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2004 02 03 FAc� e4 OF T9 FINANCING AUTHORITY AGENDA CITY COUNCIL CHAMBERS 78-495 Calle Tampico La auinta, California 92253 Regular Meeting Tuesday, February 3, 2004 - 3:00 P.M. Beginning Resolution No. FA 2004-001 CALL TO ORDER Roll Call: Board Members: Henderson, Osborne, Perkins, Sniff, and Chairman Adolph PUBLIC COMMENT At this time members of the public may address the Financing Authority on items that appear within the Consent Calendar or matters that are not listed on the agenda. Please complete a "request to speak" form and limit your comments to three minutes. When you are called to speak, please come forward and state your name for the record.. Please watch the timing device on the podium. For all Business Session matters or Public Hearings on the agenda, a completed "request to speak" form should be filed with the City Clerk prior to beginning consideration of that item. CONFIRMATION OF AGENDA APPROVAL OF MINUTES 1. APPROVAL OF'MINUTES OF JANUARY 20, 2004 Financing Authority Agenda 1 February 3, 2004 1 1 1- CONSENT CALENDAR - NONE BUSINESS SESSION 1. CONSIDERATION OF ADOPTION OF A RESOLUTION OF THE LA QUINTA FINANCING AUTHORITY APPROVING A LOAN AGREEMENT BETWEEN THE LA QUINTA FINANCING AUTHORITY AND THE LA QUINTA REDEVELOPMENT AGENCY AUTHORIZING THE FILING OF A VALIDATION ACTION WITH RESPECT THERETO. A. RESOLUTION ACTION CHAIR AND BOARD MEMBERS' ITEMS - NONE PUBLIC HEARINGS - NONE ADJOURNMENT Adjourn to a regularly scheduled meeting of the Financing Authority to be held on February 17, 2004 at 3:00 p.m. in the City Council Chambers, 78-495 Calle Tampico, La Quinta, CA 92253. DECLARATION OF POSTING I, June S. Greek, City Clerk of the City of La Quinta, do hereby declare that the foregoing agenda for the La Quinta Financing Authority meeting of Tuesday, February 3, 2004, was posted on the outside entry to the Council Chamber, 78-495 Calle Tampico and on the bulletin board at the La Quinta Chamber of Commerce and at Stater Bros. 78-630 Highway 111, on Friday, January 30, 2004. DATED: January 30, 2004 JUNE S. GREEK, CMC, City Clerk City of La Quinta, California Financing Authority Agenda 2 February 3, 2004 2 w � 5 SOFT AGENDA CATEGORY: COUNCIL/RDA MEETING DATE: February 3, 2004 BUSINESS SESSION: / ITEM TITLE: Consideration of Adoption of a Resolution of the La Quinta Financing Authority Approving a Loan CONSENT CALENDAR: Agreement Between the La Quinta Financing Authority STUDY SESSION: and the La Quinta Redevelopment Agency and Authorizing the Filing of a Validation Action with PUBLIC HEARING: Respect Thereto RECOMMENDATION: Approve a Resolution of the Financing Authority approving a Loan Agreement by and between the La Quinta Financing Authority ("Authority") and La Quinta Redevelopment Agency ("Agency") and authorize Agency Legal Counsel to initiate a validation action. FISCAL IMPLICATIONS: The Loan Agreement authorizes the Agency to borrow up to $1 10,000,000 from the proceeds of bonds issued by the Authority to fund redevelopment and housing initiatives in Project Area 1 and Project Area 2. This action does not obligate the Agency to borrow any specific amount at this time. Instead, it establishes the financing structure with specific loans subsequently implemented through one or more future Supplemental Agreements that will cause the issuance of each loan. BACKGROUND AND OVERVIEW: In February 2003, the City Council and Agency Board received the Mid -Year Financial Management Review report that outlined the need to secure new capital to implement the Agency's affordable housing mandates. The California Community Redevelopment Law ("Law") provides that the Agency must cause the production of housing units within both Redevelopment Project Areas that remain affordable to very low-, low- and moderate -income households for not less than 55 years for rental units and not less than 45 years for owner -occupied units. Further, the Law requires that the Agency BS-13-FA.doc 3 deposit 20% of the tax increment revenue it receives in a fund to achieve this requirement. The Law establishes a methodology for determining the number of units the Agency must cause to be produced. At least 15% of all privately developed residential units within both Project Areas must be affordable to very low-, low- and moderate -income households, and of this amount, 40% (6% of the total) must be affordable to very low-income households. By 2004, the Agency should have at least 1,700 affordable units in place. To date, the Agency has caused to be produced 891 affordable units. The Agency's Financing Team reviewed approaches to raising capital in the spring of 2003. Their review indicated that the best means was to use the Authority. The structure would entail having the Agency enter into a master loan agreement with the Authority. Under the .Loan Agreement, the Authority would sell bonds and loan the proceeds from such bond sales to the Agency with the repayment of the loan(s) by the Agency secured by tax increment revenue from one or both of the Agency's Redevelopment Project Areas. The Authority would use the tax increment from the loan repayment as a source for repayment to bondholders. The Resolution presented for consideration is to approve the Loan Agreement that facilitates this transaction (Attachment 1). The Agreement provides that the Agency may borrow up to $1 10,000,000 in loans from the Authority that would be repaid through tax increment revenue. This maximum loan amount was determined by identifying the Agency's current financing capacity. Establishing this maximum loan amount does not obligate the Agency to obtain $1 10,000,000 in loans. When the Agency elects to borrow a loan for future projects and programs, the dollar amount of each loan will be determined by the total funding needs of the projects the Agency wishes to implement and by the Agency's financing capacity at that time. Each specific loan must be approved by both the Authority and Agency Boards through a Supplemental Loan Agreement at the time it is proposed. If a Supplemental Loan Agreement is approved by both Boards, then the Authority would issue bonds and loan the money to the Agency. The loan terms would reflect those used for the bond issue. Tax increment revenue from one or both of the Agency's Project Areas would then be pledged to repay the loan to provide the Agency and Authority with assurance that the Loan Agreement and proposed structure of the transaction is consistent with the Community Redevelopment Law and the law under which the Authority operates (the Joint Exercise of Powers Act, Gov. Code §6500 et seq.). Agency staff and legal counsel are recommending, as set forth in the proposed Resolution, that the Agency authorize Agency legal counsel to initiate a judicial validation procedure in court, pursuant to Code of Civil Procedure Section 860 et seq., to obtain a judgment confirming that the Loan Agreement and proposed transaction between the Agency and Authority are consistent with, and valid under, applicable California law. This will also legally preclude any subsequent challenges to the Loan Agreement as well as any Supplemental Loan Agreement adopted at a future date. BS-13-FA.doc 02 0 FINDINGS AND ALTERNATIVES: The alternatives available to the Financing Authority include: 1. Approve a Resolution of the Financing Authority approving a Loan Agreement by and between the La Quinta Financing Authority and the La Quinta Redevelopment Agency and authorize Authority Legal Counsel to initiate a validation action; or 2. Do not approve a Resolution of the Financing Authority approving a Loan Agreement by and between the La Quinta Financing Authority and the La Quinta Redevelopment Agency and do not authorize Authority Legal Counsel to initiate a validation action; or 3. Provide staff with alternative direction. Respectfully submitted, J munity Development Director Attachments: 1. Loan Agreement BS-13-FA.doc Approved for submission by: mas P. Genovese, Executive Director 03 r J RESOLUTION NO. FA A RESOLUTION OF THE LA QUINTA FINANCING AUTHORITY APPROVING A LOAN AGREEMENT BETWEEN THE LA QUINTA FINANCING AUTHORITY AND THE LA QUINTA REDEVELOPMENT AGENCY WHEREAS, the La Quinta Financing Authority ("Authority") is a joint powers authority duly created, established, and authorized to transact business and exercise its powers under and pursuant to the Joint Exercise of Powers Act, Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the Government Code of the State of California (the "JPA Law"); and WHEREAS, the Authority, among other powers, is authorized by the JPA Law to make loans to local public agencies; and WHEREAS, the La Quinta Redevelopment Agency ("Agency") is a public body, corporate and politic, duly created, established, and authorized to transact business and exercise its powers, under and pursuant to the Community Redevelopment Law, Part 1 of Division 24 (commencing with Section 33000) of the Health and Safety Code of the State of California (the "Redevelopment Law"); and WHEREAS, the Agency, among other powers, is authorized by the Redevelopment Law to borrow money from any public agency for any redevelopment project within its area of operation; and WHEREAS, the Agency and Authority propose to enter into a Loan Agreement pursuant to which the Authority is authorized to loan to the Agency, and the Agency is authorized to borrow from the Authority, from time to time and one or more times, in the aggregate amount of not to exceed One Hundred Ten Million Dollars ($110,000,000), funds from the proceeds of Authority bonded indebtedness, with individual specific loans to be effected through Supplemental Loan Agreements separately approved by the Agency and the Authority, all as described in the Loan Agreement. NOW, THEREFORE, THE LA QUINTA FINANCING AUTHORITY DOES HEREBY RESOLVE, ORDER, AND DETERMINE AS FOLLOWS: Section 1. Each of the above recitals is true and correct and are incorporated herein. Section 2. The Loan Agreement, in the form on file with the Authority Secretary concurrent with the adoption of this Resolution, is hereby approved, and the Authority Chairman is authorized and directed to sign the Loan Agreement on behalf of the Authority. 04 Section 3. The Authority's approval of the Loan Agreement and the adoption of this Resolution are not subject to the California Environmental Quality Act pursuant to CEQA Guidelines Section 15378(b)(4) [California Code of Regulations Section 15378(b)(4)] because the Loan Agreement is a fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. Section 4. Agency Legal Counsel is authorized and directed to file and pursue to judgment a validating procedure with respect to the Loan Agreement in accordance with Code of Civil Procedure Section 860 et seq. PASSED, APPROVED and ADOPTED this 3'd day of February 2004, by the following vote: AYES: NOES: ABSENT: ABSTAIN: Donald Adolph, Chairperson La Quinta Financing Authority ATTEST: JUNE S. GREEK, CMC, Authority Secretary La Quinta Financing Agency (Authority Seal) APPROVED AS TO FORM: M. KATHERINE JENSON, Authority Counsel La Quinta Financing Authority 05 7 ATTACHMENT #1 LOAN AGREEMENT by and between the LA QUINTA REDEVELOPMENT AGENCY and LA QUINTA FINANCING AUTHORITY Dated as of February 3, 2004 cos 124/015610-0069 412799.08 a01/29/04 TABLE OF CONTENTS Page ARTICLEI DEFINITIONS..........................................................................................2 Section1.01 Definitions.................................................................................................2 Section 1.02 Content of Certificates and Opinions...................................................... I I Section 1.03 Article and Section Headings and References ........................................ I I ARTICLEII THE LOANS..........................................................................................12 Section 2.01 Authorization of Loans...........................................................................12 Section 2.02 Terms of the Loans.................................................................................12 ARTICLE III ISSUANCE AND DELIVERY OF LOANS; APPLICATION OFPROCEEDS......................................................................................12 Section 3.01 Issuance and Delivery of a Loan; Receipt of Loan .................................12 Section 3.02 Application of Proceeds of a Loan ..........................................................13 ARTICLE IV REDEMPTION......................................................................................13 Section 4.01 Terms of Redemption.............................................................................13 Section 4.02 Partial Prepayment..................................................................................13 ARTICLE V TAX REVENUES; DEBT SERVICE FUND, REDEMPTION FUND, RESERVE FUND, AND ACCOUNTS.....................................13 Section 5.01 Pledge and Assignment...........................................................................13 Section 5.02 Establishment of Debt Service Fund.......................................................14 Section 5.03 Establishment of Redemption Fund........................................................14 Section 5.04 Establishment of Reserve Fund..............................................................15 ARTICLE VI COVENANTS OF THE AGENCY........................................................16 Section 6.01 Punctual Payment....................................................................................16 Section 6.02 Payment of Claims..................................................................................16 Section 6.03 Management and Operation of Premises................................................17 Section 6.04 Protection of Security and Rights of Authority......................................17 Section 6.05 Payments of Taxes and Other Charges...................................................17 Section 6.06 Compliance with Law.............................................................................17 Section 6.07 Books and Accounts; Financial Statements............................................17 Section 6.08 Taxation of Leased Property...................................................................18 Section 6.09 Disposition of Property...........................................................................18 Section 6.10 Maintenance of Tax Revenues................................................................18 Section 6.11 Tax Covenants........................................................................................19 (a) Private Business Use Limitation.............................................................19 (b) Private Loan Limitation ........................................ :................................. 19 (c) Federal Guarantee Prohibition................................................................19 (d) No Arbitrage...........................................................................................19 124/015610-0069 412799.08 a01/29/04 '1' Page (e) Compliance with the Tax Code...............................................................19 (f) Covenant Regarding Mortgage Subsidy Bonds......................................19 Section 6.12 Further Assurances..................................................................................19 ARTICLE VII THE FISCAL AGENT; INVESTMENT OF MONEYS ........................20 Section 7.01 Appointment, Duties, Immunities, and Liabilities of Fiscal Agent....................................................................................................... zu Section 7.02 Merger or Consolidation.........................................................................22 Section 7.03 Liability of Fiscal Agent......................................................................... 22 Section 7.04 Right to Rely on Documents...................................................................23 Section 7.05 Preservation and Inspection of Documents.............................................23 Section 7.06 Compensation and Indemnification........................................................ 23 Section 7.07 Deposit and Investment of Moneys in Funds.........................................24 Section 7.08 Accounting Records and Financial Statements.......................................24 Section 7.09 Appointment of Co -Fiscal Agent or Agents...........................................24 ARTICLE VIII MODIFICATION OR AMENDMENT OF THE AGREEMENT........................................................................................ 25 Section 8.01 Amendments Permitted...........................................................................25 Section 8.02 Procedure for Amendment with Written Consent of Bondowners............................................................................................26 Section 8.03 Effect of Supplemental Agreements and Modifying Agreements .......... 27 ARTICLE IX EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS....................................................................................27 Section 9.01 Events of Default....................................................................................27 Section 9.02 Application of Funds Upon Default........................................................29 Section9.03 Non-waiver.............................................................................................29 Section 9.04 Remedies Not Exclusive........................................................................30 ARTICLE X MISCELLANEOUS...............................................................................30 Section 10.01 Benefits of Agreement Limited to Parties..............................................30 Section 10.02 Successor is Deemed Included in All References to Predecessor .......... 30 Section 10.03 Discharge of Agreement......................................................................... 30 Section 10.04 Waiver of Personal Liability...................................................................32 Section 10.05 Notices and Demands on Agency........................................................... 32 Section 10.06 Partial Invalidity......................................................................................33 Section 10.07 Effective Date of Agreement.................................................................. 33 Section 10.08 Governing Law....................................................................................... 33 Section 10.09 Execution in Counterparts.......................................................................33 Exhibit A — 2004 Housing Projects Loan —Sources and Uses, Debt Service Schedule, Pricing Summary 124/015610-0069 108 412799.08 a01/29/04 -11- 10 LOAN AGREEMENT THIS LOAN AGREEMENT (the "Agreement") is made and entered into as of February 3, 2004 ("Effective Date"), by and between the LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic, organized and existing under, and by virtue of, the laws of the State of California (the "Agency"), and the LA QUINTA FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of the State of California (the "Authority"). WITNESSETH: WHEREAS, the Agency is a redevelopment agency, a public body, corporate and politic, duly created, established and authorized to transact business and exercise powers under and pursuant to the provisions of the Community Redevelopment Law of the State of California (the "Law"), including the power to issue bonds, notes and other obligations for any of its corporate purposes; and WHEREAS, redevelopment plans (the "Plans") for certain redevelopment projects (the "Projects") have been adopted and approved and all requirements of law for, and precedent to, the adoption and approval of said Plans have been duly complied with; and WHEREAS, the Law authorizes the Agency to accept financial assistance from any public or private entity, including loans, to enable the Agency to finance the cost of such redevelopment; and WHEREAS, the Authority has determined to issue its Authority Loans (the "Loans") and the Agency has determined to accept the Loans, all pursuant to and secured by this Agreement and by Supplemental Agreements providing for the issuance of such Loans, all in the manner provided herein; and WHEREAS, in order to establish and declare the terms and conditions upon which the Loans are to be issued and secured and to secure the payment of the principal thereof and interest and premium, if any, thereon, the Agency and Authority have authorized the execution and delivery of this Agreement; and WHEREAS, the proceeds of the Loans shall be used by the Agency for any redevelopment purpose consistent with the terms of this Agreement and applicable Supplemental Agreement, including but not limited to, for the purpose of (i) advance refunding and legally defeasing certain outstanding bonds and loans of the Agency; (ii) providing for certain costs of issuing the Loans; and (iii) providing funds to implement the Plans for the Projects; and WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Loans, when executed by the Authority and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Agreement a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Agreement have been in all respects duly authorized; and 124/015610-0069 412799.08 a01/29/04 WHEREAS, the Agency has determined that all acts and proceedings required by law necessary to accept the Loans, when executed by the Agency and duly issued, the valid, binding and legal special obligations of the Agency, and to constitute this Agreement a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Agreement have been in all respects duly authorized; NOW, THEREFORE, THIS AGREEMENT WITNESSETH, that in order to secure the payment of the principal of, and the interest and premium, if any, on, all the Loans at any time issued and Outstanding under this Agreement, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Loans are to be issued and received, and in consideration of the promises and of the mutual covenants herein contained, and for other valuable considerations, the sufficiency and receipt whereof is hereby acknowledged, the Agency and Authority do hereby covenant and agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01, for all purposes of this Agreement, of any Supplemental Agreement (provided that any of such terms may be redefined or made not applicable with respect to a Loan by the provisions of the applicable Supplemental Agreement hereto, or of any Modifying Agreement consistent with Article VIII hereof, or of any certificate, opinion, or other document herein mentioned), shall have the meanings herein specified or as specified in the Indenture or any Supplemental Indenture: "Agency" means the La Quinta Redevelopment Agency, a public body, corporate and politic, established under the Law. "Agreement" means this Loan Agreement, entered into by the Agency and Authority, and as it may be amended or supplemented by any Supplemental Agreement adopted pursuant to the provisions hereof. "Alternative Reserve Account Security" means one or more letters of credit, surety bond, or bond insurance policies, for the benefit of the Fiscal Agent in substitution for or in place of all or any portion of the Reserve Requirement. "Annual Debt Service" means, for each Bond Year, the sum of (a) the interest payable on the Outstanding Loans in such Bond Year and (b) the principal amount of the Outstanding Loans payable by their terms or to be redeemed from sinking fund payments in such Bond Year. "Bond Counsel" means legal counsel duly licensed in the State of California and practicing as such under the laws of the State of California, engaged by Agency for the purpose of advising the Agency with respect to the issuance of the Bonds and providing the opinions required of Bond Counsel in connection with such issuance. 124/015610-0069 2_ 1 412799.08 a01/29/04 _1 12 "Bond Insurer" means the Issuer of the Qualified Surety Bond as specified in the Indenture or Supplemental Agreement. `Bondowner" or "Owner of Bonds," or any similar term means any person who shall be the registered owner or his duly authorized attorney, trustee or representative. For the purpose of Bondowners' voting rights or consents, Bonds owned by or held for the account of the Agency shall not be counted. "Bond Year" means, with respect to the Loans, the twelve-month period extending from September 2 in any year to the following September I-, both dates inclusive; provided, however, that the first Bond Year shall begin on the Closing Date and end on the next occurring September 1, and with respect to any Parity Debt, the meaning ascribed in any Supplemental Agreement relating thereto. "Bonds" means the Bonds specified in any Supplemental Agreement. "Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York and Los Angeles, California, or either of them, are authorized or obligated by law to be closed. "Chairperson" or "Chair" means the chairperson of the Agency appointed pursuant to Section 33113 of the Health and Safety Code of the State of California, or other duly appointed officer of the Agency authorized by the Agency by resolution or bylaw to perform the functions of the chairperson in the event of the chairperson's absence or disqualification. "City" means the City of La Quinta, California. "Closing Date" means any date upon which there is a physical delivery of any series of the Bonds in exchange for an amount representing the purchase price of the Bonds by the original purchaser. "Code" or "Tax Code" means the Internal Revenue Code of 1986, as amended. Any reference to a provision of the Code shall be deemed to include the applicable Tax Regulations promulgated with respect to such provision. "County" means the County of Riverside, California. "County Assessor" means the person who holds the office in the County in which the Agency is located designated as the County Assessor, or one of his or her duly appointed deputies, or any person or persons performing substantially the same duties in the event said office is ever abolished or changed. "County Auditor -Controller" means the person who holds the office in the County in which the Agency is located designated as the County Auditor -Controller, or one of his or her duly appointed deputies, or any person or persons performing substantially the same duties in the event said office is ever abolished or changed. "Debt Service Fund" means the fund by that name established by Section 5.02. 11. 124/015610-0069 412799.08 a01/29/04 -3- 13 "Effective Date" is defined in Section 10.07 hereof. "Event of Default" means any of the events described in Section 9.01 hereof. "Executive Director" means the executive director of the Agency appointed pursuant to the Law, or other duly appointed officer of the Agency authorized by the Agency by resolution or by law to perform the functions of the executive director including, without limitation, any deputy executive director of the Agency. "Fiscal Agent" means the Fiscal Agent appointed by the Agency and acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in Section 7.01. "Fiscal Year" means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both inclusive, or any other twelve-month period hereafter selected and designated by the Agency as its official fiscal year period. "Indenture" means that Indenture of Trust specified in any Supplemental Agreement. "Independent Certified Public Accountant" means any accountant or firm of such accountants duly licensed or registered or entitled to practice and practicing as such under the laws of the State of California, appointed by the Agency, and who, or each of whom: (1) is in fact independent and not under domination of the Agency; (2) does not have any substantial interest, direct or indirect, with the Agency; and (3) is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency. "Independent Financial Consultant" means any financial consultant or firm of such consultants appointed by the Agency, and who, or each of whom: (1) is in fact independent and not under domination of the Agency; (2) does not have any substantial interest, direct or indirect, with the Agency; and (3) is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency. "Interest Payment Date" means any Interest Payment Date as specified in any Supplemental Agreement. "La Quinta Redevelopment Agency Project Loans" is defined in Section 2.01 hereof. 