exhibit b fiscal agent agreement

8/13/2019 Exhibit B Fiscal Agent Agreement

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FISCAL AGENT AGREEMENT

Between

CITY OF INDIO COMMUNITY FACILITIES DISTRICT NO. 2004-3 TERRA LAGO)and

UNION BANK OF CALIFORNIA, N.A.,as Fiscal Agent

Dated as of September 1, 2005

Relating to26,330,000

CITY OF INDIO COMMUNITY FACILITIES DISTRICT NO. 2004-3TERRA LAGO) SPECIAL TAX BONDS, SERIES 2005

IMPROVEMENT AREA NO. 1)

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PageT BLE OF CONTENTS

continued)

ARTICLE I EFINITIONSSection 1.1. efinitions

ARTICLE II ENERAL AUTHORIZATION AND BOND TERMSSection 2.1. mount, Issuance, Purpose and Nature of Bonds 0Section 2.2. ype and Nature of BondsSection 2.3. quality of Bonds and Pledge of Net Taxes 1Section 2.4. escription of Bonds; Interest Rates 1Section 2.5. lace and Form of Payment 2Section 2.6. orm of Bonds 3Section 2.7. xecution and Authentication 3Section 2.8. ond Register 13Section 2.9. egistration of Exchange or Transfer 4Section 2.10. utilated, Lost, Destroyed or Stolen Bonds 4Section 2.11. alidity of Bonds 4Section 2.12. ook-Entry System 4Section 2.13. epresentation Letter 5Section 2.14. ransfers Outside Book-Entry System 5Section 2.15. ayments to the Nominee 6Section 2.16. nitial Depository and Nominee 6Section 2.17. o Parity Obligations 16

ARTICLE III CREATION OF FUNDS AND APPLICATION OF SPECIAL

Section 3.5.Section 3.6.Section 3.7.Section 3.8.Section 3.9.Section 3.10.Section 3.11.

Section 4.1.Section 4.2.Section 4.3.Section 4.4.Section 4.5.

TAXESSection 3.1.Section 3.2.Section 3.3.Section 3.4.

16Creation of Funds Application of Proceeds 6Deposits to and Disbursements from Special Tax Fund 7Administrative Expense Account of the Special Tax Fund 7Interest Account and Principal Account of the Special TaxFund 7Redemption Account of the Special Tax Fund 8[Reserved.] 9Reserve Account of the Special Tax Fund 9Surplus Fund 1Acquisition and Construction Fund 2Special Escrow Fund 2Investments

455

Selection of Bonds for Redemption 9Notice of Redemption 9Partial Redemption of BondsEffect of Notice and Availability of Redemption Money 0

ARTICLE IV REDEMPTION OF BONDS AND PARITY BONDSRedemption of Bonds

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T BLE OF CONTENTScontinued)

PageARTICLE V COVENANTS AND WARRANTY 0

Section 5 1 arranty 0Section 5 2 ovenants 0ARTICLE VI AMENDMENTS TO FISCAL AGENT AGREEMENT 5

Section 6 1 upplemental Fiscal gent greements or Orders NotRequiring B ondowner Consent 5Section 6.2. upplemental Fiscal Agent Agreements or Orders Requiring

Bondowner Consent 6Section 6.3. otation of Bonds; Delivery of Amended Bonds 7

ARTICLE VII FISCAL AGENT 7Section 7.1. iscal Agent 7Section 7.2. emoval of Fiscal Agent 8Section 7.3. esignation of Fiscal Agent 8Section 7.4. ompen sation and Liability of Fiscal Agent 8Section 7.5. erger or Consolidation 9

ARTICLE VIII EVENTS OF DEFAULT; REMEDIES 0Section 8.1. vents of Default 0Section 8.2. emedies of Owners 0

ARTICLE IX DEFEASANCE 1Section 9.1. efeasance 1

ARTICLE X MISCELLANEOUS 4242434344444444444444

Section 10.1.Section 10.2.Section 10.3.Section 10.4.Section 10.5.Section 10.6.Section 10.7.Section 10.8.Section 10.9.Section 10.10

Cancellation of BondsExecution of Documents and Proof of OwnershipUnclaimed MoneysProvisions Constitute ContractFuture ContractsFurther AssurancesSeverabilityNoticesGeneral Authorization

. xecution in Counterparts

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FISCAL AGENT AGREEMENT

THIS FISCAL AGENT AGREEMENT, dated as of September 1, 2005, between the City ofIndio Community Facilities District No. 2004-3 (Terra Lago) and Union Bank of California, N.A., anational banking association, as fiscal agent (the Fiscal Agent ) governs the terms of the City of IndioCommunity Facilities District No. 2004-3 (Terra Lago), Special Tax Bonds, Series 2005 (ImprovementArea No. 1) issued in accordance herewith from time to time.

RECITALS

WHEREAS, the City Council of the City of Indio, located in Riverside County, California(hereinafter sometimes referred to as the legislative body of the District ), has heretofore undertakenproceedings and declared the necessity to issue bonds on behalf of the City of Indio Community FacilitiesDistrict No. 2004-3 (Terra Lago) (the District ) pursuant to the terms and provisions of the Mello-RoosCommunity Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of theGovernment Code of the State of California (the Act ); and

WHEREAS, the owners of the parcels within the District has approved the levy of a special taxand the issuance of bonds by the District and the District has authorized the issuance of bonds in one ormore series, pursuant to the Act, in an aggregate principal amount not to exceed $30,000,000; and

WHEREAS, the legislative body of the District intends to accomplish the financing of theacquisition of certain public infrastructure facilities and capital fees (collectively, the Facilities ) throughthe issuance of bonds in an aggregate principal amount of $26,330,000 designated as the City of IndioCommunity Facilities District No. 2004-3 (Terra Lago) Special Tax Bonds, Series 2005 (ImprovementArea No. 1) (the Bonds ); and

WHEREAS, all requirements of the Act for the issuance of the Bonds have been satisfied;NOW, THEREFORE, in order to establish the terms and conditions upon and subject to whichthe Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained

herein and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuableconsideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree,for the benefit of the Owners of the Bonds as follows:

RTICLE I

DEFINITIONSSection 1.1. efinitions Unless the context requires, the following terms shall have the

following meanings:Acquisition and Construction Fund means the fund by such name created and established

pursuant to Section 3.1 hereof.Act means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 t

seq of the California Government Code.Administrative Expense Account means the account by such name in the Special Tax Fund

created and established pursuant to Section 3.1 hereof.

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Administrative Expense Requirement means for any Fiscal Year, an amount necessary to payAdministrative Expenses.

Administrative Expenses means the administrative costs with respect to the calculation andcollection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees andexpenses of the Fiscal Agent, any fees for credit enhancement for the Bonds which are not otherwise paidas Costs of Issuance, any costs related to the District's compliance with State and federal laws requiringcontinuing disclosure of information concerning the Bonds and the District, and any other costs otherwiseincurred by the City staff on behalf of the District in order to carry out the purposes of the District as setforth in the Resolution of Formation and any obligation of the District hereunder.

Annual Debt Service means the principal amount of any Outstanding Bonds payable in a BondYear either at maturity or pursuant to a Sinking Fund Payment and any interest payable on anyOutstanding Bonds in such Bond Year, if the Bonds are retired as scheduled.

Alternate Reserve Account Security means one or more surety bonds, bond insurance policies,or other form of guaranty from a municipal bond insurer for the benefit of the Fiscal Agent meeting therequirements therefor in Section 3.7 in substitution for or in place of all or any portion of the ReserveRequirement.

Authorized Investments means any of the following which at the time of investment are legalinvestments under the laws of the State for the moneys proposed to be invested therein:

(1) Direct obligations of the United States of America (including obligations issued or heldin book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) orobligations the principal of and interest on which are unconditionally guaranteed by the United States ofAmerica ( Direct Obligations ).

