$9,225,000 BELL PUBLIC FINANCING AUTHORITY 2005 TAXABLE PENSION REVENUE BONDS

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1 NEW ISSUE BOOK-ENTRY ONLY TAXABLE (FEDERAL) TAX-EXEMPT (CALIFORNIA) RATINGS: Fitch: AAA (A- underlying) Standard & Poor s: AAA (BBB+ underlying) (See RATINGS and BOND INSURANCE herein) In the opinion of Nixon Peabody LLP, Bond Counsel, under existing law, interest on the Bonds is INCLUDED in gross income for federal income tax purposes. In the further opinion of Bond Counsel interest on the Bonds is exempt from California personal income taxes. See TAX MATTERS herein. Dated: Date of Delivery $9,225,000 BELL PUBLIC FINANCING AUTHORITY 2005 TAXABLE PENSION REVENUE BONDS Due: August 1, as shown below The Bell Public Financing Authority 2005 Taxable Pension Revenue Bonds (the Bonds ) are being issued to provide funds to make a loan (the Loan ) to the City of Bell, California (the City ) pursuant to a Loan Agreement dated as of December 1, 2005 (the Loan Agreement ) by and between the City and the Authority. The proceeds of the Loan will allow the City to (a) fund the City s current unfunded accrued actuarial liability ( UAAL ) for retirement benefits to City safety employees, (b) advance refund the Authority s outstanding 1998 Taxable Pension Revenue Bonds dated May 1, 1998 (the 1998 Bonds ) through the prepayment of the outstanding 1998 loan to the City (the 1998 Loan ) under the loan agreement dated as of May 1, 1998 (the 1998 Loan Agreement ) between the City and the Authority entered into to fund the City s then UAAL for retirement benefits to City safety employees and (c) pay the costs of issuance of the Bonds. Pursuant to the California Government Code Section et seq. and a ballot initiative measure approved by voters in a City election held in 1944, the City is obligated to levy ad valorem taxes and to make contributions to the California Public Employees Retirement System ( PERS ) for certain obligations arising as a result of retirement benefits accruing to the City s employee members of PERS. Payment of the principal of and interest on the Bonds when due will be insured by a financial guaranty insurance policy to be issued by Ambac Assurance Corporation simultaneously with the delivery of the Bonds. The Bonds will be delivered as fully registered Bonds registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), will mature in the years and amounts set forth on this cover page and will be available in denominations of $5,000 or any integral multiple thereof under the book-entry system maintained by DTC. The Bonds are payable at the principal corporate trust office of U.S. Bank National Association, Los Angeles, California (the Trustee ) as trustee to DTC for subsequent disbursement to DTC participants, so long as DTC or its nominee remains the registered owner of the Bonds, or such other location as it may designate. Interest on the Bonds will be payable semiannually on February 1 and August 1 of each year, commencing August 1, The Bonds will bear interest at the rates per annum set forth on this cover page. Capitalized terms used and not otherwise defined herein are defined in the Trust Agreement (as hereinafter defined). The Bonds are subject to optional and mandatory redemption as discussed herein. The Bonds are limited obligations of the Authority payable solely from Loan Payments payable by the City to the Authority pursuant to the Loan. The Loan is an obligation of the City payable solely from certain ad valorem retirement taxes (the Pledged Tax Revenues ) levied by the City for such purpose. The City has covenanted in the Loan Agreement to levy and collect the Pledged Tax Revenues. The Bonds are not a debt of the State of California (the State ), or any of its political subdivisions, other than the Authority, and neither the State nor any of its political subdivisions, other than the Authority, is liable therefor. The Authority has no taxing power. The Bonds do not constitute a debt of the State, or any political subdivision thereof, within the meaning of any constitutional or statutory debt limit or restriction. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire official statement to obtain information essential to the making of an informed investment decision. Attention is hereby directed to certain Risk Factors more fully described herein. The purchase of the Bonds should not be made without thorough investigation and knowledge of the security for the Bonds and the availability and source of payment for the Bonds. Maturity Date August 1 of Principal Amount Interest Rate Yield MATURITY SCHEDULE (CUSIP Prefix 07786M) CUSIP Suffix Maturity Date August 1 of Principal Amount Interest Rate Yield CUSIP Suffix 2006 $460, % 4.770% AD $555, % 5.080% AJ , AE , AK , AF , AL , AG , AM , AH , AN6 $3,655, % Term Bonds due August 1, 2019 Yield 5.480% CUSIP Suffix AP1 The Bonds are offered when, as and if issued, subject to the approval of their legality by Nixon Peabody LLP, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the City and the Authority by its counsel, Oliver, Sandifer, Murphy & Lee, Los Angeles, California. Nixon Peabody LLP has also served as Disclosure Counsel. It is anticipated that the Bonds in definitive form will be available for delivery through the facilities of DTC in New York, New York, on or about December 22, The date of this Official Statement is December 6, 2005.

2 No dealer, broker, salesperson or other person has been authorized by the City, the Authority or the Underwriter to give any information or to make any representations other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The City, the Authority and other apparently reliable sources have provided information for this Official Statement, with the goal of providing disclosure to investors which meets legal requirements. This issue is the result of a complex team effort. Some of the people who prepared, compiled or reviewed this information had specific functions in the issue which covered some areas but not others. The City and the Authority believe that the information provided herein is accurate and complete; however, neither of them makes any guarantee. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or any other parties described herein since the date hereof. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with one or more repositories. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. CAUTION REGARDING FORWARD-LOOKING STATEMENTS Certain statements included or incorporated by reference in this Official Statement are forward-looking statements. Such statements are generally identifiable by terminology used, such as plan, expect, estimate, budget or similar words. The achievement of certain results or other expectations contained in such forwardlooking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or updates or revisions to those forward-looking statements. Neither the City nor the Authority plans to issue any updates or revisions to those forward-looking statements if or when any expectations or events, conditions or circumstances on which such statements are based occur.

3 BELL PUBLIC FINANCING AUTHORITY CITY OF BELL CITY COUNCIL AND AUTHORITY BOARD OF TRUSTEES George Mirabal, Mayor/President Oscar Hernandez, Mayor Pro Tem/Member Victor Bello, Councilmember/Member George Cole, Councilmember/Member Teresa Jacobo, Councilmember/Member CITY AND AUTHORITY STAFF Robert A. Rizzo, Chief Administrative Officer/Executive Director Ana L. Hernandez, City Treasurer/Authority Treasurer Rebecca Valdez, City Clerk/Secretary Edward W. Lee, City Attorney and Authority General Counsel Pierangela Spaccia, Fiscal Officer SPECIAL SERVICES Bond Counsel and Disclosure Counsel Nixon Peabody LLP San Francisco, California Trustee and Escrow Agent U.S. Bank National Association Los Angeles, California Financial Advisor Fieldman, Rolapp & Associates Irvine, California Underwriter Wedbush Morgan Securities Solana Beach, California Verification Agent McGladrey & Pullen, LLP Minneapolis, Minnesota

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5 TABLE OF CONTENTS Page SUMMARY STATEMENT... S-1 INTRODUCTORY STATEMENT...1 SOURCES AND USES OF PROCEEDS...3 DEBT SERVICE SCHEDULE...4 THE BONDS...5 Authority for Issuance...5 Description of the Bonds...5 Payment of Interest...5 Transfer and Exchange...5 Redemption...6 Parity Obligations...7 PLAN OF FINANCING...7 THE REFUNDING PLAN...7 RETIREMENT SYSTEM...8 VALIDATION...10 SECURITY FOR THE BONDS...11 Pledged Revenues...11 Retirement Tax...11 Assessed Valuation...12 Investment of City Funds...15 Certain Covenants...16 BOND INSURANCE...17 Payment Pursuant to Financial Guaranty Insurance Policy...17 Ambac Assurance Corporation...18 Available Information...18 Incorporation of Certain Documents by Reference...18 THE AUTHORITY...19 RISK FACTORS...19 Bonds Not General Obligations of the Authority...19 Constitutional Limitations on Taxes and Expenditures...19 No Liability of the Authority to the Owners...20 Bankruptcy and Limitations on Remedies...20 Early Redemption Risk...21 Investment Risks...21 Secondary Market...21 TAX MATTERS...21 Federal Income Taxes i-

6 State Taxes...21 CERTAIN LEGAL MATTERS...21 FINANCIAL ADVISOR...21 ABSENCE OF LITIGATION...22 CONTINUING DISCLOSURE...22 RATINGS...22 UNDERWRITING...22 MISCELLANEOUS...23 SUPPLEMENTAL INFORMATION OF THE CITY OF BELL...24 APPENDIX A SUMMARY OF PRINCIPAL LEGAL DOCUMENTS... A-1 APPENDIX B CITY AUDITED FINANCIAL STATEMENTS... B-1 APPENDIX C FORM OF CONTINUING DISCLOSURE AGREEMENT... C-1 APPENDIX D FORM OF FINAL OPINION... D-1 APPENDIX E BOOK-ENTRY SYSTEM... E-1 APPENDIX F SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY... F-1 -ii-

7 SUMMARY STATEMENT THIS SUMMARY STATEMENT IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION IN THIS OFFICIAL STATEMENT, AND THE OFFERING OF THE BELL PUBLIC FINANCING AUTHORITY 2005 TAXABLE PENSION REVENUE BONDS (THE BONDS ) TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT. City of Bell: The City of Bell, California (the City ) was incorporated on November 7, 1927, under the general laws of the State of California (the State ). Located in Los Angeles County (the County ), the City consists of approximately 2.81 square miles and is located 10 miles southeast of downtown Los Angeles. Bell Public Financing Authority: The Bell Public Financing Authority (the Authority ) was created by a Joint Exercise of Powers Agreement, dated August 5, 1991, by and between the City and the Bell Community Redevelopment Agency. Such agreement was entered into pursuant to the provisions of Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the JPA Law ). Purpose: Proceeds from the sale of the Bonds will be used to make a loan to the City (the Loan ). The proceeds of the Loan will allow the City to (a) fund the City s current unfunded accrued actuarial liability ( UAAL ) for retirement benefits to City safety employees in the amount of $7,317,000, (b) advance refund the Authority s outstanding 1998 Taxable Pension Revenue Bonds in the amount of $1,460,000 through the prepayment of the outstanding 1998 loan to the City (the 1998 Loan ) the proceeds of which funded the City s then UAAL for retirement benefits to the City s safety employees and (c) pay the costs of issuance of the Bonds. Security for the Bonds: The Bonds are being issued pursuant to a Trust Agreement dated as of December 1, 2005 (the Trust Agreement ), by and among the Bell Public Financing Authority (the Authority ), the City and U.S. Bank National Association, as trustee (the Trustee ). The Bonds are a limited obligation of the Authority payable solely from payments to be made by the City (the Loan Payments ) for the Loan pursuant to a Loan Agreement dated as of December 1, 2005 (the Loan Agreement ), by and between the City and the Authority, and amounts in certain funds and accounts held under the Trust Agreement. The Loan Payments are secured by and payable solely from an ad valorem tax levied and collected annually by the City on non-exempt real property within the boundaries of the City (the Retirement Tax ) for such purpose. The City has pledged the Retirement Tax to pay the Loan Payments (the Pledged Tax Revenues ). Pursuant to California Government Code Section et seq. and a City election held in 1944, the City is obligated to levy and collect the Retirement Tax in an amount sufficient to meet the City s contributions to the California Public Employees Retirement System ( PERS ) for certain obligations arising as a result of retirement benefits accruing to the City s employee members of PERS. The Retirement Tax has no stated maximum rate or amount within the special purpose for which it is levied to provide sufficient revenue annually to S-1

8 meet the obligations of the City to participate fully in PERS. See SECURITY FOR THE BONDS herein. Payment of the principal of and interest on the Bonds when due will be insured by a financial guaranty insurance policy to be issued by Ambac Assurance Corporation simultaneously with the delivery of the Bonds. The Bonds are not a debt of the State of California (the State ), or any of its political subdivisions, other than the Authority, and neither the State nor any of its political subdivisions, other than the Authority, is liable therefor. The Authority has no taxing power. The Bonds do not constitute a debt of the State, or any political subdivision thereof, within the meaning of any constitutional or statutory debt limit or restriction. Only the City is obligated to levy or pledge any form of taxation to make Loan Payments. See SECURITY FOR THE BONDS and APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS. Validation: On May 6, 2005, the Authority and the City filed an action in the Superior Court of the State of California in and for the County of Los Angeles (Case No. BC333031) to confirm the validity of the Bonds and certain other issues. On August 2, 2005, a default judgment was entered which determined, among other things, that the Authority was duly formed and has the legal authority to issue the Bonds for the purposes stated therein, that the proceedings were and are valid and in conformity with the law, that the Bonds and provisions of certain documents, including the Trust Agreement, Loan Agreement and other documents, are valid and binding obligations, and that the Loan Payments to be made by the City are authorized under State law. Form of Bonds: The Bonds shall be delivered in fully registered form in denominations of $5,000 or any integral multiple thereof. The Bonds, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of DTC. Redemption: The Bonds are subject to optional and mandatory redemption prior to maturity. The Bonds maturing on or after August 1, 2016 are subject to redemption prior to their stated maturity on and after August 1, 2015 as a whole or in part on any date, at the option of the Authority, from optional prepayments of Loan Payments by the City and deposited in the Redemption Fund or from any other source of available funds, at the Redemption Prices set forth herein (expressed as a percentage of the principal amount of Bonds called for redemption), plus accrued interest thereon to the date fixed for redemption. See THE BONDS - Optional Redemption. The Bonds maturing on August 1, 2019 are subject to redemption prior to their respective maturities, in part, by lot, on August 1 of each year, commencing August 1, 2016 from sinking account payments at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, without premium, according to the schedule set forth herein. See THE BONDS - Scheduled Mandatory Redemption. Additional Indebtedness: The Authority is authorized to issue additional indebtedness on a parity with the Bonds ( Parity Obligations ) but only to the extent that the issuance or incurring of such Parity Obligations does not result in any deficiency of Pledged S-2