124/015610-0069 12 412799.08 a01/29/04 4- 14 "Law" means the Community Redevelopment Law of the State of California, constituting Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code of the State of California, and the acts amendatory thereof and supplemental thereto. "Loans" means, collectively, one or more loan(s) issued pursuant to one or more Supplemental Agreement(s), in an aggregate principal amount not to exceed One Hundred Ten Million Dollars ($110,000,000.00). "Modifying Agreement, " as described in Section 8.01 of this Agreement, means an agreement, resolution or other instrument then in full force and effect which has been duly approved by the Agency and Authority, amendatory of or supplemental to this Agreement, or a Supplemental Agreement but only if and to the extent that such Supplemental Agreement is specifically authorized hereunder. "Outstanding Bonds" means the Bonds which have not been fully defeased. "Outstanding Loans" means the Loans which have not been fully repaid or discharged. "Parity Debt" means any past and future bonds, notes, loans, advances, or indebtedness issued or incurred by the Agency on a parity with the Loans, or any of them in accordance with the provisions of the applicable Indenture and/or Supplemental Agreement. "Permitted Investment", except as modified or amended by any Indenture or Supplemental Agreement, means any of the following: A. The following obligations may be used as Permitted Investments for all purposes, including defeasance'investments in refunding escrow accounts: (1) Cash (insured at all times by the Federal Deposit Insurance Corporation); (2) Obligations of, or obligations guaranteed as to principal and interest by, the United States of America or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States of America, including: (a) U.S. Treasury obligations; (b) All direct or fully guaranteed obligations; (c) Farmers Home Administration; (d) General Services Administration; (e) Guaranteed Title XI financing; (f) Government National Mortgage Association (GNMA); (g) State and Local Government Series; 124/015610-0069 _5_ i 3 412799.08 a01/29/04 1 15 (3) Obligations of government -sponsored agencies that are not backed by the full faith and credit and the United States of America: (a) Federal Home Loan Mortgager Corp. (FHLMC) Debt obligations; (b) Farm Credit System (formerly Federal Land Banks, Federal Intermediate Credit Banks, and Banks for Cooperatives); (c) Federal Home Loan Banks (FHL Banks); (d) Federal National Mortgage Association (FNMA) Debt obligations; (e) Financing Corp. (FICO) Debt obligations; (f) Resolution Funding Corp. (RESCORP) Debt obligations; (g) U. S. Agency for International Development (USAID) Guaranteed notes. Any security used for defeasance must provide for timely payment of principal and interest and cannot be callable or pre -payable prior to maturity or earlier redemption of the rated debt (excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date). USAID securities must mature at least four business days before the appropriate payment date. B. Bond Insurer will allow the following obligations to be used as Permitted Investments for all purposes other than defeasance investments in refunding escrow accounts: (1) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including: (a) Import -Export Bank; (b) Rural Economic Community Development Administration; (c) U.S. Maritime Administration; (d) Small Business Administration; (e) U.S. Department of Housing & Urban Development (PHAs); 124/015610-0069 1 412799.08 a01/29/04 -6 16 (f) Federal Housing Administration; (g) Federal Financing Bank; (2) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: (a) Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC); (b) Obligations of the Resolution Funding Corporation (REFCORP); (c) Senior debt obligations of the Federal Home Loan Bank System; (d) Senior debt obligations of other Government Sponsored Agencies approved by Ambac; (3) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "P-1" by Moody's and "A-1" or "A-1+" by S&P and maturing not more than 360 calendar days after the date of purchase (Ratings on holding companies are not considered as the rating of the bank); (4) Commercial paper which is rated at the time of purchase in the single highest classification, "P1" by Moody's and "A-1+" by S&P and which matures not more than 270 calendar days after the date of purchase; (5) Investments in a money market fund rated "AAAm" or "AAAm- G" or better by S&P; (6) Pre -funded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality, or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (a) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rated category of Moody's or S&P or any successors thereto; or 124/015610-0069 is + 412799.08 a01/29/04 -7- 1 (b) (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (A)(2) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (7) Municipal obligations rated as "Aaa/AAAS" or general obligations of States with a rating of "A2/A" or higher by both Moody's and S&P; (8) Investment agreements approved in writing by Bond Insurer (supported by appropriate opinions of counsel); and (9) Other forms of investments (including repurchase agreements) approved in writing by Bond Insurer. C. The value of the above investments shall be determined as of the end of each month, as follows: (1) For securities (a) The closing bid price quoted by Interactive Data Systems, Inc., or (b) a valuation performed by a nationally recognized and accepted pricing service acceptable to Bond Insurer whose valuation method consists of the composite average of various bid price quotes on the valuation date; or (c) the lower of two dealer bids on the valuation date. The dealers or their parent holding companies must be rated as at least investment grade by Moody's and S&P and must be market makers in the securities being valued. (2) As to certificates of deposit and banker's acceptances: the face amount thereof, plus accrued interest; and 124/015610-0069 412799.08 a01/29/04 -8- 18 (3) As to any investment not specified above: the value thereof established by prior agreement between the Authority, Agency, Fiscal Agent, and Bond Insurer. "Pledged Tax Revenues" means any Tax Revenues pledged to repayment of principal and interest, and premium if any, of any Loan pursuant to any Supplemental Agreement. "Project Area" means the territory within the boundary of the Redevelopment Project as delineated in the Redevelopment Plan. "Principal Payment Date" means the date in each year in which any of the Loans mature by their respective terms as specified in any Supplemental Agreement; and with respect to any Parity Debt means the stated maturity date of such Parity Debt as specified in any Supplemental Agreement. "Qualified Surety Bond" means an insurance policy or surety bond issued by a company licensed to issue an insurance policy or surety, the claims -paying ability of which is rated in the highest category by A.M. Best & Company (if rated by such), S&P, and Moody's as specified in any Indenture or Supplemental Agreement. "Redemption Fund" means the Fund by that name established by Section 5.03 hereof. "Redevelopment Consultant" means any consultant or firm of consultants appointed by the Agency and judged by the Agency to have experience in matters relating to the collection of Tax Revenues or otherwise with respect to financing in redevelopment project areas, and who, or each of whom: (1) is in fact independent and not under domination of the Agency; (2) does not have any substantial interest, direct or indirect, with the Agency; and (3) is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency. "Redevelopment Plan" means the redevelopment plan adopted for a Redevelopment Project as may be specified in the applicable Supplemental Agreement. "Redevelopment Project" means the redevelopment project that may be defined in the applicable Supplemental Agreement, which Redevelopment Project may be defined by reference to a specific Project Area. "Report" means a Report in writing signed by an Independent Certified Public Accountant, Independent Financial Consultant or Redevelopment Consultant and including: (1) a statement that the person or firm making or giving such Report has read the pertinent provisions of this Agreement and the Supplemental Agreement(s) to which such Report relates; 124/015610-0069 412799.08 a01/29/04 -9- 79 (2) a brief statement as to the nature and scope of the examination or investigation upon which the Report is based; and (3) a statement that, in the opinion of such person or firm, sufficient examination or investigation was made as is necessary to enable said consultant to express an informed opinion with respect to the subject matter referred to in the Report. "Reserve Fund" means the account by that name established and held by the Fiscal Agent pursuant to Section 5.04 hereof. "Reserve Requirement" means, with respect to the Bonds, the reserve required to be set aside in the Reserve Fund pursuant to the terms of any Indenture or Supplemental Indenture. "State" means the State of California. "Supplemental Agreement" means the loan agreement or a resolution or other instrument, then in full force and effect which has been duly approved by the Agency and Authority, which effects a specific Loan in implementation of this Agreement. "Tax Regulations" means temporary and permanent regulations promulgated under Section 103 and related provisions of the Code. "Tax Revenue Certificate" means a written certificate of the Agency identifying the amount of Tax Revenues shown on the records of the County Assessor to be received by the Agency in either the current Bond Year or the next Bond Year. "Tax Revenues" means that portion of taxes levied upon taxable property in the Project Area and received by the Agency on or after the date of issue of any Bonds for the Project Area of the Agency pursuant to Article 6 of Chapter 6 of the Law and Section 16 of Article XVI of the Constitution of the State of California, or pursuant to other applicable State laws, and as provided in the applicable Redevelopment Plan, and (to the extent permitted by law) all payments, subventions and reimbursements, if any, to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations. "Treasurer" means the treasurer of the Agency appointed pursuant to the Law, or other duly appointed officer of the Agency authorized by the Agency to perform the functions of the treasurer including, without limitation, the Executive Director of the Agency. "Trustee" means the entity, or any lawful and approved successor, appointed pursuant to any Indenture and/or Supplemental Agreement. "Written Request of the Agency" means an instrument in writing signed by either the Chairman (or Vice Chairman in the Chairman's absence), the Executive Director, the Deputy or Assistant Executive Director, or the Finance Director, or by any other officer of the Agency duly authorized by the Agency for that purpose. 20 124/015610-0069 "18 412799.08 a01/29/04 -10- Section 1.02 Content of Certificates and Opinions. Every certificate or opinion provided for in this Agreement with respect to compliance with any provision hereof shall include (1) a statement that the person making or giving such certificate or opinion has read such provision and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the certificate or opinion is based; (3) a statement that, in the opinion of such person, he has made or caused to be made such examination or investigation as is necessary to enable him to express an informed opinion with respect to the subject matter referred to in the instrument to which his signature is affixed; and (4) a statement as to whether, in the opinion of such person, such provision has been complied with. Any such certificate or opinion made or given by an officer of the Agency may be based, insofar as it relates to a legal matter, upon a certificate or opinion of or representation by Bond Counsel, or insofar as it related to an accounting matter, upon a certificate or opinion of or representation by an Independent Financial Consultant, Independent Certified Public Accountant, or a Redevelopment Consultant, unless such officer knows, or in the exercise of reasonable care should have known, that the certificate, opinion, or representation with respect to the matters upon which such certificate, opinion, or representation may be based, as aforesaid, is erroneous. Any such certificate, opinion, or representation made or given by Bond Counsel or an Independent Financial Consultant, Independent Certified Public Accountant or a Redevelopment Consultant, may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Agency) upon a certificate or opinion of or representation by an officer of the Agency, unless such Bond Counsel or an Independent Financial Consultant, Independent Certified Public Accountant, or Redevelopment Consultant knows, or in the exercise of reasonable care, should have known, that the certificate or opinion or representation with respect to the matters upon which such person's certificate or opinion or representation may be based is erroneous. The same officer of the Agency, or the same Bond Counsel or Independent Financial Consultant, Independent Certified Public Accountant, or Redevelopment Consultant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Agreement, but different officers, Bond Counsel or Independent Financial Consultant, Independent Certified Public Accountant, or Redevelopment Consultants may certify to different matters. Section 1.03 Article and Section Headings and References. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction, or effect of this Agreement. All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections, or subdivisions of this Agreement; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or subdivision hereof, and words of the masculine gender shall mean and include words of the feminine and neuter genders, and vice -versa. 124/015610-0069 412799.08 a01/29/04 -11- �?i ARTICLE II THE LOANS Section 2.01 Authorization of Loans. The Authority hereby authorizes the issuance and delivery of Loans hereunder in an aggregate amount not to exceed One Hundred Ten Million Dollars ($110,000,000.00), and the Agency hereby authorizes the acceptance and receipt of Loans hereunder in an aggregate amount not to exceed One Hundred Ten Million Dollars ($110,000,000.00). The Loans shall constitute special obligations of the Agency and are to be issued and delivered by the Authority to the Agency, and accepted and received by the Agency, from time to time pursuant to Supplemental Agreements, for use by the Agency for purposes not inconsistent with the terms of this Agreement and the applicable Supplemental Agreement. Such Loans are hereby collectively designated the "La Quinta Redevelopment Agency Project Loans." This Agreement constitutes a continuing agreement by the Agency, in favor of the Authority, to secure the full payment of the principal and interest on all such Loans, subject to the covenants, provisions, and conditions herein and contained in the applicable Supplemental Agreement. Loans in unlimited amounts may be issued at any time under and subject to the terms of this Agreement. All acts, conditions and things required by law to exist, happen, or be performed precedent to and in connection with the issuance of the Loans do exist, have happened, and have been performed in due time, form, and manner as required by law, and the Authority is duly authorized, pursuant to each and every requirement of law, to issue and deliver the Loans, and the Agency is duly authorized, pursuant to each and every requirement of law, to accept and receive the Loans, in the manner and form provided in this Agreement. Section 2.02 Terms of the Loans. The Loans shall be paid in installments of principal and interest. The principal component of a Loan shall be payable five Business Days prior to each Interest Payment Date in each of the years and in the amounts, and interest on each installment of principal of the Loans shall be calculated at the rates per annum, as specified in the applicable Supplemental Agreement. Interest on each installment of principal of a Loan shall be calculated on the basis of a 360-day year of twelve 30-day months and will accrue on each installment of principal from and including the Closing Date, to but not including the Interest Payment Date with respect to which such installment of principal is payable. Interest accrued on each installment of principal of a Loan will be payable at least five (5) Business Days prior to each Interest Payment Date. Any installment of principal and interest which is not paid when due shall continue to accrue interest from and including the Interest Payment Date with respect to which such principal or interest is payable. ARTICLE III ISSUANCE AND DELIVERY OF LOANS; APPLICATION OF PROCEEDS Section 3.01 Issuance and Delivery of a Loan; Receipt of Loan. At any time after the execution of this Agreement, and, from time to time, after the execution of the applicable Supplemental Agreement providing for the issuance and delivery of a n 124/015610-0069 f . l l 412799.08a01/29/04 -12- Loan, the Authority may execute and deliver such Loan to the Agency and the Fiscal Agent, and the Agency and Fiscal Agent, pursuant to this Agreement and the applicable Supplemental Agreement, shall accept and receive such Loan in accordance with the terms of this Agreement and applicable Supplemental Agreement. Section 3.02 Application of Proceeds of a Loan. The Loan proceeds received shall be deposited by the Fiscal Agent in the funds and accounts established under the applicable Supplemental Agreement, all as shall be more particularly directed in the Supplemental Agreement authorizing the issuance of such Loan. For record keeping purposes, the Fiscal Agent may establish such accounts as may be necessary to reflect receipt of funds. ARTICLE IV REDEMPTION Section 4.01 Terms of Redemption. (a) A Loan may be made subject to optional redemption as provided in the Supplemental Agreement providing for the issuance of such Loan. (b) A Loan may be made subject to mandatory sinking fund redemption as provided in the Supplemental Agreement providing for the issuance of such Loan. Section 4.02 Partial Prepayment. Whenever provision is made in this Agreement or in the applicable Supplemental Agreement for the prepayment of less than all of a Loan, the Loan to be prepaid shall be selected by the Agency in any manner which the Agency in its sole discretion shall deem fair and appropriate. ARTICLE V TAX REVENUES; DEBT SERVICE FUND, REDEMPTION FUND, RESERVE FUND, AND ACCOUNTS Section 5.01 Pledge and Assignment. (a) Subject only to the provisions of this Agreement and the applicable Supplemental Agreement permitting the application thereof for the purposes and on the terms and conditions set forth herein and therein, all of the Pledged Tax Revenues with respect to a Loan and any other amounts held in any fund or account established pursuant to the Supplemental Agreement providing for the issuance of such Loan are hereby pledged by the Agency to secure the payment of the principal of and interest and premium, if any, on such Loan in accordance with the provisions of this Agreement and the applicable Supplemental Agreement. Said pledge shall constitute a lien on and security interest in such monies and shall attach, be perfected and be valid and binding from and after execution of such Supplemental Loan Agreement by the Agency and Authority, upon the physical delivery thereof. 124/015610-0069 412799.08 a01/29/04 -13 - 4.3 3 (b) Subject to the provisions of this Agreement, the Agency hereby assigns to the Fiscal Agent, for the benefit of the owners from time to time of such Loans, all of the Pledged Tax Revenues with respect to such Loans. The Agency shall collect and receive, or cause to be collected and received by the Fiscal Agent, all of the Pledged Tax Revenues, and Pledged Tax Revenues collected or received by the Agency, or collected and received by the Fiscal Agent on behalf of the Agency, shall be deemed to be held, and to have been collected or received, by the Agency and shall be paid to the Fiscal Agent as set forth herein and in the applicable Supplemental Agreement provided. All Pledged Tax Revenues deposited with the Fiscal Agent shall be held, disbursed, allocated and applied by the Fiscal Agent only as provided in this Agreement and the applicable Supplemental Agreement. Section 5.02 Establishment of Debt Service Fund. The Agency shall establish with the Fiscal Agent, pursuant to the Supplemental Agreement providing for the issuance of a Loan, a special fund designated as the "[appropriate designation] Debt Service Fund". All Pledged Tax Revenues shall be transferred, not more than two times per calendar year immediately prior to an interest payment date, to the Fiscal Agent by the Agency and deposited by the Fiscal Agent upon receipt thereof in the Debt Service Fund. Amounts in the Debt Service Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of paying the principal and interest on the Loan authorized to be issued by such Supplemental Agreement as it shall become due and payable. Except as may be otherwise provided in any Supplemental Agreement, the Agency shall not be obligated to transfer to the Fiscal Agent for deposit in the Debt Service Fund in any Bond Year an amount of Pledged Tax Revenues which, together with other available amounts in the Debt Service Fund, exceeds the amounts required to pay principal and interest on such Loan coming due in such Bond Year. In the event that for any reason whatsoever any amounts shall remain on deposit in the Debt Service Fund on any date subsequent to an Interest Payment Date, the Fiscal Agent shall withdraw such amounts from the Debt Service Fund and transfer such amounts to the Agency, to be used for any lawful purposes of the Agency. Section 5.03 Establishment of Redemption Fund. The Agency shall establish with the Fiscal Agent pursuant to the Supplemental Agreement providing for the issuance of a Loan, a special fund designated as the "[appropriate designation] Redemption Fund." No less than thirty (30) days preceding any date on which the Loan is to be prepaid pursuant to Section 4.01(a), the Agency shall deposit with the Fiscal Agent for deposit in the Redemption Fund an amount required to pay the principal of, and premium, if any, on the Loans to be prepaid pursuant to Section 4.01(a). All moneys in the Redemption Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of paying the principal of and premium, if any, on the Loans to be prepaid pursuant to Section 4.01(a), on the date set for such prepayment. In the event that for any reason whatsoever any amounts shall remain on deposit in the Redemption Fund on any date subsequent to payment made pursuant to Section 4.01(a), the Fiscal Agent shall withdraw such amounts from the Redemption Fund and transfer such amounts to the Agency, to be used for any lawful purposes of the Agency. 124/015610-0069 14- k 412799.08 a01/29/04 -14- Section 5.04 Establishment of Reserve Fund. (a) The Agency shall establish with the Fiscal Agent pursuant to the Supplemental Agreement providing for the issuance of a Loan a special fund designated as the "[appropriate designation] Reserve Fund". In the event the amount on deposit in the Reserve Fund at any time becomes less than the Reserve Requirement, the Fiscal Agent shall promptly notify the Agency of such fact to the extent known by the Fiscal Agent. Promptly upon receipt of any such notice, the Agency shall transfer to the Fiscal Agent an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Fund. If there shall then not be sufficient Pledged Tax Revenues to transfer an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Fund, the Agency shall be obligated to continue making transfers of Pledged Tax Revenues as Pledged Tax Revenues become available until there is an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Fund. No such transfer and deposit need be made to the Reserve Fund so long as there shall be on deposit therein a sum at least equal to the Reserve Requirement. All money in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Debt Service Fund, in the event of any deficiency at any time in the Debt Service Fund as required herein or by an applicable Modifying Agreement or Supplemental Agreement, except that so long as the Agency is not in default hereunder, any amount in the Reserve Fund in excess of the Reserve Requirement shall be withdrawn from the Reserve Requirement by the Fiscal Agent upon Written Request of Agency and returned to Agency. All amounts in the Reserve Fund on the final Interest Payment Date shall be withdrawn from the Reserve Fund and shall be transferred either (i) to the Debt Service Fund, to the extent required to make the deposits then required to be made pursuant to Section 5.02, or (ii) if the Agency shall have caused to be deposited in the Debt Service Fund an amount then sufficient, the Fiscal Agent shall upon the Written Request of Agency transfer such remaining amount to the Agency. (b) The Agency reserves the right to substitute, at any time and from time to time, one or more forms of Alternative Reserve Account Security, approved in writing by the Bond Insurer, from a financial institution, the long-term unsecured obligations of which are rated to the Bond Insurer's satisfaction, in substitution for or in place of all or any portion of the Reserve Requirement, under the terms of which the Fiscal Agent is unconditionally entitled to draw amounts when required for the purposes hereof. Upon deposit by the Agency with the Fiscal Agent of any such Alternative Reserve Account Security, the Fiscal Agent shall withdraw from the Reserve Fund and transfer to the Agency an amount equal to the principal amount of such Alternative Reserve Account Security. (c) If and to the extent that the Reserve Fund has been funded with a combination of cash (or Permitted Investments) and Alternative Reserve Account Security, all such cash (or Permitted Investments) shall be completely used before any demand is made on such Alternative Reserve Account Security, and replenishment of such Alternative Reserve Account Security shall be made prior to any replenishment of any such cash (or Permitted Investment), unless otherwise directed by Written Request of Agency. If the Reserve Fund is funded, in whole or in part, with more than one form of 124/015610-0069 -15- 2 412799.08 a01/29/04 Alternative Reserve Account Security, any draws made against such Alternative Reserve Account Security shall be made pro rata unless otherwise directed by Written Request of Agency. If it is necessary to make a draw upon an Alternative Reserve Account Security, the Fiscal Agent shall deliver to a demand for payment, in such form as required by such Alternative Reserve Account Security may require, at least three (3) days prior to the date on which the funds from such draw are needed. The Fiscal Agent shall maintain adequate records as to the amount available to be drawn at any given time under such Alternative Reserve Account Security. (d) If during any Bond Year (i) Pledged Tax Revenues remain after providing (or otherwise reserving) all