HomeMy WebLinkAboutRevenue Bonds PA2/Res 06-75/Res FA-56/Res 528/PA2CITY OF PALM DESERT
PALM DESERT FINANCING AUTHORITY
PALM DESERT REDEVELOPMENT AGENCY
STAFF REPORT
REQUEST: APPROVAL OF RESOLUTION NO. 06- 75 OF THE CITY COUNCIL OF
THE CITY OF PALM DESERT MAKING A FINDING OF SIGNIFICANT
PUBLIC BENEFIT AND OTHER FINDINGS IN CONNECTION WITH THE
ISSUANCE AND SALE BY THE PALM DESERT FINANCING AUTHORITY
OF ITS TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT
AREA NO. 2), 2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL
APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES B, TAX
ALLOCATION REVENUE BONDS (PROJECT AREA NO. 2), 2006
SERIES C, AND SUBORDINATE TAX ALLOCATION REVENUE CAPITAL
APPRECIATION BONDS (PROJECT AREA NO. 2), 2006 SERIES D
APPROVAL OF RESOLUTION NO. FA- 56 OF THE PALM DESERT
FINANCING AUTHORITY ACKNOWLEDGING A FINDING OF
SIGNIFICANT BENEFIT AND APPROVING AS TO FORM AND
AUTHORIZING THE EXECUTION AND DELIVERY OF CERTAIN
DOCUMENTS IN CONNECTION WITH THE ISSUANCE, SALE AND
DELIVERY OF THE AUTHORITY'S TAX ALLOCATION REFUNDING
REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES A, TAX
ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT
AREA NO. 2), 2006 SERIES B, TAX ALLOCATION REVENUE BONDS
(PROJECT AREA NO. 2), 2006 SERIES C, AND SUBORDINATE TAX
ALLOCATION REVENUE CAPITAL APPRECIATION BONDS (PROJECT
AREA NO. 2), 2006 SERIES D, AND AUTHORIZING CERTAIN OTHER
MATTERS RELATING THERETO
APPROVAL OF RESOLUTION NO. 528 OF THE PALM DESERT
REDEVELOPMENT AGENCY APPROVING AS TO FORM AND
AUTHORIZING THE EXECUTION AND DELIVERY OF CERTAIN
DOCUMENTS IN CONNECTION WITH THE SALE AND ISSUANCE BY
THE PALM DESERT FINANCING AUTHORITY OF TAX ALLOCATION
REFUNDING REVENUE BONDS (PROJECT AREA NO. 2), 2006 SERIES
A, TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS
(PROJECT AREA NO. 2), 2006 SERIES B, TAX ALLOCATION REVENUE
BONDS (PROJECT AREA NO. 2), 2006 SERIES C, AND SUBORDINATE
TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS
(PROJECT AREA NO. 2), 2006 SERIES D, AND AUTHORIZING CERTAIN
OTHER MATTERS RELATING THERETO
SUBMITTED BY: DAVE YRIGOYEN, DIRECTOR OF REDEVELOPMENT/HOUSING
DATE: JUNE 8, 2006
CONTENTS: (1) CITY COUNCIL RESOLUTION NO. 06-75
(2) PALM DESERT FINANCING AUTHORITY RESOLUTION NO. FA 56
Staff Report
Approval of Agency/PDFA Resolutions — PA#2 Subordinate Tax Allocation Refunding
Revenue Bonds 2006 Series A
Page 2 of 5
June 8, 2006
(3) PALM DESERT REDEVELOPMENT AGENCY RESOLUTION NO.528
(4) INDENTURE OF TRUST (SENIOR BONDS)
(5) PROJECT AREA NO. 2 LOAN AGREEMENT (2006 SENIOR LOANS)
(6) INDENTURE OF TRUST (SUBORDINATE BONDS)
(7) PROJECT AREA NO. 2 LOAN AGREEMENT (2006 SUBORDINATE
LOAN)
(8) ESCROW AGREEMENT
(9) PRELIMINARY OFFICIAL STATEMENT
(10) BOND PURCHASE AGREEMENT
(11) CONTINUING DISCLOSURE AGREEMENT
Recommendation:
By Minute Motion:
1. That the City Council approve Resolution No. 06- 75 , making (i) findings of
significant public benefit in connection with the issuance and sale of four
series of bonds (the "Bonds") by the Palm Desert Financing Authority: (A) Tax
Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A (the
"Series 2006A Bonds"), (B) Tax Allocation Revenue Capital Appreciation
Bonds (Project Area No. 2), 2006 Series B (the "Series 2006E Bonds"),
(C) Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C (the
"Series 2006C Bonds"), and (D) Subordinate Tax Allocation Revenue Capital
Appreciation Bonds (Project Area No. 2), 2006 Series D (the "Series 2006D
Bonds"), and (ii) findings pursuant to Sections 33679 and 33445 of the
California Health and Safety Code with respect to the projects to be funded by
proceeds of the Bonds;
2. That the Palm Desert Financing Authority approve Resolution No. FA-56 ,
acknowledging finding of significant public benefit in connection with the
issuance and sale of the Bonds, approving of the issuance, sale and delivery
of the Bonds and authorizing the execution and delivery of documents relating
to the Bonds; and
3. That the Palm Desert Redevelopment Agency approve Resolution No. 528 ,
approving and authorizing the execution and delivery of documents relating to
the Bonds.
Executive Summary
Adoption of the attached resolutions will allow Staff to proceed with the issuance of the Bonds and
the use of proceeds from the Bonds to pay for the costs of certain projects.
Background and discussion:
Staff recommends the issuance of four series of Bonds relating to the financing and refinancing of
projects for the Agency's Project Area No. 2. The Bonds will be issued as tax-exempt bonds. A
portion of the net proceeds of the Series 2006A Bonds will be used to refund certain Authority bonds
Staff Report
Approval of Agency/PDFA Resolutions — PA#2 Subordinate Tax Allocation Refunding
Revenue Bonds 2006 Series A
Page 3 of 5
June 8, 2006
issued in 1995 to finance projects for the Project Area No. 2. A portion of the net proceeds of the
Series 2006A Bonds, along with the net proceeds of the Series 2006B Bonds, the Series 2006C
Bonds and the Series 2006D Bonds will be used to pay all or a portion of the costs of certain Agency
projects benefiting Project Area No. 2. The Series 2006C Bonds initially will be escrowed bonds, in
that the net proceeds of the Series 2006C Bonds will be deposited in a Special Escrow Fund. In
time, the Agency expects that, as certain conditions are met (primarily, that sufficient tax increments
are generated with respect to the Project Area No. 2 to meet the coverage requirements set forth in
the bond documents), money will be released from the Special Escrow Fund and become available
for use on Agency projects. Based on current estimates by the Financing Advisor and the
Underwriter, the sale of the four series of Bonds (including the moneys anticipated to be eventually
released from the Special Escrow Fund) is expected to generate approximately $59,300,000 of net
proceeds to be available for Agency projects. The refunding of the 1995 bonds is currently
expected to generate approximately $250,000 net present value savings, while achieving annual
debt service savings.
The repayment of the Bonds will be primarily secured by tax increments generated with respect to
Project Area No. 2. The Series 2006A Bonds, the Series 2006E Bonds and the Series 2006C
Bonds will rank on a parity with the outstanding Authority bonds issued for Project Area No. 2, and
will rank senior to the Series 2006D Bonds. The Series 2006A Bonds and the Series 2006C Bonds
will be current interest bonds. The Series 2006E Bonds and the Series 2006D Bonds will be capital
appreciation bonds.
Previously on April 27, 2006, the City Council, the Authority and the Agency adopted resolutions (the
"Prior Resolutions") approving the issuance, sale and delivery of the two series of bonds for Project
Area No. 2 and proposed projects to be funded by the proceeds of the such bonds. After the April
27, 2006 Council meeting, the Financial Advisor and the Underwriter, in light of feedback from rating
agencies and bond insurers, recommended a change to the structure of the financing, from two
series of bonds to the four series of Bonds as described above. Staff also undertook to review the
various potential Agency projects with respect to Project Area No. 2 and proposes to modify and
expand on the proposed projects to be funded by the proceeds of the Bonds. The proposed
projects are outlined in the attached City Council resolution and are also described in an Amended
Summary Report which was made available to the public in connection with the City Council public
hearing. The attached resolutions, once in effect, will supersede the Prior Resolutions in their
entirety.
Adoption of the attached resolutions will allow Staff to proceed with the issuance of the Bonds and
the use of proceeds to pay for the costs of the identified projects.
Staff is utilizing the following financing team:
Kenneth L. Dieker, D.B.A. Del Rio Advisors, LLC, Modesto, CA — Financial Advisor,
Richards, Watson & Gershon, A Professional Corporation, Los Angeles, CA — Bond Counsel
Jones Hall, A Professional Law Corporation, San Francisco, CA — Disclosure Counsel
Wells Fargo Bank, National Association, Los Angeles, CA — Trustee and Escrow Agent
Citigroup Global Markets Inc., Los Angeles, CA — Underwriter
Rosenow Spevacek Group, Inc., Santa Ana, CA — Fiscal Consultant
MuniFinancial, Inc., Temecula, CA — Dissemination Agent
Staff Report
Approval of Agency/PDFA Resolutions — PA#2 Subordinate Tax Allocation Refunding
Revenue Bonds 2006 Series A
Page 4 of 5
June 8, 2006
SUMMARY OF DOCUMENTS TO BE APPROVED:
Indentures of Trust
Generally, an indenture sets forth all of the terms and conditions of the bonds (e.g., principal
amounts, maturity and redemption schedules, payment, registration and transfer provisions and the
form of the Bonds), the covenants and other obligations of the Authority to the bondholders, and the
role and the duties of the Trustee. Two indentures are presented, one for the Series 2006A Bonds,
the Series 2006E Bonds and the Series 2006C Bonds, and the other for the Series 2006D Bonds.
As presented, the Indentures are in substantially final form, except that final dollar amounts and
interest rates will be added after the Bonds have been priced and sold. Provisions may also be
added, deleted or otherwise modified to accommodate the bond insurer requirements.
Loan Agreements
Presented are two loan agreements, one for the Series 2006A Bonds, the Series 2006E Bonds and
the Series 2006C Bonds, and the other for the Series 2006D Bonds. Pursuant to the Loan
Agreements, the Authority agrees to lend the Agency funds that would be used by the Agency to
refund the 1995 bonds and fund capital projects for benefit to Project Area No. 2. The Agency
agrees to pay tax increment revenues to the Trustee, as the Authority's assignee, in sufficient
amounts to pay debt service on the Bonds.
Bond Purchase Agreement
This is an agreement between the Authority, the Agency and the Underwriter for the purchase and
sale of the bonds. Pursuant to the Bond Purchase Agreement, the underwriter agrees to purchase
the Authority bonds at specified prices and interest rates, subject to the receipt of certain opinions,
certificates and other conditions. The Bond Purchase Agreement will be presented to the
appropriate officers of the Authority and Agency for approval and execution as soon as the
Underwriter has completed the process of offering and then pricing the Bonds in the market.
Preliminary Official Statement
A Preliminary Official Statement relating to the Bonds, in substantially final form, has been prepared
by Disclosure Counsel. The Preliminary Official Statement is designed to provide material
information to investors with respect to the terms and the security of the Bonds. It includes a full
description of the legal and financial aspects, as well as the various legal documents in regard to the
Bonds, except for certain information which will be determined upon the pricing of the Bonds (such
as the final principal amounts, the interest rates and the redemption dates). The Preliminary Official
Statement also includes information regarding the Authority, the Agency, and the Project Area. The
Preliminary Official Statement will be utilized by the Underwriter in its effort to market the bonds to
the public. Once the Bonds have been priced and the Bond Purchase Agreement has been signed,
Disclosure Counsel will insert the final pricing information into the Preliminary Official Statement,
thereby converting it to the Official Statement. The Underwriter will then distribute the Official
Statement to the individuals and institutions that purchased the Bonds.
Continuina Disclosure Agreement
The Continuing Disclosure Agreement is between the Agency, the Trustee and the Dissemination
Agent. This agreement directs the Agency to provide an annual report to the Dissemination Agent.
Staff Report
Approval of Agency/PDFA Resolutions — PA#2 Subordinate Tax Allocation Refunding
Revenue Bonds 2006 Series A
Page 5 of 5
June 8, 2006
The Annual Report contains the Agency's audited financial statements and other pertinent
information relating to Project Area No. 2. The Annual Report is sent to state and national
repositories so that this information is available to the bondholders. This mechanism is used to
keep bondholders informed on an annual basis of the financial status of the Agency.
Escrow Aareement
The Escrow Agreement is an agreement among the Agency, the Authority and the Trustee.
Redemption of the 1995 Bonds will occur a short period of time after the issuance of the Bonds.
During this period, money to be used for the redemption of the 1995 Bonds will be held by the
Escrow Agent in an escrow fund. The Escrow Agreement provides for the establishment and
maintenance of such escrow fund and the release of money on the redemption date
The resolutions permit Staff to make the necessary changes to all of the documents in order to
finalize and execute the documents. Staff is recommending that the City Council, the Authority and
the Agency adopt their respective resolutions approving and authorizing the sale and issuance of
the Bonds, and the execution and delivery of the related documents.
Submi
`D ve Yriclnva�ar'
Directoredevelopment/Housing
evelopment
Carlos L. Ortega
City Manager/C /Executive Director
BY FIN AUTH
ON . to d LP
VERIFIED BY: 4 Airein
Original on file with City Clerk's Office
Paul S. s rector of Finance/Treasurer
CITY COUNCIL CTION:
APPROVED DENIED
R CEIVED OTHER
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ABSTAIN:
VERIFIED BY: /
Original on File wi h City Clerk's Office
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Original on file with City Clerk's Office
RESOLUTION NO. 06-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF PALM DESERT MAKING A FINDING OF SIGNIFICANT
PUBLIC BENEFIT AND OTHER FINDINGS IN
CONNECTION WITH THE ISSUANCE AND SALE BY THE
PALM DESERT FINANCING AUTHORITY OF ITS TAX
ALLOCATION REFUNDING REVENUE BONDS
(PROJECT AREA NO. 2), 2006 SERIES A, TAX
ALLOCATION REVENUE CAPITAL APPRECIATION
BONDS (PROJECT AREA NO. 2), 2006 SERIES B, TAX
ALLOCATION REVENUE BONDS (PROJECT AREA NO.
2), 2006 SERIES C, AND SUBORDINATE TAX
ALLOCATION REVENUE CAPITAL APPRECIATION
BONDS (PROJECT AREA NO. 2), 2006 SERIES D
RECITALS:
WHEREAS, the Palm Desert Financing Authority (the "Authority") has
proposed to sell and issue four series of bonds (collectively, "the Bonds"): (i) Tax
Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A, (ii) Tax
Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series B,
(iii) Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C, and
(iii) Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No.
2), 2006 Series D; and
WHEREAS, proceeds of the Bonds are to be applied to make four loans to
the Palm Desert Redevelopment Agency (the "Agency") for the object and purpose of,
among other things, assisting in (i) effecting a refunding of all of the Authority's
remaining outstanding Tax Allocation Revenue Bonds (Project Area No. 2), Series
1995, and (ii) the financing of certain public capital improvements (the "Projects") of
benefit to Project Area No. 2, of the Agency (the "Project Area"), including : (A)
acquisition of open space for recreational purposes, (B) installation of Freedom Park at
Country Club Drive and Liberty Avenue, (C) construction of a swimming pool and
related shower and restroom facilities at the College of the Desert, (D) civic center park
improvements, including the construction and improvements of public recreational
buildings, (E) construction of a parking structure to accommodate a hotel and related
development at the Desert Willow Golf Resort, (F) construction of a fire station and
related improvements, (G) construction of a pedestrian bridge at University Park, (H)
installation of a new section of Berger Drive and related improvements, (I) widening of
Monterey Avenue between Magnesia Falls Drive and Gerald Ford Drive, (J)
improvements to the on- and off -ramps at Monterey Avenue and Interstate 10, (K)
construction of on- and off -ramps at Portola Avenue and Interstate 10, (L) drainage
improvements along Monterey Avenue and (M) undergrounding of utilities on arterial
streets throughout the Project Area; and
1>64U2. i055v89256s.1
WHEREAS, pursuant to Section 6586.5 of the California Government
Code and Section 33679 of the California Health and Safety Code, after notice duly
published in accordance with law, this City Council held a public hearing on this date
with respect to the issuance of the proposed Bonds and received evidence concerning
the public benefits therefrom; and
WHEREAS, there has been made available in the office of the City Clerk
for two weeks prior to such public hearing for public inspection and copying, at a cost
not to exceed the cost of duplication, an amended summary report which includes all of
the following: (i) estimates of the amount of such taxes allocated to the Agency from the
Project Area proposed to be used to pay for the Projects, including interest payments;
(ii) facts supporting the determinations required to be made by the City Council pursuant
to California Health and Safety Code Section 33445; and (iii) the redevelopment
purpose for which such taxes are being used to pay for the installation and construction;
and
WHEREAS, it is the intent of the City Council that this Resolution shall
supersede Resolution No. 06-57, adopted on April 27, 2006, in its entirety;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM
DESERT DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. Recitals. The above recitals, and each of them, are true and
correct.
