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Home My WebLink About1984-07-17; City Council; 7820 Exhibit 05; OFFICIAL REQUEST TO STATE OF CALIFORNIA FOR MORTGAGE REVENUE BOND ALLOCATION Exhibit 05? 4' T M =75m mkt i&T%- 7) ~71 i? %e Fd 2% C.ITY OF CARLSBAD, CALIFORNIA, Issuer AND FIRST INTERSTATE BANK OF CALIFORNIA, Trustee TRUST INDENTURE Dated as of June 1, 1985 Single Fam:tly Residential Mortgage Revenue Bonds Issue of 1985 1 T TRUST INDENTURE TABLE OF CONTENTS (This Table of Contents is for convenience of reference onl! and is not a part of the Trust Indenture) Section Pagt Parties ............................................... Preambles ............................................. Form of Current Interest Bond ......................... Form of Tax Exempt Capital Accumulator Bond ........... ARTICLE I AUTHORITY FOR BONDS; EQUAL SECURITY: DEFINITIONS 1.01 Due Authorization ............................ 1.03 Definitions .................................. 1.04 Content off Certificates and Opinions ......... 1.02 Equal Security ............................... ARTICLE I1 THE BONDS 2.01 Authorization of Bonds ....................... 2.02 Terms of the Bonds ........................... 2.03 Execution of Bonds ........................... 2.04 Transfer of Bonds ............................ 2.05 Exchange of Bonds ............................ 2.06 Bond Register ................................ 2.07 Temporary Bonds .............................. 2.08 Bonds Mutilated, Lost, Destroyed or Stolen .................................. ARTICLE I11 ISSUE OF BONDS; PURCHASE OF LOANS 3.01 Issuance, Sale and Delivery of Bonds ......... 3.02 Application of Proceeds of Bonds and Developer Fees ............................. (i) T Section Page 5.03 Establishment and Application of Program Fund ............................... 3.04 Validity of Bonds ............................ ARTICLE IV REDEMPTION OF BONDS 4.01 Terms of Ftedemption .......................... 4.02 Selection of Bonds for Redemption ............ 4.04 Partial Redemption ........................... 4.03 "Notice of Redemption ......................... 4.05 Effect of Redemption ......................... ARTICLE V REVENUES AND FUNDS 5.01 Pledge and Assignment; Revenue Fund .......... 5.02 Allocation of Revenues to Funds and Accounts . 5.03 Application of Program Expense Fund .......... 5.04 Application of Bond Fund ..................... 5.05 Deficiencies in the Bond Fund ................ 5.06 Application of Bond Reserve Fund ............. 5.07 Application of Redemption Fund ............... 5.08 Investment; of Moneys in Funds ................ 5.09 Application of Estimated Excess Earnings Account and Excess Earnings Fund ........... ARTICLE VI PARTICULAR COVENANTS 6.01 Punctual Eayment ............................. 6.02 Extension of Payment of Bonds ................ 6.03 Against Encumbrances ......................... Pledge and Assignment ...................... 6.05 Payment of Taxes and Claims .................. 6.04 Power to Issue Bonds and Make 6.06 Accounting Records and Financial Statements .. 6.07 Maintenance of Powers ........................ 6.08 Tax Covena.nts ............................... 6.09 Compliance with Indenture, Contracts, Laws and Regulations ...................... 6.10 Program Cclvenants ........................... 6.11 Waiver of Laws .............................. 6.12 Further Assurances .......................... (ii) , t Section Pag ARTICLE VI1 EVENTS OF DEFAULT AND REMEDIES OF OWNERS 7.01 Events of Default ............................ 7.02 Acceleration of Maturities ................... 7.03 Application of Revenues and Other Funds After Default ........................ 7.04 Trustee to Represent Bondholders ............. 7.05 Owners' Direction of Proceedings ............. 7.06 Limitation on Owners' Right to Sue ........... 7.07 Absolute Obligation of Issuer ................ 7.08 Termination of Proceedings ................... 7.09 Remedies :Not Exclusive ....................... 7.10 No Waiver of Default ......................... ARTICLE VI11 THE TRUSTEE 8.01 Duties, Iinmunities and Liabilities of Trustee ................................. 8.02 Compensation ................................. 8.03 Liability of Trustee ......................... 8.04 Right of Trustee to Rely on Documents ........ 8.05 Preservation and Inspection of Documents ..... 8.06 Reports to Rating Agencies ................... ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE 9.01 Amendments Permitted ......................... 9.02 Effect of Supplemental Indenture ............. 9.03 Endorsement of Bonds; Preparation of New Bonds .................................. 9.04 Amendment of Particular Bonds ................ ARTICLE X DEFEASANCE 10.01 Discharge of Indenture ....................... 10.02 Discharge of Liability on Bonds .............. 10.03 Deposit o:E Money or Securities with Trustee .. 10.04 Payment of Bonds after Discharge of Indenture. (iii) I r Section Page ARTICLE XI MISCELLANEOUS 11-01 Liability of Issuer Limited to Revenues ...... 11.02 Successor is Deemed Included in all References to Predecessor .................. 11.03 Limitation of Rights to Parties and Owners ... 11.04 Waiver of Notice ............................. 11.05 Destruction of Bonds ......................... 11.06 Severability of Invalid Provisions ........... 11.07 Notice to Issuer, Trustee and Standard & Poor's ...................................... 11.08 Evidence of Rights of Owners ................. 11-09 Calculation of Principal Amount of Bonds ..... 11-10 Disqualified Bonds ........................... 11.11 Money Held for Particular Bonds .............. 11.12 Funds and Accounts ........................... 11.13 Article and Section Headings and References ................................. 11.14 Waiver of Personal Liability ................. 11.15 Execution of Several Counterparts ............ Execution ............................................. (iv) I r THIS TRUST INDENTURE is made and entered into as of June 1, 1985, by and between the CITY OF CARLSBAD, CALIFORNIA, a municipal corporation of the State of California (the tt Issuer"), and FIRST INTERSTATE BANK OF CALIFORNIA, a corporation duly organized, existing and authorized to accept and execute trusts of the character herein set out under and by virtue of the laws of the State of California, with its principal office located in Los Angeles, California, as trustee (the "Trustee") . W I T N E S S E T H: WHEREAS, Part 5 of: Division 31 of the Health and Safety Code of the State of California (the "Act") authorizes the Issuer to incur indebtedness for the purpose of financing home mortgages authorized by the Act, and the Act provides a complete, additional and alternative method for doing the things authorized thereby; WHEREAS, the Issuer has determined to engage in a home financing program by purchasing home mortgages made to qualified persons and families from qualified lending institutions pursuant to the Act, and has determined to borrow money for such purpose by the issuance of revenue bonds as authorized by the Act; WHEREAS, the aforesaid revenue bonds are to be issued hereunder in the aggregate principal amount of 15,000,000 for the purpose, among others, of providing moneys to purchase home mortgages and are to he designated as the "City of Carlsbad, California, Single Family Residential Mortgage Revenue Bonds, Issue of 1985"; and WHEREAS, the forms of the bonds, Trustee's certificate of authentication, and assignment to appear thereon are all to be in substantially the following forms, respectively, with necessary and appropriate variations, omissions and insertions as permitted or required by this Indenture, to wit: I f [FORM OF CURRENT INTEREST BOND] Number Amount $ CITY OF CARLSBAD, CALIFORNIA SINGLE FAMILY RESIDENTIAL MORTGAGE REVENUE BOND ISSUE OF 1985 INTEREST RATE ORIGINAL ISSUE DATE MATURITY DATE CUSIP % June 1, 1985 Registered Owner Principal Sum Dollars The CITY OF CARLSBAD, a municipal corporation of the State of California duly organized and existing under the Constitution and laws of the State of California (herein called the "Issuer"), for value received, hereby promises to pay (but only out of the revenues and other assets pledged therefor as hereinafter mentioned) to the registered holder named above, or registered assigns, on the maturity date set forth above, the principal amount specified above in lawful money of the United States of America (subject to any right of prior redemption hereinafter mentioned); and to pay interest thereon in like lawful money (but only from said revenues and assets) from the interest payment date preceding the date of registration of this Bond to which interest has been paid or duly provided for (unless the date of registration of this Bond is an interest payment date, in which event it shall bear interest from such date, or unless the date of registration of this Bond is subsequent to a regular record date (which shall be the fifteenth day of the month preceding an interest payment date) and before the following interest payment date, and if the Issuer shall not default in the payment of interest due on such interest payment date, in which event it shall bear interest from such interest payment date; or unless the date of registration of this Bond is prior to November 16, 1985, in which event it shall bear interest from June 1, 1985) until payment of such principal sum shall be discharged as provided in the Indenture hereinafter mentioned, at the rate per annum mentioned above, payable semiannually on June 1 and December 1 in each year commencing December 1, 1985. The principal (or redemption price) hereof is payable upon surrender hereof at the principal corporate trust office of First Interstate Bank of California (herein called the "Trustee") in Los Angeles, California, and the interest hereon is payable by check or draft mailed to the person in whose name this Bond (or one or 05-30-85 5513p/2062/07 -2- I 1 more predecessor Bonds) is registered as of the close of business on the regular record date preceding the applicable interest payment date (subject to certain exceptions set forth in the Indenture hereinafter referred to) at such person's address as it appears on the registration books of the Trustee. The Bonds are limited obligations of the Issuer and are not a lien or charge upon the funds or property, or an indebtedness or loan of credit, of the Issuer, except to the extent of the aforesaid pledge and assignment. Neither the faith and credit nor the taxing power of the Issuer or of the State of California is pledged to the payment of the principal of or interest on the Bonds. The Bonds are not a debt of the State of California, and said State is not liable for the payment thereof. This Bond is one of a duly authorized issue of bonds of the Issuer designated as the "City of Carlsbad, California, Single Family Residential Mortgage Revenue Bonds, Issue of 1985" (herein called the "Bonds") , in the aggregate principal amount of fifteen million dollars (15,000,000), of varying dates, maturities, interest rates, redemption and other provisions, all issued under the provisions of Part 5 of Division 31 of the Health and Safety Code of the State of California (herein called the "Act"), and pursuant to a resolution of the Issuer adopted on June 4, 1985, and a trust indenture, dated as of June 1, 1985, between the Issuer and the Trustee (herein called the "Indenture"). The Bonds due on December 1, 2017 are designated as Tax Exempt Capital Accumulator Bonds, and all of the other Bonds are designated as Current Interest Bonds. The Bonds are issued for the purpose of providing moneys for the purchase of Loans (as that term is defined in the Indenture). Reference is hereby made to the Indenture (a copy of which is on file at said office of the Trustee) and all indentures supplemental thereto and to the Act for a description of the rights thereunder of the owners of the Bonds, of the nature and extent of the security and provisions for payment of the Bonds, of the rights, duties and immunities of the Trustee and of the rights and obligations of the Issuer thereunder, to all the provisions of which Indenture the owner of this Bond, by acceptance hereof, as,sents and agrees. The Bonds and the interest thereon are payable from Revenues (as that term is defined in the Indenture) and are secured by a pledge and assignment of said Revenues, the proceeds of the sale of the Bonds and the amounts held in the funds and accounts established pursuant to the Indenture (except the Excess Earnings Fund), subject only to the provisions of the Indenture permitting the application thereof for or to the purpose,s and on the terms and conditions set forth in the Indenture. The Bonds are also secured by an assignment of all of the right, title and interest of the 05-30-85 5513p/2062/07 -3- I I Issuer in the Loans arid certain agreements related thereto more particularly described in the Indenture). (as The Bonds are sublject to special mandatory redemption prior to their respective stated maturities: (i) as a whole or in part, on June 1, 1988 from amounts remaining in the Program Fund established pursuant to the Indenture on May 1, 1988, provided, however, that the Trustee may delay such redemption under the circumstances set forth in the Indenture; (ii) as a whole or in part, on any interest payment date, from Revenues deposited in the Redemption Fund established pursuant to the Indenture (except as provided for in (i) hereof); and (iii) as a whole, from amounts held in various funds established pursuant to the Indenture, on any date; in each case under the circumstances prescribed and as provided in the Indenture, at a redemption price equal. to (a) the principal amount thereof and interest accrued thereon to the date fixed for redemption in the case of Current Interest Bonds and (b) the Compound Accreted Value (as set; forth in the Tax Exempt Capital Accumulator Bonds) in the case of Tax Exempt Capital Accumulator Bonds. The Current Interest Bonds due on June 1, 2004 and June 1, 2009 and the Tax Exempt Capital Accumulator Bonds are also subject to redemption prior to their respective stated maturities, on any interest payment date on or after December 1, 1998, and December 1, 2004, respectively, in part, by lot, from mandatory sinkinq account payments established for each such maturity as provided in the Indenture, at a redemption price equal to (a) the: principal amount thereof and interest accrued thereon to the! date fixed for redemption in the case of the Current Interest Eionds and (b) the compound accreted value in the case of Tax Exempt Capital Accumulator Bonds. Notice of any redemption, identifying the Bonds or portions thereof to be redeemed, shall be given by the Trustee not less than ten nor more than sixty days before the date fixed for redemption by mail to each of the registered owners of such Bonds at their respective addresses appearing on the registration books of the Trustee. If this Bond is called for redemption and payment. is duly provided therefor as specified in the Indenture, interest shall cease to accrue or compound hereon from and after the date fixed for redemption. If an Event of Default (as that term is defined in the Indenture) shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect providled in the Indenture. The Indenture provides that in certa.in events such a declaration and its consequences may be rescinded by the registered owners of not 05-30-85 55 13p/2 062/0 7 -4- -5- LO/Z90 Z/dCT 55 58-OE-50 'ainquapu1 ayq UT yqi03 qas A1~n3 aiou s-e TTE 'burpueqsqno '(ainquapu1 ayq UT paprnoid ATssaidxa s-e qdar,xa) ainquapu1 ayq 'ainqUapUI aqq Aq paqsair, uar~ ayq yqj~ Aqri-ed -e uo io oq iorid spuog ayq io3 Aqrinr,as s-e pabpald sqass-e iayqo pu-e sanuanax ayq uo uarx Au-e 30 uorq-eair, ayq qruriad 'quaurpuau~~ io uo~qer,r3rpom yr,ns Lu-e 33a33a oq paxrnbai ST yr,ry~ 30 SI~UMO paiaqsrbai ayq 30 quasuo~ ayq spuoa 30 ab-equar,iad ayq ar,npai (rr) qsaxaqur 30 quaurded 30 aurq ayq puaqxa io 'uoaiay qsaiaqur 30 aq-ei ayq ar,npai io 'puog sryq 30 quauA-ed aqq io3 ainquapu1 ayq UT paprnoid quaurlr-ed qunoa3-e