdc� clopmcnt agcnc� to dcduct thc amount of ERAF pa� mcnts in Fiscal Ycar 200 �-0�4 and in prior ti cnrs from thc amount of thc cumulati� c ta� incrcmcnt rc� cnucs for a projcct arc;a. On Dcccmbcr 9. 200�4. thc Cit� Cow�cil adoptcd Ordinancc No. 108�4 c�tcnding b� onc � c;ar thc c�piration datc of thc Rcdc� clopmcnt Plan and thc timc limit to rcpa� dcbt in thc Projcct Arca. SB 1206 Scnatc Bill 1206 ("SB 1206"). introduccd b� thc Chair of thc Scnatc Committcc on Local Go� crnmcnt in Januan 2006. «ould amcnd scctions of thc Rcdc� clopmcnt La« to. among othcr things. rc� isc thc conditions that charactcrizc a blightcd arc;a; standardizc thc standards for mcrgcrs of projcct arc;as: and prohibit a rcdc� clopmcnt agcnc� from cstablishing am bondcd indcbtcdncss to bc paid «ith ta� incrcmcnt rc� cnucs aftcr thc I I th fiscal � c;ar in «hich such agcnc� rccci� cs ta� incrcmcnt rc� cnucs unlcss thc rcdc�clopmcnt agcnc� finds that both significnnt blight rcmains ��ithin thc projcct arc;a ancl that thc blight cannot bc climinatcd «ithout thc issuancc ofthc bondcd indcbtcdncss. In its currcnt form. SB 1206 docs not contain am cffccti� c datcs for thc application of thcsc pro� isions. T7�c Cit� is unablc to prcdict «hcthcr this Icgislation «ill bc cnactcd in its currcnt form. or at all. o�,o � z r�,�-� 19 Allocation of Taxes A.1' �)PUVlL%L'L% in tl�e Rec%veluprnent !'lan. anc! pur.st�c�n! !u A��lie(e < uf� ('l�crpte�� < u/' the Rec%velupment /,atir (cummencin,�� tiritl� .S'ectiun ��<i0 uf' tl�e ('alifui�nia Healtl� ancl .krfeh� ('uc%) ancl .S'ectiun l< uf'Ai7icle XG% uf'tl�e .S'tate ('U19.1'1l1111lU19. 1Cf�L'.1' �L'V!L'L% 1l�)Ul9 1Cf�CfJ7�L' pi�upei�h� in tl�e l'i�ujec7 Ai�ea eac% ��eai' h�� ui�.fui� tl�e henefit uf'tl�e .S'tate. Ilivei'.sic% ('ut�nh� (tl�e "('ut�nh��). tl�e ('ih'. an�� cli.sti'ict ui� utl�ei' piihlic cuipui�atiun (l�ei�ein cullectivel�� i�efei�i�ecl tu a.s ..taxin,�� a,��encie.s') fui� eac% l�i.scal }''eco� he,��lYlY!!Yl,�� Cff1L'/' 1�1L' L'ffL'C1NL' L%Cf1L'.1' Uf 1�1L' U/'L%!YlCfYlCL' Cf�)�)PUVlYl��� 1�1L' PL'L%L'VL'�U�)/77L'Y!1 �)�CfYl.1' CfYlL% CfYll' Cf/77L'Y!L%/77L'Yl1.1' CfL%L%!Yl��� tei'i'itui'�' I�9L'PL'IU CO"L' LllVlL%L'L%C(.1' fU��U}1'.1': I. To othcr ta�in� a�cncics: T7�at portion of thc ta�cs «hich «ould bc produccd b� thc ratc upon «hich thc ta� is Ic� icd c;ach � car b� or for c;ach of said ta�ing agcncics upon thc total sum of thc asscsscd � aluc of thc ta�ablc propert� in thc Projcct Arca as sho« n upon thc asscssmcnt roll uscd in conncction �� ith thc tasation of such propert� b� such ta�ing agcnc� last cqualizcd prior to thc cffccti� c datc of thc applicablc ordinancc adopting thc rcdc� clopmcnt plan or amcnding thc rcdc� clopmcnt plan to add propert� into thc Projcct Arca. shall bc allocatcd to. and «hcn collcctcd shall bc paid into thc fiinds of thc respccti� c ta�ing agcncics as ta�cs b� or for said ta�ing agcncics on all othcr propert� arc paid: and 2. To thc Rcdc� cloumcnt A�cnc� : E�ccpt for ta�cs «hich arc attributablc to a ta� ratc Ic� � b� a ta�ing agcnc� for thc purposc of producing rc� cnucs to rcpa� bondcd indcbtcdncss appro� cd b� thc � otcrs of thc ta�ing agcnc� on or aftcr Januan I. I 989. «hich shall bc allocatcd to and «hcn collcctcd shall bc paid to thc respccti� c ta�ing agcnc� and c�ccpt for statutor� pass-through pa� mcnts. that portion of thc Ic� icd ta�cs c;ach � car in c�ccss of thc amounts pro� idcd for in paragraph ( I) abo� c. shall bc allocatcd to. and «hcn collcctcd. shall bc paid into a spccial fiind of thc Rcdc� clopmcnt Agcnc� to pa� thc principal of and intcrest on bonds. loans. monc� s ad� anccd to. or indcbtcdncss (« hcthcr fi�ndcd. rcfi�ndcd. assumcd. or othcn� isc) incurrcd b� thc Rcdc� clopmcnt Agcnc� to financc or rcfinancc. in «holc or in part. projccts and programs for thc Projcct Arc;a. Whcn said bonds. loans. ad� anccs. and indcbtcdncss. if am. and intcrest thcrcon. ha� c bccn paid. all monc� s thcrcaftcr rccci� cd from ta�cs upon thc ta�ablc propert� in thc Projcct Arc;a. shall bc paid into thc fiinds of thc respccti� c ta�ing agcncics as ta�cs on all othcr propert� arc paid. Thc portion of ta�cs di� idcd and allocatcd to thc Rcdc� clopmcnt Agcnc� from thc Projcct Arca pursuant to paragraph (2) abo� c shall not c�cccd a total of `f �60 million c�ccpt b� amcndmcnt of thc Rcdc� clopmcnt Plan. This limit docs not appl� to. includc or prc� cnt thc Rcdc� clopmcnt Agcnc� from incurring dcbt to bc paid from thc Housing Sct-Asidc. or am amounts rcquircd to fiilfill thc Rcdc� clopmcnt Agcnc� �s obligations undcr scction ���41 � of thc Rcdc� clopmcnt La« . Thc Rcdc� clopmcnt Agcnc� is authorizcd to makc plcdgcs of thc portion of ta�cs mcntioncd in paragraph (2) abo� c as to spccific ad� anccs. loans and indcbtcdncss as appropriatc in carr� ing out thc Rcdc� clopmcnt Plan in thc Projcct Arca. subjcct to thc limitations on allocation of ta�cs. dcbt crcation. and bondcd indcbtcdncss containcd in thc Statc Hcalth and Safct� Codc and othcr applicablc la«s. Undcr thc pro� isions of thc Rcdc� clopmcnt Plan. thc Rcdc� clopmcnt Agcnc� shall not cstablish or incur loans. ad� anccs. or indcbtcdncss to financc in «holc or in part acti� itics in thc Projcct Arca bc� ond thc datcs for thc arcas indicatcd in ��Ti n: Piic�.ii:c r Aiii:n—Rcdc� clopmcnt Plan—Ilec%velupmenr l'lan /,imit.s—Tablc I.�� Loans. ad� anccs. or indcbtcdncss ma� bc rcpaid o� cr a period of timc bc� ond said timc limits. Thcsc limits. ho« c� cr. shall not prc� cnt thc Rcdc� clopmcnt Agcnc� from incurring dcbt to bc paid from thc Housing Fund cstablishcd pursuant to Scction >;>>�1 � of thc Rcdc� clopmcnt La« and thc Rcdc� clopmcnt Plan. or establishing morc dcbt in ordcr to fiilfill thc Rcdc� clopmcnt Agcnc� �s obligations undcr Scction >>�41 � of thc Rcdc� clopmcnt La« and thc Rcdc� clopmcnt Plan. This limit shall not prc� cnt thc Rcdc� clopmcnt Agcnc� from rcfinancing. rcfiinding or restructuring indcbtcdncss o�,o � z r�,�-� 20 aftcr thc timc limit if thc indcbtcdncss is not incrcascd and thc timc during «hich thc indcbtcdncss is to bc rcpaid is not c�tcndcd bc� ond thc timc limits containcd in thc Rcdc� clopmcnt Plan. T7�c Rcdc� clopmcnt Agcnc� ma� not rccci� c and shall not rcpa� indcbtcdncss «ith thc procccds from propert� ta�cs rccci� cd pursuant to Scction >;670 of thc Rcdc� clopmcnt La« and thc Rcdc� clopmcnt Plan bc� ond thc datcs for thc arc;as indicatcd in Tablc I. c�ccpt to rcpa� dcbt to bc paid from thc Housing Fund cstablishcd pursuant to thc Scction >;>>�4. � of thc Rcdc� clopmcnt La« and thc Rcdc� clopmcnt Plan. or dcbt cstablishcd in ordcr to fiilfill thc Rcdc� clopmcnt Agcnc� �s obligations undcr Scction >>�41 � of thc Rcdc� clopmcnt La« and thc Rcdc� clopmcnt Plan. Reserve Funds (�ei7ernl. As additional sccurit� for thc 2006 Scrics Bonds. thc Rcdc� clopmcnt Agcnc� is rcquircd to maintain a Rcscr� c Fund for c;ach scrics of 2006 Scrics Bonds pursuant to thc respccti� c 2006 Loan Agrccmcnt that «ill bc maintaincd b� thc Tnistcc in thc amount of thc "Rcscr� c Rcquircmcnt.�� T7�c Rcscr� c Rcquircmcnt is dcfincd in cach 2006 Loan Agrccmcnt. as of am datc of calculation. as thc Ic;ast of: (i) Ma�imum Annual Dcbt Scr� icc: (ii) 12�`%� of a� cragc annual dcbt scr� icc on thc Loans and all outstanding Parit� Dcbt: and (iii) 10'%� of thc procccds of thc applicablc 2006 Loan (i.e. thc original Principal Amount of thc applicablc 2006 Scrics Bonds) and thc procccds ofam Parit� Dcbt. T7�c Rcdc� clopmcnt Agcnc� plcdgcs and grants a licn and sccurit� intcrest to thc Tnistcc in cach Rcscr� c Fund to sccurc thc pa� mcnt obligations of thc Rcdc� clopmcnt Agcnc� undcr c;ach 2006 Loan Agrccmcnt. Amounts on dcposit in a Rcscr� c Fund ma� bc uscd solcl� for thc purposc of making transfcrs to thc applicablc Intcrest Account. Principal Account. in such ordcr. in thc c� cnt of a dcficicnc� at am timc in a��� such accounts «ith respcct to thc amounts duc on thc applicablc scrics of 2006 Scrics Bonds. 200< .Sei7ior Pnrit�� Boi7ds. Follo« ing thc issuancc of thc 2006 Scnior Parit� Bonds. thc Rcscr� c Rcquircmcnt «ill bc `f . In conncction «ith thc issuancc of thc 2006 Scrics Bonds. thc Rcdc� clopmcnt Agcnc� «ill dcposit �t«o dcbt scr� icc rescr� c surct� policics� in thc aggrcgatc amount of `f into thc Rcscr� c Fund. «hich togcthcr «ith thc amounts on dcposit thcrcin in thc amount of � «ill cqual thc Rcscr� c Rcquircmcnt. 200< .Suborclii7nte (.'npitn! Apprecintioiz Boi7ds. Follo« ing thc issuancc of thc 2006 Subordinatc Capital Apprcciation Bonds. thc Rcscr� c Rcquircmcnt «ill bc � . In conncction «ith thc issuancc of thc 2006 Subordinatc Capital Apprcciation Bonds. thc Rcdc� clopmcnt Agcnc� «ill dcposit procccds in thc amount of `f into thc Rcscr� c Fund. Parity Debt and Subordinate Debt /ssucuzce of Pnrit�� Debt. In addition to thc 2006 Scnior Parit� Bonds and thc 2006 Subordinatc Capital Apprcciation Bonds. thc Rcdc� clopmcnt Agcnc� ma�. b� supplcmcntal indcnturc. issuc or incur othcr loans. ad� anccs or indcbtcdncss pa� ablc from Ta� Rc� cnucs or Subordinatc Ta� Rc� cnucs. respccti� cl� . on a parit� «ith thc 2006 Scnior Parit� Bonds and thc Scrics 200 � Bonds ("Parit� Scnior Dcbt") and thc 2006 Subordinatc Capital Apprcciation Bonds ("Parit� Subordinatc Dcbt��) and refiinding bonds issucd solcl� to financc and refinancc rcdc� clopmcnt acti� itics «ith respcct to thc Projcct Arca in such principal amount as shall bc dctcrmincd b� thc Rcdc� clopmcnt Agcnc� . o�,o � z r�,�-� 21 200<.Sei7ior Pnrit�� Boi7ds. Parit� Dcbt Thc Rcdc� clopmcnt Agcnc� co� cnants in thc 2006 Scnior Parit� Loan Agrccmcnt that it «ill not incur am indcbtcdncss pa�ablc from all or am part of thc Ta� Rc� cnucs othcr than: (i) thc 2006 Scnior Parit� Loans: (ii) additional Parit� Dcbt subjcct to thc conditions dcscribcd bclo«. and (iii) am dcbt sccurcd b� a plcdgc of Ta� Rc� cnucs «hich is subordinatc to thc plcdgc of Ta� Rc� cnucs crc;atcd b� thc 2006 Loan Agrccmcnt. T7�c Rcdc� clopmcnt Agcnc� has fiirthcr co� cnantcd in thc 2006 Loan Agrccmcnt that it «ill not amcnd thc Rcdc� clopmcnt Plan (c�ccpt for thc purposc of c�tcnd or climinating thc timc limit for thc rcccipt of ta� incrcmcnt. or incrc;asing thc limitation on thc numbcr of dollars of ta�cs to bc allocatcd to thc Rcdc� clopmcnt Agcnc� ) 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 Rcdc� clopmcnt Agcnc� for pa� mcnt of thc 2006 Loan unlcss thc Rcdc� clopmcnt Agcnc� has first obtaincd: (i) a rcport of an Indcpcndcnt Rcdc� clopmcnt Consultant stating that thc amount of Tax 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 Rcdc� clopmcnt Agcnc� . thc Additional Rc� cnucs. «ill mcct thc co� cragc tcst sct forth in paragraph (b) bclo«. and (ii) thc permission of thc Bond Insurcr. Pursuant to thc 2006 Scnior Parit� Loan Agrccmcnt. thc Rcdc� clopmcnt Agcnc� ma� issuc or incur additional Scnior Parit� Dcbt subjcct to thc follo« ing spccific conditions: (a) No E� cnt of Dcfault has occurrcd and is continuing undcr and as dcfincd in thc 2006 Scnior Parit� Loan Agrccmcnt. and thc Rcdc� clopmcnt Agcnc� is othcn� isc in compliancc «ith all co� cnants sct forth in thc 2006 Scnior Parit� Loan Agrccmcnt. (b) T7�c amount of Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar. as sct forth in a Ccrtificatc of thc Rcdc� clopmcnt 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 Rcdc� clopmcnt Agcnc� thc Additional Rc� cnucs. shall bc at Ic;ast cqual to (i) I�0'%� of Ma�imum Annual Dcbt Scr� icc so long as thc asscsscd � aluc of propert� «ithin thc Projcct Arc;a is Icss than `f �60.000.000. (ii) 13�`%� of Ma�imum Annual Dcbt Scr� icc so long as thc asscsscd � aluc of propert� «ithin thc Projcct Arc;a is cqual to or grc;atcr than ��60.000.000 and Icss than `f �9�.000.000. and (iii) 12�`%� of Ma�imum Annual Dcbt Scr� icc so long as thc asscsscd �aluc of propert� «ithin thc Projcct Arc;a is cqual to or grc;atcr than `G �9�.000.000. (c) T7�c rclatcd Scnior Parit� Dcbt Instnimcnt pro� idcs that thc balancc of thc Rcscr� c Fund «ill bc incrcascd to thc nc« Rcscr� c Rcquircmcnt cffccti� c zftcr thc incurrcncc of such Scnior Parit� Dcbt. (d) T7�c rclatcd Scnior Parit� Dcbt Instnimcnt pro� idcs that am Scnior Parit� Dcbt that bcars currcnt intcrest is pa�ablc on April I and Octobcr I ofam �car: and thc principal on such Scnior Parit� Dcbt is pa�ablc on thc samc datc as principal and intcrest on thc 2006 Scnior Parit� Loans arc pa�ablc. (c) T7�c issuancc of such Scnior Parit� Dcbt «ill not causc thc Rcdc� clopmcnt Agcnc� to c�cccd am applicablc limitations containcd in thc Rcdc� clopmcnt Plan. (� T7�c Rcdc� clopmcnt Agcnc� dcli� crs to thc Tnistcc a«rittcn ccrtificatc ccrtifi ing that thc conditions prcccdcnt to thc issuancc of such Scnior Parit� Dcbt sct forth in subparagraphs (a) through (c) abo� c ha� c bccn satisficd. o�,o � z r�,�-� 22 Subordinatc Dcbt. In addition to thc 2006 Scnior Parit� Loans and am Scnior Parit� Dcbt. thc Rcdc� clopmcnt Agcnc� ma� from timc to timc issuc or incur Subordinatc Dcbt in such principal amount as dctcrmincd b� thc Rcdc� clopmcnt Agcnc�. pro� idcd that thc issuancc of such Subordinatc Dcbt «ill not causc thc Rcdc� clopmcnt Agcnc� to c�cccd am applicablc limitations containcd in thc Rcdc� clopmcnt Plan. 200<.Suborclii7nte (.'apitnlApprecintioi7 Boi7ds cu7d 200<.Sei7ior Pnrit�� Boi7ds. Parit� Dcbt Thc Rcdc� clopmcnt Agcnc� co� cnants in thc 2006 Subordinatc Loan Agrccmcnt that it «ill not incur am indcbtcdncss pa�ablc from all or am part of thc Subordinatc Ta� Rc� cnucs othcr than: (i) thc 2006 Subordinatc Loan: (ii) additional Subordinatc Parit� Dcbt subjcct to thc conditions dcscribcd bclo«. and (iii) am dcbt sccurcd b� a plcdgc of Subordinatc Ta� Rc� cnucs «hich is subordinatc to thc plcdgc of Subordinatc Ta� Rc� cnucs crc;atcd b� thc 2006 Subordinatc Loan Agrccmcnt. Thc Rcdc� clopmcnt Agcnc� has fiirthcr co� cnantcd in thc 2006 Subordinatc Loan Agrccmcnt that it «ill not amcnd thc Rcdc� clopmcnt Plan (c�ccpt for thc purposc of c�tcnd or climinating thc timc limit for thc rcccipt of ta� incrcmcnt. or incrc;asing thc limitation on thc numbcr of dollars of ta�cs to bc allocatcd to thc Rcdc� clopmcnt Agcnc� ) 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 Rcdc� clopmcnt Agcnc� for pa� mcnt of thc 2006 Loan unlcss thc Rcdc� clopmcnt Agcnc� has first obtaincd: (i) a 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 Rcdc� clopmcnt Agcnc� . thc Additional Rc� cnucs. «ill mcct thc co� cragc tcst sct forth in paragraph (b) bclo«. and (ii) thc permission ofthc Bond Insurcr. Pursuant to thc 2006 Scnior Parit� Loan Agrccmcnt. thc Rcdc� clopmcnt Agcnc� ma� issuc or incur additional Scnior Parit� Dcbt subjcct to thc follo« ing spccific conditions: (a) No E� cnt of Dcfault has occurrcd and is continuing undcr and as dcfincd in thc 2006 Subordinatc Loan Agrccmcnt. and thc Rcdc� clopmcnt Agcnc� is othcn� isc in compliancc «ith all co� cnants sct forth in thc 2006 Subordinatc Loan Agrccmcnt. (b) T7�c amount of Ta� Rc� cnucs for thc thcn currcnt Fiscal Ycar. as sct forth in a Ccrtificatc of thc Rcdc� clopmcnt 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 Rcdc� clopmcnt Agcnc� thc Additional Rc� cnucs. shall bc at Ic;ast cqual � I 10'%�� of thc principal of. intcrest on and am mandator� sing fiind pa� mcnts duc on thc 2006 Scnior Parit� Loans. Scnior Parit� Dcbt. thc 2006 Subordinatc Loan and Subordinatc Parit� Dcbt (thc "Ma�imum Combincd Annual Dcbt Scr� icc��). (c) T7�c rclatcd Subordinatc Parit� Dcbt Instnimcnt pro� idcs that thc balancc of thc Rcscr� c Fund «ill bc incrcascd to thc nc« Rcscr� c Rcquircmcnt cffccti� c aftcr thc incurrcncc of such Subordinatc Parit� Dcbt. (d) T7�c rclatcd Subordinatc Parit� Dcbt Instnimcnt pro� idcs that am Subordinatc Parit� Dcbt that bc;ars currcnt intcrest is pa�ablc on April I and Octobcr I of am �car: and thc principal on such Subordinatc Parit� Dcbt is pa�ablc on thc samc datc as principal and intcrest on thc 2006 Subordinatc Loans arc pa�ablc. (c) T7�c issuancc of such Subordinatc Parit� Dcbt «ill not causc thc Rcdc� clopmcnt Agcnc� to c�cccd am applicablc limitations containcd in thc Rcdc� clopmcnt Plan. o�,o � z r�,�-� 2� (� T7�c Rcdc� clopmcnt Agcnc� dcli� crs to thc Tnistcc a«rittcn ccrtificatc ccrtifi ing that thc conditions prcccdcnt to thc issuancc of such Subordinatc Parit� Dcbt sct forth in subparagraphs (a) through (c) abo� c ha� c bccn satisficd. Subordinatc Dcbt. In addition to thc 2006 Subordinatc Loan and am Subordinatc Parit� Dcbt. thc Rcdc� clopmcnt Agcnc� ma� from timc to timc issuc or incur Subordinatc Dcbt in such principal amount as dctcrmincd b� thc Rcdc� clopmcnt Agcnc�. pro� idcd that thc issuancc of such Subordinatc Dcbt «ill not causc thc Rcdc� clopmcnt Agcnc� to c�cccd am applicablc limitations containcd in thc Rcdc� clopmcnt Plan. Investment of Funds All fiinds hcld b� thc Tnistcc undcr thc 2006 Indcntures arc rcquircd to bc im cstcd in Pcrmittcd Im cstmcnts. Scc APPI:NUIX D attachcd hcrcto for thc dcfinition of Pcrmittcd Im cstmcnts. All fiinds hcld b� thc Rcdc� clopmcnt Agcnc� . including thc Spccial Fund into «hich all Ta� Rc� cnucs and Subordinatc Ta� Rc� cnucs arc initiall� dcpositcd. ma� bc im cstcd b� thc Rcdc� clopmcnt Agcnc� in am im cstmcnt authorizcd b� la« . Scc thc auditcd financial statcmcnts of thc Rcdc� clopmcnt Agcnc� for thc � car cndcd Junc �0. 200� attachcd hcrcto as APPI:NUIX B for a dcscription of thc Rcdc� clopmcnt Agcnc� �s im cstmcnt polic� at Junc �0. 200�. All im cstmcnts. including thc Pcrmittcd Im cstmcnts and thosc authorizcd b� la« from timc to timc for im cstmcnts b� municipalitics. contain a ccrtain dcgrcc of risk. Such risks includc. but arc not limitcd to. a lo«cr ratc of rcturn than c�pcctcd and loss or dcla�cd reccipt of principal. T7�c occurrcncc of thcsc c� cnts «ith respcct to amounts hcld undcr thc 2006 Indcntures or thc Spccial Funds could ha� c a matcrial ad� crsc affcct on thc sccurit� for thc 2006 Scrics Bonds. BONDINSURANCE ��1L' fUllU117Yl��� !YlfUl'177Cf1lUl9 �1Cf.1' J7L'L'Y! flll'Y!!.1'�1L'L% J71' 1�1L' RUl9Ll �Yl.1'1lPL'l' fUl' 11.1'L' !Y! 1�1l.1' i)f f!ClCf� .S�1Cf1L'177L'Yl1. Refei�ence i.s mac% tu Al'l'l: �7�/.�" H, fui� a.specimen uf'tl�e l�lYlCfYlClCf� G1lCfl'CfYlh' �Yl.1'tll'CfYlCL' l'ulic�� tu he i.s.siiecl h� tl�e RUl9Ll �Yl.1'1lPL'l'. I�9L' Rec%velupment A,��encr make.s nu i�epi�e.sentatiun.s a.s tu tl�e acciu�acr ui� cumpletene.s.s uf't/�i.s infui�matiun ui� a.s tu t/�e ah.sence uf'matei�ia/ ac/vei�.se c/urn,��L'.1' !Y! 1�9l.1' !YlfU/'/77Cf1lU/9 .1'11J7.1'L'L�1lL'Y!1 lU t/�e clate l�ei'euf.' . . 7%e RUl9Ll �Yl.1'1lPL'l' CfCCL'�)1.1' Y!U i�e.spun.sihilih� .fui� tl�e acciu�acr ui� cumpletene.s.s uf' tl�i.s Of'Jicial .S'tatement ui� an�� utl�ei� infui�matiun ui� cli.sclu.siu�e cuntainecl %ei�ein. ui� umittecl %ei�efi�um. utl�ei� tl�an tiritl� i�e.spec7 tu tl�e acciu�acr uf'tl�e infui�matiun i�e,��co�clin,�� tl�e RUl9Ll �Yl.1'1lPL'l' CfYlLl 11.1' Cfffl�lCf1L'.1' .1'L'1 fUl'1�9 1lYlL%L'l' 1�9l.1' �1L'CfLllYl���. �Y! CfL%Lll1lUl9. 1�1L' RUl9Ll �Yl.1'1lPL'l' 177Cf�CL'.1' Y!U PL'�)PL'.1'L'Yl1Cf1lUl9 PL'���CO'LllYl��� 1�1L' �ilil� .S�L'/7L'.1' �Ul9L%1' Ul' 1�1L' ac/vi.sahi/ih' Uf !YlVL'.1'1!Yl,�� in t/�e ?00<.S'ei�ie.s Runcls. �TO COME� LIMITATIONS ON TAX REVENUES Article X111 A of State Constitution On Junc 6. 1978. California � otcrs appro� cd Proposition I�("Proposition I�"). «hich addcd Articic XIII A to thc Statc Constitution ("Articic XIII A��). Articic XIII A. as amcndcd. limits thc amount of am acl valui�em ta� on rcal propert� to onc perccnt of thc fiill cash � aluc thcrcof. c�ccpt that additional acl valui�em ta�cs ma� bc Ic� icd to pa� dcbt scr� icc on (i) indcbtcdncss appro� cd b� thc � otcrs prior to Jul� I. 1978. (ii) (as a result ofan amcndmcnt to Articic XIII A appro�cd b� Statc �otcrs on Junc �. 1986) on bondcd indcbtcdncss for thc acquisition or impro� cmcnt of rc;al propert� «hich has bccn appro� cd on or aftcr Jul� I. 1978 b� t«o-thirds of thc �otcrs on such indcbtcdncss. and (iii) bondcd indcbtcdncss incurrcd b� a school o�,o � z r�,�-� 2�4 district or communit� collcgc district for thc constniction. rcconstniction. rchabilitation or rcplaccmcnt of school facilitics or thc acquisition or Icasc of rc;al propert� for school facilitics. appro� cd b� ��`%� of thc � otcrs of thc district. but onl� if ccrtain accountabilit� mcasures arc included in thc proposition. Articic XIII A. among othcr things affccts thc � aluation of rc;al propert� for thc purposc of ta�ation in that it dcfincs thc fiill cash propert� � aluc to mcan "thc cow�t� asscssor�s � aluation of rc;al propert� as sho« n on thc 197�-76 ta� bill undcr 'fiill cash �aluc�. or thcrcaftcr. thc appraiscd �aluc of rc;al propert� «hcn purchascd. nc«I� constnictcd. or a changc in o« ncrship has occurrcd aftcr thc 197� asscssmcnt.�� Thc fiill cash � aluc ma� bc adjustcd annuall� to rcflcct inflation at a ratc not to c�cccd 2`%� per � c;ar. a rcduction in thc consumcr pricc indcx or comparabic local data. or d�clining prop�rt� � alu� caus�d b� damag�. d�stniction or othcr factors including a gcncral cconomic do« nturn. In thc gcncral cicctions of 1986. 1988 and 1990. California � otcrs appro� cd � arious mcasures «hich fiirthcr amcndcd Articic XIII A. Onc such amcndmcnt gcncrall� pro� idcs that thc purchasc or transfcr of (i) rc;al propert� bct« ccn spouscs or (ii) thc principal residcncc and thc first � I.000.000 of thc fiill cash � aluc of othcr rc;al propert� bct«ccn parcnts and children. do not constitutc a"purchasc�� or "changc of o«ncrship�� triggcring rc;asscssmcnt undcr Articic XI II A. T7�is amcndmcnt rcduccs thc propert� ta� rc� cnucs of thc Cit� and thc ta� incrcmcnt of thc Rcdc� clopmcnt Agcnc� . Othcr amcndmcnts permittcd thc Lcgislaturc to allo« persons o� cr �� «ho scll thcir residcncc and on or aftcr No� cmbcr �. 1986. bu� or build anothcr residcncc of cqual or Icsscr �aluc «ithin t«o �cars in thc samc count�. to transfcr thc old residcncc�s asscsscd �aluc to thc nc« residcncc. and permittcd thc Lcgislaturc to authorizc cach count� undcr ccrtain circumstanccs to adopt an ordinancc making such transfcr or asscsscd �aluc applicablc to situations in ��hich thc rcplaccmcnt d«clling purchascd or constnictcd aftcr No�cmbcr 8, 1988. is locatcd «ithin that count� and thc original propert� is locatcd in anothcr count� «ithin thc Statc. In thc Junc 1990 cicction. thc � otcrs of thc Stntc appro� cd additional amcndmcnts to Articic XII I A permitting thc California Lcgislaturc to c�tcnd thc rcplaccmcnt d«clling pro�isions applicablc to persons o� cr �� to sc� crcl� disablcd homco« ncrs for rcplaccmcnt d«cllings purchascd or nc« I� constnictcd on or aftcr Junc �. 1990. and to c�cludc from thc dcfinition of "nc« constniction�� triggcring rc;asscssmcnt impro�cmcnts to ccrtain d«cllings for thc purposc of making thc d«clling morc acccssiblc to sc�crcl� disablcd persons. In thc No� cmbcr 1990 cicction. thc � otcrs appro� cd thc amcndmcnt to Articic XII I A to permit thc Statc Lcgislaturc to c�cludc from thc dcfinition of "nc« constniction" scismic rctrofitting impro� cmcnts or impro� cmcnts utilizing c;arthquakc hazard mitigation tcchnologics constnictcd or installcd in c�isting buildings aftcr No� cmbcr 6. 1990. Both thc California Suprcmc Court and thc Unitcd Statcs Suprcmc Court ha� c uphcld thc constitutionalit� of Articic X111 A. (.71n!lei7�;es to Article X/// A. On Scptcmbcr 22. 1978. thc California Suprcmc Court uphcld thc amcndmcnt o� cr challcngcs on sc� cral statc and fcdcral constitutional grounds (Amaclui� G'crlle�� Juint Uniun Hi,��l� .S'c%uul l.)i.sti�ict v. .S'tate Rucn�cl uf'l:�yt�alizatiun). Thc Court rescr�cd ccrtain constitutional issucs and thc �alidit� of Icgislation implcmcnting thc amcndmcnt for firturc dctcrmination in proper cascs. Sincc 1978. sc� cral cascs ha� c bccn dccidcd intcrprcting � arious pro� isions of Articic XIII A: ho« c� cr. nonc of thcm ha� c qucstioncd thc abilit� of rcdc� clopmcnt agcncics to usc ta� allocation financing. Thc Unitcd Statcs Suprcmc Court uphcld thc � alidit� of thc asscssmcnt proccdures of Articic XIII A in Nui�cllin,��ei� v. Hal�n. Thc RCCIC\ CIO�IllCllt A�CIIC�' CA11110I prcdict �� hcthcr thcrc �� ill bc an� fi�turc challcngcs to California�s prescnt s� stcm of propert� ta� asscssmcnt and cannot c� aluatc thc ultimatc cffcct on thc Rcdc� clopmcnt Agcnc� �s rcccipt of Ta� Rc� cnucs should a firturc dccision hold unconstitutional thc mcthod of asscssing propert� . o�,o � z r�,�-� 2� /mplemei7tii7�; I.e�;islntioi7. Lcgislation cnactcd b� thc California Lcgislaturc to implcmcnt Articic XIII A pro�idcs that all ta�ablc propert� is sho«n at fiill asscsscd �aluc as dcscribcd abo�c. In conformit� «ith this proccdurc. all ta�ablc propert� � aluc includcd in this Official Statcmcnt (c�ccpt as notcd) is sho« n at 100`%� of asscsscd � aluc and all gcncral ta� ratcs rcflcct thc `f I per `f 100 of ta�ablc � aluc. Ta� ratcs for � otcr appro� cd bondcd indcbtcdncss and pcnsion liabilit� arc also applicd to 100'%� of asscsscd � aluc. Futurc asscsscd �aluation gro«th allo«cd undcr Articic XIII A(nc« construction. changc of o« ncrship. 2`%� annual � aluc gro«th) «ill bc allocatcd on thc basis of "situs�� among thc jurisdictions that scr�c thc ta� ratc arca «ithin «hich thc gro«th occurs. c�ccpt for ccrtain utilit� propert� asscsscd b� thc Statc Board of Equalization. Local agcncics and school districts «ill sharc thc gro«th of "basc�� rc� cnuc from thc ta� ratc arca. Each � car�s gro«th allocation bccomcs part of cach agcnc� �s allocation thc follo« ing � car. Thc Rcdc� clopmcnt Agcnc� is unablc to prcdict thc naturc or magnitudc of firturc rc� cnuc sourccs «hich ma� bc pro� idcd b� thc Statc to rcplacc lost propert� ta� rc� cnucs. Articic XI II A cffccti� cl� prohibits thc Ic� � ing of am othcr acl valui�em propert� ta� abo� c thc I`%� limit c�ccpt for ta�cs to support indcbtcdncss appro� cd b� thc � otcrs as dcscribcd abo� c. Scc "CI:RInIN RISKs Ic� Bc�NUIIc�I,UI:Rs—Rcduction in Inflationar� Ratc�� rcgarding ccrtain litigation rclating to propert� asscssmcnts and thc pro� ision of Articic XIII A limiting thc annual inflation adjustmcnt to t«o perccnt «hcn thc asscssor tricd to "rccapturc�� thc ta� �aluc of thc propert� b� incrcasing its asscsscd � aluc b� appro�imatcl� four perccnt in a singlc � car. I.iti�;ntioi7 Re�;nrclii7�; 2% I.imitntioi7. Scction � I of thc Rc� cnuc and Ta�ation Codc permits count� asscssors «ho ha� c rcduccd thc asscsscd � aluation of a propert� as a result of natural disastcrs. cconomic do« nturns or othcr factors. to subscqucntl� "rccapturc�� such � aluc (up to thc prc-dcclinc � aluc of thc propert� ) at an annual ratc highcr than 2`%�. dcpcnding on thc asscssor�s mcasurc of thc restoration of � aluc of thc damagcd propert�. T7�c constitutionalit� of this proccdurc «as challcngcd in a la«suit brought in thc Orangc Count� Superior Court cntiticd ('ui�nh� uf'Oi�avr,��e v. Oi�an,��e ('ui�nh� A.,�.,�e.,�.,vnent AppeaL,� Rucn�cl Nu. ; and in similar la«suits brought in othcr countics. on thc basis that thc dccrc;asc in asscsscd �aluc crc;atcs a nc« "basc � car � aluc" for purposcs of Proposition I� and that subscqucnt incrc;ascs in thc asscsscd � aluc of a propert� b� morc than 2`%� in a singlc � car � iolatc Articic XIII A. In 2001. thc Orangc Count� Superior Court issucd an ordcr dcclaring thc rccapturc practicc to bc unconstitutional as applicd to thc plaintiffta�pa�cr. On March 26. 200�4. thc Court of Appc;al hcld that thc trial court crrcd in niling that asscsscd �aluc dctcrminations arc al«a� s limitcd to no morc than 2`%, of thc prc� ious � car�s asscsscd � aluc and re� crscd thc judgmcnt of thc trial court. On Jul� 21. 200�4. thc California Statc Suprcmc Court dcnicd a pctition to rc� ic« thc dccision of thc Court of Appcal. Article X111 B of the State Constitution; Appropriation Limitations An initiati� c to amcnd thc Statc Constitution «as appro� cd on Scptcmbcr 6. 1979 thcrcb� adding Articic XIII B to thc Statc Constitution ("Articic XIII B��). Articic XIII B limits thc annual appropriations from thc procccds of ta�cs of thc Statc and am cit�. count�. school district. authorit� or othcr political subdi� ision of thc Statc to thc Ic� cl of appropriations for thc prior fiscal � car. as adjustcd for changcs in thc cost of li� ing. population and scr� iccs rcndcrcd b� thc go� crnmcntal cntit� . Articic XIII B includcs a rcquircmcnt that if an cntit� �s rc� cnucs in am � car c�cccd thc amount permittcd to bc spcnt. thc c�ccss «ould ha� c to bc rcturncd b� rc� ising ta� or fcc schcdulcs o� cr thc subscqucnt t« o� c:ars. Effccti� c Scptcmbcr �0. 1980. thc Statc Lcgislaturc addcd Scction >;678 to thc Rcdc� clopmcnt La« «hich pro� idcs that thc allocation of ta�cs to a rcdc� clopmcnt agcnc� for thc purposc of pa� ing principal of. or intcrest on. loans. ad� anccs or indcbtcdncss incurrcd for rcdc� clopmcnt acti� it� shall not bc dccmcd thc rcccipt b� such agcnc� of procccds of ta�cs «ithin thc mc;aning of Articic XIII B. nor shall such portion of o�,o � z r�,�-� 26 ta�cs bc dccmcd reccipt of procccds of ta�cs b�. or a��� appropriation subjcct to thc limitation of. am othcr public bod� «ithin thc mcaning or thc purposc of thc Constitution and la«s of thc Statc. including Scction >;678 ofthc Rcdc�clopmcnt La«. T«o Statc appcllatc court dccisions ha�c uphcld thc constitutionalit� of Scction >;678. and in thc onc casc in «hich a pctition for rc� ic« «as filcd in thc California Suprcmc Court. such pctition «as dcnicd. Articles X111 C and X111 D of the State Constitution On No� cmbcr �. 1996. California � otcrs appro� cd Proposition 218—Votcr Appro� al for Local Go� crnmcnt Ta�cs—Initiati� c Constitutional Amcndmcnt. Proposition 218 addcd Articics XIII C and XIII D to thc California Constitution. imposing ccrtain � otc rcquircmcnts and othcr limitations on thc imposition of nc« or incrc;ascd ta�cs. asscssmcnts and propert� -rclatcd fccs and chargcs. Thc Bonds are sccurcd b� sourccs of rc� cnucs that arc not subjcct to limitation b� Proposition 218. Taxation of Unitary Property AB �4��4 (Statutcs of I 987. Chaptcr 92 I) pro� idcs a rc� iscd mcthod of rcporting and allocating propert� ta� rc� cnucs gcncratcd from most Statc-asscsscd unitar� propertics commcncing «ith Fiscal Ycar 1988-89. Undcr AB �4��4. thc Statc rcports to c;ach count� auditor-controllcr on thc count�-«idc unitar� ta�ablc �aluc of c;ach utilit�. «ithout an indication of thc distribution of thc �aluc among ta� ratc arc;as. AB �4��4 pro� idcs t«o formulas for auditor-controllcrs to usc in ordcr to dctcrminc thc allocation of unitar� propert� ta�cs gcncratcd b� thc count� -« idc unitan � aluc. «hich arc: (i) for rc� cnuc gcncratcd from thc I`%� ta� ratc. c;ach jurisdiction is to rccci� c up to 102`%� of its prior � car unitar� propert� ta� incrcmcnt rc� cnuc. ho« c� cr. if count� -�� idc rc� cnucs gcncratcd for unitan propertics arc grcatcr than 102`%� of prior � car rc� cnucs. c;ach _jurisdiction rccci� cs a perccntagc sharc of thc c�ccss unitar� rc� cnucs cqual to thc perccntagc of c;ach jurisdiction�s sharc of sccurcd propert� ta� rc� cnucs: or (ii) for rc� cnuc gcncratcd from thc application of thc dcbt scr� icc ta� ratc to count� -« idc unitan ta�ablc � aluc. cach jurisdiction is to rccci� c a perccntagc sharc of rc� cnuc bascd on thc jurisdiction�s annual dcbt scr� icc rcquircmcnts and thc perccntagc of propert� ta�cs rccci� cd b� cach jurisdiction from unitan propert� ta�cs. T7�c pro� isions of AB �4��4 appl� to all Statc-asscsscd propert�. c�ccpt railroads and non-unitar� propertics thc � aluation of «hich «ill continuc to bc allocatcd to indi� idual ta� ratc arc;as. Thc pro� isions of AB �4��4 do not constitutc an climination or rc�crsion ofthc mcthod ofasscssing utilitics b� thc Statc Board of Equalization. AB �4��1 allo«s. gcncrall�. �aluation gro«th or dcclinc of Statc-asscsscd unitar� propert� to bc sharcd b� all jurisdictions «ithin a count� . T7�c unitan rc� cnuc allocation madc b� thc Count� Auditor-Controllcr to thc Projcct Arc;a for Fiscal Ycar 200�4-0� «as � . For Fiscal Ycar 200�-06. thc aggrcgatc amount of unitar� rc� cnuc is cstimatcd to bc � . Property Tax Collection Procedw•es (.7nssificntioi7s. In California. propert� «hich is subjcct to ad �alorcm ta�cs is classificd as "sccurcd�� or "unsccurcd.