Section 2. Approval of Financing. The City Council hereby finds that the
financing and refinancing of public capital improvements described in Recitals hereof
through the issuance by the Authority of the Bonds will result in significant public
benefits to the constituents of the Agency and the City of Palm Desert, including
demonstrable savings in effective interest rate and more efficient delivery of Agency and
City services to residential and commercial development. The City Council hereby
approves the issuance of the Bonds by the Authority.
Section 3. Further Findings. The City Council hereby finds and
determines that based upon the "Amended Summary Report Regarding Payment by the
Palm Desert Redevelopment Agency for All or A Portion of the Cost of the Acquisition of
Land for Open Space and the Installation and Construction of Certain Other Public
Capital Improvements of Benefit to Project Area No. 2," which Report was made
available at the office of the City Clerk in connection with the public hearing described in
the Recitals hereof, and other information presented to the City Council: (i) the above -
described public capital improvements are of benefit to the Project Area and to the
immediate neighborhood in which the Projects are located; (ii) the payment of funds for
the cost of such public capital improvements will assist in the elimination of one or more
blighting conditions inside the Project Area; (iii) the payment of funds for the cost of
P6402.1055\892568. I 2
such improvements is consistent with the Agency's implementation plan adopted
pursuant to Health and Safety Code Section 33490; and (iv) no other reasonable means
of financing such improvements is available to the City.
Section 4. Approval of Payment by Agency. The City Council hereby
approves payment by the Agency for the cost of the installation and construction of the
above -described improvements from tax increment revenues of the Agency from the
Project Area.
Section 5. Resolution No. 06-57 Superseded. Upon adoption, this
Resolution shall supersede Resolution No. 06-57 in its entirety.
Section 6. Other Acts. The officers of the City are hereby authorized and
directed, jointly and severally, to do any and all things and to execute and deliver any
and all documents which they may deem necessary or advisable in order to effectuate
the purposes of this Resolution and any such actions previously taken by such officers
are hereby ratified and confirmed.
Section 7. Effective Date. This Resolution shall take effect immediately
upon adoption.
APPROVED and ADOPTED this 8th day of June 2006 by the following
vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Jim Ferguson, Mayor
ATTEST:
Rachelee D. Klassen, City Clerk
P6402.1055\892568.1 3
RESOLUTION NO. FA-
A RESOLUTION OF THE PALM DESERT FINANCING
AUTHORITY ACKNOWLEDGING A FINDING OF
SIGNIFICANT BENEFIT AND APPROVING AS TO FORM
AND AUTHORIZING THE EXECUTION AND DELIVERY
OF CERTAIN DOCUMENTS IN CONNECTION WITH THE
ISSUANCE, SALE AND DELIVERY OF THE
AUTHORITY'S TAX ALLOCATION REFUNDING
REVENUE BONDS (PROJECT AREA NO. 2), 2006
SERIES A, TAX ALLOCATION REVENUE CAPITAL
APPRECIATION BONDS (PROJECT AREA NO. 2), 2006
SERIES B, TAX ALLOCATION REVENUE BONDS
(PROJECT AREA NO. 2), 2006 SERIES C, AND
SUBORDINATE TAX ALLOCATION REVENUE CAPITAL
APPRECIATION BONDS (PROJECT AREA NO. 2), 2006
SERIES D, AND AUTHORIZING CERTAIN OTHER
MATTERS RELATING THERETO
RECITALS:
WHEREAS, the Palm Desert Financing Authority (the "Authority") is a joint
powers authority duly organized and existing under and pursuant to Articles 1 through 4
(commencing with Section 6500), Chapter 5, Division 7, Title 1 of the California
Government Code (the "Act") and that certain Joint Exercise of Powers Agreement
dated as of January 26, 1989, by and between the City of Palm Desert (the "City") and
the Palm Desert Redevelopment Agency (the "Agency"), and is authorized pursuant to
Article 4 of the Act to issue bonds for the purpose of making loans to the Agency to
provide financing and refinancing for public capital improvements; and
WHEREAS, the Authority desires to issue and sell four series of bonds: (i)
Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A (the
"Series 2006A Bonds"), (ii) Tax Allocation Revenue Capital Appreciation Bonds (Project
Area No. 2), 2006 Series B (the "Series 2006B Bonds"), (iii) Tax Allocation Revenue
Bonds (Project Area No. 2), 2006 Series C (the "Series 2006C Bonds," and collectively
with the Series 2006A Bonds and the Series 2006B Bonds, the "Senior Bonds"), and (iii)
Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2),
2006 Series D (the "Subordinate Bonds," and together with the "Series Bonds," the
"Bonds"); and
WHEREAS, proceeds of the Bonds are to be applied for the purpose of
making four loans to the Agency pursuant to two loan agreements for the object and
purpose of, among other things, (i) assisting in the financing of certain public capital
improvements of benefit to Project Area No. 2, of the Agency, and (ii) effecting a
P6402.1055\892569.1 1
refunding of all of the Authority's remaining outstanding Tax Allocation Revenue Bonds
(Project Area No. 2), Series 1995; and
WHEREAS, the City Council has made a finding, after a duly noticed
public hearing pursuant to Section 6586.5 of the California Government Code held on
the date hereof, that the issuance of the Bonds will result in significant public benefit;
and
WHEREAS, it is the intent of the Authority that this Resolution shall
supersede Resolution No. FA-52 and Resolution No. FA-54, adopted on April 27, 2006,
in their entirety;
NOW, THEREFORE, THE PALM DESERT FINANCING AUTHORITY
DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. Recitals. The above recitals, and each of them, are true and
correct.
Section 2.Acknowledament of City Council Findings. The Authority
hereby acknowledges and concurs with the City Council's finding of significant public
benefit and hereby approves and authorizes the issuance and sale of the Bonds.
Section 3. Issuance of Senior Bonds: Senior Indenture. The Indenture of
Trust (the "Senior Indenture"), proposed to be entered into by and between the Authority
and the Trustee (defined in Section 5 below) relating to the Senior Bonds, in the form
presented at this meeting and on file in the office of the Secretary of the Authority (the
"Secretary"), is hereby approved. The issuance of the Series 2006A Bonds in an
aggregate principal amount not exceeding $46,000,000, the Series 2006B Bonds in an
aggregate initial principal amount not exceeding $3,500,000, and the Series 2006C
Bonds in an aggregate principal amount no exceeding $8,500,000, pursuant to the
Senior Indenture is hereby approved. Subject to Section 12 below, each of the
President, the Chief Administrative Officer and the Treasurer of the Authority, any
deputy of such officers, and any member of the Authority Commission (each, an
"Authorized Officer"), acting singly, is hereby authorized and directed, for and in the
name and on behalf of the Authority, to execute and deliver the Senior Indenture in
substantially said form, with such additions or changes as the Authorized Officer
executing the same may approve (such approval to be conclusively evidenced by such
Officer's execution and delivery thereof).
Section 4. Issuance of Subordinate Bonds: Subordinate Indenture. The
Indenture of Trust (the "Subordinate Indenture"), proposed to be entered into by and
between the Authority and the Trustee relating to the Subordinate Bonds, in the form
presented at this meeting and on file in the office of the Secretary, is hereby approved.
The issuance of the Subordinate Bonds, in an aggregate principal amount not
exceeding $18,000,000, pursuant to the Subordinate Indenture is hereby approved.
Subject to Section 12 below, each Authorized Officer, acting singly, is hereby authorized
P6402.1055\892569.1
2
and directed, for and in the name and on behalf of the Authority, to execute and deliver
the Subordinate Indenture in substantially said form, with such additions or changes as
the Authorized Officer executing the same may approve (such approval to be
conclusively evidenced by such Officer's execution and delivery thereof).
Section 5.Appointment of Trustee and Escrow Agent. The appointment of
Wells Fargo Bank, National Association, as trustee (the "Trustee") under the Indenture
and as escrow agent (the "Escrow Agent") under the Escrow Agreement described in
Section 8 is hereby approved.
Section 6. Senior Loan Agreement. The Project Area No. 2 Loan
Agreement (2006 Senior Loans) (the "Senior Loan Agreement"), proposed to be entered
into by and among the Agency, the Authority and the Trustee, in the form presented at
this meeting and on file in the office of the Secretary, is hereby approved. Each
Authorized Officer, acting singly, is hereby authorized and directed, for and in the name
and on behalf of the Authority, to execute and deliver the Senior Loan Agreement in
substantially said form, with such changes therein as the Authorized Officer executing
the same may approve (such approval to be conclusively evidenced by such Officer's
execution and delivery thereof).
Section 7.Subordinate Loan Agreement. The Project Area No. 2 Loan
Agreement (2006 Subordinate Loan) (the "Subordinate Loan Agreement"), proposed to
be entered into by and among the Agency, the Authority and the Trustee, in the form
presented at this meeting and on file in the office of the Secretary, is hereby approved.
Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the
name and on behalf of the Authority, to execute and deliver the Subordinate Loan
Agreement in substantially said form, with such changes therein as the Authorized
Officer executing the same may approve (such approval to be conclusively evidenced
by such Officer's execution and delivery thereof).
Section 8. Escrow Agreement. The Escrow Agreement (Project Area No.
2) (the "Escrow Agreement"), proposed to be entered into by and among the Agency,
the Authority and the Escrow Agent, in the form presented to this meeting and on file in
the office of the Secretary, is hereby approved. Each Authorized Officer, acting singly,
is hereby authorized and directed, for and in the name and on behalf of the Authority, to
execute and deliver the Escrow Agreement in substantially said form, with such
changes therein as the Authorized Officer executing the same may approve (such
approval to be conclusively evidenced by such officer's execution and delivery thereof.
Section 9. Preliminary Official Statement. The Preliminary Official
Statement relating to the Bonds (the "Preliminary Official Statement"), in the form
presented at this meeting and on file with the Secretary, is hereby approved. Each
Authorized Officer, acting singly, is hereby authorized and directed, for and in the name
and on behalf of the Authority, to cause the Preliminary Official Statement in substantially
said form, with such changes therein as such Authorized Officer may approve, to be
deemed final for the purposes of Rule 15c2-12 of the Securities and Exchange Act of
P6402.1055\892569.1
3
1934. The distribution by Citigroup Global Markets Inc. (the "Underwriter") of copies of
the Preliminary Official Statement to potential purchasers of the Bonds is hereby
approved.
Section 10. Official Statement. Each Authorized Officer, acting singly,
is hereby authorized and directed, for and in the name and on behalf of the Authority, to
cause the Preliminary Official Statement to be brought into the form of a final Official
Statement (the "Official Statement"), and to execute the same for and in the name and
on behalf of the Authority, with such changes therein as such Authorized Officer may
approve (such approval to be conclusively evidenced by such Authorized Officer's
execution and delivery thereof). The distribution and use of the Official Statement by the
Underwriter in connection with the sale of the Bonds are hereby approved.
Section 11. Purchase Agreement. The form of the Bond Purchase
Agreement as presented to this meeting by the Underwriter and the sale of the Bonds
pursuant thereto upon the terms and conditions set forth therein are hereby approved.
Subject to Section 12 below, each Authorized Officer, acting singly, is authorized and
directed, for and in the name and on behalf of the Authority, to execute and deliver the
Purchase Agreement in substantially said form, with such changes therein as the officer
executing the same may require or approve, including such matters as are authorized
by Section 12 hereof (such approval to be conclusively evidenced by such Authorized
Officer's execution and delivery thereof).
Section 12. Terms of Sale of Bonds. Each Authorized Officer, acting
singly, is hereby authorized and directed to act on behalf of the Authority to establish
and determine each of the following:
(a) the aggregate initial principal amount of each series of Bonds,
which amount (i) with respect to the Series 2006A Bonds shall not
exceed $46,000,000, (ii) with respect to the Series 2006B Bonds
shall not exceed $3,500,000, (iii) with respect to the Series 2006C
Bonds shall not exceed $8,500,000, and (iv) with respect to the
Subordinate Bonds shall not exceed $18,000,000;
(b) interest rates on the Bonds, provided that (i) the true interest cost
with respect to the Series 2006A Bonds shall not exceed 6.25
percent, (ii) the true interest cost with respect to the Series 2006B
Bonds shall not exceed 6.25 percent, (iii) the true interest cost with
respect to the Series 2006C Bonds shall not exceed 6.25 percent,
and (iv) the true interest cost with respect to the Subordinate Bonds
shall not exceed 6.25 percent;
(d) the Underwriter's compensation (i.e., underwriter's discount) with
respect to the sale of the Bonds, provided that such compensation
(i) with respect to the Series 2006A Bonds shall not exceed
one percent of the aggregate principal amount of the Series 2006A
P6402.1055\892569.1
4
Bonds, (ii) with respect to the Series 2006B Bonds shall not exceed
one percent of the aggregate initial principal amount of the Series
2006B Bonds, (iii) with respect to the Series 2006C Bonds shall not
exceed one percent of the aggregate principal amount of the Series
2006C Bonds, and (iv) with respect to the Subordinate Bonds shall
not exceed one percent of the aggregate initial principal amount of
the Subordinate Bonds; and
(e) such provisions as may be required by the terms of the bond
insurance, if any, or debt service reserve surety bond(s), if any,
purchased in connection with the issuance of the Bonds.
The authorization and powers delegated to such officer by this Section 12
shall be valid for a period of 120 days from the date of adoption of this Resolution.
Section 13. Resolution No. FA-52 and Resolution No. FA-54
Superseded. Upon adoption, this Resolution shall supersede Resolution No. FA-52 and
Resolution No. FA-54 in their entirety.
Section 14. Other Acts. The Authorized Officers and all other officers
of the Authority are hereby authorized and directed, jointly and severally, to do any and
all things, to execute and deliver any and all documents which they may deem
necessary or advisable in order to consummate the issuance, sale and delivery of the
Bonds, or otherwise to effectuate the purposes of this Resolution, the Senior Indenture,
the Senior Loan Agreement, the Subordinate Indenture, the Subordinate Loan
Agreement, the Escrow Agreement, the Purchase Agreement and the Official
Statement, and any such actions previously taken by such officers are hereby ratified
and confirmed.
P6402.1055\892569.1
5
Section 15. Effective Date. This Resolution shall take effect
immediately upon adoption.
APPROVED AND ADOPTED this 8th day of June 2006 by the following
vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
Rachelle D. Klassen, Secretary
Jim Ferguson, President
P6402.1055\892569.1
6
RESOLUTION NO. 528
A RESOLUTION OF THE PALM DESERT
REDEVELOPMENT AGENCY APPROVING AS TO FORM
AND AUTHORIZING THE EXECUTION AND DELIVERY
OF CERTAIN DOCUMENTS IN CONNECTION WITH THE
SALE AND ISSUANCE BY THE PALM DESERT
FINANCING AUTHORITY OF TAX ALLOCATION
REFUNDING REVENUE BONDS (PROJECT AREA NO. 2),
2006 SERIES A, TAX ALLOCATION REVENUE CAPITAL
APPRECIATION BONDS (PROJECT AREA NO. 2), 2006
SERIES B, TAX ALLOCATION REVENUE BONDS
(PROJECT AREA NO. 2), 2006 SERIES C, AND
SUBORDINATE TAX ALLOCATION REVENUE CAPITAL
APPRECIATION BONDS (PROJECT AREA NO. 2), 2006
SERIES D, AND AUTHORIZING CERTAIN OTHER
MATTERS RELATING THERETO
RECITALS:
WHEREAS, the Palm Desert Financing Authority (the "Authority") has
determined to sell and issue four series of bonds: (i) Tax Allocation Refunding Revenue
Bonds (Project Area No. 2), 2006 Series A (the "Series 2006A Bonds"), (ii) Tax
Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series B (the
"Series 2006B Bonds"), (iii) Tax Allocation Revenue Bonds (Project Area No. 2), 2006
Series C (the "Series 2006C Bonds," and collectively with the Series 2006A Bonds and
the Series 2006B Bonds, the "Senior Bonds"), and (iii) Tax Allocation Revenue Capital
Appreciation Bonds (Project Area No. 2), 2006 Series D (the "Subordinate Bonds," and
together with the Senior Bonds, the "Bonds"); and
WHEREAS, proceeds of the Bonds are to be applied for the purpose of
making four loans (the "Loans") to the Palm Desert Redevelopment Agency (the
"Agency") pursuant to two loan agreements for the object and purpose of, among other
things, (i) assisting in the financing of certain public capital improvements of benefit to
Project Area No. 2 of the Agency, and (ii) effecting a refunding of all of the Authority's
remaining outstanding Tax Allocation Revenue Bonds (Project Area No. 2), Series
1995; and
WHEREAS, it is the intent of the Agency that this Resolution shall
supersede Resolution No. 525, adopted on April 27, 2006, in its entirety;
NOW, THEREFORE, THE PALM DESERT REDEVELOPMENT AGENCY
DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. Recitals. The above recitals, and each of them, are true and
correct.