(2) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by anyof the following federal agencies and provided such obligations are backed by the full faith and credit ofthe United States of America (stripped securities are only permitted if they have been stripped by theagency itself):

U.S. Export-Import Bank ( Eximbank )Direct obligations or fully guaranteed certificates of beneficial ownership

Farmers Home Administration ( FmHA )Certificates of beneficial ownership

Federal Financing BankFederal Housing Administration Debentures ( FHA )General Services Administration

Participation certificatesGovernment National Mortgage Association ( GNMA or Ginnie Mae )

GNMA-guaranteed mortgage-backed bonds

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GNMA-guaranteed pass-through obligationsU.S. Maritime Administration

Guaranteed Title XI financingU.S. Department of Housing and Urban Development (HUD)

Project NotesLocal Authority BondsNew Communities Debentures - U.S. government guaranteed debenturesU.S. Public Housing Notes and Bonds - U.S. government guaranteedpublic housing notes and bonds

(3) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by anyof the following non-full faith and credit U.S. government agencies (stripped securities are only permittedif they have been stripped by the agency itself:Federal Home Loan Bank System

Senior debt obligationsFederal Home Loan Mortgage Corporation ( FHLMC or Freddie Mac )

Participation certificatesSenior debt obligations

Federal National Mortgage Association ( FNMA or Fannie Mae )Mortgage-backed securities and senior debt obligations

Student Loan Marketing Association ( SLMA or Sallie Mae )Senior debt obligations

Resolution Funding Corp. ( REFCORP ) obligationsFarm Credit System CM. - Consolidated system-wide bonds and notes

(4) Money market funds registered under the Federal Investment Company Act of 1940,whose shares are registered under the Securities Act of 1933, and having a rating by Standard & Poor's ofAAAm-G, AAAm or AAm, and, if rated by Moody's, rated Aaa, Aal or Aa2 (including

those of the Fiscal Agent and its affiliates).(5) Certificates of deposit secured at all times by collateral described in (1) and/or (2) above.Such certificates must be issued by commercial banks, savings and loan associations or mutual savings

banks. The collateral must be held by a third party and the Bondholders must have a perfected firstsecurity interest in the collateral.

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(6) ertificates of deposit, savings accounts, deposit accounts or money market depositswhich are fully insured by FDIC or which are with a bank rated AA or better by Standard & Poor's andAa or better by Moody's (including those of the Fiscal Agent and its affiliates).

(7) nvestment Agreements with any corporation, including banking or financial institutions,provided that(a) the long-term debt of the provider of any such investment agreement is rated, atthe time of investment, at least AA and Aa by the Rating Agency (without regard to

gradations of plus or minus within such category), and(b) any such investment agreement is collateralized with United States Treasury or

agency obligations which at least equal 102% of the principal amount invested thereunder, and(c) any such agreement shall include a provision to the effect that, in the event the

long-term debt rating of the provider of such agreement is downgraded below AA- or belowAa by the applicable Rating Agency, the District has the right to withdraw or cause the FiscalAgent to withdraw all funds invested in such agreement and thereafter to invest such funds

pursuant to this Fiscal Agent Agreement.(8) ommercial paper rated, at the time of purchase, Prime - 1 by Moody's and A-1 or

better by Standard & Poor's.(9) onds or notes issued by any state or municipality which are rated by Moody's andStandard & Poor's in one of the two highest rating categories assigned by such agencies.(10) Federal funds or bankers acceptances with a maximum term of one year of any bank

which has an unsecured, uninsured or unguaranteed obligation rating of Prime - 1 or A3 or better byMoody's and A-1 or A or better by Standard & Poor's.

(11) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs orFHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporationjurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured,unsecured and unguaranteed obligation rated P-1 or A3 or better by Moody's, and A-1 or A- byStandard & Poor's; provided:

(a) a master repurchase agreement or specific written repurchase agreement governsthe transaction; and

(b) the securities are held free and clear of any lien by the Fiscal Agent or anindependent third party acting solely as agent ( Agent ) for the Fiscal Agent, and such third partyis (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit InsuranceCorporation and which has combined capital, surplus and undivided profits of not less than $50million, or (iii) a bank approved in writing for such purpose by Financial Guaranty InsuranceCompany, and the Fiscal Agent shall have received written confirmation from such third partythat it holds such securities, free and clear of any lien, as agent for the Fiscal Agent; and

(c) a perfected first security interest under the Uniform Commercial Code, or bookentry procedures prescribed at 31 C.F.R. 306.1 et seq or 31 C.F.R. 350.0 et seq in such securitiesis created for the benefit of the Fiscal Agent; and

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(d) the repurchase agreement has a term of 180 days or less, and the Fiscal Agent orthe Agent will value the collateral securities no less frequently than weekly and will liquidate thecollateral securities if any deficiency in the required collateral percentage is not restored withintwo business days of such valuation; and

(e) the fair market value of the securities in relation to the amount of the repurchaseobligation, including principal and interest, is equal to at least 103%(12) Local Agency Investment Fund ( LAIF ) of the State of California.(13) Any other investment which the District is permitted by law to make.Authorized Representative of the District means the Mayor, Vice Mayor, City Manager,

Finance Director, or any other person or persons designated by the City Council of the City.Bond Counsel means an attorney at law or a firm of attorneys selected by the District of

nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issuedby states and their political subdivisions duly admitted to the practice of law before the highest court ofany state of the United States of America or the District of Columbia.

Bond Register means the books which the Fiscal Agent shall keep or cause to be kept on whichthe registration and transfer of the Bonds shall be recorded.Bondowner or Owner means the person or persons in whose name or names any Bond isregistered.Bonds means the District's $26,330,000 City of Indio Community Facilities District No. 2004-

3 (Terra Lago), Special Tax Bonds, Series 2005 (Improvement Area No. 1), issued pursuant to this FiscalAgent Agreement.

Bond Year means the twelve month period commencing on September 2 of each year andending on September 1 of the following year, except that the first Bond Year for the Bonds shall begin onthe Delivery Date and end of the first September 1 which is not more than 12 months after the DeliveryDate.

Business Day means a day which is not a Saturday or Sunday or a day of the year on whichbanks in New York, New York, Los Angeles, California, or the city where the corporate trust office of theFiscal Agent is located, are not required or authorized to remain closed.

City means the City of Indio, California.Code means the Internal Revenue Code of 1986 and any Regulations, rulings, judicial

decisions, and notices, announcements, and other releases of the United States Treasury Department orInternal Revenue Service interpreting and construing it.Costs of Issuance means the costs and expenses incurred in connection with the issuance and

sale of the Bonds, including the acceptance and initial annual fees and expenses of the Fiscal Agent andits counsel, legal fees and expenses, costs of printing the Bonds and the preliminary and final officialstatements for the Bonds, fees of financial consultants and all other related fees and expenses, Bonds, asset forth in a written certificate of an Authorized Representative.

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Costs of Issuance Account means the account by such name in the Acquisition andConstruction Fund created and established pursuant to Section 3.1 hereof.

Defeasance Securities means any of the following:(a) Cash(b) United States Treasury Certificates, Notes and Bonds (including State and Local

Government Series -- SLGS )(c) Direct obligations of the U.S. Treasury which have been stripped by the U.S.

Treasury itself, e.g. CA TS TIGR S and similar securities.(d) The interest component of Resolution Funding Corp. strips which have been

stripped by request to the Federal Reserve Bank of New York and are in book-entry form.(e) Pre-refunded municipal bonds rated Aaa by Moody's and AAA by Standard

& Poor's.(f) Obligations issued by the following agencies which are backed by the full faith

and credit of the United States:U.S. Export-Import Bank - direct obligations or fully guaranteed certificates of beneficialownershipFarmers Home Administration - certificates of beneficial ownershipFederal Financing BankGeneral Services Administration - participation certificatesU.S. Maritime Administration - guaranteed Title XI financingU.S. Department of Housing and Urban Development (HUD) - Project Notes, LocalAuthority Bonds, New Communities Debentures - U.S. government guaranteeddebentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed publichousing notes and bonds.

Delivery Date means the date on which the Bonds were issued and delivered to the initialpurchasers thereof.Depository shall mean The Depository Trust Company, New York, New York, and its

successors and assigns as securities depository for the Certificates, or any other securities depositoryacting as Depository under Article II hereof.

District means City of Indio Community Facilities District No. 2004-3 (Terra Lago) establishedpursuant to the Act and the Resolution of Formation.Fiscal Agent means Union Bank of California, N.A., a national banking association duly

organized and existing under and by virtue of the laws of the United States of America, at its principalcorporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust

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company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3 and anysuccessor thereto.

Fiscal Agent Agreement means this Fiscal Agent Agreement, together with any SupplementalFiscal Agent Agreement approved pursuant to Article 6 hereof.

Fiscal Year means the period beginning on July 1 of each year and ending on the nextfollowing June 30.