�� Sccurcd and unsccurcd propert� arc cntcrcd on scparatc parts of thc asscssmcnt roll maintaincd b� thc count� asscssor. Thc sccurcd classification includcs propert� on «hich am propert� ta� Ic� icd b� thc Count� bccomcs a licn on that propert� sufficicnt. in thc opinion of thc count� asscssor. to sccurc pati mcnt of thc ta�cs. E� cn tat �� hich bccomcs n licn on sccurcd propert� has priorit� o� cr all othcr licns on thc sccurcd propert�. rcgardlcss of thc timc of thc crc;ation of othcr licns. A ta� Ic� icd on unsccurcd propert� docs not bccomc a licn against thc propert�. but ma� bccomc a licn on ccrtain othcr propert� o«ncd b� thc ta�pa� cr. o�,o � z r�,�-� 27 (.'o!lectioi7s. T7�c mcthod of collccting dclinqucnt ta�cs is substantiall� diffcrcnt for thc t«o classifications of propert� . Thc ta�ing authorit� has four «a�s of collccting unsccurcd propert� ta�cs in thc abscncc of timcl� pa� mcnt b� thc ta�pa� cr: ( I) a ci� il action against thc ta�pa� cr: (2) filing a ccrtificatc in thc officc of thc count� cicrk spccifi ing ccrtain facts in ordcr to obtain a judgmcnt licn on ccrtain propert� of thc ta�pa� cr: (�) filing a ccrtificatc of dclinqucnc� for rccord in thc count� rccordcr�s officc. in ordcr to obtain a licn on ccrtain propert� of thc ta�pa� cr: and (�4) scizurc and salc of thc personal propert�. impro� cmcnts or posscsson intcrests bclonging or asscsscd to thc asscsscc. T7�c c�clusi� c mcans of cnforcing thc pa� mcnt of dclinqucnt ta�cs «ith respcct to propert� on thc sccurcd roll is thc salc of propert� sccuring thc ta�cs to thc Statc for thc amount of ta�cs «hich arc dclinqucnt. Currcnt ta� pa� mcnt practiccs b� thc Count� pro� idc for pa� mcnt to thc Rcdc� clopmcnt Agcnc� of Ta� Rc� cnucs monthl� throughout thc fiscal � car. «ith thc majorit� of Ta� Rc� cnucs dcri� cd from sccurcd propert� paid to thc Rcdc� clopmcnt Agcnc� in mid-Dcccmbcr and mid-April. and thc majorit� of Ta� Rc� cnucs dcri� cd from unsccurcd propert� paid to thc Rcdc� clopmcnt Agcnc� b� mid-No� cmbcr. A final rcconciliation is madc aftcr thc closc of thc fiscal � car to incorporatc all adjustmcnts to prc� iousl� rcportcd currcnt �c;ar ta�ablc �alucs. T7�c diffcrcncc bct«ccn thc final rcconciliation and Ta� Rc�cnucs prc�iousl� allocatcd to thc Rcdc� clopmcnt Agcnc� is allocatcd mid-August. Pei7nities. A 10`%� pcnalt� is addcd to dclinqucnt ta�cs «hich ha� c bccn Ic� icd «ith respcct to propert� on thc sccurcd roll. In addition. propert� on thc sccurcd roll on «hich ta�cs arc dclinqucnt is sold to thc Statc on or about Junc �0 of thc fiscal � car. Such propert� ma� thcrcaftcr bc rcdccmcd b� pa� mcnt of thc dclinqucnt ta�cs and a dclinqucnc� pcnalt�. plus a rcdcmption pcnalt� of I`%� per month to thc timc of rcdcmption and a`f I� Rcdcmption Fcc. If ta�cs arc unpaid for a period of fi� c� cars or morc. thc propert� is dccdcd to thc Statc and thcn is subjcct to salc b� thc count� ta� collcctor. A 10'%� pcnalt� also applics to thc dclinqucnt ta�cs on propert� on thc unsccurcd roll. and fiirthcr. an additional pcnalt� of I`%� per month accnics «ith respcct to such ta�cs bcginning thc first da� of thc third month follo« ing thc dclinqucnc� datc. Delii7quei7cies. T7�c � aluation of propert� is dctcrmincd as of Januan I c;ach � c;ar and cqual installmcnts of ta�cs Ic� icd upon sccurcd propert� bccomc dclinqucnt aftcr thc follo« ing Dcccmbcr 10 and April 10. Ta�cs on unsccurcd propert� arc duc April I. Unsccurcd ta�cs cnrollcd b� Jul� � I. if unpaid. arc dclinqucnt August � I at �:00 p.m. and are subjcct to pcnalt�: unsccurcd ta�cs addcd to thc roll aftcr Jul� � I. if unpaid. arc dclinqucnt on thc last da� of thc month succccding thc month of cnrollmcnt. .Supplemei7tn! Assessmei7ts. A bill cnactcd in 198 �. SB 81 �(Statutcs of 198 �. Chaptcr �498). pro� idcs for thc supplcmcntal asscssmcnt and ta�ation of propert� as of thc occurrcncc of a changc in o«ncrship or complction of nc« constniction. Prc� iousl�. statutcs cnablcd thc asscssmcnt of such changcs onl� as of thc nc�t Januan I ta� licn datc follo« ing thc changc and thus dcla� cd thc rc;alization of incrc;ascd propert� ta�cs from thc nc« asscssmcnts for up to 1�4 months. As cnactcd. Chaptcr �498 pro� idcs incrc;ascd rc� cnuc to rcdc� clopmcnt agcncics to thc c�tcnt that supplcmcntal asscssmcnts as a result of nc« constniction or changcs of o« ncrship occur «ithin thc boundarics of rcdc� clopmcnt projccts subscqucnt to thc Januan I licn datc. To thc c�tcnt such supplcmcntal asscssmcnts occur «ithin thc Projcct Arc;a. Ta� Rc� cnucs ma� incrc;asc. Property Tax Administrative Costs Lcgislation cnactcd b� thc Statc Lcgislaturc authorizcs count� auditors to dctcrminc propert� ta� administrati� c costs proportionatcl� attributablc to local jurisdictions and to submit im oiccs to thc jurisdictions for such costs. Subscqucnt Icgislation spccificall� includcs rcdc� clopmcnt agcncics among thc cntitics that are subjcct to such chargcs. Spccificall�. in 1990 thc Statc Icgislaturc cnactcd SB 2��7 o�,o � z r�,�-� zx (Chaptcr �466. Statutcs of I 990) authorizing countics to chargc for thc cost of asscssing. collccting and allocating propert� ta� rc� cnucs to local go� crnmcnts jurisdictions in proportion to thc ta� dcri� cd re� cnucs allocatcd to cach. SB I��9 (Chaptcr 697. Statutcs of 1992) c�plicitl� includcs rcdc� clopmcnt agcncics among thc jurisdictions «hich are subjcct to such chargcs. T7�c Count� collccts propert� ta� administration costs from thc Rcdc� clopmcnt Agcnc� b� dcducting such costs from ta� rc� cnucs prior to dcli� cring such amounts to thc Rcdc� clopmcnt Agcnc� . For Fiscal Yc;ar 200�4-0� thc Count� �s administrati� c fcc «as I.�4�`%� of thc gross ta� incrcmcnt rc� cnucs from thc Projcct Arca or `f20. �79. and for Fiscal Yc;ar 200�-06. thc Count� administrati� c fcc is cstimatcd to bc �> ;. �6�4. For purposcs of projccting Ta� Rc� cnucs. thc Fiscal Consultant assumcs that this administrati�c fcc «ill rcmain at 1.�4�`%�. Scc also AI�I�I:Nu►x A—"RI:I�c�I�i c�i n u: Fiscni. Cc�Nsui, rnN�r... Housing Set-Aside Scctions >;>>�4.2 and >;>>�4. � of thc Rcdc� clopmcnt La�� (addcd b� Chaptcr I>;7. Stnt�rtcs of I 976) rcquirc rcdc� clopmcnt agcncics to sct asidc 20'%� of all ta� incrcmcnt dcri� cd from rcdc� clopmcnt projcct arc;as cstablishcd aftcr Dcccmbcr � I. 1976 in a lo«- and modcratc-incomc housing fiind. Scction >;>>�4.2 pro� idcs that this lo«- and modcratc-incomc housing rcquircmcnt can bc rcduccd or climinatcd if a rcdc� clopmcnt agcnc� finds annuall� b� resolution. consistcnt «ith thc housing cicmcnt of thc communit� �s gcncral plan. thc follo« ing: (a) that no nccd c�ists in thc communit� to impro� c. incrcasc. or prescr� c thc suppl� of lo« - and modcratc-incomc housing. including its sharc of thc rcgional housing nccds of � cn lo« incomc houscholds and persons and familics of lo« or modcratc incomc: (b) that somc statcd perccntagc Icss than 20`%� of thc ta� incrcmcnt is sufficicnt to mcct thc housing nccds of thc communit�. including its sharc of thc rcgional housing nccds of persons and familics of lo« or modcratc incomc and � cr� lo« incomc houscholds: or (c) that thc communit� is making substantial cfforts. consisting of dircct financial contributions of fiu�ds from statc. local and fcdcral sourccs for lo«- and modcratc-incomc housing of cqui�alcnt impact. to mcct its c�isting and projcctcd housing nccds (including its sharc of rcgional housing nccds). T7�c Rcdc� clopmcnt Agcnc� currcntl� dcposits thc 20'%� of gross ta� incrcmcnt rc� cnucs in its Lo« and Modcratc Incomc Housing Fund. Such fiinds arc not Ta� Rc� cnucs and arc not plcdgcd to thc rcpa� mcnt of thc 2006 Scrics Bonds. Pursuant to thc Rcdc� clopmcnt La«. housing sct-asidc fiinds ma� bc plcdgcd to thc rcpa� mcnt of bonds onl� to thc c�tcnt procccds of such bonds arc uscd (or arc uscd to rcfiind bonds. thc procccds of «hich «crc uscd) to financc lo« and modcratc incomc housing purposcs. Scc "SI:CURI"I Y �NU SOURCI:S OF P�YMI:N�I FOR "I I II: BONUS-AlloCation of Ta�cs.�� As amcndcd b� AB � I�(Chaptcr 872. Statutcs of 1991). Scction >;>>�4.2 has additional restrictions on thc abilit� to rcducc or climinatc thc lo« and modcratc incomc housing rcquircmcnt. A communit� can claim that no nccd c�ists. or can claim that Icss than 20`%� of ta� incrcmcnt rc� cnuc is sufficicnt. onl� if that claim is consistcnt «ith thc housing cicmcnt of thc communit� �s gcncral plan. T7�c authorit� for communitics to claim an "cqui� alcnt cffort�� c�cmption «as rcpcalcd as of Junc �0. 199 �. c�ccpt for obligations incurrcd prior to Ma� I. 1991. «hich «crc cntcrcd into «ith thc undcrstanding that thc "cqui�alcnt cffort�� c�cmption «ould remain intact. T7�c Rcdc� clopmcnt Agcnc� has madc no such findings. Certification of Redevelopment Agency Indebtedness Undcr thc Rcdc� clopmcnt La«. rcdc� clopmcnt agcncics must filc «ith thc count� auditor a statcmcnt of indcbtcdncss for c;ach projcct arc;a not latcr than thc first da� of Octobcr of cach � car. As dcscribcd bclo«. thc statcmcnt of indcbtcdncss controls thc amount of ta� incrcmcnt rc� cnuc that «ill bc paid to thc Rcdc� clopmcnt Agcnc� in cach fiscal � car. Each statcmcnt of indcbtcdncss is filcd on a form prescribcd b� thc Statc Controllcr and spccifics. among othcr things: (i) thc total amount of principal and intcrest pa�ablc on all loans. ad�anccs or indcbtcdncss (thc "Dcbt��). both o� cr thc lifc of thc Dcbt and for thc currcnt fiscal � c;ar. and (ii) thc amount of o�,o � z r�,�-� 29 "a� ailablc rc� cnuc�� as of thc cnd of thc prc� ious fiscal � c;ar. "A� ailablc rc� cnuc�� is calculatcd b� subtracting thc total pa� mcnts on Dcbt during thc prc� ious fiscal � car from thc total rc� cnucs (both ta� incrcmcnt rc� cnucs and othcr rc� cnucs) rccci� cd during thc prc� ious fiscal � car. plus am carr� fon� ard from thc prior fiscal � c;ar. A� ailablc rc� cnucs includc amounts hcld b� thc Rcdc� clopmcnt Agcnc� and irrc� ocabl� plcdgcd to thc pa� mcnt of Dcbt. but do not includc amounts sct asidc for lo« and modcratc incomc housing. T7�c count� auditor ma� onl� pa� ta� incrcmcnt rc� cnuc to thc rcdc� clopmcnt agcnc� in am fiscal � car to thc c�tcnt that thc total rcmaining principal and intcrest on all Dcbt c�cccds thc amount of a� ailablc rc� cnucs as sho« n on thc statcmcnt of indcbtcdncss. T7�c statcmcnt of indcbtcdncss constitutcs prima facic c� idcncc of thc indcbtcdncss of thc rcdc� clopmcnt agcnc� : ho« c� cr. thc count� auditor ma� disputc thc statcmcnt of indcbtcdncss in ccrtain cascs Scction >;67� pro� idcs for ccrtain timc limits controlling am disputc of thc statcmcnt of indcbtcdncss. and allo« s for Superior Court dctcrmination of such disputc in thc c� cnt it cannot bc resol� cd b� thc rcdc� clopmcnt agcnc� and thc count� . Am such action ma� onl� challcngc thc amount of thc Dcbt as sho« n on thc statcmcnt. and not thc � alidit� of am Dcbt or rclatcd contract or thc c�pcnditures rclatcd thcrcto. No challcngc can bc madc to pa� mcnts to a fiscal agcnt in conncction «ith a bond issuc or pa� mcnts to a public agcnc� in conncction «ith pa� mcnts b� that public agcnc� «ith respcct to a Ic;asc or bond issuc. Pass-Through Agreements and Tax Sharing Payments Pnss-�llrou�;l1 A�;reemei7ts. T7�c Rcdc� clopmcnt Agcnc� has cntcrcd into agrccmcnts «ith cach of thc Count�. thc Dcscrt Sands Unificd School District. thc Dcscrt Communit� Collcgc District. thc Coachclla Vallc� Mosquito Abatcmcnt District. thc Coachclla Vallc� Watcr District and thc Ri� crsidc Count� Superintcndcnt of Schools District to pa� ta� incrcmcnt rc� cnucs «ith cach ta�ing cntit�. othcr than thc Cit� that has tcrritor� locatcd «ithin thc Projcct Arca in thc amount «hich thc Rcdc� clopmcnt Agcnc� dctcrmincs is appropriatc to allc� iatc am financial burdcn or dctrimcnt causcd to such ta�ing cntit� as a result of rcdc� clopmcnt acti� itics «ithin thc Projcct Arca. Each of thcsc agrccmcnts (c;ach a Pass-Through Agrccmcnt��) pro� idcs for a pass-through of ta� incrcmcnt rc� cnuc dircctl� to thc rclatcd ta�ing cntit� . For a dcscription of thc Pass-T7�rough Agrccmcnts. scc Ai�i�i:Nuix A—��Ri:i�c�ii r c�r ri u: Fiscni. Cc�Nsui, rnN r— Pa� mcnts to Othcr Ta�ing Entitics.�� .Stntutor�� �n.r.Sllnrii7�; Pn��mei7ts. T7�c Rcdc� clopmcnt Plan for thc Projcct Arc;a «as amcndcd aftcr Ja�uian I. 199�4 and thcrcforc are subjcct to thc statutor� ta�-sharing pa�mcnts mandatcd in thc La«. as amcndcd b� AB 1290. rcquiring that a portion of thc ta� incrcmcnt rc� cnucs bc sharcd «ith ta�ing cntitics. SCC Also "SI:CURI I Y nNU SOURCI:S OF PnYMI:N�I FOR I�I II: BONUS-RCdCt ClopmCnt PIAn Limitations—AR /?�0." T7�csc ta�-sharing pa� mcnts are sct b� statutc and arc not ncgotiatcd. T7�c Count� Auditor-Controllcr allocatcs all ta� incrcmcnt rc� cnuc to thc Rcdc� clopmcnt Agcnc� for pa� mcnt of ta�-sharing pa� mcnts. This dcfincd ta� sharing amount has thrcc Ticrs. Ticr I: Commcnccs «ith thc first � c;ar that c;ach of E�pansion Arcas. respccti� cl�. rccci� cs ta� incrcmcnt rc� cnuc and continucs for thc lifc of c;ach such E�pansion Arca. T7�c Ticr I ta�- sharing amount is cqual to 2�`%� of thc gross ta� incrcmcnt rc� cnuc allocatcd from thc respccti� c E�pansion Arc;a nct of thc Housing Sct-Asidc Rcquircmcnt. Thc Cit� ma� chosc to forgo this Ticr of ta�ing-sharing pa� mcnts. - - Ticr 2: Commcnccs in thc I I th � car aftcr thc Agcnc� first rccci� cs ta� incrcmcnt rc� cnuc. and is in an amount cqual to 2 I`%� of thc ta� incrcmcnt rc� cnuc nct of thc Housing Sct-Asidc Rcquircmcnt. dcri� cd from thc gro« th in asscsscd � aluc that is in c�ccss of thc asscsscd � aluc of thc Projcct Arca in thc tcnth � c;ar. T7�c Cit� ma� not rccci� c am portion of thc Ticr 2 ta�-sharing pa� mcnts. - - - - o�,o � z r�,�-� �0 Ticr �: Commcnccs in thc � I st � car aftcr thc Rcdc� clopmcnt Agcnc� first rccci� cs ta� incrcmcnt rc� cnucs and is an amount cqual to I�4`%� of thc ta� incrcmcnt rc� cnuc nct of Housing Sct- Asidc dcri� cd from thc gro« th in asscsscd � aluc that is in c�ccss of thc asscsscd � aluc of thc Projcct Arca in thc �Oth � car. T7�c Cit� ma� not rccci� c am portion of thc Ticr � ta�-sharing pa� mcnts. T7�csc thrcc ticrs of ta� sharing arc calculatcd indcpcndcnt of onc anothcr and continuc from thcir inccption through thc lifc ofthc Projcct Arc;a. .SB 211 �n.r .Sllnrii7�; Pn��mei7ts. On Fcbnian 27. 200 �. thc Cit� Council adoptcd Ordinancc No. 10 �6 climinating thc timc limit to incur dcbt in thc Projcct Arca. Pursuant to SB 21 I. thc adoption of such an ordinancc rcquires thc Rcdc� clopmcnt Agcnc� to bcgin making statutor� ta� sharing pa� mcnts in thc Fiscal Ycar follo« ing thc c�piration of thc original timc limit for thc incurrcncc of nc« indcbtcdncss. Scc also ..SI:CURI I Y �NU SOURCI:S OF P�YMI:N�I FOR I I II: BONUS-Rcdct clopmcnt Plan Limitations-.S'R ?/ /... T7�c limit for incurrcncc of nc« indcbtcdncss for thc Projcct Arc;a «as c�tcndcd b� onc �car. B� c�tcnding this limit to Jul� 17. 201 I. thc Rcdc� clopmcnt Agcnc� causcd statutor� ta� sharing pa� mcnts to commcncc «ith Fiscal Ycar 2012-I �. T7�c asscsscd �alucs in thc last Fiscal Yc;ar prior to initiation of thc statutor� ta� sharing pa� mcnts arc uscd as thc basc � aluc for calculation of thc ta� sharing pa� mcnts. T7�c projcctions of thc Fiscal Consultant assumc that thc Cit� «ill cicct to rccci� c its sharc of thcsc pa� mcnts. ho« c� cr. currcntl� . if thc Cit� ciccts not to rccci� c its sharc of thcsc ta� sharing pa� mcnts. that portion of thc statutor� ta� sharing pa� mcnt «ill rcmain «ith thc Rcdc� clopmcnt Agcnc� for its usc. Thc Count� Auditor- Controllcr allocatcs all ta� incrcmcnt rc� cnuc to thc Rcdc� clopmcnt Agcnc� and it is thc responsibilit� of thc Rcdc� clopmcnt Agcnc� to makc thc rcquircd ta� sharing pa� mcnts. �T7�c Rcdc� clopmcnt Agcnc� has dctcrmincd at this timc not to scck subordination of thcsc statutor� ta� sharing pa� mcnts from thc ta�ing agcncics. � - Limitation of Tax Revenues from Certain Increased Tax Rates An initiati� c to amcnd thc California Constitution cntiticd "Propert� Ta� Rc� cnucs—Rcdc� clopmcnt Agcncics�� «as appro� cd b� California � otcrs at thc No� cmbcr 8. 1988 gcncral cicction. This initiati� c amcnds thc California Constitution to allo« thc California Lcgislaturc to prohibit rcdc� clopmcnt agcncics from rccci� ing am of thc propert� ta� rc� cnuc raiscd b� incrcascd propert� ta� ratcs imposcd b� local go� crnmcnts to makc pa� mcnts on thcir bondcd indcbtcdncss. Thc initiati� c applics to ta� ratcs Ic� icd to financc bonds appro� cd b� thc � otcrs on or aftcr Januan I. 1989. T7�c Rcdc� clopmcnt Agcnc� docs not currcntl� projcct rccci� ing am ta� rc� cnucs as a result of gcncral obligation bonds «hich ma� ha� c bccn appro� cd on or aftcr Januan I. I 989. Ballot Initiatives and Legislative Matters Articics XIIIA. XIIIB. XIIIC and XIIID «crc c;ach adoptcd pursuant to a mcasurc qualificd for thc ballot pursuant to thc Statc�s constitutional initiati� c proccss: thc Statc Lcgislaturc has in thc past cnactcd Icgislation «hich has altcrcd thc spcnding limitations or establishcd minimum fiinding pro� isions for particular acti� itics undcr thc Rcdc� clopmcnt La«. From timc to timc. othcr initiati� c mc;asures could bc adoptcd b� � otcrs of thc Statc or Icgislation cnactcd b� thc Statc Lcgislaturc. T7�c adoption of am such initiati� c mc;asures or Icgislation might placc limitations on thc abilit� of thc Statc. thc Rcdc� clopmcnt Agcnc� or local districts to incrcasc rc� cnucs. to incrc;asc appropriations or on thc abilit� of a lando« ncr to complctc thc dc� clopmcnt of propert� . o�,o � z r�,�-� �I THE FINANCING AUTHORITY T7�c Financing Authorit� is dul� organizcd and c�isting undcr a Joint E�crcisc of Po«crs Agrccmcnt datcd Januar� 26. 1989. b� and bct« ccn thc Cit� and thc Rcdc� clopmcnt Agcnc�. and undcr thc pro� isions of Chaptcr � of Di� ision 7 of Titic I of thc Statc Go� crnmcnt Codc. Thc mcmbcrs of thc Cit� Council scr� c as thc Commission mcmbcrs of thc Financing Authorit� . T7�c Financing Authorit� has no ta�ing po« cr and no sourcc of rc� cnuc to pa� dcbt scr� icc on thc Bonds othcr than thc Rc� cnucs. Thc Financing Authorit� has no ta�ing po�� cr. Scc "SI:CURI I Y �NU SOURCI:S OF P�YMI:N�I FOR I�I II: BONUS .. - THE REDEVELOPMENT AGENCY Authority, Members and Personnel T7�c Rcdc� clopmcnt Agcnc� «as cstablishcd pursuant to thc Rcdc� clopmcnt La«. and «as acti� atcd in 197�4. T7�c Rcdc� clopmcnt Agcnc� adoptcd thc rcdc� clopmcnt plan for thc Projcct arc;a in Jul� 1991. T7�c Projcct Arca is thc onl� projcct arc;a of thc Rcdc� clopmcnt Agcnc� . T7�c Rcdc� clopmcnt Agcnc� has no ta�ing po«cr. Mcmbcrs of thc Cit� Council of thc Cit� scr� c as mcmbcrs of thc Rcdc� clopmcnt Agcnc� . Thc Cit� Council mcmbcrs arc cicctcd at largc for four-� car o� crlapping tcrms. Thc currcnt mcmbcrs of thc Rcdc� clopmcnt Agcnc� are sct forth on thc insidc co� cr pagc of this Official Statcmcnt. T7�c Rcdc� clopmcnt Agcnc� is administcrcd b� a staff scicctcd from thc cmplo� ccs of thc Cit� and is undcr thc o� crall dircction of Mr. Ortcga. Bricf resumcs of thc profcssional staff of thc Rcdc� clopmcnt Agcnc� is sct forth bclo« : (.'arlos I.. l)rte�;n, E.recutive Director. Mr. Ortcga has scr� cd as E�ccuti� c Dircctor of thc Rcdc� clopmcnt Agcnc� sincc I 98 �. Hc «as also appointcd Cit� Managcr in August 2000. From 1980 to 199�. Mr. Ortcga scr� cd as Assistant Cit� Managcr. and from 1977 to 1980 as Assistant to thc Cit� Managcr. Prior to 1977. hc scr�cd as Intcrim Cit� Managcr (onc �car) and Assistant Cit� Managcr/Financc Dircctor (fi� c� cars) for thc Cit� of Coachclla. California. Mr. Ortcga rccci� cd a Bachclor of Scicncc dcgrcc in Economics from Uni� crsit� of California. Ri� crsidc. and has complctcd graduatc studics in Public Administration and Managcmcnt at Uni� crsit� of California. Ri� crsidc and Uni� crsit� of Rcdlands. ./ustii7 Mc(.'artll��, Assistcu7t (.'it�� Mcn7n�;er for Redevelopmei7t. Mr. McCarth� has scr�cd as Assistant Cit� Managcr for Rcdc� clopmcnt sincc No� cmbcr 2001. Prior to joining thc Cit� in . Mr. McCarth� «as an anal� st in thc Cit� of Long Bcach implcmcnting rcdc� clopmcnt projccts in thc do« nto« n ccntral busincss district. thc port industrial arc;a and Long Bc;ach Airport. From to hc scr� cd as thc Rcdc� clopmcnt Managcr for thc San Dicgo Southcast Economic Dc� clopmcnt Corporation managing industrial and commcrcial projccts and from to hc scr� cd as thc Dcput� E�ccuti� c Dircctor and Communit� Dc� clopmcnt Dircctor for thc Cit� of Commcrcc. Mr. McCarth� rccci� cd a dcgrcc in from . o�,o � z r�,�-� �2 Arin K. .Scott, .Sei7ior Fii7cn7cin! Ai7nl��st for Redevelopmei7t. Ms. Scott «as appointcd as Scnior Financial Anal� st for Rcdc� clopmcnt in Januar� 2006 and is responsiblc for thc rc� ic«. anal� sis and budgct monitoring of thc financcs and bond issucs of thc Rcdc� clopmcnt Agcnc� . From 1990 to 2006. shc «as cmplo�cd b� JPMorgan Chasc Bank. «hcre shc bcgan in thc Tnist Operations Dcpartmcnt and «as latcr promotcd to thc Trc;asun and Sccurit� Scr� iccs Dcpartmcnt as a Rclationship Managcr. In that position shc «orkcd in thc Municipal and Corporatc Dcbt Dcpartmcnt. «hcre shc «orkcd «ith �arious municipalitics and corporations scr� ing as a bond tnistcc. Shc «as latcr promotcd to thc Tnist Compliancc Dcpartmcnt «hcrc shc «as responsiblc for rc� ic« ing documcnts. la«s and regulations in ordcr to mitigatc risk. Shc rccci� cd a Bachclor of Busincss Administration dcgrcc in Financc from Uni� crsit� of Houston. .Sl1eiln R. (�i!li�;cu7, Assistcu7t (.'it�� Mcu7n�;er for (.'ommui7it��.Services. Ms. Gilligan has scr� cd as thc Assistant Cit� Managcr for Communit� Scr� iccs sincc 2000. Shc is responsiblc for thc arc;as of Administration (including grants and franchisc agrccmcnts). Human Rcsourccs. Cit� Clcrk. Ci� ic Arts. Markcting and Promotion. Public Information. thc Visitor�s Information Ccntcr. and spccial c� cnts for thc Cit� . Prior to appointmcnt to hcr currcnt position. Ms. Gilligan scr� cd as thc Dircctor of Communit� Affairs «hilc also scr� ing as thc Cit� Clcrk. Ms. Gilligan scr� cd as Cit� Clcrk from 1976 to Junc. 2001. Pnul.S. (�ibsoi7, �rensurer/Fii7cu7ce Director. Mr. Gibson has scr� cd as Tre;asurcr/Financc Dircctor of thc Rcdc� clopmcnt Agcnc� sincc I 988 «hcrc hc is responsiblc for . Hc has also scr� cd as thc Trc;asurcr/Financc Dircctor of thc Cit� sincc 1988. Mr. Gibson has bccn cmplo�cd b� thc Cit� sincc .«hcn hc «as hircd as thc Accounting Super� isor. Prior to joining thc Cit�. hc scr� cd from to as thc Accountant-Auditor for thc Imperial Counri Auditor-Controllcr�s officc. Mr. Gibson holds a Bachclor of Scicncc dcgrcc in Accounting from San Dicgo Statc Uni� crsit� . Dcrvid I.. Yri�;o��ei7, Director of Reclevelopmei7t ii7 Housii7�;. Mr. Yrigo�cn «as appointcd as Dircctor of Rcdc� clopmcnt in Housing and is responsiblc for all housing and redc� clopmcnt acti� itics «ithin thc Cit� . Hc has bccn cmplo� cd «ith thc Cit� sincc 198� «hcn hc scr� cd as thc Scnior Administrati� c Assistant to thc Rcdc� clopmcnt Agcnc� and thcn «as promotcd to Rcdc� clopmcnt Managcr. From. 1982 to 198�. Mr. Yrigo� cn «orkcd «ith thc Cit� of Coachclla. as thc Economic Dc� clopmcnt Coordinator. Mr. Yrigo� cn rccci� cd a Bachclor of Arts dcgrcc in Political Scicncc from Uni� crsit� of California. Bcrkcic� . and a Mastcr of Arts dcgrcc in Managcmcnt from National Uni� crsit� . San Dicgo. Rnclle!!e D. Klnssei7. .Secretnr��. Ms. Klasscn has bccn Sccrctan of thc Rcdc� clopmcnt Agcnc� and Cit� Clcrk sincc Jul� I. 2002. Shc has bccn cmplo� cd b� thc Cit� sincc 199� «hcn shc «as hircd as a in thc Financc Dcpartmcnt. In 1997. shc bcgan «orking in Cit� Clcrk's Officc: initiall� as thc Rccords Tcchnician. «as appointcd Dcput� Cit� Clcrk in 1998. a��d thcn Cit� Clcrk. Shc rccci� cd Ccrtificd Municipal Clcrk status from thc Intcrnational Institutc of Municipal Clcrks in Octobcr. 2001. As Cit� Clcrk. shc also scr�cs as Sccrctar� to Housing Authorit� and thc Financc Authorit�. «ith responsibilitics of prcparing and prescnting all agcndas and minutcs for samc. maintaining all official Cit�/Agcnc�/Authorit� rccords. as «cll as thc rclatcd dutics ofthc Cit� cicctions and bcing a�ailablc to thc public for information on Icgislati� c and administrati� c actions. Ms. Klasscn holds an Associatc in Arts Dcgrcc. «ith honors. from WaldorfCollcgc. Forest Cit�. lo«a. «ith continuing units obtaincd at Collcgc ofthc Dcscrt. Veroi7icn �npin, Redevelopmei7tAccoui7tcu7t. Ms. Tapia has bccn cmplo�cd b� thc Cit� for morc than ninc � c;ars. and for thc last t« o� c;ars has scr� cd as thc Accountant for thc Rcdc� clopmcnt Agcnc� . Ms. Tapia is responsiblc for compiling thc fcdcral and Statc mandatcd reports. thc administration of thc outstanding bond issucs of thc Rcdc� clopmcnt Agcnc�. and thc o� crall accounting dutics for both thc Rcdc� clopmcnt Agcnc� and thc Housing Dcpartmcnt. Ms. Tapia rccci� cd a Bachclor of Scicncc dcgrcc. graduating Summa Cum Laudc. in Busincss and Managcmcnt from thc Uni� crsit� of Rcdlands and currcntl� is complcting graduatc studics in Managcmcnt at thc Uni� crsit� of Rcdlands. o�,o � z r�,�-� �� >> Powers All po« crs of thc Rcdc� clopmcnt Agcnc� arc � cstcd in its fi� c-mcmbcr Board. Thc� arc chargcd «ith thc responsibilit� of climinating blight through thc proccss of rcdc� clopmcnt. Gcncrall�. this proccss culminatcs «hcn thc Rcdc� clopmcnt Agcnc� disposcs of land for dc� clopmcnt b� thc pri� atc scctor. In ordcr to accomplish this. thc Rcdc� clopmcnt Agcnc� has broad authorit� to acquirc. dc� clop. administcr. scll or Icasc propert�. including thc right of cmincnt domain and thc authorit� to issuc bonds and c�pcnd thcir procccds. Prior to disposing of land for rcdc� clopmcnt. thc Rcdc� clopmcnt Agcnc� must complctc thc proccss of acquiring and asscmbling thc ncccssar� sitcs. rclocating residcnts and busincsscs. In addition. thc Rcdc� clopmcnt Agcnc� ma� dcmolish dctcrioratcd impro� cmcnts. undcrtakc cm ironmcntal mitigation. gradc and prcpare sitcs for purchasc. and in conncction «ith am dc� clopmcnt can causc strccts. high«a� s a��d sidc«alks to bc constnictcd or rcconstnictcd and public utilitics to bc installcd. Rcdc� clopmcnt in thc Statc of California is carricd out pursuant to thc Communit� Rcdc� clopmcnt La« (Scction >;000 er .,�ey. of thc He;alth and Safct� Codc). Scction >;020 of the Rcdc�clopmcnt La« dcfincs rcdc� clopmcnt as thc planning. dc� clopmcnt. rcplanning. rcdcsign. cicarancc. rcconstniction or rchabilitation. or am combination of thcsc. of all or part of a sur� c� arc;a and thc pro� ision of such residcntial. commcrcial. industrial. public or othcr stnictures or spaccs as ma� bc appropriatc or ncccssar� in thc intcrest of thc gcncral «clfarc, including rccrc;ational and othcr facilitics incidcntal or appurtcnant to thcm. T7�c Rcdc�clopmcnt Agcnc� ma�. out of thc fiinds a�ailablc to it for such purposcs. pa� for all or part of thc �aluc of thc land and thc cost of buildings. facilitics. stnictures or othcr impro�cmcnts to bc publicl� o« ncd and operatcd to thc c�tcnt that such impro� cmcnts arc of bcncfit to thc projcct arc;a and no othcr rc;asonablc mcans of financing is a� ailablc. T7�c Rcdc� clopmcnt Agcnc� must scll or Icasc rcmaining propert� «ithin a projcct arc;a for rcdc� clopmcnt b� othcrs in strict conformit� «ith thc rcdc� clopmcnt plan. and ma� spccifi a period «ithin «hich such rcdc� clopmcnt must bcgin and bc complctcd. In accordancc «ith thcsc critcria. thc Rcdc� clopmcnt Agcnc� has adoptcd a Rcdc� clopmcnt Plan. as amcndcd. in thc Projcct Arc;a that authorizcs thc usc of thc rcdc� clopmcnt proccss and proccdures. Redevelopment Agency Finances Fii�rnlcinl.Stntemei�ts. T7�c accounts of thc Rcdc� clopmcnt Agcnc� arc organizcd on thc basis of fiinds and account groups. T7�c operations of cach fiind arc accountcd for «ith a scparatc sct of sclf-balancing accounts that comprisc its asscts. liabilitics. fiind cquit�. rc�cnucs and c�pcnditures. T7�c auditcd financial statcmcnts of thc Rcdc� clopmcnt Agcnc� for thc Fiscal Ycar cnding Junc �0. 200� are sct forth in AI�I�I:Nu►x B. Retiremei7t PIcu7. Substantiall� all fiill-timc Cit� cmplo� ccs. including cmplo� ccs of thc Rcdc�clopmcnt Agcnc�. arc cligiblc to participatc in rctircmcnt bcncfit plans through a contract «ith thc California Public Emplo�ccs� Rctircmcnt S�stcm ("PERS��). a multiplc-cmplo�cr public scctor cmplo�cc dcfincd bcncfit pcnsion plan. PERS pro� idcs rctircmcnt and disabilit� bcncfits. annual cost-of-li� ing adjustmcnts and dcath bcncfits to PERS mcmbcrs and bcncficiarics. PERS acts as a common in� cstmcnt and administrati� c agcnt for participating public cntitics �� ithin thc Statc. PERS is a contributor� plan dcri� ing fiinds from cmplo� cc contributions as «cll as from cmplo� cr contributions and carnings from im cstmcnts. o�,o � z r�,�-� ��4 PERS maintains t«o pcnsion plans for thc Cit�. a Safct� Plan (thc "Safct� Plan") and a Misccllancous Plan (thc "Misccllancous Plan�� a��d. togcthcr «ith thc Safct� Plan. thc "PERS Plans��). T7�c Cit� contributcs to PERS amounts cqual to thc rccommcndcd ratcs for thc PERS Plans multiplicd b� thc pa� roll of thosc currcnt cmplo� ccs of thc Cit�. including thc Rcdc� clopmcnt Agcnc�. «ho arc cligiblc undcr PERS. T7�crc arc positions in thc Rcdc� clopmcnt Agcnc� cligiblc to participatc in PERS. For information conccrning PERS. including information rclating to its financial position and imcstmcnts contact PERS dircctl� at CaIPERS. Lincoln Plaz�. �400 P Strcct. Sacramcnto. California 9�81�4. tcicphonc: 888-22�-7 �77. Information rcgarding thc contributions madc b� thc Cit� to PERS for thc PERS Plans is a� ailablc in thc Cit� �s Comprchcnsi� c Annual Financial Rcport copics of «hich arc a� ailablc upon rcqucst from thc Cit� of Palm Dcscrt Dcpartmcnt 7�-� 10 Frcd Waring Dri� c. Palm Dcscrt. California 92260-2�78: tcicphonc: 760-��46-061 1 or ma� bc obtaincd cicctronicall� from thc Cit� �s «cbsitc at ««« .cit� ofpalmdcscrt.org/contcnt/O�CAFR.pdf. l)tller Post Emplo��mei7t Bei7efits. T7�c Cit� offcrs thc PERS Hc;alth Carc Program to its rctirccs. T7�c Cit� contributcs `f�48 per month on bchalf of c;ach rctircc cligiblc for PERS and makcs an additional contribution to«ards ccrtain rctirccs� prcmiums undcr a Rctircc Scr� icc Stipcnd program. If thc rctircc rctires from both thc Cit� and PERS simultancousl�. has attaincd thc agc of �0 and complctcd a minimum of 10 �cars of scr�icc «ith thc Cit� and satisfics am othcr rcquircmcnts spccificd in such program continucd co� cragc for cligiblc rctirccs. spouscs and/or cligiblc dcpcndcnts for thc lifctimc of thc rctircc upon satisfaction of thc abo� c-rcfcrcnccd critcria. T7�c Rctircc Scr� icc Stipcnd is not actuariall� fiindcd and thc asscts arc accountcd for in an agcnc� fiind. An actuarial � aluation complctcd for thc Rctircc Scr� icc Stipcnd program as of Jul� I. 2002 indicatcd that thc amount of thc actuarial liabilit� to currcnt and firturc liabilitics for thc Cit� to bc �9.761.06�. THE PROJECT AREA General T7�c Projcct Arc;a is locatcd in thc Cit� and includcs appro�imatcl� 76�4 acres. comprising zoncd for residcntial. officc. commcrcial. industrial. public and opcn spacc uscs. Thc Projcct Arca is gcncrall� boundcd b� Portola A� cnuc and Cook Strcct to thc «cst. and Carlotta Di� c to thc c;ast. Ho� cl� Lanc and Running Springs Dri� c to thc north and thc Whitc«atcr Ri� cr Channcl to thc south. T7�c Portola Countr� Club is nut «ithin thc Projcct Arca. For a map of thc Projcct Arca scc pagc � i. For ccrtain information rcgarding thc Cit�. scc APPI:NUIX C—"GI:NI:R�I, INFORM� I1ON CONCI:RNING I�I II: CI IY OF P�I,M DI:SI:R I... Redevelopment Plan Limits T7�c Rcdc� clopmcnt Plan for Projcct Arc;a No. �«as adoptcd b� thc Cit� on Jul� 17. 1991. Thc Projcct Arca includcs appro�imatcl� 76�4 acres of Rcsidcntial. officc. commcrcial. industrial. public and opcn spacc uscs. o�,o � z r�,�-� �i Tablc I summarizcs thc Rcdc� clopmcnt Plan Limits for thc Projcct Arca. Table l Palm Desert Redevelopment Agency Project Area No. 3 Summary of Redevelopment Plan Limit Amendments Rc� cnuc Limits Arca Plan Limit Tcrmination Sizc Basc Dcbt Plan Dcbt Total Ta� Amount acres Ycar Incurrcncc E�uiration Rcua� mcnt Incrcmcnt Rccci� cd+ 76�4 1990-91 Nonc',' 07/17/�2 07/17/�42 ��60.000.000 y�l �.06i.6i2 Limitntion on Outstanding Bondcd Dcbt: 9�100 million I I;I Reprc�nts gross tas increment rc�enucs recci�ecl as ot�.lwic ;O. 2OOi. 12;1 Ilic limit prc�ioush est�iblishecl as.luh 17. 2c)I I. ��as climinatecl b� thc acloption ot�(hclinancc Ic);G on I ebnkin 27. 2c)c);. Sotu'cc: Krdrrrlopnu�iii.l�;riu.t'. . . . Controls, Land Use and Building Restrictions T7�c Rcdc� clopmcnt Plan for thc Projcct Arc;a scts forth thc principal land uscs permittcd and thc building restrictions to bc imposcd in projcct dc� clopmcnt. It also assigns thc Rcdc� clopmcnt Agcnc� and thc Cit� thcir respccti� c responsibilitics in carn ing out thc Rcdc� clopmcnt Plan. Pro� ision is madc for rchabilitation as «cll as nc« constniction and scts forth conditions and proccdures rcquircd undcr both approachcs. Constniction is rcquircd to compl� «ith all applicablc Statc and local la��s in cffcct. including «ithout limitation. building. cicctrical. hcating and � cntilating. housing and plumbing codcs of thc Cit� . T7�c information in Tablc 2 is bascd on land usc dcsignations as pro� idcd b� Ri� crsidc Count� Officc of thc Auditor Controllcr through ta� roll data. ho«c�cr. Count� land usc dcsignations do not ncccssaril� parallcl Cit� land usc and zoning dcsignations. Unsccurcd and SBE non-unitan �alucs arc conncctcd «ith parccls that arc alrc;ad� accountcd for in othcr catcgorics. Table 2 Palm Desert Redevelopment Agency Project Area No. 3 Land Uses by Catego�y La��d Usc Rcsidcntial Industrial Profcssional/Officc Commcrcial Vacant Land Rccrc;ational Go� crnmcnt Misccllancous Transportation rc � rn►. Numbcr of Parccls 691 167 I� �42 92 �4 I l 1.016 200�-06 Asscsscd Valuc Amount Pcrccnt `f 192.610.8��4 �46.�4`%� I 2 I.8 I 8.�490 29.�4 �2.699.862 I 2.7 2�4.98�4.;87 6.0 I 7.�4 I I.6�4 I �4.2 �.2;;.0�4; I . � 2 I I.202 0. I i9i Q.Q `G�4 I �4.970.07�4 I 00.0`%� Sow-cc: Metro Scan I R\N ba�cl upon intimnation irom thc Cowih /�s�ssor. OG012 pu�-3 � �� Summary of Development Redevelopmei7t A�;ei7c�� Projects. Thc primar� objccti� c of thc Rcdc� clopmcnt Plan is to corrcct infrastructurc and traffic circulation dcficicncics. climinatc and prc� cnt thc rcoccurrcncc of blightcd conditions and fostcr dc� clopmcnt «ithin thc Projcct Arca through thc construction of ccrtain public road«a�. sc«crand landscaping impro�cmcnts. To datc thc Rcdc� clopmcnt Agcnc� has complctcd thc follo« ing projccts «ithin thc Projcct Arca: construction and installation of ccrtain sc«cr and storm drain impro�cmcnts: thc construction. impro� cmcnt and rehabilitation of appro�imatcl� milcs of strccts: and thc construction and installation of landscaping surrounding thc public arca of ccrtain residcntial impro� cmcnts and of sidc«alks. Thc Rcdc� clopmcnt Agcnc� c�pccts to usc procccds from thc 2006 Scrics Bonds to Privnte Devel��pmei7t. In addition to thc projccts dircctl� sponsorcd b� thc Rcdc� clopmcnt Agcnc� and dcscribcd abo� c. thcrc ha� c bccn a numbcr of pri� atc projccts dc� clopcd «ithin thc Projcct Arca including: Cantcrra Lu�ur� Auartmcnts. This dc� clopmcnt consists of thc construction of an appro�imatcl� 612 unit apartmcnt complc�. Construction is undcn�a� and c�pcctcd to bc complctcd in «intcr 2008. Lakcsidc Propertics. This appro�imatcl� 27. I I� squarc foot commcrcial dc� clopmcnt is c�pcctcd to consist of t«o scparatc buildings of appro�imatcl� thc samc sizc. Construction has commcnccd and is c�pcctcd to bc complctcd in �� intcr 2006. McCo� c�. Valcntinc. This dc� clopmcnt consists of thc construction of an appro�imatcl� 10.000 squarc foot officc and «archousc building. Construction is undcr«a� and is c�pcctcd to bc complctcd in «intcr 2006. Yankcc Workshou. Thc construction of this appro�imatcl� �.