buryurs Aioq-epu-eur Au-e 30 qunoura ayq ar,npai io quaurA-ed 30 aurrq ayq puaqxa io '3oaiay T-edrr,uTid 30 qunoura ayq ampai io 'puoa s~yq 30 Aqrinq-eur pax73 ayq puaqxa (7) ~~-eys quaurpuaure io uor3e~~3rpom y3ns ou q-eyq paprnoid 'ainquapu1 ayq UT paprnoid suriaq ayq uodn pu-e 'quaqxa ayq 03 'iauu-eu~ ayq UT aurq Au-e q-e papuaur-e io pa~jrpour aq Aeu 'aaqsnij ayq 30 pu-e spuoa ayq 30 SJ~UMO paiaqsrbai ayq 30 'ianssI ayq 30 suorqe6rTqo pu-e sqybri ayq pue 'ainquapu1 ayj Uayq SpUOa TIE 30 SJBUMO PaiaqS?bai ayq 30 qUaSUO3 ay-$ qnOyqrM 30 UarT ayq 30 Spuoa ayq 30 SiaUMO PaiaqSrbai ayq anridap 30 10 'JOaiEay iaUM0 p3JaZ)Srb3i ayq 30 Z)UaSUO3 ayq 3nOyqrM 'UOaiay .Ai-eiquoa ayq oq a3rqou Au-e Kq paq3a33-e aq qou ~pys aaqsnij ayq pu-e ianssI ayq pu-e 'sasodind ~1-e io3 3oaiay iau~o aqn1osq-e ayq s-e paiaqsrbai ST puog sryq aureu asoy~ ur uosiad aqq qsaq A-eur aaqsnij ayq pua ianssI ayj -io3aiay abu-eyr,xa UT aaia3su~iq ayq 03 panssr aq TT~M 'qunour-e pue Aqrinq-eur am-es ayq 30 'suorqeupxouap io uorqeurmouap pazrioyqne Au-e 30 'spuog io puoa M~U -e 'ia3su-eiq 30 uorq-eiqsrbai yr,ns uodn -ainquapuI ayq UT paprnoid 'Aue 37: 'sabi-eyr, ayq 30 quauA-ed uodn pu-e suorqeqrurr~ ayq oq qr,aCqns 'iauu-eur ayq UT A~uo qnq '5urqri~ UT pazrioyqna ATnp Aauioqq-e sry Aq io 3oa~ay ~~UMO paiaqsrbai ayq 'Aq paqnr,axa Alnp 'aaqsni;G ayq oq Aioqr,-e3srq-es ~1x03 UT ia3su~iq 30 quaurniqsu!: uaqqri~ -e Aq paru-eduror,r,-e io 'Aq pasiopua ATnp aaqsnq ayq 30 sar,rjjo presax03-e ayq q-e i:a~su-eiq 30 uoqeiqsrbai io3 puog sryq 30 iapuaJins uodn aaqsniJ ayq 30 syooq uorqeiqsrbai aqq uo aTqeiqsrba2 ST puoa sryq 30 ia3su-eiq ay;~ -suo~q-eu~mouap pazyioyqna iayqo 30 Aqrinq-eur awes ayq 30 spuog 30 qunoura ayr~ -e io3 'aaqsni;G ayq 30 ar,rjjo pr-esai03-e ayq 38 pabu-eyr,xa aq A-eu spuog 'ainquapu1 ayq UT paprnoid 'Aue 3r 'sabi-ey~~ ayq 30 quad-ed uodn pu-e suorqeqrmr~ ayq oq qr,aCqnS '3oaiayq aTdrqTnur ~eibaqu!: Au-e pu-e 000'5$ 30 suo~qeu~u~ouap ur suodnor, qnoyqrM spuoa qsaiaqu~ quaiin3 paiaqsrbai A1~n3 s-e A~uo aTq-enssr ai-e puoa s~yq 30 Aqrinq-eu ayq 30 spuoa aqj -ainquapuI ayq oq quensind paururiaqap s-e 'burpueqsqno uayq spuoa ayq 30 anpA paqaiar,y punoduroa 30 qunour-e T-edTr,urid aq-ebai6b-e UT AqrxoC-eur -e u-eyq ssa~ -9- Lo/z9oz/d€rSs S8-OC-SO YJaT3 h?3 :Ls3LLv ( WBS 1 JOdEH La mBs'IaEr3 do ALI3 'S86T: 'sun!? 30 AaP qSJF3 aW 30 Sa TTB 'YJaT3 d3?3 Sq? 30 axnqaubrs a~rurrs3a3 ayq dq paqsaqqa pua a~rurrs3a3 dq uoa~ay pa3npoJdaJ aq 03 pas sqr pua 2oA-e~ sq? 30 saJnqaubrs a~?urrs3~~ ayq dq 3~~yaq sqr uo pua auau sqr UT paqn3axa aq oq puog STW Pasna3 SW aErBST8Er3 30 ALI3 SHL '60383HM SSBNLIM NI -aaqsnq aqq Aq paub~s pua paq-ep uaaq a~ay ~~ays pas~opua uoaxay uop.e3rquayqne 30 aqe3r3rqxa3 aqq Trqun 'asodmd dua 203 AioqabjTqo JO TEA auro3aq JO 'amquapuI ayq Japun 773auaq dua oq pa~qrqua aq qou ~~ays puoa sry~ -aznquapuI aqq Japun panssr aq 03 paqqrwad spuog 30 qunoura ay3 30 ssa3xa ur qou ST pua 'eru~o37~e3 30 aqaqs ayq 30 SMET pua uoqnqyqsuo3 ayq ilq JO 'q~y ayq dq paqy3said qrur?~ Aue paa~xa qou saop 'JanssI aqq 30 ssaupaqqapur ~ayqo -[-~-e yq.~~ ~ayqaboq 'puog sryq 30 qunoure ayq qayq pua 'ep1~03r~e3 30 aqaqs ayq 30 SMBT pua uorqnqqsuo3 ayq dq pue 'qzq ayq dq paxrnbax sa iauuaur pua u~03 'aurq anp UT paur~03~ad uaaq aAEq pup pauadday aAay 'qsrxa puog srqq 30 a3uanss!: ayq UT pua oq quapasazd paur~03~ad uaaq amy oq pu~? pauadday amy oq 'qsrxa oq paxrnbax sq3a pua sburyq 'suoyqrpuo3 1T.e pua dua qayq paqr3ax pua par3rqJa3 Aqazay sr 7.1 -L- LO/Z90Z/dETSS S8-O€-SO pava -sasruraJd ayq UT uorqnqqsqns 30 JaMod ~~n3 s ,paubrs~apun ayq ST? 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Upon such registration of transfer, a new Bond or Bonds, of any authorized denomination or denominations, of the same maturity and amount, will be issued to the transferee in exchange herefor. The Issuer and the Trustee may treat the person in whose name this Bond is registered as the absolute owner hereof for all purposes, and the Issuer and the Trustee shall not be affected by any notice to the contrary. The Indenture, and the rights and obligations of the Issuer, of the registered owners of the Bonds and of the Trustee, may be modified or amended at any time in the manner, to the extent, and upon the terms provided in the Indenture, provided that no such modification or amendment shall (i) extend the fixed maturity of this Bond, or reduce the amount of principal hereof, or extend the time of payment or reduce the amount of any mandatory sinking account payment provided in the Indenture for the payment of this Bond, or reduce the rate of interest hereon, or extend the time of payment of interest hereon, without the consent of the registered owner hereof, or (ii) reduce the percentage of Bonds the consent of the registered owners of which is required to effect any such modification or amendment, permit the creation of any lien on the Revenues and other assets pledged as security for the Bonds prior to or on a parity with the lien created by the Indenture, or deprive the registered owners of the Bonds of the lien of the Indenture (except as expressly provided in the Indenture), without the consent of the registered owners of all Bonds then outstanding, all as more fully set forth in the Indenture. It is hereby certified and recited that any and all conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of this Bond exist, have happened and have been performed in due time, form and manner as required by the Act, and by the Constitution and laws of the State of California, and that the amount of this Bond, together with all other indebtedness of the Issuer, does not exceed any limit prescribed by the Act, or by the Constitution an.d laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall ncst be entitled to any benefit under the Indenture, or become valid or obligatory for any purpose, until the certificate of authentication hereon endorsed shall have been dated and signed by the Trustee. 05-30-85 5513p/2062/07 -11- , IN WITNESS WHEREOF, THE CITY OF CARLSBAD has caused this Bond to be executed in its name and on its behalf by the facsimile signatures of its Mayor and its seal to be reproduced hereon by facsimile and attested by the facsimile signature of its City Clerk, all as of June - , 1985. CITY OF CARLSBAD BY Mayor (SEAL) ATTEST : City Clerk 05-30-85 5513p/2062/07 -12- COMPOUND ACCRETED VALUE PER $5,000 OF MATURITY AMOUNT* Tax Exempt Capital Accumulator Bonds Maturing December 1, 2017 Date Amount Date Amount June 1, 2002 $ December 1, 1985 $ December 1, 2002 June 1, 1986 June 1, 2003 December 1, 1986 December 1, 2003 June 1, 1987 June 1, 2004 December 1, 1987 December 1,2004 June 1, 1988 June 1, 2005 December 1, 1988 December 1, 2005 June 1, 1989 June 1, 2006 December 1, 1989 December 1, 2006 June 1, 1990 June 1, 2007 December 1, 1990 December 1, 2007 June 1, 1991 June 1, 2008 December 1, 1991 December 1, 2008 June 1, 1992 June 1, 2009 December 1, 1992 December 1, 2009 June 1, 1993 June 1, 2010 December 1, 1993 December 1, 2010 June 1, 1994 June 1, 2011 December 1, 1994 December 1, 2011 June 1, 1995 June 1, 2012 December 1, 1995 December 1, 2012 June 1, 1996 June 1, 2013 December 1, 1996 December 1, 2013 June 1, 1997 June 1, 2014 December 1, 1997 December 1, 2014 June 1, 1998 June 1, 2015 December 1, 1998 December 1, 2015 June 1, 1999 June 1, 2016 December 1, 1999 December 1, 2016 June 1, 2000 June 1, 2017 December 1, 2000 December 1, 2017 5,000.00 June 1, 2001 December 1, 2001 * The Compound Accreted Value per $5,000 of maturity amount as of any date other than those specified hereinabove shall be the sum of (a) the Compound Accreted Value as of the last of the dates specified hereinabove which is prior to the date as of wh:Lch the calculation is being made, plus (b) interest thereon to the date as of which the calculation is being made at an annual rate of %- 05-30-85 5513p/2062/07 -13- , [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Bonds described in the within-mentioned Indenture; and this certificate is dated First Interstate Bank of California, as Trustee By : Authorized Officer [FORM OF ASSIGNMENT] For value received the undersigned do(es) hereby sell, assign and transfer unto the within-mentioned registered Bond and hereby irrevocably constitute(s) and appo i nt ( s ) attorney, to transfer the same on the books of the Trustee with full power of substitution in the premises. as the undersigned's - Dated NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal of, and the interest and premium, if any, on, all Bonds at any time issued and outstanding under this Indenture, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the registered owners thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the Issuer does hereby covenant and agree with the Trustee, for the benefit of the respective registered owners from time to time of the Bonds, as follows: 05-30-85 5 5 13 p/2 0 62 /O 7 -14- I ARTICLE I AUTHORITY FOR BONDS; EQUAL SECURITY; DEFINITIONS SECTION 1-01. Due Authorization. The Issuer has reviewed all proceedings heretofore taken relative to the authorization of the Bonds and has found, as a result of such review, and does hereby find and determine, that each and all of the matters hereinabove recited are true and correct, and the Issuer has duly and regularly complied with all applicable provisions of law and is duly authorized by law to execute this Indenture and to issue the Bonds for the purpose, in the manner and upon the terms in this Indenture provided. SECTION 1.02. Equal Security. The pledge made in this Indenture and the provisions, covenants and agreements herein set forth to be performed by or on behalf of the Issuer or the Trustee shall be for the equal and proportionate benefit, security and protection of the Owners from time to time of the Bonds, without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of number or date thereof or time of issue, sale, execution, authentication, delivery or maturity thereof or otherwise for any cause whatsoever, except as expressly provided in or permitted by this Indenture. SECTION 1.03. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of this Inde:nture, and of any indenture supplemental hereto and of any certificate, opinion or other document herein mentioned, have the meanings herein specified, to be equally applicable to both the singular and plural forms of any of the terms herein defined. Unless otherwise defined in this Indenture, all terms used herein shall have the meanings assigned to such terms in the Act. Act - "Act" means Part 5 of Division 31 of the Health and Safety Code of the State of California, as now in effect and as it may from time to time hereafter be amended or supplemented. Agreement II Agreement" means any of the Mortgage Sale and Service Agreements among the Issuer, the Trustee, the Compliance Agent, and a Lending Institution, and all amendments or supplements thereto. Bond Fund "Bond Fund" means the fund by that name established pursuant to Section 5.01. 05-30-85 5513p/2062/07 -15- Bond Reserve Fund ''Bond Reserve Fund" means the fund by that name established pursuant to Section 5.01. Bond Reserve Fund Requirement "Bond Reserve Fund Requirement" means an amount equal to two percent (2%) of the principal amount of the Loans outstanding as of any date of calculation. Bond Year "Bond Year" means the period of twelve consecutive months ending on the first day of June in any year in which Bonds are or will be Outstanding. Bonds, Serial Bonds, Term Bonds "Bonds" means the City of Carlsbad, California, Single Family Residential Mortgage Revenue Bonds, Issue of 1985 authorized by, and at any time Outstanding pursuant to, this Indenture. "Serial Bonds" means the Bonds, falling due by their terms in specified years, for which no Mandatory Sinking Account Payments are provided. "Term Bonds" means the Bonds payable at or before their specified maturity date or dates from Mandatory Sinking Account Payments established for that purpose and calculated to retire such Bonds on or before their specified maturity date or dates. Certificate, Statement, Request, Requisition, or Order of the Issuer or a Lending Institution "Certificate, It "Statement, It "Request, If "Requisition" and "Order" mean, respectively, a written certificate, statement, request, requisition or order executed as follows: (1) if of the Issuer, by the Mayor, the City Manager, the Director of Building and Planning, or such other person as may be designated and authorized to sign for the Issuer, (2) if of a Lending Institution, by such person as may be designated and authorized to sign for or such Lending Institution, as the case may be. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section 1-04, each such instrument shall include the statements provided for in Section 1.04. 05-30-85 5513p/2062/07 -16- L Code "Code" means the Internal Revenue Code of 1954, as amended, and all regulations and rulings promulgated thereunder. Compliance Agent "Compliance Agent" means the entity designated as such in the Agreements. Compound Accreted Value "Compound Accreted Value" means, with respect to any particular redemption date, the amount set forth on the Table of Compound Accreted Values (which is included herein as part of the form of Tax Exempt Capital Accumulator Bond). Costs of Issuance "Costs of Issuance" means all administrative fees of the Issuer and items of expense directly or indirectly payable by or reimbursable to the Issuer and related to the authorization, issuance, sale and delivery of the Bonds, including but not limited to advertising and printing costs, costs of preparation and reproduction of documents, filing and recording fees, initial fees and charges of any insurer, the Issuer, the Compliance Agent and the Trustee, (including fees and charges for services through the first Bond Year), legal fees and charges, fees and disbursements of consultants and professionals, rating agency fees, fees and charges for preparation, execution, transportation and safekeeping of Bonds and any other cost, charge or fee in connection with the original issuance of Bonds. Current Interest Bond "Current Interest Bond" means any Bond other than a Tax Exempt Capi t a 1 Ac cumul- at o r Bond. Deve 1 ope r "Developer" means any person engaged in the construction of Residences who is a party to a Developer Agreement. Developer Agreement Developer Agreement" means an agreement between a Developer and the Issuer regarding the construction or development by the Developer of, and the reservation of funds for the making of Loans for, Residences. If 05-30-85 5 5 13p/2 0 62/0 7 -17- ? Developer Fees Developer Fees" means the fees paid to the Issuer by the 11 Developers pursuant to the Developer Agreements. Developer Reservation "Developer Reservation" means the aggregate principal amount of Loans allocated to a given Developer by the Issuer pursuant to the Program and the respective Developer Agreement. Estimated Excess Earnings "Estimated Excess Earnings" means the Excess Earnings which the Trustee estimates, as of each May 1 and November 1, will be earned during the Semiannual Debt Service Period for which the estimate is being made. Estimated Excess Earnings Account "Estimated Excess Earnings Account" means the account by that name established pursuant to Section 5.01. Estimated Maximum Earnings "Estimated Maximum Earnings" means the Maximum Earnings which the Trustee esti.mates, as of each May 1 and November 1, will be applicable to the Semiannual Debt Service Period for which the estimate is being made. Event of Default "Event of Default" means any of the events specified in Section 7.01. Excess Earnings Excess Earnings" means earnings on investments held hereunder (exclusive of Loans), including unrealized gains and losses upon the retirement of the last Outstanding Bond, during the period for which the calculation is being made which are in excess of the sum of (i) Maximum Earnings (calculated on the basis of semiannual compounding), (ii) actual losses on Loans and (iii) in the first Bond Year, the amount of $ (the so-called "unused subparagraph (2) amount" as such term is used in Section 103A of the Code), and in each Bond Year thereafter, any