P6402.1055\892572.1
Section 2. Senior Loan Agreement. The Project Area No. 2 Loan
Agreement (2006 Senior Loans) (the "Senior Loan Agreement"), proposed to be entered
into by and among the Authority, the Agency and Wells Fargo Bank, National
Association, as trustee (the "Trustee"), in the form presented at this meeting and on file
with the Secretary of the Agency (the "Secretary") is hereby approved. Each of the
Chairman and the Executive Director, or either of them, or their designee (each, an
"Authorized Officer"), is hereby authorized and directed, for and in the name and on
behalf of the Agency, to execute and deliver the Senior Loan Agreement in substantially
said form, with such changes therein as the Authorized Officer executing the same may
approve (such approval to be conclusively evidenced by such Authorized Officer's
execution and delivery thereof).
Section 3. Subordinate Loan Agreement. The Project Area No. 2 Loan
Agreement (2006 Subordinate Loan) (the "Subordinate Loan Agreement"), proposed to
be entered into by and among the Authority, the Agency and the Trustee, in the form
presented at this meeting and on file with the Secretary is hereby approved. Each
Authorized Officer, acting singly, is hereby authorized and directed, for and in the name
and on behalf of the Agency, to execute and deliver the Subordinate Loan Agreement in
substantially said form, with such changes therein as the Authorized Officer executing
the same may approve (such approval to be conclusively evidenced by such Authorized
Officer's execution and delivery thereof)
Section 4. Escrow Agreement. The Escrow Agreement (Project Area No.
2), proposed to be entered into by and among the Agency, the Authority and the Escrow
Agent, in the form presented to this meeting and on file in the office of the Secretary, is
hereby approved. Each Authorized Officer, acting singly, is hereby authorized and
directed, for and in the name and on behalf of the Authority, to execute and deliver the
Escrow Agreement in substantially said form, with such changes therein as the
Authorized Officer executing the same may approve (such approval to be conclusively
evidenced by such officer's execution and delivery thereof).
Section 5. Continuing Disclosure Agreement. The Continuing Disclosure
Agreement (the "Continuing Disclosure Agreement"), proposed to be entered into by
and among the Agency, the Trustee and MuniFinancial, Inc., as Dissemination Agent, in
the form presented at this meeting and on file in the office of the Secretary, is hereby
approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for
and in the name and on behalf of the Agency, to execute and deliver the Continuing
Disclosure Agreement in substantially said form, with such changes therein as the
Authorized Officer executing the same may approve (such approval to be conclusively
evidenced by such officer's execution and delivery thereof).
Section 6. Purchase Agreement. The Bond Purchase Agreement (the
"Purchase Agreement") proposed to be entered into by the Authority, the Agency and
Citigroup Global Markets Inc. (the "Underwriter"), in the form presented at this meeting
and on file with the Secretary, and the sale of the Bonds pursuant thereto upon the
terms and conditions set forth therein, are hereby approved. Subject to the limitations
P6402.1055\892572.1 2
imposed by the Authority by its Resolution relating to the issuance and sale of the
Bonds, each Authorized Officer, acting singly, is authorized and directed, for and in the
name and on behalf of the Agency, to execute and deliver the Purchase Agreement in
substantially said form, with such changes therein as the Authorized Officer executing
the same may require or approve (such approval to be conclusively evidenced by his
execution and delivery thereof).
Section 7. Requisitions. Each Authorized Officer, the Treasurer or any
deputy of such officers, acting singly, is hereby authorized and directed to execute one
or more requisitions authorizing the Trustee to pay costs relating to the incurrence of the
Loans and the issuance of the Bonds from the proceeds of the Bonds pursuant to the
Senior Loan Agreement and the Subordinate Loan Agreement.
Section 8. Resolution No. 525 Superseded. Upon adoption, this
Resolution shall supersede Resolution No. 525 in its entirety.
Section 9. Other Acts. The Authorized Officers and all other officers of the
Agency are hereby authorized and directed, jointly and severally, to do any and all
things and to execute and deliver any and all documents which they may deem
necessary or advisable in order to effectuate the purposes of this Resolution, the Senior
Loan Agreement, the Subordinate Loan Agreement, the Escrow Agreement, the
Continuing Disclosure Agreement and the Purchase Agreement, and any such actions
previously taken by such officers are hereby ratified and confirmed.
Section 10. Effective Date. This Resolution shall take effect immediately
upon adoption.
APPROVED and ADOPTED this 8th day of June 2006 by the following
vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Jim Ferguson, Chairman
ATTEST:
Rachelle D. Klassen, Secretary
P6402.1055\892572.1 3
Palm Desert Financing Authority
Tax Allocation
Refunding Revenue Bonds
(Project Area No. 2)
2006 Series A
Indenture of Trust
«ith reference to
Palm Desert Financing Authority
Tax Allocation Revenue
Capital Appreciation Bonds
(Project Area No. 2)
2006 Series B
Palm Desert Financing Authority
Tax Allocation
Revenue Bonds
(Project Area No. 2)
2006 Series C
P64 )2.I0 5\872S31.8
RWG I)RAI I : 5/22/2006
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS: AUTHORIZATION AND PURPOSE OF BONDS: EQUAL
SECURITY 2
Section I.0I. Definitions 2
Section 1.02. Rules of Construction 9
Section I.0 3. Authorization and Purpose of Bonds 9
Section 1.04. Equal Security 10
ARTICLE II ISSUANCE OF BONDS 10
Section 2.0I. Designation 10
Section 2.02. Terms of Bonds I0
Section 2.03. Redemption of Bonds I2
Section 2.04. Form of Bonds I6
Section 2.05. Execution of Bonds I6
Section 2.06. Transfer of Bonds 17
Section 2.07. Exchange of Bonds 17
Section 2.08. Temporary Bonds I
Section 2.09. Registration Books I
Section 2.10. Bonds Mutilated. Lost. Destroyed or Stolen 18
ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS:
ISSUANCE OF BONDS 18
Section 3.01. Issuance of Bonds 18
Section 3.02. Loan Funds: Application of Proceeds of Sale of Bonds 18
Section 3.03. Validity of Bonds 18
ARTICLE IV REVENUES: FLOW OF FUNDS I9
Section 4.01. Pledge of Revenues: Assignment of Rights I9
Section 4.02. Receipt. Deposit and Application of Revenues I9
Section 4.03. Investments 20
Section 4.04. Valuation and Disposition of Investments 2I
ARTICLE V COVENANTS OF THE AUTHORITY 2I
Section 5.01. Punctual Payment 2I
Section 5.02. Extension of Payment of Bonds 2I
Section 5.03. Against Encumbrances 2 I
Section 5.04. Power to Issue Bonds and Make Pledge and Assignment 2 I
Section 5.05. Accounting Records and Financial Statements 22
Section 5.06. No Additional Indebtedness 22
Section 5.07. Tax Covenants 22
Section 5.08. Loan Agreement 23
Section 5.09. Further Assurances 24
ARTICLE VI THE TRUSTEE 24
Section 6.0 I . Appointment of Trustee 24
Section 6.02. Acceptance of Tnists 24
Section 6.03. Fees. Charges and Expenses of Trustee 27
Section 6.04. Notice to Owners of Default 27
Section 6.05. Intervention by Trustee 27
Section 6.06. Removal of Trustee 27
P64U2.IU55\872531.8 -1-
Section 6.07. Resignation by Trustee 27
Section 6.08. Appointment of Successor Trustee 28
Section 6.09. Merger or Consolidation 28
Section 6.10. Concerning any Successor Trustee 28
Section 6.11. Appointment of Co -Trustee 28
Section 6.12. Indemnification: Limited Liability of Trustee 29
ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE 29
Section 7.01. Amendment Hereof 29
Section 7.02. Effect of Supplemental Indenture 30
Section 7.03. Endorsement or Replacement of Bonds After Amendment 30
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES 30
Section 8.01. Events of Default 30
Section 8.02. Remedies Upon Event of Default 31
Section 8.03. Application of Revenues and Other Funds After Default 32
Section 8.04. Power of Trustee to Control Proceedings 33
Section 8.05. Appointment of Receivers 33
Section 8.06. Non -Waiver 33
Section 8.07. Limitation on Rights and Remedies of Owners 33
Section 8.08. Termination of Proceedings 34
ARTICLE IX BOND INSURANCE 34
ARTICLE X BOOK -ENTRY SYSTEM
Section 10.01 Book -Entry System: Limited Obligation of Authority
Section 10.02 Representation Letter
Section 10.03 Transfers Outside Book -Entry System
Section 10.04 Payments to the Nominee 3�
Section 10.05 Initial Depository and Nominee 3�
ARTICLE XI MISCELLANEOUS 3iS
Section 11.01. Limited Liability of Authority 3�
Section 11.02. Benefits of Indenture Limited to Parties 36
Section 11.03. Discharge of Indenture 36
Section 11.04. Successor Is Deemed Included in All References to Predecessor 36
Section 11.05. Content of Certificates 37
Section 11.06. Execution of Documents by Owners 37
Section 11.07. Disqualified Bonds 37
Section 11.08. Waiver of Personal Liability 38
Section 11.09. Partial Invalidity 38
Section 11.10. Destruction of Cancelled Bonds 38
Section 1 1.1 1 . Funds and Accounts 38
Section 11.12. Payment on Business Days 38
Section 11.13. Notices 38
Section 11.14. Unclaimed Moncys 39
Section 1 1. 15. Governing Law 39
EXHIBIT A — FORM OF SERIES 2006A BOND
EXHIBIT B — FORM OF SERIES 2006B BOND
EXHIBIT C — FORM OF SERIES 2006C BOND
P6402.1055\872 31.x
Indenture of Trust
This Indenture of Trust (this "Indenture) is made and entered into as of Jule I. 2006. by
and between the Palm Desert Financing Authority. a joint powers authority duly organized and validly
existing under the laws of the State of California (the "Authority) and Wells Fargo Bank. National
Association. a national banking association duly organized and validly existing under the laws of the
United States of America. haying a corporate trust office in Los Angeles. California. and being qualified
to accept and administer the trusts hereby created (the "Trustee.).
Recitals
A. The Palm Desert Redevelopment Agency (the "Agency) is a redevelopment
agency. a public body. corporate and politic. duly created. established and authorized to transact business
and exercise its powers. all under and pursuant to the Redevelopment Law. and the powers of the Agency
include the power to borrow money for any of its corporate purposes.
B. A Redevelopment Plan for Project Area No. 2 of the Agency (the "Project Area)
has been duly approved and adopted by the City.
C. The Authority is authorized to borrow money for the purpose of making loans to
the Agency to provide financing and refinancing for public capital improvements of the Agency.
D. For the purpose of aiding in the financing and refinancing of redevelopment
projects for the Project Area. the Authority has determined to make three loans (the "Loans) to the
Agency under and pursuant to the Project Area No. 2 Loan Agreement (2006 Senior Loans). dated as of
July I. 2006 (the "Loan Agreement.). by and among the Authority. the Agency and the Trustee.
E. To provide the moneys required to make the Loans under the Loan Agreement.
the Authority has determined to issue three series of bonds (collectively. the "Bonds) pursuant to and
secured by this Indenture in the manner provided herein: (i) Tax Allocation Refunding Revenue Bonds
(Project Area No. 2). 2006 Series A. in the aggregate principal amount of (the "Series
2006A Bonds.). (ii) Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2). 2006
Series B. in the aggregate initial principal amount of (the "Series 2006B Bonds.). and
(iii) Tax Allocation Revenue Bonds (Project Area No. 2). 2006 Series C (the "Series 2006C Bonds.).
F. To provide for the authentication and delivery of the Bonds. to establish and
declare the terms and conditions upon which the Bonds are to be issued and to secure the payment of the
principal thereof. premium. if any. and interest thereon. the Authority has authorized the execution and
delivery of this Indenture.
NOW. THEREFORE. THIS INDENTURE WITNESSETH. that in order to secure the
payment of the principal of. premium. if any. and interest on the Bonds at any time issued and
Outstanding under this Indenture. according to their tenor. and to secure the performance and observance
of all the covenants and conditions therein and herein set forth. and to declare the terms and conditions
upon and subject to which the Bonds are to be issued and received. and in consideration of the premises
and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the
Owners thereof. and for other valuable considerations. the receipt whereof is hereby acknowledged. the
Authority hereby covenants and agrees with the Trustee. for the benefit of the Owners of the Bonds. as
follows:
P6402.1055\872 S31.8
-1-
ARTICLE I
DEFINITIONS: AUTHORIZATION AND PURPOSE
OF BONDS: EQUAL SECURITY
Section 1.01. Definitions. The following terms shall for all purposes of this Indenture
and of any Supplemental Indenture and of any certificate. opinion. request or other documents herein
mentioned have the meanings ascribed thereby. In addition. the terms defined in Section 1.01 of the Loan
Agreement and not otherwise defined in this Section 1.01 shall have the meanings ascribed thereby in the
Loan Agreement.
"Accreted Value means. Nvith respect to any Series 2006B Bond. as of any date of
calculation. the sum of the Initial Principal Amount thereof and the interest accrued thereon to such date
of calculation. compounded from the Closing Date at the stated yield to maturity thereof on each February
I and August I. assuming in any such semiannual period that such Accreted Value increases in equal
daily amounts on the basis of a 360-dav year of twelve 30-dav months.
"Act means Articles I through 4 (commencing Nvith Section 6500) of Chapter 5.
Division 7. Title I of the Government Code of the State. as in existence on the Closing Date or as
thereafter amended from time to time.
..Agency.. means the Palm Desert Redevelopment Agency. a redevelopment agency. a
public body corporate and politic. duly created. established and authorized to transact business and
exercise its powers all under and pursuant to the Redevelopment Law. and any successor to its duties and
functions.
"Authority means the Palm Desert Financing Authority. a joint powers authority duly
organized and existing under the Joint Exercise of Powers Agreement. dated January 26. 1989. by and
between the City and the Agency. and under the laws of the State.
"Authority Commission"' means the governing body of the Authority.
"Bond Counsel means Richards. Watson K. Gershon. A Professional Corporation. Los
Angeles. California. or a firm of attorneys of favorable reputation in the field of municipal bond lacy.
"Bond Lary means the Marks -Roos Local Bond Pooling Act of 1985. being Article 4 of
the Act (commencing Nyith Section 6584). as in existence on the Closing Date or as thereafter amended
from time to time.
"Bond Year- means each twelve-month period extending from August 2 in one calendar
year to August I of the succeeding calendar year. both dates inclusive. except that the first Bond Year
shall begin on the Closing Date and extend to and include August I. 2006.
"Bonds means the Series 2006A Bonds. the Series 2006B Bonds and the Series 2006C
Bonds.
"Business Day" means any day other than (i) a Saturday or a Sunday or (ii) any other day
on Nyhich the New York Stock Exchange or banks are authorized or obligated by lacy or executive order to
close in New York. New York. San Francisco. California. Los Angeles. California or any city in Nyhich
the Trust Office is located.
P6402.1055\872 531.8
-2-
"Certificate"' means a certificate in writing signed by any officer of the designated public
entity. duly authorized by its legislative body for that purpose.
"City means the City of Palm Desert. a charter city and municipal corporation duly
organized and validly existing under the laws of the State.
purchaser.
"Closing Date means the date of delivery of the Bonds to the Underwriter as the original
"Code" means the Internal Revenue Code of 1986. as amended.
"County" means the County of Riverside.