�80 squarc foot industrial «archousc has commcnccd and is c�pcctcd to bc complctcd in «intcr 2006. Thcrc arc also t«o non-residcntial dc�clopmcnts and onc 9�4 unit singlc famil� residcntial dc� clopmcnt that bccn appro� cd for construction «ithin thc Projcct Arca. Nonc of thcsc thc projccts ha� c commcnccd construction. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) o�,o � z r�,�-� �7 Principal Taxpayers T7�c top 10 ta�pa� crs «ithin thc Projcct Arc;a for Fiscal Yc;ar 200�-06 0« n propert� «ith an aggrcgatc � aluc of `f I I�.262.�9 I. rcprescnting 26.60`%� of thc asscsscd � aluc and represcnts `%� of thc total incrcmcntal � aluc of thc Projcct Arca. Tablc � lists thc principal ta�pa�crs and primar� land usc in thc Projcct Arc;a bascd on thc Fiscal Ycar 200�-06 asscsscd � aluation. Table 3 Palm Desert Redevelopment Agency Project Area No. 3 Principal Taxpaye�s�'� Fiscal Year 2005-06 O« ncr Cantcrra Apartmcnt Homcs Fountain Scnior Propertics of California Timc Warncr Entcrtainmcnt SAG Palm Dcscrt/�42 A� cnuc Storagc GHA Paloma Group I I Northcrn Tnist Bank of California Palm Dcscrt Disposal Scr� iccs. Inc. SMG 17 Lakcs Count� Club Association Lakcsidc Im cstmcnt Propertics Tc � � n►. Tc �►> T► :N Othcr Propert� O« ncrs Tc��n►. No. of Parccls I I I I 29 x i I 2 i ;.� 962 1.016 Primar� Land Usc Apartmcnt Complc� Com alcsccnt/Nursing Homc Commcrcial/Rctail Industrial/Storagc SFR Rcsidcntial Dc� clopmcnt Commcrcial Commcrcial/Industrial Commcrcial/Industrial Officcs (Guthc� Rcnkcr) Golf Coursc Commcrcial/Industrial Various 200i-06 Asscsscd Valuc',' y� �0. �90.982 z�t.;xx. i ���t I �.�419.� I � 8.0 �i3Oi0 7.�0 �.i6 � 7. I 6i.200 6.19�.�0� �.x;;. i x; �.2;;.0�4; �.ioo.�xx x i i �.z��z.��� i ; i x.o����.x�; ��4;;.; 62.�4�4�4 `%� of 200i-06 Total Roll 7.0 I `%� �.��; �.�6 i.x� 1.7� I .6� I .�4 � i .;; I I1 Inclucles �cw-ecl �aluc I`�;8i,;;; ; I;) ancl wi�cw-ecl �aluc I`��c).c)81.78-I1. 12;1 Uocs not retlect homco��iicrs esemption. Sottrces: Kirrr.sidr ('o�um�. issrssor's O/%icr ?00�-OG lup�cdizrd Loccd . Issrssmrii� Ko!!. Tax Rates 1.21 i.ix z��.��o�i� �;.�to I 00.00`%� Within thc Statc ta� ratcs �ar� from arc;a to arc;a. as «cll as «ithin a communit� and a projcct arc;a. T7�c ta� ratc for am particular parccl is bascd upon thc jurisdictions Ic� � ing thc ta� ratc for thc arc;a (a "Ta� Ratc Arca �) in «hich thc parccl is locatcd. T7�c ta� ratc applicd to incrcmcntal ta�ablc � alucs consist of t« o componcnts: (i) thc gcncral Ic� � ratc «hich ma� not c�cccd � I.00 per � I 00 of ta�ablc � alucs in accordancc «ith Articic XII I A of thc Statc Constitution and (ii) thc o� cr-ridc ta� ratc that is Ic� icd to pa� � otcr appro� cd indcbtcdncss or contractual obligations that c�istcd prior to thc cnactmcnt of Proposition XIII. Scc "LIMII�I1ON ON T�X RI:VI:NUI:S�� and "CI:RI�IN RISKS IO BONUO\�vNI:RS—RcduCtion in Asscsscd Valuc.�� T7�c o� cr-ridc ta� ratcs can dcclinc cach � car as incrc;asing propert� � alucs rcducc thc o� cr-ridc ratc nccdcd to bc Ic� icd b� thc ta�ing cntitics to satisfi � otcr appro� cd dcbt scr� icc obligations and as thc � otcr appro� cd dcbts is rctircd o� cr timc. o�,o � z r�,�-� �x T7�c Projcct Arc;a contains a total of 16 Ta� Ratc Arc;as. T7�c ta�ing cntitics «ithin a Ta� Ratc Arca c;ach rccci� c a proratcd sharc of thc gcncral Ic� � and thc rc� cnucs resulting from am � otcr appro� cd o� cr- ridc ta� ratcs. �Am o� cr-ridcs'?� Thc componcnts that makc up thc ta� ratc applicablc to thc Projcct Arc;a arc sct forth in Tablc �4 bclo« : Table 4 Palm Desert Redevelopment Agency Project Area No. 3 Breakdown of Tax Rate Fiscal Year 2005-06 Gcncral Puruosc Lc� � Count� Gcncral Count� Libran Count� Firc Cit� of Palm Dcscrt Dcscrt Sands Unificd School Dcscrt Communit� Collcgc Count� Superintcndcnt of Schools Ri� crsidc Count� Rcgional Park and Opcn Spacc Coachclla Vallc� Public Ccmctcr� Dcscrt Hospital Coachclla Vallc� Coachclla Vallc� Coachclla Vallc� Coachclla Vallc� Coachclla Vallc� Coachclla Vallc� Tc��n►. Mosquito Abatcmcnt Rccrc;ation and Park Watcr District Watcr District 80 Rcsourcc Ccntcr Watcr District Storm Watcr Unit Sottrcc: Ko.sriiou .Sprrcicrk ( iro��p bic. Historical, Cw•rent and Projected Tax Revenues Ratc 0.2�60`%� o.o2x2 0.0607 0.0�42�4 0.�7�41 0.0777 0.0�42 � 0.00 �9 0.00 � i 0.0 I 07 0.01�41 0.02 I �4 0.028 � 0.0007 0.000 � 0.0 � � 8 I .0000`%� T7�c Rcdc� clopmcnt Agcnc� �s primar� sourcc of fiinds to makc thc Loan Pa� mcnts undcr thc 2006 Loan Agrccmcnts is thc Rcdc� clopmcnt Agcnc� �s sharc of acl valui�em propert� ta� rc� cnucs «hich gcncrall� result from thc complction of nc« rc;al cstatc dc� clopmcnts and a gcncral rc;asscssmcnt of propertics «ithin thc Projcct Arca. T7�c purposc of rcdc� clopmcnt is to rc� italizc dctcrioratcd or undcrdc� clopcd arc;as «ithin a communit�. As nc« constniction progresscs. propert� �alucs normall� incrcasc and thc ultimatc result is a proportionatc incrc;asc in acl valui�em propert� ta� rc� cnucs. T7�c total ta�ablc � aluc of all propertics «ithin a gi� cn projcct arc;a on thc propert� asscssmcnt roll last cqualizcd prior to thc cffccti� c datc of thc ordinancc adopting thc rcdc� clopmcnt plan for such projcct arc;a and relatcd amcndmcnt arc;as. if am. cstablishcs a basc from «hich incrc;ascs in ta�ablc �aluc arc computcd. Thc basc so cstablishcd for thc Projcct Arca is thc Fiscal Ycar 1992-9 � asscssmcnt roll. Undcr thc Rcdc� clopmcnt La«. propert� ta�cs Ic� icd bascd upon thc amount sho« n on thc basc � car asscssmcnt rolls «ill continuc to bc paid to and retaincd b� all ta�ing agcncics Ic� � ing propert� ta�cs in thc Projcct Arc;a. Ta�cs Ic� icd b� thc respccti� c ta�ing agcncics on am incrc;ascs in ta�ablc � aluc rc;alizcd in thc Projcct Arc;a «ill bc allocatcd to thc Rcdc� clopmcnt Agcnc� . o�,o � z r�,�-� �9 It should bc undcrstood that this proccdurc docs not im ol� c thc Ic� � of a,�� additional ta�cs. but pro� idcs that rc� cnucs produccd b� thc ta� ratcs in cffcct from � car to � car arc apportioncd to thc ta�ing agcncics Ic� � ing thc ta�cs and to thc Rcdc� clopmcnt Agcnc� on thc basis dcscribcd abo� c. Aftcr all loans. ad� anccs and othcr indcbtcdncss. including intcrest. incurrcd b� thc Rcdc� clopmcnt Agcnc� in conncction «ith thc Projcct Arc;a ha� c bccn paid. thc ta� rc� cnucs «ill bc paid to and retaincd b� thc respccti� c ta�ing agcncics in thc normal manncr. Scc also "CI:RInIN RISKs Ic� Bc�Nuiic�i.ui:iis—Rcduction in Ta�ablc Valucs.�� Tablc � prescnts thc aggrcgatc ta�ablc � aluc of all propert� «ithin thc Projcct Arc;a and thc ta� incrcmcnt rc� cnucs rccci� cd for Fiscal Ycars cndcd Junc �0. 2002 through Junc �0. 2006 (Projcctcd). Asscsscd Valuc''' Local Sccurcd Utilih ($BE) U nsccu rcd Tc� r.�i. Ass�tss�ti� V.�i.� � Basc Ycar Valuc Incrcmcntal Valuc Taz Ratc Estimatcd Rc� cnuc Taz Incrcmcnt Rc�cnuc Unitan Utilih Rc�cnuc Counh Administration Chargc Tc�i.�i.Esri�i.�riti�Rit�it�� i Table 5 Palm Desert Redevelopment Agency Project Area No. 3 Historical and Cw•rent Values 200I-02 2002-0i 200i-0-1 200-4-Oi 200i-OG'�' $2i7.1G2.I» $2� I.j9i.iG2 $ i0i.G2i.G-l0 $ i 18.i8�.-1 I-1 $?8i.280.GG0 0 0 0 0 0 i2.7G2.000 ii.88�.278 -19.987.02� -1-1.912.82-1 �0.081.78-1 $2G9.92-1.1» $28�.-178.8-10 $iii.GIO.GGi $iGi.298.2i8 $-lii.iG2.-l-l-1 $ I-49.�23.2» I 20.-100.900 1.00`%� �; i.2o-t.00�� 723 (19.-10i) $1.18�.327 $ I -49.523.2» Iii.yii.i8� 1.00`%: 9��.>>��.,,�� 7i l (20.i79) $ I. �?9.908 $I-49.�23.2» $I-49.�23.2» $I-49.�23.2» 20-1.087.-110 2 I i.77-1.98 i 28i.8i9.189 1.0U`%� I.00`%� I.00`%� �;2.o-to.x�-t I.001 (29.i2-ll $2.0 I 2.» I Actual Rcccipts Sccurcd and Unitan Utilih 9� 1.20-4.732 $1.3G0.287 $2.0-41.87� Supplcmcntal Pa� mcnts 130.-497 79.7-4-4 I�0.71G Counh Administration Chargc (19.-40i1 (20.379) (29.32-4) T��t.�i.Acn.�i.Rxcr.ii�rs $1.31�.82-1 $1.-119.Gi3 $2.192.�91 I I;I Securecl � alucs inclucic homco��iicr esemption � aluc. 12;1 /�s�s�cl � alucs arc basecl on actual cl�ita. all remaining intimnation is projectecl. $2.Ii7.7�0 $2.8i8.i92 7G i 7G i (28.20-1) ( ii.iG-ll $2. I 10. i09 $2.80i.791 $2.1i8.�1 i 2GI.�i9 c2x.2o-t� �Z. ;� i.x-tx Sottrces: Kirrnsidr ('o�uirt' O/%icr o/ du�. l��diior-('oii0•oNrrcuid ('iii' o/7'cdm l)rsrri l'iiicuicr l)c/�cu•O�u�iii. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) o�,o � z r�,�-� �40 Tablc 6 summarizcs thc projcctcd Ta� Rc� cnucs to bc rccci� cd b� thc Projcct Arc;a bascd on fiscal � cars cnding Junc �0. 2007. througl� Junc �0. 201 I. To datc. thc Count� has paid to thc Rcdc� clopmcnt Agcnc� thc fiill amount of Ta� Rc� cnucs c�pcctcd to bc rccci� cd b� thc Rcdc� clopmcnt Agcnc� .«ithout rcgard to dclinqucncics in ta� collcction. Scc "—Ta� Lc� ics. Collcctions and Dclinqucncics.�� Table 6 Palm Desert Redevelopment Agency Project Area No. 3 Projection of Incremental Taxable Value and Tax Increment Tax Revenue Txxxblc Vxlucs Sccurcd Unsccurcd Totxl Vxluc Basc Ycar Valuc Txxxblc Vxluc o��cr Bxsc Gross Taz Incrcmcnt Rc� cnuc Unitan Taz Rc�cnuc Gross Rc��enucs Lcss: SB 2»7 Admin. Fcc Housing Sct Asidc Rcquircmcnt Statuton Taz Sharing Pa� mcnts Txx Rc��enucs 200C,-07 2007-08 2008-OI 2001-10 2010-11+ t nsses�cl � alucs arc ba�cl on act�kil cl�ita. all remaining intimnation is projectecl. Sottrces: Kirrnsidr ('o�uirt' O/%icr o/du�. l��diior-('oii0•oNrrcuid Kosriiou .4prrcicrk (iro��p bic. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) o�,o � z r�,�-� �4 I Debt Service Coverage Projections Thc follo« ing Tablc 7 sho« s schcdulcd dcbt scr� icc on thc Scrics 200 � Bonds and 2006 Scrics Bonds. «ithout rcgard to am optional rcdcmption and cstimatcd co� cragc. Scc "D1:13I SI:Rvicl: Scl Il:Uul,l:" for thc schcdulcd scmiannual dcbt scr� icc on thc 2006 Scrics Bonds. Fiscal Yc;ar Ending Projcctcd Nct Scrics Junc �0 Ta� Rc� cnucs''' 200 � Bonds Table 7 Palm Desert Redevelopment Agency Project Area No. 3 Debt Service Coverage Projections ($ in 000's) Scnior Parit� Bonds Dcbt Scr� icc 2006 Subordinatc Cauital Auurcciation Bonds Estimatcd Estimatcd 2006 Scnior Dcbt Scr� icc Total Dcbt Scr� icc Parit� Bonds Total Co� cra�c' ,' Dcbt Scr� icc Co� cra�c"' � N Scnior Parit� Bonds Dcbt Scr� icc Fiscal Yc;ar Ending Projcctcd Nct Scrics 2006 Scnior Junc �0 Ta� Rc� cnucs''' 200 � Bonds Parit� Bonds Total 2006 Subordinatc Cauital Auurcciation Bonds Estimatcd Estimatcd Dcbt Scr� icc Total Dcbt Scr� icc Co� cra�c' ,' Dcbt Scr� icc Co� cra�c"' '�' Projectecl Net Ias Rc�enucs is net ot�thc I lousing Set-nsicic. Pass=lhrough Pa�ments ancl Cowih aclministrati�c tces. ��hich aclministrati�c tces arc projectecl to cy�kil I.-I�`%� ot� ann�kil Gross "Ias Rc�enucs. Iliis tablc asswnes that pro}�rt� �alucs in thc Project nrca ��ill incrca� ba�cl upon nc�� cic�clopment ��ithin thc Project /�rca I�c "Ilu. 1'�zc�i�:c�i /��z�..�—Status ot�lk�clopment" ancl "—Recent Ik�clopment." ancl tirr inilation at thc ratc ot�2`%� ann�kilh. ''' Calculatecl as Projectecl Net I as Rc� enucs cli� iclecl b� total Senior Parih 13oncls I kbt Sen icc. ''' Calculatecl as Projectecl Net I as Rc� enucs lrss total Senior Parih 13oncls I kbt Sen icc cli� iclecl b� total 2OOG Suborclinatc Capital /�ppreciation 13oncls I kbt Scr� icc. Sottrcc: Ko.sriiou .Sprrcicrk ( iro��p bic. . . � ��� Assessment Appeals Propert� ta� �alucs dctcrmincd b� thc Count� Asscssor ma� bc subjcct to an appc;al b� thc propert� o«ncrs. Asscssmcnt appcals arc annuall� filcd «ith thc Asscssmcnt Appc;als Board for a hc;aring and resolution. T7�c resolution of an appcal ma� result in a rcduction to thc Count� Asscssor�s original ta�ablc � aluc and a ta� rcfiind to thc applicant/propert� o« ncr. T7�c rcduction in firturc Projcct Arca ta�ablc � alucs and thc rcfiind of ta�cs affccts all ta�ing cntitics. including thc Rcdc� clopmcnt Agcnc� . Each asscssmcnt appcal could result in a rcduction ofthc ta�ablc �aluc ofthc rc;al propert�. personal propert� or posscsson intcrest of thc propert� «hich is thc subjcct of thc appc;al. A rcduction in such ta�ablc � aluc «ould result in a rcduction of thc rc� cnucs of thc Rcdc� clopmcnt Agcnc� a� ailablc for Ta� Rc� cnucs «ith respcct to thc 2006 Scrics Bonds. Altcrnati�cl�. an appc;al ma� bc «ithdra«n b� thc applicant or thc Appc;als Board ma� dcm or modifi thc appc;al at a hc;aring or b� stipulation. Bct« ccn Fiscal Yc;ar 2001-02 through . 2006 thcrc ha� c bccn � I asscssmcnt appc;als filcd «ithin thc Projcct Arc;a. Ofthc appcals filcd. t«o resultcd in a rcduction in �aluc. I8 «crc «ithdra«n and I I arc pcnding. Thc pcnding appcals ha� c a combincd asscsscd � aluc of � 1.�49 �.966. � I� undcr appcal and includc asscssmcnt appc;als of � aluc for Fiscal Ycars 2001-02 and 200�-06. Within thc Projcct Arc;a. it is uncicar c�actl� ho« much of this � aluc is at risk bccausc somc of thc o« ncrs ha� c not statcd o« ncr opinions of � aluc. Of thc tcn principal ta�pa� crs in thc Projcct Arc;a sho« n in Tablc �. t« o SAG Palm Dcscrt ("SAG��) and Wastc Managcmcnt Inc. ("Wastc Managcmcnt��) had appc;als outstanding and unresol� cd «ith thc Count� Asscssor as of . 2006. SAG o« ns onc parccl in thc Projcct Arc;a and is sccking an adjustmcnt to thc Fiscal Yc;ar 200�-06 � aluc on thc basis that . Wastc Managcmcnt o«ns t«o parccls in thc Projcct Arca and has appc;als pcnding on all both of its parccls for Fiscal � car 200 �-0�4 sccking a rcduction of thc asscsscd � alucs in thc amount cqual to 100`%� of thc Fiscal Yc;ar 200 �-0�4 � aluc. Table 8 Palm Desert Redevelopment Agency Project Area No. 3 Assessment Appeals Fiscal Years 2000-01 through 2005-06 Roll Yc�ir 2c �c �;-c �6 2c �c u-c �; 2c �c � ;-c �-I 2OO2-O i Z�)�)��)Z Ic�I.V. r<><<�� # o�� /�p}�als r>>�a ; x Ic� i l ?� Tablc 8 summarizcs thc appc;als filcd in thc Projcct Arc;a sincc Fiscal Yc;ar 2001-02. /�p}�als w�a,a,-����„� No /�p}�arancc/ i.<��� r>>� cl 2 Ic� i i ix n����<��� na�«����v Reclttcecl/ s����«�����a c� c� O () Z z /�p}�als Pencline ; �, O () c� ii r<><<�� ���«,-�a n�,��,�a Valuc `� ;8 ;.28( ).GG( ) ; i x. ;x;.-� i-� ;c ) ;.;-I-I. �2-I 21�._l�)i li)Z Z?%,��)Z,� �� `� I .-19 ;.9GG. � I � r<><<�� ii�y«����a Reclttction `� I x.-I I I. I-Ic � i;.-�zx. i �,� 19.Gi.�. �97 � .i)� )iL�)?.�i iiz,l)i i `���.�-12.G;9 n�<<k�� ii�a«<<�<», �„ n�,��,�a Valuc �c � c� O () z;�.� ��� `�2i7.7.�9 Sottrces: Kirrnsidr ('o�uirt' O/%icr o/du�. l��diior-('oii0•oNrrcuid Kosriiou .Sprrcicrk (iro��p bic. OG012 pu�-3 �� Pencline nct�kil Rcauction Recluction Pencling `%� ot� '%� o�� total Reclttction I otal n�,��,�a �„ n�,��,�a n�,��,�a Valuc Valuc Valuc c�.c�c���� �Ix.-III.I-Ic� -I.xc���� c�.c�c� I-I.c�c�x.27�� -I.-Ic� O.00 O O.00 ().�)�) () ().�)�) c�.11 c� c�.c�c� c �. I I ��� � �2.-I I ��.-I I �� ��.2c ���� Tablc 9 lists thc principal ta�pa� crs (scc Tablc � abo� c) «ho ha� c filcd such appcals. thc asscsscd � aluc. thc rcduction rcqucstcd and thc status of thc appcal. Auulicant SAG Palm Dcscrt Wastc Managcmcnt Inc Su►3Tc� rn►. All Othcrs Tc��n►. Table 9 Palm Desert Redevelopment Agency Project Area No. 3 Outstanding Appeals by the Top Ten Taxpayers Fiscal Years 2000-01 through 2005-06 Applicant Appcal Total No. Opinion Ycar Parccls Valuc 200� 200�4 I `G�4.820.000 �4 0 � `G�4.820.000 Various `%� of Potcntial Asscsscd Roll Valuc Rcduction Valuc `�8.0 �i3O�0 `� �.21 �.0�0 �40.0`%� �48;.279 �48;.279 100.0 `f 8.� I 8. �29 `f �.698. �29 �4 �.�4`%� Sottrces: Kirrnsidr ('o�uirt' O/%icr o/du�. l��diior-('oii0•oNrrcuid Kosriiou .Sprrcicrk (iro��p bic. Tax Levies, Collections and Delinquencies T7�c Count� docs not track sccurcd ta� chargcs and dclinqucncics b� Projcct Arc;a. T7�c Count� has adoptcd thc Altcrnati� c Mcthod of Distribution of Ta� Lc� ics and Collcctions and of Ta� Salc Procccds (thc "Tcctcr Plan��). as pro� idcd for in Scction �4701 er. .,�ey. of thc Statc Rc� cnuc and Ta�ation Codc. Undcr thc Tcctcr Plan. c;ach participating local agcnc� . including citics. Ic� � ing propert� ta�cs in its count� ma� rccci� c thc amount of uncollcctcd ta�cs crcditcd to its fiind in thc samc manncr as if thc amount crcditcd had bccn collcctcd. In rcturn. thc count� «ould recci� c and retain dclinqucnt pa� mcnts. pcnaltics and intcrest. as collcctcd. that «ould ha� c bccn duc to thc local agcnc� . Ho« c� cr. although a local agcnc� could recci� c thc total Ic� � for its propert� ta�cs «ithout rcgard to actual collcctions. fiindcd from a rescr� c cstablishcd and hcld b� thc count� for this purposc. thc basic Icgal liabilit� for propert� ta� dcficicncics at all timcs rcmains «ith thc local agcnc� . T7�c Tcctcr Plan rcmains in cffcct unlcss thc Count� Board of Super� isors ordcrs its discontinuancc or unlcss. prior to thc commcnccmcnt of am fiscal �car of thc Count� («hich commcnccs on Jul� I). thc Count� Board of Super� isors rccci� cs a pctition for its discontinuancc joincd in b� resolutions adoptcd b� t«o-thirds of thc participating rc�cnuc districts in thc Count�. in «hich c�cnt. thc Count� Board of Super� isors is to ordcr discontinuancc of thc Tcctcr Pla�� cffccti� c at thc commcnccmcnt of thc subscqucnt fiscal � car. T7�c Count� Board of Super� isors ma�. b� resolution adoptcd not latcr than Jul� I� of thc fiscal �car for «hich it is to appl�. aftcr holding a public hcaring on thc mattcr. discontinuc thc proccdures undcr thc Tcctcr Plan «ith respcct to am ta� Ic� � ing agcnc� in thc count� . T7�c Cit� is a participant in thc Tcctcr Plan. Scc "LIMI InI1c�Ns c�N TnX RI:vI:NUI:s—Propert� Ta� Collcction Proccdures.�� o�,o � z r�,�-� �4 � CERTAIN RISKS TO BONDHOLDERS 7%e fu//utirin,�� !YlfU/'/77Cf1lU/9 .1'/9U11�L% J7L' cun.sic%i�ec/ h�� pi�u.spec7ive !YlVL'.1'lU/'.1' !Y! eva/i�atin,�� t/�e ?00< .SL/7L'.1' RUl9LL1'. HU11'L'VL'l'. 1�9L' fUllU117Yl,�� clue.s nut pt�ipui't tu he an exl�at�.stive li.stin,�� uf'i'i.sk.s ancl utl�ei' CU/9.1YL%L'/'Cf!!U/21' 11'�1lC�1 /77Cf1' %7L' PL'�L'VCfYl1 lU /77Cf�ClYl��� CfY! !YlVL'.1'1/77L'Y!1 L%L'Cl.1YU/21' 1171�1 PL'.1'�)L'Cl lU 1�1L' �i%i%� .SL/'!L'.1' /3U/9L%1'. �Y! CfL%L%!1!U/9. 1�1L' U/'L%L'/' !Y! 11'�1lC�1 1�1L' fU//U117Yl��� !YlfU/'/77Cf1lU/9 !.1' �)PL'.1'L'Yl1L'L% !.1' YlUI !Yl1L'Y!L%L'L% lU PL'fIL'Cl 1�1L' i�elative impui�tance uf'an��.siic% i�i.sk.s. Accuracy of Assumptions To cstimatc thc rc� cnucs a� ailablc to pa� dcbt scr� icc on thc Bonds. thc Rcdc� clopmcnt Agcnc� has madc ccrtain assumptions «ith rcgard to thc asscsscd � aluation of ta�ablc propert� in thc Projcct Arc;a. firturc ta� ratcs. perccntagc of ta�cs collcctcd. thc amount of fiinds a� ailablc for im cstmcnt and thc intcrest ratc at «hich thosc fiinds «ill bc im cstcd. T7�c Rcdc� clopmcnt Agcnc� bclic� cs thcsc assumptions to bc rc;asonablc. but to thc c�tcnt that thc asscsscd � aluation. thc ta� ratcs and thc perccntagcs collcctcd. arc Icss than thc Rcdc� clopmcnt Agcnc� �s assumptions. thc Ta� Rc� cnucs a� ailablc to makc thc Loan Pa� mcnts and thc resulting dcbt scr� icc on thc Bonds «ill. in all likclihood. bc Icss than thosc projcctcd hcrcin. Scc "DI:13I SI:RVICI: SCI II:UUI,I:�� and "TI II: PRc�.iI:C i ARI:n—Dcbt Scr� icc Co� cragc Projcctions... Reduction of Tax Revenues Ta� Rc� cnucs allocatcd to thc Rcdc� clopmcnt Agcnc� .«hich constitutc thc primar� sccurit� for thc Bonds. arc dctcrmincd b� thc incrcmcntal asscsscd � aluc of ta�ablc propert� in thc Projcct Arc;a. thc currcnt ratc or ratcs at «hich propert� in thc Projcct Arc;a is ta�cd. and thc perccntagc of ta�cs collcctcd in thc Projcct Arca. Sc� cral t��pcs of c� cnts «hich arc bc� ond thc control of thc Rcdc� clopmcnt Agcnc� could occur a��d causc a rcduction in a� ailablc Ta� Rc� cnucs. A rcduction of ta�ablc � alucs of propert� in thc Projcct Arc;a or a rcduction of thc ratc of incrc;asc in ta�ablc � alucs of propert� in thc Projcct Arca causcd b� cconomic or othcr factors bc� ond thc control of thc Rcdc� clopmcnt Agcnc� (such as a succcssfiil appc;al b� a propert� o« ncr for a rcduction in a propert� �s asscsscd � aluc. a rcduction of thc gcncral inflationar� ratc. a rcduction in �aluc. or thc dcstniction of propert� causcd b� natural or othcr disastcrs) could occur. thcrcb� causing a rcduction in thc Ta� Rc� cnucs that sccurc thc Bonds. Such a rcduction in Ta� Rc� cnucs could ha� c an ad� crsc impact on thc Rcdc� clopmcnt Agcnc� �s abilit� to makc timcl� pa� mcnt of principal of and intcrest on thc Bonds. Morco� cr. in addition to thc othcr limitations on Ta� Rc� cnucs dcscribcd undcr "LIMI I n I Ic�Ns c�N TnX RI:vI:Nul:s." thc Statc cicctoratc or Lcgislaturc could adopt a constitutional or Icgislati� c propert� ta� dccrcasc «ith thc cffcct of rcducing Ta� Rc� cnucs pa� ablc to thc Rcdc� clopmcnt Agcnc� . Thcrc is no assurancc that thc Statc cicctoratc or Lcgislaturc «ill not at somc firturc timc appro� c additional limitations that could reducc Ta� Rc� cnucs and ad� crscl� affcct thc sccurit� of thc Bonds. Additionall�. thc Rcdc� clopmcnt Agcnc� has no po« cr to Ic� � and collcct propert� ta�cs. T7�c rcccipt of ta� rc� cnucs b� thc Rcdc� clopmcnt Agcnc� is dcpcndcnt on thc timcl� pa� mcnt of propert� ta�cs b� lando« ncrs «ithin thc Projcct Arc;a. Substantial dclinqucncics or othcr rcductions in thc pa� mcnt of propert� ta�cs on rcal propert� in thc Projcct Arc;a b� a largc numbcr of lando« ncrs could ha� c an ad� crsc cffcct on thc Rcdc� clopmcnt Agcnc� �s abilit� to makc timcl� dcbt scr� icc pa� mcnts on thc Bonds sccurcd b� Ta� Rc� cnucs dcri� cd from thc Projcct Arc;a. Ta� rc� cnucs allocatcd to thc Rcdc� clopmcnt Agcnc� arc distributcd throughout thc fiscal �c;ar in installmcnts. «ith a first installmcnt in Dcccmbcr and thc sccond installmcnt in Junc of thc samc fiscal � c;ar. T7�c pa� mcnts arc adjustcd to rcflcct actual collcctions. o�,o � z r�,�-� �46 Reductions in Unitary Values As thc result of thc adoption of AB �4��4 (Chaptcr 921. Statutcs of 1986). a portion of thc Count�- «idc unitan �alucs assigncd to public utilitics «as allocatcd to thc Projcct Arc;a. In Fiscal Yc;ar. 200�-06. appro�imatcl� `%� of thc Ta� Rc� cnucs in thc Projcct Arc;a arc attributablc to such unitar� � alucs. Am substantial rcduction in thc �alucs of public utilit� propertics. cithcr bccausc of dcrcgulation of a utilit� industr� or for am othcr rc;ason. «ill ha� c an ad� crsc impact on thc amount of Ta� Rc� cnucs. Ho« c� cr. am such impact «ith respcct to utilit� propertics «ithin thc Projcct Arc;a «ill bc Icsscncd bccausc thc impact «ill bc sprc;ad on a Count� -« idc basis. For fiirthcr information conccrning unitar� � alucs. scc "LIMI I n I Ic�Ns c�N TnX RI:vI:NUI:s—Propert� Ta� Collcction Proccdures�� and "—Ta�ation of Unitan Propert� .�� Appeals to Assessed Values T7�crc arc t«o basic t�pcs ofasscssmcnt appc;als pro�idcd for undcr Statc la«. Thc first t��pc of appc;al. commonl� rcfcrrcd to as a basc � car asscssmcnt appc;al. im ol� cs a disputc on thc � aluation assigncd b� thc Count� asscssor immcdiatcl� subscqucnt to an instancc of a changc in o«ncrship or complction of nc« constniction. If thc basc � car � aluc assigncd b� thc Count� asscssor is rcduccd. thc � aluation of thc propert� cannot incrc;asc in subscqucnt �c;ars morc than t«o perccnt annuall� unlcss and until anothcr changc in o« ncrship and/or additional nc« constniction acti� iri occurs. T7�c sccond t� pc of appcal. commonl� rcfcrrcd to as a Proposition 8 appcal. can result if factors occur causing a dcclinc in thc markct � aluc of thc propert� to a Ic� cl bclo« thc propert� �s thcn currcnt ta�ablc � aluc (cscalatcd basc � car � aluc). Pursuant to California la«. a propert� o«ncr ma� appl� for a Proposition 8 rcduction of thc propert� ta� asscssmcnt for such o«ncr�s propert� b� filing a«rittcn application. in form prescribcd b� thc Statc Board of Equalization. «ith thc appropriatc count� board of cqualization or asscssmcnt appc;als board. In thc Count�. a propert� o«ncr dcsiring a Proposition 8 rcduction of thc asscsscd �aluc of such o« ncr�s propert� in am onc � car must submit an application to thc Ri� crsidc Count� Asscssmcnt Appc;als Board (thc "Appcals Board��). Applications for am ta� � car must bc submittcd b� Scptcmbcr I� of such ta� � car. Follo« ing a rc� ic« of thc application b� thc Ri� crsidc Count� Asscssor�s Officc (thc "Count� Asscssor �). thc Count� Asscssor ma� offcr to thc propert� o«ncr thc opportunit� to stipulatc to a rcduccd asscssmcnt. or ma� confirm thc asscssmcnt. If no stipulation is agrccd to. and thc applicant ciccts to pursuc thc appc;al. thc mattcr is brought bcforc thc Appc;als Board (or. in somc cascs. a hcaring c�amincr) for a hcaring and dccision. Thc Appc;als Board gcncrall� is rcquircd to dctcrminc thc outcomc of appcals «ithin t«o �c;ars of c;ach appcal�s filing datc. Am rcduction in thc asscssmcnt ultimatcl� grantcd applics onl� to thc �car for «hich application is madc and during «hich thc «rittcn application is filcd. T7�c asscsscd �aluc incrc;ascs to its prc-rcduction Ic� cl (cscalatcd to thc inflation ratc of no morc than t« o perccnt) follo« ing thc �car for i�hich thc rcduction application is filcd. Ho«c�cr. thc Count� Asscssor has thc po«cr to grant a rcduction not onl� for thc � car for «hich application «as originall� madc. but also for thc thcn currcnt � c;ar and am intcr�cning �cars as «cll. In practicc. such a rcduccd asscssmcnt ma� and oftcn docs rcmain in cffcct bc� ond thc � car in «hich it is grantcd. Scc "LIMI�I � I1c)NS c�N TnX RI:vI:NUI:s—Propert� Ta� Collcction Proccdures�� and "TI II: PRc�,il:c i ARI:n—Asscssmcnt Appc;als.�� An appcal ma� result in a rcduction to thc Count� Asscssor�s original ta�ablc �aluc and a ta� rcfiind to thc applicant propert� o« ncr. A rcduction in ta�ablc � alucs «ithin thc Projcct Arca and thc rcfiind of ta�cs «hich ma� arisc out of succcssfi�l appcals b� thcsc o«ncrs «ill affcct thc amount of Ta� Rc�cnucs and Subordinatc Ta� Rc� cnucs a� ailablc to pa� dcbt scr� icc on thc 2006 Scnior Parit� Bonds and thc 2006 Subordinatc Capital Apprcciation Bonds. respccti� cl� . o�,o � z r�,�-� �47 Reduction in Inflation Rate As dcscribcd in grc;atcr dctail abo� c. Articic XIII A of thc California Constitution pro� idcs that thc fiill cash � aluc basc of rc;al propert� uscd in dctcrmining ta�ablc � aluc ma� bc adjustcd from � car to � car to rcflcct thc inflation ratc. not to c�cccd a t« o perccnt incrc;asc for am gi� cn � c;ar. or ma� bc rcduccd to rcflcct a rcduction in thc consumcr pricc indc�. comparablc local data or am rcduction in thc c� cnt of dcclining propert� � aluc causcd b� damagc. dcstniction or othcr factors (as dcscribcd abo� c). Such mcasurc is computcd on a calcndar � c;ar basis. Am resulting rcduction in thc fiill cash � aluc basc o� cr thc tcrm of thc 2006 Scrics Bonds could reducc Ta� Rc� cnucs. Scc "LIMI�I n I Ic�Ns c�N TnX RI:vI:Nul:s—Articic XI II A of thc Statc Constitution.�� Bankruptcy and Foreclosw•e T7�c rights of thc O« ncrs of thc 2006 Scrics Bonds and thc cnforcc;abilit� of thc obligation to makc pa� mcnts on thc Bonds ma� bc subjcct to bankniptc� . insol� cnc� . rcorganization. moratoriwn and othcr similar la«s affccting crcditors� rights undcr currcntl� c�isting la« or la«s cnactcd in thc fiiturc and ma� also bc subjcct to thc c�crcisc of judicial discrction undcr ccrtain circumstanccs. T7�c opinions of Bond Counscl as to thc cnforccabilit� of thc obligation to makc pa� mcnts on thc 2006 Scrics Bonds «ill bc qualificd as to ba��kruptc� and such othcr Icgal c� cnts. Scc A►�►�►:Nu►x E—"P►�c�►>c�s►:u Fc�►�Nt c�► Bc�Nu Cc�uNs►:►. O►�►N►c�N." Furthcr. thc pa� mcnt of thc ta� incrcmcnt rc� cnucs and thc abilit� of thc Count� to timcl� forcclosc thc licn of a dclinqucnt unpaid ta� ma� bc limitcd b� bankruptc�. insol�cnc�. or othcr la«s gcncrall� affccting crcditors� rights or b� thc la«s ofthc Statc rclzting to judicial forcclosurc. Am dcla� in prosccuting superior court forcclosurc procccdings «ould incrc;asc thc likclihood of a dcla� or dcfault in pa� mcnt of thc principal of and intcrest on thc 2006 Scrics Bonds and thc possibilit� of dclinqucnt ta� installmcnts not bcing paid in fiill. Delinquencies Dclinqucncics in thc pa� mcnt of propert� ta�cs and thc impact of bankruptc� procccdings on thc Icgal abilit� to collcct propert� ta�cs could ha� c an ad� crsc impact on thc abilit� of thc Rcdc� clopmcnt Agcnc� to makc timcl� pa� mcnts undcr thc 2006 Loan Agrccmcnt. T7�c � aluation of propert� is dctcrmincd as of thc Januar� I licn datc as cqualizcd in August of cach � c;ar and cqual installmcnts of ta�cs Ic� icd upon sccurcd propert� bccomc dclinqucnt on thc follo« ing Dcccmbcr 10 and April 10. Ta�cs on unsccurcd propert� arc duc April I and bccomc dclinqucnt August � I. Scc "Ti u: Piic�,ii;c i Aiii:n—Ta� Lc� ics. Collcctions and Dclinqucncics.�� State Budget 7%e, fullutirin,�� inJui�matiun cuncei�nin,�� tl�e .S'tate '.s ?00-i-0� ancl ?00�-0< l�i.scal Y'eco� Rial��et.s ancl tl�e ?00<-Oi Guvei�nui�'.s Riicl��et l�a.s heen uhtainecl fi�um piihliel�' CfVCfl�CfJ7�L' !YlfUl'177Cf1lUl9 Ul9 (�9L' .S'tate l)epco7ment uf'l'!YlCfYlCL'. 1�9L' .S'tate 7i�ea.siu�ei� ancl tl�e ('alifui�nia /,e,s,�i.slative Anal��.st Of'Jice tireh.,�ite.s. 7%e e.stimate.s ancl pi�ujec7iun.s pi�uvic%cl helutir co�e ha.secl i�pun VCO7U11.1' Cf.1'.1'tl177�)1!U121' Cf.1' 1l�)L%Cf1L'Ll !Y! tl�e ?00<-Oi Guvei�nui�'.s Rial��et. ti�•%ic% mm� he affec7ecl h�' 1911/77L'PU11.1' fCfC1Ul'.1'. lYlC�1lLllYl,��.fi�tiu�e ecunumic cunclitiun.s in tl�e .S'tate ancl 1�1L' YlCf!!U19. CfYlL% 1�1L'PL' CCfY! l7L' Y!U Cf.1'.1'tll'CfYlCL' 1�1Cf1 1�1L' L'.1'1!177Cf1L'.1' 11'!�� %7L' CfC�1lL'VL'L% �'Ul' f1ll'1�1L'l' !YlfUl'177Cf1lUl9 CfYlLl Lll.1'C11.1'.1YU19 Uf, fCfC1Ul'.1' 1lYlG%L'l'�17Yl��� 1�1L' .S�1Cf1L' .1' �)PU�L'C!!U121'. .S'L'L' 1�1L' CffUl'L'177L'Y!1!Ul9L'L% 11'L'J7.1Y1L'.1'. I�1L' RL'L%L'VL'�U�)177L'Y!1 A,��encr helieve.s .siic% inJui�matiun tu he i�eliahle. l�utirevci�. tl�e Rec%velupmen! A,��encr tnke.,� nu i�e.,�pun.,�ihilih� a.s� tc� t/�e accitrac�� or comp/ctcnc.s.s t/�ei�euf'ancl /�a.s nut incJepencJentl�' VL'/7flL'L%.1'11CI9 !YlfU/'/77Cf1lU/9. In conncction �� ith its appro� al of thc budgct for Fiscal Ycars 1992-9 �. I 99 �-9�4. 199�4-9�. 2002-0 �. 200 �-0�4. 200�4-Oi and 200;-06. thc Statc Lcgislaturc cnactcd Icgislation «hich. among othcr things. rc;allocatcd fiinds from rcdc� clopmcnt agcncics to school districts b� shifting a portion of c;ach rcdc� clopmcnt o�,o � z r�,�-� �tx agcnc� �s ta� incrcmcnt. nct of amounts duc to othcr ta�ing agcncics. to school districts for such fiscal � c;ars for dcposit in thc Education Rc� cnuc Augmcntation Fund ("ERAF��). T7�c amount rcquircd to bc paid b� a rcdc� clopmcnt agcnc� undcr such Icgislation is apportioncd among all of its rcdc� clopmcnt projcct arc;as on a collccti� c basis. and «as not allocatcd scparatcl� to indi� idual projcct arc;as. In Fiscal Ycar 2002-0 �. thc aggrcgatc amount transfcrrcd b� rcdc� clopmcnt agcncics into ERAF «as `f I.� billion. «as `f 2�0 million for Fiscal Ycar 200�4-0� and �2�0 million for Fiscal Ycar 200�-06. Bascd on thc ta� incrcmcnt rc� cnucs sho« n in of thc Statc Controllcr�s Annual Rcport as bcing rctaincd b� thc Rcdc�clopmcnt Agcnc�. thc Rcdc� clopmcnt Agcnc� «as rcquircd to pa� `f into ERAF in Fiscal Ycar 200 �-0�4 of «hich `f «as attributablc for thc Projcct Arca. `f �.887.1>; in Fiscal Ycar 200�4-0� of «hich `f I 17.698 «as attributablc for thc Projcct Arc;a. and `f �.99�.0�4 I in Fiscal Ycar 200�-06 of «hich `f �60.8�9 is attributablc for thc Projcct Arca. Fiscn! Yenr 200;1-OS. Thc 200�4-0� Budgct Act (thc "Statc 200�4 Budgct Act") «as adoptcd b� thc Lcgislaturc on Jul� 29. 200�4. along «ith a numbcr of implcmcnting mcasures. and signcd b� Go� crnor Sch«arzcncggcr on Jul� � I. 200�4. Undcr thc Statc 200�4 Budgct Act. Gcncral Fund re� cnucs «crc projcctcd to incrc;asc �.6`%�. from �7�4.6 billion in Fiscal Yc;ar 200 �-0�4 (including appro�imatcl� �2. � billion in tobacco sccuritization bond procccds) to `f 77. � billion in Fiscal Ycar 200�4-0�. Thc rc� cnuc projcctions assumcd a continuing rcbound in California�s cconom� as rcflcctcd in sc� cral kc� indicators. E�cluding thc impact of thc cconomic rcco� cn bonds. Gcncral Fund c�pcnditures «crc cstimatcd to incrc;asc b� 6.7`%�. from �7�.6 billion in Fiscal Ycar 200 �-0�4 to `f 80.7 billion in Fiscal Yc;ar 200�4-0�. Thc Junc �0. 200� rescr� c«as projcctcd to bc `f 768 million. comparcd to an cstimatcd Junc �0. 200�4 rescr� c of �2.198 billion. T7�c Statc 200�4 Budgct Act and relatcd Icgislation dra�naticall� changcd thc Statc-local fiscal rclationship. Pursuant to Proposition I A. thc VLF «as rcduccd from 2`%� to 0.6�`%� of thc � aluc of thc � chicic. In ordcr to protcct local go� crnmcnts. thc rcduction in VLF rc� cnuc to citics and countics from this ratc changc «as to bc rcplaccd b� an incrc;asc in thc amount of propert� ta� thc� rccci� c. Rcdc� clopmcnt agcncics «crc again rcquircd to makc transfcrs to thc applicablc ERAF in thc aggrcgatc amount of `f2�0 million as implcmcntcd b� SB 1096. T7�c transfcrs rcquircd undcr SB 1096 to thc ERAF «cre subordinatc to pa� mcnts on bonds sccurcd b� ta� incrcmcnt rc� cnucs. For a morc dctailcd dcscription of SB 1096. scc ..SI:CURI I Y �NU SOURCI:S OF P�YMI:N�I OF I�I II: BONUS-Rcdct clopmcnt Plan Limitations-.S%3 /O)<... Undcr Proposition IA. for Fiscal Yc;ars 200�4-0� and 200�-06 onl�. thc rcplaccmcnt propert� ta�cs that citics and countics rccci� c«ould bc rcduccd b� �700 million. In firturc � cars. local go� crnmcnts «ould rccci� c thc fiill � aluc of thc VLF rc� cnuc that thc� «ould ha� c rccci� cd undcr currcnt la« . Also for thcsc t«o Fiscal Ycars. Proposition IA «ould requirc rcdc�clopmcnt agcncics to shift `f2�0 million in propert� ta� rc� cnuc thc� «ould othcn� isc rccci� c to schools. and spccial districts «ould shift ���0 million to schools. For a morc dctailcd dcscription of Proposition I A. SCC "CONS I I I U"I1ONnl, nNU S I n I�U"I ORY LIMI l n llONS ON Tnxi:s. iii:vi:Nui:s nNu Ai�i�iu�i>iiin ric�Ns—Proposition I A." Fiscn! Yenr 200 �-0<. Lcgislaturc on Jul� 7. 