9 Tax Revenues for the scheduled payment in any Fiscal Year of principal of and interest on all Bonds then Outstanding when and as such amounts shall become due and payable. See THE BONDS - Parity Obligations. Continuing Disclosure: The City has covenanted for the benefit of the Owners and beneficial owners of the Bonds to provide certain financial information and operating data relating to the City by April 1 of the succeeding fiscal year, commencing with the report for the 2004/05 fiscal year (the Annual Report ), and to provide notices of the occurrence of certain enumerated events, if deemed by the City to be material, pursuant to the Continuing Disclosure Agreement executed by the City and delivered to the Underwriter simultaneously with the delivery of the Bonds. The Trustee will act as the Dissemination Agent for the City under the Continuing Disclosure Agreement. The Annual Reports will be filed by the City or the Dissemination Agent with each Nationally Recognized Municipal Securities Information Repository and with the State Repository, if any. The notices of material events will be filed by the City or the Dissemination Agent with the Municipal Securities Rulemaking Board and the State Repository, if any. The specific nature of the information to be contained in the Annual Reports or the notices of material events is set in APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission. The City has never failed to comply in all material respects with any previous undertaking with regard to said Rule to provide financial reports or notices of material events. Certain Risks: Payment of the principal of and interest on the Bonds shall be payable solely from Loan Payments to be made by the City pursuant to the Loan Agreement. Loan Payments are payable by the City solely from Pledged Tax Revenues. See RISK FACTORS for a discussion of certain risks attendant to investing in the Bonds. S-3

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11 OFFICIAL STATEMENT $9,225,000 BELL PUBLIC FINANCING AUTHORITY 2005 TAXABLE PENSION REVENUE BONDS INTRODUCTORY STATEMENT This Official Statement, including the cover page and appendices (the Official Statement ) hereto, is provided to furnish information in connection with the sale by the Bell Public Financing Authority (the Authority ) of $9,225,000 aggregate principal amount of the Authority s 2005 Taxable Pension Revenue Bonds (the Bonds ). The Bonds are being issued pursuant to the laws of the State of California (the State ), an election held in 1944 and a Trust Agreement dated as of December 1, 2005 (the Trust Agreement ), by and among the Authority, the City of Bell, California (the City ) and U.S. Bank National Association, Los Angeles, California, as trustee (the Trustee ). Capitalized terms used and not otherwise defined herein are defined in the Trust Agreement. The Bonds are being issued for the purpose of making a loan to the City (the Loan ) pursuant to the Loan Agreement dated as of December 1, 2005 (the Loan Agreement ) by and between the City and the Authority. The proceeds of the Loan will allow the City to (a) fund the City s current unfunded accrued actuarial liability ( UAAL ) for retirement benefits to City safety employees in the amount of $7,317,000, (b) advance refund the Authority s outstanding 1998 Taxable Pension Revenue Bonds dated May 1, 1998 (the 1998 Bonds ) in the amount of $1,460,000 through the prepayment of the outstanding 1998 loan to the City (the 1998 Loan ) under the loan agreement dated as of May 1, 1998 (the 1998 Loan Agreement ) between the City and the Authority entered into to fund the City s then UAAL for retirement benefits to City safety employees (the proceeds of such prepayment will be used by the Authority to establish an Escrow Fund providing for the redemption of the Authority s 1998 Bonds) and (c) pay the costs of issuance of the Bonds. The Bonds are a limited obligation of the Authority payable solely from payments to be made by the City (the Loan Payments ) for the Loan pursuant to the Loan Agreement and certain other funds and accounts held under the Trust Agreement. The Loan Payments are secured by and payable solely from an ad valorem tax levied and collected annually by the City on non-exempt real property within the boundaries of the City (the Retirement Tax ) for such purpose. The Retirement Tax has no stated maximum rate or amount within the special purpose for which it is levied to provide sufficient revenue annually to meet the obligations of the City to participate fully in PERS. Pursuant to California Government Code Section et seq. (the Pension Law ) and a ballot initiative measure approved by voters in a City election held in 1944 (the Retirement Tax Initiative ), the City is obligated to levy and collect the Retirement Tax in an amount sufficient to meet the City s contributions to the California Public Employees Retirement System ( PERS ) for certain obligations arising as a result of retirement benefits accruing to the City s employee members of PERS. The Bonds are not a debt of the State of California (the State ), or any of its political subdivisions, other than the Authority, and neither the State nor any of its political subdivisions, other than the Authority, is liable therefor. The Authority has no taxing power. The Bonds do not constitute a debt of the State, or any political subdivision thereof, within the meaning of any constitutional or statutory debt limit or restriction. Only the City is obligated to levy and pledge any form of taxation to make Loan Payments. See SECURITY FOR THE BONDS and APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS. Payment of the principal of and interest on the Bonds when due will be insured by a financial guaranty insurance policy (the Financial Guaranty Insurance Policy ) to be issued by Ambac Assurance Corporation ( Ambac Assurance or the Bond Insurer ) simultaneously with the delivery of the Bonds. See BOND INSURANCE herein. In the opinion of Nixon Peabody LLP, Bond Counsel, under existing law, the interest on the Bonds is exempt from California personal income taxes, but is includable in gross income for federal income tax purposes. See TAX MATTERS herein. -1-

12 The Bonds will be sold, executed and delivered as fully registered Bonds, in the name of Cede & Co., as nominee for the Depository Trust Company ( DTC ), in denominations of $5,000 or any integral multiple thereof. See THE BONDS - Book-Entry System below. Interest on the Bonds is payable on February 1 and August 1, commencing August 1, The Bonds are subject to optional and mandatory redemption prior to maturity as discussed herein. The Bonds are offered when, as and if issued, subject to approval as to legality by Nixon Peabody LLP, Bond Counsel. Certain legal matters will be passed on for the Authority and the City by its counsel, Oliver, Sandifer, Murphy & Lee, Los Angeles, California. Nixon Peabody LLP has also served as Disclosure Counsel. It is anticipated that the Bonds will be available for delivery through the facilities of DTC in New York, New York, on or prior to December 22, Fieldman, Rolapp & Associates, Irvine, California, is the City s financial advisor with respect to the Bonds. Fieldman, Rolapp & Associates and Nixon Peabody LLP will receive compensation from the City contingent upon the issuance, sale and delivery of the Bonds. Prospective investors should review this Official Statement and the Appendices hereto in their entirety and should consider risk factors associated with the purchase of the Bonds, including those which have been included in the section herein entitled RISK FACTORS. Brief descriptions of the Bonds, the Trust Agreement, the Loan Agreement, the Authority and the City are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Trust Agreement, the Loan Agreement, the Constitution and the laws of the State, the proceedings of the Authority and the City are qualified in their entirety by reference to such documents. References herein to the Bonds are qualified in their entirety by reference to the form thereof, included in the Trust Agreement and the information with respect thereto included herein, copies of which are all available for inspection at the offices of the Authority. During the period of the offering of the Bonds, copies of the forms of all documents will be available at the offices of Wedbush Morgan Securities, Solana Beach, California, and thereafter from the City Clerk s office, City of Bell, 6330 Pine Avenue, Bell, California

13 SOURCES AND USES OF PROCEEDS The estimated sources and uses of the proceeds of the Bonds is summarized as follows: Sources: Uses: Principal Amount of the Bonds $9,225, TOTAL SOURCES $9,225, PERS Contribution $7,317, Escrow Fund 1,601, Underwriter s Discount 64, Premium for Financial Guaranty Insurance Policy 52, Costs of Issuance (1) 188, TOTAL USES $9,225, (1) Includes the legal fees and financial consultant fees and expenses, printing costs and certain other costs of issuance. -3-

14 DEBT SERVICE SCHEDULE The following table sets forth the annual debt service on the Bonds. YEAR ENDING (AUGUST 1) PRINCIPAL PAYMENT INTEREST PAYMENT ANNUAL PAYMENTS 2006 $460,000 $294, $754, , , , , , , , , , , , , , , , , , , , , , , , , , , ,021, , , ,045, ,000 76, ,073, ,000 51, ,098, ,000 24, ,

15 THE BONDS Authority for Issuance The Bonds are authorized for issuance pursuant to resolutions adopted by the Authority, the Trust Agreement and Section of the JPA Law. The Loan is authorized by resolutions adopted by the City, the Pension Law, the Retirement Tax Initiative approved by voters at an election held November 13, 1944 and the Loan Agreement. On August 2, 2005, the Superior Court of the State of California for the County of Los Angeles entered judgment that the Bonds, the Trust Agreement and the Loan Agreement are valid and binding obligations of the Authority and of the City. See VALIDATION herein. Description of the Bonds The Bonds will be sold, executed and delivered as fully registered Bonds in denominations of $5,000 or any integral multiple thereof, in book-entry form only. The Bonds will be dated their date of delivery and will mature in the amounts and years set forth on the cover page. Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months and will be payable on February 1 and August 1 of each year, commencing on August 1, The Bonds, when issued, will be registered in the name of Cede & Co., as registered nominee of The Depository Trust Company, New York, New York ( DTC, and together with any successor securities depository, the Securities Depository ). DTC will act as Securities Depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form. Purchasers will not receive certificated Bonds. So long as Cede & Co., is the registered owner of the Bonds, as nominee of DTC, references herein to the Owners mean Cede & Co., and not the Beneficial Owners (as defined herein) of the Bonds. So long as Cede & Co., is the registered owner of the Bonds, principal of and interest on the Bonds are payable by wire transfer in same day available funds by the Trustee to Cede & Co., as nominee of DTC. DTC is obligated, in turn, to remit amounts to DTC Participants (as defined herein) for subsequent disbursement to the Beneficial Owners. Payments of principal will be made only upon surrender of the Bonds at the principal corporate trust office of the Trustee. See APPENDIX E BOOK-ENTRY SYSTEM. Payment of Interest Payment of the interest on the Bonds on each Interest Payment Date will be made to the Owners as of the Record Date immediately preceding such Interest Payment Date by check mailed by the Trustee by first class mail on such Interest Payment Date to such Owners at their addresses as they appear on the registration books of the Trustee as of the Record Date or, upon written request filed with the Trustee prior to the Record Date by any Owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United States designated by such Owner in such written request. The Bonds will bear interest from the Interest Payment Date next preceding the date of authentication, unless a Bond is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it will bear interest from such Interest Payment Date, or a Bond is authenticated on or before the first Record Date, in which event it will bear interest from the date of delivery; provided, however, that if, as of the date of authentication, interest is in default, such interest will be payable from the Interest Payment Date to which has previously been paid or made available for payment. Interest in respect of defaulted interest will not accrue to any Owner other than the Bond Insurer so long as the Bond Insurer is not in default in its payment obligations under the Financial Guaranty Insurance Policy. Transfer and Exchange Any Bond may, in accordance with its terms, be transferred upon the registration books of the Trustee by the person in whose name it is registered, in person or by such person s duly authorized agent, upon surrender of such Bond for cancellation at the office of the Trustee, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee. Whenever any Bond is surrendered for registration of transfer or for exchange, the Trustee will execute and deliver a new Bond for like aggregate principal amount in authorized denominations. -5-