"Defeasance Obligations means (a) any obligations described in paragraph A or B of the
definition of "Permitted Investments set forth in this Section or (b) collateralized investment agreements.
provided that
(i) the counterparty to any such agreement shall be a domestic bank or
foreign bank with a senior unsecured debt rating of AAA by S&P and
Aaa by Moody's: a domestic or Canadian life insurance company with a
claims -paying or financial strength rating of AAA and Aaa by S&P and
Moody's. respectively: a wholly -owned and guaranteed financial
institution subsidiary of one of the above mentioned institutions: an
insurance holding company. rated AAA and Aaa. by S&P and Moody's
respectively: or a domestic financial guaranty insurance company or an
affiliate of a domestic financial guaranty insurance company. whose
obligations are fully guaranteed by an affiliate or the parent company
which has a rating of AAA and Aaa by S&P and Moody's. respectively:
(ii) any such agreement shall be collateralized by securities issued or
guaranteed by the United States government. the Government National
Mortgage Association. the Federal Home Loan Mortgage Corporation or
the Federal National Mortgage Association. or municipal. corporate.
asset -backed and mortgage -backed obligations rated AAA and Aaa by
S&P and Moody's. respectively: the counterparty must grant to the
Trustee or the agent holding the collateral for the Trustee a first perfected
security interest in all collateral delivered pursuant to the agreement and
in all proceeds of the collateral: and the collateral must be delivered free
and clear of claims of any third parties and must be registered in the
name of the Trustee or agent: and
(iii) the value of the collateral. which shall be valued by the Trustee or the
collateral agent Nveckly. must be equal to at least 105 percent of the
amount of cash transferred by or on behalf of the Authority to the
counterparty plus accrued interest.
"Deuositorv- means The Depository Trust Company. NOV York. NOV York. and its
successors and assigns as securities depository for the Bonds. or any other securities depository acting as
Depository under Article X.
"Event of Default means any of the events described in Section 8.01.
P6402.1055\872531.8 -3-
"Fiscal Year"' means any twelve-month period extending from July I in one calendar year
to June 30 of the succeeding calendar year. both dates inclusive. or any other twelve-month period
selected and designated by the Authority as its official fiscal year period.
"Indenture"' means this Indenture of Trust. as may from time to time be supplemented.
modified or amended by any Supplemental Indenture pursuant to the provisions hereof.
"Independent Accountant"' means any certified public accountant or firm of certified
public accountants appointed and paid by the Authority. and who. or each of whom (i) is in fact
independent and not under domination of the Authority. the City or the Agency: (ii) does not have any
substantial interest. direct or indirect. in the Authority. the City or the Agency: and (iii) is not connected
with the Authority. the City or the Agency as an officer or employee of the Authority. the City or the
Agency but whom may be regularly retained to make annual or other audits of the books of or reports to
the Authority. the City or the Agency.
"Information Services" means Financial Information. Inc.'s "Daily Called Bond Service."
30 Montgomery Street. I0th Floor. Jersey City. New Jersey 07302. Attention: Editor: Mergentfs
"Municipal and Government."' 5250 77 Center Drive. Suite 150. Charlotte. North Carolina 28217.
Attention: Called Bond Department: and Kenny S&P. 55 Water Street. 45 Floor. New York. New York
10041. Attention: Notification Department: or. in accordance with then -current guidelines of the
Securities and Exchange Commission. such other addresses and/or such other services providing
information with respect to called bonds as the Agency may designate to the Trustee in writing.
"Initial Principal Amount." with respect to any Series 2006B Bond. means the initial
principal amount thereof as of the Closing Date.
"Insurance Paying Agent" means or its
successors under the Insurance Policy.
"Insurance Policy" means the municipal bond insurance policy issued by the Insurer
insuring the payment when due of the principal of and interest on the Bonds.
"Insurer"' means
"Interest Account" means the account by that name established and held by the Trustee
pursuant to Section 4.02(b)( I).
"Interest Payment Date means February I and August I of each year. commencing
August I. 2006.
"Loan Agreement"' means the Project Area No. 2 Loan Agreement (2006 Senior Loans).
dated as of July I. 2006. by and among the Authority. the Agency and the Trustee. relating to the Loans.
as may from time to time be supplemented. modified or amended.
"Loan Funds" means the Series 2006A Loan Fund. the Series 2006B Loan Fund. and the
Series 2006C Loan Fund.
"Loans" means the Series 2006A Loan. the Series 2006B Loan and the Series 2006C
Loan.
"Maturity Amount." with respect to any Series 2006B Bond. means the Accreted Value
thereof at maturity.
P6402.1055\872531.8 -4-
"Moody's- means Moody's Investors Service. its successors and assigns.
"Nominee means the nominee of the Depository. which may be the Depository. as
determined from time to time pursuant to Article X.
"Outstanding. when used as of any particular time with reference to Bonds. means
(subject to the provisions of Section 11.07) all Bonds theretofore executed. issued and delivered by the
Authority under this Indenture except (i) Bonds theretofore cancelled by the Trustee or surrendered to the
Trustee for cancellation. (ii) Bonds paid or deemed to have been paid within the meaning of Section
11.0 3. and (riff) Bonds in Iicu of or in substitution for which other Bonds shall have been executed. issued
and delivered pursuant to this Indenture.
"Owner- means the person in whose name the ownership of any Bond or Bonds shall be
registered on the Registration Books.
"Participants means those broker -dealers. banks and other financial institutions from
time to time for which the Depository holds Bonds as securities depository.
"Paying Agent means the Trustee.
"Permitted Investments means any of the following which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein:
A. Direct obligations of the United States of America (including obligations
issued or held in book -entry form on the books of the Department of the Treasury. and CATS and
TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United
States of America. For purposes of this paragraph A. "obligations the principal of and interest on which
are unconditionally guaranteed by the United States of America include without limitation tax exempt
obligations of a state or a political subdivision thereof which have been defeased under irrevocable
escrow instructions with non -callable obligations for which the full faith and credit of the United States of
America are pledged for the payment of principal and interest and which are rated "Aaa- by Moody's and
"AAA by S&P.
B. Bonds. debentures. notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies. provided such obligations are backed by the full
faith and credit of the United States of America (provided that stripped securities are only permitted if
they have been stripped by the agency itself):
P6402.1055\872531.8
I. United States Export -Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial
ownership
2. Farmers Home Administration (FmHA)
Certificates of beneficial ownership
3. Federal Financing, Bank
4. Federal Housing, Administration Debentures (FHA)
5. General Services Administration
Participation certificates
-5-
6. Government National Mortgage Association (GNMA or "Ginnie
Mae-)
GNMA - guaranteed mortgage -backed bonds
GNMA - guaranteed pass -through obligations
7. United States Maritime Administration
Guaranteed Title XI financing
8. United States Department of Housing and Urban Development
(HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - United States government
guaranteed debentures
United States Public Housing Notes and Bonds - United States
government guaranteed public housing notes and bonds
C. Bonds. debentures. notes or other evidence of indebtedness issued or
guaranteed by any of the following non -full faith and credit United States government agencies (provided
that stripped securities are only permitted if they have been stripped by the agency itself):
I . Federal Home Loan Bank System
Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie
Mace)
Participation Certificates
Senior debt obligations
3. Federal National Mortgage Association (FNMA or "Fannie
Mae-)
Mortgage -backed securities and senior debt obligations
4. Student Loan Marketing, Association (SLMA or "Sallie Mae-)
Senior debt obligations
5. Resolution Funding, Corp. (REFCORP) obligations
D. Money market funds. including funds for Nyhich the Trustee or its
affiliates provide investment advisory or other management services. registered under the Investment
Company Act of 1940. Nyhose shares are registered under the Securities Act of 1933. and having a rating
by S&P of AAAm-G. AAAm. or AAm and. if rated by Moody's. rated Aaa. Aa I or Aa2.
E. Certificates of deposit secured at all times by collateral described in A
and/or B above: provided that such certificates must be issued by commercial banks (including the
Trustee and its affiliates). savings and loan associations or mutual savings banks and provided further that
the collateral must be held by a third party and the Trustee on behalf of the Owners must have a perfected
first security interest in the collateral.
P6402.1055\872531.8 -6-
F. Certificates of deposit. savings accounts. deposit accounts or money
market deposits Nvhich are fully insured by the Federal Deposit Insurance Corporation. including those of
the Trustee and its affiliates.
G. Investment agreements. including guaranteed investment contracts
(GICs). Forward Purchase Agreements and Reserve Fund Put Agreements acceptable to the Insurer.
H. Commercial paper rated. at the time of purchase. "Prime - I.. by
Moody's and "A -I" or better by S&P.
I. Bonds or notes issued by any state or municipality which are rated by
Moody's and S&P in one of the two highest rating categories assigned by such agencies.
J. Federal funds or bankers acceptances with a maximum term of one year
of any bank (including the Trustee and its affiliates) which has an unsecured. uninsured and unguaranteed
obligation rating of "Prime - I.. or "A — or better by Moody's and "A- I.. or "A"' or better by S&P.
K. Repurchase Agreements. which are approved by the Insurer. and which
provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee
or third party custodian. as the case may be (buyer/lender). and the transfer of cash from the Trustee to the
dealer bank or securities firm with an agreement that the dealer bank or securities firm Nvill repay the cash
plus a yield to the Trustee in exchange for the securities at a specified date.
L. The Local Agency Investment Fund in the State Treasury or any similar
pooled investment fund administered by the State. to the extent such investment is held in the name and to
the credit of the Trustee.
M. Medium -term notes issued by corporations organized and operating
within the United States or by depository institutions licensed by the United States or any state and
operating within the United States. Such notes shall have a minimum credit rating of "Aa 3.. by Moody's
and "AA by S&P at time of purchase. and shall mature within three years or less.
N. Shares of beneficial interest issued by the California Asset Management
Trust. a common lacy trust established under the laws of the State.
"Principal Account" means the account by that name established and held by the Trustee
pursuant to Section 4.02(b)(2).
"Principal Amount" means. as of any date of calculation. with respect to (i) any Series
2006A Bond or Series 2006C Bond. the principal amount thereof. and (ii) any Series 2006B Bond. the
Accreted Value thereof.
" Proiect Area means. unless the context clearly requires otherwise. the project area
described and defined in the Redevelopment Plan approved and adopted by the City by its Ordinance
No. 509.
"Record Date" means. with respect to any Interest Payment Date. the 15th calendar day
of the month immediately preceding such Interest Payment Date. Nvhether or not such day is a Business
Day.
"Redemption Account" means the account by that name established and held by the
Trustee pursuant to Section 4.02(b)(3).
P6402.1055\872 S31.8
-7-
"Redevelopment Law means the Community Redevelopment Law. being California
Health and Safety Code Section 33000. et seq.. and all future acts supplemental thereto or amendatory
thereof.
"Redevelopment Plane means the Redevelopment Plan for the Project Area. approved
and adopted by the City by its Ordinance No. 509 and includes any amendment of the Redevelopment
Plan heretofore or hereafter made pursuant to law.
"Registration Books means the records maintained by the Trustee pursuant to Section
2.09 for the registration and transfer of ownership of the Bonds.
"Report means a document in writing signed by an Independent Redevelopment
Consultant and including: (i) a statement that the person or firm making or giving such Report has read
the pertinent provisions of the document or documents to which such Report relates: (ii) a brief statement
as to the nature and scope of the examination or investigation upon which the Report is based: and (iii) a
statement that. in the opinion of such person or firm. sufficient examination or investigation was made as
is necessary to enable said consultant to express an informed opinion with respect to the subject matter
referred to in the Report.
"Representation Letter- means the Blanket Issuer Letter of Representations. dated July I.
1997. from the Authority to the Depository. qualifying bonds issued by the Authority for the Depository's
book -entry system.
"Request means a request in writing signed by any officer of the designated public entity
duly authorized by its legislative body for that purpose.
"Revenue Fundy means the fund bv that name established and held by the Trustee
pursuant to Section 4.02(a).
"Revenues" means (i) all amounts payable by the Agency pursuant to Section 2.3 or
Section 2.4 of the Loan Agreement: (ii) any proceeds of the Bonds originally deposited with the Trustee
and all moneys deposited and held from time to time by the Trustee in the funds and accounts established
hereunder: and (iii) income and gains with respect to the investment of amounts on deposit in the funds
and accounts established hereunder. other than amounts payable to the United States of America pursuant
to Section 5.07.
"S&P- means Standard & Poor's Ratings Services and its successors and assigns.
"Securities Depositories means The Depository Trust Company. ;; Water Street. 50th
Floor. New York. New York. 10041. Attn: CaII Notification Department. Fax (2 12) 855-72 32: and. in
accordance with then current guidelines of the Securities and Exchange Commission. such other
addresses or such other securities depositories as the Authority may designate in a Certificate of the
Authority delivered to the Trustee.
"Series 2006A Bonds means the Palm Desert Financing Authority Tax Allocation
Refunding Revenue Bonds (Project Area No. 2). 2006 Series A.
"Series 2006A Loan means the Series 2006A Loan. as defined in the Loan Agreement.
made by the Authority to the Agency.
"Series 2006A Loan Fundy means the fund by that name established and held bv the
Trustee pursuant to Section 3.02.
P6402.1055\x72; 31.8
-8-
"Series 2006B Bonds" means the Palm Desert Financing Authority Tax Allocation
Revenue Capital Appreciation Bonds (Project Area No. 2). 2006 Series B.
"Series 2006B Loan" means the Series 2006B Loan. as defined in the Loan Agreement.
made by the Authority to the Agency.
"Series 2006B Loan Fundy means the fund by that name established and held by the
Trustee pursuant to Section 3.02.
"Series 2006C Bonds" means the Palm Desert Financing Authority Tax Allocation
Revenue Bonds (Project Area No. 2). 2006 Series C.
"Series 2006C Loan" means the Series 2006B Loan. as defined in the Loan Agreement.
made by the Authority to the Agency.
"Series 2006C Loan Fundy means the fund by that name established and held by the
Trustee pursuant to Section 3.02.
"State" means the State of California.
"Supplemental Indenture"' means any indenture. agreement or other instrument hereafter
duly executed by the Authority and the Trustee in accordance with the provisions of Section 7.01.
"Tax Retzulations- means temporary and permanent regulations promulgated under or
with respect to Section 103 and Sections 141 through 150. inclusive. of the Code.
"Trust Office" means the corporate trust office of the Trustee at the address set forth in
Section 1 1.13 or such other offices as may be specified to the Authority by the Trustee in writing. With
respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall
mean the office or agency of the Trustee at which. at any particular time. its corporate trust business shall
be conducted.
"Trustee" means Wells Fargo Bank. National Association. and its successors and assigns.
and any other corporation or association which may at any time be substituted in its place as provided in
Article VI.
"Underwriter"' means Citigroup Global Markets Inc.
Section 1.02. Rules of Construction. All references in this Indenture to "Articles."
"Sections." and other subdivisions. unless indicated otherwise. are to the corresponding Articles. Sections
or subdivisions of this Indenture: and the words "herein." "hereof. "hereunder."' and other words of
similar import refer to this Indenture as a whole and not to any particular Article. Section or subdivision
hereof.
Section 1.03. Authorization and Purpose of Bonds. The Authority has reviewed all
proceedings heretofore taken relative to the authorization of the Bonds and has found. as a result of such
review. and hereby finds and determines that all things. conditions. and acts required by Iaw to exist.
happen and be performed precedent to and in the issuance of the Bonds do exist. have happened and have
been performed in due time. form and manner as required by Iaw. and the Authority is now authorized
under the Bond Law and each and every requirement of Iaw. to issue the Bonds in the manner and form
provided in this Indenture. The Authority hereby authorizes the issuance of the Bonds pursuant to the
P6402.1055\872531.8
-9-
Bond Law and this Indenture for the purpose of providing funds to make the Loans to the Agency
pursuant to the Loan Agreement.
Section 1.04. Equal Security. In consideration of the acceptance of the Bonds by the
Owners thereof. this Indenture shall be deemed to be and shall constitute a contract among the Authority.
the Trustee and the Owners of the Bonds: and the covenants and agreements herein set forth to be
performed on behalf of the Authority shall be for the equal and proportionate benefit. security and
protection of all Owners of the Bonds without preference. priority or distinction as to security or
othenvise of any of the Bonds over any of the others by reason of the number or date thereof or the time
of sale. execution or deliyenv thereof. or otherwise for any cause NVhatsoeyer. except as expressly
provided therein or herein.
ARTICLE II
ISSUANCE OF BONDS
Section 2.0I I. Desiwnation. The Series 2006A Bonds shall be designated the Palm Desert
Financing Authority Tax Allocation Refunding Revenue Bonds (Project Area No. 2). 2006 Series A. and
shall be issued in the original aggregate Principal Amount of $ . The Series 2006B Bonds
shall be designated the Palm Desert Financing Authority Tax Allocation Revenue Capital Appreciation
Bonds (Project Area No. 2). 2006 Series B and shall be issued in the aggregate Initial Principal Amount
of $ . The Series 2006C Bonds shall be designated the Palm Desert Financing Authority Tax
Allocation Revenue Bonds (Project Area No. 2). 2006 Series C and shall be issued in the original
aggregate Principal Amount of $
Section 2.02. Terms of Bonds.