Improvement Area No. 1 means Improvement Area No. 1 of the District.Improvement Area No. 1 Value means the market value, as of the date of the appraisal or tax

roll described below, of all parcels of real property in Improvement Area No. 1 subject to the levy of theSpecial Taxes and not delinquent in the payment of any Special Taxes then due and owing, including withrespect to such non-delinquent parcels the value of the then existing improvements and any facilities to beconstructed or acquired with any amounts then on deposit in the Acquisition and Construction Fund, asdetermined by reference to (i) an appraisal performed within six (6) months of the date of any proposedrelease of moneys from the Special Escrow Fund by an MM appraiser (the Appraiser ) selected by theDistrict, or (ii) in the alternative, the assessed value of all such non-delinquent parcels and improvementsthereon as shown on the then current County real property tax roll available to the District. The Districtshall not be liable to the Owners, the Underwriter or any other person or entity in respect of any appraisalprovided for purposes of this definition or by reason of any exercise of discretion made by any Appraiserpursuant to this definition.

Independent Financial Consultant means a financial consultant or special tax consultant or firmof either such consultants generally recognized to be well qualified in the financial consulting or specialtax consulting field, appointed and paid by the District, who, or each of whom:

(1) is, in fact, independent and not under the domination of the District;(2) does not have any substantial interest, direct or indirect, in the District; and(3) is not connected with the District as a member, officer or employee of the District, butwho may be regularly retained to make annual or other reports to the District.Interest Account means the account by such name created and established in the Special Tax

Fund pursuant to Section 3.1 hereof.Interest Payment Date means each March 1 and September 1, commencing March 1, 2006;

provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Datewill be paid on the next succeeding Business Day.

Investment Agreement means one or more agreements for the investment of funds of theDistrict complying with the criteria therefor as set forth in Subsection (7) of the definition of AuthorizedInvestments herein.

Maximum Annual Debt Service means the maximum sum obtained for any Bond Year prior tothe final maturity of the Bonds by adding the following for each Bond Year:

(1) he principal amount of all Outstanding Bonds payable in such Bond Year either atmaturity or pursuant to a Sinking Fund Payment; and

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(2) he interest payable on the aggregate principal amount of all Bonds Outstanding in suchBond Year if the Bonds are retired as scheduled.Moody's means Moody's Investors Service, its successors and assigns.Net Taxes means Special Taxes minus an amount equal to the Administrative Expense

RequirementNominee shall mean the nominee of the Depository, which may be the Depository, as

determined from time to time pursuant to Section 2.16 hereof.except: Outstanding or Outstanding Bonds means all Bonds theretofore issued by the District,

(1) Bonds theretofore cancelled or surrendered for cancellation in accordance with Section10.1 hereof;(2) Bonds for payment or redemption of which monies shall have been theretofore deposited

in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, ifsuch Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have beengiven as provided in this Fiscal Agent Agreement; and(3) Bonds which have been surrendered to the Fiscal Agent for transfer or exchange pursuant

to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof.Participants shall mean those broker-dealers, banks and other financial institutions from time to

time for which the Depository holds Bonds as securities depository.Person means natural persons, firms, corporations, partnerships, associations, trusts, publicbodies and other entities.Principal Account means the account by such name in the Special Tax Fund created andestablished pursuant to Section 3.1 hereof.Principal Office of the Fiscal Agent means the office of the Fiscal Agent located in Los

Angeles, California or such other office or offices as the Fiscal Agent may designate from time to time, orthe office of any successor Fiscal Agent where it principally conducts its business of serving as FiscalAgent under indentures pursuant to which municipal or governmental obligations are issued.

Project means those public facilities and/or capital fees described in the Resolution ofFormation that are to be acquired, constructed or financed within and outside of the District, including allengineering, planning and design services and other incidental expenses related to such facilities andother facilities, if any, authorized by the qualified electors within the District from time to time.

Project Costs means the amounts necessary to finance the Project, to create and replenish anynecessary reserve funds, to pay the initial and annual costs associated with the Bonds, including, but notlimited to, remarketing, credit enhancement, Fiscal Agent and other fees and expenses relating to theissuance of the Bonds and the formation of the District, and to pay any other incidental expenses of theDistrict, as such term is defined in the Act.

Rating Agency means Moody's and Standard & Poor's, or both, as the context requires.

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Record Date means the fifteenth day of the month preceding an Interest Payment Date,regardless of whether such day is a Business Day.Redemption Account means the account by such name created and established in the SpecialTax Fund pursuant to Section 3.1 hereof.Regulations means the regulations adopted or proposed by the Department of Treasury fromtime to time with respect to obligations issued pursuant to section 103 of the Code.Representation Letter shall mean the Blanket Letter of Representations from the District to theDepository as described in Section 2.13 hereofReserve Account means the account by such name created and established in the Special TaxFund pursuant to Section 3.1 hereofReserve Requirement means, as of any date of calculation, an amount equal to the lowest of (1)10% of the original proceeds of the Bonds, less accrued interest, if any, less original issue discount, ifany, plus original issue premium, if any, or (2) Maximum Annual Debt Service, or (3) 125% of the

average Annual Debt Service of the Outstanding Bonds. The District may originally fund the ReserveAccount with an Alternate Reserve Account Security or may at any time substitute an Alternate ReserveAccount Security for the cash on deposit in the Reserve Account to satisfy the Reserve Requirementpursuant to Section 3.7 hereofResolution of Formation means Resolution No. 9025 adopted by the City Council of the Cityon July 20, 2005, pursuant to which the City formed the District.Sinking Fund Payment means the annual payment to be deposited in the Redemption Accountto redeem a portion of the Term Bonds in accordance with the schedule set forth in this Fiscal AgentAgreement.

Special Escrow Term Bonds means the Bonds maturing on September 1, 2035 issued in theaggregate principal amount of $3,000,000.Special Taxes means the taxes authorized to be levied within Improvement Area No. 1 by the

District in accordance with the Resolution of Formation, the Act and the voter approval obtained at theJuly 20, 2005 election in the District, together with prepayments thereof and the proceeds collected fromthe sale of property pursuant to the foreclosure provisions of this Fiscal Agent Agreement for thedelinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosureactions, and any additional special taxes authorized to be levied by the District from time to time whichare pledged by the District to the repayment of the Bonds.hereof. Special Tax Fund means the fund by such name created and established pursuant to Section 3.1

assigns. Standard & Poor's means Standard & Poor's, a division of McGraw-Hill, its successors and

Supplemental Fiscal Agent Agreement means any supplemental fiscal agent agreementamending or supplementing this Fiscal Agent Agreement.

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hereof. Surplus Fund means the fund by such name created and established pursuant to Section 3.1

Tax Certificate means the certificate by that name to be executed by the District on a DeliveryDate to establish certain facts and expectations and which contains certain covenants relevant tocompliance with the Code.Term Bonds means the Bonds maturing on September 1, 2025, September 1, 2030,September 1, 2035 and the Special Escrow Term Bonds.Underwriter means the institution or institutions, if any, with whom the District enters into apurchase contract for the sale of the Bonds.Written Request of the District means a request in writing executed by an AuthorizedRepresentative of the District.

ARTICLE IIGENERAL AUTHORIZATION AND BOND TERMS

Section 2.1. mount Issuance Purpose and Nature of Bonds. Under and pursuant to theAct, the Bonds in the aggregate principal amount of $26,330,000 shall be issued for the purpose offinancing the Project, provided that the aggregate principal amount of the Bonds shall not exceed the totalindebtedness presently authorized or subsequently authorized by the qualified electors of the District inaccordance with the Act. The Bonds shall be and are limited obligations of the District and shall bepayable as to the principal thereof and interest thereon and any premiums upon the redemption thereofsolely from the Net Taxes and the other amounts in the Special Tax Fund (other than amounts in theAdministrative Expense Account of the Special Tax Fund).

Section 2.2. ype and Nature of Bonds. Neither the faith and credit nor the taxing power ofthe City, the State of California or any political subdivision thereof other than the District is pledged tothe payment of the Bonds. Except for the Net Taxes, no other taxes are pledged to the payment of theBonds. The Bonds are not general or special obligations of the City nor general obligations of theDistrict, but are limited obligations of the District payable solely from certain amounts deposited by theDistrict in the Special Tax Fund (exclusive of the Administrative Expense Account), as more fullydescribed herein. The District's limited obligation to pay the principal of, premium, if any, and intereston the Bonds from amounts in the Special Tax Fund (exclusive of the Administrative Expense Account)is absolute and unconditional, free of deductions and without any abatement, offset, recoupment,diminution or set-off whatsoever. No Owner of the Bonds may compel the exercise of the taxing powerby the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of theirproperty. The principal of and interest on the Bonds and premiums upon the redemption thereof, if any,are not a debt of the City, the State of California or any of its political subdivisions within the meaning ofany constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge,charge, lien, or encumbrance upon any of the District's property, or upon any of its income, receipts orrevenues, except the Net Taxes and other amounts in the Special Tax Fund (exclusive of theAdministrative Expense Account) which are, under the terms of this Fiscal Agent Agreement and the Act,set aside for the payment of the Bonds and interest thereon and neither the members of the legislativebody of the District or the City Council of the City nor any persons executing the Bonds are liablepersonally on the Bonds by reason of their issuance

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Notwithstanding anything to the contrary contained in this Fiscal Agent Agreement, the Districtshall not be required to advance any money derived from any source of income other than the Net Taxesfor the payment of the interest on or the principal of the Bonds, or for the performance of any covenantscontained herein. The District may, however, advance funds for any such purpose, provided that suchfunds are derived from a source legally available for such purpose.