16 Any Bond may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. The Trustee will require the payment by the Bond Owner requesting transfer or exchange of any tax or other governmental charge required to be paid with respect to such transfer. The Trustee is not required to transfer or exchange any Bond during the period fifteen (15) days prior to any Interest Payment Date, during the period established by the Trustee for the selection of Bonds redemption or any Bond selected for redemption. Redemption Optional Redemption. The Bonds maturing on or after August 1, 2016 are subject to redemption prior to their stated maturity on and after August 1, 2015 as a whole or in part on any date, at the option of the Authority, from optional prepayments of Loan Payments by the City and deposited in the Revenue Fund or from any other source of available funds, at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption. Scheduled Mandatory Redemption. The Bonds maturing on August 1, 2019, are subject to redemption prior to their maturity, in part, by lot, on August 1 of each year, commencing August 1, 2016, from sinking account payments at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, without premium, according to the following schedule: Year (August 1) Amount 2016 $845, , , ,000 Selection of Bonds for Redemption. Whenever provision is made in the Trust Agreement for the redemption of less than all of the Bonds of any given maturity, the Trustee will select the Bonds by lot in such a manner as the Trustee will determine; provided that the portion of any Bond to be redeemed will be in Authorized Denominations as provided in the Trust Agreement. Notice of Redemption. Notice of redemption will be mailed by first-class mail, postage prepaid, by the Trustee, not less than 30 nor more than 60 days prior to the redemption date (which redemption date, except in the case of scheduled mandatory redemption, will not be less than 60 days after notice of a redemption has been delivered to the Trustee by the Authority), to the Bond Insurer and to the respective Owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee. Notice of redemption will be given by confirmed facsimile transmission, or by first class mail, postage prepaid, or by overnight delivery service to the Securities Depositories and the Information Services. Each notice of redemption will specify (a) the redemption date; (b) the redemption price; (c) if less than all Outstanding Bonds are to be redeemed, the CUSIP numbers and Bond numbers of the Bonds to be redeemed; (d) in the case of partial redemption, the respective principal amounts of the Bonds to be redeemed; (e) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon will cease to accrue from and after said date; (f) the place where such Bonds will be surrendered for payment of the redemption price; and (g) such other matters as may be appropriate in the circumstances or which may be requested by the Authority. Failure by any Owner to receive notice of redemption mailed pursuant to the Trust Agreement will not affect the validity of the proceedings for redemption. Effect of Redemption. Notice of redemption having been duly given, and moneys for payment of the redemption price of, together with interest accrued to the redemption date with respect to, the Bonds so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds so called for redemption will become due and payable at the redemption price specified in such notice and interest accrued -6-

17 thereon to the redemption date, interest on the Bonds so called for redemption will cease to accrue, said Bonds will cease to be entitled to any benefit or security under the Trust Agreement, and the Owners of said Bonds will have no rights in respect thereof except to receive payment of said redemption price and accrued interest. All Bonds redeemed pursuant to the Trust Agreement will be cancelled upon surrender thereof by the Trustee. Parity Obligations The City may issue or incur Parity Obligations but only to the extent that the issuance or incurring of such Parity Obligations does not result in any deficiency of Pledged Tax Revenues for the scheduled payment in any Fiscal Year of principal of and interest on all Bonds then Outstanding when and as such amounts become due and payable. PLAN OF FINANCING The Bonds are being issued to provide funds for the Authority to make the Loan to the City pursuant to the Loan Agreement. The Loan is incurred in part to provide funds to allow the City to fund a portion of its current UAAL for retirement benefits for City safety employees. As of a report from the PERS Actuarial and Employer Services Division which performed the actuarial valuation at June 30, 2004, for the period then ended, the most recent actuarial valuation date, the UAAL for City safety employees was $7,320,000. The Authority and the City have determined that the City s obligations to PERS may be funded more economically through the issuance of the Bonds for the purpose of funding the Loan, in that the interest rates on the Bonds will be sufficiently low to enable the City to invest proceeds of the Loan and/or make payment arrangements to PERS which are more favorable to the City than the present method of City collection of the Retirement Tax and the payment of the UAAL to PERS. The amount being funded with proceeds of the Bonds equals the present value of the payments the City would otherwise be required to make to amortize the current UAAL over a 14 year period. Upon the issuance of the Bonds, a portion of the proceeds from the sale of the Bonds will be transferred to PERS to fund the City s UAAL obligations to PERS. In addition, the Loan is incurred in part to provide funds to enable the City to prepay the 1998 Loan. The proceeds of the prepayment will enable the Authority to establish an Escrow Fund sufficient to provide for the redemption of the 1998 Bonds. See THE REFUNDING PLAN below. The balance of the proceeds will be deposited with the Trustee to pay the costs of issuing the Bonds. THE REFUNDING PLAN Proceeds of the prepayment of the 1998 Loan will fund an Escrow Fund to be established by the Authority and held by U.S. Bank National Association, as Escrow Agent under an Escrow Agreement between the Authority and U.S. Bank National Association. Amounts deposited in the Escrow Fund will be invested in Federal Securities pursuant to the Escrow Agreement. The Authority elects to call all of the outstanding 1998 Bonds for redemption on September 1, 2008, at a redemption price of 102% of the principal amount to be repaid. The principal of and investment earnings on such deposits and investments, plus any available cash to be held uninvested, will be verified by McGladrey & Pullen, LLP, Minneapolis, Minnesota (the Verification Agent ) to be sufficient to pay the principal, interest and premium, if any, on the 1998 Bonds to and including the redemption thereof on September 1, As a result of the deposit and application of funds as provided for in the Escrow Agreement, the obligation of the City to pay the 1998 Bonds will be defeased and discharged, and following the issuance of the Bonds the 1998 Bonds will be payable solely from amounts held by the Escrow Agent under the Escrow Agreement and will no longer be secured by a pledge of payments of the 1998 Loan under the 1998 Loan Agreement. -7-

18 RETIREMENT SYSTEM The City of Bell contributes to the California Public Employees Retirement System (PERS), an agent multiple-employer public employee defined benefit pension plan. PERS provides retirement, disability benefits, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Safety participants are required to contribute 9% (7% for miscellaneous employees) of their annual covered salary. The City makes the contributions required of City employees on their behalf and for their account. For the year ended June 30, 2004, the amount contributed by the City on behalf of the employees was $273,598 for safety employees and $197,685 for miscellaneous employees. Benefit provisions and all other requirements are established by state statute and by contract with employee bargaining groups. Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required contribution (ARC) plus an adjustment for the cumulative difference between the APC and the employer s actual plan contributions for the year. The cumulative difference is called the net pension obligation (NPO). The ARC for the period July 1, 2003 to June 30, 2004 has been determined by an actuarial valuation of the plan as of June 30, The contribution rate indicated for the period is % of payroll for the safety plan and 0.000% of payroll for the miscellaneous plan. In order to calculate the dollar value of the ARC for inclusion in financial statements prepared as of June 30, 2004, this contribution rate would be multiplied by the payroll of covered employees that was actually paid during the period July 1, 2003 to June 30, Initial unfunded liabilities are amortized over a closed period that depends on the plan s date of entry into PERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan are amortized over a rolling period, which results in an amortization of 10% of unamortized gains and losses each year. If the plan s accrued liability exceeds the actuarial value of plan assets, then the amortization period may not be lower than the payment calculated over a 30 year amortization period. For the safety plan, the unfunded actuarial liability is amortized over a period ending June 30, For the miscellaneous plan, the City was overfunded for the year ended June 30, Amortization periods are not determined for overfunded plans. The table below shows the recent history of the actuarial value of assets, actuarial accrued liability, their relationship, and the relationship of the unfunded accrued liability to payroll. TABLE 1 CITY OF BELL PERS Defined Benefit Pension Plan Trend Information (1) Actuarial Valuations June 30, 2001 through June 30, 2003 (1) Entry Age Unfunded Normal Actuarial Liability/ Annual UAAL Valuation Accrued Value (Excess Funded Covered As a % of Date Liability of Assets Assets) Status Payroll Payroll 6/30/01 $35,767,142 36,422,598 (655,456) 101.8% 2,629,124 (24.9%) 6/30/02 38,715,337 33,798,701 4,916, ,935, /30/03 40,476,555 33,612,310 6,864, ,813, Safety employees only. Source: City s Audited Financial Statements,

19 The following table displays the City s contributions to PERS for fiscal years ended 2002 through TABLE 2 CITY OF BELL Annual Pension Cost (Employer Contribution) June 30, 2002 through June 30, 2004 Fiscal Percentage of Net Pension Year Safety Miscellaneous APC Contributed Obligation 6/30/ % - 6/30/03 $407, /30/04 565, Source: City s Audited Financial Statements, The following table sets forth the statement of revenues, expenditures and fund balances for the Retirement Tax Fund for fiscal years 1999/2000 through 2003/

20 TABLE 3 CITY OF BELL State Retirement Fund Revenues, Expenditures and Changes In Fund Balance Fiscal Years 2000 Through Revenues: Taxes $1,246,261 $1,323,667 $1,394,383 $1,488,760 $1,485,298 Investment income 36,952 55,394 46,720 31,191 12,377 Total Revenues 1,283,213 1,379,061 1,441,103 1,512,951 1,497,675 Expenditures: Current: Public safety 794, , ,978 1,652,390 2,212,944 Total expenditures 794, , ,978 1,652,390 2,212,944 Excess (deficiency) of revenues over (under) expenditures 489, , ,125 (132,439) (715,269) Other financing sources (uses): Operating transfers out (173,346) 170,126 (171,746) (173,311) (169,644) Total other financing sources (uses) (173,346) 170,126 (171,746) (173,311) (169,644) Excess (deficiency) of revenues over (under) expenditures and other sources (uses) 315, , ,379 (305,750) (884,913) Fund balances at beginning of year 657, ,638 1,234,012 1,799,391 1,493,641 Fund balances at end of year $973,638 $1,234,012 $1,799,391 $1,493,641 $608,728 Source: City s Audited Financial Statements. VALIDATION On May 6, 2005, the City and the Authority, acting pursuant to the provisions of California Code of Civil Procedure Section 860 et seq., filed a complaint in the Superior Court of the State of California for the County of Los Angeles seeking judicial validation of the transactions relating to the issuance of the Bonds and certain other matters. On August 2, 2005, the court entered a default judgment as to all defendants to the effect that, among other things, the Bonds and the Trust Agreement are valid and binding obligations of the Authority in accordance with their terms, and the Loan Agreement is valid and binding obligation of the City in accordance with their terms, and were and are in conformity with applicable provisions of law. -10-

21 SECURITY FOR THE BONDS Pledged Revenues The Bonds are limited obligations of the Authority payable solely from Loan Payments to be made by the City to the Authority pursuant to the Loan Agreement and amounts in the funds and accounts held by the Trustee for such purpose under the Trust Agreement. The Loan Payments are obligations of the City payable solely from Pledged Tax Revenues. Pledged Tax Revenues constitute a first and prior lien on the Retirement Tax. Subject only to the provisions of the Trust Agreement and the Loan Agreement regarding Parity Obligations and Additional Loan Payments permitting the application thereof for the purposes and on the terms and conditions set forth therein, the Pledged Tax Revenues and all amounts in the Pledged Revenue Fund or in any fund or account held under the Trust Agreement are pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with the terms of the Trust Agreement. The Loan and all Parity Obligations will be equally secured by a first pledge of, lien on and security interest in all of the Pledged Tax Revenues, without preference or priority for series, issue, number, dated date, sale date, date of execution or date of delivery. The Pledged Tax Revenues are allocated in their entirety to the payment of the principal of and interest on the Loan and all Parity Obligations, except as provided in the Loan Agreement and Trust Agreement. The pledge will continue as a lien on and a security interest in such assets and will attach, be perfected and be valid and binding from and after delivery of the Bonds by the Trustee. Except for the Pledged Tax Revenues and amounts in the funds and accounts pledged hereunder, no funds or properties of the City shall be pledged to, or otherwise liable for, the payment of principal of or interest or premium (if any) on the Loan. The City will deposit all of the Pledged Tax Revenues received in any Bond Year in the Pledged Revenue Fund promptly upon receipt thereof, until such time (if any) during any Bond Year as the amounts on deposit in the Pledged Revenue Fund equal the aggregate amounts required to be transferred to the Trustee in any such Bond Year; and (except as may be otherwise provided in any document relating to any Parity Obligation) any Pledged Tax Revenues received during any such Fiscal Year in excess of such amounts are released from the pledge, lien and security interest of the Loan Agreement and may be used for any lawful purposes of the City permitted therefor. The Loan Agreement requires that Loan Payments be deposited in the Revenue Fund maintained by the Trustee pursuant to the Trust Agreement. On each Interest Payment Date, the Trustee will withdraw from the Revenue Fund the aggregate amount necessary to make principal of and interest payments due on the Bonds. Retirement Tax The electorate of the City approved the Retirement Tax Initiative pursuant to an election held on November 7, 1944, certified by the City Council on November 13, 1944, providing for the levy and collection of the Retirement Tax in an amount sufficient to meet the City s obligation to PERS. The Retirement Tax is an annual ad valorem tax on all non-exempt property within the City and has been levied and collected since The Retirement Tax has no stated maximum rate or amount within the special purpose for which it is levied to provide sufficient revenue annually to meet the obligations of the City to participate fully in PERS. The current tax rate for the Retirement Tax is $ per $100 assessed valuation of taxable property. This rate has been constant since

22 Below is a table displaying collections of the Retirement Tax over and a statement of revenues, expenditures and fund balances for the Retirement Tax Fund for fiscal years 1998/1999 through 2003/04. TABLE 4 CITY OF BELL Retirement Tax Actual Collections Fiscal Years 1999 through 2004 Retirement Fiscal Year Tax Percent Ended June 30 Collected Change 1999 $1,239, ,246, % ,323, ,394, ,488, ,485, Source: City s Audited Financial Statements. Assessed Valuation Property in the City is assessed by the County Assessor. All ad valorem taxes levied on property in the City by the County, schools and special districts are due at the same time as and are based on the same rolls as county taxes. The valuation of secured property is established as of January 1 of each year and is equalized for purposes of establishing tax rates in August. -12-