200i. Sch«arzcncggcr on Jul� I I. Thc 200�-06 Budgct Act (thc "Statc 200� Budgct Act") «as adoptcd b� thc along «ith a numbcr of implcmcnting mcasures. and signcd b� Go� crnor Thc 200� Statc Budgct Act rcflcctcd an impro� ing Statc fiscal picturc brought about b� bcttcr- than-c�pcctcd gro«th in Gcncral Fund re�cnucs. Thc 200� Statc Budgct Act fiinds thc Proposition �42 transfcr of gcncral fiind salcs ta�cs to transportation spccial fiinds. and includcd significant incrcascs in both K-12 and highcr cducation. Thc 200� Statc Budgct Act did not usc am of thc rcmaining ��.7 billion in dcficit-financing bonds authorizcd b� Proposition �7. and thc Statc prcpaid thc `f 1.2 billion VLF "gap�� loan that «as duc to local go� crnmcnts in Fiscal Ycar 2006-07 in August 200�. o�,o � z r�,�-� �49 At thc samc timc. 200� Statc Budgct Act includcd appro�imatcl� �6 billion in sa� ings and relatcd budgct solutions in ordcr to maintain budgctar� balancc. including. among othcr solutions. thc ERAF transfcr from rcdc� clopmcnt agcncics in thc aggrcgatc amount of �2�0 million Aftcr taking into account thc highcr rc� cnucs and othcr offsctting factors (including highcr Proposition 98 fiinding rcquircmcnts undcr currcnt la« ) thc resulting operating shortfall for Fiscal Ycar 200i-06 «as cstimatcd at ��4.9 billion. 200<-07 (�overi7or'.s Bucl�;et. Thc 2006-07 Go� crnor�s Budgct (thc "2006 Go� crnor�s Budgct��). rcicascd on Januar� 10. 200C. cstimatcs that thc Statc operating dcficit for Fiscal Ycar 200C-07 «ill bc `I�C. � billion. Thc 2006 Go� crnor�s Budgct is balanccd b� using a largc part of thc Fiscal Ycar 200�-06 cnding fiind balancc. Aftcr taking into considcration thc adjustmcnts of `f I.6 billion for thc rcpa� mcnt or prcpa� mcnt of prior obligations. including ��460 million to prcpa� thc cconomic rcco� cn bonds. thc cffccti� c operating dcficit for Fiscal Yc;ar 2006-07 is `f�4.7 billion. T7�c 2006-07 Go� crnor�s Budgct projccts to cnd Fiscal Ycar 2006-07 «ith a�61 � million total rescr� c. including `f�460 million in thc nc« I� crc;atcd Budgct Stabilization Account pursuant to Proposition �8 (cnactcd in 200�4). Statc Gcncral Fw�d re� cnucs and transfcrs for Fiscal Ycar 2006-07 arc projcctcd at `f91.� billion. an incrc;asc of `f �.9 billion comparcd «ith rc� iscd cstimatcs for Fiscal Ycar 200�-06. Statc Gcncral Fund c�pcnditures for Fiscal Ycar 2006-07 arc projcctcd at Y�97.9 billion. an incrc;asc of �7.6 billion. or 8.�4` �,. comparcd «ith rc� iscd cstimatcs for Fiscal Yc;ar 200�-06. No ERAF transfcrs from rcdc� clopmcnt agcncics arc includcd in thc 2006 Go� crnor�s Budgct. 200<-07 Mn�� Revisioi7. On Ma� I�. 2006. thc Go� crnor rcicascd a rc� ision to thc 2006 Go� crnor�s Budgct (thc "2006 Ma� Rc� ision��). Thc Ma� Rc� ision is bascd upon strongcr than c�pcctcd incomc ta� collcction in thc amount of appro�imatcl� `f 7.� billion sincc thc rcicasc of thc 2006 Go� crnor�s Budgct in Ja�uiar� 2006. Among othcr things. thc 2006 Ma� Rc� ision proposcs to (i) allocatc nc;arl� �40`%� of thc �7.� billion incrc;asc in rc� cnucs to K-12 and communit� collcgc cducation: «ith thc balancc for prcpa� mcnt of budgct dcbt: (ii) build up thc rescr� c: (iii) makc onc-timc and ongoing augmcntations to hcalth. resourccs. corrcctions and local go� crnmcnts (including an `f 87 million prcpa� mcnt of thc Fiscal Ycar 2007-08 obligation of thc Statc for prior-�c;ar mandatc costs): and (i�) makc a proposcd sctticmcnt to a la«suit im ol� ing school fiinding resulting in addcd annual out-� c;ar obligations a� craging morc than `f�400 million for sc� cn � cars. T7�c 2006 Ma� Rc� ision docs not includc am ERAF transfcrs from rcdc� clopmcnt agcncics. T7�c Fiscnl Ycnr 2006-07 Stntc Budgct is cspcctcd to bc subjcct to significant ncgotiation and reti ision prior to adoption b� thc Lcgislaturc of thc Statc. T7�crc can bc no assuranccs that thc final Fiscal Ycar 2006-07 Statc Budgct «ill not placc additional burdcns on local go� crnmcnts. including thc Rcdc� clopmcnt Agcnc�. or «ill not rc;allocatc or rcducc rc� cnucs to local go� crnmcnts. T7�c Rcdc� clopmcnt Agcnc� cannot prcdict «hcthcr thc Statc Lcgislaturc «ill cnact firturc Icgislation rcquiring additional or incrc;ascd firture shifts of ta� incrcmcnt rc� cnucs to thc Satc and/or to schools. «hcthcr through an arrangcment similar to ERAF or b� othcr arrangcmcnts, and. if so. thc cffcct on firturc Ta� Rc� cnucs. Natw•al Disasters Floocliiz�;. Flood zoncs arc idcntificd b� thc Fcdcral Emcrgcnc� Managcmcnt Agcnc� ("FEMA��). FEMA dcsignatcs land locatcd in a lo«- to modcratc-risk flood zonc (i.e. not in a floodplain) as bcing «ithin a Non-Spccial Flood Haz�rd Arc;a (a "NSFHA��). A NSFHA is an arc;a that is in a lo«- to modcratc-risk flood zonc (i.c. not in a floodplain) a,�d has Icss than a I`%� chancc of flooding c;ach �car. Whilc thc Cit� is o�,o � z r�,�-� �0 locatcd «ithin a NSFHA. sc� crc. conccntratcd rainfall could result in localizcd flooding and ri� cr o� crflo« s. T7�c Cit� can makc no rcprescntation that firturc maps «ill not bc rc� iscd to includc thc Cit� «ithin an arc;a dccmcd subjcct to flooding. T7�c occurrcncc of flooding in thc Projcct Arca could result in a rcduction in Ta� Rc� cnucs and Subordinatc Ta� Rc� cnucs. Such a rcduction of Ta� Rc� cnucs or Subordinatc Ta� Rc� cnucs could ha� c an ad� crsc cffcct on thc abilit� of thc Rcdc� clopmcnt Agcnc� abilit� to makc timcl� pa� mcnts of principal and intcrest on thc 2006 Loans. .Seismic Fnctors. Gcncrall�. scismic acti� it� occurs on a rcgular basis in thc Statc. Pcriodicall�. thc magnitudc of a singlc scismic c� cnt can causc significant ground shaking and potcntial damagc to propert� locatcd at or ncar thc ccntcr of sudi scismic acti� it� . Thc occurrcncc of sc� cre scismic acti� it� in thc Cit� could result in damagc to roads. infrastnicturc and othcr propert� «ithin thc Projcct Arca. T7�c occurrcncc of such a sc� cre scismic could ha� c a ncgati� c impact on asscsscd � alucs of ta�ablc � alucs of propert� in thc Projcct Arca and could result in a rcduction in Ta� Rc� cnucs and Subordinatc Ta� Rc� cnucs. Such a rcduction of Ta� Rc� cnucs or Subordinatc Ta� Rc� cnucs could ha� c an ad� crsc cffcct on thc abilit� of thc Rcdc� clopmcnt Agcnc� abilit� to makc timcl� pa� mcnts of principal and intcrest on thc 2006 Loans. Hazardous Substances An additional cmironmcntal condition that ma� result in thc rcduction in thc asscsscd �aluc of propert� «ould bc thc disco� cr� of a haz�rdous substancc that «ould limit thc bcncficial usc of tn�ablc propert� «ithin thc Projcct Arca. In gcncral. thc o« ncrs and operators of a propert� ma� bc rcquircd b� la« to rcmcd� conditions of thc propert� rclating to rcicascs or thrcatcncd relcascs of hazardous substanccs. T7�c o« ncr or operator ma� bc rcquircd to rcmcd� a hazardous substancc condition of propert� «hcthcr or not thc o« ncr or operator has am thing to do «ith crc;ating or handling thc haz�rdous substancc. T7�c cffcct. thcrcforc. should am of thc propert� «ithin thc Projcct Arca bc affcctcd b� a hazardous substancc. could bc to rcducc thc markctabilit� and � aluc of thc propert� b� thc costs of rcmcd� ing thc condition. Loss of Tax Exemption In ordcr to maintain thc c�clusion from gross incomc for fcdcral incomc ta� purposcs of thc intcrest on thc Bonds. thc Rcdc� clopmcnt Agcnc� has co� cnantcd in thc Indcnturc to compl� «ith thc applicablc rcquircmcnts of thc Intcrnal Rc� cnuc Codc of 1��86. as a�ncndcd. Thc intcrest on thc 2006 Scrics Bonds could bccomc includablc in gross incomc for purposcs of fcdcral incomc ta�ation rctroacti� c to thc datc of issuancc of such 2006 Scrics Bonds as a result of acts or omissions of thc Rcdc� clopmcnt Agcnc� in � iolation of this or othcr co� cnants in thc Indcnturc applicablc to thc 2006 Scrics Bonds. T7�c 2006 Scrics Bonds arc not subjcct to rcdcmption or am incrcasc in intcrest ratcs should an c� cnt of ta�abilit� occur and �� ill rcmain outstanding until maturitti or prior rcdcmption in accordancc �� ith thc pro� isions contnincd in thc Indcnturc. Scc "TnX Mn i'I1:Rs .. - Risk of Tax Audit In Dcccmbcr 1999. as a part of a largcr rcorganization of thc Intcrnal Rc� cnuc Scr� icc (thc "IRS��). thc IRS conu»cnccd operation of its Ta� E�cmpt and Go� crnmcnt Entitics Di� ision (thc "TE/GE Di� ision��). as thc succcssor to its Emplo� cc Plans and E�cmpt Organizations di� ision. Thc nc« TE/GE Di� ision has a subdi� ision that is spccificall� dc� otcd to ta�-c�cmpt bond compliancc. Public statcmcnts b� IRS officials indicatc that thc numbcr of ta�-c�cmpt bond c�aminations («hich «ould includc thc issuancc of sccuritics such as thc 2006 Scrics Bonds) is c�pcctcd to incrcasc significantl� undcr thc nc« TE/GE Di� ision. Thcrc is no assurancc that if an IRS CSA111111At1011 of thc 2006 Scrics Bonds «as undcrtakcn that it «ould not ad� crscl� affcct thc markct � aluc of thc 2006 Scrics Bonds. Scc ��Tnx Mn i i i:iis .. - OG012 po�-3 �� T7�c Rcdc� clopmcnt Agcnc� has not bccn contactcd b� thc IRS rcgarding thc c�amination of am of its bond transactions. Secondary Market T7�crc can bc no guarantcc that thcrc «ill bc a sccondan markct for thc 2006 Scrics Bonds or. if a sccondar� markct c�ists. that thc 2006 Scrics Bonds can bc sold for am particular pricc. Occasionall�. bccausc of gcncral markct conditions or bccausc of ad� crsc histon or cconomic prospccts conncctcd «ith a particular issuc. sccondar� markcting practiccs are suspcndcd or tcrminatcd. Additionall�. priccs of issucs for «hich a markct is bcing madc «ill dcpcnd upon thcn prc� ailing circumstanccs. Such priccs could bc substantiall� diffcrcnt from thc original purchasc pricc. TAX MATTERS In thc opinion of Richards. Watson c�. Gcrshon. A Profcssional Corporation. Bond Counscl. undcr c�isting la« intcrest on thc 2006 Scrics Bonds is c�cludcd from gross incomc for fcdcral incomc ta� purposcs undcr Scction 10 � of thc Intcrnal Rc� cnuc Codc of I 986. as amcndcd (thc "Codc��). and is not an itcm of ta� prcfcrcncc for purposcs of thc fcdcral altcrnati� c minimum ta� imposcd on indi� iduals and corporations. Bond Counscl «ill c�press no opinion as to am othcr fcdcral ta� conscqucnccs rcgarding thc 2006 Scrics Bonds. T7�c opinion on fcdcral ta� mattcrs «ill bc bascd on and «ill assumc thc accurac� of ccrtain rcprescntations and ccrtifications. a��d continuing complia��cc «ith ccrtain co� cnants. of thc Agcnc� and thc Authorit� that arc intcndcd to assurc thc forcgoing. including that thc 2006 Scrics Bonds arc and «ill rcmain obligations. thc intcrest on «hich is c�cludcd from gross incomc for fcdcral incomc ta� purposcs. Bond Counscl «ill not indcpcndcntl� � crifi thc accurac� of thosc rcprescntations and ccrtifications. T7�c Codc prescribcs a numbcr of qualifications and conditions for thc intcrest on statc and local go� crnmcnt obligations to bc and to rcmain c�cludcd from gross incomc for fcdcral incomc ta� purposcs. Somc of thcsc qualifications and conditions rcquirc firturc or continucd compliancc aftcr issuancc of thc obligations for thc intcrest to bc and to continuc to bc c�cludcd from thc datc of issuancc. Noncompliancc «ith thcsc qualifications and conditions b� thc Authorit� or thc Agcnc� ma� causc thc intcrest on thc 2006 Scrics Bonds to bc includcd in gross incomc for fcdcral incomc ta� purposcs rctroacti� cl� to thc datc of issuancc of thc 2006 Scrics Bonds. Thc Authorit� and thc Agcnc� ha� c co� cnantcd to takc thc actions rcquircd of thcm for thc intcrest on thc 2006 Scrics Bonds to bc and to rcmain c�cludcd from gross incomc for fcdcral incomc ta� purposcs. and not to takc am actions that «ould ad� crscl� affcct that c�clusion. Undcr thc Codc. a portion of thc intcrest on thc 2006 Scrics Bonds carncd b� ccrtain corporations ma� bc subjcct to a corporatc altcrnati� c minimum ta�. In addition. intcrest on thc 2006 Scrics Bonds ma� bc subjcct to a branch profits ta� imposcd on ccrtain forcign corporations doing busincss in thc Unitcd Statcs a��d to a ta� imposcd on c�ccss nct passi� c incomc of ccrtain S corporations. Undcr thc Codc. thc c�clusion of intcrest from gross incomc for fcdcral incomc ta� purposcs ma� ha� c ccrtain ad� crsc fcdcral incomc ta� conscqucnccs on itcros of incomc. dcduction or crcdit for ccrtain ta�pa� crs. including financial institutions. ccrtain insurancc companics. rccipicnts of Social Sccurit� and Railroad Rctircmcnt bcncfits. thosc that arc dccmcd to incur or continuc indcbtcdncss to acquirc or carr� ta�- c�cmpt obligations. and indi� iduals othcn� isc cligiblc for thc carncd incomc ta� crcdit. Thc applicabilit� and c�tcnt of thcsc and othcr ta� conscqucnccs «ill dcpcnd upon thc particular ta� status or othcr ta� itcros of thc o« ncrs of thc 2006 Scrics Bonds. Bond Counscl «ill c�press no opinion rcgarding thosc conscqucnccs. o�,o � z r�,�-� i2 Am c�ccss of thc statcd redcmption pricc at maturit� of thc 2006 Scrics Bonds o� cr thc initial offcring pricc to thc public of thc 2006 Scrics Bonds sct forth on thc insidc co� cr of this Official Statcmcnt is "original issuc discount.�� Such original issuc discount accniing on a 2006 Scrics Bond is trc;atcd as intcrest c�cludcd from thc gross incomc of thc o« ncr thcrcof for fcdcral incomc ta� purposcs and c�cmpt from California personal incomc ta�. Original issuc discount on am 2006 Scrics Bond purchascd at such initial offcring pricc and pursuant to such initial offcring «ill accnic on a scmiannual basis o� cr thc tcrm of thc 2006 Scrics Bond on thc basis of a constant � icld mcthod and. «ithin cach scmiannual period. «ill accnic on a ratablc dail� basis. T7�c amount of original issuc discount on such a 2006 Scrics Bond accniing during cach period is addcd to thc adjustcd basis of such 2006 Scrics Bond to dctcrminc ta�ablc gain upon disposition (including salc. rcdcmption or pa� mcnt on maturit� ) of such 2006 Scrics Bond. T7�c Codc includcs ccrtain pro� isions rclating to thc accnial of original issuc discount in thc casc of purchascrs of thc 2006 Scrics Bonds «ho purchasc thc 2006 Scrics Bonds othcr than at thc initial offcring pricc and pursuant to thc initial offcring. Am person considcring purchasing a 2006 Scrics Bond should consult his on c�r o«n ta� ad�isors «ith respcct to thc ta� conscqucnccs of o« ncrship of bonds «ith original issuc discount. including thc trc;atmcnt of purchascrs «ho do not purchasc in thc original offcring and thc original offcring pricc. thc allo«ancc of a dcduction for am loss on a salc or othcr disposition. and thc trc;atmcnt of accnicd original issuc discount on such bonds undcr fcdcral indi� idual and corporatc altcrati� c minimum ta�cs. If thc 2006 Scrics Bonds «crc offcrcd and sold to thc public at a pricc in c�ccss of thcir statcd rcdcmption pricc (thc principal amount) at maturit�. that c�ccss constitutcs "prcmium.�� For fcdcral incomc ta� purposcs. that prcmium is amortizcd o� cr thc period to maturit� of thc 2006 Scrics Bonds. bascd on thc � icld to maturit� of thc 2006 Scrics Bonds. compoundcd scmiannuall� . No portion of that prcmium is dcductiblc b� thc o« ncr of a 2006 Scrics Bond. For purposcs of dctcrmining thc o« ncr�s gain or loss on thc salc. rcdcmption (including rcdcmption at maturit� ) or othcr disposition of a 2006 Scrics Bond. thc o« ncr�s ta� basis in thc 2006 Scrics Bond is rcduccd b� thc amount of prcmium that accnics during thc period of o«ncrship. As a result. an o«ncr ma� rc;alizc ta�ablc gain for fcdcral incomc ta� purposcs from thc salc or othcr disposition of a 2006 Scrics Bond for an amount cqual to or Icss than thc amount paid b� thc o« ncr for that 2006 Scrics Bond. A purchascr of a 2006 Scrics Bond in thc initial public offcring at thc pricc for that 2006 Scrics Bond statcd on thc insidc co� cr of this Official Statcmcnt «ho holds that 2006 Scrics Bond to maturit� «ill rc;alizc no gain or loss upon thc rctircmcnt of that 2006 Scrics Bond. O« ncrs of thc 2006 Scrics Bonds should consult thcir o« n ta� ad� iscrs as to thc dctcrmination for fcdcral incomc ta� purposcs of thc amount of prcmium properl� accniablc in am period «ith respcct to thc 2006 Scrics Bonds and as to othcr fcdcral ta� conscqucnccs and thc trc;atmcnt of prcmium for purposcs of statc and local ta�cs on. or bascd on. incomc. Purchascrs of thc 2006 Scrics Bonds at othcr than thcir original issuancc at thc respccti� c priccs indicatcd on thc insidc co� cr of this Official Statcmcnt should consult thcir o« n ta� ad� iscrs rcgarding othcr ta� considcrations such as thc conscqucnccs of markct discount or prcmium. In thc fiirthcr opinion of Bond Counscl. intcrest on thc 2006 Scrics Bonds is c�cmpt from personal incomc ta�ation imposcd b� thc Statc of California. A cop� of thc proposcd form of Bond Counscl�s final appro� ing opinion «ith respcct to thc 2006 Scrics Bonds is attachcd hcrcto as AI�I�I:Nu►x E. o�,o � z r�,�-� i; APPROVAL OF LECAL PROCEEDINGS Ccrtain Icgal mattcrs incidcnt to thc authorization. issuancc and salc of thc 2006 Scrics Bonds arc subjcct to thc appro�al of Richards. Watson c�. Gcrshon. A Profcssional Corporation Los Angcics. California. Bond Counscl. A cop� of thc proposcd form of Bond Counscl�s opinion is containcd in AI'1'I:NuIX E to this Official Statcmcnt. and thc final opinion «ill bc madc a� ailablc to thc o« ncrs of thc 2006 Scrics Bonds at thc timc of dcli� cr� of thc 2006 Scrics Bonds. Ccrtain Icgal mattcrs «ill bc passcd upon for thc Rcdc� clopmcnt Agcnc� b� . and b� Lofton c�. Jcnnings. San Francisco. California. Disclosurc Counscl. Bond Counscl «ill also dcli� cr a supplcmcntal opinion as to thc accurac� in all matcrial respccts of thc dcscriptions containcd in this Official Statcmcnt of thc Bonds. and Bond Counscl�s fcdcral and Statc ta� opinions. E�ccpt as c�pressl� dcscribcd in said opinion. Bond Counscl is not passing upon and undcrtakcs no responsibilit� for thc accurac�. complctcncss or fairncss of thc information containcd in this Official Statcmcnt. Bond Counscl and Disclosurc Counscl «ill c;ach rccci� c compcnsation from thc Rcdc� clopmcnt Agcnc� that is contingcnt upon thc salc and dcli� cr� of thc 2006 Scrics Bonds. ABSENCE OF MATERIAL LITIGATION General Thcrc is no litigation pcnding conccrning thc �alidit� of thc 2006 Indcntures or thc 2006 Scrics Bonds or thc issuancc and dcli� cr� thcrcof. thc c�istcncc of thc Financing Authorit� or thc Rcdc� clopmcnt Agcnc�. thc titic of thc officcrs thcrcof «ho shall c�ccutc thc 2006 Scrics Bonds to thcir respccti� c officcs. thc plcdgc of Rc� cnucs to thc pa� mcnt of thc 2006 Scnior Parit� Bonds. thc plcdgc of Subordinatc Rc� cnucs to thc pa� mcnt of thc 2006 Subordinatc Capital Apprcciation Bonds. thc plcdgc of Ta� Rc� cnucs to thc pa� mcnt of thc 2006 Scnior Pariri Loan or thc plcdgc of Subordinatc Ta� Rc� cnucs to thc pa� mcnt of thc 2006 Subordinatc Loan. Other Matters In thc rcgular coursc of thc busincss. thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� arc cach partics to a� arict� of pcnding and thrcatcncd la« suits and administrati� c procccdings. in addition to thosc spccificall� discusscd hcrcin. Ncithcr thc Financing Authorit� nor thc Rcdc� clopmcnt Agcnc� bclic� cs that am such la« suits or procccdings «ill ha� c a matcrial ad� crsc cffcct on thc operations or financial condition of thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc�. respccti� cl� . FINANCIAL ADVISOR Dcl Rio Ad� isors. LLC. Modcsto. California. has scr� cd as Financial Ad� isor to thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� «ith respcct to thc salc of thc 2006 Scrics Bonds. T7�c Financial Ad� isor has assistcd thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� in thc rc� ic« of this Official Statcmcnt and in othcr mattcrs rclating to thc planning. stnicturing. c�ccution and dcli� cr� of thc 2006 Scrics Bonds. Thc Financial Ad� isor has not indcpcndcntl� � crificd am of thc data containcd hcrcin or conductcd a dctnilcd in� cstigation of thc affairs of thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� to dctcrminc thc accurac� or complctcncss of this Official Statcmcnt. Duc to thcir limitcd participation. thc Financial Ad� isor assumcs no responsibilit� for thc accurac� or complctcncss of am of thc information containcd hcrcin. - - o�,o � z r�,�-� i.� T7�c Financial Ad� isor «ill rccci� c compcnsation from thc Rcdc� clopmcnt Agcnc� contingcnt upon thc salc and dcli� cr� of thc 2006 Scrics Bonds. CONTINUING DISCLOSURE T7�c Rcdc� clopmcnt Agcnc� has co� cnantcd in thc Continuing Disclosurc Agrccmcnt datcd Jul� .2006. b� and among thc Rcdc�clopmcnt Agcnc�. thc Tnistcc. and MuniFinancial Inc.. as Disscmination Agcnt for thc bcncfit of thc holdcrs and bcncficial o« ncrs of thc 2006 Scrics Bonds to pro� idc ccrtain financial information and operating data rclating to thc Rcdc� clopmcnt Agcnc� c;ach � car b� not latcr than thc datc «hich is si� months follo« ing thc cnd of thc Fiscal Yc;ar. commcncing «ith thc rcport for thc 200�-06 Fiscal Yc;ar (thc "Annual Rcport��). and to pro� idc noticcs of thc occurrcncc of ccrtain cnumcratcd c� cnts. if matcrial. T7�c Annual Rcport and noticcs of matcrial c� cnts «ill bc filcd b� thc Tnistcc as Disscmination Agcnt «ith c;ach nationall� Rccognizcd Municipal Sccuritics Information Rcpositor� and «ith am thcn c�isting Statc Rcpositor�. if am . Currcntl�. thcrc is no Statc Rcpositor� . T7�c co� cnants sct forth in thc Continuing Disclosurc Agrccmcnt ha� c bccn madc b� thc Rcdc� clopmcnt Agcnc� in ordcr to assist thc Undcn� ritcrs in compl� ing «ith Sccuritics and E�changc Commission Rulc I�c2-12(b)(�). Thc spccific naturc of thc information to bc containcd in thc Annual Rcport and thc noticcs of matcrial c� cnts is sct forth in APPI:NUIX F-"FORM OF CON�I INUING DISCLOSURI: AGRI:I:MI:N�I ... T7�c Rcdc� clopmcnt Agcnc� has nc� cr failcd to compl� in all matcrial respccts «ith am prc� ious undcrtakings «ith rcgard to said Rulc to pro� idc annual rcports or noticcs of matcrial c� cnts. UNDERWRITING Pursuant to thc tcrms of a Bond Purchasc Agrccmcnt datcd . 2006 (thc "Purchasc Agrccmcnt��). among thc Financing Authorit�. thc Rcdc� clopmcnt Agcnc� and Citigroup Global Markcts. Inc. (thc "Undcn�ritcr �). thc Undcn�ritcr «ill purchasc all of thc 2006 Scrics Bonds. if am arc purchascd. ho« c� cr. thc obligation of thc Undcn� ritcr to makc such purchasc is subjcct to ccrtain tcrms and conditions sct forth in thc Purchasc Agrccmcnt. T7�c public offcring priccs of thc 2006 Scrics Bonds ma� bc changcd from timc to timc b� thc Undcn� ritcr. Thc Undcn� ritcr ma� offcr and scll 2006 Scrics Bonds to ccrtain dcalcrs and othcrs at a pricc lo« cr than thc offcring pricc statcd on thc insidc co� cr pagc hcrcof. Cw•rent Interest Bonds T7�c Undcn�ritcr purchascd thc Currcnt Intcrest Bonds. at a pricc of � (rcprescnting thc principal amount of thc Currcnt Intcrest Bonds Icss an Undcn�ritcr�s discount in thc amount of `f ). Capital Appreciation Bonds T7�c Undcn� ritcr purchascd thc Capital Apprcciation Bonds. at a pricc of `f (rcprescnting thc principal amount of thc Capital Apprcciation Bonds Icss an Undcn�ritcr�s discount in thc amount of `f ). 2006 Subordinate Capital Appreciation Bonds T7�c Undcn� ritcr purchascd thc 2006 Subordinatc Capital Apprcciation Bonds. at a pricc of `f (rcprescnting thc principal amount of thc 2006 Subordinatc Capital Apprcciation Bonds Icss an Undcn� ritcr�s discount in thc amount of � 1. o�,o � z r�,�-� ii RATI NGS Standard c�. Poor�s Ratings Scr� iccs. a di� ision of thc McGra« Hill Companics ("Sc�.P��) and Fitch Inc. ("Fitch��) ha� c assigncd thcir ratings of " �� and " .�� respccti� cl� . to thc 2006 Scrics Bonds �� ith thc undcrstanding that upon dcli� cr� of thc 2006 Scrics Bonds thc Insurancc Polic� «ill bc issucd b� thc Bond Insurcr. Scc "Bc)NU INSURnNCI:�� And APPI:NUIX H-"SPI:CIMI:N FINnNCInI, GUnRnN�I Y INSURnNCI: Pc�I,ICY.�� Sc�.P and Fitch ha� c also assigncd uninsurcd ratings of " �� and " .�� respccti� cl�. to thc 2006 Scrics Bonds. A rating rcflccts onl� thc � ic« of thc agcnc� gi� ing such rating and is not a rccommcndation to bu�. scll or hold thc 2006 Scrics Bonds. An c�planation of thc significancc of thc rating ma� bc obtaincd from Sc�.P at Standard c�. Poor�s. �� Watcr Strcct. Nc« York. Nc« York 100�41 and from Fitch at Fitch Ratings. Onc Statc Strcct Plaz�. Nc« York. Nc« York 100�41. Thcrc is no assurancc that such ratings «ill continuc for am gi� cn period of timc or that thc� «ill not bc rcduccd or «ithdra« n cntircl� b� Sc�.P or Fitch. if in thcir indi� idual judgmcnt circumstanccs so «arrant. T7�c Rcdc� clopmcnt Agcnc� has not undcrtakcn am responsibilit� to opposc am such proposcd re� ision or «ithdra«al. Am such rc� ision or «ithdra«al ofa rating ma� ha� c an ad� crsc cffcct on thc markctabilit� or markct pricc of thc 2006 Scrics Bonds. FINANCIAL STATEMENTS Thc auditcd financial statcmcnts of thc Rcdc� clopmcnt Agcnc� for Fiscal Ycar 200�4-0�. prcparcd b� Lancc. Soll and Lunghard LLP. indcpcndcnt ccrtificd public accountants. in accordancc «ith Go� crnmcntal Accounting Standards Board guidclincs. arc includcd as APPI:NUIX B attachcd hcrcto. Lancc. Soll and Lunghard LLP �has/has not� conscntcd to thc inclusion of its rcport in AI'1'I:NuIX B. but has not undcrtakcn to updatc its rcport or takc am action intcndcd or likcl� to clicit information conccrning thc accurac�. complctcncss or fairncss of statcmcnts madc in this Official Statcmcnt and no opinion is c�presscd b� Lancc. Soll and Lunghard LLP «ith respcct to am c� cnt subscqucnt to thc datc of its rcport. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) o�,o � z r�,�-� �6 MISCELLANEOUS All of thc prcccding summarics of thc 2006 Scrics Bonds. thc 2006 Indcntures. thc 2006 Loan Agrccmcnts. thc Rcdc� clopmcnt La«. thc Rcdc� clopmcnt Plan. thc Projcct Arca. othcr applicablc Icgislation. agrccmcnts and othcr documcnts arc madc subjcct to thc pro� isions of thc 2006 Scrics Bonds and such documcnts. respccti� cl�. and do not purport to bc complctc statcmcnts of am or all of such pro� isions. Rcfcrcncc is hcrcb� madc to such documcnts on filc «ith thc Rcdc� clopmcnt Agcnc� for fiirthcr information in conncction thcrc« ith. Am statcmcnts madc in this Official Statcmcnt im ol� ing mattcrs of opinion or of cstimatcs. «hcthcr or not c�pressl� statcd. are sct forth as such and not as rcprescntations of fact. and no rcprescntation is madc that am ofthc cstimatcs «ill bc rc;alizcd. T7�c c�ccution and dcli� cn of this Official Statcmcnt b� thc � E�ccuti� c Dircctor� of thc Financing Authorit� has bccn dul� authorizcd b� thc Financing Authorit� . PALM DESERT FINANCING AUTHORITY : �Carlos L. Ortcga. E�ccuti� c Dircctor� o�,o � z r�,�-� i7 APPENDIX A REPORT OF THE FISCAL CONSULTANT o�,o � z r�,�-� A- I APPENDIX B REDEVELOPMENT AGENCY AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2005 o�,o � z r�,�-� B- I APPENDIX C GENERAL INFORMATION CONCERNING THE CITY OF PALM DESERT 7%e .fullutirin,�� infui�matiun CUl9CL'l'Y!!Yl,�� tl�e ('ih� uf' l'alm l)e.sei�t. tl�e ('ui�nh� uf' Ilivei�.sic% ancl .1'tll'PU1lYlLllYl��� C(PL'C(.1' !.1' !YlC�1lL%L'L% Ul9/1' fUl' 1�1L' �)1ll�)U.SL' Uf .1'tl�)�)�17Yl��� ���L'Y!L'l'Cf� !YlfUl'197Cf1lUl9 PL'���Cfl'LllYl��� 1�1L' CU177/7711Y!!11'. Overview Thc Cit� of Palm Dcscrt (thc "Cit� ��). incorporatcd in No� cmbcr 26. 197 � Zs a gcncral la« cit�. bccamc a chartcr cit� through thc adoption of Ordinancc 8�8 b� thc Cit� Council on Januar� 8. 1998. Thc Cit� is locatcd in thc Coachclla Vallc� and is appro�imatcl� mid-«a� bct«ccn thc citics of Indio and Palm Springs. I 17 milcs cast of Los Angcics. I I 8 milcs northcast of San Dicgo and � I� milcs southcast of San Francisco. Thc Cit� occupics an arca of appro�imatcl� 26 squarc milcs. Elc� ation of thc Cit� is 2�4 � fcct and thc mcan tcmperaturc is 7�. I dcgrccs. E�ccpt in summcr. thc «cathcr is mild and annual a� cragc rainfall is �. �8 inchcs. According to thc Statc Dcpartmcnt of Fina��cc. thc Cit� population as of Januan I. 2006 «as appro�imatcl� �49.� �9. an incrcasc of appro�imatcl� 19.�`%� sincc 2000. attributablc in part to tcrritorial annc�ation. - - Government T7�c Cit� Council is compriscd of fi� c mcmbcrs. cicctcd at largc for four-� car staggcrcd tcrms c� cr� t��o � cars. Thc Cit� Council sciccts onc of its mcmbcrs to scr� c as Ma� or for a onc-� car tcrm and appoints a Cit� Managcr to conduct thc da� to da� busincss of thc Cit� and thc Cit� Clcrk. Thc Cit� Attornc� is appointcd b� . Thc Cit� operatcs as "Contract Cit��� utilizing. primaril�. agrccmcnts «ith othcr go� crnmcntal cntitics. pri� atc companics and indi� iduals to pro� idc scr� iccs. Contractcd scr� iccs includc policc and firc protcction pro� idcd through thc Count�. animal control. hcalth scr� iccs. Icgal scr� iccs and landscapc maintcnancc. T7�c Cit� Council also scr� cs as thc go� crning board of thc Financing Authorit�. thc Rcdc� clopmcnt Agcnc� . thc Housing Authorit� and thc Parking Authorit� and thc Cit� Mangcr scr� cs as thc E�ccuti� c Dircctor of thc Financing Authorit�. thc Rcdc�clopmcnt Agcnc�. thc Housing Authorit� and thc Parking Authorit�. Thc Cit� Attornc� and thc Cit� Clcrk also scr�c as thc Gcncral Counscl and Sccrctan. respccti� cl� . of thc Rcdc� clopmcnt Agcnc� and thcsc Authoritics. Thc currcnt mcmbcrs of thc Cit� Council and kc� administrati� c personncl of thc Cit� arc listcd in Tablc C- I and Tablc C-2. respccti� cl� : TABLE C-1 CITY OF PALM DESERT City Council Members Namc Jim Fcrguson Richard S. Kcll� Jc;an M. Bcnson Buford A. Critcs Robcrt A. Spicgcl Officc Ma� or Ma� or Pro Tcm Councilmcmbcr Councilmcmbcr Councilmcmbcr Tcrm E�pires No� cmbcr 2006 No� cmbcr 2008 No� cmbcr 2006 No� cmbcr 2008 No� cmbcr 2008 Occuuation Attornc� Rctircd GTE E�ccuti� c Rctircd Tra� cl Industr� Collcgc Profcssor Rctircd Rctail Industr� Profcssional E�ccuti� c o�,o � z r�,�-� c-i TABLE C-2 CITY OF PALM DESERT Key Administrative Personnel Namc Carlos L. Ortcga Justin McCarth� Paul S. Gibson Da� id L. Yrigo� cn Rachcllc D. Klasscn Population Position Cit� Managcr Assistant Cit� Managcr Trc;asurcr/Financc Dircctor Rcdc� clopmcnt Dircctor Cit� Clcrk Bct��ccn 200Q and 20Q6. thc Cit��s population incrcascd b� a totnl of 8.089 or appro�imatcl� 19.�`%�. In addition to permancnt residcnts. thc Cit� has appro�imatcl� I�. 000 sc;asonal residcntial residcnts «ho li�c thrcc to si� month in thc Cit�. primaril� during thc «intcr months. Tablc C-� illustratcs thc population of thc Cit�. thc Count� and thc Statc for 2000 through 2006. Table C-3 CITY OF PALM DESERT AND RIVERSIDE COUNTY AND STATE OF CALIFORNIA POPULATION Ycar (Januar� I ) 2000 2001 2002 200� 2oo�t 200� 200�� �41.�4�0 �4 I .900 �42.900 �4�4. �00 �t�.�� i o ���.;��; �t��.�;�� Ri� crsidc Count� 1.��7.800 1.�8 �.600 1.6�4�. �00 I .7 I 9.000 i.xo�.x�x i.xxx. � i i i.���;.;;o Statc of California ;�4.207.000 ��4. �8�.000 � i3O � 7.000 �i,i91.000 �6.27I.09I ;��.�2x. i ���� ;�.i�2.oi� Sottrces: ( iiiird .Sicdr.s l)c/�cu•O�u�iii o/ ('onu�u�irr. 13�u•rcn� o/ du� ('ritsus /in• ?000 cuid .Sicdr o/ ('cdi/imiici l)c'pcu•O�u�iii o/ l'7iicuicr /br rrmciiiiiii�; t'rcir.s. Labor Force and Employment T7�c main sourccs of rc� cnuc in thc Cit� arc dcri� cd from tourism and salcs ta�. Historicall�. thc uncmplo� mcnt ratc in thc Cit� has bccn lo«cr than that for thc Count� and thc Statc. Cit� of Palm Dcscrt o�,o � z r�,�-� c-z Tablc C-�4 tablc rcprescnts thc labor pattcrns in thc Cit�. thc Count�. thc Statc. and thc Unitcd Statcs from 2001 through 200i, - - Table C-4 CITY OF PALM DESERT, RIVERSIDE COUNTY, STATE OF CALIFORNIA AND UNITED STATES CIVILIAN LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT 2001 through 2005 Uncmplo� mcnt Ycar and Arc;a Labor Forcc Emulo� mcnt Uncmulo� mcnt Ratc 2001 Cit� 20.000 19.�400 600 �. I`%� Count� 711.200 672.�00 �8.700 �.�4 Statc 17. I�0. I 00 16.217.�00 9�2.600 �.�4 Unitcd Statcs 1�41.81 �.000 I�i,07 �.000 6.7�42.000 �4.8 2002 Cit� 2 I.100 20. �00 800 �.6 Count� 7�49.800 702.;00 �47.�00 6. � Statc 17. �26.900 16.16�. I 00 I.161.800 6.7 Unitcd Statcs 1�4�4.86 �.000 I�6.�48�.000 8. �78.000 �.8 2003 Cit� 21.900 21.100 800 �.6 Count� 781.600 7;2.;00 �49.;00 6. � St�tc 17.�41�4.000 16.22�.i00 1.190.i00 6.8 Unitcd Statcs 1�46.�10.000 I�7.7�6.000 8.77�4.000 6.0 2004 Cit� 22.800 22.100 700 �. � Count� 812.000 76�4.900 �47.100 �.8 Statc 17.��2.;00 16.�4�9.900 1.092.�400 6.2 Unitcd Statcs 1�47.�401.000 I�9.2�2.000 8.1�49.000 �.� 2005 Cit� 2�4.000 2�. �00 700 2.8 Count� 8�49.600 806.700 �42.900 �.I Statc I 7.69�.600 I 6.7�46.900 9�48.700 �.�4 Unitcd Statcs 1�49.�21.000 1�41.7�0.000 7.�91.000 �.I Sottrces: ('cdi/imiici .Sicdr l:mplotnu�iii l)rrrlopnu�iii l)c/�cu•O�u�iii cuid (�..5. l)c/�cu•O�u�iii o/7.cibor. 13�u•rcn� o/7.ci6or.Sicdi.siic.s. OG012 pu�-3 c-� Tablc C-� dcscribcs thc largcst cmplo� crs in thc Cit� . Table GS CITY OF PALM DESERT+ LARGEST EMPLOYERS (As of January 1, 2006) Comuam Product/Scr� icc Numbcr of Emulo� ccs JW Marriott Dcscrt Springs Rcsort Sccuritas Sccurit� S� c USA Inc. Collcgc of thc Dcscrt Marriott's Dcscrt Spas Villas Sunshinc Landscapc Dcscrt Vallc� Industrics Marriott O«ncrship Rcsorts Inc. Sunrisc Colom Co. Foundation For thc Rctardcd Timc Warncr Cablc Bighorn Golf Club Springs At thc Fountains Mac�'s Wcst Montcrc� Palms Hcalth Carc Fountains At thc Carlotta Indian Ridgc Countr� Club Williams Mcchanical Inc. Palm Vallc� Countr� Club Koala Tcc Printing Hospitalit� Sccurit� Scr� iccs Education Hospitalit� Landscaping Scr� iccs Busincss Support Scr� iccs Hospitalit� Golf Coursc Communit� Social Scr� iccs Tciccommunications Golf Rcsort Com alcsccnt and Nursing Carc Rctail Hc;althcarc Com alcsccnt and Nursing Carc Golf Coursc Communit� Plumbing - Golf Coursc Communit� Scrccn Printing � Fecicral ancl Statc Go� emment not incluclecl. Sow-cc: /�mcrica's Labor Market Intimnation S�steml/�I,MISI. Commercial Activity I. �00 700 6�0 i00 i00 �400 �00 2�0 2 �6 220 220 200 200 200 200 200 200 200 200 A salcs ta� is imposcd on rctail salc or consumption of personal propert� . Salcs ta� rc� cnucs arc dctcrmincd b� thc total ta�ablc transactions «ithin a jurisdiction and distributcd b� thc Statc Board of Equalization to thc jurisdiction «hcrc thc salc took placc. Salcs ta�cs collcctcd from mcrchants «ith no permancnt placc of busincss (i.e.. manufacturcrs. constniction contractors. ctc.) arc accumulatcd to a Count� «idc or Statc-« idc (out-of-statc busincsscs) pool a��d distributcd to citics and countics in proportion to thcir collcctions from all salcs ta�pa� crs. T7�c � aluc and � olumc of thcsc ta�ablc tra��sactions arc dcpcndcnt on cconomic conditions and othcr factors. Such factors includcd thc Ic� cl of inflation affccting thc pricc of goods and scr� iccs subjcct to thc salcs ta�. thc ratc of population gro«th in thc gcncral arca. thc charactcristics of rctail dc� clopmcnts. such as thc rclati� c sizc of markct scr� icc arc;as. thc scnsiti� it� of thc t� pcs of busincsscs «ithin thc Cit� to changcs in thc cconom�. and compcting rctail cstablishmcnts outsidc thc Cit�. A dctcrioration of cconomic conditions and othcr factors influcncing ta�ablc salcs gcncratcd in thc Cit�. ma� rcducc thc Cit� �s salcs ta� rc� cnucs. o�,o � z r�,�-� c-� Tablc C-6 summarizcs ta�ablc transactions in thc Cit� for calcndar � cars 2000 through 200�4. TABLE C-6 CITY OF PALM DESERT Taxable Retail Sales Data Calendar Years 2000 to 2004 ($ in 000's) R►�rn►►. Src�►i►:s Apparcl Stores Gcncral Mcrchandisc Food Stores Eating c�. Drinking Placcs Homc Furnishings and Applianccs Building Matcrials and Farm Implcmcnts Auto Dcalcrs and Auto Supplics Scr� icc Stations Othcr Rctail Stores Tc� i n►. R► � rn►►. S rc�►i►:s All Othcr Outicts Tc�rn►. A►.