Section 2.3. quality of Bonds and Pledge of Net Taxes Pursuant to the Act and this FiscalAgent Agreement, the Bonds shall be equally payable from the Net Taxes and other amounts in theSpecial Tax Fund (exclusive of the Administrative Expense Account) without priority for number, date ofthe Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on andprincipal of the Bonds and any premiums upon the redemption thereof, shall be exclusively paid from theNet Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expense Account),which are hereby set aside for the payment of the Bonds. Amounts in the Special Tax Fund (other thanthe Administrative Expense Account therein) shall constitute a trust fund held for the benefit of theOwners to be applied to the payment of the interest on and principal of the Bonds and so long as any ofthe Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except aspermitted by this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement.Notwithstanding any provision contained in this Fiscal Agent Agreement to the contrary, Special Taxesdeposited in the Administrative Expense Account of the Special Tax Fund and the Surplus Fund shall nolonger be considered to be pledged to the Bonds, and none of the Surplus Fund or the AdministrativeExpense Account of the Special Tax Fund shall be construed as a trust fund held for the benefit of theOwners.

Nothing in this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement shallpreclude, subject to the limitations contained hereunder, the redemption prior to maturity of any Bondssubject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued underthe Act as the same now exists or as hereafter amended, or under any other law of the State of California.

Section 2.4. escription of Bonds; Interest Rates The Bonds shall be issued in fullyregistered form in denominations of $5,000 or any integral multiple thereof. The Bonds shall benumbered as desired by the Fiscal Agent.

The Bonds shall be designated CITY OF INDIO COMMUNITY FACILITIES DISTRICT NO.2004-3 (TERRA LAGO) SPECIAL TAX BONDS, SERIES 2005 (IMPROVEMENT AREA NO. 1) .The Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in theyears and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates setforth in the table below payable on each Interest Payment Date, commencing March 1, 2006:

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Maturity Date(September 1) Principal Amount Interest Rate2007 385,000 3.350%2008 370,000 3.4002009 395,000 3.7002010 425,000 3.9002011 460,000 4.0002012 495,000 4.1502013 515,000 4.2502014 535,000 4.2502015 560,000 4.3752016 585,000 4.5002017 610,000 4.6002018 640,000 4.7002019 670,000 4.7502020 705,000 4.8502025 4,080,000 5.0002030 5,210,000 5.1002035 6,690,000 5.1502035 3,000,000 5.150

Interest shall be payable on each Bond from the date established in accordance with Section 2.5below on each Interest Payment Date thereafter until the principal sum of that Bond has been paid;provided, however, that if at the maturity date of any Bond (or if the same is redeemable and shall be dulycalled for redemption, then at the date fixed for redemption) funds are available for the payment orredemption thereof in full, in accordance with the terms of this Fiscal Agent Agreement, such Bonds shallthen cease to bear interest. Interest due on the Bonds shall be calculated on the basis of a 360-day yearcomprised of twelve 30-day months.

Section 2.5. lace and Form of Payment The Bonds shall be payable both as to principaland interest, and as to any premiums upon the redemption thereof, in lawful money of the United States ofAmerica. The principal of the Bonds and any premiums due upon the redemption thereof shall be payableupon presentation and surrender thereof at the Principal Office of the Fiscal Agent, or at the designatedoffice of any successor Fiscal Agent. Interest on any Bond shall be payable from the Interest PaymentDate next preceding the date of authentication of that Bond, unless (i) such date of authentication is anInterest Payment Date in which event interest shall be payable from such date of authentication, (ii) thedate of authentication is after a Record Date but prior to the immediately succeeding Interest PaymentDate, in which event interest shall be payable from the Interest Payment Date immediately succeeding thedate of authentication, or (iii) the date of authentication is prior to the close of business on the first RecordDate occurring after the issuance of such Bond, in which event interest shall be payable from the dateddate of such Bond, as applicable; provided, however, that if at the time of authentication of such Bond,interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to whichthe interest has been paid or made available for payment or, if no interest has been paid or made availablefor payment on that Bond, interest on that Bond shall be payable from its dated date. Interest on anyBond shall be paid to the person whose name shall appear in the Bond Register as the Owner of suchBond as of the close of business on the Record Date. Such interest shall be paid by check of the FiscalAgent mailed on the Interest Payment Date by first class mail, postage prepaid, to such Bondowner at hisor her address as it appears on the Bond Register. In addition, upon a request in writing received by theFiscal Agent on or before the applicable Record Date from an Owner of 1,000,000 or more in principal

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amount of the Bonds, payment shall be made on the Interest Payment Date by wire transfer inimmediately available funds to an account within the United States designated by such Owner.

Section 2.6. orm of Bonds The definitive Bonds may be printed from steel engraved orlithographic plates or may be typewritten. The Bonds and the certificate of authentication shall besubstantially in the form attached hereto as Exhibit A, which forms are hereby approved and adopted asthe forms of such Bonds and of the certificate of authentication.

Notwithstanding any provision in this Fiscal Agent Agreement to the contrary, the District may,in its sole discretion, elect to issue the Bonds in book-entry form.Until definitive Bonds shall be prepared, the District may cause to be executed and delivered in

lieu of such definitive Bonds temporary bonds in typed, printed, lithographed or engraved form and infully registered form, subject to the same provisions, limitations and conditions as are applicable in thecase of definitive Bonds, except that they may be in any denominations authorized by the District. Untilexchanged for definitive Bonds, any temporary bond shall be entitled and subject to the same benefits andprovisions of this Fiscal Agent Agreement as definitive Bonds. If the District issues temporary Bonds, itshall execute and furnish definitive Bonds without unnecessary delay and thereupon any temporary Bondmay be surrendered to the Fiscal Agent at its office, without expense to the Owner, in exchange for adefinitive Bond of the same issue, maturity, interest rate and principal amount in any authorizeddenomination. All temporary Bonds so surrendered shall be cancelled by the Fiscal Agent and shall notbe reissued.

Section 2.7. xecution and Authentication The Bonds shall be signed on behalf of theDistrict by the manual or facsimile signature of the Mayor of the City and attested by the manual orfacsimile signature of the City Clerk of the City. In case any one or more of the officers who shall havesigned or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealedhave been authenticated and delivered by the Fiscal Agent (including new Bonds delivered pursuant tothe provisions hereof with reference to the transfer and exchange of Bonds or to lost, stolen, destroyed ormutilated Bonds), such Bonds shall nevertheless be valid and may be authenticated and delivered asherein provided, and may be issued as if the person who signed or sealed such Bonds had not ceased tohold such office.

Only the Bonds as shall bear thereon such certificate of authentication in the form set forth inExhibit A hereto shall be entitled to any right or benefit under this Fiscal Agent Agreement, and no Bondshall be valid or obligatory for any purpose until such certificate of authentication shall have been dulyexecuted by the Fiscal Agent.

Section 2.8. ond Register The Fiscal Agent will keep or cause to be kept, at its office,sufficient books for the registration and transfer of the Bonds which shall upon reasonable prior notice beopen to inspection by the District during all regular business hours, and, subject to the limitations set forthin Section 2.9 below, upon presentation for such purpose, the Fiscal Agent shall, under such reasonableregulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register,Bonds as herein provided.

The District and the Fiscal Agent may treat the Owner of any Bond whose name appears on theBond Register as the absolute Owner of that Bond for any and all purposes, and the District and the FiscalAgent shall not be affected by any notice to the contrary. The District and the Fiscal Agent may rely onthe address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be theduty of the Bondowner to give written notice to the Fiscal Agent of any change in the Bondowner saddress so that the Bond Register may be revised accordingly.

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Section 2.9. egistration of Exchange or Transfer. Subject to the limitations set forth inthe following paragraph, the registration of any Bond may, in accordance with its terms, be transferredupon the Bond Register by the person in whose name it is registered, in person or by his or her dulyauthorized attorney, upon surrender of such Bond for cancellation at the office of the Fiscal Agent,accompanied by delivery of written instrument of transfer in a form approved by the Fiscal Agent andduly executed by the Bondowner or his or her duly authorized attorney.