portion of such amount not taken into account in any previous Bond Year. 11 05-30-85 5513p/2062/07 -18- I Excess Earnings Fund Excess Earnings Fund" means the fund by that name If established pursuant to Section 5.01. Financial Newspaper or Journal "Financial Newspaper or Journal'' means The Wall Street Journal or The Bond Buyer or any other newspaper or journal containing financial news, printed in the English language, customarily published on each business day and circulated in Los Angeles, California, and New York, New York, and selected by the Trustee, whose decision shall be final and conclusive. Fiscal Year "Fiscal Year" means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve-month period hereafter selected and designated as the official fiscal year period of the Issuer. Impound Payments "Impound Payments" means all deposits made by a Mortgagor in order to obtain or maintain mortgage insurance or guarantees or fire and other hazard insurance or any federal, state or local program subsidy with respect to a Loan or the premises relating thereto, and deposits required to be made with respect to taxes and other governmental charges or similar charges customarily required to be deposited in advance by a Mortgagor and impounded pending their payment for the item or items for which the deposits were impounded. Interest Payment Date "Interest Payment Date" means each June 1 and December 1, commencing December 1, 1985. Indenture "Indenture" means this Indenture, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture. Investment Agreement "Investment Agreement" means one or more agreements in form and substance satisfactory to the Issuer, dated as of the date on which the Bonds are issued, by and between the Trustee and sale of the Bonds may be invested. pursuant to which the proceeds from the 05-30-85 5 5 13p/2 0 62/0 7 -19- Investment Securities "Investment Securities" means any of the following which at the time are legal investments under the laws of the State of California for moneys held hereunder and then proposed to be invested therein: (1) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of -the Department of the Treasury of the United States of America) or obligations the principal of and interest on which are guaranteed by the United States of America; (2) obligations, debentures, notes or other evidence of indebtedness the payment of which is secured by the full faith and credit of the United States of America; (3) certificates of deposit with any bank or savings and loan association the unsecured debt securities of which carry the highest rating by Moody's Investors Service, Inc. and Standard & Poor's Corporation; and (4) the Investment Agreement. Issuer "Issuer" means the City of Carlsbad, a municipal corporation of the State of California, duly organized and existing under the Constitution and laws of the State of California. Lending Institution "Lending Institution" means any financial institution identified as such in, and which is a party to, an Agreement and its successors and assigns pursuant thereto. Loan "Loan" means a loan, evidenced by a Note secured by a first lien Mortgage, which meets the requirements of the Agreement and which the Trustee, on behalf of the Issuer, has purchased or intends to purchase from a Lending Institution pursuant to the Agreement. Loan Principal Prepayments It Loan Principal Prepayments" means all amounts received by the Issuer or the Trustee representing recovery of the principal amount of any Loan (exclusive of regularly scheduled principal payments) as a result of (1) any prepayment of the principal amount of any Loan, less the amount retained by any Lending Institution as servicer of such Loan as additional compensation on account of such prepayment; (2) the sale, assignment or other disposition of any Loan; (3) the acceleration of any Loan (on account of default or any other cause) or the foreclosure or sale under deed of trust or other proceedings taken in the event of default of any Loan; and (4) 05-30-85 5513p/2062/07 -20- v compensation for losses incurred with respect to any Loan from the proceeds of condemnation, title insurance, hazard insurance, mortgage insurance or guarantees (whether received in the form of moneys or as debentures or certificates issued pursuant to a contract of insurance), exclusive of amounts recovered in respect of such losses to the extent required to be otherwise applied pursuant to the applicable contract of insurance. Mandatory Sinking Account Payment "Mandatory Sinking Account Payment" means, as of any date of calculation, the amount required by Section 5.04(C) to be paid by the Issuer on a given date for the retirement of Term Bonds. Maximum Earnings "Maximum Earnings" means the product of an interest rate equal to the Yield on the Bonds multiplied by the average daily balance of amounts held hereunder in investments other than Loans during the period for which the calculation is being made, calculated on the basis of semiannual compounding. Mortgage "Mortgage" means a deed of trust, mortgage or other similar instrument or instruments creating a first lien (subject to certain permitted encumbrances) on the real property and the improvements thereon securing a Loan. Mortgagor II Mortgagor" means the maker of, and any other party obligated on, a Note in connection with the acquisition of a Residence through the borrowing of money pursuant to a Loan who has or will have an ownership interest in the Residence and shall also include, where appropriate, a subsequent purchaser of a Residence who purchased such Residence subject to the related Mortgage and who meets the applicable requirements of the Code, the Act and the Program. Note "Note" means the promissory note or other document or documents evidencing the obligation to repay a Loan. Notice of Fee, Rate and Allocation "Notice of Fee, Rate and Allocation" means a notice from the Issuer to the Trustee and others specifying, among other things, the Yield on the Bonds, which notice shall be provided within thirty days after the issuance of the Bonds. 05 - 30- 85 55 13p/2 0 62/07 -21- Outstanding "Outstanding" when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.09) all Bonds theretofore, or thereupon being, authenticated and delivered by or on behalf of the Trustee under this Indenture except (1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Bonds with respect to which all liability of the Issuer shall have been discharged in accordance with Section 10.02, including Bonds (or portions of Bonds) referred to in Section 11.10; and (3) Bonds for the transfer or exchange of or in lieu of or in substitution for whic:h other Bonds shall have been authenticated and delivered by or on behalf of the Trustee pursuant to this Indenture. Owner "Owner" means the Person in whose name a Bond is registered in the registry maintained by the Trustee. Person "Person" means an individual, corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. Program If Program" means the Issuer's program of purchasing Loans pursuant to this Indenture, the Act and the rules and regulations adopted by the Board, as such rules and regulations may from time to time be amended or supplemented. Program Expense Fund "Program Expense Fund" means the fund by that name established pursuant to Section 5.01. Program Expense Fund Requirement "Program Expense Fund Requirement" means, as of any date of calculation, such amount as may at any time and from time to time be fixed or determined by the Trustee, with notice thereof to the Issuer, as necessary to be accumulated in the Program Expense Fund as a reserve for the uses to which amounts in such fund may be applied pursuant to Section 5.03. Program Fund "Program Fund" means the fund by that name established pursuant to Section 3.03. 05-30-85 5513p/2062/07 -22- 1 Qualified Program Expenses "Qualified Program Expenses" means the following of the Issuer's expenses in carrying out and administering the Program, set forth in their order of priority: (1) fees and expenses of the Trustee, (2) insurance premiums with respect to the special hazard insurance required to be maintained pursuant to Section 6.10(C), (3) the annual fee of the Compliance Agent, and (4) fees and expenses of the Issuer (but only to the extent paid or incurred in connection with the preparation of financial reports required pursuant to Section 6.06 plus a monthly administrative fee equal to one-twelfth (1/12) of one-tenth of one percent (0.10%) of the principal amount of Mortgage Loans outstanding each month). Redemption Fund "Redemption Fund" means the fund by that name established pursuant to Section 5,Ol. Redemption Price "Redemption Price'' means, with respect to any Current Interest Bond (or portion thereof if less than all of such a Bond is to be redeemed), the principal amount of such Bond (or portion) plus accrued interest thereon to the date fixed for redemption and, with respect to any Tax Exempt Capital Accumulator Bond (or portion thereof if less than all of such a Bond is to be redeemed), the Compound Accreted Value thereof to the date fixed for redemption, in each case without premium. Regular Record Date "Regular Record Date" means the close of business on the fifteenth day of the month preceding each Interest Payment Date, whether or not such fifteenth day is a business day. Residence "Residence" means real property and improvements thereon consisting of a single family detached or attached (condominium, rowhouse, townhouse) residential unit (but not including a mobile home, that is, a residence transportable in one or more sections built on a chassis) which can reasonably be expected to become the principal residence of the mortgagor within a reasonable period of time (which shall not exceed 60 days) after the Loan is made to the Mortgagor and which is located within the unincorporated area of the Issuer or within the corporate limits of a Participating City. 05-30-85 5513p/2062/07 -23- Revenues ll Revenues" means all amounts received by the Issuer or the Trustee from or with respect to any Loan, any Agreement, any Developer Agreement or any policy of insurance on or with respect to any Loan, including, without limiting the generality of the foregoing, scheduled payments of principal and interest required pursuant to any Loan and paid from any source (including both timely and delinquent payments), Loan Principal Prepayments, and all interests, profits or other income derived from the investment of amounts in any fund or account established pursuant to this Indenture (except the Excess Earnings Fund), but shall not include (1) Impound Payments, (2) any amount retained by any Lending Institution (other than the Issuer) as a servicing fee or other compensation, and (3) Excess Earnings. Revenue Fund "Revenue Fund" means the fund by that name established pursuant to Section 5.01. Semiannual Debt Service Period "Semiannual Debt Service Period" means the period from December 1 through May 31 of the following year and the period from June 1 through November 30 in any year in which there are Bonds Outstanding. Supplemental Indenture "Supplemental Indenture" means any indenture hereafter duly authorized under and in compliance with the Act, and entered into between the Issuer and the Trustee, supplementing, modifying or amending this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. Tax Exempt Accumulator Bond "Tax Exempt Capital Accumulator Bond" means any Bond due on December 1, 2018. Trustee "Trustee" means First Interstate Bank of California, a national banking association organized and existing under the laws of the United States of America having a corporate trust office in Los Angeles, California, or its successor, as Trustee hereunder as provided in Section 8.01. 05-30-85 55 13p/2 062/07 -24- I Yield on the Bonds "Yield on the Bonds" means the yield thereon as determined by the Issuer to be percent in accordance with the Code and as specified by the Issuer in a Notice of Fee, Rate and Allocation. SECTION 1.04. Content of Certificates and Opinions. Every certificate or opinion provided for in this Indenture 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 Issuer or a Lending Institution may be based, insofar as it relates to legal, accounting or Program matters, upon a certificate or opinion of or representation by counsel, accountant or program 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 or statement may be based, as aforesaid, is erroneous or misleading. Any such certificate or opinion made or given by counsel, accountant or program consultant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Issuer or a Lending Institution) upon a certificate or opinion of or representation by an officer of the Issuer or the Lending Institution, unless such counsel, accountant or program 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 representations may be based, as aforesaid, is erroneous or misleading. The same officer of the Issuer or a Lending Institution, or the same counsel or accountant or program consultant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Indenture, but different officers, counsel, accountants or program consultants may certify to different matters, respectively. 05-30-85 55 13p/2 062/07 -25- L ARTICLE I1 THE BONDS SECTION 2.01. Authorization of Bonds. An issue of bonds to be issued hereunder in order to obtain moneys to carry out the Program is hereby created. Such bonds are designated as the "City of Carlsbad, California, Single Family Residential Mortgage Revenue Bonds, Issue of 1985." The aggregate principal amount of Bonds which may be issued and Outstanding under this Indenture shall not exceed fifteen million dollars (15,000,000). SECTION 2.02. Terms of the Bonds. The Bonds shall be issued only as fully registered Bonds without coupons in the denomination of $5,000 principal amount, or any integral multiple thereof, in the case of Current Interest Bonds, the initial amount of $ or any respective integral multiple thereof, Exempt Capital Accumulator Bonds. shall be assigned a different initial letter designation, commencing with the letter "A" for the first maturity and proceeding in consecutive alphabetical order for the remaining maturities; and the Bonds within each maturity shall be numbered in consecutive numerical order from 1 upwards. The Current Interest Bonds shall be dated as of June 1, 1985, and interest thereon shall be payable semiannually on the Interest Payment Dates in each year as hereinafter provided. Each Current Interest Bond shall bear interest from the Interest Payment Date next preceding the date of registration thereof unless: (i) it is registered as of an Interest Payment Date, in which event it shall bear interest from such date; or (ii) unless it is registered after a Regular Record Date and before the following Interest Payment Date and if the Issuer shall not default in the payment of interest due on such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (iii) unless it is registered prior to November 16, 1985, in which event it shall bear interest from June 1, 1985; provided, however, that if, as of the date of registration of any Current Interest Bond, interest is in default on Outstanding Bonds, bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on the Outstanding Bonds. and in ($5,000 maturity amount) in the case of Tax Each maturity of the Bonds such Bond shall The Tax Exempt Capital Accumulator Bonds shall be dated as of the date of issuance thereof and shall bear interest from such date payable only at maturity or upon redemption in advance of maturity, the total amount of principal and interest payable thereupon to be determined by reference to the Table of 05-30-85 55 13p/2 062/07 -26- Compound Accreted Values which is set forth as part of the form of Tax Exempt Capital Accumulator Bond. The Current Interest Bonds shall mature on the following dates, in the following amounts, and shall bear interest at the following rates per annum: Maturity Principal ' Interest Date Amount Rate December 1, 1986 June 1, 1987 December 1, 1987 June 1, 1988 December 1, 1988 June 1, 1989 December I, 1989 June 1, 1990 December 