►. Ou r►.►�rs Most recent anntkil cl�ita a�ailablc. Sottrcc: .S�cdr l3�xu•r! o/7up�cdizcdioii. Construction Activity 2000 �92. I 92 269.776 ��.817 I �;.970 i zx.x���� �7.86� x. i ox 2�.807 227.�91 I .020.02 � I 97.96 I � I .2 I 7.986 f►.IiIill �9;.792 272.8�6 �2.282 I ��.91 I iz�.i;o 6�4.2 � I x.xz� 22.6> ; 220.2�2 I .0 I �.9 � 2 19�.1 �7 � I .2 I I .069 2002 �97.92�4 z�x.�x � �1.7�8 i�tx.zzx i z��.��z; ��4.111 ��.��o�t 2�.9�0 zzx.zx�� 1.019. �27 190_Oi8 `f I .209. � 8 � 200� x i ox.xz�� ;o�. i x�� � 2.�46 I i �2.�ox i;;.�����t i6.180 x.z i i �9.1�46 z�t;.�t��t I.10;.689 19;_0�41 � I .296.7;0 200�4+ x i;z.x; i ��to.2�� �47.�4i i i���.�i� i ��.��z i 68.7 �7 �.x��z �4�.�8� z���t. i z�� i.zzx. i i z 20�_ I 8�4 � I .�4;;.296 In Fiscal Ycar 200�4-0�. thc Cit� issucd constniction permits � alucd in c�ccss of � 170 million. T7�is total amount. appro�imatcl� 27.�`%� consistcd of nc« singlc famil� constniction and appro�imatcl� 10. �'%� consistcd of nc« multifamil� constniction. A fi� c-� car histor� of building permits and � aluation appc;ars in T�bi� c-�. � � � Table C-7 CITY OF PALM DESERT BUILDING PERMITS AND VALUATIONS 2001-2005 Rcsidcntial Numbcr of Units Ycar Sin�lc Famil� 2001 2�� 2002 221 200� 2�7 2oo�t �2� 200; i o0 Multifamil� �4 I I �10 101 iii i;; Valuation (`G in OOO�s)+ � 120.07 �.2 I 00.�486.0 x��.;x�.�� io�.��x.2 �x. i;o.�� + i„��«a�� ����«� <>r�„a���a�k�� «„���. �����r����<»,� ancl aciclitions. Sow-cc: ('oiisntiu•iioii /iirh�snl�Krsrc,rc•l� 13�x,rd. 13��ildiii�; l'rii��i�.S��n�rt�. Nonresidcntial Valuation (`G in OOO�s)+ y� �6. � 19.0 �41.�41 �.7 20. i 2;.0 �t;.i i2.i ��2.�;;.�t Total `f I �6.;92.0 I �4 I .899. 7 i o��.� i o.�� i�t��.x�o. � i �o.����;.; OG012 pu�-3 c-� Effective Buying Income "Effccti� c bu� ing incomc" ("EBl") is a classification dc� clopcd c�clusi� cl� b� .S'cr(e.s c� Mco�ketin� Mana,��ement magazinc to distinguish it from othcr sourccs rcporting incomc statistics. EBI is dcfincd as "monc� incomc�� Icss personal ta� and nonta� pa� mcnts - a numbcr oftcn rcfcrrcd to as "disposablc�� or "aftcr-ta��� incomc. Monc� incomc is thc aggrcgatc of «agcs and salarics. nct farm and nonfarm sclf- cmplo� mcnt incomc. intcrest. di� idcnds. nct rcntal and ro�alt� incomc. Social Sccurit� and railroad rctircmcnt incomc. othcr rctircmcnt and disabilit� incomc. public assistancc incomc. uncmplo� mcnt compcnsation. Vctcrans Administration pa� mcnts. alimom and child support. militar� famil� allotmcnts. nct «innings from gambling and othcr periodic incomc. Monc� incomc docs not includc monc� rccci� cd from thc salc of propert� (unlcss thc rccipicnt is cngagcd in thc busincss of sclling propert� ): thc � aluc of "in-kind�� incomc such as food stamps. public housing subsidics. mcdical carc. cmplo� cr contributions for persons. ctc.: «ithdra«al of bank dcposits: monc� borro«cd: ta� rcfiinds: c�changc of monc� bct«ccn rclati�cs li� ing in thc samc houschold: gifts and lump-sum inhcritanccs. insurancc pa� mcnts. and othcr t��pcs of Iwnp-sum rcccipts. EBI is computcd b� dcducting from monc� incomc all personal incomc tascs (fcdcral. statc and local). personal contributions to social insurancc (Social Sccurit� and fcdcral rctircmcnt pa� roll dcductions). and ta�cs on o« ncr-occupicd nonbusincss rc;al cstatc. T7�c total EBI for thc Cit�. as rcportcd b� Salcs c�. Markcting Managcmcnt in its ?00� .S'iuve�� uf' Rm�in,�� l'utirei�. «as `f 1.29�.78� and thc mcdian houschold EBI «as ��42.769. Thc 200i Cit� mcdian houschold EBI of ��42.769 compares that of �>;.��7 for thc Cit� of Palm Springs: ��9.287 for thc Cit� of Ontario: �� 1.80 � for thc Cit� of Corona: �� �.20� for thc Cit� of Tcmccula: and ��9.�41 �4 for thc Cit� of Los Angcics. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) o�,o � z r�,�-� c-�� Tablc C-8 prescnts thc latcst a� ailablc total cffccti� c bu� ing incomc and mcdian houschold cffccti� c bu� ing incomc for thc Cit�. thc Count�. thc Statc and thc nation. Table C-8 CITY OF PALM DESERT, RIVERSIDE COUNTY, STATE OF CALIFORNIA, AND UNITED STATES EFFECTIVE BUYING INCOME Yc;ar and Arca Total Effccti� c Bu� ing Incomc (`G in OOO�s) Mcdian Houschold Effccti� c Bu� in� Incomc 2005 Cit� Count� scacc Unitcd Statcs 2004 Cit� Count� Statc Unitcd Statcs 2003 Cit� Count� Statc Unitcd Statcs 2002 Cit� Count� Statc Unitcd Statcs 2001 Cit� Count� Statc Unitcd Statcs � 1.29�.78� z��.�t��x.zox 70i. I 08.�4 I 0 �.692.909.�67 1.2�8.�2� 27.62 �.7�4 � 67�4.72 I .020 �.�466.880.008 i.ix�t.izx 2�. I 80.0�40 6�47.879.�427 �.;�40.682.8 I 8 i.00x.���x 2�.617.�01 6i0.�21.�407 i. �0 �.�48 I .�498 1.109.�27 2 �. I �4�4. I 20 6i2. I 90.282 �.2;0.82�4.90�4 .So��rcrs: Sales c�, Marketing Management. 2c)c) I through 2c)c)i .S��n�rt�s o/73�n�iii�; l'oirrr. Utilities ��42.769 �to.z�� �4 �.9 I � �9. �2�4 �4 I .699 �9.�21 �42.92�4 � 8.20 I �tz.z���� � 8.69 I �tz.�tx�t � 8.0 � i ;�.�»� � 7.�480 �4 �.� �2 �8. �6� �46.0�46 �9.29 � �4�4.�46�4 �9.129 Watcr. sc«agc trc;atmcnt and «astc«atcr disposal arc pro� idcd b� thc Coachclla Vallc� Watcr District. Southcrn California Gas Compam supplics natural gas to thc Cit� and cicctric po« cr is pro� idcd b� thc Southcrn California Edison Compam . Tcicphonc scn icc is a� ailablc through Vcrizon. Cablc tcic� ision scr� icc is pro� idcd b� Timc Warncr. o�,o � z r�,�-� c-� Transportation Intcr-Cit� transportation is pro� idcd b� Grc�hound Bus «hich pro� idcs scr� icc from its conncction points in thc Cit� to its lincs outsidc of thc Cit� in addition to thc communit� o«ncd and operatcd Sunlinc Bus S�stcm «hich pro� idcs scr� icc throughout thc cntirc Coachclla Vallc� . Intra-Cit� transportation is pro� idcd b� Tcl-a-Ridc and local ta�i firms. Thc Cit� �s ccntral high«a�s arc California High«a� I I I and 7�4 «hich conncct to US Intcrstatc 10 and to California High«a� 6� and 86. Shipping is pro� idcd b� numcrous tnick carricrs «hich ha� c o� crnight scr� icc to Los Angcics. San Francisco. San Dicgo and Phocni�. Rail transportation is pro� idcd b� thc Southcrn Pacific Railroad locatcd in Indio. 10 milcs c;ast of thc Cit�. and b� Amtrak. «hich has t«o stations locatcd in Coachclla Vallc� . A fiill scr� icc �irport is locatcd in Palm Springs. I2 milcs north��cst of thc Cit�. «ith appro�imatcl� sc� cn carricrs pro� iding scr� icc. Thc airport has an 8.�00 foot nim�a� and gcncral a� iation facilitics. Thcrc is also a pri� atc airport in Bcrmuda Duncs. cight milcs northc;ast of thc Cit� . Community Services T7�c Cit� of Palm Dcscrt pro� idcs both policc and firc protcction through contracts «ith thc Count� of Ri� crsidc. T7�c Ri� crsidc Count� Public Libran S� stcm pro� idcs libran scr� iccs to thc Cit� . Thc Cit� also operatcs a�4 �.000 squarc foot public libran on thc Collcgc of thc Dcscrt campus «hich is jointl� uscd b� thc public and thc Collcgc of thc Dcscrt. Education, Cultw•e and Recreation Public school cducation is pro� idcd b� thc Dcscrt Sands Unificd School District (thc "School District��). T7�c School District pro� idcs preschool through gradc 12 cducation to studcnts li� ing in thc Cit� and thc communitics of Indian Wclls. Indio. La Quinto. Rancho Miragc and Bcrmuda Duncs. T7�c School District and operatcs 17 cicmcntan schools. si� middlc schools. thrcc comprchcnsi� c high schools. onc indcpcndcnt stud�/altcrnati� c school and a continuation high school. T7�c Collcgc of thc Dcscrt. thc Coachclla v�u�� co�„�„��„�c� cou��� is locatcd in thc Cit� . A satcllitc campus of California Stntc Uni�crsit�. San Bcrnardino is also locatcd on thc Collcgc of thc Dcscrt Campus. Cultural facilitics in thc Cit� includc thc 1.127 sc;at McCallum T7�catcr for thc Pcrforming Arts locatcd in Bob Hopc Cultural Ccntcr. thc 1.200 acrc Li� ing Dcscrt Zoo and Gardcns. and thc Art in Public Placcs (a muscum «ithout «alls fcaturing morc than I�0 «orks of art throughout thc Cit� ). Rccrc;ation programs for residcnts ofthc Cit� and othcr ncighboring communitics arc offcrcd through thc Coachclla Vallc� Rccrcation and Park District (thc "Park District��). T7�c Park District pro� idcs rccrc;ational acti� itics and programs ranging from tim tots programs. kids clubs and summcr da� camp. to dancc. hc;alth and fitncss and music instniction. to thc scnior gamcs. T7�c Dcscrt Willo« Golf Rcsort. a�6 holc. public golf coursc. is locatcd on acres in thc arc;a of thc Cit�. T7�is golf coursc also fc;atures a>;.000 squarc foot clubhousc. and dining and banquct facilitics. T7�c Cit� also is homc to fi� c othcr public golf courscs and resorts and 20 pri� atc or scmi-pri� atc golf clubs a��d resorts. o�,o � z r�,�-� �-x APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE 2006 INDENTURES o�,o � z r�,�-� D- I APPENDIX E PROPOSED FORM OF BOND COUNSEL OPINION o�,o � z r�,�-� E-I APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT o�,o � z r�,�-� F-I APPENDIX G DTC AND THE BOOK-ENTRY ONLY SYSTEM 7%e !YlfUl'177Cf1lUl9 !Y! tl�i.s Appenclix G CUl9CL'l'Y!!Yl,�� 7%e l)epu.situi��� 7rr�.st ('umpanr. Neu• r'ui�k. Neu• r'ui�k (..l)7( ") ancl l)7( ".s huuk-enti�r .s��.stem l�a.s heen uhtainecl fi�um l)7(' ancl tl�e Rec%velupment A,��ener 1Cf�CL'.1' Y!U PL'.1'�)U/21'!J7l�lh'./ui' t/�e cump%etene.s.s ui' acctu'�tc�' t/�ei'euf.' 7%e Rec%ve/upmeht A,��enc�' CCfYlYlUI CfYlL% c/ue.s nut ,��ive an�� a.s.stu�anee.s t/urt /)7('. /)7(' /�CO'1!Cl�JCfYl1.1' U/' //9L%!PL'Cl �'co�tieipant.s tiri// c/i.sti�ihiite tu t/�e RL'Y!L'f!ClCf� i)11'Y!L'l'.1' �Cf� �)Cfl'177L'Yl1.1' Uf !Yl1L'PL'.1'1. �)l7YlCl�)Cf� Ul' �)l'L'l77l11/77. !f CfYl1�. tiritl� i�e.spec7 tu tl�e ?00< .S'ei�ie.s l3Ul9L%1'. �J7� CL'l'1!flCCf1L'.1' PL'�)PL'.1'L'Y!1!Yl��� U11'Y!L'l'.1'�1l�) !Yl1L'PL'.1'1 !Y! Ul' U1�1L'P CUl9f!l'177Cf1lUl9 Ul' U11'Y!L'l'.1'�1l�) !Yl1L'PL'.1'1 !Y! 1�1L' �i%i%� .S�L'/7L'.1' �U/9L%1'. U/' �C� PL'L%L'/77�)1!U/9 U/' U1�1L'/' YlUIlCL'.1' .1'L'Y!1 lU /)/( � U/' i�L'L%L' c�' i�U.. 11.1' Y!U/77lYlL'L'. Cf.1' 1�1L' i�e,��i.stei�ecl utirnei� uf'tl�e ?00< .S'ei�ie.s RuncLs. ui� tl�at tl�e�� tiri// .su clu un a timel�� ha.si.s. ui� tlurt l)7('. l)7(' /'co7ieipant.s ui� /)7(' /nc/ii�ec7 /�CO'1!C!�)CfYl1.1' 11'!�� CfCI !Y! 1�9L' /77CfYlYlL'/' L%L'.1'C/'lJ7L'L% !Y! 1�9l.1' A�)�)L'Y!L%!�. I�9L' eiu�i�ent ..Ili�le.s.. applicrrhle tu l)7(' co�e un file tiritl� tl�e .S�L'Ctll71lL'.1' CfYlLl �:XC�9CfYl,��e ('ummi.s.siun ancl tl�e eiu�i�ent ..!'r.ucecltu�e.s.. u/'l)7(' !u he.fullu�i•ecl in c%c�(in� �i•rth l)7(' l'rn�ticipant.s a��e un./ile �rith l)l('. T7�c Dcpositor� Tnist Compam ("DTC��). Nc« York. NY. «ill act as sccuritics dcpositor� for thc 2006 Scrics Bonds. T7�c 2006 Scrics Bonds «ill bc issucd as fiill�-rcgistcrcd sccuritics rcgistcrcd in thc namc of Ccdc c�. Co. (DTC�s partncrship nomincc) or such othcr namc as ma� bc rcqucstcd b� an authorizcd rcprescntati� c of DTC. Onc fiill� -rcgistcrcd sccurit� ccrtificatc «ill bc issucd for cach maturit� of thc 2006 Scrics Bonds. c;ach in thc aggrcgatc principal amount of such maturit�. and «ill bc dcpositcd «ith DTC. DTC. thc «orld�s largcst dcpositor�. is a limitcd-purposc tnist compam organizcd undcr thc Nc« York Banking La«. a"banking organization�� «ithin thc mc;aning of thc Nc« York Banking La«. a mcmbcr of thc Fcdcral Rcscr� c S� stcm. a"cic;aring corporation�� «ithin thc mc;aning of thc Nc« York Uniform Commcrcial Codc. and a"cicaring agcnc� �� rcgistcrcd pursuant to thc pro� isions of Scction 17A of thc Sccuritics E�changc Act of 19 ��4. DTC holds and pro� idcs assct scr� icing for o� cr 2.2 million issucs of U.S. and non-U.S. cquit� issucs. corporatc and municipal dcbt issucs. and monc� markct instnimcnts from o� cr 100 countrics that DTC�s participants ("Dircct Participants��) dcposit «ith DTC. DTC also facilitatcs thc post- tradc sctticmcnt among Dircct Participants of salcs and othcr sccuritics transactions in dcpositcd sccuritics. through cicctronic computcrizcd book-cntn transfcrs and plcdgcs bct«ccn Dircct Participants� accounts. This climinatcs thc nccd for ph� sical mo� cmcnt of sccuritics ccrtificatcs. Dircct Participants includc both U.S. and non-U.S. sccuritics brokcrs and dcalcrs. banks. tnist companics. cic;aring corporations. and ccrtain othcr organizations. DTC is a«holl� -o« ncd subsidian of T7�c Dcpositor� Tnist c�. Clcaring Corporation ("DTCC��). DTCC. in turn. is o« ncd b� a numbcr of Dircct Participants of DTC and Mcmbcrs of thc National Sccuritics Clcaring Corporation. Go�crnmcnt Sccuritics Clc;aring Corporation. MBS Clc;aring Corporation. and Emcrging Markcts Clcaring Corporation. (respccti�cl�. "NSCC��. "GSCC��. "MBSCC��. and "EMCC��. also subsidiarics of DTCC). as «cll as b� thc Nc« York Stock E�changc. Inc.. thc Amcrican Stock E�changc LLC. and thc National Association of Sccuritics Dc;alcrs. Inc. Acccss to thc DTC s� stcm is also a�ailablc to othcrs such as both U.S. and non-U.S. sccuritics brokcrs and dc;alcrs. banks. tnist companics. and cic;aring corporations that cicar through or maintain a custodial rclationship «ith a Dircct Participant. cithcr dircctl� or indircctl� ("Indircct Participants��). DTC has Standard c�. Poor�s highcst rating: AAA. Thc DTC Rulcs applicablc to its Participants arc on filc «ith thc Sccuritics and E�changc Commission. Morc information about DTC can bc found at «««.dtcc.com and «««.dtc.org. Purchascs of thc 2006 Scrics Bonds undcr thc DTC s�stcm must bc madc b� or through Dircct Participants. «hich «ill rccci� c a crcdit for thc 2006 Scrics Bonds on DTC�s rccords. Thc o« ncrship intcrest of cach actual purchascr of c;ach Bond ("Bcncficial O« ncr �) is in turn to bc rccordcd on thc Dircct and Indircct Participants� rccords. Bcncficial O«ncrs «ill not rccci�c «rittcn confirmation from DTC ofthcir purchasc. Bcncficial O« ncrs arc. ho« c� cr. c�pcctcd to rccci� c«rittcn confirmations pro� iding dctails of thc transaction. as «cll as periodic statcmcnts of thcir holdings. from thc Dircct or Indircct Participant through «hich thc Bcncficial O« ncr cntcrcd into thc transaction. Transfcrs of o« ncrship intcrests in thc 2006 Scrics o�,o � z r�,�-� G- I Bonds arc to bc accomplishcd b� cntrics madc on thc books of Dircct and Indircct Participants acting on bchalf of Bcncficial O« ncrs. Bcncficial O« ncrs «ill not rccci� c ccrtificatcs rcprescnting thcir o« ncrship intcrests in thc 2006 Scrics Bonds. c�ccpt in thc c� cnt that usc of thc book-cntr� s� stcm for thc 2006 Scrics Bonds is discontinucd. To facilitatc subscqucnt transfcrs. all 2006 Scrics Bonds dcpositcd b� Dircct Participants «ith DTC arc rcgistcrcd in thc namc of DTC�s partncrship nomincc. Ccdc c�. Co.. or such othcr namc as ma� bc rcqucstcd b� an authorizcd represcntati� c of DTC. T7�c dcposit of thc 2006 Scrics Bonds «ith DTC and thcir rcgistration in thc namc of Ccdc c�. Co. or such othcr DTC nomincc do not cffcct am changc in bcncficial o« ncrship. DTC has no kno« Icdgc of thc actual Bcncficial O« ncrs of thc 2006 Scrics Bonds: DTC�s rccords rcflcct onl� thc idcntit� of thc Dircct Participants to «hosc accounts such Bonds arc crcditcd. «hich ma� or ma� not bc thc Bcncficial O«ncrs. Thc Dircct and Indircct Participants «ill rcmain responsiblc for kccping account of thcir holdings on bchalf of thcir customcrs. Com c� ancc of noticcs and othcr commw�ications b� DTC to Dircct Participants. b� Dircct Participants to Indircct Participants. and b� Dircct Participants and Indircct Participants to Bcncficial O«ncrs «ill bc go� crncd b� arrangcmcnts among thcm. subjcct to am statutor� or rcgulator� rcquircmcnts as ma� bc in cffcct from timc to timc. Bcncficial O« ncrs of thc 2006 Scrics Bonds ma� «ish to takc ccrtain stcps to augmcnt thc transmission to thcm of noticcs of significant c� cnts «ith respcct to thc 2006 Scrics Bonds. such as rcdcmptions. tcndcrs. dcfaults. and proposcd amcndmcnts to thc Indcnturc. For c�amplc. Bcncficial O« ncrs of thc 2006 Scrics Bonds ma� «ish to asccrtain that thc nomincc holding thc 2006 Scrics Bonds for thcir bcncfit has agrccd to obtain and transmit noticcs to Bcncficial O«ncrs. In thc altcrnati�c. Bcncficial O« ncrs ma� «ish to pro� idc thcir namcs and addresscs to thc rcgistrar and requcst that copics of noticcs bc pro� idcd dircctl� to thcm. Rcdcmption noticcs shall bc scnt to DTC. T7�c com c� ancc of noticcs and othcr communications b� DTC to DTC Participants. b� DTC Participants to Indircct Participants and b� DTC Participants and Indircct Participants to Bcncficial O« ncrs «ill bc go� crncd b� arrangcmcnts among thcm. subjcct to am statutor� or rcgulator� rcquircmcnts as ma� bc in cffcct from timc to timc. Am failurc of DTC to ad� isc am DTC Participant. or of am DTC Participant or Indircct Participant to notifi a Bcncficial O« ncr. of am such noticc and its contcnt or cffcct «ill not affcct thc � alidit� of thc rcdcmption of thc 2006 Scrics Bonds callcd for rcdcmption or of a��� othcr action prcmiscd on such noticc. Rcdcmption of portions of thc 2006 Scrics Bonds b� thc Rcdc� clopmcnt Agcnc� «ill rcducc thc outstanding principal amount of Bonds hcld b� DTC. In such c� cnt. DTC «ill implcmcnt. through its book-cntr� s� stcm. a rcdcmption b� lot of intcrests in thc 2006 Scrics Bonds hcld for thc account of DTC Participants in accordancc «ith its o«n nilcs or othcr agrccmcnts «ith DTC Participants and thcn DTC Participants and Indircct Participants «ill implcmcnt a rcdcmption of thc 2pp6 Scrics Bonds for thc Bcncficial O«ncrs. Am such scicction of Bonds to bc rcdccmcd «ill not bc go� crncd b� thc Indcnturc and «ill not bc conductcd b� thc Rcdc� clopmcnt Agcnc� or thc Tnistcc. Ncithcr DTC nor Ccdc c�. Co. (nor am othcr DTC nomincc) «ill conscnt or � otc «ith respcct to thc 2006 Scrics Bonds w�lcss authorizcd b� a Dircct Participant in accordancc «ith DTC�s Proccdures. Undcr its usual proccdures. DTC mails an Omnibus Pro�� to thc issucr as soon as possiblc aftcr thc rccord datc. T7�c Omnibus Pro�� assigns Ccdc c�. Co.�s conscnting or �oting rights to thosc Dircct Participants to «hosc accounts thc 2006 Scrics Bonds arc crcditcd on thc rccord datc (idcntificd in a listing attachcd to thc Omnibus Pro�� ). Pa� mcnts of principal of. prcmium. if am. and intcrest c� idcnccd b� thc 2006 Scrics Bonds «ill bc madc to Ccdc c�: Co., or such othcr nomincc ns mn� bc rcqucstcd b� an authorizcd represcntati� c of DTC. DTC�s practicc is to crcdit Dircct Participants� accounts upon DTC�s rcccipt of fiinds and corresponding dctail information from thc Rcdc� clopmcnt Agcnc� or thc Tnistcc. on pa�ablc datc in accordancc «ith thcir respccti� c holdings sho« n on DTC�s rccords. Pa� mcnts b� Participants to Bcncficial O« ncrs «ill bc go� crncd b� standing instnictions a��d customan practiccs. as is thc casc «ith sccuritics hcld for thc accounts o�,o � z r�,�-� G-2 of customcrs in bc;arcr form or rcgistcrcd in "strcct namc.�� and «ill bc thc responsibilit� of such Participant and not of DTC (nor its nomincc). thc Tnistcc. or thc Rcdc�clopmcnt Agcnc�. subjcct to am statutor� or rcgulator� rcquircmcnts as ma� bc in cffcct from timc to timc. Pa� mcnt of principal of. prcmium. if am. and intcrest c� idcnccd b� thc 2006 Scrics Bonds to Ccdc c�. Co. (or such othcr nomincc as ma� bc rcqucstcd b� an authorizcd represcntati� c of DTC) is thc responsibilit� of thc Rcdc� clopmcnt Agcnc� or thc Tnistcc. disburscmcnt of such pa� mcnts to Dircct Participants «ill bc thc responsibilit� of DTC. and disburscmcnt of such pa� mcnts to thc Bcncficial O« ncrs «ill bc thc responsibilit� of Dircct and Indircct Participants. NEITHER THE REDEVELOPMENT AGENCY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS. INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS. INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF BONDS FOR REDEMPTION. Ncithcr thc Rcdc� clopmcnt Agcnc� nor thc Tnistcc can gi� c am assuranccs that DTC. DTC Participants. Indircct Participants or othcrs «ill distributc pa�mcnts of principal of. prcmium. if am. and intcrest on thc 2006 Scrics Bonds paid to DTC or its nomincc. as thc rcgistcrcd O« ncr. or am rcdcmption or othcr noticc. to thc Bcncficial O« ncrs or that thc� «ill do so on a timcl� basis or that DTC «ill scr� c and act in a manncr dcscribcd in this Official Statcmcnt. DTC ma� discontinuc pro� iding its scr� iccs as dcpositon «ith respcct to thc 2006 Scrics Bonds at am timc b� gi� ing rc;asonablc noticc to thc Rcdc� clopmcnt Agcnc� or thc Tnistcc. Undcr such circumstanccs. in thc c� cnt that a succcssor dcpositon is not obtaincd. Bond ccrtificatcs arc rcquircd to bc printcd and dcli� crcd. T7�c Rcdc� clopmcnt Agcnc� ma� dccidc to discontinuc usc of thc s� stcm of book-cntr� transfcrs through DTC (or a succcssor sccuritics dcpositor� ). In that c� cnt. Bond ccrtificatcs «ill bc printcd and dcli� crcd. In thc c� cnt that thc book-cntr� s� stcm is discontinucd as dcscribcd abo� c. thc rcquircmcnts of thc Indcnturc «ill appl�. Thc forcgoing information conccrning DTC conccrning and DTC�s book-cntr� s�stcm has bccn pro� idcd b� DTC. and ncithcr thc Rcdc� clopmcnt Agcnc� nor thc Tnistcc takc am responsibilit� for thc accurac� thcrcof. T7�c Rcdc� clopmcnt Agcnc� and thc Tnistcc cannot and do not gi� c am assura��ccs that DTC. thc Participants or othcrs «ill distributc pa� mcnts of principal. intcrest or prcmium. if am. c� idcnccd b� thc 2006 Scrics Bonds paid to DTC or its nomincc as thc rcgistcrcd o«ncr. or «ill distributc am rcdcmption noticcs or othcr noticcs. to thc Bcncficial O«ncrs. or that thc� «ill do so on a timcl� basis or «ill scr�c and act in thc manncr dcscribcd in this Official Statcmcnt. Ncithcr thc Rcdc� clopmcnt Agcnc� nor thc Tnistcc arc responsiblc or liablc for thc failurc of DTC or am Participant to makc am pa� mcnt or gi� c am noticc to a Bcncficial O« ncr «ith respcct to thc 2006 Scrics Bonds or an crror or dcla� rclating thcrcto. o�,o � z r�,�-� G- � APPENDIX H SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY o�,o � z r�,�-� H- I APPENDIX J TABLE OF ACCRETED VALUES Capital Appreciation Bonds, 2006 Series B o�,o � z r�,�-� I-I 2006 Subordinate Capital Appreciation Bonds, 2006 Series C o�,o � z r�,�-� G-2 Lc�'.J DRAFT # I Oi/22/06 $ Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 3) 2006 Series A $ Palm Desert Financing Authority Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series B $ Palm Desert Financing Authority Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series C RONn PURC'HASF. AGRF.F.MF.NT . 2006 Palm Dcscrt Financing Authorit� 7�-� I 0 Frcd Waring Dri� c Palm Dcscrt. California 92260-2�78 Ladics and Gcnticmcn: Citigroup Global Markcts Inc. (thc "Unc%rtiri�itei� "). offcrs to cntcr into this Bond Purchasc Agrccmcnt (thc "l'iu�clur.se A,��i�eement ") «ith thc Palm Dcscrt Financing Authorit� (thc "l'!YlCfYlClYl,�� Ai�tl�ui�ih�") "). a joint po«crs authoriri crc;atc;d b� a Joint E�crcisc of Po«crs Agrc;c;mcnt datc;d Ja�uian 26. I 989 (thc ' Jl'A A,��i�eement ") bcri� e;e;n thc Ciri of Palm Dcscrt a��d thc Palm Dcscrt Re;dc� clopmcnt Agcnc� (thc ..Rec%velupment A,��encr'). «hich upon acccptancc and appro�al. «ill bc binding upon thc Financing Authorit� and thc Undcn� ritcr. This offcr is madc subjcct to acccptancc b� thc Financing Authorit� and appro� al b� thc Rcdc� clopmcnt Agcnc� b� c�ccution of this Purchasc Agrccmcnt and dcli� cr� of thc samc to thc Undcn�ritcr on or bcforc I I:�9 p.m. (California timc) on thc datc hcrcof. and. if not so acccptcd and appro� cd. «ill bc subjcct to «ithdra« al b� thc Undcn� ritcr upon noticc dcli� crcd to thc Financing Authorit� at am timc prior to such acccptancc and appro� al. Capitalizcd tcrms uscd in this Purchasc Agrccmcnt and not othcn� isc dcfincd hcrcin shall ha� c thc respccti� c mcanings sct forth for such tcrms in thc 2006 Indcntures (dcfincd bclo« ) and if not othcn� isc dcfincd thcrcin. shall ha� c thc mcanings gi� cn to such tcrms as sct forth in thc Official Statcmcnt (dcfincd bclo« ). Section 1. Pw•chase and Sale of the 2006 Bonds. Upon thc tcrms and conditions and upon thc basis of thc rcprescntations sct forth in this Purchasc Agrccmcnt. thc Undcn� ritcr agrccs to purchasc from thc Financing Authorit� . and thc Financing Authorit� agrccs to scll and dcli� cr to thc Undcn� ritcr. all (but not Icss than all) of thc `f aggrcgatc principal amount of thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc�cnuc Bonds (Projcct Arca No. �) 2006 Scrics A(thc "(�1l1'PL'Y!1 �Yl1L'PL'.1'1 RUl9LL1'..� Al1C{ `f principal amount of Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics B(thc "('apital Appi�eciatiun RuncLs.. and togcthcr «ith thc Currcnt Intcrest Bonds. thc ".S'L'Y!!Ul' l3Ul9LL1' �: Al1C{ all (but not Icss than all) of thc `f aggrcgatc principal amount of thc Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc�cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics C(thc ".S'i�hui�clinate ('apital Appi�eciatiun RuncLs.. and togcthcr «ith thc Scnior Bonds. thc "?00< RuncLs ..). z��t-o�,o�z r�-� Thc Scnior Bonds shall bc datcd thc datc of dcli� cr� and shall ha� c thc maturitics. bcar intcrest at thc ratcs per annum. ha� c thc � iclds and bc subjcct to mandator� sinking fiind redcmption all as sct forth on S�hr.rl��lr. I attachcd hcrcto. Thc purchasc pricc for thc Scnior Bonds shall bc `f (calculatcd as thc principal amount of thc Scnior Bonds. Icss an original issuc discount in thc amount of � and Icss an Undcn� ritcr�s discount in thc amount of � ). Thc Subordinatc Capital Apprcciation Bonds shall bc datcd thc datc of dcli� cr� and shall ha� c thc maturitics. bcar intcrest at thc ratcs per annum. ha� c thc � iclds and bc subjcct to mandator� sinking fiind rcdcmption all as sct forth on S�hr.rl��lr. I attachcd hcrcto. Thc purchasc pricc for thc Subordinatc Capital Apprcciation Bonds shall bc � (calculatcd as thc principal amount of thc Subordinatc Capital Apprcciation Bonds. Icss an original issuc discount in thc amount of `f and Icss an Undcn� ritcr�s discount in thc amount of � ). Section 2. Preliminary Official Statement. Thc Financing Authorit� has dcli� crcd to thc Undcn� ritcr a Prcliminar� Official Statcmcnt. datcd Junc _. 2006 (thc "l'i�eliminai��� Of'ficial .S'tatement "). and «ill dcli� cr to thc Undcn� ritcr a final Official Statcmcnt datcd thc datc hcrcof as pro� idcd in Scction � of this Purchasc Agrccmcnt (as amcndcd and supplcmcntcd from timc to timc pursuant to Scction 6(k) of this Purchasc Agrccmcnt. thc "Of'ficial .S'raremenr "). Thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� ha� c cach dcli� crcd to thc Undcn� ritcr a ccrtificatc pursuant to Sccuritics and E�changc Commission Rulc I�c2-12 ("Rulc I�c2-12��) rclating to thc Prcliminar� Official Statcmcnt. in substantiall� thc forms attachcd hcrcto as F�l,ihit A- I and F�hihit A-2, respccti� cl� . Section 3. Description of the 2006 Bonds. Thc 2006 Bonds arc issucd pursuant to thc Communit� Rcdc� clopmcnt La« of thc Statc of California. constituting Part I of Di� ision 2�4 of thc Hcalth and Safct� Codc. commcncing «ith Scction >;000 (thc "Rec%velupment /,atir ..) and Rcsolution No. adoptcd b� thc Financing Authorit� on . 2006 (thc "l'!YlCfYlClYl,�� Ai�tl�ui�ih� Re.suli�tiun "). Thc 2006 Bonds shall bc pa�ablc and subjcct to rcdcmption as pro�idcd in thc 2006 Indcntures (dcfincd hcrcin) and as sct forth in thc Official Statcmcnt. Thc 2006 Bonds arc Icgal. � alid and binding limitcd obligations of thc Financing Authorit�. and arc pa�ablc solcl� from and sccurcd b� a plcdgc of Rc�cnucs (as dcfincd in thc 2006 Indcntures) dcri� cd primaril� from loan pa� mcnts madc b� thc Rcdc� clopmcnt Agcnc� pursuant to thc 2006 Loan Agrccmcnts (dcfincd hcrcin). Thc Scnior Bonds shall bc substantiall� in thc form dcscribcd in. shall bc issucd and sccurcd undcr thc pro� isions of. and shall bc pa� ablc as pro� idcd in. thc Indcnturc of Trust. datcd as of Jul� I. 2006 (thc ".S'eniui� /nc%ntiu�e "). b� and bct«ccn thc Financing Authorit� and Wclls Fargo Bank. National Association (thc "7i�i�.stee��). Thc Financing Authorit� is issuing thc Scnior Bonds to makc t«o loans. onc «ith respcct to thc Currcnt Intcrest Bonds and onc «ith respcct to thc Capital Apprcciation Bonds (collccti�cl�. thc ...5'L'Y!!Ul' /,UCfYl.1' ..�. t0 t�1C Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Rec%velupment A,��encr �) pursuant to thc tcrms of a Projcct Arca No. � Loan Agrccmcnt madc and c�ccutcd as of Jul� I. 2006 (thc ".S'L'Y!!Ul' /,UCfY! A,����eement") b� and among thc Financing Authorit�. thc Rcdc�clopmcnt Agcnc� and thc Trustcc. Thc Rcdc� clopmcnt Agcnc� «ill appl� thc procccds of thc Scnior Loans to: (i) financc � arious rcdc� clopmcnt acti� itics «ithin Projcct Arca No. � locatcd in thc Cit� of Palm Dcscrt (thc "l'i�uject Ai�ea��): (ii) purchasc a rescr� c fiind surct� polic� (thc "Re.seive l'ulicr ") for dcposit into thc Rcscr� c Fund for thc Scnior Bonds: and (iii) pa� thc costs associatcd «ith thc issuancc of thc Scnior Bonds. Thc Subordinatc Capital Apprcciation Bonds shall bc substantiall� in thc form dcscribcd in. shall bc issucd and sccurcd undcr thc pro� isions of. and shall bc pa� ablc as pro� idcd in a scparatc Indcnturc of Trust. datcd as of Jul� I. 2006 (thc ".S'i�hui�clinate /nc%ntiu�e�� and togcthcr «ith thc Scnior Indcnturc. thc .. �00< /nc%ntiu�e.s ..). b� and bct« ccn thc Financing Authorit� and thc Trustcc. Thc Financing Authorit� is issuing thc Subordinatc Capital Apprcciation Bonds to makc a loan (thc ".S'i�hui�clinate /,uan�� and togcthcr z��t-o�,o�z r�-� 2 «ith thc Scnior Loans. thc "?00< /,uan.s ") to thc Rcdc� clopmcnt Agcnc� pursuant to thc tcrms of a Projcct Arca No. � Loan Agrccmcnt (Subordinatc Loan) madc and cntcrcd into as of Jul� I. 2006 (thc ...5'iihui�clinate /,uan A,��i�eement�� and togcthcr «ith thc Scnior Loan Agrccmcnt. thc "?00< /,uan A,����eemenr.,� ..) b� and among thc Financing Authorit� . thc Rcdc� clopmcnt Agcnc� and thc Trustcc. Thc Rcdc� clopmcnt Agcnc� «ill appl� thc procccds of thc Subordinatc Loan to: (i) financc � arious rcdc� clopmcnt acti� itics «ithin thc Projcct Arca: (ii) fiind a dcposit into thc Rcscr� c Fund for thc Subordinatc Capital Apprcciation Bonds: and (iii) pa� thc costs associatcd «ith thc issuancc of thc Subordinatc Capital Apprcciation Bonds. Thc pa� mcnt of principal of and intcrest on thc 2006 Bonds «hcn duc «ill bc insurcd b� municipal bond insurancc �polic�/policics� (thc "/Runcl/n.siu�ance l'ulic�'.. ..RUl9Ll�Yl.1'tll'CfYlCL' l'ulicie.s../) to bc issucd b� (thc "Runcl /n.,�iu�ei�..). simultancousl� «ith thc dcli�cn of thc 2006 Bonds. T7�c Bond Insurcr «ill also issuc thc Rcscn c Polic� «ith respcct to thc Scnior Bonds upon thc dcli� cn of thc Scnior Bonds. Section 4. Public Offering. Thc Undcn� ritcr agrccs to makc a bona fidc public offcring of all thc 2006 Bonds at not in c�ccss of thc initial public offcring priccs or � iclds sct forth in S�hr.rl��lr. I attachcd hcrcto. plus intcrest accrucd thcrcon. if applicablc. from thc datc of thc 2006 Bonds. Thc Undcn� ritcr rescr� cs thc right to makc conccssions to dcalcrs and to changc such initial public offcring priccs or � iclds as thc Undcn� ritcr rcasonabl� dccros ncccssar� in conncction «ith thc markcting of thc 2006 Bonds. Thc Undcn� ritcr also rescr� cs thc right (i) to o� cr-allot or cffcct transactions that stabilizc or maintain thc markct pricc of thc 2006 Bonds at a Ic� cl abo� c that «hich might othcn� isc prc� ail in thc opcn markct and (ii) to discontinuc such stabilizing. if commcnccd. at am timc. Section 5. Delivery of Official Statement. Thc Financing Authorit� shall dcli� cr to thc Undcn� ritcr. as promptl� as practical but in no c� cnt latcr than thc Closing Datc (as dcfincd hcrcin). such numbcr of copics of thc final Official Statcmcnt. as thc Undcn� ritcr ma� rcasonabl� rcqucst in ordcr to compl� «ith thc Sccuritics and E�changc Commission Rulc I�c2-12(b) and thc rulcs of thc Municipal Sccuritics Rulcmaking Board (thc "M.S'IZR "). Thc Financing Authorit� hcrcb� authorizcs thc Undcn� ritcr to usc thc Official Statcmcnt and thc information containcd thcrcin in conncction «ith thc offcring and salc of thc 2006 Bonds and ratifics and confirms thc authorization of thc usc b� thc Undcn� ritcr prior to thc datc hcrcof of thc Prcliminar� Official Statcmcnt. fiirnishcd to thc Undcn� ritcr b� thc Financing Authorit� in conncction «ith such offcring and salc. Thc Undcn� ritcr agrccs that from thc timc thc Official Statcmcnt bccomcs a� ailablc until thc carlicr of (i) thc "l:�ncl uf'tl�e Ul9L%L'P117'!1!Yl,�� l'e��iucL " as dcfincd in Scetion 6(I) hcrcin. or (ii) thc timc «hcn thc Official Statcmcnt is a� ailablc to am person from a nationall� rccognizcd municipal sccuritics information rcpositor�. but in no casc Icss than 2� da� s follo« ing thc End of thc Undcn� riting Pcriod. thc Undcn� ritcr shall scnd no latcr than thc nc�t busincss da� follo« ing a rcqucst for a cop� thcrcof. b� first class mail or othcr cquall� prompt mcans. to am Potcntial Customcr. as dcfincd in Rulc I�c2-12. on rcqucst. a singlc cop� of thc Official Statcmcnt. Thc Undcn� ritcr agrccs to filc as soon as rcasonabl� practicablc a cop� of thc Official Statcmcnt «ith a nationall� rccognizcd municipal sccuritics information rcpositor� and takc am and all actions ncccssar� to compl� «ith applicablc Sccuritics and E�changc Commission rulcs and MSRB rulcs go� crning thc offcring. salc and dcli� cr� of thc 2006 Bonds to ultimatc purchascrs. At thc timc of pricing. thc Undcn� ritcr shall dcli� cr to thc Financing Authorit� a summar� of thc ordcrs b� maturit� . z��t-o�,o�z r�-� � � Section 6. Representations, Warranties and Covenants of the Financing Authority. Thc Financing Authorit� rcprescnts. «arrants and co� cnants «ith thc Undcn� ritcr that: (a) thc go� crning board of thc Financing Authoriri has b� thc Financing Authoriri Rcsolution adoptc;d b� a majoriri of its mcmbcrs at a mc;c;ting dul� callc;d. noticc;d a��d conductc;d. at «hich a quonim «as prescnt and acting throughout on . 