Bonds may be exchanged at the office of the Fiscal Agent for a like aggregate principal amountof Bonds for other authorized denominations of the same maturity and issue. The Fiscal Agent shall notcollect from the Owner any charge for any new Bond issued upon any exchange or transfer, but shallrequire the Bondowner requesting such exchange or transfer to pay any tax or other governmental chargerequired to be paid with respect to such exchange or transfer. Whenever any Bond shall be surrenderedfor registration of transfer or exchange, the District shall execute and the Fiscal Agent shall authenticateand deliver a new Bond or Bonds of the same issue and maturity, for a like aggregate principal amount;provided that the Fiscal Agent shall not be required to register transfers or make exchanges of i) Bondsfor a period of 15 days next preceding any selection of the Bonds to be redeemed, or ii) any Bondschosen for redemption.

Section 2.10. Mutilated Lost Destroyed or Stolen Bonds. If any Bond shall becomemutilated, the District shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond oflike tenor, date, issue and maturity in exchange and substitution for the Bond so mutilated, but only uponsurrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to theFiscal Agent shall be cancelled by the Fiscal Agent pursuant to Section 10.1 hereof. If any Bond shall belost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agentand, if such evidence is satisfactory to the Fiscal Agent and, if any indemnity satisfactory to the Districtand the Fiscal Agent shall be given, the District shall execute and the Fiscal Agent shall authenticate anddeliver, a new Bond of like tenor, maturity and issue, numbered and dated as the Fiscal Agent shalldetermine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieuof any Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitledto the benefits hereof with all other Bonds issued hereunder. The Fiscal Agent shall not treat both theoriginal Bond and any replacement Bond as being Outstanding for the purpose of determining theprincipal amount of Bonds which may be executed, authenticated and delivered hereunder or for thepurpose of determining any percentage of Bonds Outstanding hereunder, but both the original andreplacement Bond shall be treated as one and the same. Notwithstanding any other provision of thisSection, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and whichhas matured, the Fiscal Agent may make payment with respect to such Bonds.

Section 2.11. Validity of Bonds. The validity of the authorization and issuance of the Bondsshall not be affected in any way by any defect in any proceedings taken by the District, or by theinvalidity, in whole or in part, of any contracts made by the District in connection therewith, and therecital contained in the Bonds that the same are issued pursuant to the Act and other applicable laws ofthe State shall be conclusive evidence of their validity and of the regularity of their issuance.

Section 2.12. Book-Entry System. The Bonds shall be initially delivered in the form of aseparate single fully registered Bond which may be typewritten) for each of the maturities of the Bonds.Upon initial delivery, the ownership of each such Bond shall be registered in the registration books keptby the Fiscal Agent in the name of the Nominee as nominee of the Depository. Unless the District electsto discontinue the use of the book-entry system, all of the Outstanding Bonds shall be registered in theregistration books kept by the Fiscal Agent in the name of the Nominee.

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With respect to Bonds registered in the registration books kept by the Fiscal Agent in the name ofthe Nominee, the District and the Fiscal Agent shall have no responsibility or obligation to any suchParticipant or to any Person on behalf of which such a Participant holds an interest in the Bonds. Withoutlimiting the immediately preceding sentence, the District and the Fiscal Agent shall have no responsibilityor obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or anyParticipant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or anyother Person, other than an Owner as shown in the registration books kept by the Fiscal Agent, of anynotice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depositoryand its Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds areredeemed in part, or (iv) the payment to any Participant or any other Person, other than an Owner asshown in the registration books kept by the Fiscal Agent, of any amount with respect to principal of,premium, if any, or interest due with respect to the Bonds. The District and the Fiscal Agent may treatand consider the Person in whose name each Bond is registered in the registration books kept by theFiscal Agent as the holder and absolute owner of such Bond for the purpose of payment of the principalof, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and othermatters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, andfor all other purposes whatsoever. The Fiscal Agent shall pay all principal of, premium, if any, andinterest due on the Bonds only to or upon the order of the respective Owner, as shown in the registrationbooks kept by the Fiscal Agent, or their respective attorneys duly authorized in writing, and all suchpayments shall be valid and effective to satisfy and discharge fully the District s obligations with respectto payment of the principal, premium, if any, and interest due on the Bonds to the extent of the sum orsums so paid. No Person other than an Owner, as shown in the registration books kept by the FiscalAgent, shall receive a Bond evidencing the obligation of the District to make payments of principal,premium, if any, and interest pursuant to this Fiscal Agent Agreement. Upon delivery by the Depositoryto the Fiscal Agent and the District of written notice to the effect that the Depository has determined tosubstitute a new nominee in place of the Nominee, and subject to the provisions herein with respect toRecord Dates, the word Nominee in this Fiscal Agent Agreement shall refer to such new nominee of theDepository.

Section 2.13. Representation Letter. In order to qualify the Bonds which the District elects toregister in the name of the Nominee for the Depository s book-entry system, an authorized representativeof the District or the Fiscal Agent is hereby authorized to execute from time to time and deliver to suchDepository the Representation Letter. The execution and delivery of the Representation Letter shall notin any way limit the provisions of Section 10.2 or in any other way impose upon the District or the FiscalAgent any obligation whatsoever with respect to persons having interests in the Bonds other than theOwners, as shown on the registration books kept by the Fiscal Agent. The Fiscal Agent agrees to take allaction necessary to continuously comply with all representations made by it in the Representation Letter.In addition to the execution and delivery of the Representation Letter, any Authorized Representative ofthe District are hereby authorized to take any other actions, not inconsistent with this Fiscal AgentAgreement, to qualify the Bonds for the Depository s book-entry program.

Section 2.14. Transfers Outside Book Entry System. In the event (i) the Depositorydetermines not to continue to act as securities depository for the Bonds, or (ii) the District determines thatthe Depository shall no longer so act, then the District will discontinue the book-entry system with theDepository. If the District fails to identify another qualified securities depository to replace theDepository then the Bonds so designated shall no longer be restricted to being registered in theregistration books kept by the Fiscal Agent in the name of the Nominee, but shall be registered inwhatever name or names Persons transferring or exchanging Bonds shall designate, in accordance withthe provisions of Section 2.9 hereof.

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Section 2.15. Payments to the Nominee Notwithstanding any other provisions of this FiscalAgent Agreement to the contrary, so long as any Bond is registered in the name of the Nominee, allpayments with respect to principal, premium, if any, and interest due with respect to such Bond and allnotices with respect to such Bond shall be made and given, respectively, as provided in theRepresentation Letter or as otherwise instructed by the Depository.

Section 2.16. Initial Depository and Nominee The initial Depository under this Article shallbe The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., asNominee of The Depository Trust Company, New York, New York.Section 2.17. No Parity Obligations Other than refunding bonds, the District may not issuebonds, notes or other similar evidences of indebtedness payable from the Net Taxes and other amounts

deposited in the Special Tax Fund and secured by a lien and charge upon such amounts equal to the lienand charge securing the Outstanding Bonds.ARTICLE III

CREATION OF FUNDS AND APPLICATION OF SPECIAL TAXESSection 3.1. reation of Funds; Application of Proceeds There is hereby created andestablished and shall be maintained by the Fiscal Agent the following funds and accounts:(1) The Special Tax Fund (in which there shall be established and created an InterestAccount, a Principal Account, a Redemption Account, a Reserve Account and an Administrative ExpenseAccount).(2) The Surplus Fund.(3) The Acquisition and Construction Fund (in which there shall be established a Costs ofIssuance Account).(4) The Special Escrow Fund.The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by theFiscal Agent and the Fiscal Agent shall invest and disburse the amounts in such funds, accounts andsubaccounts in accordance with the provisions of this Article 3 and shall disburse investment earningsthereon in accordance with the provisions of Section 3.11 hereof. Except as required to be segregated

into funds and accounts as described herein, money held by the Fiscal Agent hereunder need not besegregated from other funds except to the extent required by law.All proceeds of the sale of the Bonds shall be received by the Fiscal Agent on behalf of theDistrict and deposited and transferred as follows:(1) 335,000.00 shall be transferred to the Costs of Issuance Account of the Acquisition and

Construction Fund established hereunder for disbursement in accordance with Section 3.9 below; and(2) 19,497,172.37 shall be transferred to the Acquisition and Construction Fund establishedhereunder for disbursement in accordance with Section 3.9 below; and(3) 1,758,080.00 (which is equal to the initial Reserve Requirement) shall be deposited inthe Reserve Account to be disbursed in accordance with Section 3.7 below; and

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(4) 1,234,030.63 shall be transferred to the Interest Account of the Special Tax Fund fordisbursement in accordance with Section 3.4 below; and(5) 3,000,000.00 shall be transferred to the Special Escrow Fund for disbursement inaccordance with Section 3.10 below.Section 3.2. eposits to and Disbursements from Special Tax Fund The District shall, oneach date on which it receives Special Taxes from the Treasurer-Tax Collector of the County ofRiverside, transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund in

accordance with the terms of this Fiscal Agent Agreement. The Fiscal Agent shall first deposit into theAdministrative Expense Account of the Special Tax Fund an amount equal to the Administrative ExpenseRequirement as determined by the District and provided to the Fiscal Agent in writing and shall thentransfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth in thefollowing Sections, in the following order of priority, to:

(a) The Interest Account of the Special Tax Fund;(b) The Principal Account of the Special Tax Fund;(c) The Redemption Account of the Special Tax Fund;(d) The Reserve Account of the Special Tax Fund;(e) The Administrative Expense Account of the Special Tax Fund; and(f) The Surplus Fund.