(a) The Series 2006A Bonds shall be issued in fully registered form without coupons in
denominations of $5.000 or any integral multiple thereof. so Tong as no Series 2006A Bond shall have
more than one maturity date. The Series 2006A Bonds shall be dated the Closing Date. shall mature on
August I in each of the years and in the amounts. and shall bear interest (calculated on the basis of a 360-
day year of twelve 30-day months) at the rates. as follows:
Maturity Date Principal Interest Maturity Date Principal Interest
(August I) Amount Rate (August I) Amount Rate
(to come)
Each Series 2006A Bond shall bear interest from the Interest Payment Date next
preceding the date of authentication thereof. unless (i) it is authenticated during the period from the day
after the Record Date for an Interest Payment Date to and including such Interest Payment Date. in which
event it shall bear interest from such Interest Payment Date. or (ii) it is authenticated on or prior to the
Record Date for the first Interest Payment Date. in which event it shall bear interest from the Closing
Date: provided. however. that if. at the time of registration of any Series 2006A Bond interest with respect
to such Series 2006A Bond is in default. such Series 2006A Bond shall bear interest from the Interest
Payment Date to which interest has been paid or made available for payment with respect to such Series
2006A Bond.
P6402.1055\872 S31.8
-10-
Interest on the Series 2006A Bonds shall be payable on each Interest Payment Date to the
person wvhose name appears on the Registration Books as the Owner thereof as of the close of business on
the Record Date. such interest to be paid by check or draft of the Trustee mailed by first class mail.
postage prepaid. on each Interest Payment Date to the Owner at the address of such Owner as it appears
on the Registration Books on such Record Date: provided. however. that at the written request of the
Owner of at least $ I.000.000 in aggregate principal amount of Outstanding Series 2006A Bonds filed
with the Trustee prior to any Record Date. interest on such Series 2006A Bonds shall be paid to such
Owner on each succeeding Interest Payment Date by wire transfer of immediately available funds to an
account in the United States designated in such «rittcn request (unless and until such request has been
revoked in writing). Payments of defaulted interest with respect to the Series 2006A Bonds shall be paid
by check or draft to the Owners as of a special record date to be fixed by the Trustee. notice of which
special record date shall be given to the Owners not Icss than ten days prior thereto. Principal of and
premium. if any. on any Series 2006A Bond shall be paid upon presentation and surrender thereof. at
maturity or the prior redemption thereof. at the Trust Office. The principal of and interest and premium.
if any. on the Series 2006A Bonds shall be payable in lawful money of the United States of America.
(b) The Series 2006B Bonds shall be issued in fully registered form in any
denominations of Initial Principal Amount but shall reflect denominations of $5.000 Maturity Amount or
any integral multiple thereof. No Series 2006B Bond shall have more than one maturity date. The Series
2006B Bonds shall be dated the Closing Date. shall mature on August I in each of the years and in the
Maturity Amounts set forth in the following schedule. The Series 2006B Bonds shall be delivered on the
Closing Date in the aggregate Initial Principal Amounts set forth below. Interest on the Initial Principal
Amount of the Series 2006B Bonds shall accrue and compound at the yield to their maturity set forth
below (such interest being equal to the difference between the Maturity Amounts and the Initial Principal
Amounts thereof):
Maturity Maturity Initial Initial Principal Yield to
Date Amount Principal Amount per $5.000 Maturity
(Autzust I) Amount Maturity Amount Date
Interest on each Series 2006B Bond shall be compounded semi-annually at the yield set
forth above from the Closing Date on each February I and August I. commencing August I. 2006. until
maturity or earlier redemption thereof. computed using a year of 360 days of twelve 30-day months and
shall be payable (i) at maturity as part of the Maturity Amount. or (ii) at redemption as part of the
Accreted Value to the redemption date. The Maturity Amount. or the Accreted Value and redemption
premium (if any). as applicable. with respect to any Series 2006B Bond shall be paid upon presentation
and surrender thereof. at maturity or the prior redemption thereof. at the Trust Office. in lawful money of
the United States of America.
(c) The Series 2006C Bonds shall be issued in fully registered form without coupons in
denominations of $5.000 or any integral multiple thereof. so long as no Series 2006C Bond shall have
more than one maturity date. The Series 2006C Bonds shall be dated the Closing Date. shall mature on
August I in each of the years and in the amounts. and shall bear interest (calculated on the basis of a 360-
day year of twelve 30-day months) at the rates. as follows:
P64 2.1055\872i 3 I.8 -1 1-
Maturity Date Principal Interest Maturity Date Principal Interest
(August I) Amount Rate (August I) Amount Rate
(to come)
Each Series 2006C Bond shall bear interest from the Interest Payment Date next
preceding the date of authentication thereof. unless (i) it is authenticated during the period from the day
after the Record Date for an Interest Payment Date to and including such Interest Payment Date. in which
event it shall bear interest from such Interest Payment Date. or (ii) it is authenticated on or prior to the
Record Date for the first Interest Payment Date. in which event it shall bear interest from the Closing
Date: provided. however. that if. at the time of registration of any Series 2006C Bond interest with respect
to such Series 2006C Bond is in default. such Series 2006C Bond shall bear interest from the Interest
Payment Date to which interest has been paid or made available for payment with respect to such Series
2006C Bond.
Interest on the Series 2006C Bonds shall be payable on each Interest Payment Date to the
person wvhose name appears on the Registration Books as the Owner thereof as of the close of business on
the Record Date. such interest to be paid by check or draft of the Trustee mailed by first class mail.
postage prepaid. on each Interest Payment Date to the Owner at the address of such Owner as it appears
on the Registration Books on such Record Date: provided. however. that at the written request of the
Owner of at least $ 1.000.000 in aggregate principal amount of Outstanding Series 2006C Bonds filed
with the Trustee prior to any Record Date. interest on such Series 2006A Bonds shall be paid to such
Owner on each succeeding Interest Payment Date by \wire transfer of immediately available funds to an
account in the United States designated in such «rittcn request (unless and until such request has been
revoked in writing). Payments of defaulted interest with respect to the Series 2006C Bonds shall be paid
by check or draft to the Owners as of a special record date to be fixed by the Trustee. notice of which
special record date shall be given to the Owners not Tess than ten days prior thereto. Principal of and
premium. if any. on any Series 2006C Bond shall be paid upon presentation and surrender thereof. at
maturity or the prior redemption thereof. at the Trust Office. The principal of and interest and premium.
if any. on the Series 2006C Bonds shall be payable in lawful money of the United States of America.
Section 2.03. Redemption of Bonds.
(a) Series 2006A Bonds.
(I) Redemption from Optional Loan Prepayment. In the event that the
Agency shall exercise its option to prepay principal installments of the Series 2006A Loan pursuant to
Section 2.4(a) of the Loan Agreement. the Revenues derived from such prepayment shall be applied to the
redemption of the Series 2006A Bonds maturing on or after August I. 2() . as a whole. or in part among
maturities as designated in writing by the Authority and by lot within a maturity. in integral multiples of
$5.000 principal amount. on any Interest Payment Date on or after August I. 20 . at the following
respective redemption prices (expressed as a percentage of the principal amount of Series 2006A Bonds
to be redeemed). plus accrued interest thereon to the date of redemption:
Redemption
Redemption Dates Price
August I. 2() and February I. 2() `%)
August I. 2() and February I. 2()
August I. 2() and thereafter
P6402.I055\872531.8 -12-
The Authority shall provide Nvritten notice to the Trustee of any redemption pursuant to
this Section 2.03(a)( I) at least 45 but not more than 90 days prior to the date fixed for such redemption.
(2) Mandatory Sinking, Fund Redemption. The Series 2006A Bonds
maturing on August I. 20 and August I. 20 shall also be subject to mandatory redemption by lot. on
August I in each year commencing August I. 20 and August I. 20 . respectively. from sinking fund
payments made by the Authority into the Principal Account pursuant to Section 4.02(b)(2). at a
redemption price equal to the principal amount thereof to be redeemed. Nvithout premium. plus accrued
interest to the date of redemption. in the aggregate respective principal amounts and on August I in the
respective years as set forth in the following tables: provided. however. that (i) in Iicu of redemption
thereof on August I in any year. the Series 2006A Bonds may be purchased by the Agency pursuant to
Section 2.3 of the Loan Agreement and tendered to the Trustee for cancellation no later than the
preceding May 15. and (ii) if some but all of the Series 2006A Bonds of a maturity have been redeemed
pursuant to Paragraph (a) above. the total amount of all future sinking fund payments Nvith respect to the
Series 2006A Bonds of such maturity shall be reduced by the aggregate principal amount of such Series
2006A Bonds so redeemed. to be allocated among such sinking fund payments on a pro rata basis.
Series 2006A Bonds Maturing, August I. 20
Sinking Fund
Redemption Date
(August I)
+Maturity.
Principal Amount
to be Redeemed
Series 2006A Bonds Maturing, August I. 20
Sinking Fund
Redemption Date
(August I)
+Maturity.
P6402.1055\872531.8 -1 3-
Principal Amount
to be Redeemed
(b) Series 2006B Bonds.
(I) Optional Redemption. In the event that the Agency shall exercise its
option to prepay installments of the Series 2006B Loan pursuant to Section 2.4(b) of the Loan
Agreement. the Revenues derived from such prepayment shall be applied to the redemption of the Series
2006B Bonds maturing on or after August I. 2() . as a whole. or in part among maturities as designated
in writing by the Authority and by lot within a maturity. in integral multiples of $5.000 of Maturity
Amount. on any February I or August Ion or after August I. 20 . at the following respective
redemption prices (expressed as a percentage of the Accreted Value of the called Series 2006B Bonds on
the date fixed for redemption):
Redemption
Redemption Dates Price
August I. 2() and February I. 2() `%)
August I. 2() and February I. 2()
August I. 2() and thereafter
The Authority shall provide written notice to the Trustee of any redemption pursuant to
this Section 2.03(b)( I) at least 45 but not more than 90 days prior to the date fixed for such redemption.
(c) Series 2006C Bonds.
(I) Optional Redemption. In the event that the Agency shall exercise its
option to prepay principal installments of the Series 2006C Loan pursuant to Section 2.4(c) of the Loan
Agreement. the Revenues derived from such prepayment shall be applied to the redemption of the Series
2006C Bonds maturing on or after August I. 2() . as a whole. or in part among maturities as designated
in writing by the Authority and by lot within a maturity. in integral multiples of $5.000 principal amount.
on any Interest Payment Date on or after August I. 20 . at the following respective redemption prices
(expressed as a percentage of the principal amount of Series 2006C Bonds to be redeemed). plus accrued
interest thereon to the date of redemption:
Redemption
Redemption Dates Price
August I. 2() and February I. 2() `%)
August I. 2() and February I. 2()
August I. 2() and thereafter
The Authority shall provide written notice to the Trustee of any redemption pursuant to
this Section 2.03(a)( I) at least 45 but not more than 90 days prior to the date fixed for such redemption.
(2) Mandatory Sinking, Fund Redemption. The Series 2006C Bonds
maturing on August I. 2() and August I. 2() shall also be subject to mandatory redemption by lot. on
August I in each year commencing August I. 2() and August I. 20 . respectively. from sinking fund
payments made by the Authority into the Principal Account pursuant to Section 4.02(b)(2). at a
redemption price equal to the principal amount thereof to be redeemed. without premium. plus accrued
interest to the date of redemption. in the aggregate respective principal amounts and on August I in the
respective years as set forth in the following tables: provided. however. that (i) in lieu of redemption
thereof on August I in any year. the Series 2006C Bonds may be purchased by the Agency pursuant to
Section 2.3 of the Loan Agreement and tendered to the Trustee for cancellation no later than the
P6402.10.5i\872i 31.8 - I4-
preceding May 1 5. and (ii) if some but all of the Series 2006C Bonds of a maturity have been redeemed
pursuant to Paragraph (a) above. the total amount of all future sinking fund payments with respect to the
Series 2006A Bonds of such maturity shall be reduced by the aggregate principal amount of such Series
2006A Bonds so redeemed. to be allocated among such sinking fund payments on a pro rata basis.
Series 2006C Bonds Maturing, August 1. 20
Sinking Fund
Redemption Date
(August 1)
tMaturity.
Principal Amount
to be Redeemed
Series 2006C Bonds Maturing, August 1. 20
Sinking Fund
Redemption Date
(August 1)
tMaturity.
Principal Amount
to be Redeemed
(3) Extraordinary Redemption From Unreleased Special Escrow Fund
Moneys. The Series 2006C Bonds shall be subject to extraordinary redemption in wvhole or in part among
maturities and by lot within each maturity as designated in writing by the Authority from amounts
transferred from the Special Escrow Fund to the Principal Account for such purpose pursuant to the Loan
Agreement. on August 1. 20 . at a redemption price equal to percent of the principal amount
thereof to be redeemed. together with accrued interest thereon to the redemption date.
(d) General Redemption Provisions
(1) Notice of Redemption. The Tnistcc on behalf and at the expense of the
Authority shall mail (by first class mail) notice of any redemption to the respective Owners of any Bonds
designated for redemption at their respective addresses appearing on the Registration Books and. by such
means acceptable to the following institutions. to the Securities Depositories and to one or more
Information Services. at least 30 but not more than 60 days prior to the date fixed for redemption:
provided. however. that neither failure to receive any such notice so mailed nor any defect therein shall
affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of
interest thereon. Such notice shall state the date of the notice. the redemption date. the redemption place
and the redemption price and shall designate the CUSIP numbers. the series designation of the Bonds. the
Bond numbers (but only if less than all of the Outstanding Bonds of such series are to be redeemed) and
the maturity or maturities of the Bonds of such series (in the event of redemption of all of such Bonds of
such maturity or maturities in NVhoIe) to be redeemed. and shall require such Bonds be then surrendered at
the Trust Office of the Trustee in Los Angeles. California (or such other location as designated by the
Trustee) for redemption at the redemption price. giving notice also that further interest on such Bonds will
not accrue from and after the redemption date.
P6402.1055\872531.8 -15-
(2) Selection of Bonds for Redemption. With respect to the redemption of
Bonds of any series. Nvheneyer provision is made in this Indenture for the redemption of less than all of
such Bonds of any maturity. the Trustee shall select the Bonds to be redeemed from all Bonds of such
series and maturity not previously called for redemption. by lot in any manner Nvhich the Trustee in its
sole discretion shall deem appropriate under the circumstances. For purposes of selecting Series 2006A
Bonds or Series 2006C Nvithin a maturity for redemption. all of the Bonds of such series shall be deemed
to be comprised of separate $5.000 principal amount portions and such portions shall be treated as
separate bonds Nvhich may be separately redeemed. For purposes of selecting Series 2006B Bonds Nvithin
a maturity for redemption. all Series 2006B Bonds shall be deemed to be comprised of separate $5.000
Maturity Amount portions and such portions shall be treated as separate bonds Nvhich may be separately
redeemed.
(3) Partial Redemption of Bonds. In the event only a portion of any Bond is
called for redemption. then upon surrender of such Bond the Authority shall execute and the Trustee shall
authenticate and deliver to the Owner thereof. at the expense of the Authority. a new Bond or Bonds of
the same series. tenor and maturity date. of authorized denominations in aggregate Principal Amount or
Maturity Amount. as the case may be. equal to the unredeemed portion of the Bond to be redeemed.
(4) Effect of Redemption. From and after the date fixed for redemption. if
funds available for the payment of the principal of. interest on and premium. if any. on the Bonds so
called for redemption shall have been duly provided. such Bonds so called shall cease to be entitled to any
benefit under this Indenture other than the right to receive payment of the redemption price. and no
interest shall accrue thereon from and after the redemption date specified in such notice. All Bonds
redeemed pursuant to this Section shall be destroyed.
Section 2.04. Form of Bonds. The Series 2006A Bonds. the Trustees certificate of
authentication. and the form of assignment to appear thereon shall be substantially in the respective forms
set forth in Exhibit A attached hereto and by this reference incorporated herein. Nvith necessary or
appropriate variations. omissions and insertions. as permitted or required by this Indenture. The Series
2006B Bonds. the Trustees certificate of authentication. and the form of assignment to appear thereon
shall be substantially in the respective forms set forth in Exhibit B attached hereto and by this reference
incorporated herein. Nvith necessary or appropriate variations. omissions and insertions. as permitted or
required by this Indenture. The Series 2006C Bonds. the Trustees certificate of authentication. and the
form of assignment to appear thereon shall be substantially in the respective forms set forth in Exhibit C
attached hereto and by this reference incorporated herein. Nvith necessary or appropriate variations.
omissions and insertions. as permitted or required by this Indenture.