23 A summary of the City s assessed values of taxable property for fiscal years through is as follows. TABLE 5 CITY OF BELL Assessed Valuation of Taxable Property Fiscal Years 1995 through 2006 Fiscal Year Ended June 30 Local Secured Utility Unsecured Before Redevelopment Increment % Change After Redevelopment Increment 1995 $732,710,070 $7,544,501 $3,154,964 $743,409, % $588,811, ,304,155 8,098,031 34,846, ,248, ,172, ,616,690 9,401,910 35,519, ,538, ,414, ,439,593 7,944,252 49,758, ,142, ,924, ,607,072 7,944,252 48,763, ,315, ,416, ,656,907 4,428,289 36,129, ,214, ,258, ,845,513 10,994,859 47,834, ,674, ,054, ,612,590 20,710,695 54,176, ,499, ,222, ,230,283 12,509,537 55,520, ,259, ,941, ,160,959 11,398,717 50,497, ,056, ,849, ,040,787,724 6,455,356 50,921,844 1,098,164, ,292, ,107,366,306 6,432,613 45,820,674 1,159,619, ,306,577 Sources: City s Audited Financial Statements, (for Fiscal years ); California Municipal Statistics, Inc (for Fiscal Years 2005 and 2006). Ad Valorem Property Taxes. Taxes, including the Retirement Tax, are levied for each fiscal year on taxable real and personal property as of the preceding January 1. For assessment and collection purposes, property is classified either as secured or unsecured and is listed accordingly on separate parts of the assessment roll. The secured roll is that part of the assessment roll containing State-assessed public utilities property and real property the taxes on which are a lien sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the unsecured roll. Property taxes on the secured roll are due in two installments, on November 1 and March 1 of each fiscal year, and become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to all delinquent payments. Properties on the secured roll with respect to which taxes are delinquent become tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1 1/2% per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is deeded to the State and may be sold at public auction. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 pm. on October 31, an additional penalty of 1 1/2% attaches to them on the first day of each month until paid. The County has four ways of collecting delinquent unsecured personal property taxes: (i) a civil action against the taxpayer; (ii) filing a Certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (iii) filing a certificate of delinquency for record in the County Recorder s office in order to -13-

24 obtain a lien on certain property of the taxpayer; and (iv) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. Below is a table of the direct and overlapping property tax rates per $100 of assessed value of taxable property within a typical tax rate area (TRA 516) within the City for fiscal years through The City s Retirement Tax is levied at a rate of TABLE 6 CITY OF BELL Property Tax Rates (TRA 516) - Direct and Overlapping Governments Fiscal Years 1995 through 2006 City of Fiscal Basic County, Bell County Year Ended City and Retirement County Flood Water School June 30 School Levy Tax Funds Control District Districts Total (1) (1) Not available. Sources: City s Audited Financial Statements, (for Fiscal Years ); California Municipal Statistics, Inc. (for Fiscal Years 2005 and 2006). -14-

25 Below is a table of the secured tax charges of the City and respective delinquencies for fiscal years through TABLE 7 CITY OF BELL Secured Tax Charges and Delinquencies Fiscal Years 1995 through 2005 Amount Percent Fiscal Year Secured Tax Delinquent Delinquent Ended June 30 Charge (1) June 30 June $916,394 $42, % ,246 47, ,188 94, ,213 57, ,113 47, ,217 45, ,013,131 36, ,077,337 35, ,124,276 45, ,172,710 46, ,266,951 27, (1) Tax District No. 1 debt service levy only. Sources: City s Audited Financial Statements, (for Fiscal Years ); California Municipal Statistics, Inc. (for Fiscal Year 2005). Investment of City Funds The City and its component units are generally authorized under their own investment policy to invest in any instrument allowable under current legislation of the State of California (Government Code Section 53601) so long as the investment is appropriate when the City s investment objectives and policies are considered. Funds required to be held by outside fiscal agents are authorized under the provisions of the bond indentures. The investments which are authorized and acceptable according to the above criteria are as follows: U.S. Treasury bills, U.S. Treasury notes, U.S. Treasury bonds, U.S. Government Agency Securities and Instrumentalities of Government Sponsored Corporations, banker s acceptances, commercial paper, certificates of deposit, passbook savings accounts, interest bearing checking accounts, medium term notes, money market accounts, Local Agency Investment Fund of the State of California, and mutual funds. -15-

26 TABLE 8 CITY OF BELL Cash and Investments as of June 30, 2004 ($ s in thousands) Cash and Investments Held by the City Carrying Amount Petty Cash $3,954 Demand Deposits (242,513) Time Certificates of Deposits 373,217 Local Agency Investment Fund 8,914,840 Sweep Account-U.S. Treasury Mutual Fund 1,888,764 Total $10,938,262 Cash and Investments Held by Fiscal Agents Mutual Funds-Treasury Obligations $3,007,323 Bank Investment Contracts 3,088,930 Total $6,096,253 Source: City of Bell Annual Financial Report (2004). Certain Covenants No Superior Obligations. The City covenants that, so long as the Loan remains unpaid, the City shall not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any loans, advances or indebtedness, which is in any case secured by a lien on all or any part of the Pledged Tax Revenues which is superior to or on a parity with the lien established under the Loan Agreement for the security of the Loan, excepting any Parity Obligations issued pursuant to the Loan Agreement. Without limitation on the foregoing, in no Fiscal Year shall the City make any pledge, assignment or transfer of Pledged Tax Revenues to or for the benefit of PERS or otherwise appropriate or expend Pledged Tax Revenues for any purpose other than the payment of scheduled principal of, premium, if any, and interest on the Bonds or any Parity Obligations during such Fiscal Year, if and to the extent that such pledge, assignment, transfer, appropriation or expenditure would result in any deficiency of Pledged Tax Revenues for the scheduled payment in such Fiscal Year of principal of and interest on all Bonds or any Parity Obligations then Outstanding when and as such amounts shall become due and payable. Levy and Collection of Retirement Tax. The City will levy and collect the Retirement Tax pursuant to the Retirement Tax Initiative on all non-exempt real property within the boundaries of the City. Without limitation on the foregoing, so long as the Loan remains unpaid, the City shall collect or cause to be collected, commencing with the ad valorem tax payments due November 1, 2005, the Retirement Tax in each Fiscal Year and such amounts collected shall be used to pay principal and interest payments on the Bonds or any Parity Obligations in the succeeding Fiscal Year. Without limitation on the foregoing, the City will not grant any exemption to the Retirement Tax, nor will the City waive the collection thereof or reduce the amounts required to be collected, nor will the City amend, modify, repeal or terminate the Retirement Tax or the Retirement Tax Initiative. If in any Fiscal Year the lien of the Retirement Tax shall become delinquent as to more than 7.5% of the aggregate liens therefor imposed in said year and the Retirement Tax collections in the previous Fiscal Year fall below one and one hundred percent (100%) the Maximum Annual Debt Service on the Bonds, the City will foreclose upon such delinquent liens with all due and deliberate speed. Maintain Revenues. The City will implement and comply with all requirements of the Retirement Tax Initiative and all other applicable laws to insure the levy and collection of the Pledged Tax Revenues in each Fiscal -16-

27 Year in an amount not less than the amount of scheduled principal and interest payments on the Bonds or any Parity Obligations in such Fiscal Year. BOND INSURANCE Payment Pursuant to Financial Guaranty Insurance Policy Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the Financial Guaranty Insurance Policy ) relating to the Bonds effective as of the date of issuance of the Bonds. Under the terms of the Financial Guaranty Insurance Policy, Ambac Assurance will pay to The Bank of New York, in New York, New York or any successor thereto (the Insurance Trustee ) that portion of the principal of and interest on the Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor (as such terms are defined in the Financial Guaranty Insurance Policy). Ambac Assurance will make such payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the date on which Ambac Assurance shall have received notice of Nonpayment from the Trustee. The insurance will extend for the term of the Bonds and, once issued, cannot be canceled by Ambac Assurance. The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding Bonds, Ambac Assurance will remain obligated to pay principal of and interest on outstanding Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. In the event the Trustee has notice that any payment of principal of or interest on an Bond which has become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available. The Financial Guaranty Insurance Policy does not insure any risk other than Nonpayment, as defined in the Policy. Specifically, the Financial Guaranty Insurance Policy does not cover: 1. payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity. 2. payment of any redemption, prepayment or acceleration premium. 3. nonpayment of principal or interest caused by the insolvency or negligence of any Trustee, Paying Agent or Bond Registrar, if any. If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires surrender of Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to permit ownership of such Bonds to be registered in the name of Ambac Assurance to the extent of the payment under the Financial Guaranty Insurance Policy. Payment of interest pursuant to the Financial Guaranty Insurance Policy requires proof of Holder entitlement to interest payments and an appropriate assignment of the Holder s right to payment to Ambac Assurance. Upon payment of the insurance benefits, Ambac Assurance will become the owner of the Bond, appurtenant coupon, if any, or right to payment of principal or interest on such Bond and will be fully subrogated to the surrendering Holder s rights to payment. -17-

28 In the event that Ambac Assurance were to become insolvent, any claims arising under the Policy would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California. Ambac Assurance Corporation Ambac Assurance Corporation ( Ambac Assurance ) is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, with admitted assets of approximately $8,645,000,000 (unaudited) and statutory capital of approximately $5,403,000,000 (unaudited) as of September 30, Statutory capital consists of Ambac Assurance s policyholders surplus and statutory contingency reserve. Standard & Poor s Credit Markets Services, a Division of The McGraw-Hill Companies, Moody s Investors Service and Fitch Ratings have each assigned a triple-a financial strength rating to Ambac Assurance. Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring of a bond by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such bond and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions substantially identical to those contained in its financial guaranty insurance policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the Obligor of the Bonds. Ambac Assurance makes no representation regarding the Bonds or the advisability of investing in the Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official Statement other than the information supplied by Ambac Assurance and presented under the heading BOND INSURANCE. Available Information The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the Company ), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the SEC ). These reports, proxy statements and other information can be read and copied at the SEC s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C Please call the SEC at SEC-0330 for further information on the public reference room. The SEC maintains an internet site at that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC, including the Company. These reports, proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc. (the NYSE ), 20 Broad Street, New York, New York Copies of Ambac Assurance s financial statements prepared in accordance with statutory accounting standards are available from Ambac Assurance. The address of Ambac Assurance s administrative offices and its telephone number are One State Street Plaza, 19th Floor, New York, New York and (212) Incorporation of Certain Documents by Reference The following documents filed by the Company with the SEC (File No ) are incorporated by reference in this Official Statement: 1. The Company s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and filed on March 15, 2005; 2. The Company s Current Report on Form 8-K dated April 5, 2005 and filed on April 11, 2005; 3. The Company s Current Report on Form 8-K dated and filed on April 20, 2005; -18-

29 4. The Company s Current Report on Form 8-K dated May 3, 2005 and filed on May 5, 2005; 5. The Company s Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 31, 2005 and filed on May 10, 2005; 6. The Company s Current Report on Form 8-K dated and filed on July 20, 2005; 7. The Company s Current Report on Form 8-K dated July 28, 2005 and filed on August 2, 2005; 8. The Company s Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 30, 2005 and filed on August 9, 2005; 9. The information furnished and deemed to be filed under Item 2.02 contained in the Company s Current Report on Form 8-K dated and filed on October 19, 2005; 10. The Company s Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 30, 2005 and filed on November 9, 2005; and The Company s Current Report on Form 8-K dated November 29, 2005 and filed on December 5, All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above in Available Information. THE AUTHORITY The Authority was created by a Joint Exercise of Powers Agreement, dated August 5, 1991, by and between the City and the Bell Community Redevelopment Agency. Such agreement was entered into pursuant to the provisions of Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code. The Authority is governed by a five-member Board of Trustees (the Board ) which consists of the members of the City Council of the City. The Mayor acts as the President of the Authority, the Chief Administrative Officer as its Executive Director, the City Clerk as its Secretary and the Treasurer of the City as the Treasurer of the Authority. Bonds Not General Obligations of the Authority RISK FACTORS The Bonds are limited obligations of the Authority payable solely from Pledged Tax Revenues. Pledged Tax Revenues constitutes Loan Payments made by the City pursuant to the Loan Agreement and other funds held by the Trustee as provided in the Trust Agreement. Loan Payments are made solely from Retirement Taxes annually levied and collected by the City. The obligation of the City to make the Loan Payments does constitute an obligation of the City for which the City is obligated to levy and pledge the Retirement Tax. The City has covenanted to continue to levy and collect the Retirement Tax. Neither the Bonds nor the obligation of the City to make the Loan Payments under the Loan Agreement constitutes a debt or indebtedness of the Authority, the State or any of its political subdivisions within the meaning of any constitutional or statutory debt provision, limitation or restriction. Constitutional Limitations on Taxes and Expenditures Article XIIIA of the California Constitution limits the taxing powers of California public agencies. Article XIIIA provides that the maximum ad valorem tax on real property cannot exceed 1% of the full cash value which is defined as the county assessor s valuation of real property as shown on the tax bill under full cash -19-