At the maturity of all of the Bonds, and after all principal and interest then due on the Bonds thenOutstanding has been paid or provided for and any amounts owed to the Fiscal Agent have been paid infull, moneys in the Special Tax Fund and any accounts therein shall be transferred to the District and maybe used by the District for any lawful purpose.

Section 3.3. dministrative Expense Account of the Special Tax Fund The Fiscal Agentshall transfer from the Special Tax Fund and deposit in the Administrative Expense Account of theSpecial Tax Fund from time to time, in accordance with Section 3.2 above, amounts necessary to maketimely payment of Administrative Expenses, which shall be disbursed by the Fiscal Agent upon theWritten Request of the District. Moneys in the Administrative Expense Account of the Special Tax Fundmay be invested in any Authorized Investments as directed in a Written Request or in accordance withSection 3.11(4) hereof

Section 3.4. nterest Account and Principal Account of the Special Tax Fund Theprincipal of and interest due on the Bonds until maturity, other than principal due upon redemption, shallbe paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund,respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds willbe made when due, after making the transfer required by Section 3.3, at least five Business Days prior toeach March 1 and September 1, the Fiscal Agent shall make the following transfers from the Special TaxFund first to the Interest Account and then to the Principal Account; provided, however, that to the extentthat deposits have been made in the Interest Account or the Principal Account from the proceeds of thesale of an issue of the Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; andprovided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers,then any deficiency shall be made up by an immediate transfer from the Reserve Account:

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(1) To the Interest Account, an amount such that the balance in the Interest Account fiveBusiness Days prior to each Interest Payment Date shall be equal to the installment of interest due on theBonds on said Interest Payment Date and any installment of interest due on a previous Interest PaymentDate which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest onthe Bonds as the same become due.

(2) To the Principal Account, an amount such that the balance in the Principal Account fiveBusiness Days prior to September 1 of each year, commencing September 1, 2007 shall at least equal theprincipal payment due on the Bonds maturing on such September 1 and any principal payment due on aprevious September 1 which remains unpaid. Moneys in the Principal Account shall be used for thepayment of the principal of such Bonds as the same become due at maturity.

Section 3.5. edemption Account of the Special Tax Fund(1) On each September 1 on which a Sinking Fund Payment is due, after the deposits have

been made to the Interest Account and the Principal Account of the Special Tax Fund as required bySection 3.4 hereof, the Fiscal Agent shall next transfer into the Redemption Account of the Special TaxFund from the Special Tax Fund the amount needed to make the balance in the Redemption Account fiveBusiness Days prior to each September 1 equal to the Sinking Fund Payment due on any OutstandingBonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequateto make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from theReserve Account, if funded, pursuant to Section 3.7 below. Moneys so deposited in the RedemptionAccount shall be used and applied by the Fiscal Agent to call and redeem Term Bonds in accordance withthe Sinking Fund Payment schedule set forth in Section 4.1 hereof and in any Supplemental Fiscal AgentAgreement for such Term Bonds.

(2) After making the deposits to the Interest Account and the Principal Account of theSpecial Tax Fund pursuant to Section 3.4 above and to the Redemption Account for Sinking FundPayments then due pursuant to subparagraph (a) of this Section, and in accordance with the District selection to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, the Fiscal Agent shalltransfer from the Special Tax Fund and deposit in the Redemption Account moneys available for thepurpose and sufficient to pay the interest, the principal and the premiums, if any, payable on the Bondscalled for optional redemption; provided, however, that amounts in the Special Tax Fund (other than theAdministrative Expense Account therein) may be applied to optionally redeem Bonds only if immediatelyfollowing such redemption the amount in the Reserve Account will equal the Reserve Requirement.

(3) All prepayments of Special Taxes shall be deposited in the Redemption Account to beused to redeem Bonds on the next date for which notice of redemption can timely be given.(4) Moneys set aside in the Redemption Account shall be used solely for the purpose of

redeeming Bonds and shall be applied on or after the redemption date to the payment of the principal ofand premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds and inthe case of an optional redemption to pay the interest thereon; provided, however, that in lieu or partiallyin lieu of such call and redemption, moneys deposited in the Redemption Account as set forth above maybe used to purchase Outstanding Bonds in the manner hereinafter provided. Purchases of OutstandingBonds may be made by the District at public or private sale as and when and at such prices as the Districtmay in its discretion determine but only at prices (including brokerage or other expenses) not more thanpar plus accrued interest, plus, in the case of moneys set aside for an optional redemption, the premiumapplicable at the next following call date according to the premium schedule established pursuant toSection 4.1(1) hereof. Any accrued interest payable upon the purchase of Bonds may be paid from the

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amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the nextfollowing Interest Payment Date.

Section 3.6. Reserved ]Section 3.7. eserve Account of the Special Tax Fund There shall be maintained in the

Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The amounts inthe Reserve Account shall be applied as follows:1) Moneys in the Reserve Account shall be used solely for the purpose of paying the

principal of, including Sinking Fund Payments, and interest on any Bonds when due in the event that themoneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficienttherefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a SinkingFund Payment when due. If the amounts in the Interest Account, the Principal Account or theRedemption Account of the Special Tax Fund are insufficient to pay the principal of, including SinkingFund Payments, or interest on any Bonds when due, the Fiscal Agent shall withdraw from the ReserveAccount for deposit in the Interest Account, the Principal Account or the Redemption Account of theSpecial Tax Fund, as applicable, moneys necessary for such purposes.

2) Whenever moneys are withdrawn from the Reserve Account, after making the requiredtransfers referred to in Sections 3.4 and 3.5 above, the Fiscal Agent shall transfer to the Reserve Accountfrom available moneys in the Special Tax Fund, or from any other legally available funds which theDistrict elects to apply to such purpose, the amount needed to restore the amount of such ReserveAccount to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available fortransfer to the Reserve Account only if the Fiscal Agent determines that such amounts will not be neededto make the deposits required to be made to the Interest Account, the Principal Account or theRedemption Account of the Special Tax Fund. If amounts in the Special Tax Fund or otherwisetransferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the ReserveRequirement, then the District shall include the amount necessary fully to restore the Reserve Account tothe Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permittedSpecial Tax rates.

3) In connection with any redemption of the Bonds under Section 4.1 a) or b), or a partialdefeasance of the Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account may beapplied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Accountfollowing such redemption or partial defeasance equals the Reserve Requirement. To the extent that theReserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds,amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds inthe final Bond Year for such issue. Moneys in the Reserve Account in excess of the ReserveRequirement not transferred in accordance with the preceding provisions of this paragraph shall bewithdrawn from the Reserve Account on the fifth Business Day before each March 1 and September 1and transferred to the Interest Account of the Special Tax Fund.

Anything to the contrary herein notwithstanding, the District may, at any time on or after theissuance of the Bonds, substitute an Alternate Reserve Account Security for cash in the Reserve Account.Upon the deposit with the Fiscal Agent of such Alternate Reserve Account Security, the Fiscal Agentshall transfer any excess amounts then on deposit in the Reserve Account into a segregated account of theSpecial Tax Fund to be established by the Fiscal Agent, which monies shall be applied at the writtendirection of the District either i) to the payment within one year of the date of transfer of capitalexpenditures of the District permitted by law, or ii) to the redemption of Bonds on the earliest succeedingdate on which such redemption is permitted hereby, and pending such application shall in accordance

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with written direction of the District be held either not invested in investment property (as defined insection 148(b) of the Code), or invested in such property to produce a yield that is not in excess of theyield on the Bonds; provided, however, that the District may by written direction to the Fiscal Agentcause an alternative use of such amounts if the District shall first have obtained a written opinion ofnationally recognized bond counsel substantially to the effect that such alternative use will not adverselyaffect the exclusion pursuant to section 103 of the Code of interest on the Bonds from the gross income ofthe owners thereof for federal income tax purposes. In the event the District delivers an AlternateReserve Account Security, the Fiscal Agent shall hold and apply such instrument pursuant to this FiscalAgent Agreement so as to have moneys available thereunder for the purposes and at the times requiredunder this Fiscal Agent Agreement.