Section 2.05. Execution of Bonds. The Bonds shall be signed in the name and on behalf
of the Authority Nvith the manual or facsimile signatures of its President and attested Nvith the manual or
facsimile signature of its Secretary or any deputy duly appointed by the Authority Commission. and shall
be delivered to the Trustee for authentication by it. In case any officer of the Authority \yho shall have
signed any of the Bonds shall cease to be such officer before the Bonds so signed shall have been
authenticated or delivered by the Trustee or issued by the Authority. such Bonds may nevertheless be
authenticated. delivered and issued and. upon such authentication. delivery and issue. shall be as binding
upon the Authority as though the individual \yho signed the same had continued to be such officer of the
Authority. Also. any Bond may be signed on behalf of the Authority by any individual \yho on the actual
date of the execution of such Bond shall be the proper officer although on the nominal date of such Bond
such individual shall not have been such officer.
Only such of the Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A. Exhibit B or Exhibit C. as applicable. manually executed by
the Trustee. shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture. and
1)6402.10i i\872.531.8 - 16-
such certificate of the Trustee shall be conclusive evidence that the Bonds so authenticated have been
duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture.
Section 2.06. Transfer of Bonds. Any Bond may. in accordance Nyith its terms. be
transferred. upon the Registration Books. by the person in Nvhose name it is registered. in person or by
such Owners duly authorized attorney. upon surrender of such Bond for cancellation. accompanied by
delivery of a Nvritten instrument of transfer in a form acceptable to the Trustee. duly executed. Whenever
any Bond shall be surrendered for transfer. the Authority shall execute and the Trustee shall thereupon
authenticate and deliver to the transferee a new Bond or Bonds of the same series and of like tenor.
maturity and aggregate principal amount. The cost of printing any Bonds and any services rendered or
expenses incurred by the Trustee in connection Nvith any such transfer shall be paid by the Authority.
except that the Trustee shall require the payment by the Owner requesting such transfer of any tax or
other governmental charge required to be paid Nvith respect to such transfer. The Trustee shall not be
required to transfer. pursuant to this Section 2.06. either (i) any Bond during the period established by the
Trustee for the selection of Bonds for redemption. or (ii) any Bond selected for redemption pursuant to
Section 2.03.
Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Trust Office for the
same aggregate Principal Amount or Maturity Amount. as applicable. of Bonds of the same series and of
the same tenor and maturity and of other authorized denominations. The cost of printing any Bonds and
any services rendered or expenses incurred by the Trustee in connection Nvith any such exchange shall be
paid by the Authority. except that the Trustee shall require the payment by the Owner requesting such
exchange of any tax or other governmental charge required to be paid Nvith respect to such exchange. The
Trustee shall not be required to exchange. pursuant to this Section 2.07. either (i) any Bond during the
period established by the Tnistcc for the selection of Bonds for redemption. or (ii) any Bond selected for
redemption pursuant to Section 2.03.
Section 2.08. Temporary Bonds. The Bonds may be issued initially in temporary form
exchangeable for definitive Bonds Nvhen ready for delivery. The temporary Bonds may be printed.
lithographed or typewritten. shall be of such denominations as may be determined by the Authority and
may contain such reference to any of the provisions of this Indenture as may be appropriate. Every
temporary Bond shall be executed by the Authority and be registered and authenticated by the Trustee
upon the same conditions and in substantially the same manner as the definitive Bonds: provided that any
temporary Bond need only be signed in the name and on behalf of the Authority Nvith the manual or
facsimile signature of the Secretary. or any deputy duly appointed by the Authority Commission. and
need not be attested. If the Authority issues temporary Bonds. it NyiII execute and furnish definitive
Bonds Nvithout delay. and thereupon the temporary Bonds shall be surrendered. for cancellation. in
exchange therefor at the Trust Office of the Trustee in Los Angeles. California (or such other location
designated by the Trustee). and the Trustee shall authenticate and deliver in exchange for such temporary
Bonds definitive Bonds of like series. term. maturity and aggregate Principal Amount or Maturity
Amount. as applicable. in authorized denominations. Until so exchanged. the temporary Bonds shall be
entitled to the same benefits under this Indenture as definitive Bonds authenticated and delivered
hereunder.
Section 2.09. Registration Books. The Trustee Nvill keep or cause to be kept at its Trust
Office sufficient records for the registration and transfer of the Bonds. Nvhich shall at all times during
regular business hours be open to inspection by the Authority Nvith reasonable prior notice: and. upon
presentation for such purpose. the Trustee shall. under such reasonable regulations as it may prescribe.
register or transfer or cause to be registered or transferred. on such records. Bonds as hereinbefore
provided.
P6402.1055\872 531.8
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Section 2.10. Bonds Mutilated. Lost. Destroyed or Stolen. If any Bond shall become
mutilated. the Authority. at the expense of the Owner of such Bond. shall execute. and the Trustee shall
thereupon authenticate and deliver. a new Bond of like series. tenor. maturity and aggregate Principal
Amount or Maturity Amount. as applicable. in authorized denominations in exchange and substitution for
the Bond so mutilated. but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated
Bond so surrendered to the Trustee shall be cancelled by it and destroyed. If any Bond issued hereunder
shall be Iost. destroyed or stolen. evidence of such Toss. destruction or theft may be submitted to the
Trustee and. if such evidence be satisfactory to the Trustee and indemnity satisfactory to the Trustee shall
be given. the Authority. at the expense of the Owner. shall execute. and the Trustee shall thereupon
authenticate and deliver. a new Bond of like series and tenor in Iicu of and in substitution for the Bond so
Iost. destroyed or stolen (or if any such Bond shall have matured or shall have been called for redemption.
instead of issuing a substitute Bond the Trustee may pay the same Nyithout surrender thereof upon receipt
of indemnity satisfactory to the Trustee). The Trustee may require payment of a reasonable fee for each
nc« Bond issued under this Section 2. I0 and of the expenses \yhich may be incurred by the Authority and
the Trustee. Any Bond issued under the provisions of this Section 2. I() in Iicu of any Bond alleged to be
Iost. destroyed or stolen shall constitute an original contractual obligation on the part of the Authority
Nyhether or not the Bond alleged to be Iost. destroyed or stolen be at any time enforceable by anyone. and
shall be equally and proportionately entitled to the benefits of this Indenture Nvith all other Bonds secured
by this Indenture.
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS OF
BONDS: ISSUANCE OF BONDS
Section 3.01. Issuance of Bonds. Upon the execution and delivery of this Indenture. the
Authority shall execute and deliver the Series 2006A Bonds and the Series 2006B Bonds in the respective
aggregate Initial Principal Amounts set forth herein and shall deliver the Bonds to the Trustee for
authentication and delivery to the original purchaser thereof upon the Request of the Authority.
Section 3.02. Loan Funds: Application of Proceeds of Sale of Bonds. (a) The Trustee
shall establish and maintain a separate fund to be known as the "Series 2006A Loan Fund." Upon the
receipt of payment for the Series 2006A Bonds on the Closing Date. the Trustee shall deposit the
proceeds of sale thereof in the amount of $ in the Series 2006A Loan Fund. The Trustee
shall disburse all amounts in the Series 2006A Loan Fund pursuant to Section 2.2 of the Loan Agreement.
(b) The Trustee shall establish and maintain a separate fund to be known as the
"Series 2006B Loan Fund." Upon the receipt of payment for the Series 2006B Bonds on the Closing
Date. the Trustee shall deposit the proceeds of sale thereof in the amount of $ in the Series
2006B Loan Fund. The Trustee shall disburse all amounts in the Series 2006B Loan Fund pursuant to
Section 2.2 of the Loan Agreement.
(c) The Trustee shall establish and maintain a separate fund to be known as the
"Series 2006C Loan Fund." Upon the receipt of payment for the Series 2006C Bonds on the Closing
Date. the Trustee shall deposit the proceeds of sale thereof in the amount of $ in the Series
2006C Loan Fund. The Trustee shall disburse all amounts in the Series 2006B Loan Fund pursuant to
Section 2.2 of the Loan Agreement.
Section 3.03. Validity of Bonds. The validity of the authorization and issuance of the
Bonds shall not be affected in any Nvay by any proceedings taken by the Agency Nyith respect to the
application of the proceeds of the Loans. and the recital contained in the Bonds that the same are issued
P6402.1055\872531.8
-I8-
pursuant to the Bond Law shall be conclusive evidence of their validity and of the regularity of their
issuance.
ARTICLE IV
REVENUES: FLOW OF FUNDS
Section 4.01. Pledtze of Revenues: Assiwiment of Rights. Subject to the provisions of
Section 6.03. the Bonds shall be secured by a first lien on and pledge (which shall be effected in the
manner and to the extent hereinafter provided) of all of the Revenues. The Bonds shall be equally
secured by a pledge. charge and lien upon the Revenues without priority for series. number. date of
Bonds. date of execution or date of delivery: and the payment of the interest on and principal of the Bonds
and any premiums upon the redemption of any thereof shall be and are secured by an exclusive pledge.
charge and Tien upon the Revenues. So Tong as any of the Bonds are Outstanding. the Revenues shall not
be used for any other purpose: except that out of the Revenues there may be apportioned such sums. for
such purposes. as are expressly permitted by Section 4.02.
The Authority hereby transfers in trust and assigns to the Trustee. for the benefit of the
Owners from time to time of the Bonds. all of the Revenues and all of the right. title and interest of the
Authority in the Loan Agreement (other than the rights of the Authority under Section 5.04 thereof). The
Trustcc shall be entitled to and shall receive all of the Revenues. and any Revenues collected or received
by the Authority shall be deemed to be held. and to have been collected or received. by the Authority as
the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also
shall be entitled to and. subject to the provisions hereof. shall take all steps. actions and proceedings
reasonably necessary in its judgment to enforce. either jointly with the Authority or separately. all of the
rights of the Authority and all of the obligations of the Agency under the Loan Agreement.
Section 4.02. Receipt. Deposit and Application of Revenues.
(a) Deposit of Revenues. Revenue Fund. All Revenues described in clause (i) of the
definition thereof in Section 1.0I shall be promptly deposited by the Trustee upon receipt thereof in a
special fund designated as the "Revenue Fundy which the Trustee shall establish. maintain and hold in
trust hereunder.
(b) Application of Revenues: Accounts. On or before each Interest Payment Date.
the Trustee shall transfer from the Rcycnuc Fund and deposit into the following respective accounts (each
of which the Trustee shall establish and maintain within the Rcycnuc Fund). the following amounts in the
following order of priority. the requirements of each such account (including the making up of any
deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required
deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in
priority:
(I) Interest Account. On or before each Interest Payment Date. the Trustee
shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the
Interest Account to equal the amount of interest coming due and payable on such Interest Payment Date
on all Outstanding Series 2006A and Series 2006C Bonds. No deposit need be made into the Interest
Account if the amount contained therein is at least equal to the interest coming due and payable upon all
Outstanding Series 2006A and Series 2006C Bonds on the next succeeding Interest Payment Date. All
moneys in the Interest Account shall be used and Nvithdrawn by the Trustee solely for the purpose of
paying the interest on the Series 2006A Bonds and Series 2006C as it shall become due and payable
(including accrued interest on any Series 2006A Bonds or Series 2006C redeemed prior to maturity). All
amounts on deposit in the Interest Account on the first day of any Bond Year. to the extent not required to
1)6402.10i i\872.531.8 - 19-
pay any interest then having come due and payable on the Outstanding Series 2006A or Series 2006C
Bonds. shall be withdrawn therefrom by the Trustee and transferred to the Agency to be used for any
lawful purposes of the Agency.
(2) Principal Account. On or before each date on wvhich the principal of the
Bonds shall be payable. the Trustee shall deposit in the Principal Account an amount required to cause the
aggregate amount on deposit in the Principal Account to equal (i) the Principal Amount of the Bonds
coming due and payable on such date pursuant to Section 2.02. and (ii) the Principal Amount of the
Bonds subject to mandatory sinking fund redemption on such date pursuant to Section 2.03(a)(2) or
2.03(c)(2). All moneys in the Principal Account shall be used and withdrawn by the Trustee solely for the
purpose of paying the Principal Amount of the Bonds (i) at the maturity thereof. or (ii) upon mandatory
sinking fund redemption thereof. All amounts on deposit in the Principal Account on the first day of any
Bond Year. to the extent not required to pay the principal of any Outstanding Bonds then haying come
due and payable. shall be withdrawn therefrom and transferred to the Agency to be used for any lawful
purposes of the Agency.
(3) Redemption Account. The Trustee. at any time that the Agency shall
exercise its option to prepay principal installments of the Loans pursuant to Section 2.4 of the Loan
Agreement. shall deposit the Revenues derived from such prepayment in the Redemption Account (which
the Trustee shall also establish and maintain within the Revenue Fund). to be used and withdrawn by the
Trustee solely for the purpose of paying the Principal Amount and redemption premiums. if any. on the
Bonds to be redeemed on their respective redemption dates. as directed by the Authority.
Section 4.03. Investments. All moneys in any of the funds or accounts established with
the Trustee pursuant to this Indenture or pursuant to the Loan Agreement shall be invested by the Trustee
solely in Permitted Investments pursuant to the written direction of the Authority given to the Trustee two
Business Days in advance of the making of such investments (and promptly confirmed in writing. as to
any such direction given orally): provided that moneys in the Reserve Fund established pursuant to the
Loan Agreement shall be invested in Permitted Investments which mature not more than five years from
the date of such investment. In the absence of any such direction from the Authority. the Tnistcc shall
invest any such moneys in Permitted Investments described in Paragraph D of the definition thereof.
Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or
account.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder shall be deposited in the fund or account from which such investment was
made. For purposes of acquiring any investments hereunder. the Trustee may commingle funds held by it
hereunder. The Tnistcc may (but shall not be obligated to) act as principal or agent in the acquisition or
disposition of any investment. The Trustee shall incur no liability for losses arising from any investments
made at the direction of the Authority. or otherwise made pursuant to this Section.
The Trustee shall be entitled to rely conclusively upon the written instructions of the
Authority directing investments in Permitted Investments as to the fact that each such investment is
permitted by the laws of the State. and shall not be required to make further investigation with respect
thereto. With respect to any restrictions set forth in the definition of Permitted Investments set forth in
Section 1.0I which embody legal conclusions (e.g.. the existence. validity and perfection of security
interests in collateral). the Trustee shall be entitled to rely conclusively on an opinion of counsel or upon a
representation of the provider of such Permitted Investment obtained at the Authority's or the Agency's
expense.
P6402.1055\872 S31.8
-20-
Except as specifically provided in this Indenture. the Trustee shall not be liable to pay
interest on any moneys received by it. but shall be liable only to account to the Authority and the Agency
for earnings derived from funds that have been invested.
The Authority acknowledges that to the extent regulations of the Comptroller of the
Currency or other applicable regulatory entity grant the Authority the right to receive brokerage
confirmations of security transactions as they occur. the Authority specifically \valves receipt of such
confirmations to the extent permitted by law. The Trustee Nvill furnish the Authority periodic cash
transaction statements Nyhich include detail for all investment transactions made by the Trustee hereunder.
The Trustee or any of its affiliates may act as sponsor. advisor or manager in connection
Nyith any investments made by the Trustee hereunder.
Section 4.04. Valuation and Disposition of Investments. For the purpose of determining
the amount in any fund or account established hereunder or under the Loan Agreement. any investments
credited to such fund or account shall be valued at least annually. on or before July I. at the market value
thereof. In making any valuations hereunder the Trustee may utilize computerized securities pricing
services that may be available to it. including those available through its regular accounting system.
ARTICLE V
COVENANTS OF THE AUTHORITY
Section 5.01. Punctual Payment. The Authority shall punctually pay or cause to be paid
the principal. interest and premium. if any. to become due in respect of all the Bonds. in strict conformity
Nyith the terms of the Bonds and of this Indenture. according to the true intent and meaning thereof. but
only out of Revenues and other assets pledged for such payment as provided in this Indenture.
Section 5.02. Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of
any claims for interest by the purchase of such Bonds or by any other arrangement. and in case the
maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended.
such Bonds or claims for interest shall not be entitled. in case of any default hereunder. to the benefits of
this Indenture. except subject to the prior payment in full of the principal of all of the Bonds then
Outstanding and of all claims for interest thereon Nvhich shall not have been so extended. Nothing in this
Section 5.02 shall be deemed to limit the right of the Authority to issue bonds or other obligations for the
purpose of refunding any Outstanding Bonds. and such issuance shall not be deemed to constitute an
extension of maturity of the Bonds.