30 value or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment, subject to exceptions for certain circumstances of transfer or reconstruction. The full cash value is subject to annual adjustment to reflect increases not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reduction in property value caused by damage, destruction or other factors. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem sales or transaction tax on real property. As recently amended, Article XIIIA exempts from the 1% tax limitation any taxes above the level required to any debt service on certain voter-approved general obligation bonds. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State laws resulting in increased tax revenues. Article XIIIB limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the government entity. This limit is popularly known as the Gann Limit, named after the author and chief proponent of the measure. The base year for establishing such appropriation limit is the fiscal year and the limit is to be adjusted annually to reflect changes in population, consumer price index and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. Proceeds of taxes include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity s revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. If the City is at or over its Gann Limit, the City may be effectively precluded from utilizing options such as a property tax or utility users tax, because such tax revenues are not exempt from the Gann limit. General obligation bonds, in which the annual debt payments or increased tax revenues are exempt from the Gann limit, could provide a financing alternative, but would require two-thirds voter approval. The City is currently well below its Gann Limit. Both Article XIIIA and XIIIB were adopted as measures that qualified for the ballot pursuant to California s constitutional initiative process. From time to time other initiative measures could be adopted, affecting the ability of the City to increase revenues and to increase appropriations. No Liability of the Authority to the Owners Except as expressly provided in the Trust Agreement, the Authority will not have any obligation or liability to the Owners of the Bonds with respect to the payment when due of the Loan Payments by the City, or with respect to the observance or performance by the City of other agreements, conditions, covenants and terms required to be observed or performed by the City under the Loan Agreement or under the Trust Agreement, or with respect to the performance by the Trustee of any obligation required to be performed by it under the Trust Agreement. Bankruptcy and Limitations on Remedies In addition to the limitations on remedies contained in the Loan Agreement and the Trust Agreement, the rights and remedies provided in the Loan Agreement and the Trust Agreement may be limited by and are subject to the provisions of federal bankruptcy laws and to other laws or equitable principles that may affect the enforcement of creditors rights. The availability of the mandamus or specific performance remedy may be limited to the extent that any legally available funds of the City are needed to maintain essential City services or otherwise by the exercise of judicial discretion. -20-

31 Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs the bankruptcy proceedings for public agencies such as the City, there are no involuntary petitions in bankruptcy. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners, the Trustee and the Authority could be prohibited from taking any steps to enforce the rights under the Loan Agreement, and from taking any steps to collect amounts due from the City under Loan Agreement. Early Redemption Risk In the event of redemption of the Bonds, a Owner s reinvestment opportunities may not provide a return equivalent to the return on the Bonds. Certain of the Bonds are subject to scheduled mandatory sinking fund redemption in part and all Bonds are subject to optional redemption on and after August 1, See THE BONDS Redemption. Investment Risks The City administers a pooled investment program of moneys in its funds and accounts, including moneys which will be used to make Loan Payments. The City has established an investment policy which it believes to be prudently conservative. Nevertheless, the City s investments will be subject to market fluctuations and other risks over which the City has no control, and which could impair the Pledged Tax Revenues and the City s ability to make the Loan Payments. Secondary Market There can be no assurance that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing circumstances. Such prices could be substantially different from the original purchase price. Federal Income Taxes TAX MATTERS Bond Counsel is of the opinion that interest on the Bonds is included in gross income for federal tax purposes. State Taxes Bond Counsel is further of the opinion that interest on the Bonds is exempt from California personal income taxes. CERTAIN LEGAL MATTERS The legal opinion of Bond Counsel, approving the validity of the Bonds, in substantially the form attached hereto as APPENDIX D, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the Authority by its counsel, Oliver, Sandifer, Murphy & Lee, Los Angeles, California. Nixon Peabody LLP has also served as Disclosure Counsel. Payment of fees of Bond Counsel and Disclosure Counsel is contingent upon the issuance of the Bonds. FINANCIAL ADVISOR Fieldman, Rolapp & Associates is acting as Financial Advisor to the City with respect to the Bonds. The Financial Advisor has assisted the City in the matters relating to the planning, structuring, execution and delivery of -21-

32 the Bonds. Because of its limited participation in reviewing this Official Statement, the Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The Financial Advisor will receive compensation from the City contingent upon the sale and delivery of the Bonds. ABSENCE OF LITIGATION No material litigation is pending, with service of process having been accomplished or, to the knowledge of the City, threatened, concerning the validity of the Bonds, the corporate existence of the City, or the title of the officers of the City who will execute the Bonds as to their respective offices. The City will furnish to the initial purchaser or purchasers of the Bonds a certificate of the City as to the foregoing as of the time of the original delivery of the Bonds. CONTINUING DISCLOSURE The City has covenanted for the benefit of the Owners and beneficial owners of the Bonds to provide certain financial information and operating data relating to the City by April 1 of the succeeding fiscal year, commencing with the report for the 2004/05 fiscal year (the Annual Report ), and to provide notices of the occurrence of certain enumerated events, if deemed by the City to be material, pursuant to the Continuing Disclosure Agreement. The Continuing Disclosure Agreement will be a document required to be delivered at closing by the City. Notwithstanding any other provision of the Trust Agreement, failure of the City to comply with the Continuing Disclosure Agreement shall not be considered an event of default; however, any participating underwriter, Holder or beneficial Owner of the Bonds may take such action as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. The Trustee will act as the Dissemination Agent for the City under the Continuing Disclosure Agreement. The Annual Reports will be filed by the City or the Dissemination Agent with each Nationally Recognized Municipal Securities Information Repository and with the State Repository, if any. The notices of material events will be filed by the City or the Dissemination Agent with the Municipal Securities Rulemaking Board and the State Repository, if any. The specific nature of the information to be contained in the Annual Reports or the notices of material events is set in APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission. The City has never failed to comply in all material respects with any previous undertaking with regard to said Rule to provide financial reports or notices of material events. RATINGS Fitch Ratings ( Fitch ) and Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ) have assigned their municipal bond rating of AAA and AAA, respectively, to the Bonds conditioned on the issuance by the Bond Insurer of the Financial Guaranty Insurance Policy at the time of delivery of the Bonds. Underlying ratings of A- and BBB+ have been assigned by Fitch and S&P, respectively, to the Bonds. Such ratings reflect only the view of such organizations and an explanation of the significance of such ratings should be obtained from Fitch and S&P. There is no assurance that the rating mentioned above will continue for any given period of time or that the rating may not be lowered or withdrawn entirely by such rating agency, if in its judgment circumstances so warrant. Neither the Authority nor the City has undertaken any responsibility to maintain a rating for the Bonds. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. UNDERWRITING The Bonds are being purchased by the Underwriter for a price of $9,160,425, which reflects an Underwriter s discount of $64,575. The Bond Purchase Agreement provides that the Underwriter will purchase all of the Bonds, if any are purchased. The obligation of the Underwriter to accept delivery of the Bonds is subject to various conditions contained in the Bond Purchase Agreement. The Underwriter intends to offer the Bonds to the public initially at the yields set forth on the cover page of this Official Statement, plus accrued interest from the date of the Bonds, which yields may subsequently change without any requirement of prior notice. -22-

33 The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices, and such dealers may reallow any such discounts on sales to other dealers. In reoffering Bonds to the public, the Underwriter may overallocate or effect transactions which stabilize or maintain the market prices for Bonds at levels above those which might otherwise prevail. Such stabilization, if commenced, may be discontinued at any time. MISCELLANEOUS The purpose of this Official Statement is to supply information to purchasers of the Bonds. Quotations from and summaries and explanations of the Bonds, the Trust Agreement and the Loan Agreement or laws and documents contained herein do not purport to be complete, and reference is hereby made to said Bonds, Trust Agreement, Loan Agreement, laws and documents for full and complete statements of their provisions. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or Owners of any of the Bonds. All data contained herein have been taken or constructed from the City s records and other sources. The appropriate City officials, acting in their official capacity, have reviewed this Official Statement and have determined that as of the date hereof the information contained herein is, to the best of their knowledge and belief, true and correct in all material respects and does not contain an untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The appropriate City official will execute a certificate to this effect upon delivery of the Bonds. This Official Statement and its distribution have been duly authorized and approved by the City. CITY OF BELL, CALIFORNIA By /s/ Robert A. Rizzo Chief Administrative Officer -23-

34 SUPPLEMENTAL INFORMATION OF THE CITY OF BELL The following information concerning the City of Bell is presented as general background data. The Bonds are not an obligation of the City of Bell, the County of Los Angeles, the State of California or any of its political subdivisions, and neither said City, said County, said State nor any of its political subdivisions is liable therefor. General Description The City is a general law city incorporated on November 7, Located in Los Angeles County (the County ), the City consists of approximately 2.81 square miles and is located 10 miles southeast of downtown Los Angeles. Government The City adopted a Council Administrator form of government consisting of five Council Members elected to four year overlapping terms. The Mayor is determined through an annual election. Population The City s population, as of January 1, 2005 was 38,961 according to the State Department of Finance. A historical summary of the City s population (as of January 1 of each year except where noted) is shown below. City of Bell Year Population Year Population , , , , , , , , , , , , , ,961 Source: State Department of Finance, Demographic Research Unit, estimate as of January 1 of each year. Geography and Climate The City is located at an altitude of 160 feet above sea level. The City s climate is characterized as mild with a mean temperature of 70 degrees in the summer months and 55 degrees in the winter months. The average annual rainfall in the City is 14 inches. Transportation The City is well served by various modes of transportation. The Long Beach Freeway runs through the City, connecting the City to other major freeways and highways. The major airport serving the City is located in Los Angeles. Bus service is available and provided by the Southern California Rapid Transit system, Greyhound and Continental bus lines. Rail service is provided by Santa Fe Freight. In addition the City provides a dial a ride service to the community. -24-

35 Commerce The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions is presented in the following table. Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions Retail Stores Total All Outlets Number Taxable Number Taxable of Permits Transactions of Permits Transactions ,648, ,721, ,037, ,707, ,903, ,106, ,073, ,848, ,172, ,382, ,480, ,468, ,763, ,902, ,609, ,214, ,013, ,237, (1) ,039, ,130,000 (1) Through Third Quarter, Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). Employment and Industry The City is located in the southeast portion of the County, is part of the Los Angeles-Long Beach labor market area. The distribution of employment in the Los Angeles-Long Beach labor market is as follows: (3) Agriculture 7,800 7,800 7,600 7,200 Natural Resources and Mining 3,700 3,800 3,900 4,300 Construction 134, , , ,600 Manufacturing 534, , , ,700 Trade, Transportation and Utilities 782, , , ,000 Information 207, , , ,900 Financial Activities 232, , , ,800 Professional and Business Services 575, , , ,900 Educational and Health Services 450, , , ,900 Leisure and Hospitality 354, , , ,100 Other Services 145, , , ,700 Government 606, , , ,800 Total All Industries 4,034,600 3,990,800 3,999,700 4,008,900 Total Civilian Labor Force (1) 4,769,900 4,782,000 4,809,700 4,907,400 Total Unemployment 323, , , ,300 Unemployment Rate (2) 6.8% 7.0% 6.6% 5.7% (1) Annual average total labor force (and components) by location of residence; includes workers involved in trade disputes. (2) (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates using rounded figures. As of July, Source: State Development Department, Employment and Data Research. -25-

36 Major Employers The Bell Chamber of Commerce estimates there are over 200 manufacturing plants in the community area. Leading classes of products include yarn, construction and building materials and plastic products. The following is a list of the major manufacturing and non-manufacturing employers in the area. Employer Product/Service Employment Manufacturing: Custom Building Products Building Materials Manufacturers 120 Inland Container Corp. Corrugated Box Manufacturers 101 Himolene California Inc. Plastic Bag Manufacturers 65 Bearing Engineers Bearing Manufacturers 41 Employer Product/Service Employment Non Manufacturing Employment: U.S. Postal Service Bulk Mail Center 1,080 Bingo Cash & Carry Wholesale Food Outlet 103 Trammell Crow Construction/Commercial Real Estate 65 Source: Community Economic Profile prepared by the Bell Chamber of Commerce. Largest Taxpayers CITY OF BELL Largest Local Secured Taxpayers % of Property Owner Land Use Assessed Valuation Total (1) 1. Cheli Distribution Center Inc. Industrial $137,569, % 2. Bell Palm Plaza LP Commercial 13,513, Bristol Industrial I LLC Industrial 12,228, AMB Property LP Industrial 12,209, Bandini Partners LLC Industrial 11,559, Bank of America NT & SA Commercial 5,321, Inland Container Corp. Industrial 5,121, Eagle Investments LLC Apartments 4,340, Bell Housing Partners LP Apartments 4,022, Horacio Rodriguez Apartments 3,998, Ying H. and Ying C. Wu Hotel/Motel 3,500, Michael Brandon Enterprises LLC Industrial 3,411, Abdul R. and Mary E. Kamari Industrial 3,102, KP Bell LLC Commercial 2,856, Haeri LLC Commercial 2,812, Arturo and Juanita Barrera Apartments 2,739, Lorena Lazhezzter Apartments 2,500, Ninos I LP Industrial 2,359, Reynaldo and Isolina Tobias Apartments 2,216, Joy 2001 LLC Commercial 2,200, $237,581, % (1) Local Secured Assessed Valuation: $1,107,366,306 Source: California Municipal Statistics, Inc. -26-