payments required to be made pursuant to Section 5.02 during the entirety of such Bond Year, (ii) the amounts on deposit in the Reserve Fund and in any debt service reserve account established with respect to any Parity Debt, are equal to or exceed their respective required levels, (iii) any Alternative Reserve Account Security used to fund the Reserve Fund or any debt service reserve accounts established with respect to any Parity Debt are fully replenished and all interest on amounts advanced under the Alternative Reserve Account Security has been paid to the provided thereof, and (iv) the Agency is not default hereunder, then any such Pledged Tax Revenues may be used by the Agency for any lawful purpose, including but not limited to early redemption or purchase of the Bonds and Parity Debt, as provided in the Indenture and permitted by the Law. ARTICLE VI COVENANTS OF THE AGENCY Section 6.01 Punctual Payment. The Agency shall punctually pay or cause to be paid the principal and interest to become due in respect of all the Loans in strict conformity with the terms of the Loans and of this Agreement and applicable Supplemental Agreement, but only out of the Tax Revenues and other assets pledged for such payment as provided in the applicable Supplemental Agreement, and it shall faithfully observe and perform all of the conditions, covenants, and requirements of this Agreement and all Supplemental Agreements and of the Loans. Nothing herein contained shall prevent the Agency from making advances of its own moneys howsoever derived to any of the uses or purposes permitted by law. Section 6.02 Payment of Claims. The Agency shall pay and discharge, or cause to be paid and discharged, any and all lawful claims for labor, materials, or supplies which, if unpaid, might become a lien or charge upon the properties owned by the Agency or upon the Pledged Tax Revenues or other amounts pledged to the payment of the Loans, or any part thereof, or upon any funds in the hands of the Fiscal Agent, or which might impair the security of the Loans. The Agency shall not be required to make any such payment so long as the Agency in good faith shall contest the validity of such claims. 124/015610-0069 412799.08 a01/29/04 -16- 16 Section 6.03 Management and Operation of Premises. The Agency shall manage and operate all properties owned by the Agency and comprising any part of any Redevelopment Project in a sound and businesslike manner, and shall keep such properties insured at all times in conformity with sound business practice. Section 6.04 Protection of Security and Rights of Authority. The Agency shall preserve and protect the security of the Loans and the rights of the Authority and shall warrant and defend their rights against all claims and demands of all persons. From and after the issuance and delivery of any of the Loans by the Authority to the Agency and the receipt thereof by the Agency, the Loans shall be incontestable by either the Authority or Agency. Section 6.05 Payments of Taxes and Other Charges. The Agency shall pay and discharge, or cause to be paid and discharged, all taxes, service charges, assessments, and other governmental charges which may hereafter be lawfully imposed upon the Agency or the properties then owned by the Agency in any Redevelopment Project, or upon the revenues therefrom, when the same shall become due. Nothing herein contained shall require the Agency to make any such payment so long as the Agency in good faith shall contest the validity of said taxes, assessments, or charges. The Agency shall duly observe and conform to all valid requirements of any governmental authority relative to any Redevelopment Project or any part thereof. Section 6.06 Compliance with Law. The Agency shall comply with all applicable provisions of the Law in implementing any Redevelopment Project including, without limitation, duly noticing and holding any public hearing required by either Section 33445 or 33679 of the Law prior to application of proceeds of the Bonds to any portion of any Redevelopment Project which application is subject to either Section 33445 or 33679. Section 6.07 Books and Accounts; Financial Statements. The Agency shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Agency and the City, in which complete and correct entries will be made of all transactions relating to all of the Redevelopment Projects, the Tax Revenues, the Debt Service Fund, Redemption Fund, and Reserve Fund. Such books of record and accounts shall at all times during business hours be subject, upon prior written request, to the inspection of the Fiscal Agent and the Bondowners of not less than ten percent (10%) of the principal amount of the then -Outstanding Bonds, or their representatives authorized in writing. The Agency shall cause to be prepared and filed with the Fiscal Agent annually, within one hundred eighty (180) days after the close of each Fiscal Year, so long as there were any Outstanding Loans in such Fiscal Year, complete audited financial statements with respect to such Fiscal Year showing the Tax Revenues, all disbursements from the Tax Revenues and the 124/015610-0069 arc 412799.08 a01/29/04 -17- financial condition of the Redevelopment Projects, including the balances in all funds and accounts relating to the Redevelopment Projects, as of the end of such fiscal year which statement shall be accompanied by a certificate or opinion in writing of an Independent Certified Public Accountant. The Agency will furnish a copy of such statements, upon reasonable written request, to any Bondowner. Section 6.08 Taxation of Leased Property. Whenever any property in any of the Redevelopment Projects has been redeveloped and thereafter is leased by the Agency to any person or persons (other than the City) or whenever the Agency leases real property in any of the Redevelopment Projects to any person or persons (other than the City) for redevelopment, the property shall be assessed and taxed in the same manner as privately owned property, as required by Section 33673 of the Law. Section 6.09 Disposition of Property. The Agency shall not authorize the disposition of any land or real property in any of the Redevelopment Projects to anyone which will result in such property becoming exempt from taxation because of public ownership or use or otherwise (except property dedicated for public right-of-way and except property planned for public ownership or public use pursuant to the Redevelopment Plan in effect on the date of the applicable Supplemental Agreement) so that such disposition shall, when taken together with other such dispositions, aggregate more than ten percent (10%) of the land area in such Redevelopment Project unless such disposition is permitted as described below. If the Agency proposes to make such a disposition, it will thereupon appoint a Redevelopment Consultant to report on the effect of said proposed disposition. If the report of the Redevelopment Consultant concludes that the security of such Loan will not be materially impaired by said proposed disposition, and that taxes allocated to the Agency will not be significantly diminished by the proposed disposition, the Agency may thereafter make such disposition. If said report concludes that taxes allocated to the Agency will be significantly diminished or that such security or rights will be materially impaired by said proposed disposition, the Agency shall not authorize said disposition. Section 6.10 Maintenance of Tax Revenues. The Agency shall comply with all requirements of the Law to insure the allocation and payment to it of Tax Revenues, including without limitation, the timely filing of any necessary statements of indebtedness with appropriate officials of the State of California and/or County of Riverside, and such other public officials as may be required under the Law. The Agency shall not enter into any agreement with the County of Riverside or any other governmental unit which would have the effect of reducing the Tax Revenues available to the Agency for payment of a particular Loan. The Agency has not and shall not incur any loans, obligations or indebtedness repayable from Tax Revenues such that the total aggregate debt service on said loans, obligations or indebtedness incurred from and after the date of adoption of the Redevelopment Plan for the applicable Redevelopment Project, when added to the total aggregate debt service on such Loan and all outstanding Parity Debt with respect to, will exceed the maximum amount of Tax Revenues to be divided and allocated to the Agency pursuant to the Redevelopment Plan for the applicable Redevelopment Project. Subject to the preceding sentence, nothing in this Agreement 124/015610-0069 26 412799.08 a01/29/04 -18 is intended or shall be construed in any way to prohibit or impose any limitations on the entering into by the Agency of any such agreement, amendment or supplement which by its term is subordinate to the payment of such Loan. Section 6.11 Tax Covenants. (a) Private Business Use Limitation. The Agency shall assure that the proceeds of the Loans are not used in a manner which would cause the Bonds to become "private activity bonds" within the meaning of Section 141(a) of the Tax Code. (b) Private Loan Limitation. The Agency shall assure that no more than the lesser of five percent (5%) of the net proceeds of the Loans or $5,000,000 are used, directly or indirectly, to make or finance a loan (other than loans constituting non - purpose obligations as defined in the Tax Code or constituting any governmental tax or assessments) to persons other than state or local governmental units. (c) Federal Guarantee Prohibition. The Agency shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Loans to be "federally guaranteed" within the meaning of Section 149(b) of the Tax Code. (d) No Arbitrage. The Agency shall not take, or permit or suffer to be taken by the Fiscal Agent or otherwise, any action with respect to the proceeds of the Loans which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code. (e) Compliance with the Tax Code. The Agency covenants to take any and all action and to refrain from taking such action, which is necessary in order to comply with the Tax Code in order to maintain the exclusion from federal gross income, pursuant to Section 103 of the Tax Code, of interest on the Bonds paid by the Authority and received by the Bondowners. (f) Covenant Regarding Mortgage Subsidy Bonds. The Agency covenants that the proceeds of the Loans shall not be used directly or indirectly for mortgages on owner -occupied residences so as to cause the Bonds to be subject to provisions of Section 143 of the Tax Code. Section 6.12 Further Assurances. The Agency and Authority shall adopt, make, execute, and deliver any and all such further resolutions, instruments, and assurances as may be reasonably necessary or proper to carry out the intention of, or to facilitate the performance of, this Agreement and for the better assuring and confirming unto the Agency and Authority of the obligations, rights, and benefits provided in this Agreement. 124/015610-0069 -19- 27 � 9 412799.08 a01/29/04 ARTICLE VII THE FISCAL AGENT; INVESTMENT OF MONEYS Section 7.01 Appointment, Duties, Immunities, and Liabilities of Fiscal Agent. (a) At any time after the effectiveness of the first Supplemental Agreement, the Agency and Authority may jointly appoint a person, firm, or entity as a Fiscal Agent to carry out the duties of the Fiscal Agent under this Agreement and such Supplemental Agreement(s) specifically assigned to such Fiscal Agent. The Agency and Authority may jointly appoint different Fiscal Agents for one or more of the Supplemental Agreements. Unless and until a Fiscal Agent is appointed, the Treasurer of the Agency shall be the Fiscal Agent under this Agreement and applicable Supplemental Agreement(s) in trust for the benefit of the Authority, and in regard thereto the Agency covenants for the direct benefit of the Authority that its Treasurer shall be vested with all of the rights and powers of the Fiscal Agent hereunder and shall assume all of the responsibilities and perform all of the duties of the Fiscal Agent hereunder in trust for the benefit of the Authority. (b) The Fiscal Agent shall, prior to the occurrence of an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in this Agreement. The Fiscal Agent shall only be obligated to perform such duties as are expressly set forth herein, and no duties or obligations not expressly set forth herein shall be implied. The Fiscal Agent shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) The Agency may remove the Fiscal Agent, at any time upon thirty (30) days written notice to the Trustee, unless an Event of Default shall have occurred and then be continuing, and shall remove the Fiscal Agent (i) if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Authority (or their attorneys duly authorized in writing) or (ii) if at any time the Fiscal Agent shall cease to be eligible in accordance with subsection (f) of this Section 7.01, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Fiscal Agent or its property shall be appointed, or any public officer shall take control or charge of the Fiscal Agent or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. In each case such removal shall be accomplished by the giving of written notice of such removal by the Agency to the Fiscal Agent, whereupon in the case of the Fiscal Agent, the Agency shall appoint a successor Fiscal Agent by an instrument in writing. (d) The Fiscal Agent may at any time resign by giving written notice of such resignation to the Agency and by giving the Authority notice of such resignation by mail at their respective addresses shown on the Registration Books. Upon receiving such notice of resignation, the Agency shall promptly appoint a successor Fiscal Agent by an instrument in writing. The Fiscal Agent shall not be relieved of its duties until such successor Fiscal Agent has accepted such appointment. 