Section 5.03. Aizainst Encumbrances. The Authority shall not create. or permit the
creation of. any pledge. Tien. charge or other encumbrance upon the Revenues and other assets pledged or
assigned under this Indenture Nvhile any of the Bonds are Outstanding. except the pledge and assignment
created by this Indenture. Subject to this limitation. the Authority expressly reserves the right to enter
into one or more other indentures for any of its corporate purposes. including other programs under the
Bond Law. and reserves the right to issue other obligations for such purposes.
Section 5.04. Power to Issue Bonds and Make Pledize and Assiwnment. The Authority is
duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to pledge and
assign the Revenues. the Loan Agreement and other assets purported to be pledged and assigned.
respectively. under this Indenture in the manner and to the extent provided in this Indenture. The Bonds
and the provisions of this Indenture are and Nyill be the legal. valid and binding special obligations of the
Authority in accordance Nyith their terms. and the Authority shall at all times. to the extent permitted by
P6402.1055\872 S31.8
-2 I -
law. defend. preserve and protect said pledge and assignment of Revenues and other assets and all the
rights of the ON\ners under this Indenture against all claims and demands of all persons Nyhomsoeyer.
Section 5.05. Accounting, Records and Financial Statements. The Trustee shall at all
times keep. or cause to be kept. proper books of record and account. prepared in accordance Nvith
corporate trust industry standards. in Nyhich complete and accurate entries shall be made of all transactions
made by the Trustee relating to the proceeds of Bonds. the Revenues. the Loan Agreement and all funds
and accounts established pursuant to this Indenture. Such books of record and account shall be available
for inspection by the Authority and the Agency. during regular business hours Nyith reasonable prior
notice.
Section 5.06. No Additional Indebtedness. Except for the Bonds. the Authority shall not
incur any indebtedness payable out of the Revenues. (For clarification. this provision does not prohibit
the Agency from incurring additional debt secured by Tax Revenues. so long as the incurrence of such
debt is in compliance Nyith the Loan Agreement.)
Section 5.07. Tax Covenants.
(a) The Authority covenants that. in order to maintain the exclusion from gross
income for Federal income tax purposes of the interest on the Bonds. and for no other purpose. the
Authority \\ill satisfy. or take such actions as are necessary to cause to be satisfied. each provision of the
Code necessary to maintain such exclusion. In furtherance of this covenant the Authority agrees to
comply Nyith such Nvritten instructions as may be provided by Bond Counsel.
(b) The Authority covenants that no part of the proceeds of the Bonds shall be used.
directly or indirectly. to acquire any Investment Property Nyhich Nvould cause the Bonds to become
arbitrage bonds. as that term is defined in Section 148 of the Code. or under applicable Tax Regulations.
In order to assure compliance Nyith the rebate requirements of Section 148 of the Codc. the Authority
further covenants that it \\ill pay or cause to be paid to the United States the amounts necessary to satisfy
the requirements of Section 148(f) of the Code. and that it \\ill establish such accounting procedures as
are necessary to adequately determine. account for and pay over any such amount required to be paid
thereunder in a manner consistent Nyith the requirements of Section 148 of the Code. such covenants to
survive the defeasance of the Bonds.
(c) The Authority covenants that it \\ill not take anv action or omit to take any
action. Nyhich action or omission. if reasonably expected on the date of initial execution and delivery of
the Bonds. Nvould result in a Toss of exclusion from gross income for purposes of Federal income taxation.
under Section 103 of the Code. of interest on the Bonds.
(d) The Authority covenants that it \\ill not use or permit the use of any property
financed Nyith the proceeds of the Bonds bv anv person (other than a state or local governmental unit) in
such manner or to such extent as Nvould result in a Toss of exclusion of the interest on the Bonds from
gross income for Federal income tax purposes under Section 103 of the Code.
(c) Notwithstanding any provision of this Indenture. and except as provided below.
the Authority covenants that none of the moneys contained in anv of the funds or accounts created
pursuant to this Indenture with respect to the Bonds shall be: (i) used in making loans guaranteed by the
United States (or anv agency or instrumentality thereof). (ii) invested directly or indirectly in a deposit or
account insured bv the Federal Deposit Insurance Corporation. National Credit Union Administration or
any other similar Federally chartered corporation. or (iii) otherwise invested directly or indirectly in
obligations guaranteed (in NyhoIe or in part) by the United States (or any agency or instrumentality
thereof): provided. however. that the above restrictions do not apply to: (a) the investment on moneys
P6402.1055\872 531.8
-22-
held in the Rcycnuc Fund or any other "bona fide debt service fund as defined for purposes of Section
148 of the Code. (b) investment in direct obligations of the United States Treasury. (c) investment in
obligations guaranteed by the Federal National Mortgage Association. Government National Mortgage
Association. or the Federal Home Loan Mortgage Corporation. (d) investment in obligations issued
pursuant to Section 2 I B(d)(3) of the Federal Home Loan Bank Act. as amended by Section 5 I I (a) of the
Financial Institutions Reform. Recovery. and Enforcement Act of 1989. (c) investments permitted under
regulations issued pursuant to Section I49(b)(3)(B) of the Code. or (f) such other investments permitted
under this Indenture as. in the opinion of Bond Counsel. do not jeopardize the exclusion from gross
income for Federal income tax purposes of interest on the Bonds.
Section 5.08. Loan Agreement. The Trustee. as assignee of the Authority's rights
pursuant to Section 4.01. shall receive all amounts due from the Agency pursuant to the Loan Agreement
and. upon an Event of Default. shall diligently enforce. and take all steps. actions and proceedings
reasonably necessary for the enforcement of all of the rights of the Authority thereunder and for the
enforcement of all of the obligations of the Agency thereunder.
The Loan Agreement may be amended or modified pursuant to the applicable provisions
thereof. but only Nyith the «rittcn consent of the Insurer (as Tong as the Insurance Policy is in full force
and effect) and only: (i) if the Authority. the Agency or the Trustee first obtains the «rittcn consent of the
Owners of a majority in aggregate Principal Amount of the Bonds then Outstanding to such amendment
or modification. provided. however. that no such amendment or modification shall (a) extend the maturity
of or reduce the amount of interest or principal payments on a Loan. or otherwise alter or impair the
obligation of the Agency to pay the principal. interest or prepayment premiums on a Loan at the time and
place and at the rate and in the currency provided therein. Nyithout the express «rittcn consent of the
Owner of each affected Bond. (b) reduce the percentage of the Bonds required for the «rittcn consent to
any such modification or amendment thereof or hereof. or (c) Nyithout its «rittcn consent thereto. modify
any of the rights or obligations of the Trustee: or (ii) Nyithout the consent of any of the Owners. if such
amendment or modification does not modify the rights or obligations of the Trustee Nyithout its prior
«rittcn consent. and is for any one or more of the following purposes:
(a) to add to the covenants and agreements of the Agency contained in the
Loan Agreement other covenants and agreements thereafter to be observed. or to limit or surrender any
rights or power therein reserved to or conferred upon the Agency so long as such limitation or surrender
of such rights or powers shall not materially adversely affect the Owners of the Bonds:
(b) to make such provisions for the purpose of curing any ambiguity. or of
curing. correcting or supplementing any defective provision contained in the Loan Agreement. or in any
other respect Nvhatsoever as the Agency and the Authority may deem necessary or desirable. provided
under any circumstances that such modifications or amendments shall not materially adversely affect the
interests of the Owners of the Bonds:
(c) to amend any provision thereof relating to the Code. to any extent
Nvhatsoever but only if and to the extent such amendment Nvill not adversely affect the exclusion from
gross income for federal income tax purposes of interest on any of the Bonds under the Code. in the
opinion of Bond Counsel: or
(d) to provide for the issuance of Parity Debt under and in accordance with
the provisions of the Loan Agreement.
Nothing in this Section 5.08 shall prevent the Agency and the Authority. with the «rittcn
consent of the Insurer (as long as the Insurance Policy is in full force and effect). from entering into any
amendment or modification of the Loan Agreement which solely affects a particular Bond or Bonds all of
P64U2. I U.5.5\872.31.8 -23-
the Owners of which shall have consented to such amendment or modification: provided. however. no
such amendment or modification shall affect the rights or obligations of the Trustee without its prior
Nvritten consent. The Tnistcc shall be entitled to rely upon the opinion of Bond Counsel stating that the
requirements of this Section 5.08 have been met with respect to any amendment or modification of the
Loan Agreement.
Section 5.09. Further Assurances. The Authority Nvill 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 this Indenture. and for the better assuring and
confirming unto the Owners of the Bonds the rights and benefits provided in this Indenture.
ARTICLE VI
THE TRUSTEE
Section 6.0I I. Appointment of Trustee. Wells Fargo Bank. National Association. a
national banking association organized and existing under and by virtue of the lays of the United States
of America. Nvith a corporate trust office in Los Angeles. California. is hereby appointed Trustee by the
Authority for the purpose of receiving all moneys required to be deposited «ith the Trustee hereunder and
to allocate. use and apply the same as provided in this Indenture. The Authority agrees that it Nvill
maintain a Trustee which shall be a financial institution having a corporate trust office in the State. with a
combined capital and surplus of at least $75.000.000. and subject to supervision or examination by federal
or State authority. so long as any Bonds are Outstanding. If such financial institution publishes a report
of condition at least annually pursuant to law or to the requirements of any supervising or examining
authority above referred to. then for the purpose of this Section 6.0I the combined capital and surplus of
such financial institution shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.
The Trustee is hereby authorized to pay the principal of and interest and redemption
premium. if any. on the Bonds Nyhen duly presented for payment at maturity. or on redemption or
purchase prior to maturity. and to cancel all Bonds upon payment thereof. The Trustee shall keep
accurate records of all funds administered by it and of all Bonds paid and discharged.
Section 6.02. Acceptance of Tnists. The Trustee hereby accepts the trusts imposed upon
it by this Indenture. and agrees to perform said trusts. but only upon and subject to the following express
terms and conditions:
(a) The Trustee. prior to the occurrence of an EN ent of Default and after curing of all
Events of Default which may have occurred. undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture and no implied covenants. duties or obligations shall be read
into this Indenture against the Trustee. In case an Event of Default hereunder has occurred (which has not
been cured or \valved). the Trustee may exercise such of the rights and powers vested in it by this
Indenture. and shall use the same degree of care and skill and diligence in their exercise. as a prudent
person would use in the conduct of its own affairs.
(b) The Trustee may execute any of the trusts or powers hereof and perform the
duties required of it hereunder by or through attorneys. agents. or receivers. and shall be entitled to advice
of counsel concerning all matters of trust and its duty hereunder. The Trustee may conclusively rely on
an opinion of counsel as full and complete protection for any action taken or suffered by it hereunder.
(c) The Trustee shall not be responsible for any recital herein. in the Loan
Agreement or in the Bonds. or for any of the supplements hereto or thereto or instruments of further
P6402.1055\872 531.8
-24-
assurance. or for the validity of this Indenture or the Loan Agreement. or for the sufficiency of the
security for the Bonds issued hereunder or intended to be secured hereby. or the tax status of the interest
on the Bonds. and the Trustee shall not be bound to ascertain or inquire as to the observance or
performance of any covenants. conditions or agreements on the part of the Authority hereunder.
(d) The Trustee (including its officers and employees) may become the Owner of
Bonds secured hereby Nvith the same rights Nyhich it Nvould have if not the Trustee: may acquire and
dispose of other bonds or evidences of indebtedness of the Authority Nvith the same rights it Nvould have if
it \sere not the Trustee: and may act as a depositary for and permit any of its officers or directors to act as
a member of. or in any other capacity Nvith respect to. any committee formed to protect the rights of
Owners of Bonds. Nvhether or not such committee shall represent the Owners of the majority in aggregate
Principal Amount of the Bonds then Outstanding. The Trustee. either as principal or agent. may engage
in or be interested in any financial or other transaction Nvith the Authority.
(e) The Trustee shall be protected in acting upon any Report. notice. request.
consent. certificate. order. affidavit. letter. direction. telegram. facsimile transmission. electronic mail or
other paper or document believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons and need not make any investigation into the facts or matters contained therein.
Any action taken or omitted to be taken by the Trustee pursuant to this Indenture upon the request or
authority or consent of any person \yho at the time of making such request or giving such authority or
consent is the Owner of any Bond. shall be conclusive and binding upon all future Owners of the same
Bond and upon Bonds issued in exchange therefor or in place thereof. The Trustee shall not be bound to
recognize any person as an Owner of any Bond or to take any action at his request unless the ownership
of such Bond by such person shall be reflected on the Registration Books.
(f) As to the existence or non-existence of any fact or as to the sufficiency or
validity of any instrument. paper or proceeding. the Trustee shall be entitled to rely upon a Certificate of
the Authority as sufficient evidence of the facts therein contained and prior to the occurrence of an Event
of Default hereunder of Nvhich the Trustee has been given notice or is deemed to have notice. as provided
in Section 6.02(h). shall also be at liberty to accept a Certificate of the Authority to the effect that any
particular dealing. transaction or action is necessary or expedient. but may at its discretion secure such
further evidence deemed by it to be necessary or advisable. but shall in no case be bound to secure the
same.
(g) The permissive right of the Trustee to do things enumerated in this Indenture
shall not be construed as a duty and it shall not be answerable for other than its negligence or �yillfuI
misconduct. The immunities and exceptions from liability of the Trustee shall extend to its officers.
directors. employees and agents. In the absence of negligence or misconduct. the Trustee shall not
be liable for any error of judgment.
(h) The Trustee shall not be required to take notice or be deemed to have notice of
any Event of Default hereunder except failure by the Authority to make any of the payments to the
Trustee required to be made by the Authority pursuant hereto. unless the Trustee shall be specifically
notified in «citing of such default by the Authority. the Insurer or by the Owners of at least 25 percent in
aggregate principal amount of the Bonds then Outstanding and all notices or other instruments required
by this Indenture to be delivered to the Trustee must. in order to be effective. be delivered at the Trust
Office of the Trustee in Los Angeles. California. and in the absence of such notice so delivered the
Trustee may conclusively assume there is no Event of Default hereunder except as aforesaid.
(i) At any and all reasonable times the Trustee. and its duly authorized agents.
attorneys. experts. accountants and representatives. shall have the right. but not the obligation. fully to
P6402.1055\872 S31.8
-25-
inspect all books. papers and records of the Authority pertaining to the Bonds. and to make copies of any
of such books. papers and records such as may be desired but which is not privileged by statute or by law.
(j) The Trustee shall not be required to give any bond or surety in respect of the
execution of the said trusts and powers or otherwise in respect of the premises hereof.
(k) Notwithstanding anything elsewhere in this Indenture with respect to the
execution of any Bonds. the withdrawal of any cash. the release of any property. or any action Nvhatsoeyer
within the purview of this Indenture. the Trustee shall have the right. but shall not be required. to demand
any showings. certificates. opinions. appraisals or other information. or corporate action or evidence
thereof. as may be deemed desirable for the purpose of establishing the right of the Authority to the
execution of any Bonds. the withdrawal of any cash. or the taking of any other action by the Trustee.
(I) Before taking action referred to in Section 6.05. Section 8.02 or the first
paragraph of Section 5.08. the Trustee may require that a satisfactory_ indemnity bond be furnished for the
reimbursement of all expenses to which it may be put and to protect it against all liability. except liability
which is adjudicated to have resulted from its negligence or willful misconduct in connection with any
such action.
(m) All moneys received by the Trustee shall. until used or applied or invested as
herein provided. be held in trust for the purposes for which they \were received but need not be segregated
from other funds except to the extent required by law.
(n) The Trustee shall have no liability or obligation to the Bond Owners with respect
to the payment of debt service by the Authority or with respect to the observance or performance by the
Authority of the other conditions. covenants and terms contained in this Indenture. or with respect to the
investment of any moneys in any fund or account established. held or maintained by the Authority
pursuant to this Indenture or otherwise.
(o) The Trustee makes no covenant. representation or warranty concerning the
current or future tax status of interest on the Bonds. The Trustee need only keep accurate records of all
investments and funds. and send rebate payments to the United States in accordance with explicit
instructions from the Authority.
(p) The Trustee shall have no responsibility with respect to any information.
statement. or recital in any official statement. offering memorandum or any other disclosure material
prepared or distributed with respect to the issuance of the Bonds.
(q)
Loan Agreement.