37 Construction Activity The following table is a five-year summary of the valuation of building permits issued in the City. City of Bell Building Permit Valuation (Valuation in Thousands of Dollars) Residential (1) New Single-Dwelling , ,159 New Multi-Dwelling 216 4, Total Residential 216 4,791 2, ,159 No. of New Dwelling Units Single-Dwelling Multi-Dwelling Total Units (1) Through July, Source: Economic Sciences Corporation. -27-

38 Direct and Overlapping Bonded Debt The following table shows the direct and overlapping bonded debt for the City Assessed Valuation: $1,159,619,593 Redevelopment Incremental Valuation: 350,313,016 Adjusted Assessed Valuation: $ 809,306,577 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable (1) Debt 11/1/05 Los Angeles County 0.112% $ 18,150 Los Angeles County Flood Control District ,404 Metropolitan Water District ,052 Los Angeles Community College District ,375,516 Los Angeles Unified School District ,781,303 Montebello Unified School District ,007 City of Bell ,000,000 Los Angeles County Regional Park and Open Space Assessment District ,795 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $28,803,227 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 0.112% $1,507,691 Los Angeles County Pension Obligations ,176,109 Los Angeles County Superintendent of Schools Certificates of Participation ,399 Los Angeles Unified School District Certificates of Participation ,331,996 Montebello Unified School District Certificates of Participation ,963 Los Angeles County Sanitation District No. 1 Authority ,386,672 Los Angeles County Sanitation District No.2 Authority ,653 City of Bell Pension Obligations ,460,000 (2) TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $7,131,483 Less: Los Angeles County Certificates of Participation (100% self-supporting from leasehold revenues on properties in Marina Del Rey) 43,938 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $7,087,545 GROSS COMBINED TOTAL DEBT $35,934,710 (3) NET COMBINED TOTAL DEBT $35,890,772 Ratios to Assessed Valuation: Direct Debt ($15,000,000) % Total Direct and Overlapping Tax and Assessment Debt % Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($16,460,000) % Gross Combined Total Debt % Net Combined Total Debt % STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/05: $2,743 (1) Based on ratios. (2) Excludes pension obligations to be sold. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and nonbonded capital lease obligations. Source: California Municipal Statistics, Inc. Utilities Water is supplied by the Southern California Water Company and the California Water Service Company. Southern California Gas Company supplies natural gas and electric power is provided by Southern California Edison Company. Telephone service is available through Pacific Telephone Company and trash collection is provided by a private disposal service on contract with the City. -28-

39 Community Service Facilities The City s educational system is comprised of three elementary schools, one high school, one continuation high school and an adult educational school. The City serves the educational needs of approximately 6031 students. The Bell Public Library also serves as an educational resource center. Health care is provided by the Bell Convalescent Hospital, Community Hospital, Mission Hospital and St. Francis Medical Center all located in the community area as well as a County health care facility. In addition, there are many physicians, dentists, optometrists, ophthalmologists and chiropractors in the area. The City also maintains an active public recreation program with six major parks. There are also 10 churches serving the community. -29-

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41 APPENDIX A SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

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43 APPENDIX A SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following are brief summaries of certain provisions of the Trust Agreement and the Loan Agreement not otherwise summarized elsewhere in the text of this Official Statement. These summaries do not purport to be comprehensive or definitive and are subject to all of the terms and provisions of the respective documents in their entirety. Capitalized terms not defined in this Official Statement shall have the meaning set forth in the Trust Agreement or the Loan Agreement, as applicable. Definitions Authorized Denomination means the amount of $5,000 or any integral multiple thereof. Authorized Officer means: (a) with respect to the City, its Mayor, the Vice Mayor, the Chief Administrative Officer, the City Clerk, or any other person designated as an Authorized Officer of the City by a Written Certificate signed on behalf of the City by its Chief Administrative Officer and filed with the Authority and the Trustee; (b) with respect to the Authority, any officer of the Authority; and (c) with respect to the Trustee, any Senior Vice President, any Vice President, any Assistant Vice President or any Trust Officer of the Corporate Trust Department of the Trustee, and when used with reference to any act or document also means any other person authorized to perform such act or sign any document by or pursuant to a resolution of the Board of Directors of the Trustee. Bond Year means the twelve-month period during the time that any Bonds remain Outstanding commencing on August 2 in any year and ending on August 1 in the next succeeding year except that the first Bond Year shall commence on the Closing Date and end on August 1, Business Day means a day which is not a Saturday, Sunday or legal holiday on which banking institutions in the State, or in any state in which the office of the Trustee is located, are closed. If any payment under the Trust Agreement is due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day; provided, however, that interest shall not accrue to such next succeeding Business Day. Closing Date means the date on which the Bonds are delivered to Wedbush Morgan Securities, as underwriter. Election Resolution means Resolution No. 953 adopted by the City Council of the City of Bell certifying the results of the Retirement Tax Initiative. Event of Bankruptcy means, with respect to any person, the filing of a petition in bankruptcy or the commencement of a proceeding under the United States Bankruptcy Code or any other applicable law concerning insolvency, reorganization or bankruptcy by such person as debtor. Event of Default means any of the events specified in the Trust Agreement and the Loan Agreement. 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 City and certified to the Trustee in writing by an Authorized Officer of the City. Information Services means Financial Information, Inc. s Daily Called Bond Service, 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services Called Bond Service, 65 Broadway, 16th Floor, New York, New York 10006; Moody s Municipal and Government, 99 Church Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; and Standard and Poor s Called Bond Record, 25 Broadway, 3rd Floor, New York, New York 10004; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or A-1

44 such other services providing information with respect to called Bonds as the Authority may designate in a written request delivered to the Trustee. Maximum Annual Debt Service means the maximum aggregate amount of principal and interest scheduled to be due and payable in any Bond Year. Outstanding, when used as of any particular time with reference to Bonds, means all Bonds theretofore, or thereupon being, issued and delivered by the Authority under the Trust Agreement except (a) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with the Trust Agreement; and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been issued and delivered by the Authority pursuant to the Trust Agreement. Owner or Registered Owner whenever used in the Trust Agreement with respect to a Bond, means the person in whose name the ownership of such Bond is registered on the Bond Register. Parity Obligations means any loans, bonds, notes, advances or indebtedness payable from Pledged Tax Revenues on a parity basis with the Loan, issued or incurred pursuant to and in accordance with the provisions of the Loan Agreement. Permitted Investments means any of the following which at the time of investment are certified to the Trustee by the City to be legal investments under the laws of the State of California for the moneys proposed to be invested therein: (a) Direct obligations of the United States of America (including obligations issued or held in bookentry form on the books of the Department of the Treasury) or obligations the principal and interest on which are unconditionally guaranteed by the United States of America. (b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are permitted only if they have been stripped by the agency itself): (i) (ii) (iii) (iv) (v) (vi) Farmers Home Administration (FmHA) Certificates of beneficial ownership Federal Housing Administration Debentures (FHA) General Services Administration Participation certificates Government National Mortgage Association (GNMA or Ginnie Mae ) GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations (participation certificates) (not acceptable for certain cash-flow sensitive issues) U.S. Maritime Administration Guaranteed Title XI financing U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds (c) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): A-2

45 (i) (ii) (iii) (iv) (v) (vi) Federal Home Loan Bank System Senior debt obligations (Consolidated debt obligations) Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac ) Participation Certificates (Mortgage-backed securities) Senior debt obligations Federal National Mortgage Association (FNMA or Fannie Mae ) Mortgage-backed securities and senior debt obligations (excluded are stripped mortgage securities which are valued greater than par on the portion of unpaid principal.) Student Loan Marketing Associations (SLMA or Sallie Mae ) Senior debt obligations Resolution Funding Corp. (REFCORP) Only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form are acceptable. Farm Credit System Consolidated systemwide bonds and notes (d) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAAm; or AA-m and if rated by Moody s rated Aaa, Aa1 or Aa2. (e) Certificates of deposit secured at all times by collateral described in (a) and/or (b) above. CD s must have a one year or less maturity. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks whose short term obligations are rated A-1+ or better by S&P and Prime-1 by Moody s. The collateral must be held by a third party and the Trustee on behalf of the Bondholders must have a perfected first security interest in the collateral. (f) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF. (g) Investment Agreements, including guaranteed investment contracts, acceptable to Bond Insurer (Investment Agreement criteria is available upon request). (h) Commercial paper rated Prime-1 by Moody s and A-1+ or better by S&P. (i) Federal funds of banker s acceptance with a maximum of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of Prime-1 or A3 or better by Moody s and A-1+ by S&P. (j) (k) California Local Agency Investment Fund. Any other investment approved in writing by the Bond Insurer. Pledged Tax Revenues means all taxes annually levied and collected pursuant to the Retirement Tax Initiative and Election Resolution, including all payments, subventions and reimbursements (if any) to the City specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations. Record Date means the fifteenth day of the month next preceding any Interest Payment. A-3

46 Retirement Tax Initiative means the initiative ballot measure approved by the electorate of the City on November 7, Securities Depositories means The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax (516) or 4190, or, in accordance with the then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. Trust Fund means the fund by that name established under and held by the Trustee pursuant to the Trust Agreement. Written Certificate and Written Request of the City or the Authority means a written certificate or written request signed in the name of the City or the Authority by its Authorized Officer, as applicable. Any such certificate or request 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. The Trust Agreement Bond Register. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which will be open to inspection during regular business hours and upon reasonable notice by the City or the Authority; and, upon presentation of any Bonds, the Trustee will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as provided in the Trust Agreement. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond is mutilated, the Authority, at the expense of the Owner of said Bond, will execute, and the Trustee will thereupon authenticate and deliver, a new Bond of like tenor 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 will be cancelled by it and delivered to, or held by the Trustee upon the order of, the Authority. If any Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Authority and the Trustee and, if such evidence be satisfactory to them and indemnity satisfactory to them is given, the Authority, at the expense of the Owner, will execute, and the Trustee will authenticate and deliver, a new Bond of like tenor in lieu of and in replacement for the Bond so lost, destroyed or stolen (or if any such Bond has matured or is about to mature, instead of issuing a replacement Bond, the Trustee may pay same without surrender thereof upon receipt of indemnity satisfactory to the Trustee). The Authority may require payment by the Owner of a sum not exceeding the actual cost of preparing each replacement Bond issued under the Trust Agreement and of the expenses which may be incurred by the Trustee. Any Bond issued under the provisions of the Trust Agreement in lieu of any Bond alleged to be lost, destroyed or stolen will constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and will be entitled to the benefits of the Trust Agreement with all other Bonds secured by the Trust Agreement. Establishment and Application of Revenue Fund. (a) Within the Trust Fund, there is established a separate account designated the 2005 Taxable Pension Revenue Bonds Revenue Fund (the Revenue Fund ). Such account will be maintained by the Trustee for the benefit of the Bond Owners until the Loan is paid in full pursuant to the terms of the Trust Agreement and the Loan Agreement. The Loan Payments, when paid to the Trustee pursuant to the Trust Agreement and the Loan Agreement, have been assigned to the Trustee pursuant to the Trust Agreement and will be deposited by the Trustee in the Revenue Fund. (b) The Trustee will withdraw from the Revenue Fund, on each Interest Payment Date, an amount equal to the principal of, redemption premium, if any, and interest on the Bonds due on such Interest Payment Date, and will cause the same to be applied to the payment of principal and interest payments due on the Bonds on such Interest Payment Date. A-4

47 (c) Any surplus remaining in the Revenue Fund, after payment of all Bonds, including accrued interest (if any), or provision for such payment having been made to the satisfaction of Trustee, will, after payment of all fees, and expenses of the Trustee, be withdrawn by the Trustee and remitted to the City. Deposit and Investment of Moneys in Funds. (a) The moneys and investments held by the Trustee under the Trust Agreement, if any, are irrevocably held in trust for the benefit of the owners of the Bonds and for the purposes specified in the Trust Agreement, and such moneys, and any income or interest earned thereon, will be expended only as provided in the Trust Agreement, and will not be subject to levy or attachment or lien by or for the benefit of any creditor of the Trustee or the City. (b) Moneys held by the Trustee under the Trust Agreement will be invested and reinvested by the Trustee, at the written direction of an Authorized Officer of the City (giving full consideration to the time at which funds are required to be available), in Permitted Investments; provided, however, the Trustee has received at least two (2) Business Days written notice prior to the date of any such proposed investment. In the absence of such written direction, the Trustee will invest in Permitted Investments described in part (d) of the definition thereof. Such investments, if registrable, will be registered in the name of and held by the Trustee. The Trustee may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by the Trust Agreement. The Trustee may act as principal or agent in the making or disposing of any investment. The Trustee will incur no liability for losses arising from any investments made pursuant to the Trust Agreement. (c) All income or earnings on the investment of amounts in any of the funds or accounts created under the Trust Agreement will be retained in such funds or accounts from which they were earned and used for the purposes provided therein. (d) The Authority and the City (by execution of the Loan Agreement) acknowledge that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority or the City the right to receive brokerage confirmations of security transactions as they occur, the Authority and the City specifically waive receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Authority and the City periodic cash transaction statements which include detail for all investment transactions made by the Trustee under the Trust Agreement. (e) The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee under the Trust Agreement. Duties of the Trustee; Removal; Resignation. (a) The Trustee will, prior to an Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in the Trust Agreement. The Trustee will, during the existence of any Event of Default which has not been cured or waived, exercise such of the rights and powers vested in it by the Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person s own affairs. The Trustee may execute any of the trusts or powers of the Trust Agreement and perform the duties required of it under the Trust Agreement by or through attorneys, agents or receivers and will not be answerable for the conduct of the same to the extent appointed by it with reasonable care. (b) The City and the Authority may by written agreement between themselves remove the Trustee at any time unless an Event of Default has occurred and then be continuing, and will 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 will cease to be eligible in accordance with paragraph (e) under this heading, or will become incapable of acting, or will be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property will be appointed, or any public officer will take control or charge of the Trustee or its property or affairs for the A-5