Any and all Alternate Reserve Account Securities shall comply with the following requirements:(1) A surety bond or insurance policy issued to the Fiscal Agent, by a company licensed to

issue an insurance policy guaranteeing the timely payment of debt service on the Bonds (a municipalbond issuer ) may be deposited in the Reserve Account to meet the Reserve Requirement if at the time ofissuance the claims paying ability of the issuer thereof shall be rated AAA or Aaa by S&P orMoody's, respectively.

(2) The use of any Alternate Reserve Account Security pursuant to this Paragraph shall besubject to receipt of an opinion of counsel acceptable to the District and in form and substancesatisfactory to the District as to the due authorization, execution, delivery and enforceability of suchinstrument in accordance with its terms, subject to applicable laws affecting creditors' rights generally,and, in the event the issuer of such Alternate Reserve Account Security is not a domestic entity, anopinion of foreign counsel in form and substance satisfactory to the District.

(3) The obligation to reimburse the issuer of an Alternate Reserve Account Security for anyfees, expenses, claims or draws upon such Alternate Reserve Account Security shall be subordinate to thepayment of debt service on the Bonds. The right of the issuer of an Alternate Reserve Account Securityto payment or reimbursement of its fees and expenses shall be subordinated to cash replenishment of theReserve Account, and, subject to the second succeeding sentence, its right to reimbursement for claims ordraws shall be on a parity with the cash replenishment of the Reserve Account. The Alternate ReserveAccount Security shall provide for a revolving feature under which the amount available thereunder willbe reinstated to the extent of any reimbursement of draws or claims paid. If the revolving feature issuspended or terminated for any reason, the right of the issuer of the Alternate Reserve Account Securityto reimbursement will be further subordinated to cash replenishment of the Reserve Account to an amountequal to the difference between the full original amount available under the Alternate Reserve AccountSecurity and the amount then available for further draws or claims. If (a) the issuer of an AlternateReserve Account Security becomes insolvent or (b) the issuer of an Alternate Reserve Account Securitydefaults in its payment obligations thereunder or (c) the rating of the claims-paying ability of the issuer ofthe insurance policy or surety bond falls below an S&P AAA or a Moody's Aaa, the obligation toreimburse the issuer of the Alternate Reserve Account Security shall be subordinate to the cashreplenishment of the Reserve Account.

(4) If (a) the revolving reinstatement feature described in the preceding paragraph issuspended or terminated or (b) the rating of the claims paying ability of the issuer of the surety bond orinsurance policy falls below an S&P AAA or a Moody's Aaa, the District shall either (i) deposit intothe Reserve Account an amount sufficient to cause the cash or permitted investments on deposit in theReserve to equal the Reserve Account Requirement on all outstanding Bonds, such amount to be paidover the ensuing year in equal installments on at least a monthly basis or (ii) replace such instrument with

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a surety bond or insurance policy meeting the requirements in paragraph (1) above within six months ofsuch occurrence.(5) Where applicable, the amount available for draws or claims under the Alternate ReserveAccount Security may be reduced by the amount of cash or permitted investments deposited in the

Reserve Account pursuant to clause (i) of subdivision (d) of the preceding subparagraph (4).(6) If the District chooses the above described alternatives to a cash-funded ReserveAccount, any amounts owed by the District to the issuer of such Alternate Reserve Account Security as a

result of a draw thereon or a claim thereunder, as appropriate, shall be included in any calculation of debtservice requirements required to be made pursuant to Section 9.2 hereof.

(7) The Fiscal Agent shall ascertain the necessity for a claim or draw upon the AlternateReserve Account Security and to provide notice to the issuer of the Alternate Reserve Account Security inaccordance with its terms not later than three days (or such longer period as may be necessary dependingon the permitted time period for honoring a draw under the Alternate Reserve Account Security) prior toeach Interest Payment Date.

(8) Cash on deposit in the Reserve Account shall be used (or investments purchased withsuch cash shall be liquidated and the proceeds applied as required) prior to any drawing on any AlternateReserve Account Security. If and to the extent that more than one Alternate Reserve Account Security isdeposited in the Reserve Account, drawings thereunder and repayments of costs associated therewith shallbe made on a pro rata basis, calculated by reference to the maximum amounts available thereunder.

Section 3.8. urplus Fund After making the transfers required by Sections 3.3, 3.4, 3.5 and3.7 hereof, as soon as practicable after each September 1, and in any event prior to each October 1, theFiscal Agent shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, other thanamounts in the Special Tax Fund which the District directs the Fiscal Agent by Written Request of theDistrict to retain because the District has included such funds as being available in the Special Tax Fundin calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(b)hereof. Moneys deposited in the Surplus Fund shall be transferred by the Fiscal Agent (i) to the InterestAccount, the Principal Account or the Redemption Account of the Special Tax Fund to pay the principalof, including Sinking Fund Payments, premium, if any, and interest on the Bonds when due in the eventthat moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficienttherefor, (ii) to the Reserve Account in order to replenish the Reserve Account to the ReserveRequirement, and (iii) to the Administrative Expense Account of the Special Tax Fund to payAdministrative Expenses to the extent that the amounts on deposit in the Administrative Expense Accountof the Special Tax Fund are insufficient to pay Administrative Expenses or, upon the Written Request ofthe District, may be disbursed to the District to be expended for any other lawful purpose of the District.On September 1, 2006, the Fiscal Agent shall transfer 50,000.00 from the Surplus Fund to theAdministrative Expense Account of the Special Tax Fund to the extent such amount is available in theSurplus Fund.

The amounts in the Surplus Fund are not pledged to the repayment of the Bonds. In the event thatthe District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt serviceon any Outstanding Bonds, upon the written direction of an Authorized Representative of the District, theFiscal Agent will segregate such amount into a separate subaccount and the moneys on deposit in suchsubaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which isexcludable from gross income under Section 103 of the Code (other than bonds the interest on which is atax preference item for purposes of computing the alternative minimum tax of individuals andcorporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the

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issue of Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel,investment at a higher yield will not adversely affect the exclusion from gross income for federal incometax purposes of interest on the Bonds which were issued on a tax-exempt basis for federal income taxpurposes.

Section 3.9. cquisition and Construction Fund(1) The moneys in the Acquisition and Construction Fund and the Costs of Issuance Account

within the Acquisition and Construction Fund shall be applied exclusively to pay the Project Costs orCosts of Issuance. Amounts for Project Costs and Costs of Issuance shall be disbursed by the FiscalAgent from the account in the Acquisition and Construction Fund and the Costs of Issuance Accountwithin the Acquisition and Construction Fund upon receipt of a requisition signed by an AuthorizedRepresentative of the District, substantially in the form of Exhibit B hereto. On a date 180 days from thedate of delivery of the Bonds, or earlier if instructed by an Authorized Representative of the District, anyamount remaining in the Costs of Issuance Account of the Acquisition and Construction Fund shall betransferred to the Acquisition and Construction Fund and used for Project Costs.

(2) Upon receipt of a written certificate of an Authorized Representative stating that all or aspecified portion of the amount remaining in the Acquisition and Construction Fund is no longer neededto pay Project Costs, the Fiscal Agent shall transfer all or such specified portion of the moneys remainingon deposit in the Acquisition and Construction Fund to the Special Tax Fund, or to the Surplus Fund ifrequested in such written certificate and if there shall have been delivered to the Fiscal Agent with suchwritten certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will notadversely affect the exclusion from gross income for federal income tax purposes of interest on the Bondswhich were issued on a tax-exempt basis for federal income tax purposes. Upon transfer of the finalamounts on deposit in the Acquisition and Construction Fund or either account in such fund, suchaccounts and fund shall be closed.