124/015610-0069 412799.08 a01/29/04 -20- 2 830 (e) Any removal or resignation of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent. If no successor Fiscal Agent shall have been appointed and have accepted appointment within forty-five (45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Fiscal Agent or the Authority, at the expense of the Agency, may petition any court of competent jurisdiction for the appointment of a successor Fiscal Agent, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Fiscal Agent. Any successor Fiscal Agent appointed under this Agreement shall signify its acceptance of such appointment by executing and delivering to the Agency and to its predecessor Fiscal Agent a written acceptance thereof, and thereupon and upon receipt by the predecessor Fiscal Agent of all fees and expenses due and payable to it, such successor Fiscal Agent, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Fiscal Agent, with like effect as if originally named Fiscal Agent herein; but, nevertheless at the Written Request of the Agency or the request of the successor Fiscal Agent, such predecessor Fiscal Agent shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Fiscal Agent all the right, title and interest of such predecessor Fiscal Agent in and to any property held by it under this Agreement and shall pay over, transfer, assign and deliver to the successor Fiscal Agent any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Fiscal Agent, the Agency shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Fiscal Agent all such moneys, estates, properties-, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Fiscal Agent as provided in this subsection (e), the Agency shall mail a notice of the succession of such Fiscal Agent to the trusts hereunder to each rating agency which then has a current rating on the Loans, if any, and to the Authority. If the Agency fails to mail such notice within fifteen (15) days after acceptance of appointment by the successor Fiscal Agent, the successor Fiscal Agent shall cause such notice to be mailed at the expense of the Agency. (f) Any Fiscal Agent appointed under the provisions of this Section 7.01 in succession to the Fiscal Agent shall be a corporation organized and doing business under the laws of any state, the District of Columbia or the United States of America, authorized under such laws to exercise corporate trust powers, which shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least seventy-five million dollars ($75,000,000), and subject to supervision or examination by federal or state authority, so long as any Bonds are Outstanding. If such corporation publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this subsection (f) the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Fiscal Agent shall cease to be eligible in accordance with the provisions of this subsection (f), the Fiscal Agent shall resign immediately in the manner and with the effect specified in Section (e). 124/015610-0069 412799.08 a01/29/04 -21V 1 Section 7.02 Merger or Consolidation. Any bank or trust company into which the Fiscal Agent may be merged or converted or with which either of them may be consolidated or any bank or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank or trust company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such bank or trust company shall be eligible under subsection (f) of Section 7.01, shall be the successor to such Fiscal Agent without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. Section 7.03 Liability of Fiscal (a) The recitals of facts herein contained shall be taken as statements of the Agency, and the Fiscal Agent shall not assume responsibility for the correctness of the same, nor make any representations as to the validity or sufficiency of this Agreement nor shall incur any responsibility in respect thereof, other than as expressly stated herein. The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Fiscal Agent shall not be liable for th acts of any agents of it selected by it with due care. The Fiscal Agent may become the Owner of Loans with the same rights it would have if it were not Fiscal Agent and, to the extent permitted by law, may act as depositary for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of the Authority. (b) The: Fiscal Agent shall not be liable for any error of judgment made in good faith by its officers, agents, directors, or employees, unless it shall be proved that it was negligent in mcertaining the pertinent facts. (c) The Fiscal Agent shall not be liable with respect to any action taken or omitted to be take# by it in good faith in accordance with the direction of the Authority, method and place Iof conducting any proceeding for any remedy available to the Fiscal Agent, or exercis ng any trust or power conferred upon the Fiscal Agent under this Agreement. j (d) The Fiscal Agent shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agi eement. (e) Thc Fiscal Agent shall not be deemed to have knowledge of any Event of Default hereunder unless and until it shall have actual knowledge thereof, or shall have received written notice thereof, at its Corporate Trust Office in Los Angeles, California. Except as otherwise expressly provided herein, the Fiscal Agent shall not be bound to ascertain or inquir as to the performance or observance of any of the terms, conditions, covenants or agreements herein or of any of the documents executed in connection with the Loans, or as to the existence of an Event of Default thereunder. The Fiscal Agent shall not be responsible for the validity or effectiveness of any collateral given to or held by it. Without limiting the generality of the foregoing, the Fiscal Agent shall not be 124/015610-0069 -22- 3 T) 412799.08 a01/29/04 responsible for reviewing the contents of any financial statements furnished to the Fiscal Agent pursuant to Section 6.07 and may rely conclusively on the certificates accompanying such financial statements to establish the Agency's compliance with its financial covenants hereunder, including, without limitation, its covenants regarding ,the deposit of Tax Revenues into the Debt Service Fund and the investment and application of moneys on deposit in the Debt Service Fund (other than its covenants to transfer such moneys to the Fiscal Agent when due hereunder). Section 7.04 Right to Rely on Documents. The Fiscal Agent shall be protected in acting upon any notice, resolution, request, consent, order, certificate, requisition, report, opinion, bonds or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Fiscal Agent may consult with counsel, who may be counsel of or to the Agency, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. No provision in this Agreement shall require the Fiscal Agent to risk or expend its own funds or otherwise incur any financial liability hereunder if repayment of such funds or adequate indemnity is not assured to it. The Fiscal Agent shall be entitled to interest on any funds advanced by it at the lesser of twelve percent (12%) or the maximum rate permitted by law, per annum, with interest at such rate compounded annually. Section 7.05 Preservation and Inspection of Documents. All documents received by the Fiscal Agent under the provisions of this Agreement shall be retained in its possession and shall be subject at all reasonable times during business hours upon reasonable notice to the inspection of the Agency and the Authority, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. Section 7.06 Compensation and Indemnification. The Agency shall pay to the Fiscal Agent from time to time all compensation for all reasonable services rendered under this Agreement, and such other and further agreement(s), if any, pursuant to which the Fiscal Agent is appointed in accordance with Section 7.01(a), and also all reasonable expenses, charges, legal and consulting fees and other disbursements and those of its attorneys, agents and employees, incurred in and about the performance of its powers and duties under this Agreement. The Agency further covenants and agrees to indemnify and save the Fiscal Agent and its officers, directors, agents and employees harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise and performance of its powers and duties hereunder, including the costs and expenses of defending against any claim of liability, but excluding any and all losses, expenses and liabilities which are due to the negligence or willful misconduct of the Fiscal Agent, its officers, directors, agents or employees. The obligations of the Agency under this paragraph shall survive resignation or removal of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of this Agreement. 124/015610-0069 _23_ 412799.08 a01/29/04 �3 Section 7.07 Deposit and Investment of Moneys in Funds. Moneys in the Debt Service Fund, and the Redemption Fund shall be invested by the Fiscal Agent in Permitted Investments as specified by the Treasurer of the Agency and shall be promptly confirmed in writing by the Agency with the Fiscal Agent within at least one (1) Business Day. In the absence of any such direction provided by the Treasurer of the Agency, the Fiscal Agent shall invest any such moneys in Permitted Investments described in clause (d) of the definition thereof which by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. Whenever in this Agreement any moneys are required to be transferred by the Agency to the Fiscal Agent, such transfer may be accomplished by transferring a like amount of Permitted Investments which by their terms mature prior to the date on which such moneys are required to be paid out hereunder. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder (other than with respect to funds held by the Agency) shall be retained in the respective funds and accounts to be used for the purposes thereof. For purposes of acquiring any investments hereunder, the Fiscal Agent may in its discretion commingle funds held by it hereunder. The Fiscal Agent may act as principal or agent in the acquisition of any investment. The Fiscal Agent shall incur no liability for losses arising from any investments made pursuant to this Section 7.07. For purposes of determining the amount on deposit in any fund or account held hereunder, all Permitted Investments credited to such fund or account shall be valued by the Fiscal Agent at the lower of cost or the market value (including accrued interest and brokerage commissions, if any). The Fiscal Agent may utilize such computerized securities pricing services as are available to it in obtaining such valuations. Section 7.08 Accounting Records and Financial Statements. The Fiscal Agent shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of the Loans and all funds and accounts established and held by the Fiscal Agent pursuant to this Agreement and any Supplemental Agreements. Such books of record and account shall be available for inspection by the Agency at reasonable hours, upon reasonable notice and under reasonable circumstances. The Fiscal Agent shall furnish to the Agency, at least monthly, an accounting of all transactions relating to the proceeds of the Loans and all funds and accounts established pursuant to this Agreement and any Supplemental Agreements, which may be in the form of the Fiscal Agent's regular monthly statement. Section 7.09 Appointment of Co -Fiscal Agent or Agents. It is the purpose of this Agreement that there shall be no violation of any law of any jurisdiction (including particularly the laws of the State) denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement, and in particular, in case of the 124/015610-0069 3 Z 412799.08 a01/29/04 -24- V enforcement thereof or default thereunder, or in case the Fiscal Agent deems that by reason of any present or future law of any jurisdiction it may not exercise or it finds it impracticable to exercise any of the powers, rights or remedies herein granted to the Fiscal Agent or hold title to the properties, in trust, as herein granted, or take any action which may be desirable or necessary in connection therewith, it may be necessary that the Agency appoint an additional individual or institution as a separate or co -trustee. The following provisions of this Section 7.09 are adopted to these ends. In the event that the Agency appoints an additional individual or institution as a separate or co -trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest, duty, obligation and lien expressed or intended by this Agreement to be exercised by, or vested in or conveyed to the Fiscal Agent with respect thereto shall be exercisable by and vest in such separate or co -trustee to exercise such powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate or co -trustee shall run to and be enforceable by either of them. Should any instrument in writing from the Agency be required by the separate or co - trustee so appointed by the Agency for more fully and certainly vesting in and confirming to him or it, such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Agency. In case any separate or co -trustee or a successor to either shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate or co -trustee, so far as permitted by law, shall vest in and be exercised by the Fiscal Agent until the appointment of a new Fiscal Agent or successor to such separate or co -trustee. ARTICLE VIII MODIFICATION OR AMENDMENT OF THE AGREEMENT Section 8.01 Amendments Permitted. This Agreement and any Supplemental Agreement and the rights and obligations of the Agency and of the Authority and of the Fiscal Agent may be modified or amended at any time by an agreement or agreements supplemental hereto (hereinafter, a "Modifying Agreement") and pursuant to the affirmative vote at a meeting of Bondowners or with the written consent without a meeting of the Bondowners holding a majority in aggregate principal amount of all then Outstanding Bonds. No such Modifying Agreement shall (1) extend the maturity of any Loan or reduce the amount of principal thereof, or change the interest rate thereon, or reduce any premium payable upon the redemption thereof, otherwise alter or impair the obligation of the Agency to pay the principal thereof, or interest thereon, or any premium payable on the redemption thereof, at the time and place and at the rate and in the currency provided therein, or (2) permit the creation by the Agency of any mortgage pledge or lien upon the Tax Revenues superior to the pledge and lien created for the benefit of the Loans (except as otherwise provided in this Agreement and the applicable Supplemental Agreement) or (3) reduce the percentage of Bonds required for the affirmative vote or written consent to an amendment or modification) or (4) modify any of the rights or obligations of the Fiscal Agent without its written assent thereto. 