48 purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee and thereupon will appoint a successor Trustee by an instrument in writing. (c) The Trustee may at any time resign by giving written notice of such resignation by first class mail, postage prepaid, to the City, and to the Bond Owners at the respective addresses shown on the Bond Register. Upon receiving such notice of resignation, the City will promptly appoint a successor Trustee by an instrument in writing, one copy of which will be delivered promptly by the City to the resigning Trustee. The Trustee will not be relieved of its duties until such successor Trustee has accepted appointment. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee will become effective upon acceptance of appointment by the successor Trustee. If no successor Trustee has been appointed and has accepted appointment within thirty (30) days following giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bond Owner (on behalf of himself and all other Bond Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Trust Agreement will signify its acceptance of such appointment by executing and delivering to the City and to its predecessor Trustee a written acceptance thereof, and to the predecessor Trustee an instrument indemnifying the predecessor Trustee for any costs or claims arising during the time the successor Trustee serves as Trustee under the Trust Agreement, and such successor Trustee, without any further act, deed or conveyance, will 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 in the Trust Agreement; but, nevertheless at the Written Request of the City or the request of the successor Trustee, such predecessor Trustee will 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 the Trust Agreement and will pay over, transfer assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions in the Trust Agreement set forth upon request of the successor Trustee and the City will 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. Upon acceptance of appointment by a successor Trustee as provided in this paragraph, the successor Trustee will mail, at the City s expense, by first class mail postage prepaid, a notice of the succession of such Trustee to the trusts under the Trust Agreement to each rating agency which then maintains a rating on the Bonds and to the Bond Owners at the addresses shown on the Bond Register. (e) Any Trustee appointed under the provisions of the Trust Agreement in succession to the Trustee originally named in the Trust Agreement will be a trust company or bank having the powers of a trust company, having (or will be a member of a bank holding system whose parent bank holding company has) a combined capital and surplus of at least seventy-five million dollars ($75,000,000), and be subject to supervision or examination by a federal or state agency. 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 agency above referred to, then for the purpose of this paragraph the combined capital and surplus of such bank or trust company will 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 will cease to be eligible in accordance with the provisions of this paragraph (e), the Trustee will resign immediately in the manner and with the effect specified in the Trust Agreement. Events of Default and Remedies. Events of Default Defined. The following constitute events of default under the Trust Agreement and the terms, Events of Default, events of default and default mean, whenever they are used in the Trust Agreement, any one or more of the following events. Immediately upon the occurrence of an Event of Default or a condition which, with the passing of time will become an Event of Default, the City will provide the Trustee with written notice thereof. (a) The City fails to pay the Loan Payments to the Authority in order to make the payments of principal and interest required to be paid under the Trust Agreement at the times specified in the Trust Agreement; A-6

49 (b) If default is made by the City or the Authority in the observance of any of the other covenants, agreements or conditions on the part of either of them contained in the Trust Agreement, the Loan Agreement or in the Bonds contained, if such default has continued for a period of sixty (60) days after written notice thereof, specifying such and requiring the same to be remedied, has been given to the City by the Trustee or the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds at the time Outstanding; provided, however, if the failure stated in the notice can be corrected, but not within the applicable period, the City, the Trustee and such Owners will not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City or the Authority within the applicable period and diligently pursued until the default is corrected. The City or the Authority will notify the Trustee of any action taken pursuant to the preceding sentence and will update such notice as reasonably requested by the Trustee; and (c) The occurrence of an Event of Bankruptcy with respect to the City. Remedies Upon Event of Default. Subject to the control, direction and rights of the Bond Insurer, if any Event of Default occurs under the provisions of the Trust Agreement, the Trustee or the Owners of not less than a majority in aggregate principal amount of the Bonds at the time outstanding may, upon notice in writing to the City, exercise any and all remedies available pursuant to law, including without limitation acceleration of the Loan Payments to the extent permitted by law. Other Remedies of Bond Owners. Subject to the control, direction and rights of the Bond Insurer and the provisions of the Trust Agreement, the Trustee and any Bond Owner will have the right, for the equal benefit and protection of all Bond Owners similarly situated: (a) By mandamus, suit, action or proceeding, to compel the City and the Authority and their members, officers, agents or employees to perform each and every term, provision and covenant contained in the Trust Agreement and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the City or the Authority and the fulfillment of all duties imposed upon them by law; (b) By suit, action or proceeding in equity, to enjoin any acts or things which are unlawful or in violation of any of the Bond Owners rights; or (c) Upon the happening of any Event of Default, by suit, action or proceeding in any court of competent jurisdiction, to require the City and the Authority and their members and employees to account as if it and they were the trustees of an express trust. Application of Funds After Default. All of the moneys in any funds or accounts received by the Trustee under any of the provisions of the Trust Agreement will be applied by the Trustee as follows and in the following order: (a) (i) To the payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Trust Agreement; and (ii) to the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds. (b) To the payment of the principal of and interest then due with respect to the Bonds (upon presentation of the appropriate Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the following: First: To the payment to the persons entitled thereto of all installments of interest then due, and, if the amount available is not sufficient to pay in full such installment, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and A-7

50 Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which have become due, with interest, on the overdue principal at the rate borne by the Bonds on the date of maturity, and, if the amount available is not sufficient to pay in full all the Bonds so maturing, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference. Trustee To Represent Bond Owners. The Trustee is irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, will be conclusively deemed to have so appointed the Trustee) as 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 the Owners under the provisions of the Bonds and the Trust Agreement. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bond Owners, the Trustee in its discretion may, and upon the written request of the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, will, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action suit, mandamus or other proceedings as it will 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 in the Trust Agreement, or in aid of the execution of any power in the Trust Agreement granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee and such Owners under the Bonds, the Trust Agreement, or any law; and upon instituting such proceeding, the Trustee will be entitled, as a matter of right, to the appointment of a receiver of the all assets pledged under the Trust Agreement, pending such proceedings. All rights of action under the Trust Agreement 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 proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee will be brought in the name of the Trustee for the benefit and protection of the Owners of such Bonds, subject to the provisions of the Trust Agreement. Bond Owners Direction of Proceedings. (a) Anything in the Trust Agreement to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, will have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indemnification of the Trustee to its reasonable satisfaction, to direct the method of conducting all remedial proceedings taken by the Trustee under the Trust Agreement, provided that such direction is not otherwise than in accordance with law and the provisions of the Trust Agreement and that the Trustee has the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Bond Owners not parties to such direction or expose the Trustee to liability. (b) In the event that the Trustee, upon the happening of an Event of Default, has taken any action, by judicial proceedings or otherwise, pursuant to its duties under the Trust Agreement, whether at its own discretion or upon the request of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, it will have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee will not, unless there no longer continues an Event of Default under the Trust Agreement, discontinue, withdraw, compromise, settle or otherwise dispose of any litigation pending at law or in equity, if at the time there has been delivered to the Trustee an instrument in writing signed by the Owners of a majority in aggregate principal amount of the Bonds then outstanding, opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. Limitation on Bond Owners Right to Sue. No Owner of any Bonds has 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 the Trust Agreement, or any applicable law with respect to such Bonds, unless: (a) such Owner has given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding, have made written request upon the Trustee to exercise the powers granted in the Trust Agreement or to institute such suit, action or proceeding in its own name; (c) such Owner or said Owners have tendered to the Trustee indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee has refused or omitted, to comply with such request A-8

51 for a period of sixty (60) days after such written request has been received by, and said tender of indemnity has been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy under the Trust Agreement or under law; it being understood and intended that no one or more Owners of Bonds have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Trust Agreement or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, the Trust Agreement, or applicable law with respect to the Bonds, except in the manner provided in the Trust Agreement, and that all proceedings at law or in equity to enforce any such right will be instituted, had and maintained in the manner provided in the Trust Agreement and for the benefit and protection of all Owners of the outstanding Bonds, subject to provisions of the Trust Agreement. Payment Procedure Pursuant to the Financial Guaranty Insurance Policy. As long as the Financial Guaranty Insurance Policy is in full force and effect, the Authority and the Trustee agree to comply with the following provisions: (a) At least one (1) business day prior to all Interest Payment Dates the Trustee, if any, will determine whether there will be sufficient funds in the Funds and Accounts to pay the principal of or interest on the Bonds on such Interest Payment Date. If the Trustee determines that there will be insufficient funds in such Funds or Accounts, the Trustee will so notify the Bond Insurer. Such notice will specify the amount of the anticipated deficiency, the Bonds to which such deficiency is applicable and whether such Bonds will be deficient as to principal or interest, or both. If the Trustee has not so notified the Bond Insurer at least one (1) business day prior to an Interest Payment Date, the Bond Insurer will make payments of principal or interest due on the Bonds on or before the first (1st) business day next following the date on which the Bond Insurer has received notice of nonpayment from the Trustee. (b) The Trustee will, after giving notice to the Bond Insurer as provided in paragraph (a) above, make available to the Bond Insurer and, at the Bond Insurer s direction, to The Bank of New York, as insurance trustee for the Bond Insurer or any successor insurance trustee (the Insurance Trustee ), the registration books of the Authority maintained by the Trustee and all records relating to the Funds and Accounts maintained under the Trust Agreement. (c) The Trustee will provide the Bond Insurer and the Insurance Trustee with a list of registered owners of Bonds entitled to receive principal or interest payments from the Bond Insurer under the terms of the Financial Guaranty Insurance Policy, and will make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Bonds entitled to receive full or partial interest payments from the Bond Insurer and (ii) to pay principal upon Bonds surrendered to the Insurance Trustee by the registered owners of Bonds entitled to receive full or partial principal payments from the Bond Insurer. (d) The Trustee will, at the time it provides notice to the Bond Insurer pursuant to paragraph (a) above, notify registered owners of Bonds entitled to receive the payment of principal or interest thereon from the Bond Insurer (i) as to the fact of such entitlement, (ii) that the Bond Insurer will remit to them all or a part of the interest payments next coming due upon proof of Bond Owner entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner s right to payment, (iii) that should they be entitled to receive full payment of principal from the Bond Insurer, they must surrender their Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Bonds to be registered in the name of the Bond Insurer) for payment to the Insurance Trustee, and not the Trustee and (iv) that should they be entitled to receive partial payment of principal from the Bond Insurer, they must surrender their Bonds for payment thereon first to the Trustee who will note on such Bonds the portion of the principal paid by the Trustee and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the un-paid portion of principal. (e) In the event that the Trustee has notice that any payment of principal of or interest on a Bond which has become Due for Payment and which is made to a Bond Owner by or on behalf of the Authority has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States A-9

52 Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee will, at the time the Bond Insurer is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner s payment is so recovered, such registered owner will be entitled to payment from the Bond Insurer to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee will furnish to the Bond Insurer its records evidencing the payments of principal of and interest on the Bonds which have been made by the Trustee and subsequently recovered from registered owners and the dates on which such payments were made. (f) In addition to those rights granted the Bond Insurer under the Trust Agreement, the Bond Insurer will, to the extent it makes payment of principal of or interest on Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Financial Guaranty Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee will note the Bond Insurer s rights as subrogee on the registration books of the Authority maintained by the Trustee upon receipt from the Bond Insurer of proof of the payment of interest thereon to the registered owners of the Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Trustee will note the Bond Insurer s rights as subrogee on the registration books of the Authority maintained by the Trustee upon surrender of the Bonds by the registered owners thereof together with proof of the payment of principal thereof. Defeasance. Discharge of Trust Agreement. The Bonds may be paid and discharged in any of the following ways: (a) By paying or causing to be paid the principal of and interest on the Bonds, as and when the same become due and payable; (b) By depositing with the Trustee or other qualified escrow agent, in trust (pursuant to an escrow agreement), at or before maturity, money or securities in the necessary amount certified as to accuracy by a certified public accountant which will be sufficient to pay all Bonds then Outstanding; or (c) By delivering to the Trustee, for cancellation by it all of the Bonds then Outstanding. If the City also pays or causes to be paid all other expenses payable under the Trust Agreement by the City including without limitation any compensation due and owing the Trustee under the Trust Agreement, then and in that case, at the election of the City (evidenced by a Written Certificate of the City, filed with the Trustee, signifying the intention of the City to discharge all such indebtedness and the Trust Agreement) and notwithstanding that any Bonds have not been surrendered for payment, the Trust Agreement and the pledge of the funds and accounts and other assets made under the Trust Agreement and all covenants, agreements and other obligations of the City and the Authority under the Trust Agreement will cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Written Request of the City, and upon receipt of a Written Certificate of an Authorized Officer of the City, and an opinion of counsel, each to the effect that all conditions precedent provided in the Trust Agreement for relating to the discharge and satisfaction of the obligations of the City and the Authority have been satisfied, the Trustee will cause an accounting for such period or periods as may be requested by the City to be prepared and filed with the City and will execute and deliver to the City all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee will pay over, transfer, assign or deliver all moneys or securities or other property held by it pursuant to the Trust Agreement, which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption, to the City. 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 the Trust Agreement) to pay or redeem any Outstanding Bonds, then all liability of the City and the Authority in respect of such Bonds will cease, terminate and be completely discharged, and the Owners thereof will thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid subject, however, to the provisions of the Trust Agreement. A-10