2006. takcn all action ncccssan for thc c�ccution. dcli� cn and duc perforn�ancc of thc 2006 Indcntures. thc 2006 Loan Agrc;c;mcnts. thc Ta� Ccrtificatc of thc Financing Authoriri datcd as of thc datc of thc initial dcli� cn of thc 2006 Bonds (thc "7ax ('ei7iJicrrte ") and this Purchasc Agre;e;mcnt (collccti� cl�. thc "l'!YlCfYlClYl,�� Ai�tl�ui�ih� A,��i�eement.s ..) and thc authorization and appro� al of thc Prcliminan Official Statcmcnt and thc Official Statcmcnt: thc Financing Authoriri Rcsolution is in fiill forcc and cffcct and has not bc;c;n a�ncndc;d. modific;d or rescindc;d: thc adoption of thc Financing Authoriri Rcsolution constitutcs all ncccssan action to bc takcn b� thc Financial Authoriri for thc c�ccution. issuancc and dcli� cn of thc 2006 Bonds and thc c�ccution dcli� cn and duc perforn�ancc of thc Financing Authoriri Agrc;c;mcnts. (b) thc Financing Authoriri is and «ill bc on thc Closing Datc a joint c�crcisc of po«crs authoriri dul� organizc;d and c�isting undcr thc la«s of thc Statc of California (thc ".S'tate ") and thc JPA Agrc;c;mcnt and has all ncccssan po«cr and authoriri to adopt thc Financing Authoriri Rcsolution. to cntcr into and perforn� its dutics undcr thc Financing Authoriri Agrc;c;mcnts: and. «hcn c�ccutc;d and dcli� crc;d b� thc respccti� c partics thcrcto. thc Financing Authoriri Agrc;c;mcnts «ill c;ach constitutc Icgal. � alid a,�d binding obligation of thc Financing Authoriri cnforcc;ablc in accordancc «ith its respccti� c tcrn�s. c�ccpt as cnforccmcnt ma� bc limitc;d b� bankniptc�. insol�cnc�. rwrganization. moratorium or similar la«s or c;quitablc principlcs rclating to or affccting crc;ditors� rights gcncrall� . (c) this Purchasc Agrc;c;mcnt has bc;c;n dul� c�ccutc;d and dcli�crc;d b� thc Financing Authoriri. and constitutcs. and upon thcir c�ccution and dcli�cn. thc Financing Authoriri Agrc;c;mcnts and thc 2006 Bonds «ill constitutc. Icgal. � alid a,�d binding obligations of thc Financing Authoriri cnforcc;ablc in accordancc «ith thcir tcrn�s. c�ccpt as cnforcc;abiliri ma� bc limitc;d b� bankniptc�. insol�cnc�. moratorium or crc;ditors� rights gcncrall� : and thc c�ccution and dcli� cn of thc Purchasc Agrc;c;mcnt doc;s not and thc c�ccution and dcli� cn of thc Financing Authoriri Agrc;c;mcnts and thc 2006 Bonds and compliancc «ith thc pro� isions of c;ach thcrwf «ill not conflict «ith or constitutc a brc;ach of or a dcfault undcr am applicablc la« or administrati� c rcgulation of thc Statc or thc Unitc;d Statcs. or am applicablc judgmcnt. dccrc;c;. agrc;c;mcnt or othcr instnimcnt to «hich thc Financing Authoriri is a part� or is othcn� isc subjcct: (d) at thc timc of acccptancc hcrcof b� thc Financing Authorit�. and (unlcss an c� cnt occurs of thc naturc dcscribcd in Scction 6(k)) at all timcs during thc period from thc datc of this Purchasc Agrccmcnt to and including thc datc «hich is 2� da� s follo« ing thc End of thc Undcn� riting Pcriod for thc 2006 Bonds (as dctcrmincd in accordancc «ith Scction 6(j)). thc statcmcnts and information containcd in thc Prcliminar� Official Statcmcnt as of its datc. and thc Official Statcmcnt as of its datc (c�cluding thc information w�dcr thc captions "MUNICIPnI, Bc)NU INSURnNCI:." and "UNUI:R\NRI I1NG." and containcd in APPI:NUIX G—"DTC �NU I I II: BOOK-EN I RY SYS I I:M.�� and APPI:NUIX H—"SPI:CIMI:N MUNICIP�I, BONU INSUR�NCI: Pc)I,ICY�� and APPI:NUIX I—"SPI:CIMI:N RI:SI:RVI: FUNU SURI:"I Y Pc)I,ICY��) arc truc. corrcct and complctc in all matcrial respccts and such statcmcnts «ith respcct to thc Prcliminar� Official Statcmcnt do not. and «ith respcct to thc Official Statcmcnt «ill not. omit to statc am matcrial fact ncccssar� to makc such statcmcnts. in light of thc circumstanccs undcr «hich thc� «crc madc. not mislcading: (c) to thc bcst of its kno« Icdgc. thc Financing Authorit� is not in � iolation or brcach of or dcfault undcr am applicablc constitutional pro� ision. la« or administrati� c rulc or rcgulation of thc Statc of California or thc Unitcd Statcs of Amcrica. or am agcnc� or instrumcntalit� of cithcr of thcm. or am applicablc judgmcnt or dccrcc. or am loan agrccmcnt. indcnturc. bond. notc. resolution. agrccmcnt or othcr z��t-o�,o�z r�-� � � instrumcnt to «hich thc Financing Authorit� is a part� or is othcn� isc subjcct. «hich «ould constitutc a dcfault undcr am of thc Financing Authorit� Agrccmcnts or thc 2006 Bonds. and no c� cnt has occurrcd and is continuing «hich. «ith thc passagc of timc or thc gi� ing of noticc. or both «ould constitutc a � iolation or a brcach of or a dcfault undcr am such loan agrccmcnt. indcnturc. bond. notc. resolution. agrccmcnt or othcr instrumcnt to «hich thc Financing Authorit� is a part� or is othcn� isc subjcct: (� at thc datc hcrcof and on thc Closing Datc. thc Financing Authorit� «ill bc in compliancc in all respccts «ith thc matcrial co� cnants and agrccmcnts containcd in thc Financing Authorit� Agrccmcnts and no c� cnt of dcfault and no c� cnt has occurrcd and is continuing «hich. «ith thc passagc of timc or gi� ing of noticc. or both. «ould constitutc an c� cnt of dcfault thcrcundcr shall ha� c occurrcd and bc continuing: (g) to thc bcst kno« Icdgc of thc Financing Authorit� . aftcr duc im cstigation. othcr than as sct forth in thc Official Statcmcnt or as thc Financing Authorit� has othcn� isc discloscd in «riting to thc Undcn� ritcr. thcrc is no action. suit. procccding. inquir� or im cstigation. at la« or in cquit�. or b� or bcforc am court. go�crnmcntal agcnc�. public board or bod�. pcnding or thrcatcncd against thc Financing Authorit�. (i) «hcrcin an unfa� orablc dccision. ruling or finding «ould ad� crscl� affcct thc c�istcncc of thc Financing Authorit� or thc titic of am official of thc Financing Authorit� to such person�s officc. or (ii) sccking to restrain or cnjoin thc issuancc. salc or dcli� cr� of thc 2006 Bonds. or thc assignmcnt b� thc Financing Authorit� of its rights undcr thc 2006 Indcntures. or (iii) in am «a� contcsting or affccting thc � alidit� or cnforccabilit� of thc Financing Authorit� Agrccmcnts or thc 2006 Bonds. or (i� ) contcsting in am «a� thc complctcncss or accurac� of thc Prcliminan Official Statcmcnt. or (� ) contcsting thc po«cr of thc Financing Authorit� or its authorit� «ith respcct to thc 2006 Bonds or thc Financing Authorit� Agrccmcnts. or (� i) contcsting thc c�clusion of intcrest on thc 2006 Bonds from gross incomc for fcdcral and Statc incomc «hcrcin an unfa� orablc dccision. ruling or finding «ould matcriall� ad� crscl� affcct thc � alidit� of thc Financing Authorit� Agrccmcnts or thc authorization. c�ccution. dcli� cr� or performancc b� thc Financing Authorit� of thc 2006 Bonds or thc Financing Authorit� Agrccmcnts: (h) thc Financing Authorit� «ill fiirnish such information. c�ccutc such instrumcnts and takc such othcr action not inconsistcnt «ith la« in cooperation «ith thc Undcn� ritcr «hich thc Undcn� ritcr ma� rcasonabl� rcqucst in ordcr for thc Undcn� ritcr to qualifi thc 2006 Bonds for offcr and salc undcr thc Bluc Sk� or othcr sccuritics la« s and regulations of such statcs and othcr jurisdictions of thc Unitcd Statcs as thc Undcn� ritcr ma� dcsignatc and to dctcrminc thc cligibilit� of thc 2006 Bonds for im cstmcnt undcr thc la« s of such statcs and othcr jurisdictions: pro� idcd. ho«c� cr. that in no c� cnt shall thc Financing Authorit� bc rcquircd to takc am action «hich «ould subjcct it to scr� icc of proccss in am jurisdiction in «hich it is not no« subjcct: - - - (i) to thc bcst of kno« Icdgc of thc Financing Authorit�. all appro� als. conscnts and ordcrs of am go� crnmcntal authorit� or agcnc� ha� ing jurisdiction in thc mattcr «hich «ould constitutc a condition prcccdcnt to thc duc performancc b� thc Financing Authorit� of its obligations undcr thc Financing Authorit� Agrccmcnts or thc 2006 Bonds ha� c bccn dul� obtaincd or madc. and arc. and «ill bc on thc Closing Datc. in fiill forcc and cffcct: (I) as uscd in this Purehasc Agrccmcnt. thc tcrm "l:�ncl uf'tl�e Ul9L%L'P117'!1!Yl,�� l'ei�iucf� for thc 2006 Bonds shall mcan thc carlicr of (i) thc Closing Datc unlcss thc Financing Authorit� shall ha� c bccn notificd in «riting to thc contrar� b� thc Undcn� ritcr on or prior to thc Closing Datc or (ii) thc datc on «hich thc End of thc Undcn� riting Pcriod for thc 2006 Bonds has occurrcd undcr Rulc I�c2-12. pro� idcd. ho« c� cr. that thc Financing Authorit� ma� trcat as thc End of thc Undcn� riting Pcriod for thc 2006 Bonds thc datc spccificd as such in a noticc from thc Undcn� ritcr stating thc datc «hich is thc End of thc Undcn� riting Pcriod: z��t-o�,o�z r�-� i (k) if bct«ccn thc datc hcrcof and thc datc «hich is 2� da� s aftcr thc End of thc Undcn� riting Pcriod for thc 2006 Bonds. an c� cnt occurs. or facts or conditions bccomc kno« n to thc Financing Authorit� «hich. in thc rcasonablc opinion thc Cit� Attornc�. as Counscl to thc Financing Authorit� or Lofton c�. Jcnnings. San Francisco. California (..l)i.sclu.siu�e ('ui�n.sel "). might or «ould causc thc information containcd in thc Official Statcmcnt. as thcn supplcmcntcd or amcndcd. to contain an untruc statcmcnt of a matcrial fact or to omit to statc a matcrial fact rcquircd to bc statcd thcrcin or ncccssar� to makc such information thcrcin. in thc light of thc circumstanccs undcr «hich it «as madc. not mislcading in am matcrial respcct. thc Financing Authorit� «ill notifi thc Undcn� ritcr. and if in thc opinion of thc Undcn� ritcr such c� cnt rcquires thc prcparation and publication of a supplcmcnt or amcndmcnt to thc Official Statcmcnt. thc Financing Authorit� «ill forth« ith prcparc and fiirnish to thc Undcn� ritcr (at thc c�pcnsc of thc Financing Authorit� ) a rcasonablc numbcr of copics of an amcndmcnt of or supplcmcnt to thc Official Statcmcnt (in thc form and substancc satisfactor� to thc Undcn� ritcr) «hich «ill amcnd or supplcmcnt thc Official Statcmcnt so that it «ill not contain an untruc statcmcnt of a matcrial fact or omit to statc a matcrial fact ncccssar� in ordcr to makc thc statcmcnts thcrcin. in thc light of thc circumstanccs c�isting at thc timc thc Official Statcmcnt is dcli� crcd to prospccti� c purchascrs. not mislcading in am matcrial respcct «ith respcct to thc information of thc Financing Authorit� . If such notification shall bc subscqucnt to thc Closing Datc. thc Financing Authorit� shall forth« ith pro� idc to thc Undcn� ritcr such Icgal opinions. ccrtificatcs. instrumcnts and othcr documcnts as thc Undcn� ritcr ma� rcasonabl� dccm ncccssan to c� idcncc thc truth and accurac� of such supplcmcnt or amcndmcnt to thc Official Statcmcnt. For thc purposcs of this subscction. bct«ccn thc datc hcrcof and thc datc «hich is 2� da� s aftcr thc End of thc Undcn� riting Pcriod for thc 2006 Bonds. thc Financing Authorit� «ill fiirnish such information «ith respcct to itsclf as thc Undcn� ritcr ma� from timc to timc rcasonabl� rcqucst: (I) if thc information containcd in thc Official Statcmcnt rclating to thc Financing Authorit� is amcndcd or supplcmcntcd pursuant to Scction 6(k). at thc timc of such supplcmcnt or amcndmcnt thcrcto and (unlcss subscqucntl� again supplcmcntcd or amcndcd pursuant to such subparagraph) at all timcs subscqucnt thcrcto up to and including thc datc «hich is 2� da� s aftcr thc End of thc Undcn� riting Pcriod for thc 2006 Bonds. thc portions of thc Official Statcmcnt so supplcmcntcd or amcndcd (including am financial and statistical data containcd thcrcin). «ill not contain am untruc statcmcnt of a matcrial fact or omit to statc a matcrial fact rcquircd to bc statcd thcrcin or ncccssar� to makc such information thcrcin. in thc light of thc circumstanccs undcr «hich it «as madc. not mislcading: (m) am ccrtificatc signcd b� am officcr of thc Financing Authorit� and dcli� crcd to thc Undcn� ritcr pursuant to thc 2006 Indcntures or this Purchasc Agrccmcnt or am documcnt contcmplatcd thcrcb� shall bc dccmcd a rcprescntation and «arrant� b� thc Financing Authorit� to thc Undcn� ritcr as to thc statcmcnts madc thcrcin and that such officcr shall ha� c bccn dul� authorizcd to c�ccutc thc samc: (n) to thc bcst kno« Icdgc of thc Financing Authorit� . thcrc is no public � otc or rcfcrcndum pcnding or proposcd. thc results of «hich could matcriall� ad� crscl� affcct thc transactions contcmplatcd b� thc Official Statcmcnt or thc Financing Authorit� Agrccmcnts or thc 2006 Bonds. or thc � alidit� or cnforccabilit� of thc 2006 Bonds: (o) thc Financing Authorit� «ill compl� «ith thc rcquircmcnts of thc ta� ccrtificatc c�ccutcd b� thc Financing Authorit� in conncction «ith thc dcli� cr� of thc 2006 Bonds: and (p) thc Financing Authorit� «ill appl� thc procccds from thc salc of thc 2006 Bonds for thc purposcs spccificd in thc 2006 Indcntures. Section 7. Representations, Warranties and Covenants of the Redevelopment Agency. Thc Rcdc� clopmcnt Agcnc� rcprescnts. «arrants and co� cnants «ith thc Undcn� ritcr that: z��t-o�,o�z r�-� 6 (a) thc Rcdc� clopmcnt Agcnc� is a public bod� corporatc and politic. organizcd and c�isting undcr thc la«s of thc Statc. including thc Rcdc�clopmcnt La«. «ith fiill right. po«cr and authorit� to c�ccutc. dcli� cr and perform its obligations undcr thc 2006 Loan Agrccmcnts. thc Continuing Disclosurc Ccrtificatc Agrccmcnt among thc Rcdc�clopmcnt Agcnc�. thc Trustcc and MuniFinancial. Inc.. as Disscmination Agcnt. datcd thc Closing Datc and substantiall� in thc form attachcd to thc Official Statcmcnt as E�hibit F(thc "( �U191lYl1llYl,�� l)i.sclu.siu�e A,��i�eement "). and to appro� c this Purchasc Agrccmcnt (collccti� cl� . thc "Rec%velupmenr A,��encr A,��i�eement.s "). and to carr� out all transactions contcmplatcd b� cach of thc Rcdc� clopmcnt Agcnc� Agrccmcnts and thc Official Statcmcnt. (b) thc Rcdc� clopmcnt Agcnc� has b� Rcsolution No. (thc "Rec%velupment A,��encr Re.suh�tiun��) adoptc;d b� a majoriri of its mcmbcrs at a mc;c;ting dul� callc;d. noticc;d and conductc;d. at «hich a quonim «as prescnt a��d acting throughout. on . 2006. takcn all action ncccssan to bc takcn b� it to authorizc and appro� c thc c�ccution. dcli� cr� of and thc performancc b� thc Rcdc� clopmcnt Agcnc� of thc obligations containcd in thc Rcdc� clopmcnt Agcnc� Agrccmcnts: thc Rcdc� clopmcnt Agcnc� Rcsolution is in fiill forcc and cffcct and has not bccn amcndcd. modificd or rescindcd: and thc adoption of thc Rcdc� clopmcnt Agcnc� Rcsolution constitutcs all action ncccssar� to bc takcn b� thc Rcdc� clopmcnt Agcnc� for thc c�ccution. dcli� cr� and duc performancc of thc Rcdc� clopmcnt Agcnc� Agrccmcnts: (c) «hcn c�ccutcd and dcli� crcd b� thc respccti� c partics thcrcto. cach of thc Rcdc� clopmcnt Agcnc� Agrccmcnts «ill constitutc a Icgall� � alid and binding obligation of thc Rcdc� clopmcnt Agcnc� cnforccablc in accordancc «ith thcir respccti�c tcrms. c�ccpt as cnforccmcnt ma� bc limitcd b� bankruptc�. insol�cnc�. rcorganization. moratorium or similar la«s or cquitablc principlcs rclating to or affccting crcditors� rights gcncrall�: thc Rcdc�clopmcnt Agcnc� has complicd. and «ill at thc Closing bc in compliancc in all matcrial respccts. «ith thc tcrms of thc Rcdc� clopmcnt Agcnc� Agrccmcnts: (d) at thc timc of acccptancc hcrcof b� thc Rcdc� clopmcnt Agcnc� . and (unlcss an c� cnt occurs of thc naturc dcscribcd in Scction 7(k)) at all timcs during thc period from thc datc of this Purchasc Agrccmcnt to and including thc datc «hich is 2� da� s follo« ing thc End of thc Undcn� riting Pcriod for thc 2006 Bonds (as dctcrmincd in accordancc «ith Scction 7(j)). thc statcmcnts and information containcd in thc Prcliminar� Official Statcmcnt as of its datc. and thc Official Statcmcnt as of its datc undcr thc captions ..Ti n: Ri:ui:vi:i.c�i>Mi:N r Ac�i:Ncv" and "Ti n: Piic�.ii:c r Aiii:n" and containcd in Ai�i�i:Nuix i3— ..RI:UI:VI:LOPMI:N I A(�I:NCY AUUI I I:U FINnNCInI, S I n I I:MI:N I S FOR I I II: FISCnI, YI:nR ENUI:U JUNI: �0. 200�" arc truc. corrcct and complctc in all matcrial respccts and such statcmcnts do not «ith respcct to thc Prcliminar� Official Statcmcnt. and «ill not «ith respcct to thc Official Statcmcnt. omit to statc am matcrial fact ncccssar� to makc such statcmcnts. in light of thc circumstanccs undcr «hich thc� «crc madc. not mislcading: z��t-o�,o�z r�-� 7 (c) to thc bcst of its kno« Icdgc. thc Rcdc� clopmcnt Agcnc� is not in � iolation or brcach of or dcfault undcr am applicablc constitutional pro� ision. la« or administrati� c rulc or rcgulation of thc Statc or thc Unitcd Statcs of Amcrica. or am agcnc� or instrumcntalit� of cithcr of thcm. or am applicablc judgmcnt or dccrcc. or am loan agrccmcnt. indcnturc. bond. notc. resolution. agrccmcnt or othcr instrumcnt to «hich thc Rcdc� clopmcnt Agcnc� is a part� or is othcn� isc subjcct. «hich «ould constitutc a dcfault undcr am of thc Rcdc� clopmcnt Agrccmcnts. no c� cnt has occurrcd and is continuing «hich. «ith thc passagc of timc or thc gi� ing of noticc. or both «ould constitutc a� iolation or a brcach of or a dcfault undcr am such loan agrccmcnt. indcnturc. bond. notc. resolution. agrccmcnt or othcr instrumcnt to «hich thc Rcdc� clopmcnt Agcnc� is a part� or is othcn� isc subjcct: and compliancc «ith thc pro� isions of thc Rcdc� clopmcnt Agcnc� Agrccmcnts «ill not matcriall� conflict «ith or constitutc a brcach of or dcfault undcr am applicablc constitutional pro� ision. la«. administrati� c rcgulation. court ordcr or conscnt dccrcc or am applicablc judgmcnt or dccrcc or am loan agrccmcnt. notc. resolution. indcnturc. agrccmcnt or othcr instrumcnt to «hich thc Rcdc� clopmcnt Agcnc� is a part� or ma� bc othcn� isc subjcct: (� at thc datc hcrcof and on thc Closing Datc. thc Rcdc� clopmcnt Agcnc� «ill bc in compliancc in all respccts «ith thc matcrial co� cnants and agrccmcnts containcd in thc Rcdc� clopmcnt Agcnc� Agrccmcnts and no c� cnt of dcfault and no c� cnt has occurrcd and is continuing «hich. «ith thc passagc of timc or gi� ing of noticc. or both. «ould constitutc an c� cnt of dcfault thcrcundcr shall ha� c occurrcd and bc continuing: (g) to thc bcst kno« Icdgc of thc Rcdc� clopmcnt Agcnc� . aftcr duc im cstigation. othcr than as sct forth in thc Official Statcmcnt or as thc Rcdc� clopmcnt Agcnc� has othcn� isc discloscd in «riting to thc Undcn� ritcr. thcrc is no action. suit. procccding. inquir� or im cstigation. at la« or in cquit�. or b� or bcforc am court. go�crnmcntal agcnc�. public board or bod�. pcnding or thrcatcncd against thc Rcdc� clopmcnt Agcnc�. (i) «hcrcin an unfa� orablc dccision. ruling or finding «ould ad� crscl� affcct thc c�istcncc of thc Rcdc� clopmcnt Agcnc� or thc titic of am official of thc Rcdc� clopmcnt Agcnc� to such person�s officc. or (ii) in am «a� contcsting or affccting thc � alidit� or cnforccabilit� of thc Rcdc� clopmcnt Agcnc� Agrccmcnts or thc 2006 Bonds. or (iii) contcsting in am «a� thc complctcncss or accurac� of thc information in thc Prcliminar� Official Statcmcnt containcd undcr thc captions "TI II: RI:UI:vI:I,c�PMI:N I Ac�i:Ncv" and "Ti n: Piic�.ii:c r Aiii:n" and containcd in Ai�i�i:Nuix B-"RI:UI:VI:LOPMI:N I A(�I:NCY Auul i►:u FINnNc►n►. S I n I I:MI:N i s I c�R I I II: Flscn►. YI:nR ENu►:u JuN►: ;0. 200;." or (i� ) contcsting thc po« cr of thc Rcdc� clopmcnt Agcnc� or its authorit� «ith respcct to thc Rcdc� clopmcnt Agcnc� Agrccmcnts: «hcrcin an unfa� orablc dccision. ruling or finding «ould matcriall� ad� crscl� affcct thc � alidit� of thc Rcdc� clopmcnt Agcnc� Agrccmcnts or thc authorization. c�ccution. dcli� cr� or performancc b� thc Rcdc� clopmcnt Agcnc� of thc Rcdc� clopmcnt Agcnc� Agrccmcnts: (h) thc Rcdc� clopmcnt Agcnc� «ill fiirnish such information. c�ccutc such instrumcnts and takc such othcr action not inconsistcnt «ith la« in cooperation «ith thc Undcn� ritcr «hich thc Undcn� ritcr ma� rcasonabl� rcqucst in ordcr for thc Undcn� ritcr to qualifi thc 2006 Bonds for offcr and salc undcr thc Bluc Sk� or othcr sccuritics la« s and regulations of such statcs and othcr jurisdictions of thc Unitcd Statcs as thc Undcn� ritcr ma� dcsignatc and to dctcrminc thc cligibilit� of thc 2006 Bonds for im cstmcnt undcr thc la« s of such statcs and othcr jurisdictions: pro� idcd. ho« c� cr. that in no c� cnt shall thc Rcdc� clopmcnt Agcnc� bc rcquircd to takc am action «hich «ould subjcct it to scr� icc of proccss in am jurisdiction in «hich it is not no« subjcct: (i) to thc bcst of kno« Icdgc of thc Rcdc� clopmcnt Agcnc� . all appro� als. conscnts and ordcrs of am go� crnmcntal authorit� or agcnc� ha� ing jurisdiction in thc mattcr «hich «ould constitutc a condition prcccdcnt to thc duc performancc b� thc Rcdc� clopmcnt Agcnc� of its obligations undcr thc Rcdc� clopmcnt Agcnc� Agrccmcnts ha� c bccn dul� obtaincd or madc. and arc. and «ill bc on thc Closing Datc. in fiill forcc and cffcct: z��t-o�,o�z r�-� x (I) as uscd in this Purehasc Agrccmcnt. thc tcrm "l:�ncl uf'tl�e Ul9L%L'P117'!1!Yl,�� l'ei�iucf� for thc 2006 Bonds shall mcan thc carlicr of (i) thc Closing Datc unlcss thc Rcdc� clopmcnt Agcnc� shall ha� c bccn notificd in ��riting to thc contrar� b� thc Undcn�ritcr on or prior to thc Closing Datc or (ii) thc datc on «hich thc End of thc Undcn� riting Pcriod for thc 2006 Bonds has occurrcd undcr Rulc I�c2-12. pro� idcd. ho« c� cr. that thc Rcdc� clopmcnt Agcnc� ma� trcat as thc End of thc Undcn� riting Pcriod for thc 2006 Bonds thc datc spccificd as such in a noticc from thc Undcn� ritcr stating thc datc «hich is thc End of thc Undcn� riting Pcriod: (k) if bct��ccn thc datc hcrcof and thc datc «hich is 2� da� s aftcr thc End of thc Undcn� riting Pcriod for thc 2006 Bonds. an c� cnt occurs. or facts or conditions bccomc kno« n to thc Rcdc� clopmcnt Agcnc� «hich. in thc rcasonablc opinion of thc Cit� Attornc�. as Counscl to thc Rcdc� clopmcnt Agcnc� or Disclosurc Counscl. might or «ould causc thc information containcd in thc Official Statcmcnt. as thcn supplcmcntcd or amcndcd. to contain an untruc statcmcnt of a matcrial fact or to omit to statc a matcrial fact rcquircd to bc statcd thcrcin or ncccssar� to makc such information thcrcin. in thc light of thc circumstanccs undcr «hich it «as madc. not mislcading in am matcrial respcct. thc Rcdc� clopmcnt Agcnc� «ill notifi thc Undcn� ritcr. and if in thc opinion of thc Undcn� ritcr such c� cnt rcquires thc prcparation and publication of a supplcmcnt or amcndmcnt to thc Official Statcmcnt. thc Rcdc� clopmcnt Agcnc� «ill forth« ith prcparc and fiirnish to thc Undcn� ritcr (at thc c�pcnsc of thc Rcdc� clopmcnt Agcnc� ) a rcasonablc numbcr of copics of an amcndmcnt of or supplcmcnt to thc Official Statcmcnt (in thc form and substancc satisfactor� to thc Undcn� ritcr) «hich «ill amcnd or supplcmcnt thc Official Statcmcnt so that it «ill not contain an untruc statcmcnt of a matcrial fact or omit to statc a matcrial fact ncccssar� in ordcr to makc thc statcmcnts thcrcin. in thc light of thc circumstanccs c�isting at thc timc thc Official Statcmcnt is dcli� crcd to prospccti� c purchascrs. not mislcading in am matcrial respcct «ith respcct to thc information of thc Rcdc� clopmcnt Agcnc� . If such notification shall bc subscqucnt to thc Closing Datc. thc Rcdc� clopmcnt Agcnc� shall forth« ith pro� idc to thc Undcn� ritcr such Icgal opinions. ccrtificatcs. instrumcnts and othcr documcnts as thc Undcn� ritcr ma� rcasonabl� dccm ncccssar� to c� idcncc thc truth and accurac� of such supplcmcnt or amcndmcnt to thc Official Statcmcnt. For thc purposcs of this subscction. bct«ccn thc datc hcrcof and thc datc «hich is 2� da� s aftcr thc End of thc Undcn� riting Pcriod for thc 2006 Bonds. thc Rcdc� clopmcnt Agcnc� «ill fiirnish such information «ith respcct to itsclf as thc Undcn� ritcr ma� from timc to timc rcasonabl� rcqucst: (I) if thc information containcd in thc Official Statcmcnt rclating to thc Rcdc� clopmcnt Agcnc� is amcndcd or supplcmcntcd pursuant to Scction 7(k). at thc timc of such supplcmcnt or amcndmcnt thcrcto and (unlcss subscqucntl� again supplcmcntcd or amcndcd pursuant to such subparagraph) at all timcs subscqucnt thcrcto up to and including thc datc «hich is 2� da� s aftcr thc End of thc Undcn� riting Pcriod for thc 2006 Bonds. thc portions of thc Official Statcmcnt so supplcmcntcd or amcndcd (including am financial and statistical data containcd thcrcin). «ill not contain am untruc statcmcnt of a matcrial fact or omit to statc a matcrial fact rcquircd to bc statcd thcrcin or ncccssar� to makc such information thcrcin. in thc light of thc circumstanccs undcr «hich it «as madc. not mislcading: (m) am ccrtificatc signcd b� am officcr of thc Rcdc� clopmcnt Agcnc� and dcli� crcd to thc Undcn� ritcr pursuant to thc Rcdc� clopmcnt Agcnc� Agrccmcnts or this Purchasc Agrccmcnt or am documcnt contcmplatcd thcrcb� shall bc dccmcd a rcprescntation and «arrant� b� thc Rcdc� clopmcnt Agcnc� to thc Undcn� ritcr as to thc statcmcnts madc thcrcin and that such officcr shall ha� c bccn dul� authorizcd to c�ccutc thc samc: (n) to thc bcst kno« Icdgc of thc Rcdc� clopmcnt Agcnc� . thcrc is no public � otc or rcfcrcndum pcnding or proposcd. thc results of «hich could matcriall� ad� crscl� affcct thc transactions contcmplatcd z��t-o�,o�z r�-� y b� thc Official Statcmcnt or thc Rcdc� clopmcnt Agcnc� Agrccmcnts or thc � alidit� or cnforccabilit� of thc 2006 Bonds: - - (o) thc Rcdc� clopmcnt Agcnc� «ill appl� thc procccds from thc salc of thc 2006 Bonds for thc purposcs spccificd in thc 2006 Loan Agrccmcnts: (p) thc financial statcmcnts of thc Rcdc� clopmcnt Agcnc� containcd in thc Official Statcmcnt as Appcndi� B fairl� prescnt thc financial positions and results of operations thcrcof as of thc datcs and for thc periods thcrcin sct forth. and thc Rcdc� clopmcnt Agcnc� has no rcason to bclic� c that such financial statcmcnts ha� c not bccn prcparcd in accordancc «ith gcncrall� acccptcd accounting principlcs consistcntl� applicd: and (q) thc Rcdc� clopmcnt Agcnc� is in compliancc «ith all of its prior continuing disclosurc undcrtakings cntcrcd into pursuant to Rulc I�c2-12 and at or prior to thc Closing Datc. thc Rcdc� clopmcnt Agcnc� shall ha� c dul� authoriz�d. czccutcd and dcli� crcd thc Continuing Disclosurc Ccrtificatc Agrccmcnt. Section 8. Closing. At 8:00 A.M.. California timc. on . 2006. or on such carlicr or latcr datc as ma� bc mutuall� agrccd upon b� partics hcrcto (thc "(7u.sin,�� l)ate "). thc Financing Authorit�. «ill dcli� cr or causc to bc dcli� crcd to thc Undcn� ritcr thc dul� c�ccutcd Bonds through thc facilitics of Thc Dcpositor� Trust Compam in Nc« York. Nc« York ("DTC��) b� thc initial dcposit «ith thc Trustcc (in carc of DTC) through thc Fast Automatcd Sccuritics Transfcr S� stcm. and «ill dcli� cr or causc to bc dcli� crcd at thc officcs of Richards. Watson c�. Gcrshon. A Profcssional Corporation ("Runcl ('ui�n.sel ") in Los Angcics. California. or such othcr placc as shall ha� c bccn mutuall� agrccd upon b� thc partics. thc othcr documcnts dcscribcd hcrcin: and thc Undcn� ritcr shall pa� thc purchasc pricc of cach Scrics of 2006 Bonds as sct forth in Sr.�tic,n I of this Purchasc Agrccmcnt. Icss thc prcmium for thc � Bond Insurancc Polic� / Bond Insurancc Policics� in thc amount of `f and thc prcmium for thc Rcscr� c Polic� Bond in thc amount of `f .«hich thc Undcn� ritcr «ill «irc dircctl� to thc Bond Insurcr. Thc 2006 Bonds shall bc issucd in fiill� rcgistcrcd form. It is anticipatcd that CUSIP idcntification numbcrs «ill bc inscrtcd on thc 2006 Bonds. but ncithcr thc failurc to pro� idc such numbcrs nor am crror «ith respcct thcrcto shall constitutc a causc for failurc or rcfiisal b� thc Undcn� ritcr to acccpt dcli� cr� of thc 2006 Bonds in accordancc «ith thc tcrms of this Purchasc Agrccmcnt. Section 9. Termination. Thc Undcn� ritcr shall ha� c thc right to tcrminate thc obligations of thc w�dcn� ritcrs undcr this Purchasc Agrccmcnt to purchasc. to acccpt dcli� cr� of and to pa� for thc 2006 Bonds b� notifi ing thc Financing Authorit� of its cicction to do so if. aftcr thc c�ccution hcrcof and prior to thc Closing Datc: ( I) Icgislation (including am amcndmcnts thcrcto). resolution. rulc or rcgulation (including am amcndmcnts thcrcto) shall bc introduccd in. considcrcd b� or bc cnactcd b� am go� crnmcntal bod�. dcpartmcnt or political subdi� ision of thc Statc. or a dccision b� am court of compctcnt jurisdiction «ithin thc Statc shall bc rcndcrcd «hich. in thc rcasonablc opinion of thc Undcn� ritcr. «ould makc it impracticablc or inad� isablc to procccd «ith thc offcr. salc or dcli� cr� of thc 2006 Bonds on thc tcrms and in thc manncr contcmplatcd in thc Official Statcmcnt: (2) thc outbrcak or dcclaration of «ar. institution of a policc action. cngagcmcnt in or escalation of militar� hostilitics b� or against thc Unitcd Statcs. or am cscalation of am cxisting conflict or hostilitics in «hich thc Unitcd Statcs is im ol� cd or thc occurrcnccs of am othcr national cmcrgcnc� or calamit� or crisis or am changc in financial markcts resulting from thc forcgoing. «hich. in thc rcasonabl� opinion of thc Undcn� ritcr. «ould makc it impracticablc or inad� isablc to procccd «ith thc offcr. salc or dcli� cr� of thc 2006 Bonds on thc tcrms and in thc manncr contcmplatcd in thc Official Statcmcnt: (�) thc dcclaration of a gcncral banking moratorium b� fcdcral. Nc« York or California authoritics. or thc gcncral suspcnsion or matcrial limitation z��t-o�,o�z r�-� 10 of trading on am national sccuritics c�changc «hich matcriall� ad� crscl� affccts thc markct pricc of thc 2006 Bonds: (�4) thc imposition b� thc Nc« York Stock E�changc or othcr national sccuritics c�changc. or am go� crnmcntal authorit� . of am matcrial restrictions not no« in forcc «ith respcct to thc 2006 Bonds or obligations of thc gcncral charactcr of thc 2006 Bonds or sccuritics gcncrall�. or thc matcrial incrcasc of am such restrictions no« in forcc. including thosc rclating to thc c�tcnsion of crcdit b�. or thc chargc to thc nct capital rcquircmcnts of. thc Undcn� ritcr «hich. in thc rcasonablc opinion of thc Undcn� ritcr «ould makc it impracticablc or inad� isablc to procccd «ith thc offcr. salc or dcli� cr� of thc 2006 Bonds on thc tcrms and in thc manncr contcmplatcd in thc Official Statcmcnt: (�) Icgislation cnactcd (or resolution passcd) b� or introduccd or pcnding Icgislation amcndcd in thc Congress or rccommcndcd for passagc b� thc Presidcnt of thc Unitcd Statcs. or an ordcr. dccrcc or injunction issucd b� am court of compctcnt jurisdiction. or an ordcr. ruling. rcgulation (final. tcmporar� or proposcd) issucd or madc b� or on bchalf of thc Sccuritics and E�changc Commission. or am othcr go� crnmcntal agcnc� ha� ing jurisdiction of thc subjcct mattcr. to thc cffcct that sccuritics of thc gcncral charactcr of thc 2006 Bonds. or thc 2006 Bonds. including am or all undcrl� ing arrangcmcnts. arc not c�cmpt from rcgistration undcr thc Sccuritics Act of 19>;. as amcndcd. or that thc 2006 Indcntures arc not c�cmpt from qualification undcr thc Trust Indcnturc Act of 19 �9. as amcndcd. or that thc c�ccution. offcring or salc of obligations of thc gcncral charactcr of thc 2006 Bonds. including am or all undcrl� ing arrangcmcnts. as contcmplatcd hcrcb� or b� thc Official Statcmcnt. othcn� isc is or «ould bc in � iolation of thc fcdcral sccuritics la« s as amcndcd and thcn in cffcct: (6) action b� or on bchalf of thc Statc or thc California Franchisc Ta� Board. «ith thc purposc or cffcct. dircctl� or indircctl�. of imposing California personal incomc ta�ation upon such intcrest as «ould bc rccci� cd b� thc O« ncrs of thc 2006 Bonds: (7) (i) Icgislation (including am amcndmcnt thcrcto) shall ha� c bccn introduccd in or adoptcd b� cithcr Housc of thc Congress of thc Unitcd Statcs or rccommcndcd to thc Congress or othcn� isc cndorscd for passagc b� thc Presidcnt of thc Unitcd Statcs. thc Trcasur� Dcpartmcnt of thc Unitcd Statcs. thc Intcrnal Rc� cnuc or thc chairman or ranking minorit� mcmbcr of thc Committcc on Financc of thc Unitcd Statcs Scnatc or thc Committcc on Wa� s and Mcans of thc Unitcd Statcs Housc of Rcprescntati� cs. or Icgislation is proposcd for considcration b� cithcr such committcc b� am mcmbcr thcrcof or prescntcd as an option for considcration b� cithcr such committcc b� thc staff of such committcc. or b� thc staff of thc Joint Committcc on Ta�ation of thc Congress of thc Unitcd Statcs. or a bill to amcnd thc Intcrnal Rc� cnuc Codc shall bc filcd in cithcr housc. or (ii) a dccision shall ha� c bccn rcndcrcd b� am fcdcral or statc court. or (iii) an ordcr. filing. ruling or rcgulation shall ha� c bccn issucd or proposcd b� or on bchalf of thc Trcasur� Dcpartmcnt of thc Unitcd Statcs or thc Intcrnal Rc� cnuc Scr� icc or am othcr agcnc� of thc Unitcd Statcs. or (i� ) a rcicasc or official statcmcnt shall ha� c bccn issucd b� thc Presidcnt of thc Unitcd Statcs or b� thc Trcasur� Dcpartmcnt of thc Unitcd Statcs or b� thc Intcrnal Rc� cnuc Scr� icc. thc cffcct of «hich. in am such casc dcscribcd in clausc (i). (ii). (iii). or (i� ). «ould bc to imposc. dircctl� or indircctl�. fcdcral incomc ta�ation upon intcrest rccci�cd on obligations of thc gcncral charactcr of thc 2006 Bonds or upon incomc of thc gcncral charactcr to bc dcri�cd b� thc Financing Authorit�. othcr than as imposcd on thc 2006 Bonds and incomc thcrcfrom undcr thc fcdcral ta� la« s in cffcct on thc datc hcrcof. in such a manncr as in thc judgmcnt of thc Undcn� ritcr «ould makc it impracticablc or inad� isablc to procccd «ith thc offcr. salc or dcli� cr� of thc 2006 Bonds on thc tcrms and in thc manncr contcmplatcd in thc Official Statcmcnt: (8) thc «ithdra«al or do«ngrading or am noticc of an intcndcd or potcntial do«ngrading of am rating of thc obligations of thc Financing Authorit� (including thc rating to bc issucd «ith respcct to thc 2006 Bonds) b� a"nationall� rccognizcd statistical rating organization.