33 124/015610-0069 412799.08 a01/29/04 -25- '? 5 V This Agreement and any Supplemental Agreement and the rights and obligations of the Agency, the Fiscal Agent, the Authority and of the Bondowners may also be modified or amended by a Modifying Agreement at any time without the consent of any Bondowners of any applicable Series of Bonds, but only to the extent permitted by law and only for any one or more of the following purposes. (a) to add to the covenants and agreements of the Agency in this Agreement and in any Supplemental Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the Agency; or (b) to make modifications not adversely affecting any Outstanding Loan in any material respect; or (c) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Agreement or in any Supplemental Agreement, or in regard to questions arising under this Agreement, as the Agency and the Fiscal Agent may deem necessary or desirable and not inconsistent with this Agreement, and which shall not materially adversely affect the rights of the Authority and the Bondowners or any applicable series of Bonds; or (d) to make such additions, deletions or modifications as may be necessary to assure compliance with Section 148 of the Code relating to required rebate of Excess Investment Earnings to the United States or otherwise as may be necessary to assure exclusion from gross income for federal tax purposes of interest on the Bonds or to conform with the Regulations; or (e) to provide for the issuance of any Parity Debt, and to provide the terms and conditions under which such Parity Debt may be issued, subject to and in accordance with the provisions of the applicable Supplemental Agreement. Section 8.02 .Procedure for Amendment with Written Consent of Bondowners. The Agency may at any time adopt a Modifying Agreement amending the provisions of one or more Loans or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01, to take effect when and as provided in this Section. A copy of such Modifying Agreement, together with a request to Bondowners for their consent thereto, if such consent is required, shall be mailed by the Agency to each registered Bondowner of Outstanding Bonds, but failure to mail copies of such Modifying Agreement and request shall not affect the validity of the Modifying Agreement when assented to as in this Section provided. Such Modifying Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Bondowners of a majority in aggregate principal amount of the then -Outstanding Bonds (if such consent is required) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the Outstanding Bonds for which such consent is given. Any such consent shall be binding upon the Bondowner giving such consent and on any subsequent Bondowner (whether or not such subsequent Bondowner has notice thereof) unless such consent 124/015610-0069 412799.08 a01/29/04 -26-` is revoked in writing by the Bondowner giving such consent or a subsequent Bondowner by filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this Section provided for has been mailed. Any revocation received by the Fiscal Agent after such notice has been filed shall be of no force or effect. After the Bondowners of the required percentage of Outstanding Bonds shall have filed their consents to the Modifying Agreement (if such consent is required), the Agency shall mail a notice to the affected Bondowners in the manner hereinbefore provided in this Section for the mailing of the Modifying Agreement, stating in substance that the Modifying Agreement has been consented to by the Bondowners of the required percentage of the Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Modifying Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record consisting of the papers required by this Section to be filed with the Fiscal Agent shall be proof of the matters therein stated until the contrary is proved. The Modifying Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Modifying Agreement shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article) upon the Agency and the Bondowners of all then -Outstanding Bonds at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty (60) day period. Section 8.03 Effect of Supplemental Agreements and Modifying Agreements. From and after the time any Supplemental Agreement becomes effective pursuant to its terms, and any Modifying Agreement becomes effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations under this Agreement of the Agency, the Authority and all Bondowners of the then -Outstanding Bonds shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental Agreement and any such Modifying Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes. The Fiscal Agent shall be furnished an opinion of counsel on which it may conclusively rely that the conditions precedent to the execution of a Supplemental Agreement or Modifying Agreement have been complied with. ARTICLE IX EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS Section 9.01 Events of Default. The following events shall constitute Events of Default with respect to each Loan individually: (a) if default shall be made in the due and punctual payment of the principal of or interest or redemption premium (if any) on any Loan when and as the same shall 124/015610-0069 412799.08 a01/29/04 -27- become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) if default shall be made by the Agency in the observance of any of the covenants, agreements or conditions on its part in this Agreement or in the Loans contained, other than a default described in the preceding clause (a) , and such default shall have continued for a period of sixty (60) days following the receipt by the Agency of written notice from the Fiscal Agent or the Bondowners of not less than 25% in aggregate principal amount of the Bonds Outstanding of the occurrence of such default; provided, however, that if in the reasonable opinion of the Agency the failure stated in such notice can be corrected, but not within such sixty (60)-day period, the Fiscal Agent and such Bondowners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the Agency within such sixty (60)-day period and diligently pursued until such failure is corrected; or (c) if the Agency shall file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the Agency, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Agency or of the whole or any substantial part of its property; or Unless specifically stated in the Supplemental Agreement relating to such Loan, an Event of Default with respect to one series of the Bonds shall not constitute an Event of Default with respect to any other Loan. If an Event of Default has occurred and is continuing, the Fiscal Agent, subject to the provisions of this Agreement, shall have the right, (1) by mandamus, suit, action, or proceeding, to compel the Agency and its members, officers, agents or employees to perform each and every term, provision and covenant contained in the Loan Agreement and in the Loans, and to require the carrying out of any or all such covenants and agreements of the Agency and the fulfillment of all duties imposed upon it by the Redevelopment Law; (2) by suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the violation of any of the Authority's rights; or (3) upon the happening of any event of default, by suit, action or proceeding in any court of competent jurisdiction, to require the Agency and its members and employees to account as if it and they were the trustees of an express trust. Immediately upon obtaining actual knowledge of the occurrence of an Event of Default, the Fiscal Agent shall give notice of such Event of Default to the Agency by telephone 124/015610-0069 412799.08 a01/29/04 -28- 36 confirmed in writing. With respect to any Event of Default described in clause (a) or (c) above the Fiscal Agent shall, and with respect to any Event of Default described in clause (b) above the Fiscal Agent in its sole discretion may, also give such notice to the Authority. Section 9.02 Application of Funds Upon Default. All of the Tax Revenues pledged to the applicable Loan and all sums in the funds and accounts established and held by the Fiscal Agent hereunder for the payment of such Loan or under the applicable Supplemental Agreement upon the date of the occurrence of an Event of Default as provided in Section 9.01, and all sums thereafter received by the Fiscal Agent hereunder, for the payment of such Loan or under the applicable Supplemental Agreement shall be applied by the Fiscal Agent in the following order: First, to the payment of the fees, costs and expenses of the Fiscal Agent for the performance of its duties hereunder, including reasonable compensation to its or their agents, attorneys and counsel; and Second, to the payment of the whole amount then owing and unpaid upon the Loan for principal and interest, with interest on the overdue principal and installments of interest at the rates of interest then borne by the Loan of such Series (to the extent that such interest on overdue installments of principal and interest shall have been collected), and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Loan, then to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, or any Loan over any other Loan, ratably to the aggregate of such principal and interest. Section 9.03 Non -waiver. Nothing in this Article IX or in any other provision of this Agreement or the applicable Supplemental Agreement, shall affect or impair the obligation of the Agency, which is absolute and unconditional, to pay from the pledged Tax Revenues and other amounts pledged hereunder, the principal of and interest and premium (if any) on the Loans on the respective Interest Payment Dates, as therein provided, or affect or impair the right of action, which is also absolute and unconditional, of the Authority to institute suit to enforce such payment by virtue of the contract embodied in the Loans. A waiver of any default by the Authority shall not affect any subsequent default or impair any rights or remedies on the subsequent default. No delay or omission of the Authority to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Authority by the Law or by this Article IX may be enforced and exercised from time to time and as often as shall be deemed expedient by the Authority. If a suit, action or proceeding to enforce any right or exercise any remedy shall be abandoned or determined adversely to the Authority, the Agency and the Authority shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. �9 124/015610-0069 37 412799.08 a01/29/04 -29- Section 9.04 Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Law or any other law. ARTICLE X MISCELLANEOUS Section 10.01 Benefits of Agreement Limited to Parties. Nothing in this Agreement, expressed or implied, is intended to give to any person, other than the Agency, the Fiscal Agent, the Authority and the Bondowners, any right, remedy, or claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of the Agency shall be for the sole and exclusive benefit of the Bondowners, the Authority, and the Fiscal Agent. Section 10.02 Successor is Deemed Included in All References to Predecessor. Whenever in this Agreement or any Supplemental Agreement either the Agency or the Fiscal Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof and all the covenants and agreements in this Agreement contained by or on behalf of the Agency or the Fiscal Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 10.03 Discharge of Agreement. Any Loan, or any portion thereof, may be paid by the Agency in any one or more of the following ways: (1) by well and truly paying or causing to be paid the principal of and interest and premium, if any, on the Loan or any portion thereof, as and when the same become due and payable; (2) by irrevocably depositing with the Fiscal Agent, in trust, at or before maturity money which, together with the amounts then on deposit in the funds and accounts established pursuant to this Agreement with respect to such Loan and pursuant to the applicable Supplemental Agreement is fully sufficient to pay the prepayment amount, as defined below, with respect to the Loan or any portion thereof; or (3) by irrevocably depositing with the Fiscal Agent, in trust, (pursuant to an escrow agreement) non -callable Federal Securities in such amount as an Independent Financial Consultant shall certify to the Fiscal Agent, based upon a certificate of an Independent Certified Public Accountant, will together with the interest to accrue thereon and moneys then on deposit in the funds and accounts UK 124/015610-0069 -3 Q- 412799.08 a01/29/04 established pursuant to this Agreement with respect to such Loan and pursuant to the applicable Supplemental Agreement, be fully sufficient to pay the Prepayment Amount then the pledge of the Tax Revenues and other funds provided for in this Agreement and the applicable Supplemental Agreement and all other obligations of the Agency under this Agreement and the Supplemental Agreement with respect to the Loans or any portion thereof shall cease and