53 The City may at any time surrender to the Trustee for cancellation by it any Bonds previously issued, and delivered, which the City may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, will be deemed to be paid and retired. Notwithstanding anything in the Trust Agreement to the contrary, in the event that the principal of and/or interest due on the Bonds is paid by the Bond Insurer pursuant to the Financial Guaranty Insurance Policy, the Bonds will remain Outstanding for all purposes and will not be defeased or otherwise satisfied and not be considered paid by the Authority, and the assignment and pledge of the Authority under the Trust Agreement and all covenants, agreements and other obligations of the Authority to the Bond Owners will continue to exist and will run to the benefit of the Bond Insurer, and the Bond Insurer will be subrogated to the rights of such Bond Owners. Payment of Bonds After Discharge of Trust Agreement. Notwithstanding any provisions of the Trust Agreement, any moneys held by the Trustee in trust for the payment of the principal of or interest on any Bonds and remaining unclaimed for two (2) years after the principal of all of the Bonds has become due and payable will be repaid to the Authority free from the trusts created by the Trust Agreement and all liability of the Trustee with respect to such moneys will thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee may (at the cost of the Authority) mail, by first class mail postage prepaid, to the Owners of Bonds which have not yet been paid, at the respective addresses shown on the Bond Register, 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 Authority of the moneys held for the payment thereof. Amendments. Amendments Permitted. (a) The Trust Agreement and the Loan Agreement and the rights and obligations of the Authority and the City, the Owners of the Bonds and of the Trustee may be modified or amended from time to time and at any time by an agreement or agreements supplemental thereto, which the Authority, the City and the Trustee may enter into with the written consent of the Owners of a majority in aggregate principal amount of all Bonds then outstanding, which has been filed with the Trustee. No such modification or amendment will (i) extend the fixed maturity of the Bonds, or reduce the amount of principal thereof, or extend the time of payment, or change the interest rate thereon, without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or (iii) permit the creation of any lien on the funds and accounts and other assets pledged under the Trust Agreement or the Loan Agreement prior to or on a parity with the lien created by the Trust Agreement or the Loan Agreement or deprive the Owners of the Bonds of the lien created by the Trust Agreement on such funds or accounts and other assets (except as expressly provided in the Trust Agreement) without the consent of the Owners of all of the Bonds then Outstanding. It will not be necessary for the consent of the Bond Owners to approve the particular form of any supplemental indenture, but it will be sufficient if such consent will approve the substance thereof. Promptly after the execution by the Authority, the City and the Trustee of any supplemental trust agreement pursuant to this paragraph (a), the Trustee will mail a notice (the form of which will be furnished to the Trustee by the City), by first class mail postage prepaid, setting forth in general terms the substance of such supplemental agreement, to the Owners of the Bonds at the respective addresses shown on the Bond Register. Any failure to give such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such supplemental agreement. (b) The Trust Agreement and the Loan Agreement and the rights and obligations of the Authority, the City, or the Trustee and the Owners of the Bonds may also be modified or amended from time to time, and at any time by an agreement or agreements supplemental thereto, which the Authority, the City and the Trustee may enter into without the consent of any Bond Owners, provided such modification or amendment does not materially adversely affect the rights of the Owners under the Trust Agreement, for any one or more of the following purposes: (i) to add to the covenants and agreements of the Authority and the City contained in the Trust Agreement or the Loan Agreement, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof) or to surrender any right or power reserved in the Trust Agreement to or conferred upon the Authority or the City; A-11

54 (ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision contained in the Trust Agreement or the Loan Agreement, or as to any other provisions of the Trust Agreement or the Loan Agreement as the Authority and the City may deem necessary or desirable, in any case which do not materially adversely affect the security for the Bonds granted under the Trust Agreement, and (iii) to modify, amend or supplement the Trust Agreement or the Loan Agreement in such manner as to permit the qualification of the Trust Agreement 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. Effect of Supplemental Trust Agreement. Upon the execution of any supplemental trust agreement pursuant to the provisions of the Trust Agreement, the Trust Agreement will be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Trust Agreement of the Authority, the City and the Trustee and all Owners of Bonds Outstanding will thereafter be determined, exercised and enforced under the Trust Agreement subject in all respects to such modification and amendment, and all the terms and conditions of any such supplemental trust agreement will be deemed to be part of the terms and conditions of the Trust Agreement for any and all purposes. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any supplemental trust agreement pursuant to the provisions of the Trust Agreement may, and if the City so determines will, bear a notation by endorsement or otherwise in form approved by the City and the Trustee as to any modification or amendment provided for in such supplemental trust agreement, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Office of the Trustee a suitable notation will be made on such Bonds. If the supplemental trust agreement will so provide, new Bonds so modified as to form, will be prepared and executed by the Authority and authenticated by the Trustee, and upon demand of the owners of any Bonds then Outstanding will be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bond, in equal aggregate principal amount of the same interest rate and maturity. Amendment of Particular Bonds. The provisions of the Trust Agreement will not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such Owner. Amendments Requiring Consent of Trustee. The rights and obligations of the Trustee will not be modified or amended without the prior written approval of the Trustee. The Trustee may consult with counsel, who may be counsel of or to the City, with regard to legal questions, and the opinion of such counsel will be full and complete authorization and protection in respect of any action taken or suffered by it under the Trust Agreement in good faith and in accordance herewith. Loan Payments. The Loan Agreement Payment. The principal of the Loan will be payable in installments on July 15 in each of the years and in the amounts, and interest on each installment of the Loan will be calculated at the rates per annum, to correspond to the principal of (including sinking account payments) and interest on the Bonds. Interest on the Loan will be payable on each July 15 and January 15, commencing with July 15, 2006, until no Bonds are outstanding. Any installment of principal or interest which is not paid when due will continue to accrue interest from and including the Interest Payment Date with respect to which such principal or interest is payable, to but not including the date of actual payment. Prepayment. The principal of the Loan will be subject to optional prepayment in whole, or in part in any integral multiple of $5,000, on any date on or after July 15, 2015, from any available source of funds, at a prepayment price equal to the redemption premium equal for the Bonds, together with accrued interest thereon to the prepayment date. A-12

55 Pledged Revenue Fund. There is established a fund to be known as the 2005 Taxable Pension Revenue Bonds Pledged Revenue Fund (the Pledged Revenue Fund ) which will be held by the City. The City will deposit all of the Pledged Tax Revenues received in any Bond Year in the Pledged Revenue Fund promptly upon receipt thereof, until such time (if any) during any Bond Year as the amounts on deposit in the Pledged Revenue Fund equal the aggregate amounts required to be transferred to the Trustee pursuant to the Loan Agreement in any such Bond Year and (except as may be otherwise provided in any document relating to any Parity Obligation) any Pledged Tax Revenues received during any such Bond Year in excess of such amounts are released from the pledge, lien and security interest of the Loan Agreement and may be used for any lawful purposes of the City. Prior to the payment in full of the principal of and interest and prepayment premium (if any) on the Loan and all Parity Obligations and the payment in full of all other amounts payable under the Loan Agreement and under any Parity Obligations, the City will not have any beneficial right or interest in the moneys on deposit in the Pledged Revenue Fund, except only as provided in the Loan Agreement and in the documents relating to or evidencing any Parity Obligations, and such moneys will be used and applied as set forth in the Loan Agreement and in any such documents. Certain Covenants. Pay Punctually. The City will punctually pay or cause to be paid the principal of and interest on the Loan together with any prepayment premiums thereon in strict conformity with the terms of the Loan Agreement, and it will faithfully observe and perform all of the conditions, covenants and requirements of the Loan Agreement. Nothing contained in the Loan Agreement will prevent the City from making advances of its own moneys howsoever derived to any of the uses or purposes referred to in the Loan Agreement. No Superior Obligations. The City covenants that, so long as the Loan remains unpaid, the City will not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any loans, advances or indebtedness, which is in any case secured by a lien on all or any part of the Pledged Tax Revenues which is superior to or on a parity with the lien established under the Loan Agreement for the security of the Loan, excepting any Parity Obligations issued pursuant to the Loan Agreement. Nothing in the Loan Agreement is intended or will be construed in any way to prohibit or impose any limitations upon the issuance by the City of loans, bonds, notes, advances or other indebtedness which are unsecured or which are secured by a junior lien on the Pledged Tax Revenues; provided that the City agrees not to incur any obligation if the expected total Pledged Tax Revenues are not sufficient to retire on a timely basis all the outstanding obligations of the City payable from collections. Without limitation on the foregoing, in no Fiscal Year will the City make any pledge, assignment or transfer of Pledged Tax Revenues to or for the benefit of PERS or otherwise appropriate or expend Pledged Tax Revenues for any purpose other than the payment of scheduled principal of, premium, if any, and interest on the Bonds or any Parity Obligations during such Fiscal Year, if and to the extent that such pledge, assignment, transfer, appropriation or expenditure would result in any deficiency of Pledged Tax Revenues for the scheduled payment in such Fiscal Year of principal of and interest on all Bonds or any Parity Obligations then Outstanding when and as such amounts will become due and payable. Claims. The City will pay and discharge, or cause to be paid and discharged, any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Pledged Tax Revenues or any part thereof, or upon any funds in the hands of the Trustee, or which might impair the security of the Loan. Nothing contained in the Loan Agreement will require the City to make any such payment so long as the City in good faith will contest the validity of said claims. Account and Report. The City will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City and the City, in which complete and correct entries will be made of all transactions relating to the Unfunded Liability and the Pledged Tax Revenues. Such books of record and accounts will at all times during business hours be subject, upon prior written request, to the reasonable inspection of the Authority, the Trustee who will have no duty to so inspect and the Owners of any Bonds then Outstanding, or their representatives authorized in writing. A-13

56 Further Assurances. The City will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Loan Agreement and for the better assuring and confirming to the Trustee, the Authority and the Owners of the Bonds of the rights and benefits provided in the Loan Agreement. Events of Default. The following events will constitute Events of Default under the Loan Agreement: (a) Failure by the City to pay the principal of or interest or redemption premium (if any) on the Loan or any Parity Obligations when and as the same will become due and payable. (b) Failure by the City to observe and perform any of the covenants, agreements, or conditions on its part contained in the Loan Agreement, other than as referred to in the preceding clause (a), for a period of ninety (90) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Trustee; provided, however, that if in the reasonable opinion of the City the failure stated in such notice can be corrected, but not within such ninety (90) day period, the Trustee will not reasonably withhold its consent to an extension of such time if corrective action is instituted by the City within such ninety (90) day period and diligently pursued until such failure is corrected. (c) The City commences a voluntary action under Title 11 of the United States Code or any substitute or successor statute. (d) The occurrence of an Event of Default under the Trust Agreement or any event of default as to any Parity Obligation. If an Event of Default has occurred and is continuing, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Outstanding Bonds and any Parity Obligations the Trustee will, (a) declare the principal of the Loan and any Parity Obligations, together with the accrued interest on all unpaid installments thereof, to be due and payable immediately, and upon any such declaration the same will become immediately due and payable, anything in the Loan Agreement to the contrary notwithstanding, and (b) subject to the provisions of the Trust Agreement, exercise any other remedies available to the Trustee in law or at equity. Immediately upon becoming aware of the occurrence of an Event of Default, the Trustee will give notice of such Event of Default to the City and the Authority by telephone, confirmed in writing. This provision, however, is subject to the condition that if, at any time after the principal of the Loan has been so declared due and payable, and before any judgment or decree for the payment of the moneys due have been obtained or entered, the City will deposit with the Trustee a sum sufficient to pay all installments of principal of the Loan and any Parity Obligations matured prior to such declaration and all accrued interest thereon, with interest on such overdue installments of principal and interest at the net effective rate than borne by the Outstanding Bonds and any Parity Obligations, and the reasonable costs, fees, 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 Loan due and payable solely by reason of such declaration) have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate have been made therefor, then, and in every such case, the Owners of the majority in aggregate principal amount of the Outstanding Bonds and any Parity Obligations may, by written notice to the Trustee and the City, rescind and annul such declaration and its consequences. However, no such rescission and annulment will extend to or will affect any subsequent default, or will impair or exhaust any right or power consequent thereon. Amendments. The Loan Agreement may be amended by the parties to the Loan Agreement but only under the circumstances set forth in, and in accordance with, the provisions of the Trust Agreement. The Authority covenants that, so long as the City is not in default under the Loan Agreement, the Trust Agreement will not be amended without the prior written consent of the City. A-14

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