�� as such tcrm is dcfincd for purposcs of Rulc �4�6(g)(2) undcr thc Sccuritics Act of 19>;. as amcndcd «hich. in thc rcasonablc opinion of thc Undcn� ritcr. «ould makc it impracticablc or inad� isablc to procccd «ith thc offcr. salc or dcli� cr� of thc 2006 Bonds on thc tcrms and in thc manncr contcmplatcd in thc Official Statcmcnt: (9) am c�cnt occurring. or information bccoming kno«n «hich. in thc rcasonablc judgmcnt of thc Undcn� ritcr. makcs untruc in am matcrial respcct am statcmcnt or information containcd in thc Official Statcmcnt. or has thc cffcct that thc Official Statcmcnt contains am untruc statcmcnt of a matcrial fact or omits to statc a matcrial fact to bc statcd thcrcin or ncccssar� in ordcr to makc thc statcmcnts thcrcin. in thc light of thc circumstanccs undcr «hich thc� «crc madc. not mislcading: (10) am changc or z��t-o�,o�z r�-� II dc� clopmcnt im ol� ing a prospccti� c changc in thc condition of thc Financing Authorit� . financial or othcn� isc. or in thc operations of thc Financing Authorit� from thosc sct forth in thc Official Statcmcnt that makcs thc 2006 Bonds. in thc rcasonablc judgmcnt of thc Undcn� ritcr. impracticablc or inad� isablc to offcr. scll or dcli� cr thc 2006 Bonds on thc tcrms and in thc manncr contcmplatcd b� thc Official Statcmcnt: ( I I)(i) trading gcncrall� shall ha� c bccn suspcndcd or matcriall� limitcd on or b�. as thc casc ma� bc. am of thc Nc« York Stock E�changc or thc Nasdaq National Markct: (ii) trading of am sccuritics of thc Financing Authorit� shall ha� c bccn suspcndcd on am c�changc or in am o� cr-thc-countcr markct: (iii) a matcrial disruption in sccuritics sctticmcnt. pa� mcnt or cicarancc scr� iccs in thc Unitcd Statcs shall ha� c occurrcd: or (i� ) am moratorium on commcrcial banking acti� itics shall ha� c bccn dcclarcd b� Fcdcral or Nc« York Statc authoritics: or (12) thc purchasc of and pa� mcnt for thc 2006 Bonds b� thc Undcn� ritcr. or thc resalc of thc 2006 Bonds b� thc Undcn� ritcr. on thc tcrms and conditions hcrcin pro� idcd shall bc prohibitcd b� am applicablc la«. go� crnmcntal authorit�. board. agcnc� or commission. Section 10. Closing Conditions. Thc Undcn� ritcn c�rcb� cntcrs into this Purchasc Agrccmcnt in rcliancc upon thc rcprescntations and «arrantics of thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� containcd hcrcin and thc rcprescntations and «arrantics to bc containcd in thc documcnts and instrumcnts to bc dcli�crcd on thc Closing Datc and upon thc performancc b� thc Financing Authorit�. thc Rcdc� clopmcnt Agcnc� and thc Trustcc of thcir respccti� c obligations both on and as of thc datc hcrcof and as of thc Closing Datc. Accordingl�. thc obligations of thc Undcn�ritcr undcr this Purchasc Agrccmcnt to purchasc. to acccpt dcli� cn of and to pa� for thc 2006 Bonds shall bc subjcct. at thc option of thc Undcn� ritcr. to thc accurac� in all matcrial respccts of thc rcprescntations and «arrantics of thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� containcd hcrcin as of thc datc hcrcof and as of thc Closing Datc. to thc accurac� in all matcrial respccts of thc statcmcnts of thc officcrs and othcr officials of thc Financing Authorit�. thc Rcdc�clopmcnt Agcnc� and thc Trustcc madc in am ccrtificatc or documcnt fiirnishcd pursuant to thc pro� isions hcrcof. to thc performancc b� thc Financing Authorit�. thc Rcdc� clopmcnt Agcnc� and thc Trustcc of thcir respccti� c obligations to bc performcd hcrcundcr and undcr thc Financing Authorit� Agrccmcnts and thc Rcdc� clopmcnt Agcnc� Agrccmcnts. at or prior to thc Closing Datc. and also shall bc subjcct to thc follo« ing additional conditions: (a) thc Undcn� ritcr shall rccci� c. «ithin sc� cn busincss da� s aftcr thc datc hcrcof. copics of thc Official Statcmcnt (including all information permittcd to ha� c bccn omittcd from thc Prcliminar� Official Statcmcnt b� thc Rulc I�c2-12 and am amcndmcnts or supplcmcnts as ha� c bccn appro� cd b� thc Undcn� ritcr). in such rcasonablc quantit� as thc Undcn� ritcr shall ha� c rcqucstcd: (b) on thc Closing Datc. thc Financing Authorit� Agrccmcnts and thc Rcdc� clopmcnt Agcnc� Agrccmcnts shall ha� c bccn dul� authorizcd. c�ccutcd and dcli� crcd b� thc partics thcrcto. all in substantiall� thc forms hcrctofore submittcd to thc Undcn� ritcr. «ith onl� such changcs as shall ha� c bccn agrccd to in «riting b� thc Undcn� ritcr. and such agrccmcnts shall bc in fiill forcc and cffcct: and thcrc shall bc in fiill forcc and cffcct such resolutions of thc go� crning boards of thc Financing Authorit� and thc Rcdc� clopmcnt Agcnc� as. in thc opinion of Bond Counscl. shall bc ncccssan or appropriatc in conncction «ith thc transactions contcmplatcd hcrcb� : (c) on thc Closing Datc. all ncccssar� action of thc Financing Authorit� rclating to thc c�ccution and dcli� cn of thc 2006 Bonds «ill ha� c bccn takcn and «ill bc in fiill forcc and cffcct and «ill not ha� c bccn amcndcd. modificd or supplcmcntcd: (d) at or prior to thc Closing Datc. thc Undcn� ritcr shall ha� c rccci� cd thc follo« ing documcnts. in cach casc satisfactor� in form and substancc to thc Undcn� ritcr: z��t-o�,o�z r�-� 12 (i) thc Financing Authorit� Agrccmcnts. thc Rcdc� clopmcnt Agcnc� Agrccmcnts and thc Official Statcmcnt. cach dul� c�ccutcd and dcli� crcd b� thc respccti� c partics thcrcto. and ccrtificd copics of thc Financing Authorit� Rcsolution and thc Rcdc� clopmcnt Agcnc� Rcsolution: (ii) thc appro� ing opinion of Bond Counscl. datcd thc Closing Datc and addresscd to thc Financing Authorit�. in substantiall� thc form attachcd to thc Official Statcmcnt as Appcndi� E. togcthcr «ith a Icttcr of Bond Counscl. addresscd to thc Undcn� ritcr to thc cffcct that such opinion ma� bc rclicd upon b� thc Undcn� ritcr to thc samc c�tcnt as if such opinion «crc addresscd to it: (iii) thc supplcmcntal opinion of Bond Counscl. datcd thc Closing Datc and addresscd to thc Undcn� ritcr. substantiall� to thc cffcct that: (A) this Purchasc Agrccmcnt has bccn dul� authorizcd. c�ccutcd and dcli� crcd b� thc Financing Authorit� and is a� alid and binding agrccmcnt of thc Financing Authorit�. cnforccablc in accordancc «ith its tcrms. c�ccpt as cnforccmcnt thcrcof ma� bc limitcd b� bankruptc� . insol� cnc� or othcr la« s affccting thc cnforccmcnt of crcditors. rights and b� thc application of cquitablc principlcs if cquitablc rcmcdics are sought: (B) thc 2006 Bonds arc not subjcct to thc rcgistration rcquircmcnts of thc Sccuritics Act of 19>;. as amcndcd. and thc 2006 Indcntures arc cach c�cmpt from qualification undcr thc Trust Indcnturc Act of 19 �9. as amcndcd: (C) thc Continuing Disclosurc Ccrtificatc Agrccmcnt has bccn dul� authorizcd. c�ccutcd and dcli�crcd b� thc Financing Authorit�: (D) thc statcmcnts containcd in thc Official Statcmcnt undcr thc captions "TI II: 2006 Bc�NUs .. ..SI:�'UI�I I Y nNU Sc�UR�'I:s c�l PnvMi:N r rc�ii ri n: Bc�Nus" and "Tnx Mn r ri:iis" and containcd in Appcndi� E. insofar as such statcmcnts c�pressl� summarizc ccrtain pro� isions of thc 2006 Bonds. thc 2006 Indcntures. and thc final opinion of Bond Counscl conccrning ccrtain fcdcral ta� mattcrs rclating to thc 2006 Bonds. arc accuratc in all matcrial respccts: and (E) that. on thc basis of thc information madc a� ailablc to thcm. no facts camc to thcir attcntion in conncction «ith thc prcparation of thc Official Statcmcnt «hich causc thcm to bclic� c that thc Official Statcmcnt as of its datc (c�cluding thcrcfrom financial cnginccring and statistical data. forccasts. projcctions. cstimatcs. assumptions and c�pressions of opinions. statcmcnts rclating to DTC. Ccdc c�. Co. and thc operation of thc book-cntn s� stcm and Appcndiccs A. B. C. F. G. H. I. and J as to all of «hich no � ic« nccd bc c�presscd) containcd am untruc statcmcnt of a matcrial fact or omittcd to statc a matcrial fact ncccssar� to makc thc statcmcnts thcrcin. in thc light of thc circumstanccs undcr «hich thc� «crc madc. not mislcading in am matcrial respcct: (i� ) thc opinion of thc Cit� Attornc�. as counscl to thc Financing Authorit�. datcd thc Closing Datc and addressc;d to thc Financing Authoriri and thc Undcn�ritcr. in substa,�tiall� thc forn� of F�l,ihit R: - - (�) thc opinion of thc Cit� Attornc�. as counscl to thc Rcdc�clopmcnt Agcnc�. datcd thc Closing Datc and addresscd to thc Financing Authorit� and thc Undcn� ritcr in substantiall� thc forn� of F�l,ihit C': - - (� i) thc opinion of Disclosurc Counscl. datcd thc Closing Datc and addresscd to thc Financing Authorit� and thc Undcn� ritcr. to thc cffcct that. on thc basis of thc information madc a� ailablc to thcm. no facts camc to thcir attcntion in conncction «ith thc prcparation of thc Official Statcmcnt «hich causc thcm to bclic� c that thc Official Statcmcnt as of its datc (c�cluding thcrcfrom financial. cnginccring and statistical data. forccasts. projcctions. cstimatcs. assumptions and c�pressions of opinions. statcmcnts rclating to DTC. Ccdc c�. Co. and thc operation of thc book-cntn s� stcm. thc Bond Insurcr and thc Bond Insurancc Polic� and thc appcndiccs (c�ccpt for Appcndi� F). as to all of «hich no � ic« nccd bc c�presscd) containcd am untruc statcmcnt of a matcrial fact or omittcd to statc a matcrial fact ncccssar� to makc thc statcmcnts thcrcin. in thc light of thc circumstanccs undcr «hich thc� «crc madc. not mislcading in am matcrial respcct. thc 2006 Bonds arc not subjcct to thc rcgistration rcquircmcnts of thc Sccuritics Act of 19>;. as amcndcd. and thc 2006 Indcntures arc cach c�cmpt from qualification undcr thc Trust Indcnturc z��t-o�,o�z r�-� I� Act of 19 �9. as amcndcd. and thc Continuing Disclosurc Ccrtificatc Agrccmcnt pro� idcs a suitablc basis for thc Undcn� ritcr. in conncction «ith thc Offcring (as dcfincd in Rulc I�c2-12) of thc 2006 Bonds to makc a rcasonablc dctcrmination as rcquircd b� scction (b)(�) of such Rulc. (� ii) thc opinion of counscl to thc Trustcc. datcd thc Closing Datc and addresscd to thc Undcn�ritcr and thc Financing Authorit�. to thc cffcct that: (A) thc Trustcc has bccn dul� incorporatcd as a national banking association. dul� organizcd and � alidl� c�isting and in good standing undcr thc la« s of thc Unitcd Statcs of Amcrica and thc Statc. ha� ing thc Icgal authorit� to c�crcisc trust po«crs in thc Statc and ha� ing fiill po«cr and authorit� to cntcr into and to perform its dutics as Trustcc undcr thc 2006 Indcntures: (B) thc Trustcc has dul� authorizcd. c�ccutcd and dcli�crcd cach 2006 Indcnturc. and b� all proper corporatc action has authorizcd thc acccptancc of thc trusts of cach 2006 Indcnturc: (C) cach 2006 Indcnturc constitutcs a Icgall� � alid and binding agrccmcnt of thc Trustcc. cnforccablc against it in accordancc «ith its respccti� c tcrms: (D) thc 2006 Bonds ha� c bccn � alidl� authcnticatcd. rcgistcrcd and dcli� crcd b� thc Trustcc: (E) no authorization. appro� al. conscnt or othcr ordcr of thc Statc or am othcr go� crnmcntal authorit� or agcnc� «ithin thc Statc ha� ing jurisdiction o� cr thc Trustcc. or. to such counscl�s kno« Icdgc aftcr rcasonablc im cstigation. am othcr person or corporation. is rcquircd for thc � alid authorization. c�ccution. dcli� cr� and performancc b� thc Trustcc of thc 2006 Indcntures: and (F) thc c�ccution and dcli� cn of thc 2006 Indcntures. and compliancc b� thc Trustcc «ith thc pro� isions of cach 2006 Indcnturc undcr thc circumstanccs contcmplatcd thcrcb�. docs not and «ill not in am matcrial respcct conflict «ith or constitutc on thc part of thc Trustcc a brcach or dcfault undcr am agrccmcnts or othcr instrumcnt to «hich thc Trustcc is a part� (and of «hich such counscl is a«arc aftcr rcasonablc im cstigation) or b� «hich it is bound (and of «hich such counscl is a« arc aftcr rcasonablc im cstigation) or am c�isting la«. rcgulation. court ordcr or conscnt dccrcc to «hich thc Trustcc is subjcct: (� iii) a ccrtificatc of thc Financing Authorit� datcd thc Closing Datc. signcd b� a dul� authorizcd official. in form and substancc satisfactor� to thc Undcn� ritcr. to thc cffcct that. to thc bcst of such official's kno« Icdgc: (A) thc rcprescntations and «arrantics of thc Financing Authorit� containcd in thc Purchasc Agrccmcnt arc truc and corrcct in all matcrial respccts on and as of thc Closing Datc «ith thc samc cffcct as if madc on thc Closing Datc: (B) thc Financing Authorit� has complicd «ith thc rcquircmcnts of thc Financing Authorit� Agrccmcnts rcquircd to bc complicd «ith on and as of thc Closing Datc «ith respcct to thc 2006 Bonds: and (C) no c� cnt matcriall� ad� crscl� affccting thc Financing Authorit� has occurrcd sincc thc datc of thc Official Statcmcnt: (i�) a ccrtificatc of thc Rcdc� clopmcnt Agcnc� datcd thc Closing Datc. signcd b� a dul� authorizcd official. in form and substancc satisfacton to thc Undcn� ritcr. to thc cffcct that. to thc bcst of such official�s kno« Icdgc: (A) thc rcprescntations and «arrantics of thc Rcdc� clopmcnt Agcnc� containcd in thc Purchasc Agrccmcnt arc truc and corrcct in all matcrial respccts on and as of thc Closing Datc «ith thc samc cffcct as if madc on thc Closing Datc: (B) thc Rcdc�clopmcnt Agcnc� has complicd «ith thc rcquircmcnts of thc Rcdc� clopmcnt Agcnc� Agrccmcnts rcquircd to bc complicd «ith on and as of thc Closing Datc: (C) no c� cnt matcriall� ad� crscl� affccting thc Rcdc� clopmcnt Agcnc� has occurrcd sincc thc datc of thc Official Statcmcnt: and (D) that thc financial statcmcnts of thc Rcdc�clopmcnt Agcnc� containcd in thc Official Statcmcnt fairl� prescnt thc financial positions and results of operations thcrcof as of thc datcs and for thc periods thcrcin sct forth. and such officcr has no rcason to bclic� c that such financial statcmcnts ha� c not bccn prcparcd in accordancc «ith gcncrall� acccptcd accounting principlcs consistcntl� applicd: (�) a ccrtificatc of thc Trustcc datcd thc Closing Datc. signcd b� a dul� authorizcd official. in form and substancc satisfactor� to thc Undcn� ritcr. to thc cffcct that: (A) thc Trustcc is a national banking association organizcd and c�isting undcr and b� � irtuc of thc la«s of thc Unitcd Statcs. ha� ing thc fiill po«cr and bcing qualificd to cntcr into and perform its dutics undcr thc 2006 Indcntures and to authcnticatc and dcli� cr thc 2006 Bonds to thc Undcn� ritcr: (B) thc Trustcc is dul� authorizcd to cntcr z��t-o�,o�z r�-� I �4 into thc 2006 Indcntures and to c�ccutc and dcli� cr thc 2006 Bonds to thc Undcn� ritcr pursuant to thc 2006 Indcntures: (C) thc 2006 Bonds «ill ha� c bccn dul� authcnticatcd and dcli� crcd b� thc Trustcc: (D) thc c�ccution and dcli� cn of thc 2006 Indcntures and compliancc «ith thc pro� isions on thc part of thc Trustcc containcd in cach 2006 Indcnturc. «ill not conflict �� ith or constitutc a brcach of or dcfault undcr am la«. administrati�c rcgulation. judgmcnt. dccrcc. loan agrccmcnt. indcnturc. notc. resolution. agrccmcnt or othcr instrumcnt to «hich thc Trustcc is a part� or is othcn� isc subjcct (c�ccpt that no rcprescntation or «arrant� is madc «ith respcct to am fcdcral or statc sccuritics or bluc sk� la«s or rcgulations). nor «ill am such c�ccution. dcli� cn. adoption or compliancc result in thc crcation or imposition of am licn. chargc or othcr sccurit� intcrest or cncumbrancc of am naturc «hatsoc� cr upon am of thc propertics or asscts hcld b� thc Trustcc pursuant to thc licn crcatcd b� cach 2006 Indcnturc undcr thc tcrms of am such la«. administrati� c rcgulation. judgmcnt. dccrcc. loan agrccmcnt. indcnturc. bond. notc. resolution. agrccmcnt or othcr instrumcnt. c�ccpt as pro� idcd b� cach 2006 Indcnturc: and (E) to thc bcst of thc kno« Icdgc of thc Trustcc. it has not bccn scr� cd «ith am action. suit. procccding. inquir� or im cstigation in la« or in cquit�. bcforc or b� am court. go�crnmcntal agcnc�. public board or bod�. nor is am such action or othcr procccding thrcatcncd against it. affccting its c�istcncc. or thc titics of its officcrs to thcir respccti� c officcs or sccking to prohibit. restrain. or cnjoining thc c�ccution and dcli� cr� of thc 2006 Bonds or thc collcction of rc� cnucs to bc applicd to pa� thc principal. prcmium. if am . and intcrest «ith respcct to thc 2006 Bonds. or thc plcdgc thcrcof. or in am «a� contcsting or affccting thc � alidit� or cnforccabilit� of cach 2006 Indcnturc or contcsting thc po«crs of thc Trustcc or its authorit� to cntcr into. adopt or perform its obligations undcr am of thc forcgoing to «hich it is a part�. «hcrcin an unfa�orablc dccision. ruling or finding «ould matcriall� ad� crscl� affcct thc � alidit� or cnforccabilit� of thc 2006 Bonds or cach 2006 Indcnturc or thc po«cr and authorit� of thc Trustcc to cntcr into and perform its respccti� c dutics undcr thc 2006 Indcntures and to authcnticatc and dcli� cr thc 2006 Bonds to thc Undcn� ritcr: (�i) a ccrtificatc of thc Cit� signcd b� an authorizcd officcr of thc Cit� datcd thc Closing Datc to thc cffcct that thc information rclating to thc Cit� in AI'1'I:NUIX C—"G►:Ni:iini. INI c�RMn I Ic�N C��NCI:RNINc� I I II: C► I v c�i PnI.M DI:sI:R i" to thc Official Statcmcnt. as of its datc and as of thc datc of thc Closing. is truc and corrcct in all matcrial respccts: (�ii) c� idcncc of an insurcd rating of " �� b� Standard c�. Poor�s Ratings Scr� iccs. a di� ision of thc McGra�� Hill Companics and an uninsurcd rating of " ��bcing in fiill forcc and cffcct as of thc Closing Datc: (�iii) thc � Bond Insurancc Polic� / Bond Insurancc Policics� and thc Rcscr� c Polic� issucd b� thc Bond Insurcr: (�i� ) an opinion of Counscl to thc Bond Insurcr. datcd thc Closing Datc and addresscd to thc Financing Authorit� and thc Undcn� ritcr to thc cffcct that (a) thc � Bond Insurancc Polic� / Bond Insurancc Policics� and thc Rcscr� c Polic� dcscribcd in thc Official Statcmcnt arc cach Icgal. � alid and binding obligations of thc Bond Insurcr cnforccablc in accordancc «ith its tcrms. and (b) thc statcmcnts in thc Prcliminar� Official Statcmcnt and thc Official Statcmcnt undcr thc caption "MuNicii�ni. Bc�Nu INSUR�NCI:�� and Containcd in APPI:NUIX H—"SPI:CIMI:N FIN�NCI�I, GU�R�N I Y INSUR�NCI: POI,ICY�� and AI'1'I:NUIX I—"SPI:CIMI:N RI:sI:Rvl: FUNU SURI: I Y Pc�l,l�'Y" accuratcl� rcflcct and fairl� rcprescnt thc information purportcd to bc sho«n thcrcin: (�� ) a ccrtificatc of Roscno« Spc� acck Group Inc. (thc "l�i.scal (�U19.1'11�1CfYl1 � t0 t�1C cffcct that thc rcport of thc Fiscal Consultant datcd . 2006 (thc "Repui�t ") containcd in thc Official Statcmcnt docs not contain am untruc statcmcnt of a matcrial fact or omittcd to statc a matcrial fact ncccssar� to makc thc statcmcnts thcrcin. in thc light of thc circumstanccs undcr «hich thc� «crc madc. not mislcading in am matcrial respcct. and conscnting to thc usc of thc Rcport in thc Prcliminar� and Final Official Statcmcnts: z��t-o�,o�z r�-� I� �(�� i) a Icttcr of Lancc. Soll and Lunghard conscnting to thc inclusion of its rcport in thc Prcliminar� Official Statcmcnt and thc Official Statcmcnt as APPI:NUIX B—"RI:UI:VI:LOPMI:N I A(�I:NCY Auurri:u FiNnNcini. S rn ri:Mi:N rs rc�ii ri n: Fiscni. Yi:nii ENui:u JuNi: ;0. 200�:"� (�� ii) thc Ccrtificatc as to Arbitragc and thc Ccrtificatc Rcgarding Usc of Procccds of thc Financing Authorit� in form and substancc acccptablc to Bond Counscl: filing: (�� iii) c� idcncc that thc fcdcral ta� information form 80 �8-G has bccn prcparcd for (�i�) thc Noticcs of Salc rcquircd to bc dcli� crcd to thc California Dcbt and Im cstmcnt Ad� isor� Commission pursuant to Scction 88��(g) and ���8 � of thc California Go� crnmcnt Codc: and (��) thc Blankct Lcttcr of Rcprescntations of thc Financing Authorit� to thc Dcpositor� Trust Compam. Nc« York. Nc« York. rclating to thc book-cntr� onl� s�stcm for thc 2006 Bonds: and (��i) such additional Icgal opinions. ccrtificatcs. instrumcnts or c� idcnccs thcrcof and othcr documcnts as thc Disclosurc Counscl or Bond Counscl ma� rcasonabl� rcqucst to c� idcncc thc duc authorization. c�ccution and dcli� cr� of thc 2006 Bonds and thc conformit� of thc 2006 Bonds and thc 2006 Indcntures «ith thc tcrms of thc 2006 Bonds and as summarizcd in thc Official Statcmcnt. All of thc opinions. Icttcrs. ccrtificatcs. instrumcnts and othcr documcnts mcntioncd abo� c or clsc«hcrc in this Purchasc Agrccmcnt «ill bc dccmcd to bc in compliancc «ith thc pro� isions hcrcof if and onl� if thc� arc in form and substancc satisfactor� to thc Undcn� ritcr. If thc Financing Authorit� shall bc unablc to satisfi thc conditions to thc Undcn� ritcr�s obligations containcd in this Purchasc Agrccmcnt or if thc Undcn� ritcr. obligations shall bc tcrminatcd for am rcason permittcd hcrcin. all obligations of thc Undcn� ritcn c�rcundcr ma� bc tcrminatcd b� thc Undcn� ritcr at. or at am timc prior to. thc Closing Datc b� «rittcn noticc to thc Financing Authorit� and nonc of thc Undcn� ritcr thc Financing Authorit� shall ha� c am fiirthcr obligations hcrcundcr. c�ccpt that thc respccti� c obligations of thc partics sct forth in Sr.ctic,n IO. Section 11. Expenses. (a) Thc Undcn�ritcr shall bc undcr no obligation to pa�. and thc Financing Authorit� shall pa� thc follo« ing c�pcnscs incidcnt to thc performancc of thc Financing Authorit� �s obligations hcrcundcr: (i) thc fccs and disburscmcnts of Bond Counscl and Disclosurc CounscL (ii) thc cost of printing and dcli� cring thc 2006 Bonds. thc Prcliminar� Official Statcmcnt and thc Official Statcmcnt (and am amcndmcnt or supplcmcnt prcparcd pursuant to this Purchasc Agrccmcnt): (iii) thc fccs and disburscmcnts of Dcl Rio Ad� isors. LLC. as Financial Ad� isor to thc Financing Authorit�. thc Trustcc and its counscl. thc Fiscal Consultant. accountants. ad� iscrs and of am othcr c�perts or consultants rctaincd b� or for thc Financing Authorit� : and (i� ) am othcr c�pcnscs and costs of thc Financing Authorit� incidcnt to thc performancc of thcir respccti� c obligations in conncction «ith thc authorization. issuancc and salc of thc 2006 Bonds. including out-of-pockct c�pcnscs and regulator� c�pcnscs. and am othcr c�pcnscs agrccd to b� thc partics. (b) Thc Undcn� ritcr shall pa� all c�pcnscs incurrcd b� thcm in conncction «ith thc public offcring and distribution of thc 2006 Bonds including. but not limitcd to: (i) all ad� crtising c�pcnscs in conncction «ith thc offcring of thc 2006 Bonds: and (ii) all out-of-pockct disburscmcnts and c�pcnscs incurrcd b� thc Undcn� ritcr in conncction «ith thc offcring and distribution of thc 2006 Bonds (including tra� cl and othcr c�pcnscs. fccs of thc California Dcbt and Im cstmcnt Ad� ison Commission. CUSIP Scr� icc Burcau fccs z��t-o�,o�z r�-� 16 and am othcr fccs and c�pcnscs). c�ccpt as pro�idcd in (a) abo�c or as othcn�isc agrccd to b� thc Undcn� ritcr and thc Financing Authorit� . Section 12. Notices Am noticc or othcr communication to bc gi�cn to thc Financing Authorit� or thc Financing Authorit� undcr this Purchasc Agrccmcnt ma� bc gi� cn b� dcli� cring thc samc in «riting at thc address of thc Financing Authorit� sct forth abo� c. and am noticc or othcr communication to bc gi� cn to thc Undcn� ritcr undcr this Purchasc Agrccmcnt ma� bc gi� cn b� dcli� cring thc samc in «riting to thc Undcn� ritcr: Citigroup. Onc Sansomc Strcct. Citigroup Ccntcr. Suitc 2800. San Francisco. California 9�410�4: Attcntion: Nikolai Sklaroff. Dircctor. Section 13. Parties in Interest. This Purchasc Agrccmcnt is madc solcl� for thc bcncfit of thc Financing Authorit� and thc Undcn� ritcr (including thc succcssors or assigns of thc Undcn� ritcr) and no othcr person shall acquirc or ha� c am right hcrcundcr or b� � irtuc hcrcof. All thc rcprescntations and «arrantics of thc partics hcrcto containcd in this Purchasc Agrccmcnt shall rcmain operati� c and in fiill forcc and cffcct. rcgardlcss of (a) am im cstigations madc b� or on bchalf of thc Undcn� ritcr or thc Financing Authorit� or (b) dcli� cr� of and pa� mcnt for thc 2006 Bonds. Thc agrccmcnts containcd in Sr.�tic,n IO hcrcin shall sur� i� c am tcrmination of this Purchasc Agrccmcnt. Section 14. Severability. In thc c� cnt am pro� ision of this Purchasc Agrccmcnt shall bc hcld or dccmcd to bc im alid. inoperati� c or w�cnforccablc b� am court of compctcnt jurisdiction. such holding shall not im alidatc or rcndcr uncnforccablc am othcr pro� ision hcrcof. Section 15. Governing Law; Venue. This Purchasc Agrccmcnt shall bc go� crncd and intcrprctcd c�clusi� cl� b� and construcd in accordancc «ith thc la« s of thc Statc applicablc to contracts madc and to bc performcd in thc Statc. Am and all disputcs or Icgal actions or procccdings arising out of this Purchasc Agrccmcnt or am documcnt rclatcd hcrcto shall bc filcd and maintaincd in a court of compctcnt jurisdiction for mattcrs arising in Ri� crsidc Count�. California. B� c�ccution of and dcli� cn of this Purchasc Agrccmcnt. thc partics hcrcto acccpt and conscnt to thc aforesaid jurisdiction. Section 16. Execution in Counterparts. This Purchasc Agrccmcnt ma� bc c�ccutcd in am numbcr of countcrparts. all of «hich takcn togcthcr shall constitutc onc agrccmcnt. znd am of thc partics hcrcto ma� c�ccutc thc Purchasc Agrccmcnt b� signing am such countcrpart. Section 17. Entire Agreement. Thc partics agrcc that thc tcrms and conditions of this Purchasc Agrccmcnt superscdc thosc of all prc� ious agrccmcnts bct«ccn thc partics. and that this Purchasc Agrccmcnt contains thc cntirc agrccmcnt bct��ccn thc partics hcrcto. In thc c�cnt of a disputc bct«ccn thc partics undcr this Purchasc Agrccmcnt. thc losing part� in such disputc shall pa� all rcasonablc costs and c�pcnscs incurrcd b� thc prc� ailing part� in conncction thcrc« ith. including but not limitcd to attornc� s� fccs. z��-oc,otz p�-t 17 Section 18. Effectiveness. This Purchasc Agrccmcnt shall bc cffccti� c as of thc datc sct forth abo� c upon thc c�ccution of thc acccptancc hcrcof b� authorizcd officcrs of thc Financing Authorit� and appro� al b� thc Rcdc� clopmcnt Agcnc� shall bc � alid and cnforccablc as of thc timc of such acccptancc and appro� al. Vcr� trul� �ours. CITIGROUP GLOBAL MARKETS INC. : Acccptcd: PALM DESERT FINANCING AUTHORITY I� �Namc�. �Titic� Appro� c;d: PALM DESERT REDEVELOPMENT AGENCY I� �Namc�. �Titic� Nikolai Sklaroff Dircctor z��t-o�,o�z r�-� ix SCHEDULEI SINKING FUND PAYMENT DATES, AMOUNTS, RATES, YIELDS AND PRICES Principal Intcrest (M�r�h I ) �� $�� Yic,Irl Pri�c' 23�1-OG012 p�-1 I� EXHIBIT A-1 $ Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 3) 2006 Series A $ Palm Desert Financing Authority Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series B $ Palm Desert Financing Authority Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series C FORM OF THE CERTIFICATE OF THE FIANCING AUTHORITY REGARDING PRELIMINARY OFFICIAL STATEMENT Thc undcrsigncd hcrcb� statcs and ccrtifics: I. That hc is thc dul� appointcd. qualificd and acting E�ccuti� c Dircctor of thc Palm Dcscrt Financing Authorit� (thc "Authorit� ��) and as such. is familiar «ith thc facts hcrcin ccrtificd and is authorizcd and qualificd to ccrtifi thc samc: 2. That thcrc has bccn dcli� crcd to Citigroup Global Markcts Inc. (thc "Undcn� ritcr �) of thc captioncd Bonds. a Prcliminar� Official Statcmcnt. rclati� c to thc captioncd Bonds. datcd Junc _. 2006 (including thc co� cr pagc and all appcndiccs thcrcto. thc "Prcliminar� Official Statcmcnt��). «hich thc Financing Authorit�. dccros final as of its datc for purposcs of Rulc I�c2-12 promulgatcd undcr thc Sccuritics E�changc Act of I 9��4. as amcndcd ("Rulc I�c2- I 2��). c�ccpt for information permittcd to bc omittcd thcrcfrom b� Rulc I�c2-12: and �. Thc Financing Authorit� hcrcb� appro� cs thc usc and distribution b� thc Undcn� ritcr of thc Prcliminar� Official Statcmcnt. Datcd: Junc .2006 PALM DESERT FINANCING AUTHORITY I� E�ccuti� c Dircctor z��t-o�,o�z r�-� A-I-I EXHIBIT A-2 $ Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 3) 2006 Series A $ Palm Desert Financing Authority Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series B $ Palm Desert Financing Authority Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 3) 2006 Series C FORM OF THE CERTIFICATE OF THE REDEVELOPMENT AGENCY REGARDING PRELIMINARY OFFICIAL STATEMENT Thc undcrsigncd hcrcb� statcs and ccrtifics: I. That hc is thc dul� appointcd. qualificd and acting E�ccuti� c Dircctor of thc Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Rcdc� clopmcnt Agcnc� ��) and as such. is familiar «ith thc facts hcrcin ccrtificd and is authorizcd and qualificd to ccrtifi thc samc: 2. That thcrc has bccn dcli� crcd to Citigroup Global Markcts Inc. (thc "Undcn� ritcr �) of thc captioncd Bonds. a Prcliminar� Official Statcmcnt. rclati� c to thc captioncd Bonds. datcd Junc _. 2006 (including thc co� cr pagc and all appcndiccs thcrcto. thc "Prcliminar� Official Statcmcnt��). «hich «ith respcct to thc statcmcnts containcd undcr thc captions "TI II: RI:u► vl:I.c�i>MI:N I Ac�I:NCY" and "TI II: Piic�.ii:c r Aiii:n" and containcd in Ai�i�i:Nuix 13-"RI:UI:VI:LOPMI:N I A(�I:NCY Auurr►:u FINnNCInI, S I n I1:MI:N i s Fc�R I I II: Fisc'nl. YI:nR ENUI:U JUNI: 30. 200�" arc truc. corrcct and complctc in all matcrial respccts and such statcmcnts do not omit to statc a matcrial fact ncccssar� to makc such statcmcnts. in light of thc circumstanccs undcr «hich thc� «crc madc. not mislcading. Datcd: Junc .2006 PALM DESERT REDEVELOPMENT AGENCY : E�ccuti� c Dircctor z��t-o�,o�z r�-� A-2- I EXHIBIT B FORM OF OPINION OF FINANCIAL AUTHORITY COUNSEL � Lcttcnc�;ad of Counscl to thc Financing Authoriri � 2006 Palm Dcscrt Financing Authoriri Palm Dcscrt. California Citigroup Global Markcts Inc. Sa�� Fra��cisco. California Rc: Palm Dcscrt Financing Authoriri Ta� Allocation Rc� cnucs Bonds (Projcct Arc;a No. �). 2006 Scrics Ladics and Gcnticmcn: Our officc has actc;d as counscl to thc Palm Dcscrt Financing Authoriri (thc "Financing Authoriri ��) in conncction «ith thc issua��cc. salc a��d dcli� cn of � aggrcgatc principal amount of thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc�cnuc Bonds (Projcct Arca No. �) 2006 Scrics A(thc "('iu�i�ent /ntei�e.st RuncLs��). y� principal amount of Palm Dcscrt Financing Authorit� Ta� Allocation Rc�cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics B(thc "Capital Apprcciation Bonds�� and togcthcr «ith thc Currcnt Intcrest Bonds. thc "Scnior Bonds"): and � aggrcgatc principal amount of thc Palm Dcscrt Financing Authorit� Subordinatc Ta� Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics B(thc "Subordinatc Capital Apprcciation Bonds�� and togcthcr «ith thc Scnior Bonds. thc "2006 Bonds��). In conncction «ith thc 2006 Bonds. «c ha� c rc� ic«c;d: (i) thosc documcnts rclating to thc c�istcncc. organization and operntion of thc Finv�cing Authoriri :(ii) Rcsolution No. of thc Financing Authoriri adoptc;d . 2006 (thc "Rcsolution��) authorizing thc issuancc. c�ccution and dcli� cn of thc 2006 Bonds: (iii) thc Indcnturc of Trust datcd as of Jul� I. 2006 «ith respcct to thc Scnior Bonds (thc "Scnior Indcnturc��). b� and bct«ccn thc Financing Authorit� and Wclls Fargo Bank. National Association. as tnistc;c; (thc "Tnistui �): (i� ) thc Indcnturc of Trust datcd as of Jul� I. 2006 «ith respcct to thc Subordinatc Bonds (thc "Subordinatc Indcnturc�� and togcthcr «ith thc Scnior Indcnturc. thc "2006 Indcntures��). b� and bct«ccn thc Financing Authorit� and thc Trustcc: (� ) thc Projcct Arca No. � Loan Agrccmcnt madc and c�ccutcd as of Jul� I. 2006 (thc "Scnior Loan Agrccmcnt��). b� and among thc Financing Authorit�. thc Palm Dcscrt Rcdc� clopmcnt Agcnc� (thc "Rcdc� clopmcnt Agcnc� ��) and thc Trustcc «ith respcct to thc loan of thc procccds of thc Scnior Bonds b� thc Financing Authorit� to thc Rcdc� clopmcnt Agcnc� . onc «ith respcct to thc Currcnt Intcrest Bonds and onc «ith respcct to thc Capital Apprcciation Bonds (collccti�cl�. thc "Scnior Loans��}: (� i) thc Projcct Arca No. � Loan Agrccm�nt (Subordinatc Loan) ►nadc and c�ccutcd as of Jul� I. 2006 (thc "Subordinatc Loan Agrccmcnt�� and togcthcr «ith thc Scnior Loan Agrccmcnt. thc "2006 Loan Agrccmcnts��). b� and among thc Financing Authorit�. thc Rcdc�clopmcnt Agcnc� and thc Trustcc «ith respcct to thc loan of thc procccds of thc Subordinatc Bonds b� thc Financing Authorit� to thc z��t-o�,o�z r�-� B-I Rcdc� clopmcnt Agcnc� (thc "Subordinatc Loan�� and togcthcr «ith thc Scnior Loans. thc "2006 Loans��): (� ii) thc Bond Purchasc Agrc;c;mcnt. datc;d as of . 2006 (thc "Purchasc Agrc;c;mcnt��). bcri�c;c;n thc Financing Authoriri and Citigroup Global Markcts Inc.. as undcn� ritcr (thc "Undcn� ritcr �). and appro� c;d b� thc Rc;dc� clopmcnt Agcnc� : and (� iii) thc Prcliminan Official Statcmcnt. datc;d . 2006. (thc "Prcliminan Official Statcmcnt��). «ith such changcs and a�ncndmcnts thcrcto as of thc datc of this opinion (thc "Official Statcmcnt��). T7�c 2006 Indcntures. thc 2006 Loan Agrc;c;mcnts. thc 2006 Loans and thc Purchasc Agrc;c;mcnt arc collccti� cl� rcfcrrc;d to hcrcin as thc "Financing Authoriri Agrc;c;mcnts.�� Am capitalizc;d tcrn� usc;d hcrcin and not othcn� isc dcfinc;d shall ha� c thc mc;anings gi� cn to such tcrn�s as spccific;d in thc Official Statcmcnt. Basc;d on thc forcgoing. «c arc of thc opinion that: I. T7�c Financing Authoriri is a joint c�crcisc of po«cr authoriri dul� crc;atc;d. organizc;d and c�isting undcr thc la«s of thc Statc of California pursuant to an Agrc;c;mcnt cntitic;d "Joint E�crcisc of Po«crs Agrc;c;mcnt�� datc;d Ja�uian 26. 