terminate, except only the obligation of the Agency to pay or cause to be paid to the Authority and paid all sums due thereon, and thereafter Tax Revenues shall not be payable to the Fiscal Agent. Notice of such election shall be filed with the Fiscal Agent. The Agency has the right at any time, to prepay all or any part of any of the Agency Loans, and the Authority and the Trustee shall accept such prepayments when the same are tendered by the Agency. The Agency may prepay an Agency Loan by depositing with the Fiscal Agent for deposit in the Redemption Funds for the Loans, the "Prepayment Amount," which is calculated as follows: (i) Divide the total remaining payments of principal and interest on the Loan to be prepaid by the total of all remaining principal and interest on all Loans and multiply the result by the principal amount of any Outstanding Bonds. Round the result up to the nearest $5,000. (ii) Select the Bonds to be redeemed in a principal amount equal to that determined in (i) above. Such Bonds shall be selected by the Authority among maturities such that the Revenues to be received by the Authority following the prepayment of such Loan will be sufficient to pay Debt Service on the Bonds to remain Outstanding following such redemption. (iii) Multiply the amount determined in (ii) by the redemption premium, if any, on the Bonds and add to such amount (a) the amount determined by the Treasurer to be the difference between the amount needed to pay Debt Service on the Bonds to be redeemed and the amount to be derived from the reinvestment of the prepaid Loan pending the redemption of such Bonds (subject to any limitations imposed by the Tax Code on such earnings) and (b) the premium, if any, determined by the Authority. Add this amount to the amount determined in (i) above. (iv) The administrative fees of the Authority as are determined by the Treasurer, which include the costs of the computation of the Prepayment Amount, the costs of redeeming the Bonds, the costs of any fiduciary, and the costs of recording or publishing any notices of redemption. Add these costs to the total of the amounts determined in (ii) and (iii) above. (v) The Reserve Account credit, if any, is computed by deducting the Reserve Requirement for the Bonds to remain Outstanding following such redemption from the current Reserve Requirement. Deduct the result from the total of the amounts determined in (ii), (iii) and (iv) above. This represents the Prepayment Amount. 124/015610-0069 412799.08 a01/29/04 -31- 41 39 The Prepayment Amount will be deposited in the Redemption Funds and used to redeem Bonds in accordance with a Certificate of the Agency and the Authority; provided that the administrative fees of the Authority determined in (iv) above will be retained by the Authority. If the Agency shall have taken the action specified above, the pledge of the Tax Revenues and other funds provided for in this Agreement and the applicable Supplemental Agreement and other obligations of the Agency under this Agreement and the applicable Supplemental Agreement with respect to such Loan Outstanding shall cease and terminate. Notwithstanding the foregoing, the obligation of the Agency to pay or cause to be paid to all amounts owing to the Fiscal Agent pursuant to this Agreement shall continue in any event. Upon compliance by the Agency with the foregoing with respect to all Outstanding Loans, any funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent, which are not required for the purposes of the preceding paragraph, shall be paid over to the Agency for deposit in the respective Special Fund and any of the respective Tax Revenues thereafter received by the Agency shall not be remitted to the Fiscal Agent but shall be deposited by the Agency to be used for the purposes specified in the Redevelopment Law. Upon the discharge of all Loans, any funds thereafter held by the Fiscal Agent with respect to such Loans which are not required for said purpose or for any remaining fees or expenses of the Fiscal Agent shall be paid over to the Agency. Section 10.04 Waiver of Personal Liability. No member, officer, agent or employee of the Agency shall be individually or personally liable for the payment of the principal of or interest on the Loans; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duly provided by law. Section 10.05 Notices and Demands on Agency. Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Authority or the Agency on the other, or by the Fiscal Agent on the Authority and/or Agency, shall be delivered by (i) personal delivery, (ii) reputable same -day or overnight courier service that provides a receipt showing date and time of delivery, (iii) facsimile transmission provided the sender receives confirmation of receipt; or (iv) by United States mail, postage prepaid, certified, and addressed, as follows: If to the Agency: La Quinta Redevelopment Agency 78-495 Calle Tampico La Quinta, California 92253 Attn: Executive Director Telephone: (760) 777-7100 Facsimile: (760) 777-7101 124/015610-0069 412799.08 a01/29/04 —32- 4'� 2 If to the Authority: La Quinta Financing Authority 78-495 Calle Tampico La Quinta, California 92253 Attn: Executive Director Telephone: (760) 777-7100 Facsimile: (760) 777-7101 Notices that are personally delivered or delivered by courier or delivered by facsimile transmission shall be shall be effective upon receipt (provided that any such delivery received after 5:00 p.m. on a Business Day or received on a non -Business Day shall be deemed delivered at 9:00 a.m. on the next Business Day. Mailed notices shall be effective at Noon on the third Business Day following deposit with the United States Postal Service. The parties hereto may change their address for receipt of notices by giving notice to the other party hereto and to the Fiscal Agent by delivery of a notice complying with this Section. Section 10.06 Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Agreement shall for any reason be held illegal or unenforceable such holding shall not affect the validity of the remaining portions of this Agreement. The Agency and Authority each hereby declare that it would have adopted this Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance and receipt of the Loans pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be held illegal, invalid or unenforceable. If, by reason of the judgment of any court, the Fiscal Agent is rendered unable to perform its duties hereunder, all such duties and all of the rights and powers of the Fiscal Agent hereunder shall be assumed by and vest in the Treasurer of the Agency in trust for the benefit of the Authority. The Agency covenants for the direct benefit of the Authority that its Treasurer in such case shall be vested with all of the rights and powers of the Fiscal Agent hereunder and shall assume all of the responsibilities and perform all of the duties of the Fiscal Agent hereunder in trust for the benefit of the Authority. Section 10.07 Effective Date of Agreement. This Agreement shall take effect from and after the date of its passage and adoption. Section 10.08 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflicts of law principles. Section 10.09 Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. [end —signature page follows] 43 124/015610-0069 4 1 412799.08 a01/29/04 -33- IN WITNESS WHEREOF, the Agency and Authority have caused this Agreement to be executed in their respective name and attested hereto, as of the Effective Date. LA QUINTA REDEVELOPMENT AGENCY Terry Henderson, Chairperson ATTEST: June S. Greek, Secretary APPROVED AS TO FORM: M. Katherine Jenson Agency Counsel LA QUINTA FINANCING AUTHORITY Un ATTEST: June S. Greek, Secretary APPROVED AS TO FORM: M. Katherine Jenson Authority Counsel Donald Adolph, Chairperson 42 124/015610-0069 A 412799.08 a01/29/04 4 EXHIBIT "A" LA QUINTA FINANCING AUTHORITY LA QUINTA REDEVELOPMENT PROJECT AREAS NOS. 1 & 2 2004 HOUSING PROJECT LOANS SOURCES & USES, DEBT SERVICE SCHEDULE, & PRICING SUMMARY [SEE ATTACHED PAGES] 124/015610-0069 4tS 412799.08 a01/29/04 45 La Quinta Financing Authority La Quinta Redevelopment Project Area Nos. 1 & 2 2004 Housing Projects Loan SOURCES & USES Dated 06/01/2004 Delivered 06/01/2004 SOURCES OF FUNDS Par Amount of Bonds...................................................................... $110,000,000.00 TOTALSOURCES.......................................................................... $110,000,000.00 USES OF FUNDS NewMoney...................................................................................... 75,061,011.07 Deposit to Project Construction Fund .............................................. 24,000,000.00 Deposit to Debt Service Reserve Fund(DSRF).............................. 8,164,200.00 Gross Bond Insurance Premium (70.0 bp) ..................................... 1,599,788.93 Total Underwriter's Discount(0.750%)........................................... 825,000.00 Costs of Issuance............................................................................ 350,000.00 TOTAL USES.................................................................................. $110,000,000.00 Wedbush Morgan Securities Public Finance-DPM )4 Housing Projects Loan- SINGLE PURPOSE 1/ 812004 2:13 PM 46 44 Preliminary La Quinta Financing Authority La Quinta Redevelopment Project Area Nos. 1 & 2 2004 Housing Projects Loan DEBT SERVICE SCHEDULE Date Principal Coupon Interest Total P+I 9/01 /2004 - - 9/01/2005 270,000.00 5.250% 7,889,312.50 8,159,312.50 9/01/2006 1,865,000.00 5.250% 6,297,275.00 8,162,275.00 9/01/2007 1,960,000.00 5.250% 6,199,362.50 8,159,362.50 9/01/2008 2,065,000.00 5.250% 6,096,462.50 8,161,462.50 9/01/2009 2,175,000.00 5.250% 5,988,050.00 8,163,050.00 9/01/2010 2,290,000.00 5.250% 5,873,862.50 8,163,862.50 9/01/2011 2,410,000.00 5.250% 5,753,637.50 8,163,637.50 9/01/2012 2,535,000.00 5.250% 5,627,112.50 8,162,112.50 9/01/2013 2,670,000.00 5.500% 5,494,025.00 8,164,025.00 9/01/2014 2,815,000.00 5.500% 5,347,175.00 8,162,175.00 9/01/2015 2,970,000.00 5.500% 5,192,350.00 8,162,350.00 9/01/2016 3,135,000.00 5.500% 5,029,000.00 8,164,000.00 9/01/2017 3,305,000.00 5.500% 4,856,575.00 8,161,575.00 9/01/2018 3,485,000.00 5.500% 4,674,800.00 8,159,800.00 9/01/2019 3,680,000.00 5.500% 4,483,125.00 8,163,125.00 9/01/2020 3,880,000.00 5.500% 4,280,725.00 8,160,725.00 9/01/2021 4,095,000.00 5.500% 4,067,325.00 8,162,325.00 9/01/2022 4,320,000.00 5.500% 3,842,100.00 8,162,100.00 9/01/2023 4,555,000.00 6.000% 3,604,500.00 8,158,500.00 9/01/2024 4,830,000.00 6.000% 3,331,200.00 8,161,200.00 9/01 /2025 5,120,000.00 6.000% 3,041,400.00 8,161,400.00 9/01/2026 5,430,000.00 6.000% 2,734,200.00 8,164,200.00 9/01/2027 5,755,000.00 6.000% 2,408,400.00 8,163,400.00 9/01/2028 6,100,000.00 6.000% 2,063,100.00 8,163,100.00 9/01/2029 6,465,000.00 6.000% 1,697,100.00 8,162,100.00 9/01/2030 6,855,000.00 6.000% 1,309,200.00 8,164,200.00 9/01/2031 7,265,000.00 6.000% 897,900.00 8,162,900.00 9/01/2032 7,700,000.00 6.000% 462,000.00 8,162,000.00 Total 110,000,000.00 - 118,541,275.00 228,541,275.00 YIELD STATISTICS BondYear Dollars................................................................................................................ $2,026,785.00 AverageLife......................................................................................................................... 18.425 Years AverageCoupon.................................................................................................................. 5.8487346% Net Interest Cost(NIC)........................................................................................................ 5.8894394% TrueInterest Cost (TIC)....................................................................................................... 5.8837249% Bond Yield for Arbitrage Purposes....................................................................................... 5.9508705% All Inclusive Cost(AIC)........................................................................................................ 6.0541173% IRS FORM 8038 NetInterest Cost.................................................................................................................. 5.8487346% Weighted Average Maturity.................................................................................................. 18.425 Years Wedbush Morgan Securities File = LAQUNITA 2004 WORKFILE. SF-2004 Housing Projects Loan- SINGLE PURPOSE Public Finance-DPM 1/ 8/2004 2:13 PM 45 47 Preliminary La Quinta Financing Authority La Quinta Redevelopment Project Area Nos. 1 & 2 2004 Housing Projects Loan PRICING SUMMARY Maturity Type of Bond Coupon Yield Maturity Value Price Dollar Price 9/01/2012 Term 1 Coupon 5.250% 5.249% 15,570,000.00 100.000% 15,570,000.00 9/01/2022 Term 2 Coupon 5.500% 5.499% 34,355,000.00 100.000% 34,355,000.00 9/01/2032 Term 3 Coupon 6.000% 5.999% 60,075,000.00 100.000% 60,075,000.00 Total - - 110,000,000.00 - 110,000,000.00 BID INFORMATION Par Amount of Bonds ................................................... $110,000,000.00 Gross Production......................................................... $110,000,000.00 Total Underwriter's Discount (0.750%)....................... $(825,000.00) Bid(99.250%).............................................................. 109,175,000.00 Total Purchase Price ................................................... $109,175,000.00 Bond Year Dollars........................................................ $2,026,785.00 Average Life................................................................. 18.425 Years Average Coupon.......................................................... 5.8487346% Net interest Cost(NIC)................................................ 5.8894394% True Interest Cost (TIC) ............................................... 5.8837249% Wedbush Morgan Securities File = LAQUNITA 2004 WORKFILE.SF-2004 Housing Projects Loan- SINGLE PURPOSE Public Finance-DPM 1/ 8/2004 2:13 PM 46 4