1, 1990 June 1, 2004 December 1, 2009 The Tax Exempt Capital Accumulator Bonds shall mature on December 1, 2017 in the principal amount of $ and shall bear interest at the rate of percent per annum, subject ot rounding as shown on the Table of Compound Accreted Values set forth thereon. The principal or Redemption Price of the Bonds and the interest on the Tax Exempt Capital Accumulator Bonds shall be payable in lawful money of the United States of America at the principal corporate trust office of the Trustee, in Los Angeles, California. Payment of the interest on each Current Interest Bond which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be made to the Person whose name appears on the bond registration books of the Trustee as the registered Owner thereof on the Regular Record Date preceding such Interest Payment Date, such interest to be paid by check or draft mailed to the registered Owner at his address as it appears on such registration books or at such address as he may have filed with the Trustee for that purpose. Any interest on any Current Interest Bond which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Owner on the relevant Regular Record Date by virtue of having been such Owner; and such Defaulted Interest shall be paid to the person in whose name such Bond (or its respective predecessor Bonds) 05-30-85 5 5 13 p/2 0 62/0 7 -27- 4 is registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Issuer shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Issuer of such special record date and shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class, postage prepaid, to each Owner at his address which appears in the bond registration books not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the person in whose name the Bond (or its respective predecessor Bonds) is registered on such special record date. The Bonds shall be subject to redemption as provided in Article IV. SECTION 2.03. Execution of Bonds. The Bonds shall be executed in the name and on behalf of the Issuer with the manual or facsimile signatures of its Mayor, under its seal attested by the manual or facsimile signature of its City Clerk. Such seal may be in the form of a facsimile of the Issuer's seal and may be reproduced, imprinted or impressed on the Bonds. The Bonds shall then be delivered to the Trustee for authentication by it. In case any of the officers who shall have signed or attested any of the Bonds shall cease to be such officer or officers of the Issuer before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee or issued by the Issuer, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Issuer as though those who signed and attested the same had continued to be such officers of the Issuer, and also any Bond may be signed and attested on behalf of the Issuer by such Persons as at the actual date of execution of such Bond shall be the proper officers of the Issuer although at the nominal date of such Bond any such Person shall not have been such officer of the Issuer. 05-30-85 5513p/2062/07 -28- Only such of the Bonds as shall bear thereon a certificate of authentication in the form hereinbefore recited, manually executed by or on behalf of the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Indenture. SECTION 2.04. Transfer of Bonds. The transfer of any Bond is registrable on the books required to be kept pursuant to Section 2.06 upon the surrender of such Bond for registration of transfer at the principal corporate trust office of the Trustee in Los Angeles, California, accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by the Owner or by his attorney duly authorized in writing. Whenever any Bond or Bonds shall be surrendered for transfer, the Issuer shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds, of the same maturity and for a like aggregate principal amount. The Trustee shall require the payment by the Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer and may require the payment of a charge equal to the customary fee charged by the Trustee for such transfers. SECTION 2.05. Exchange of Bonds. Bonds may be exchanged at the aforesaid offices of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations of the same maturity. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange and may require the payment of a charge equal to the customary fee charged by the Trustee for such exchanges. SECTION 2.06. Bond Register. The Trustee will keep or cause to be kept, at its principal corporate trust office in Los Angeles, California, sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the Issuer; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such books, Bonds as hereinbefore provided. SECTION 2.07. Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. Any temporary Bond may be printed, lithographed or typewritten, shall be of such denomination as may be determined by the Issuer, shall be in 05-30-85 5513p/2062/07 -29- registered form without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. A temporary Bond may be in the form of a single fully registered Bond payable in installments, each on the date, in the amount and at the rate of interest established for the Bonds maturing on such date. Every temporary Bond shall be executed by the Issuer and be authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Issuer issues temporary Bonds it will execute and furnish definitive Bonds without delay, and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the principal corporate trust office of the Trustee in Los Angeles, California, and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations of the same maturity. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds authenticated and delivered hereunder. SECTION 2.08. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Issuer, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and number in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by it and delivered to, or upon the Order of, the Issuer. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Issuer and the Trustee and, if such evidence be satisfactory to both and indemnity satisfactory to both shall be given, the Issuer, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Issuer may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under this Section and of the expenses which may be incurred by the Issuer and the Trustee in the premises. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Issuer whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitl-ed to the benefits of this Indenture with all other Bonds secured by this Indenture. 05-30-85 55 13p/2 0 62/0 7 -30- t ARTICLE I11 ISSUE OF BONDS; PURCHASE OF LOANS SECTION 3.01. Issuance, Sale and Delivery of Bonds. Upon the sale and execution thereof by the Issuer, the Trustee shall authenticate and deliver, or cause to be authenticated and delivered, to or upon the Order of the Issuer, Bonds in the aggregate principal amount of fifteen million dollars (15,000,000). SECTION 3.02. Application of Proceeds of Bonds, Lending Institution Contribution and Developer Fees. (A) The proceeds received by the Issuer from the sale of the Bonds shall be deposited in trust with the Trustee, who shall forthwith set aside such proceeds in the following respective funds and amounts: (1) in the Bond Reserve Fund, $ I plus accrued interest received upon the sale and delivery of the Bonds; and (2) in the Program Fund, the remainder of said proceeds. (B) On the date of issuance of the Bonds, the Issuer shall transfer the Developer Fees to the Trustee, and the Trustee shall deposit the same in the Program Fund. On said date the Trustee shall also deposit in the Program Fund the fee, if any, paid by the Lending Institution in connection with its participation in the Program and the premium and prepaid interest, if any, received by it in connection with the initial investment of the Bond proceeds pursuant to the Investment Agreement. SECTION 3.03. Establishment and Application of Program Fund. (A) The Trustee shall establish, maintain and hold in trust a separate fund designated as the "Program Fund." Moneys in the Program Fund shall be used and withdrawn, as provided in this Section, solely for the (1) purchase of Loans, (2) payment of Costs of Issuance of the Bonds, and (3) purchase or redemption of Bonds, all as hereinafter provided. (B) The Trustee shall disburse moneys in the Program Fund for the purchase of Loans only upon Requisition of the Issuer and a Lending Institution, as hereinafter provided. Such Requisition shall identify (by Mortgagor, principal amount and location of property) each Loan to be purchased and shall state with respect to each such Loan the amount to be paid, the Lending Institution to whom payment is to be made, the date on which such payment is to occur, the Lending Institution which is to service each such Loan and that each such Loan is 05-30-85 5513p/2062/07 -31- authorized to be purchased by the Issuer under the Act (as in force on the date of issuance of the Bonds or on the date of such Requisition), the Program and this Indenture. Such Requisition may provide that disbursement for the purchase of any particular Loan shall be from an escrow account established for such purpose, in which case such Requisition shall, in addition to the foregoing, state the number and holder of said escrow account, and the Trustee shall transfer the amount requisitioned with respect to such Loan to said escrow account. Prior to any disbursement being made to a Lending Institution for the purchase of any particular Loan (whether from the Program Fund or from an escrow account), the Trustee shall have received the documentation required for such Loan under the applicable Agreement. The Trustee shall maintain or cause to be maintained accurate records of all such Requisitions for the purchase of Loans and of all Loans purchased pursuant thereto, and shall file or cause to be filed with the Issuer annually, or more frequently upon Request of the Issuer (but not more frequently than quarterly), a schedule of all such Loans, identifying each Loan by reference to the name of the Mortgagor, the address of the applicable property, the Lending Institution by whom such Loan was originated, the Lending Institution servicing such Loan, the outstanding principal balance on such Loan as of the date of purchase and as of the date of said schedule, the interest rate on and maturity date of such Loan and whether such Loan is then in default. (C) The Trustee shall disburse moneys in the Program Fund to pay Costs of Issuance of the Bonds only upon Requisition of the Issuer stating the Person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund; provided, however, that the aggregate amount of such disbursements shall not exceed $ (D) Any amounts remaining in the Program Fund on May 1, 1988, or such later date as the Trustee may designate pursuant to the provisions of this paragraph, shall be transferred to the General Account of the Redemption Fund on the last day of the Semiannual Debt Service Period during which such date occurs. The Trustee shall designate a date later than May 1, 1988 for the purposes of this paragraph if prior to May 1, 1988 it receives an Order of the Issuer directing it to do so and specifying the later date to be so designated which Order is accompanied by: (i) an opinion of counsel acceptable to the Trustee to the effect that such change of dates will not cause the interest on the Bonds to become taxable for federal income tax purposes, and (ii) an acknowledgement from Standard & Poor's Corporation (or such other evidence as may be satisfactory to the Trustee) that such change of dates will not adversely affect the rating of the Bonds. 05-30-85 5513p/2062/07 -32- SECTION 3.04. Validity of Bonds. The validity of the authorization and issuance of the Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the Issuer or the Trustee with respect to the purchase of any Loan or by the failure to purchase Loans. The recital contained in the Bonds that the same are issued pursuant to the Act and the Constitution and laws of the State of California shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance. ARTICLE IV REDEMPTION OF BONDS SECTION 4.01. Terms of Redemption. (A) The Bonds are subject to special mandatory redemption prior to their respective stated maturities at their respective Redemption Prices: (a) as a whole or in part, on June 1, 1988 from amounts transferred from the Program Fund to the General Account of the Redemption Fund pursuant to Section 3.03(D) (provided that if, pursuant to said Section, the Trustee shall designate a date later than May 1, 1988 as of which any amounts remaining in the Program Fund are to be transferred to the General Account of the Redemption Fund, then Bonds shall be redeemed from such amounts on the earliest date subsequent to such transfer with respect to which notice of redemption can be timely given); (b) as a whole or in part, under the circumstances prescribed in Section 5.02, on any Interest Payment Date from Revenues deposited in the General Account of the Redemption Fund; (c) as a whole or in part, under the circumstances prescribed in Section 5.07 on any Interest Payment Date from Loan Principal Prepayments deposited in the Loan Principal Prepayment Account of the Redemption Fund as provided in Section 5.02; (d) as a whole on any date whenever the moneys in the Revenue Fund, the Bond Fund, the Bond Reserve Fund, and the Redemption Fund, less the portion of said sum required to be set aside and disbursed pursuant to Section 5.09, will equal the Redemption Price of all Outstanding Bonds plus any Qualified Program Expense the payment for which has not been provided. In the event that Bonds are to be specially redeemed in part under the circumstances described in (a) and (b) above, the amount of Bonds of each maturity to be so redeemed shall be determined by the Trustee as nearly as practicable by multiplying the total amount of moneys available for such redemption by the ratio which the principal amount or Compound Accreted Value, as the case may be, of Bonds of each maturity then Outstanding bears to the principal amount and/or Compound Accreted Value of all Bonds then Outstanding. In the event Bonds are to be specially redeemed under the circumstances 05-30-85 5513p/2062/07 -33- described in (c) above, first, the Current Interest Bonds maturing June 1, 2004 shall be redeemed; then the Current Interest Bonds shall be redeemed, on a reasonably proportionate basis from among all the then Outstanding maturities of such Bonds as described hereinabove; finally, the Tax Exempt Capital Accumulator Bonds shall be redeemed. The Bonds within each such maturity to be redeemed shall be selected by lot pursuant to Section 4.02. (B) Bonds due on June 1, 2004 and December 1, 2009, and the Tax Exempt Capital Accumulator Bonds are also subject to redemption prior to their respective stated maturities, on any Interest Payment Date on or after June 1, 1998, December 1, 2004 and June 1, 2010, respectively, in part, by lot, from Mandatory Sinking Account Payments established for each such maturity in Section 5.,04(C), at their respective Redemption Prices. SECTION 4.02. Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of a portion of a maturity of the Bonds by lot, the Trustee shall select the Bonds to be redeemed, from all Bonds of such maturity not previous]-y called for redemption, by lot in any manner which the Trustee in its sole discretion shall deem appropriate and fair. For purposes of such selection, Current Interest Bonds shall be deemed to be composed of $5,000 portions, Tax Exempt Capital Accumulator Bonds shall be deemed to be composed of the respective portions of initial amount per $5,000 maturity amount set forth in the table provided in Section 2.02 hereof, and in either case any such portion may be separately redeemed. The Trustee shall promptly notify the Issuer in writing of the Bonds or portions thereof so selected for redemption. SECTION 4.03. Notice of Redemption. Notice of redemption shall be mailed, not less than ten nor more than sixty days prior to the redemption date, to the respective Owners of any Bonds, or portions thereof, designated for redemption at their addresses appearing on the bond registration books of the Trustee. Each notice of redemption shall state the redemption date, the place or places of redemption, the maturities to be redeemed, and, if less than all of any such maturity, the numbers of the Bonds of such maturity to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal or initial amount thereof to be redeemed, and shall also state that on said date there will become due and payable on each of said Bonds the Redemption Price thereof or of said specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered with a written instrument of transfer 05-30-85 5513p/2062/07 -34- duly executed by the registered Owner thereof or by his attorney duly authorized in writing. Neither the failure to mail such notice to a particular Owner nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of Bonds owned by any other Person. Notice of redemption of Bonds shall be given by the Trustee for and on behalf of the Issuer. Such notice shall be deemed to have been given when mailed, first class postage prepaid, to the Owner of a Bond, a portion thereof, as provided for hereinabove. SECTION 4.04. Partial Redemption. Upon surrender of any Bond redeemed in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Issuer, a new Bond or Bonds of authorized denominations, and of the same maturity, equal in aggregate principal amount to the unredeemed portion of the Bond surrendered. SECTION 4.05. Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys being held by the Trustee for payment of the Redemption Price of the Bonds (or portions thereof) so called for redemption on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable at the Redemption Price specified in such notice and interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of said Redemption Price. All Bonds redeemed pursuant to the provisions of this Article shall be cancelled upon surrender thereof and delivered to or upon the Order of the Issuer. ARTICLE V REVENUES AND FUNDS SECTION 5.01. Pledge and Assignment; Revenue Fund. (A) Subject only to the provisions of this Indenture permitting the application thereof for or to the purposes and on the terms and conditions set forth herein, there are hereby pledged to secure the payment of the principal of and interest on the Bonds in accordance with their terms and the provisions of this Indenture, all of the Revenues, all of the proceeds of the Bonds and any other amounts held in any fund or account established pursuant to this Indenture (exclusive of the Excess Earnings Fund). Said pledge shall constitute a lien on and 05-30-85 5 5 13p/2 0 62/0 7 -35- security interest in such assets and shall attach, be perfected and be valid and binding from and after delivery by the Trustee of the Bonds, without any physical delivery thereof or further act. (B) The Issuer hereby transfers in trust, grants a security interest in and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds all of the Revenues and other moneys pledged in subsection (A) of this Section and all of the right, title and interest of the Issuer in each Loan, Agreement and Developer Agreement (including all agreements entered into under each Agreement and Developer Agreement). The Trustee shall be entitled to and shall collect and receive all of the Revenues, and any Revenues collected or received by the Issuer shall be deemed to be held, and to have been collected or received, by the Issuer as the agent of the Trustee and shall forthwith be paid by the Issuer to the Trustee. (C) The Trustee shall establish, maintain and hold in trust the following special funds: ( 1) the Revenue Fund, (2) the Estimated Excess Earnings Account, (3) the Excess Earnings Fund, (4) the Program Expense Fund, (5) the Bond Fund, (6) the Bond Reserve Fund, and (7) the Redemption Fund consisting of the General Account and the Loan Principal Prepayments Account. All Revenues and Excess Earnings prior to their deposit in the Excess Earnings Fund shall be promptly deposited by the Trustee upon receipt thereof in the Revenue Fund except as provided in Section 3.02(B) and except that all Loan Principal Prepayments shall be deposited in the Loan Principal Prepayment Account of the Redemption Fund. in trust for the benefit of the Owners at any time of the Bonds, and the Issuer shall have no beneficial right or interest in any of such moneys, except as in this Indenture provided. All Revenues deposited with the Trustee shall be held, disbursed allocated and applied by the Trustee only as provided in this Indenture. All Revenues shall be held by the Trustee SECTION 5.02. Allocation of Revenue to Funds and Accounts. The Trustee shall transfer from the Revenue Fund, and deposit into one or more of the following respective funds on the last day of each Semiannual Debt Service Period the following amounts, in the following order of priority, the requirements of each such account or fund (including the making up of any deficiencies in any such account or fund resulting 05-30-85 5 5 13 p/2 0 62/0 7 -36- from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account or fund subsequent in priority: First: Into the Estimated Excess Earnings Account, the Estimated Excess Earnings for such Semiannual Debt Service Period; Second: Into the Bond Fund, the amount, if any, needed to increase the amount in the Bond Fund to the sum of (i) the aggregate amount of interest becoming due and payable on the next Interest Payment Date upon all Bonds then Outstanding, plus (ii) the aggregate amount of Mandatory Sinking Account Payments required to be paid, if any, on the next Interest Payment Date, plus (iii) the aggregate amount of principal becoming due and payable on the next Interest Payment Date; Third: Into the Bond Reserve Fund, the amount, if any, needed to increase the amount in the Bond Reserve Fund to the Bond Reserve Fund Requirement; Fourth: Into the Program Expense Fund, the amount, if any, needed to increase the amount in the Program Expense Fund to the Program Expense Fund Requirement. Fifth: Into the General Account of the Redemption Fund, an amount equal to the sum required on the next Interest Payment Date to redeem Bonds with respect to which the Trustee has given notice of redemption. In connection therewith, approximately one month prior to each Interest Payment Date the Trustee shall estimate the amount of money which will be available for the redemption of Bonds on such Interest Payment Date and shall proceed to give notice of redemption with respect to Bonds in an aggregate principal amount equal thereto; and Notwithstanding the foregoing, any amount in the Revenue Fund which would otherwise be required pursuant to the second clause of this Section to be deposited into the Bond Fund for the making of Mandatory Sinking Account Payments or pursuant to the fifth clause of this Section to be deposited into the Redemption Fund for redeeming Bonds may be applied by the Trustee, at any time prior to giving notice of redemption as provided in Article IV hereto, to the purchase of Bonds in the same manner, at the same prices, and with the same effect as is provided for in Sections 5.04 and 5.07 hereof. SECTION 5.03. Application of Program Expense Fund. All amounts in the Program Expense Fund shall be used and withdrawn by the Trustee solely for the purpose of paying Qualified Program Expenses. Any amount in the Program Expense Fund in excess of the Program Expense Fund Requirement shall be transferred to the Revenue Fund. 05-30-85 5513p/2062/07 -37- SECTION 5.04. Application of Bond Fund. (A) All amounts in the Bond Fund shall be used and withdrawn by the Trustee solely for the purposes of (1) paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to this Indenture), (2) paying the principal of the Serial Bonds when due and payable, (3) purchasing or redeeming or paying at maturity the Term Bonds as provided in this Section, and (4) redeeming Bonds in accordance with Section 4.01(A)(d). (B) On each Mandatory Sinking Account Payment date, the Trustee shall apply the Mandatory Sinking Account Payment or Payments required on that date to the redemption (or payment at maturity, as the case may be) of the applicable Term Bonds upon the notice and in the manner provided in Article IV. time prior to giving such notice of such redemption, the Trustee may apply moneys in the Bond Fund, in an amount not in excess of such respective Mandatory Sinking Account Payments, to the purchase of the applicable Term Bonds at public or private sale, as and when and at such prices (including brokerage and other charges) as the Trustee may in its discretion determine, except that the purchase price (including brokerage or other similar charges) shall not exceed the Redemption Price that would be payable for such Bonds upon redemption by application of such Mandatory Sinking Account Payment. At any (C) Subject to the terms and conditions hereinbefore set forth in this Section and in Section 4.01(B), the Term Bonds shall be redeemed (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments in the amounts (after giving effect to the credits provided for in this Section) and upon the dates hereinafter set forth: Mandatory Sinking Account Payments for Term Bonds Due on June 1, 2004 Date Principal Amount June 1, 1998 $ December 1, 1998 June 1, 1999 December 1, 1999 June 1, 2000 December 1, 2000 June 1, 2001 December 1, 2001 June 1, 2002 December 1, 2002 June 1, 2003 December 2003 June 1, 2004 December 2004 05-30-85 5513p/2062/07 -38- Mandatory Sinking Account Payments for Term Bonds Due on December 1, 2009 December 1, 2004 June 1, 2005 December 1, 2005 June 1, 2006 December 1, 2006 June 1, 2007 December 1, 2007 June 1, 2008 December 1, 2008 June 1, 2009 December 1, 2009 Mandatory Sinking Account Payments for Term Bonds Due on December 1, 2017* Date Initial Amount June 1, 2010 $ December 1, 2010 June 1, 2011 December 1, 2011 June 1, 2012 December 1, 2012 June 1, 2013 December 1, 2013 June 1, 2014 December 1, 2014 June 1, 2015 December 1, 2015 June 1, 2016 December 1, 2016 June 1, 2017 December 1, 2017 *The Tax Exempt Capital Accumulator Bonds shall be redeemed in the amount of the Compound Accreted Value corresponding to the initial amount set forth above. In any case in which Term Bonds are redeemed pursuant to Section 4.01(A)(a), (b) or (c) or are purchased pursuant to Section 5-07, the principal or initial amount of such Bonds, as the case may be, shall be credited against remaining Mandatory Sinking Account Payments (in integral multiples of $5,000 in the case of Current Interest Bonds and respective initial amounts per $5,000 of maturity amounts (as set forth in the table provided in Section 2.02) in the case of Tax Exempt Capital Accumulator Bonds) as nearly as practicable in such a manner as will leave each Mandatory Sinking Account Payment 05-30-85 5513p/2062/07 -39- after such redemption in the same proportion to the total amount of Mandatory Sinking Account Payments then remaining (after such credits) as the proportion of each Mandatory Sinking Account Payment then remaining as originally herein provided for bore to the total amount of Mandatory Sinking Account Payments then remaining as originally scheduled (before any such credits). If, (1) during the six-month period immediately preceding a Mandatory Sinking Account Payment date the Trustee purchases Term Bonds with moneys in the Revenue Fund or the Bond Fund, or (2) during said period and prior to giving said notice of redemption the Issuer otherwise deposits Term Bonds with the Trustee (together with a Request of the Issuer to apply such Bonds so deposited to a Mandatory Sinking Account Payment due on said date), then the amount of Bonds so purchased or deposited or redeemed shall be credited at the time of such purchase or deposit, to the extent of the full principal or initial amount thereof, to reduce the applicable Mandatory Sinking Account Payment. All Bonds purchased or deposited pursuant to this subsection shall be cancelled and delivered by the Trustee to or upon the Order of the Issuer. SECTION 5.05. Deficiencies in the Bond Fund. In the event that the amount in the Bond Fund is insufficient to pay principal of or interest on the Bonds or any Mandatory Sinking Account Payment when due, the Trustee shall transfer to the Bond Fund the amount of such deficiency by withdrawing said amount from the Bond Reserve Fund. SECTION 5.06. Application of Bond Reserve Fund. All amounts in the Bond Reserve Fund shall be used and withdrawn by the Trustee solely for the purposes of (A) making up any deficiency in the Bond Fund in the manner and to the extent set forth in Section 5.05; and (B) redeeming Bonds in accordance with Section 4.01(A)(d). Any amount in the Bond Reserve Fund in excess of the Bond Reserve Fund Requirement shall be transferred to the Revenue Fund on June 1, 1988 (or such later date as may be specified pursuant to Section 4.01(A) hereof) and thereafter on or before each Interest Payment Date. SECTION 5.07. Application of Redemption Fund. All amounts in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purposes of redeeming Bonds in accordance with Section 4.01(A) as specified in, and on the next practicable date for which notice may be given in accordance with, Article IV. At any time prior to giving notice of redemption as provided in Article IV hereof, the Trustee may apply amounts in the Redemption Fund to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and similar charges, but excluding accrued interest, which shall be payable from the Bond Fund) as the Trustee may 05-30-85 5513p/2062/07 -40- in its discretion determine, except that the purchase price (as determined hereinabove) may not exceed the par value of such Bonds. In the event that Bonds are to be purchased in part, the amount of Bonds to be purchased in each maturity shall be determined as nearly as practicable in such manner as set forth in Section 4.01 of this Indenture, governing redemption of Bonds. SECTION 5.08. Investment of Moneys in Funds. All moneys in any of the funds and accounts established pursuant to this Indenture shall be invested by the Trustee in Investment Securities to maximize investment income, with proper regard for the preservation of principal provided, however, that the Trustee shall invest funds in the Investment Agreement if and to the extent so directed by the Issuer. All Investment Securities shall be acquired subject to the limitations set forth in Section 6.08, to the limitations as to maturities hereinafter in this Section set forth and to such additional limitations or requirements consistent with the foregoing as may be established by Request of the Issuer. Moneys in all funds and accounts established under this Indenture shall be invested in Investment Securities paying interest and maturing not later than the dates on which it is estimated that such moneys will be required by the Trustee. Investment Securities acquired as an investment of moneys in any fund or account established under this Indenture shall be credited to such fund or account provided, however, that in order to maximize the return on investments, the Trustee may transfer Investment Securities from one fund or account to any other fund or account subject to any restrictions with respect to such transfers contained in the Investment Agreement. For the purpose of determining the amount in any such fund or account, all Investment Securities credited to such fund or account shall be valued at par or, if purchased at less than par, at their cost, without accrued interest, plus discount accrued ratably over the period to the maturity date of such investments; however, the accrual of a discount with respect to any investment of the Bond Reserve Fund shall not be taken into account in determining whether an excess exists in such Fund for the purpose of determining whether amounts are to be withdrawn from such Fund pursuant to this Indenture. The Trustee may sell at the best price obtainable, or present for redemption, any Investment Securities so purchased whenever it shall be necessary in order to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Investment Security is credited, and the Trustee shall not be liable or responsible for any loss resulting from such investment. 