1989. bcri�c;c;n thc Ciri of Palm Dcscrt and thc Rc;dc�clopmcnt Agcnc�. and has fiill Icgal right. po«cr. and authoriri to issuc thc 2006 Bonds. 2. T7�c Rcsolution appro� ing and authorizing thc issuancc. c�ccution. and dcli� cn of thc 2006 Bonds. and thc c�ccution and dcli� cn of thc Financing Authoriri Agrc;c;mcnts and thc Official Statcmcnt has bc;c;n dul� adoptc;d. and is in fiill forcc and cffcct and has not bc;c;n modific;d. a�ncndc;d or rescindc;d. �. T7�c Financing Authoriri has thc fiill Icgal right. po«cr and authoriri to c�ccutc. dcli�cr and perforn� its obligations and dutics undcr thc 2006 Bonds and Financing Authoriri Agrc;c;mcnts. and thc Financing Authoriri has complic;d «ith thc pro� isions of applicablc la« in all mattcrs rclating to thc transactions contcmplatc;d b� thc 2006 Bonds and thc Financing Authoriri Agrc;c;mcnts. �4. T7�c Financing Authoriri Agrc;c;mcnts ha� c c;ach bc;c;n dul� authorizc;d. c�ccutc;d and dcli� crc;d b� thc Financing Authoriri. c;ach is in fiill forcc and cffcct and. assuming duc authorization. c�ccution. and dcli�cn b� thc othcr partics thcrcto. constitutc Icgal. � alid and binding agrc;c;mcnts of thc Financing Authoriri cnforcc;ablc against thc Financing Authoriri in accordancc «ith thcir respccti� c tcrn�s. subjcct in c;ach casc to la« s rclating to bankniptc�. insol�cnc�. or othcr la«s affccting thc cnforccmcnt of crc;ditors� rights gcncrall� and to thc application of c;quitablc principlcs if c;quitablc rcmc;dics are sought. �. No appro�al. conscnt. or authorization of am go�crnmcntal or public agcnc�. authoriri. or person is rc;quirc;d for thc c�ccution a,�d dcli� cn b� thc Financing Authoriri of thc Financing Authoriri Agrc;c;mcnts or thc Official Statcmcnt. or thc perforn�ancc b� thc Financing Authoriri of its obligations thcrcundcr or for thc issuancc. salc and dcli� cn of thc 2006 Bonds. c�ccpt as such appro� al. conscnt or authorization ma� ha�c bc;c;n obtainc;d. and c�ccpt as ma� bc rc;quirc;d undcr Statc sccuritics or bluc sk� la«s in conncction «ith thc purchasc and distribution of thc 2006 Bonds b� thc Undcn� ritcr. 6. T7�c c�ccution and dcli� cn of thc Financing Authoriri Agrc;c;mcnts b� thc Financing Authoriri. and compliancc «ith thc pro� isions thcrwf. undcr thc circumstanccs contcmplatc;d thcrcb�. doc;s not in am matcrial respcct conflict «ith or constitutc a brc;ach of. or dcfault undcr. am instnimcnt rclating to thc organization. c�istcncc or operation of thc Financing Authoriri. or am commitmcnt. agrc;c;mcnt or othcr instnimcnt to «hich thc Financing Authoriri is a part�. or b� «hich it is bound. or am c�isting la«. niling. rcgulation. ordinancc. judgmcnt. ordcr or dccrc;c; to «hich thc Financing Authoriri is subjcct. «hich brc;ach or dcfault has or ma� ha� c a matcrial ad� crsc cffcct on thc abilin of thc Financing Authoriri to perforn� its obligations undcr thc Financing Authoriri Agrc;c;mcnts. z��t-o�,o�z r�-� B-2 7. To thc bcst of our kno« Ic;dgc. c�ccpt as othcn� isc disclosc;d in thc Official Statcmcnt. thcrc is no action. suit. procc;c;ding. inquin or imcstigation. at la« or in c;quiri. or bcforc am court. public board or bod� pcnding or thrc;atcnc;d against thc Financing Authoriri. challcnging thc crc;ation. organization. c�istcncc or po«crs of thc Financing Authoriri. or challcnging thc capaciri of its officcrs. or thc �alidiri of thc 2006 Bonds. thc Financing Authoriri Agrc;c;mcnts or thc transactions contcmplatc;d thcrcb�. or thc procc;c;dings takcn b� thc Financing Authoriri in conncction «ith thc authorization. c�ccution or dcli� cn of thc 2006 Bonds or thc Financing Authoriri Agrc;c;mcnts. «hcrcin am unfa� orablc dccision. niling or finding «ould ad� crscl� affcct thc transactions contcmplatc;d thcrcb� or b� thc Official Statcmcnt. or «hich. in am «a�. «ould ad�crscl� affcct thc � alidiri or cnforcc;abiliri of thc 2006 Bonds or thc Financing Authoriri Agrc;c;mcnts or. in am matcrial respcct. thc abiliri of thc Financing Authoriri to perforn� its obligations thcrcundcr. z��t-o�,o�z r�-� Vcn tnil� �ours. B-� EXHIBIT C FORM OF OPINION OF REDEVELOPMENT AGENCY COUNSEL � Lcttcnc�;ad of Counscl to thc Rc;dc� clopmcnt Agcnc� � . 2006 Palm Dcscrt Financing Authoriri Palm Dcscrt. California Citigroup Global Markcts Inc. Sa�� Fra��cisco. California Rc: Palm Dcscrt Financing Authorit� Ta� Allocation Rc� cnucs Bonds (Projcct Arc;a No. �). 2006 Scrics Ladics and Gcnticmcn: Our officc has actc;d as counscl to thc Palm Dcscrt Rc;dc� clopmcnt Agcnc� (thc "R�;dc� clopmcnt Agcnc� ��) in conncction «ith thc issua��cc. salc a��d dcli� cn of � aggrcgatc principal amount of thc Palm Dcscrt Financing Authorit� Ta� Allocation Rc�cnuc Bonds (Projcct Arca No. 3) 2006 Scrics A(thc ..('iu�i�ent /ntei�e.st RuncLs..). y� principal amount of Palm Dcscrt Financing Authorit� Ta� Allocation Rc�cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics B(thc "Capital Apprcciation Bonds�� and togcthcr «ith thc Currcnt Intcrest Bonds. thc "Scnior Bonds��): and `f aggrcgatc principal amount of thc Palm Dcscrt Financing Authorit� Subordinatc Tas Allocation Rc� cnuc Capital Apprcciation Bonds (Projcct Arca No. �) 2006 Scrics C(thc "Subordinatc Capital Apprcciation Bonds�� and togcthcr «ith thc Scnior Bonds. thc "2006 Bonds��). In conncction «ith thc 2006 Bonds. «c ha� c rc� ic«c;d: (i) thosc documcnts rclating to thc c�istcncc. orga��ization a��d operation of thc Ri;dc� clopmcnt Agcnc� :(ii) Rcsolution No. of thc Rc;dc� clopmcnt Agcnc� adoptc;d . 2006 (thc "Rcsolution��) authorizing thc c�ccution a,�d dcli� cn of thc Rc;dc� clopmcnt Agcnc� Agrc;c;mcnts (dcfinc;d bclo« ): (iii) thc Projcct Arca No. � Loan Agrccmcnt madc and c�ccutcd as of Jul� I. 2006 (thc "Scnior Loan Agrccmcnt��). b� and among thc Palm Dcscrt Financing Authorit� (thc "Financing Authorit� ��). thc Rcdc� clopmcnt Agcnc� and Wclls Fargo Bank. National Association (thc "Trustcc��) «ith respcct to thc loan of thc procccds of thc Scnior Bonds b� thc Financing Authorit� to thc Rcdc�clopmcnt Agcnc�. onc «ith respcct to thc Currcnt Intcrest Bonds and onc «ith respcct to thc Capital Apprcciation Bonds (collccti� cl�. thc "Scnior Loans��): (i� ) thc Projcct Arca No. � Loan Agrccmcnt (Subordinatc Loan) madc and c�ccutcd as of Jul� I. 2006 (thc "Subordinatc Loan Agrccmcnt�� and togcthcr «ith thc Scnior Loan Agrccmcnt. thc "2006 Loan Agrccmcnts��) b� and among thc Financing Authorit�. thc Rcdc� clopmcnt Agcnc� and thc Trustcc «ith respcct to thc loan of thc procccds of thc Subordinatc Bonds b� thc Financing Authorit� to thc Rcdc� clopmcnt Agcnc� (thc "Subordinatc Loan�� and togcthcr «ith thc Scnior Loans. thc "2006 Loans��): (� ) thc Bond Purchasc Agrc;c;mcnt. datc;d as of . 2006 (thc "Purchasc Agrc;c;mcnt��). bcri�c;c;n thc Financing Authoriri and Citigroup Global Markcts Inc.. as undcn�ritcr (thc "Undcn� ritcr �). and appro� c;d b� thc Rc;dc� clopmcnt Agcnc� : and (� i) thc Prcliminan Official Statcmcnt. datc;d z��t-o�,o�z r�-� c-i . 2006. (thc "Prcliminan Official Statcmcnt��). «ith such changcs and a�ncndmcnts thcrcto as of thc datc of this opinion (thc "Official Statcmcnt��): and thc Continuing Disclosurc Agrc;c;mcnt. datc;d . 2006 (thc "Continuing Disclosurc Agrc;c;mcnt��). b� and a�nong thc Rc;dc�clopmcnt Agcnc�. thc Tnistc;c; and MuniFina��cial. Inc.. as disscmination agcnt. T7�c 2006 Loan Agrc;c;mcnts. thc 2006 Loa��s. thc Purchasc Agrc;c;mcnt and thc Continuing Disclosurc Agrc;c;mcnt arc collccti� cl� rcfcrrc;d to hcrcin as thc "Rc;dc� clopmcnt Agcnc� Agrc;c;mcnts.�� Am capitalizc;d tcrn� usc;d hcrcin and not othcn� isc dcfinc;d shall ha� c thc mc;anings gi� cn to such tcrn�s as spccific;d in thc Official Statcmcnt. Basc;d on thc forcgoing. «c arc of thc opinion that: I. Thc Rcdc� clopmcnt Agcnc� is dul� organizcd and � alidl� c�isting undcr thc Constitution and la« s of thc Statc of California. 2. Thc Rcsolution appro� ing and authorizing thc c�ccution and dcli� cn of thc Rcdc� clopmcnt Agcnc� Agrccmcnts «as dul� adoptcd at a mccting of thc Rcdc� clopmcnt Agcnc� «hich «as callcd and hcld pursuant to la« and «ith all public noticc rcquircd b� la« and at «hich a quorum «as prescnt and acting throughout. and is in fiill forcc and cffcct and has not bccn amcndcd or rcpcalcd: �. No matcrial litigation is pcnding. «ith scr� icc of proccss ha� ing bccn accomplishcd or. to thc kno« Icdgc of thc Rcdc� clopmcnt Agcnc� . thrcatcncd. conccrning thc � alidit� of thc Rcdc� clopmcnt Agcnc� Agrccmcnts. thc corporatc c�istcncc of thc Rcdc� clopmcnt Agcnc� . or thc titic of thc officcrs of thc Rcdc� clopmcnt Agcnc� «ho «ill c�ccutc thc Rcdc� clopmcnt Agcnc� Agrccmcnts as to thcir respccti� c officcs: �4. Thc adoption of thc Rcsolution. thc c�ccution and dcli� cn of thc Rcdc� clopmcnt Agcnc� Agrccmcnts. and compliancc b� thc Rcdc� clopmcnt Agcnc� «ith thc pro� isions of thc forcgoing. undcr thc circumstanccs contcmplatcd thcrcb�. do not and «ill not in am matcrial respcct conflict «ith or constitutc on thc part of thc Rcdc� clopmcnt Agcnc� a brcach or dcfault undcr am agrccmcnt or othcr instrumcnt to «hich thc Rcdc�clopmcnt Agcnc� is a part� (and of «hich such counscl is a«arc aftcr rcasonablc im cstigation) or b� «hich it is bound (and of «hich such counscl is a« arc aftcr rcasonablc im cstigation) or b� am c�isting la«. rcgulation. court ordcr or conscnt dccrcc to «hich thc Rcdc�clopmcnt Agcnc� is subjcct: �. Thc Rcdc� clopmcnt Agcnc� Agrccmcnts cach ha� c bccn dul� authorizcd. c�ccutcd and dcli� crcd b� thc Rcdc� clopmcnt Agcnc� and. assuming duc authorization. c�ccution and dcli� cr� b� thc othcr partics thcrcto. constitutc Icgal. � alid and binding agrccmcnts of thc Rcdc� clopmcnt Agcnc� cnforccablc in accordancc «ith thc respccti� c tcrms. subjcct to la« s rclating to bankruptc� . insol� cnc� or othcr la« s affccting thc cnforccmcnt of crcditors. rights gcncrall� and thc application of cquitablc principlcs if cquitablc rcmcdics are sought. 6. No authorization. appro� al. conscnt. or othcr ordcr of thc Statc of California or am othcr go� crnmcntal authorit� or agcnc� «ithin thc Statc of California ha� ing jurisdiction o� cr thc Rcdc� clopmcnt Agcnc� is rcquircd for thc � alid authorization. c�ccution. dcli� cr� and performancc b� thc Rcdc� clopmcnt Agcnc� of thc Rcdc� clopmcnt Agcnc� Agrccmcnts. or for thc adoption of thc Rcsolution «hich has not bccn obtaincd. z��t-o�,o�z r�-� c-z 7. To thc bcst of our kno« Ic;dgc. c�ccpt as othcn� isc disclosc;d in thc Official Statcmcnt. thcrc is no action. suit. procc;c;ding. inquin or imcstigation. at la« or in c;quiri. or bcforc am court. public board or bod� pcnding or thrc;atcnc;d against thc Rcdc� clopmcnt Agcnc� . challcnging thc crc;ation. organization. c�istcncc or po« crs of thc Rcdc� clopmcnt Agcnc� . or challcnging thc capaciri of its officcrs. or thc � alidiri of thc Rcdc�clopmcnt Agcnc� Agrc;c;mcnts or thc transactions contcmplatc;d thcrcb�. or thc procc;c;dings takcn b� thc Rcdc� clopmcnt Agcnc� in conncction «ith thc authorization. c�ccution or dcli� cn of thc Rcdc� clopmcnt Agcnc� Agrc;c;mcnts. «hcrcin am unfa� orablc dccision. niling or finding «ould ad� crscl� affcct thc transactions contcmplatc;d thcrcb� or b� thc Official Statcmcnt. or «hich. in am «a�. «ould ad� crscl� affcct thc � alidiri or cnforcc;abiliri of thc Rcdc� clopmcnt Agcnc� Agrc;c;mcnts or. in am matcrial respcct. thc abiliri of thc Rcdc� clopmcnt Agcnc� to perforn� its obligations thcrcundcr. z��t-o�,o�z r�-� Vcn tnil� �ours. c-� L&J DRAFT 42 05/ 18/06 CONTINUING DISCLOSURE AGREEMENT The Continuing Disclosure Agreement (the "Disclosure AgreemerIC) is executed and deliN ered by the Palm Desert RedeN elopment Agency (the " RedeN elopment Agencx '). Wells Fargo Bank. National Association (the "Trustee"*) and MuniFinancial. Inc. (the "Dissemination Agent"*) in connection «ith the issuance of the $ aggregate principal amount of Palm Desert Financing Authority Tax Allocation RcN enue Bonds (Proiect Area No. )) 2006 Series A. $ principal amount of Palm Desert Financing Authority Tax Allocation ReN enue Capital Appreciation Bonds (Proicct Area No. 3) 2006 Series B (the "Senior Parity Bonds"*) and $ principal amount of Palm Desert Financing Authority Subordinate Tax Allocation ReN enue Capital Appreciation Bonds (Proicct Area No. )) 2006 Series C (the "Subordinate Bonds"* and together «ith the Senior Parity Bonds. the "Bonds"*). The Senior Parity Bonds are being executed and delixered pursuant to an Indenture of Trust dated as of Jule 1. 2006 (the "Senior Parity Indenture"*). by and bct« ccn the Palm Desert Financing Authority (the "Financing Authoritx `) and the Trustee. The Financing Authority «ill loan the proceeds of the Senior Parity Bonds to the RedeN elopment Agency pursuant to a Loan Agreement made and entered into as of Jule I. 2006. The Subordinate Bonds are being executed and deliN ered pursuant to an Indenture of Trust dated as of Jule I. 2006 (the "Subordinate Indenture"*). by and bet« een the Financing Authority (and the Trustee. The Financing Authority «ill loan the proceeds of the Subordinate Bonds to the RedeN elopment Agency pursuant to a Loan Agreement made and entered into as of Jule I. 2006. The RedeN elopment Agency coN enants and agrees as follo« s: SECTION 1. Purpose of this Disclosure Agreement. This Disclosure Agreement is being executed and deliN ered by the RedeN elopment Agency for the benefit of the Holders and Beneficial O« ners of the Bonds and in order to assist the Participating Undem riter in complying NN ith Securities and Exchange Commission (-SEC-) Rule I5c2-12(b)(5). The RedeNelopment Agency ackno«ledges that the Financing Authority has undertaken no responsibility «ith respect to am reports. notices or disclosures proN ided or required under this Disclosure Agreement. and has no liability to am person. including the o«ners of the Bonds. «ith respect to any reports. notices or disclosures. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture. «hich apple to am capitalized term used in this Disclosure Agreement unless otherNN Ise defined in this Section. the folio« ing capitalized terms shall haN e the follo« ing meanings: "Annual Report shall mcan any annual report proN ided by the RedeN elopment Agency pursuant to. and as described in. Sections 3 and 4 of this Disclosure Agreement. "Beneficial O« ncr ­ shall mcan any person «hick (a) has the po« er. directly or indirectly. to N ote or consent «ith respect to. or to dispose of o« nership of. any Bonds (including persons holding Bonds through nominees. depositories or other intermediaries) or (b) is treated as the o« ner of any Bonds for federal income tax purposes. "Dissemination Agent"* shall mcan MuniFinancial. Inc.. acting in its capacity as Dissemination Agent hereunder. or any successor Dissemination Agent designated in «riting by the RedeN elopment Agency and «hick has filed «ith the Trustee a «ritten acceptance of such designation. "Fiscal Year— shall mcan «ith respect to the RedeN elopment Agency. the period beginning on Jule I of each year and ending on the next succeeding June 30. or any t«elNe month or fiftx-t«o «eek period thereafter selected bx the RedeN elopment Agency «ith notice of such selection of change in fiscal y car to be proN ided as set forth herein. 06012 C 1). \-2 "Holders"* shall mean either the registered o« ners of the Bonds. or. if the Bonds are registered in the name of The Depository Trust Company or another recognized depository. wiv applicable participant in its depository system. "Listed ENent- shall mean any of the cNents listed in Section 5(a) of this Disclosure Agreement. "National Repository"* shall mcan any Nationally Recognized Municipal SCCUCIties Information Repository for purposes of the RUIc. A list of the current National Repositories approNed by the S.E.C. may be found at the S.E.C. «cbsitc: http://www.sec.,-,ov/info/municipal/nrmsir.htm. "Participating Undemriter * shall mcan Citigroup Global Markets. Inc.. as the original undemriter of the Bonds rcquircd to comply «ith the RUIc in connection «ith offering of the Bonds. "Repository"* shall mcan each National Repository and each State Repository. if any. " Rulc­ shall mcan RUIc 15c2-12(b)(5) adopted by the Sccuritics and Exchange Commission under the Sccuritics Exchange Act of 19 ) 4. as the same may be amended from time to timc. "State"* shall mean the State of California. "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 and recognized as such by the Sccuritics and Exchange Commission. As of the date of this Disclosure Agreement. there is no State Repository. SECTION'). Provision of Annual Rcoorts. (a) The RedeNclopment Agency shall. not later than six months after the end of the RedeNclopment Agency "s Fiscal Year («hick currently is June )0). commencing «ith the report for the 2005-06 Fiscal Year. provide to each Repository an Annual Report «hick is consistent «ith the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package. and may include by reference other information as provided in Section 4 of this Disclosure Agreement: provided that the audited financial statements of the RedeNclopment Agency may be submitted separately from the balance of the Annual Report. The RedeNclopment Agency shall provide a «ritten certification «ith cacti Annual Report furnished to the Dissemination Agent and the Trustee to the effect that such Annual Report constitutes the Annual Report rcquircd to be ftinushcd by the RedeNclopment Agency hcrcunder. The Dissemination Agent and the Trustee may conclusiycly rcly upon such certification of the Redcyclopment Agency. if the Rcdcti clopment Agency "s Fiscal Year changes. it shall giyc notice of such change in the same manner as for a Listed Eycnt under Section 5(c). (b) If the Dissemination Agent is other than the RedeNclopment Agency. then not later than fifteen (15) Business Days prior to said date. the Redeyclopment Agency shall provide the Annual Report to the Dissemination Agent. If the Dissemination Agent is unable to ycrifv that an Annual Report has been provided to the Repositories by the date rcquircd in subsection (a). the Dissemination Agent shall send a notice to the Municipal Sccuritics Rulcmaking Board and the State Repository. if any. in substantially the form attached as Exhibit A to this Disclosure Agreement. (c) The Dissemination Agent shall: (1) determine each year prior to the date for providing the Annual Report the name and address of each Repository: 06012 C 1). \-2 F-2 (ii) file the Annual Report «ith cach Repository by the date rcquircd therefor by Section )(a) and file anv notice of a listed EN ent. if requested by the RedeNclopment Agency. as soon as practicable Ulm ing receipt from the RedeN clopment Agency of such notice: and (iii) if the Dissemination Agent is other than the RedeNclopment Agency. file a report «ith the RedeNclopment Agency certifying that the Annual Report has been proN ided pursuant to this Disclosure Agreement. stating the date it «as proN ided and listing all the Repositories to «hich it «as proN ided. SECTION 4. Content of Annual Rcoorts. The RedeNclopment Agency "s Annual Report shall contain or incorporate by reference the follo« ing: (a) The audited financial statements of the RedeNclopment Agency. presented in accordance «ith generally accepted accounting principles as pronuilgated to apple to goN ernmental entities Commission from time to time. If the audited financial statements of the RedeN clopment Agency are not aN ailable by the time the Annual Report is rcquircd to be filed as described aboN c. the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement. and the audited financial statements shall be filed in the same manner as the Annual Report «hcn the become mailable. (b) Unless othem ise pro\ ided in the audited financial statements filed on or prior to the annual filing deadline for Annual Reports pro\ ided in Section 3 abo\ c. financial information and operating data «ith respect to the Rcdc\ clopment Agency for the preceding Fiscal Year. substantially similar to that pro\ ided in the follm ing tables and charts in the Official Statement: (i) Table 3—"Palm Desert RedeNclopment Agency Pro _.ect Area No. 3—Principal Taxpa\ crs... and I(II) Table 4—"Palm Desert RedeNclopment Agency —Historical and Current Values:"* (iii) Table 5—"Palm Desert RedeNclopment Agency —Tax RcN cnucs RcccIN cd:j"* and (c) The percent by «hich Tax Rc\ cnucs lime pro\ idcd co\ cmgc for MaxImLim Annual Debt Sen ice for the most current completed Fiscal Year. (d) The outstanding principal amount of Bonds. the calculation of the Resen e Requirement and the balance in the Resen e Fund for the preceding Fiscal Year. Such annual information and operating data described aboN e may be included by specific reference to other documents. including official statements of debt issues of the RedeN clopment Agency or related public entities. «hich haN e been submitted to each of the Repositories or the SCCUCIties and Exchange Commission: proviclect. that if the documents included by reference is a final official statement. it mist be Mailable from the Municipal Sccuritics Rulemaking Board: and proviclec/.Jiu-ther. that the RedeNclopment Agency shall clearly Identify cach such other document so included by reference. SECTION 5. Rcoorting of Significant EN ents. (a) Pursuant to the proN isions of this Section 5. the RedeN clopment Agency shall giN c. or cause to be gIN en. notice of the occurrence of any of the Ulm ing cN ents «ith respect to the Bonds. if material: (1) principal and interest payment dclinqucncics. 06012 C D. \-2 Bonds. (ii) non -pax meat related defaults. (iii) modifications to rights of Bondholders. (IN ) optional. contingent or unscheduled bond calls. (N ) defeasances. (N i) rating changes. (N ii) adN erse tax opinions or eN ents adN ersely affecting the tax-exempt status of the (N iii) unscheduled dra«s on the Resen e Fund reflecting financial difficulties. (is) unscheduled dra«s on the credit enhancements reflecting financial difficulties. (�) substitution of the credit or liquiditx proN iders or their failure to perform. (XI) release. substitution or sale of property securing repayment of the Bonds. (sii) Significant amendments to the land use regulations or entitlements of the Cite of Palm Desert «ithin the Proiect Area «hich «ould adN ersely affect deN elopment of property therein. (b) The Trustee shall. promptIN upon obtaining actual kno« ledge of the occurrence of any of the Listed EN ents contact the Disclosure RepresentatiN e. inform such person of the eN ent. and rcqucst that the RedeN elopment Agency promptly notify the Dissemination Agent in «riting «nether or not to report the eN ent pursuant to subsection (f) and promptly notif- the Trustee in «citing «nether or not to report the eN ent to the O«ners (unless notice to the O«ners is required by the Indcnturc). For purposes of this Disclosure Agreement. "actual kno« ledge"* of the occurrence of such Listed EN ents shall mean actual kno« ledge by the officer at the Trust Office of the Trustee «ith regular responsibility for the administration of the Indcnturc. (c) WhencN er the RedeN elopment Agency obtains kno« ledge of the occurrence of a Listed EN ent. «nether because of a notice from the Trnustee pursuant to Section 5(b) or othermse. the RedeN elopment Agency shall as soon as possible determine if such eN ent «ould be material under applicable federal sccuritics la« s. (d) If the RedeN elopment Agency determines that kno« ledge of the occurrence of a Listed EN ent «ould be material under applicable federal sccuritics la«s. the RedeN elopment Agency shall promptly I f\ the Dissemination Agent and the Trustee in «citing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence «ith the Municipal SCCUCIties Rulemaking Board and the State Repository. if any. Not« ithstanding the foregoing. notice of Listed EN ents described in subsections (a)(IN ) and (a)(N ) need not be gIN en under this subsection any earlier than the notice (if any) of the underk ing eN ent is gIN en to Holders of affected Bonds pursuant to the Indenture. (c) If in response to a rcqucst under subsection (b). the RedeN elopment Agency determines that the Listed EN ent is not material. the RedeN elopment Agency shall so notify the Dissemination Agent and the Trustee in «citing and instruct the Dissemination Agent and the Trustee not to report the occurrence. SECTION 6. Termination of Rcoortinur Obliuration. The obligations of the RedeN elopment Agency under this Disclosure Agreement shall terminate upon the legal defeasance. prior redemption or payment in fiull of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds. the 06012 C D. \-2 4 RedeN clopment Agency shall gIN e notice of such termination in the same manner as for a Listed EN ent under Section 5(c). SECTION 7. Dissemination Aacnt. The RedeN clopment 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. «ith or «ithout appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the RedeN clopment Agency pursuant to this Disclosure Agreement. The initial Dissemination Agent shall be the MuniFinancial. Inc. The Dissemination Agent may resign its duties hcrcundcr at any time upon «ritten notice to the RedeN clopment Agency. SECTION 8. Amendment. Not« ithstanding any other proN ision of this Disclosure Agreement. the parities may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to am amendment so requested by the RedeN clopment Agency proN ided 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 hcrcundcr) only if (a) the amendment is made in connection «ith a change in circumstances that arises from a change in legal requirements. change in la«. or change in identity. nature. or status of the RedeNclopment Agency. or type of business conducted: (b) this Disclosure Agreement. as amended. «ould haN e compiled «ith the requirements of the Rule at the time of sale of the Bonds. after taking into account any amendments or interpretations of the RUIc. as Nell as any change in circumstances: (c) the amendment does not materially impair the interests of the O« ners. as determined by parties unaffiliated «ith the RedeN clopment Agency (such as. but «ithout limitation. the RedeN clopment Agency "s bond counsel) or by O« ner"s 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 «ill explain. in narratIN e form. the reasons for the amendment and the "impact"* (as that Nord is used in the letter from the staff of the SCCUCIties and Exchange Commission to the National Association of Bond La«-crs dated June 23). 1995) of the change in the type of operating data or financial information being proN ided. SECTION 9. Additional Information. (a) The RedeN clopment Agency agrees to proN ide public information concerning the Bonds and the RedeN clopment Agency to any Holder or Beneficial O« ner making a «ritten request therefor. (b) Nothing in this Disclosure Agreement shall be deemed to preN ent the RedeN clopment Agency from disseminating any other information. using the means of dissemination set forth in this Disclosure Agreement or any other means of conununication. or including an other information in an Annual Report or notice of occurrence of a Listed Bent. in addition to that «hich is rcquircd by this Disclosure Agreement. If the RedeN clopment Agency chooses to include any information in any Annual Report or notice of occurrence of a Listed Bent in addition to that «hich is specifically rcquircd by this Disclosure Agreement. the RedeN clopment Agency shall haN e no obligation under this Disclosure Agreement to update such information or include it in any fixture Annual Report or notice of occurrence of a Listed EN ent. 06012 C D. \-2 SECTION 10. Default. In the cN en to a failure of the RedeN clopment Agency to comply «ith an proN ision of this Disclosure Agreement. the Trustee shall. at the «ritten direction of anv Participating Under« riter or the O« ners of a majority in aggregate principal amount of Outstanding Bonds (but onl\ to the extent fiinds haN e been proN ided to it or it has been other« ise indemnified to its satisfaction from anv cost. liability. expense or additional charges of the Trustee «hatsocN er. including. «ithout limitation. fees and expenses of its attorne s). or any O«ner may. take such actions as may be necessary and appropriate. including seeking mandate or specific performance by court order. to cause the RedeN clopment Agency. the Trustee or the Dissemination Agent. as the case may be. to comply «ith its obligations under this Disclosure Agreement: proN ided that any such action may be instituted only in the Federal or State Court located in the Count\ 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 Bent of Default under the Indenture or the Loan Agreement. and the sole remedy under this Disclosure Agreement in the cN ent of a failure of the RedeN clopment Agency. the Trustee or the Dissemination Agent to comply «ith this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties. Immunities and Liabilities of Dissemination Alrcnt. The Dissemination Agent shall haN e only such dutics as are specifically set forth in this Disclosure Agreement. and the RedeN clopment Agency agrees to Indemnify and saN e the Dissemination Agent and the Trustee. their officers. directors. employees and agents. harmless against any loss. expense and liabilities «hich it may incur arising out of or in the exercise or performance of its po« ers and dutics hcrcundcr. including the costs and expenses (including attorne s fees) of defending against any claim of liability. but cscluding liabilities due to the Dissemination Agents or Trustec"s negligence or «illful 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 nationall-v recognized bond counsel. The Dissemination Agent and the Trustee shall be paid compensation by the RedeN clopment Agency for its sen ices proN ided hcrcundcr in accordance «ith its schedule of fees as amended from time to time and all expenses. legal fees and adNances made or incurred by the Dissemination Agent in the performance of its dutics hcrcundcr. The Dissemination Agent and the Trustee shall haN e no dut\ or obligation to reN 1c« any information proN ided to them by the RedeN clopment Agency hcrcundcr and shall not be deemed to be acting in a fiduciary capacity for the Financing Authority. the RedeN clopment Agency. the O« ners. or any other party. The obligations of the RedeN clopment Agcnc\ under this Section shall sure IN e resignation or remoN al of the Dissemination Agent and payment of the Bonds. No person shall haN e any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Agreement. The Dissemination Agent shall not be liable under any circumstances for monctary damages to any person for any breach of this Disclosure Agreement. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the RedeN clopment Agency. the Participating Under« riter. the Dissemination Agent and Holders and Beneficial O« ners from time to time of the Bonds. and shall create no rights in any other person or entity. SECTION I ). Notices. Notices should be sent in «riting to the Ulm ing addresses. The Ulm ing information may be conclusiN cly relied upon until changed in «riting. RedeN clopment Agency: Palm Desert RedeN clopment Agency 7 )-� 10 Fred Waring DrIN e Palm Desert. California 92260 (760) 3 46-061 1 (760) 3) 46-0;74 Fax 06012 C 1). \-2 6 Dissemination Agency : MunlFlnanclal. Inc. 27 368 Via Industrial. Suite 10 Temecula. California 92�90 (909)587-3)500 (909) 587-3)510 Fax Trustee: Wells Fargo Bank. National Association 700 South Flo«er Street. Suite 500 Los Angeles. California 90017-4104 (2I )) 6 )0-6237 (2 I )) 6 )0-6215 Fax SECTION 14. Counterparts. This Disclosure Agreement may be CXCCuted in seNeral counterparts. each of Nduch shall be an original and all of Nduch shall constitute but one and the same instrument. Date: Jule .2006 PALM DESERT REDEVELOPMENT AGENCY OF Authorized Officer 06012 C 1). \-2 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Palm Desert RedeN clopment Agency Name of Bond Issue: Palm Desert Financing Authority Tax Allocation ReN cnuc Bonds (Project Area No. )) 2006 Series A. Palm Desert Financing Authority Tax Allocation ReN cnuc Capital Appreciation Bonds (Project Area No. )) 2006 Series B and Palm Desert Financing Authority Subordinate Tax Allocation ReN cnuc Capital Appreciation Bonds (Project Area No. )) 2006 Series C Date of Issuance: Jule . 2006 NOTICE IS HEREBY GIVEN that the Palm Desert RedeN clopment Agency (the " RedeN clopment Agency") has not proN ided an Annual Report «ith respect to the aboN e-named Bonds as required by Section 3 of the Continuing Disclosure Agreement dated Jule 2006. by and among the RedeN clopment Agency. the Trustee and the Dissemination Agent CXCCuted by the Dissemination Agent for the benefit of the Holders and Beneficial O« ners of the aboN c-referenced bonds. The RedeN clopment Agency anticipates that the Annual Report «ill be filed by Dated: MUNIFINANCIAL. INC.. on behalf of the Palm Desert RedeN clopment Agency By Its: 06012 C 1). \-2 A-1 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Palm Desert Financing Authority Name of Bond Issue: Palm Desert Financing Authority Tax Allocation ReN cnuc Bonds (Project Area No. )) 2006 Series A. Palm Desert Financing Authority Tax Allocation ReN cnuc Capital Appreciation Bonds (Project Area No. )) 2006 Series B and Palm Desert Financing Authority Subordinate Tax Allocation ReN cnuc Capital Appreciation Bonds (Project Area No. )) 2006 Series C Date of Issuance: Jule . 2006 NOTICE IS HEREBY GIVEN that the Palm Desert Financing Authority (the "Financing Authority") has not proN ided an Annual Report «ith respect to the aboN e-named Bonds as required by Section 3 of the Continuing Disclosure Agreement dated Jule 2006 CXCCuted by the Financing Authority for the benefit of the Holders and Beneficial O« ners of the aboN e-referenced bonds. The Financing Authority anticipates that the Annual Report «ill be filed by Dated: PALM DESERT FINANCING AUTHORITY By Its: 06012 C 1). \-2 A-1