Section 3.10. Special Escrow Fund(1) The Fiscal Agent shall make a disbursement from the Special Escrow Fund to theAcquisition and Construction Fund upon receipt of a certificate of Authorized Representative of the

District (the Administrator herein) pursuant to Section 3.10(2) below directing the Fiscal Agent torelease funds from the Special Escrow Fund. Upon receipt of such certificate, the Fiscal Agent shalldeposit the disbursement to the Acquisition and Construction Fund, in an amount specified by theAdministrator in a written certificate. The transfers referred to in the preceding sentence shall only bemade on any Business Day on or prior to the Initial Escrow Close Date or any Revised Escrow CloseDate (as such terms are defined below) and any certificate of the Administrator requesting any such drawshall be presented to the Fiscal Agent by the District at least 10 days (or such lesser number of days asagreed to by the Fiscal Agent) prior to the date for the transfer to be made.

(2) At any time after the Delivery Date and prior to the release of all moneys held in theSpecial Escrow Fund, the Developer at its sole election, may provide the District with funds so that theDistrict may cause a formal appraisal to be prepared, at the expense of the Developer, consistent with theappraisal standards of the City to determine the Improvement Area No. 1 Value (the AdditionalAppraisal ). If the Administrator approves the Additional Appraisal and the Improvement Area No. 1Value established by the Additional Appraisal indicates that additional moneys are to be released from theSpecial Escrow Fund consistent with the City's policy of maintaining a value-to-lien ratio and SpecialTax coverage ratio as described below, then the Administrator will cause a written notice to be providedto the Fiscal Agent for the release of amounts to the Acquisition and Construction Fund.

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(i) Value-to-Lien Ratio. The Improvement Area No. 1 Value (not including the value of anyparcel that is then delinquent in the payment of Special Taxes) shall be at least three times thesum of: (a) the aggregate principal amount of all Bonds then Outstanding, less the principalamount of any Bonds representing amounts (if any) to remain on deposit in the Special EscrowFund following the proposed disbursement, plus (b) the aggregate principal amount of any fixedassessment liens on the parcels in the District subject to the levy of Special Taxes, plus (c) aportion of the aggregate principal amount of any and all other community facilities district bondsor assessment district assessment liens then outstanding and payable at least partially from specialtaxes or assessments to be levied on parcels of land within the District (the Prior Bonds ) equalto the aggregate principal amount of the Prior Bonds multiplied by a fraction, the numerator ofwhich is the amount of special taxes and special assessments levied for the Prior Bonds on parcelsof land within the District, and the denominator of which is the total amount of special taxes andspecial assessments levied for the Prior Bonds on all parcels of land against which the specialtaxes and special assessments are levied to pay the Prior Bonds (such fraction to be determinedbased upon the maximum special taxes which could be levied in the year in which maximumannual debt service on the Prior Bonds occurs), based upon information from the most recentavailable Fiscal Year.(ii) Minimum Value Test. The Improvement Area No. 1 Value (including, for purposes ofthis Section 3.10(2)(ii), only those parcels of real property in the District then constitutingUndeveloped Property, as defined in the Rate and Method of Apportionment relating to

Improvement Area No. 1, shall be at least two and one-half times (a) the sum of the amountsreferred to in clauses (a), (b) and (c) of Section 3.10(2)(i) above which are determined by theDistrict's special tax consultant to be allocable to the parcels of Undeveloped Property assumingthat for (a) above the special tax consultant shall allocate to Developed Property that portion ofthe principal amount of the Outstanding Bonds for which the maximum annual debt service isequal to the aggregate Assigned Special Tax in the then Fiscal Year for all then DevelopedProperty (as the terms Assigned Special Tax and Developed Property are defined in the Rateand Method of Apportionment), and otherwise not taking into account the principal amount ofany Bonds representing amounts (if any) to remain on deposit in the Special Escrow Fundfollowing the proposed disbursement).(iii) Special Tax Coverage. The maximum Special Taxes that may be levied in each FiscalYear on parcels that are not then delinquent in the payment of Special Taxes shall be at least onehundred ten percent (110%) of the then Maximum Annual Debt Service, based upon the Rate andMethod of Apportionment of Special Taxes of Improvement Area No. 1.In making the determinations under the preceding clauses (i), (ii) and (iii), the Administrator may

conclusively rely on a certificate of a special tax consultant engaged by the District.(3) n and after July 15, 2007 (the Initial Escrow Close Date ), the Fiscal Agent shall makeno further disbursements from the Special Escrow Fund pursuant to Section 3.10(2) above, and on

September 1, 2007 (the Initial Escrow Redemption Date ), the Fiscal Agent shall use amounts in theSpecial Escrow Fund to redeem the Bonds to the maximum extent possible on the Initial EscrowRedemption Date, as provided in this Section 3.10(3).

Notwithstanding the foregoing, the Initial Escrow Close Date (and any Revised Escrow CloseDate established pursuant to this paragraph) and the Initial Escrow Redemption Date (and any RevisedEscrow Redemption Date established pursuant to this paragraph) may be extended from time to time uponreceipt by the Fiscal Agent, not later than one Business Day prior to the Initial Escrow Close Date (or, ifextended pursuant to the terms of this paragraph, the then applicable Revised Escrow Close Date), of a

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Written Request requesting such extension and stating (a) the new date after which amounts in the SpecialEscrow Fund will no longer be subject to disbursement pursuant to Section 3.10(1) (the Revised EscrowClose Date ) which date shall be at least 45 days but not more than 90 days prior to the date such amountsare to be used to redeem the Bonds as described in the following clause (b), and (b) the new date onwhich the Bonds are to be subject to mandatory redemption from the amounts held in the Special EscrowFund (the Revised Escrow Redemption Date ), which date shall be an Interest Payment Date. In noevent will the Revised Escrow Redemption Date be extended beyond the earliest date following the thirdanniversary of the issuance of the Delivery Date on which the Bonds may be redeemed pursuant to theterms thereof

The Fiscal Agent shall provide the Owners, the Underwriter and the District with a writtenstatement as to any Revised Escrow Redemption Date established under this Section 3.10(3) promptlyfollowing receipt of the Written Request and other documents described in clauses (i) through (iii) above,which notice shall set forth the Initial Escrow Redemption Date (or, if applicable, the most recent RevisedEscrow Redemption Date), and shall state that such redemption date has been extended to the newly-established Revised Escrow Redemption Date.

On or after any Revised Escrow Close Date the Fiscal Agent shall make no further disbursementsfrom the Special Escrow Fund pursuant to Section 3.10(2), and on the Revised Escrow Redemption Datethe Fiscal Agent shall use amounts in the Special Escrow Fund to redeem the Bonds to the maximumextent possible on the Revised Escrow Redemption Date.

The Special Escrow Fund shall be closed when no funds remain therein.(4) he Fiscal Agent shall invest the moneys in the Special Escrow Fund in such AuthorizedInvestments, which shall be rated in one of the highest two rating categories offered by each Rating

Agency (without regard to gradations of plus or minus, or numerical gradations, within such category) asthe District shall direct in Written Request of the District which shall be delivered to the Fiscal Agent onthe Delivery Date and thereafter at least two (2) Business Days prior to the maturity date of any suchAuthorized Investment; provided that if the District does not deliver such Written Request, the FiscalAgent shall invest such funds in Authorized Investments, which shall be rated in one of the highest tworating categories offered by each Rating Agency (without regard to gradations of plus or minus, ornumerical gradations, within such category) of the type specified in clause (4) of the definition ofAuthorized Investments. Investment earnings shall be transferred by the Fiscal Agent to the InterestAccount of the Special Tax Fund to be used for the purposes of such account.

Section 3.11. Investments Moneys held in any of the funds and accounts under this FiscalAgent Agreement shall be invested at the Written Request of the District in accordance with thelimitations set forth below only in Authorized Investments which shall be deemed at all times to be a partof such funds and accounts. Any loss resulting from such Authorized Investments shall be credited orcharged to the fund or account from which such investment was made, and any investment earnings on afund or account shall be applied as follows: (i) investment earnings on all amounts deposited in theSpecial Tax Fund (other than the Reserve Account), Acquisition and Construction Fund and Surplus Fundand each Account therein shall be deposited in those respective funds and accounts, and (ii) all otherinvestment earnings shall be deposited in the Interest Account of the Special Tax Fund; provided,however, investment earnings in the Reserve Account shall be deposited in the Interest Account of theSpecial Tax Fund only to the extent moneys in such Reserve Account exceed the Reserve Requirement.Moneys in the funds and accounts held under this Fiscal Agent Agreement may be invested by the FiscalAgent at the Written Request of the District received at least 2 Business Days prior to the investment date,from time to time, in Authorized Investments subject to the following restrictions:

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1) Moneys in the Interest Account, the Principal Account and the Redemption Account ofthe Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature,or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates soas to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same becomedue

2) Moneys in the Acquisition and Construction Fund shall be invested in AuthorizedInvestments which will by their terms mature, or in the case of an Investment Agreement are availablewitho