05-30-85 5513p/2062/07 -41- SECTION 5.09. Application of Estimated Excess Earnings Account and Excess Earnings Fund. (A) On or before May 1 and November 1 of each Bond year, the Trustee shall determine the Estimated Excess Earnings for the six months ending on the last calendar day of the succeeding June and December for purposes of the transfer required by Section 5.02 hereof. On or before July 1 of each year the Trustee shall determine the Excess Earnings for the preceding Bond Year and shall transfer an amount equal thereto from the Estimated Excess Earnings Account to the Excess Earnings Fund. Any moneys still remaining in the Estimated Excess Earnings Account subsequent to such transfer shall be then transferred to the Revenue Fund. To the extent that the amount transferred from the Estimated Excess Earnings Account to the Excess Earnings Fund is less than the amount required to be so transferred pursuant hereto, the Trustee shall transfer the amount of such deficiency to the Excess Earnings Fund from the Revenue Fund. (B) The Issuer elects to pay Excess Earnings to the United States Government pursuant to Section 103A(i)(4)(D) of the Code. All amounts in the Excess Earnings Fund shall be held by the Trustee free and clear of the lien of this Indenture, and the Trustee shall pay said amounts over to the United States from time to time as the Trustee shall determine provided that the Trustee shall so pay over to the United States: (1) not less frequently than once each five years after the date of issuance of the Bonds, an amount equal to 90 percent of the aggregate amount of Excess Earnings earned during such period (and not theretofore paid to the United States), and (2) not later than thirty days after the redemption of the last Bond, 100 percent of the aggregate amount of Excess Earnings not theretofore paid to the United States. ARTICLE VI PARTICULAR COVENANTS SECTION 6.01. Punctual Payment. The Issuer shall punctually pay or cause to be paid the principal or Redemption Price and interest to become due in respect of all the Bonds, in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, and shall punctually pay or cause to be paid all Mandatory Sinking Account Payments, but only out of Revenues and other assets pledged for such payment as provided in this Indenture. SECTION 6.02. Extension of Payment of Bonds. The Issuer shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any of the claims for interest by the purchase or funding of such Bonds or claims for interest or by any other 05-30-85 5513p/2062/07 -42- arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section shall be deemed to limit the right of the Issuer to issue bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds. SECTION 6.03. Against Encumbrances. The Issuer shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues or other assets pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by this Indenture. Subject to this limitation, the Issuer expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, including other programs under the Act, and reserves the right to issue other obligations for such purposes. SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment. The Issuer is duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned, respectively, under this Indenture in the manner and to the extent provided in this Indenture. The Bonds and the provisions of this Indenture are and will be legal, valid and binding limited obligations of the Issuer in accordance with their terms, and the Issuer and Trustee shall at all times, to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Owners under this Indenture against all claims and demands of all Persons whatsoever. SECTION 6.05. Payment of Taxes and Claims. The Issuer or the Trustee shall, from time to time, duly pay and discharge, or cause to be paid and discharged, any property taxes, assessments or other governmental charges that may be lawfully imposed upon the Revenues or other assets pledged or assigned under this Indenture, when the same shall become due, as well as any lawful claim which, if unpaid, might by law become a lien or charge upon the Revenues or such other assets or which might impair the security of the Bonds. SECTION 6.06. Accounting Records and Financial State- ments. The Issuer shall at all times keep, or cause to be kept, proper books of record and account in which complete and accurate entries shall be made of all transactions relating to the proceeds of Bonds, the Revenues, the Loans and all funds 05-30-85 5 5 13p/2 062/0 7 -43- and accounts established pursuant to this Indenture. Such books of record and account shall be available for inspection by the Trustee or the Issuer, as the case may be, and, with respect to such books of record and account maintained by the Trustee, by any Owner or agent or representative thereof duly authorized in writing, at reasonable hours and under reasonable circumstances. The Issuer shall file with the Trustee, or cause the Trustee to place on file and furnish to the Issuer at the expense of the Issuer, and furnish to each Owner who shall have filed his name and address with the Issuer or the Trustee for such purpose, within 120 days after the close of each Bond Year so long as any of the Bonds remain Outstanding, complete financial statements with respect to the Program, prepared in accordance with generally accepted accounting principles to the extent practicable, covering receipts, disbursements, allocation and application of all income (including Revenues) for such Bond Year, including a statement of revenue, expenditures and fund balance (covering all of the funds and accounts established pursuant to this Indenture), balance sheet and statement of changes in financial position. SECTION 6.07. Maintenance of Powers. As long as any of the Bonds is Outstanding, the Issuer shall preserve its existence as a legal subdivision and body corporate and politic of the State of California, and will not be dissolved or lose its right to exist as such or lose any rights necessary to enable it to function and to maintain the Revenues. The Issuer shall at all times use its best efforts to maintain the powers, functions, duties and obligations now reposed in it pursuant to law, and will not at any time voluntarily do, suffer or permit any act or thing the effect of which would be to hinder, delay or imperil either the payment of the indebtedness evidenced by any of the Bonds or the observance of any of the covenants herein contained. SECTION 6.08. Tax Covenants. (A) The Issuer shall not use or permit the use of any proceeds of Bonds or any other funds of the Issuer, directly or indirectly, to acquire any securities or obligations, and shall not use or permit the use of any amounts received by the Issuer or Trustee with respect to the Loans in any manner, and shall not take or permit to be taken any other action or actions, which would cause any Bond to be an "arbitrage bond'' within the meaning of Section 103(c) of the Code or which would fail to comply with the requirements of Section 103A(i) of the Code. The Issuer shall require that any Person (or any "related Person" as defined in Section 103(b)(6)(C) of the Code) from whom it may acquire Loans shall not, pursuant to an arrangement, formal or informal, purchase Bonds in an amount related to the amount of Loans to be purchased from such Person. 05-30-85 5513p/2062/07 -44- (B) The Issuer shall not use or permit the use of any proceeds of Bonds or any other funds of the Issuer, directly or indirectly, in any manner, and shall not take or permit to be taken any other action or actions, which would result in any of the Bonds being treated as an obligation not described in Section 103(a) of the Code by reason of classification of such Bond as an "industrial development bond" within the meaning of Section 103(b) of the Code. (C) The Issuer shall in good faith attempt to meet all the requirements of Section 103A(d), (e), (f) and (j) of the Code before the purchase of each Loan. The Issuer shall establish reasonable procedures to insure compliance with such requirements which shall include reasonable investigations by the Lending Institution to determine that the Loans satisfy such requirements. The Issuer shall require that a Loan may be assumed only if it has been determined that the conditions of Treasury Regulations Section 6a.103A-2(j)(3) are satisfied. Any failure of a Loan, the Residence financed thereby or the Mortgagors with respect thereto to meet such requirements shall be corrected within a reasonable period after such failure is discovered. The Issuer shall in good faith attempt to meet all the requirements of Section 103A(h) of the Code and shall use reasonable diligence in attempting to place proceeds of the Bonds in accordance therewith. The Issuer shall in good faith attempt to meet the requirements of Section 103A(i) of the Code, and the Issuer and the Trustee shall at all times do and perform all acts and things permitted by law and the Indenture which are necessary or desirable in order to assure that interest paid on the Bonds shall be exempt from federal income taxes. (D) The Issuer and the Trustee reserve the right, however, to purchase any Investment Security permitted by the laws of the State of California if, when and to the extent that the Code shall be repealed, amended or interpreted to permit the same or shall be held void by final judgment of a court of competent jurisdiction so as to permit the Issuer or the Trustee to do so, but only if such investment made by virtue of such repeal, amendment, interpretation or decision would not, in the opinion of counsel of recognized competence in such matters, result in making the interest on the Bonds subject to federal income taxation. (E) It is the intention of the Issuer that the Mortgagors be indebted by reason of their respective Loans only to the extent that the payment of said indebtedness is required to provide for the payment of the principal or Redemption Price of and interest on the Bonds and the payment to the Issuer of such amount as is consistent with the provisions of Section 103(A)(i) of the Code. Accordingly, upon the redemption of the last Outstanding Bond, and after paying to the Issuer an amount 05-30-85 5513p/2062/07 -45- equal to the future value (calculated on the basis of semiannual compounding at an interest rate equal to the Yield on the Bonds plus 112-1/2 basis points) of $ (less any part of such $ previously taken into account in clause (iii) of the definition of Excess Earnings) the Trustee shall forgive any and all indebtedness of principal and interest, due and payable subsequent to such redemption, on the Loans which are then held by the Trustee for the benefit of the Program. The Trustee is hereby authorized and directed to execute any and all documents necessary to effect such discharge of indebtedness. The County will pay to the Trustee from said amount such reasonable fee as the Trustee may specify for the services rendered by the Trustee during the period after the redemption of the last Outstanding Bond and the completion of its obligations hereunder. (F) Beginning in the first Bond Year after one year from the date of issuance of the Bonds, at no time during any Bond Year may the aggregate amount invested, at a yield materially higher than the Yield on the Bonds (other than moneys invested in the Loans) exceed an amount equal to 150 percent of the debt service on the Bonds for the current Bond Year. SECTION 6.09. Compliance with Indenture, Contracts, Laws and Regulations. The Issuer and the Trustee shall faithfully observe and perform all the covenants, conditions and requirements of this Indenture, shall not issue any Bonds in any manner other than in accordance with this Indenture, and shall not suffer or permit any default to occur hereunder, or do or permit to be done anything that might in any way weaken, diminish or impair the security intended to be given pursuant to this Indenture. Subject to the limitations and consistent with the covenants, conditions and requirements contained in this Indenture, the Issuer and the Trustee shall comply with the terms, covenants and provisions, express or implied, of all contracts concerning or affecting the application of proceeds of Bonds, Loans or Revenues. The Issuer and the Trustee shall comply promptly, fully and faithfully with and abide by any statute, law, ordinance, order, rule or regulation, judgment, decree, direction or requirement now in force or hereafter enacted, adopted, prescribed, imposed or entered by any competent governmental authority or agency applicable to or affecting the Program or the Loans. SECTION 6.10. Program Covenants. (A) The Issuer and the Trustee shall from time to time, with all practical dispatch and in a sound and economical manner consistent in all respects with the Act, the Program, this Indenture, all other applicable laws and regulations and with sound banking practices and principles, use and apply the amounts held in the Program Fund to purchase Loans, and shall do all such acts and things necessary to produce Revenues sufficient to pay when due the 05-30-85 55 13p/2 062/07 -46- principal of and interest on the Bonds, and shall take all steps, actions and proceedings reasonably necessary in the judgment of the Issuer to enforce the terms, covenants and conditions of the Loans, the Agreements and the Developer Agreements and to maintain and enforce all policies of insurance or guarantees required to be maintained on or with respect to any one or more Loans. The Issuer shall supervise, or cause the Compliance Agent to supervise, the Lending Institutions, and shall otherwise assure the continuous, competent and adequate servicing of each Loan. In the event any Agreement shall be cancelled or terminated for any reason, the Trustee shall take all steps necessary to procure an appropriate successor Compliance Agent and/or Lending Institution, as the case may be, subject to the provisions of the Agreement, and, during the period necessary to obtain such successors, shall perform or cause to be performed the duties and responsibilities of the Compliance Agent and/or Lending Institution, under the Agreement cancelled or terminated and shall be compensated therefor, in addition to the compensation payable to it under this Indenture or any other instrument, in the same manner and amounts as provided under the Agreement cancelled or terminated. (B) Subject to Section 6.08, amounts in the Program Fund shall be used to purchase only Loans which (1) are in compliance with the Act, the Program and the requirements set forth in subsection (B) of Section 3.03, and (2) in the aggregate have scheduled payments of principal and interest at least sufficient, together with other expected Revenues, to pay when due the principal of and interest on the Bonds. (C) The Trustee shall maintain, or cause to be maintained, with respect to each Loan, the insurance required by the Agreement and, in addition, the Trustee shall maintain or cause to be maintained a special hazard insurance policy or policies, in such form as may be acceptable to the Trustee, insuring against losses arising from physical damage or destruction of any real property subject to any Loan caused by mud flows or arising from the application of coinsurance clauses in the applicable standard hazard insurance policies, issued by an insurance company qualified to do business in the State of California, with loss payable clauses or endorsement in favor of the Trustee and with maximum loss limits of not less than the greater of one percent of the aggregate amount of Loans reasonably expected to be purchased or twice the original principal amount of the largest Loan purchased (less claims made and paid). (D) No Loan shall be sold, assigned or otherwise disposed of by the Issuer or the Trustee, except (1) pursuant to a covenant to repurchase contained in the appropriate Developer 05-30-85 55 13p/2 062/07 -47- Agreement or Agreement or (2) in connection with any action or proceedings taken in the event of default on any Loan or as may be necessary for the purpose of realizing the benefits of mortgage or title insurance with respect to such Loan or (3) in connection with the forgiveness thereof pursuant to Section 6.08(E). Subject to the provisions of this subsection, any Loan may be sold, assigned or otherwise disposed of, and such Loan shall be released from the assignment made by this Indenture and the Issuer and the Trustee shall take all necessary action and execute and deliver all necessary instruments to confirm any such sale, assignment or disposition and to vest title to the Loan in the purchaser, assignee or other recipient thereof. (E) The Issuer and the Trustee shall not consent to the modification of, or modify, the rate or rates of interest, or the amount or time of payment of any installment of interest or principal, or the security for or any of the terms or provisions of any Loan or any insurance on or with respect thereto in any manner which would result in the failure of such Loan to satisfy the conditions set forth in subsection (B) of this Section or which would materially impair the security of the Bonds. (F) Lending Institutions may only be Persons qualified to sell mortgages to FHLMC or FNMA. SECTION 6.11. Waiver of Laws. The Issuer shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension provision of law now or at any time hereafter in force that may affect the covenants and agreements contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Issuer to the extent permitted by law. SECTION 6.12. Further Assurances. The Issuer will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Indenture. ARTICLE VI1 EVENTS OF DEFAULT AND REMEDIES OF OWNERS SECTION 7.01. Events of Default. The following events shall be Events of Default: 05-30-85 5513p/2062/07 -48- (A) default in the due and punctual payment of the principal or Redemption Price of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise, or default in the redemption from any Mandatory Sinking Account Payment of any Term Bonds in the amounts and at the times provided therefor; (B) default in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable; (C) default by the Issuer in the observance of any of the covenants, agreements or conditions on its part in this Indenture or in the Bonds contained, if such default shall have continued for a period of sixty days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Issuer by the Trustee, or to the Issuer and the Trustee by the Owners of not less than 25 percent in aggregate principal amount of the Bonds at the time Outstanding; or (D) the assumption, under the provisions of any law relating to bankruptcy or insolvency or any similar law relating to creditors rights, by any court of competent jurisdiction, of custody or control of the Issuer or of the whole or any substantial part of its property, if such custody or control is not terminated or stayed within sixty days from the date of assumption of such custody or control. SECTION 7.02. Acceleration of Maturities. If an Event of Default shall occur, then, and in each and every such case during the continuance of such Event of Default, the Trustee or the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding shall be entitled, upon notice in writing to the Issuer, to declare the principal of all the Current Interest Bonds then Outstanding, the interest accrued thereon and the Compound Accreted Value of all the Tax Exempt Capital Accumulator Bonds then Outstanding to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Bonds contained to the contrary notwithstanding. Any such declaration (other than one occasioned by an Event of Default desscribed in paragraph (D) of Section 7.01), however, is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Issuer shall deposit with the Trustee a sum sufficient to pay all the principal or Redemption Price of and installments of interest on the Bonds payment of which is overdue, with 05-30-85 5513p/2062/07 -49- interest on such overdue principal at the rate borne by the respective Bonds, and the reasonable charges and expenses of the Trustee, and any and all other defaults known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case, the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Issuer and to the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences and waive such default; but no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon. SECTION 7.03. Application of Revenues and Other Funds After Default. If an Event of Default shall occur and be continuing, all Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of this Indenture (subject to Section 11-10) shall be applied by the Trustee as follows and in the following order: (A) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and payment of reasonable charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel, and premiums for the Mortgage Pool Insurance and special hazard insurance policy or policies required by Section 6.10(C)) incurred.in and about the performance of its powers and duties under this Indenture; (B) To the payment of the principal, scheduled Mandatory Sinking Account Payments, or Redemption Price of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or and surrender thereof if fully paid) subject to the provisions of this Indenture (including Section 7.02), as follows: (1) Unless the principal of all of the Bonds shall have become or have been declared due and payable, First: To the payment to the Persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto, without any discrimination or preference; and 05-30-85 5513p/2062/07 -50- Second: To the payment to the Persons entitled thereto of the unpaid principal, scheduled Mandatory Sinking Account Payments, or Redemption Price of any Bonds which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, with interest on the overdue principal at the rate borne by the respective Bonds, and, if the amount available shall not be sufficient to pay in full all the Bonds due on any date, together with such interest, then to the payment thereof ratably, according to the amounts of principal, Mandatory Sinking Account Payments or Redemption Price due on such date to the Persons entitled thereto, without any discrimination or preference. (2) If the principal of all of the Bonds shall have become or have been declared due and payable, to the payment of the principal and interest then due and unpaid upon the Bonds, with interest on the overdue principal at the rate borne by the respective Bonds, and, if the amount available shall not be sufficient to pay in full the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference. SECTION 7.04. Trustee to Represent Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds and this Indenture, as well as under the Act and applicable provisions of any other law. Upon the occurrence and continuance of any Event of Default or other occasion giving rise to a right in the Trustee to represent the Owners, the Trustee in its discretion may, and upon the written request of the Owners of not less than 25 percent in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate suit, action, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under this Indenture, the Act or any 05-30-85 5 5 13p/2 0 62/0 7 -51- other law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right to the appointment of a receiver of the Revenues and other assets pledged under this Indenture, pending such proceedings. All rights of action under this Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceedings relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of this Indenture. SECTION 7.05. Owners' Direction of Proceedings. Anything in this Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, to direct the method of conducting all remedial proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Owners not parties to such direction. SECTION 7.06. Limitation on Owners' Right to Sue. No Owner of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under this Indenture, the Act or any other applicable law with respect to such Bond, unless (A) such Owner shall have given to the Trustee written notice of the occurrence of an Event of Default; (B) the Owners of not less than 25 percent in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (C) such Owner or said Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (D) the Trustee shall have refused or omitted to comply with such request for a period of sixty days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture on the 05-30-85 5513p/2062/07 -52- rights of any other Owners of Bonds, or to enforce any right under this Indenture, the Act or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this Indenture. SECTION 7.07. Absolute Obligation of Issuer. Nothing in Section 7.06 or in any other provision of this Indenture, or in the Bonds, contained shall affect or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal or Redemption Price of and interest on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon call for redemption, as herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. SECTION 7.08. Termination of Proceedings. In case any proceedings taken by the Trustee or any one or more Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Owners, then in every such case the Issuer, the Trustee and the Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the Issuer, the Trustee and the Owners shall continue as though no such proceedings had been taken. SECTION 7.09. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. SECTION 7.10. No Waiver of Default. No delay or omission of the Trustee or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiesence therein; and every power and remedy given by this Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient. 05-30-85 5 5 13p/2 062/07 -53- ARTICLE VI11 THE TRUSTEE SECTION 8.01. Duties, Immunities and Liabilities of Trustee. (A) The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in this Indenture. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (B) The Issuer may remove the Trustee at any time unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (E) of this Section, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; in each case by giving written notice of such removal to the Trustee and the Lending Institutions, and thereupon shall appoint a successor Trustee by an instrument in writing. (C) The Trustee may at any time resign by giving written notice of such resignation to the Issuer and by giving the Owners notice of such resignation by publication at least once in a Financial Newspaper or Journal. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor Trustee by an instrument in writing. (D) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. Promptly upon such acceptance, the Issuer shall give notice thereof to the Owners by publication at least once in a Financial Newspaper or Journal and to the Lending Institutions in writing. If no successor Trustee shall have been appointed and have accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Owner (on behalf of himself and all other Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may 05-30-85 5 5 13p/2 0 62/0 7 -54- thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture shall signify its acceptance of such appointment by executing and delivering to the Issuer and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the request of the Issuer or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Issuer shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. (E) Any Trustee appointed under the provisions of this Section in succession to the Trustee shall be (i) a trust company or bank having the powers of a trust company doing business and having a corporate trust office in Los Angeles, California, or San Francisco, California, having a combined capital and surplus of at least one hundred million dollars ($100,000,000), and subject to supervision or examination by federal or state authority and (ii) a seller/service of mortgage loans approved by FNMA or FHLMC which meets all requirements of applicable laws so as to be eligible to originate, purchase, hold and service conventional mortgages (or shall have a wholly-owned mortgage banking subsidiary which meets said criteria). If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (E), the Trustee shall resign immediately in the manner and with the effect specified in this Section. (F) Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company 05-30-85 5 5 13p/2 0 62/0 7 -55- resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under subsection (E) of this Section, shall be the successor to such Trustee without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. SECTION 8.02. Compensation. Subject to the terms of any contract with the Trustee, the Issuer shall pay to the Trustee from time to time reasonable compensation for all services rendered under this Indenture, and also all reasonable expenses, charges, fees of counsel, accountants and consultants and other disbursements, including those of their attorneys, agents and employees, incurred in good faith in and about the performance of their powers and duties under this Indenture. The Issuer further agrees, to the extent permitted by law, to indemnify and save the Trustee harmless against any liabilities which it may incur in the exercise and performance of its powers, functions and duties under this Indenture, which are not due to its own negligence or default. SECTION 8.03. Liability of Trustee. The recitals of facts herein and in the Bonds contained shall be taken as statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same, and makes no representations as to the validity or sufficiency of this Indenture or of the Bonds, and shall incur no responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder except for its own negligence or default. The Trustee may become the owner of Bonds with the same rights it would have if it were not appointed to its respective position hereunder, 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 Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. SECTION 8.04. Right of Trustee to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, Request, consent, Order, Certificate, report, opinion, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the Issuer, with regard to legal questions, and the opinion of such counsel shall be full and 05-30-85 5513p/2062/07 -56- complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee shall not be bound to recognize any Person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of the trusts imposed upon it by this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Certificate of the Issuer, and such Certificate shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such Certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional as to it may seem reasonable. SECTION 8.05. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in its possession and shall be subject at all reasonable times to the inspection of the Issuer and any Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. SECTION 8.06. Reports to Rating Agencies. In addition to its other duties under and pursuant to the Agreements and this Indenture, the Trustee will provide to Moody's Investors Service, Inc. and/or Standard & Poor's Corporation if either or both shall have assigned a rating to the Bonds (the "rating agency") annually or as may be reasonably requested by the rating agency information concerning the periodic delinquency, foreclosure and prepayment experience with respect to the Loans as well as the financial status of the issue and such other information as may be reasonably requested by the rating agency in order to maintain a rating for the Bonds. To the extent that compliance with the requirements of this Section requires the Trustee to do any more than forward to the rating agency the reports received by the Trustee from the Lending Institutions pursuant to Section 5.14 of the Agreements, the Trustee shall be reimbursed for any cost or expense incurred by it in connection therewith. The Trustee shall also provide the rating agency with written notice promptly following its receiving knowledge of any reallocation of Developers' Reservations totalling greater than 10% of the initial balance in the Program Fund. 05-30-85 5 5 13p/2 0 62/07 -57- ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE SECTION 9.01. Amendments Permitted. (A) This Indenture and the rights and obligations of the Issuer and of the Owners of the Bonds and of the Trustee may be modified or amended at any time by a Supplemental Indenture which shall become effective when the written consents of the Owners of 60 percent in aggregate principal amount of the Bonds then Outstanding shall have been filed with the Trustee; provided that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any particular maturity remain Outstanding, the consent of the Owners of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Outstanding Bonds under this Section. No such modification or amendment shall (1) extend the fixed maturity of any Bond, or reduce the amount of principal thereof, or extend the time of payment or reduce the amount of any Mandatory Sinking Account Payment provided in the Indenture for the payment of any Bond, or reduce the rate of interest thereon, or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the Owner of each Bond so affected, or (2) reduce the aforesaid percentage of Bonds the consent of the Owners of which is requ$red to effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture, or deprive the Owners of the Bonds of the lien created by this Indenture upon such Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then Outstanding. (B) This Indenture and the rights and obligations of the Issuer and of the Owners of the Bonds may also be modified or amended at any time by a Supplemental Indenture, which shall become effective upon execution (or such later date as may be specified in such Supplemental Indenture), without the consent of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes: (1) to add to the covenants and agreements of the Issuer in this Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds, or to surrender any right or power herein reserved to or conferred upon the Issuer, provided, that no such covenant, agreement, pledge, assignment or surrender shall materially adversely affect the interests of the Owners of the Bonds; 05-30-85 55 13p/2 062/07 -58- (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in this Indenture, or in regard to matters or questions arising under this Indenture, as the Issuer may deem necessary or desirable and not inconsistent with this Indenture, and which shall not materially adversely affect the interests of the Owners of the Bonds; or (3) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds. SECTION 9.02. Effect of Supplemental Indenture. From and after the time any Supplemental Indenture becomes effective pursuant to this Article, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Issuer, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after any Supplemental Indenture becomes effective pursuant to this Article may, and if the Trustee so determines shall, bear a notation by endorsement or otherwise in form approved by the Issuer and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for the purpose at the principal corporate trust office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bond. If the Issuer or the Trustee shall so determine, new Bonds so modified as to conform, in the opinion of the Issuer and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Issuer and authenticated by the Trustee, and upon demand of the Owners of any Bonds then Outstanding shall be exchanged at the principal corporate trust office of the Trustee, without cost to any Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts of the same maturity. 05-30-85 55 13p/2 062/07 -59- I SECTION 9.04. Amendment of Particular Bonds. The provisions of this Article shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds. ARTICLE X DEFEASANCE SECTION 10.01. Discharge of Indenture. If the Issuer shall pay and discharge the entire indebtedness on all Bonds Outstanding in any one or more of the following ways -- (a) Redemption Price of and interest on Bonds Outstanding, as and when the same become due and payable; by paying or causing to be paid the principal or (b) by depositing with the Trustee, in trust, at or before maturity, money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem Bonds Outstanding; or (c) by delivering to the Trustee, for cancellation by it, Bonds Outstanding; and if the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer, then and in that case, at the election of the Issuer (evidenced by a Certificate of the Issuer, filed with the Trustee, signifying the intention of the Issuer to discharge all such indebtedness and this Indenture), and notwithstanding that any Bonds shall not have been surrendered for payment, this Indenture and the pledge of Revenues and other assets made under this Indenture and all covenants, agreements and other obligations of the Issuer under this Indenture shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon Request of the Issuer, the Trustee shall cause an accounting for such period or periods as shall be requested by the Issuer to be prepared and filed with the Issuer and shall execute and deliver to the Issuer all such instruments as may be necessary or desirable to evidence such discharge and satisfaction; and, to the extent provided in Section 6.08(E), the Trustee shall pay over, transfer, assign or deliver to the Issuer all moneys or securities or other property held by it pursuant to this Indenture which are not required for the payment of redemption of Bonds not theretofore surrendered for such payment or redemption and shall thereafter forgive any and all indebtedness with respect to the Loans. the Trustee in excess of the amounts paid to the Issuer pursuant to Section 6.08(E) shall be paid to the mortgagors of Loans then outstanding on a proportionate basis. of the obligations of the Issuer under this Indenture shall be Any amounts held by The discharge 05-30-85 55 13p/2 062/07 -60- without prejudice to the rights of the Trustee to charge for and be reimbursed by the Issuer for any expenditures which it may thereafter incur in connection herewith. SECTION 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bond (whether upon or prior to its maturity or the redemption date of such Bond), provided that, if such Bond is to be redeemed prior to maturity, notice of such redemption shall have been given as in Article IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Issuer in respect of such Bond shall cease, terminate and be completely discharged, and the Owner thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of Section 10.04. The Issuer may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered which the Issuer may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. SECTION 10.03. Deposit of Money or Securities with Trustee. Whenever in this Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held shall be -- (a) lawful money of the United States of America in an amount equal to the principal amount and all unpaid interest thereon to maturity and/or Compound Accreted Value of such Bonds, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as in Article IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the Redemption Price of such Bonds; or (b) Investment Securities described in clause (1) of the definition thereof in Section 1.03 and which are not redeemable in advance of their maturity at the option of the Issuer or any other Person (other than the holder thereof) the principal of and interest on which when due will provide money sufficient to pay the principal or Redemption Price of and all unpaid interest to maturity, or to the redemption date, as the case may be, on the Bonds to be paid or redeemed, as such principal or Redemption Price 05-30-85 55 13p/2062/07 -61- )i and interest become due, provided that, in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in Article IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice; provided, in each case, that the Trustee shall have been irrevocably instructed (by the terms of this Indenture or by Request of the Issuer) to apply such money to the payment of such principal or Redemption Price and interest with respect to such Bonds. SECTION 10.04. Payment of Bonds After Discharge of Indenture. Notwithstanding any provisions of this Indenture, any moneys held by the Trustee in trust for the payment of the principal or Redemption Price of, or interest on, any Bonds and remaining unclaimed for six years after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in this Indenture), if such moneys were so held at such date, or six years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall, upon Request of the Issuer, be repaid to the Issuer free from the trusts created by this Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Issuer as aforesaid, the Trustee, may (at the cost of the Issuer) first publish at least once in a Financial Newspaper or Journal a notice, in such form as may be deemed appropriate by the Trustee, with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Issuer of the moneys held for the payment thereof. ARTICLE XI MISCELLANEOUS SECTION 11-01. Liability of Issuer Limited to Revenues. Notwithstanding anything in this Indenture or in the Bonds contained, the Issuer shall not be required to advance any moneys derived from any source other than the Revenues and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal or Redemption Price of or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Issuer may, but shall not be required to, advance for any of the purposes hereof any funds of the Issuer which may be made available to it for such purposes. 05-30-85 5 5 13p/2 0 62/0 7 -62- W I SECTION 11.02. Successor is Deemed Included in All References to Predecessor. Whenever in this Indenture either the Issuer or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the Issuer or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. SECTION 11.03. Limitation of Rights to Parties and Owners. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any Person other than the Issuer, the Trustee, and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Issuer, the Trustee, and the Owners of the Bonds. SECTION 11.04. Waiver of Notice. Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the Person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 11.05. Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to the Issuer of any Bonds, the Trustee may, upon Request of the Issuer, in lieu of such cancellation and delivery, destroy such Bonds (in the presence of an officer of the Issuer, if the Issuer shall so require), and deliver a certificate of such destruction to the Issuer. SECTION 11.06. Severability of Invalid Provisions. If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Issuer hereby declares that it would have entered into this Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal; invalid or unenforceable. 05-30-85 5513p/2062/07 -63- * L SECTION 11.07. Notice to Issuer, Trustee and Standard & Poor's Corporation. may be served or presented, and such demand may be made, at the principal corporate trust office of the Trustee in Los Angeles, California, which at the date of adoption of this Indenture is located at 333 South Hope Street, Los Angeles, California 90071, Attention: Corporate Trust Department, or at such other address as may have been filed in writing by the Trustee with the Issuer. Any notice to or demand upon the Issuer shall be deemed to have been sufficiently given or served for all purposes by being deposited, postage prepaid, in a post office letter box, addressed to the Issuer, City of Carlsbad, County Administrative Office, Third Floor, 10 Civic Center Plaza, Santa Ana, California 92701, Attention: Housing Bond Program Compliance Agent, or to the Issuer at such other address as may have been filed in writing by the Issuer with the Trustee. Any notice to or demand upon the Trustee Any such notice to Standard & Poor's Corporation shall be deemed to have been sufficiently given or served for all purposes by being deposited, postage prepaid, in a post office box, address to Standard & Poor's Corporation, 25 Broadway, New York, New York 10004, Attn: Financial Institutions, Mortgage Ratings. SECTION 11.08. Evidence of Rights of Owners. Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Owners in Person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any Person of Bonds transferable by delivery, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and of the Issuer if made in the manner provided in this Section. The fact and date of the execution by any Person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgements of deeds, certifying that the Person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and of every Bond issued upon transfer thereof, in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Issuer in accordance therewith or reliance thereon. 05-30-85 55 13p/2062/07 - 64- f SECTION 11-09. Calculation of Principal Amount of Bonds. For purposes of Articles VI1 and IX hereof, the principal amount of a Tax Exempt Capital Accumulator Bond shall be deemed to be its Compound Accreted Value as of the date of calculation, except that if an Event of Default has occurred and is continuing the principal amount of such Bond shall be deemed to be its Compound Accreted Value as of the date the Event of Default occurred. SECTION 11-10. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are owned or held by or for the account of the Issuer, or by any other obligor on the Bonds, or by any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Issuer or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Bonds and that the pledgee is not a Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Issuer or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 11.11. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or Redemption Price due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04. SECTION 11.12. Funds and Accounts. Any fund required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds shall at all times be maintained in accordance with generally accepted accounting principles, to the extent practicable, and with due regard for the requirements of Section 6.06 and for the protection of the security of the Bonds and the rights of every Owner thereof. 05-30-85 5513p/2062/07 -65- .1 I SECTION 11.13. Article and Section Headings and Refer- ences. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Indenture. All references herein to "Articles, 'I "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture; the words "herein, 'I "hereof , 'I hereby," "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof; and words of the masculine gender shall mean and include words of the feminine and neuter genders. II SECTION 11.14. Waiver of Personal Liability. No officer, agent or employee of the Issuer shall be individually or personally liable for the payment of the principal or Redemption Price of or interest on the Bonds; but nothing herein contained shall relieve any such officer, agent or employee from the performance of any official duty provided by law. SECTION 11.15. Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Issuer and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. 05-30-85 5513p/2062/07 -66- 1 * IN WITNESS WHEREOF, the CITY OF CARLSBAD has caused this Indenture to be signed in its name by its Mayor and its seal to be hereunto affixed and attested by its City Clerk, and First Interstate Bank of California, in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by one of its Trust Officers, all as of the day and year first above written. CITY OF CARLSBAD By : Mayor [SEAL] SIGNED AND CERTIFIED THAT A COPY OF THIS DOCUMENT HAS BEEN DELIVERED TO THE CHAIRMAN OF THE BOARD. City Clerk FIRST INTERSTATE BANK OF CALIFORNIA By : Its: [I1 05-30-85 5 5 13p/2 0 62/0 7 -67- * c CITY OF CARLSBAD, CALIFORNIA, Issuer AND