The Trustee in its capacity as Trustee is authorized and directed to execute the
(r) The Trustee shall not be considered in breach of or in default in its obligations
hereunder or progress in respect thereto in the event of enforced delay ("unavoidable delay) in the
performance of such obligations due to unforeseeable causes beyond its control and w ithout its fault or
negligence. including. but not limited to. Acts of God or of the public enemy or terrorists. acts of a
government. acts of the other party. fires. floods. epidemics. quarantine restrictions. strikes. freight
embargoes. earthquakes. explosion. mob violence. riot. inability to procure or general sabotage or
rationing of labor. equipment. facilities. sources of energy. material or supplies in the open market.
litigation or arbitration involving a party or others relating to zoning or other governmental action or
inaction pertaining to the project. malicious mischief. condemnation. and unusually severe weather or
delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond
the control of the Trustee: provided that. in the event of any such unavoidable delay under this paragraph
P6402.1055\872 531.8
-26-
6.02(r). the Trustcc notify the Authority and the Agency in «citing «ithin five business days after (i) the
occurrcncc of the event giving rise to the unavoidable delay. (ii) the Trustees actual knowledge of the
impending unavoidable delay. or (iii) the Trustees knowledge of sufficient facts under which a
rcasonablc person would conclude the unavoidable delay will occur.
(s) The Trustcc agrees to accept and act upon facsimile transmission of written
instructions and/or directions pursuant to this Indenture. provided. however. that: (i) subsequent to such
facsimile transmission of written instructions and/or directions the Trustcc shall forthwith receive the
originally executed instructions and/or directions. (ii) such originally executed instructions and/or
directions shall be signed by a person as may be dcsignatcd and authorized to sign for the party signing
such instructions and/or directions. and (iii) the Trustcc shall have received a current incumbency
certificate containing the specimen signature of such dcsignatcd person.
Section 6.03. Fccs. Charzes and Expenses of Trustcc. The Trustcc shall be entitled to
payment and rcimburscmcnt for rcasonablc fccs for its services rendered hereunder and all advances (with
interest on such advances at the maximum rate allowed by lacy). counsel fccs and expenses (including
those of in-house counsel to the extent they are for services not duplicative of other counsels' work) and
other expenses reasonably and necessarily made or incurred by the Trustcc in connection with such
services. which payment and reimbursement shall not be limited by any provision of lacy in regard to the
compensation of a trustee of an express trust. Upon the occurrcncc of an Event of Default hereunder. but
only upon an Event of Default. the Trustcc shall have a first lien with right of payment prior to payment
of any Bond upon the amounts held hereunder for the foregoing fccs. charges and expenses incurred by it
respectively. which right to payment shall survive the resignation or removal of the Trustcc.
Section 6.04. Notice to Owners of Default. !fan Event of Default hereunder occurs with
respect to any Bonds of which the Trustcc has bccn given or is deemed to have notice. as provided in
Section 6.02(h). then the Trustcc shall promptly given «cittcn notice thereof by first-class mail to the
Owner of each such Bond. unless such Event of Default shall have bccn cured before the giving of such
notice: provided. however. that unless such Event of Default consists of the failure by the Authority to
make any payment \yhen due. the Trustcc may elect not to give such notice if and so long as the Trustcc
in good faith determines that such Event of Default does not materially adversely affect the interests of
the Owners or that it is othenyisc not in the best interests of the Owners to give such notice.
Section 6.05. Intervention by Trustcc. In any judicial proceeding to which the Authority
is a party which. in the opinion of the Trustcc. has a substantial bearing on the interests of Owners of any
of the Bonds. the Trustcc may intervene on behalf of such Owners. and subject to Section 6.02(I). shall do
so if requested in writing by the Owners of a majority in aggrcgatc Principal Amount of such Bonds then
Outstanding.
Section 6.06. Removal of Trustcc. The ON\ncrs of a majority in aggrcgatc Principal
Amount of the Outstanding Bonds may at any time. and the Authority may (and at the request of the
Agency shall) so long as no Eycnt of Default shall hays occurred and then be continuing. remove the
Trustcc initially appointed. and any successor thcrcto. by an instrument or concurrent instruments in
«citing delivered to the Tnistcc. «hereupon the Authority or such ON\ncrs. as the case may bc. shall
appoint a successor or successors thcrcto: provided that any such successor shall be a financial institution
meeting the requirements set forth in Section 6.0I I.
Section 6.07. Resitznation by Trustcc. The Trustcc and any successor Trustcc may at any
time ON «cittcn notice of its intention to resign as Trustcc hereunder. such notice to be given to the
Authority and the Agency by registered or certified mail. Upon receiving such notice of resignation. the
Authority shall promptly appoint a successor Trustcc. Any resignation or removal of the Trustcc and
appointment of a successor Trustcc shall become effective upon acceptance of appointment by the
P6402.1055\872 S31.8
-27-
successor Trustee. Upon such acceptance. the Authority shall cause notice thereof to be given by first
class mail. postage prepaid. to the Bond Owners at their respective addresses set forth on the Registration
Books.
Section 6.08. Appointment of Successor Trustee. In the event of the removal or
resignation of the Trustee pursuant to Sections 6.06 or 6.07. respectively. with the prior written consent of
Agency. the Authority shall promptly appoint a successor Trustee. In the event the Authority shall for
any reason Nvhatsoeyer fail to appoint a successor Trustee within 60 days following the delivery to the
Trustee of the instrument described in Section 6.06 or within 60 days following the receipt of notice by
the Authority pursuant to Section 6.07. the Trustee may. at the expense of the Authority. apply to a court
of competent jurisdiction for the appointment of a successor Trustee meeting the requirements of
Section 6.0 I . Any such successor Trustee appointed by such court shall become the successor Trustee
hereunder notwithstanding any action by the Authority purporting to appoint a successor Trustee
following the expiration of such sixty-day period.
Section 6.09. Merger or Consolidation. Any bank or trust company into which the
Trustee may be merged or converted or with which either of them may be consolidated or any bank or
trust company resulting from any merger. conversion or consolidation to which it shall be a party or any
bank or trust company to which the Trustee may sell or transfer all or substantially all of its corporate
trust business. provided such bank or trust company shall be eligible under Section 6.0I. shall be the
successor to such Trustee without the execution or filing of any paper or further act. except as provided in
Section 6.10.
Section 6.10. Concerning, any Successor Trustee. Every successor Trustee appointed
hereunder shall execute. acknowledge and deliver to its predecessor and also to the Authority an
instrument in writing accepting such appointment hereunder and thereupon such successor. without any
further act. deed or conveyance. shall become fully vested with all the estates. properties. rights. powers.
trusts. duties and obligations of its predecessors: but such predecessor shall. nevertheless. on the Request
of the Authority. or of the Trustees successor. execute and deliver an instrument transferring to such
successor all the estates. properties. rights. powers and trusts of such predecessor hereunder: and every
predecessor Trustee shall deliver all securities and moneys held by it as the Trustee hereunder to its
successor. Should any instrument in writing from the Authority be required by any successor Trustee for
more fully and certainly vesting in such successor the estate. rights. powers and duties hereby vested or
intended to be vested in the predecessor Trustee. any and all such instruments in writing shall. on request.
be executed. acknowledged and delivered by the Authority.
Section 6. I I . Appointment of Co -Trustee. It is the purpose of this Indenture that there
shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or
restricting the right of banking corporations or associations to transact business as Trustee in such
jurisdiction. It is recognized that in the case of litigation under this Indenture. and in particular in case of
the enforcement of the rights of the Trustee on default. or in the case the Trustee or the Authority deems
that by reason of any present or future law of any jurisdiction it may not exercise any of the powers. rights
or remedies herein granted to the Trustee or hold title to the properties. in trust. as herein granted. or take
any other action which may be desirable or necessary in connection therewith. it may be necessary that
the Trustee or the Authority appoint an additional individual or institution as a separate co -trustee. The
following provisions of this Section 6. I I are adopted to these ends.
In the event that the Trustee or the Authority appoints an additional individual or
institution as a separate or co -trustee. each and every remedy. power. right. claim. demand. cause of
action. immunity. estate. title. interest and lien expressed or intended by this Indenture to be exercised by
or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co -trustee
P6402.1055\x72; 31.8
-28-
but only to the extent necessary to enable such separate or co -trustee to exercise such powers. rights and
remedies. and every covenant and obligation necessary to the exercise thereof by such separate or co -
trustee shall run to and be enforceable by either of them. The Trustee shall not be liable for the acts or
omissions of any separate or co -trustee appointed hereunder.
Should any instrument in writing from the Authority be required by the separate trustee
or co -trustee so appointed by the Trustee for more fully and certainly vesting in and conforming to it such
properties. rights. powers. trusts. duties and obligations. any and all such instruments in writing shall. on
request. be executed. acknowledged and delivered by the Authority. In case any separate trustee or co -
trustee. or a successor to either. shall become incapable of acting. resign or be removed. all the estates.
properties. rights. powers. trusts. duties and obligations of such separate trustee or co -trustee. so far as
permitted by law. shall vest in and be exercised by the Trustee until the appointment of a new trustee or
successor to such separate trustee or co -trustee.
Section 6.12. Indemnification: Limited Liability of Trustee. The Authority further
covenants and agrees to indemnify. defend and save the Trustee and its officers. directors. agents and
employees. harmless against any loss. expense and liabilities which it may incur arising out of or in the
exercise and performance of its powers and duties hereunder. including the costs of expenses of defending
against any claim of liability. but excluding any and all losses. expenses and liabilities which are due to
the negligence or intentional misconduct of the Trustee. its officers. directors or employees. No provision
in this Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial
liability hereunder if it shall have reasonable grounds for believing repayment of such funds or adequate
indemnity against such liability or risk is not assured to it. The Trustee shall not be liable for any action
taken or omitted to be taken by it in accordance with the direction of the Insurer or the Owners of at least
a majority in aggregate Principal Amount of Bonds Outstanding relating to the time. method and place of
conducting any proceeding or remedy available to the Trustee under this Indenture in exercising any trust
or power conferred on the Tnistcc by this Indenture. The obligations of the Authority under this Section
shall survive the payment and discharge of the Bonds or the resignation or removal of the Trustee under
this Indenture.
ARTICLE VII
MODIFICATION AND AMENDMENT OF THE
INDENTURE
Section 7.0I I. Amendment Hereof. This Indenture and the rights and obligations of the
Authority and of the Owners of the Bonds may be modified or amended at any time by a Supplemental
Indenture which shall become binding upon adoption. with the written consent of the Insurer (as long as
the Insurance Policy is in full force and effect) but without consent of any Bond Owners. to the extent
permitted by law but only for any one or more of the following purposes:
(a) To add to the covenants and agreements of the Authority in this Indenture
contained. other covenants and agreements thereafter to be observed. or to limit or surrender any rights or
powers herein reserved to or conferred upon the Authority so long as such limitation or surrender of such
rights or powers shall not materially adversely affect the Owners of the Bonds: or
(b) To make such provisions for the purpose of curing any ambiguity. or of curing.
correcting or supplementing any defective provision contained in this Indenture. or in any other respect
Nvhatsoeyer as the Authority may deem necessary or desirable. provided under any circumstances that
such modifications or amendments shall either (i) conform to the original intention of the Authority. or
(ii) not materially adversely affect the interests of the Owners of the Bonds in the reasonable judgment of
the Authority: or
P6402.1055\872531.8 -29-
(c) To amend any provision hereof relating to the Code. to any extent Nvhatsoever but
only if and to the extent such amendment \\ill not adversely affect the exclusion from gross income of
interest on any of the Bonds under the Code. in the opinion of Bond Counsel.
Except as set forth in the preceding paragraphs of this Section 7.0I. this Indenture and the
rights and obligations of the Authority and of the Owners of the Bonds may only be modified or amended
at any time by a Supplemental Indenture Nvhich shall become binding \yhen the «rittcn consent of the
Insurer (as Tong as the Insurance Policy is in full force and effect) and of the Owners of a majority in
aggregate Principal Amount of the Bonds then Outstanding are filed Nvith the Trustee. No such
modification or amendment shall (i) extend the maturity of or reduce the interest rate on any Bond or
othenvise alter or impair the obligation of the Authority to pay the principal. interest or premiums. if any.
at the time and place and at the rate and in the currency provided therein of any Bond Nvithout the express
«rittcn consent of the Owner of such Bond or (ii) reduce the percentage of Bonds required for the «rittcn
consent to any such amendment or modification. In no event shall any Supplemental Indenture modify
any of the rights or obligations of the Trustee Nyithout its prior «rittcn consent.
Section 7.02. Effect of Supplemental Indenture. From and after the time any
Supplemental Indenture becomes effective pursuant to this Article VII. this Indenture shall be deemed to
be modified and amended in accordance therewith. the respective rights. duties and obligations of the
parties hereto or thereto and all Owners of Outstanding Bonds. as the case may be. shall thereafter be
determined. exercised and enforced hereunder subject in all respects to such modification and
amendment. and all the terms and conditions of any Supplemental Indenture shall be deemed to be part of
the terms and conditions of this Indenture for any and all purposes.
Section 7.03. Endorsement or Replacement of Bonds After Amendment. After the
effective date of any action taken as hereinabove provided. the Authority may determine that the Bonds
shall bear a notation. by endorsement in form approved by the Authority. as to such action. and in that
case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his
bond for that purpose at the Trust Office of the Trustee. a suitable notation as to such action shall be made
on such Bond at the expense of the Authority. If the Authority shall so determine. new Bonds so
modified as. in the opinion of the Authority. shall be necessary to conform to such Bond Owners' action
shall be prepared and executed. and in that case upon demand of the Owner of any Bond Outstanding at
such effective date such new Bonds shall be exchanged at the Trust Office of the Trustee. at the expense
of the Authority. for Bonds then Outstanding. upon surrender of such Outstanding Bonds.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN. SO LONG AS
THE INSURANCE POLICY REMAINS IN EFFECT AND THE INSURER HAS NOT DEFAULTED
WITH RESPECT TO ITS PAYMENT OBLIGATIONS UNDER THE INSURANCE POLICY. ALL
PROVISIONS OF THIS ARTICLE VIII SHALL BE SUBJECT TO. AND QUALIFIED BY. THE
PROVISIONS SET FORTH IN ARTICLE IX. INCLUDING. WITHOUT LIMITATION. THE
INSURERS RIGHT TO CONSENT TO ACCELERATION OF THE BONDS. AND THE INSURERS
RIGHT TO CONSENT TO OR DIRECT CERTAIN AUTHORITY. TRUSTEE OR OWNER ACTIONS.
Section 8.0I I. Events of Default. The following events shall be Events of Default
hereunder:
P6402.1 c055\872 531.8
-30-
(a) Default in the due and punctual payment of the principal of any Bond w hen and
as the same shall become due and payable. whether at maturity as therein expressed. by proceedings for
redemption. by declaration or otherwise.
(b) Default in the due and punctual payment of any installment of interest on an
Bond when and as such interest installment shall become due and payable.
(c) Failure by the Authority to observe and perform any of the covenants.
agreements or conditions on its part in this Indenture or in the Bonds contained. other than as referred to
in the preceding Paragraphs (a) and (b). for a period of 60 days after written notice. specifying such a
failure and requesting that it be remedied has been given to the Authority by the Trustee. or to the
Authority and the Trustee by the Owners of a majority in aggregate Principal Amount of the Outstanding
Bonds: provided. however. that if in the reasonable opinion of the Authority the failure stated in such
notice can be corrected. but not within such 60 day period. such failure shall not constitute an Event of
Default if corrective action is instituted by the Authority within such 60 day period and diligently pursued
until such failure is corrected.
(d) The filing by the Authority of a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law of the United States of
America. or if a court of competent jurisdiction shall approve a petition. filed with or without the consent
of the Authority. seeking reorganization under the federal bankruptcy laws or any other applicable law of
the United States of America. or if. under the provisions of any other law for the relief or aid of debtors.
any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or
any substantial part of its property.
(e) The occurrence of any Event of Default under. and as that term is defined in. the
Loan Agreement.
Section 8.02. Remedies Upon Event of Default. Subject to the provisions of Article IX.
if any Event of Default shall occur. then. and in each and every such case during the continuance of such
Event of Default. the Trustee may. and at the written direction of the Owners of a majority in aggregate
Principal Amount of the Bonds at the time Outstanding shall. upon notice in writing to the Authority and
the Agency. declare the principal of all of the Bonds then Outstanding. and the interest accrued thereon. to
be due and payable immediately. and upon any such declaration the same shall become and shall be
immediately due and payable. anything in this Indenture or in the Bonds contained to the contrary
notwithstanding.
Any such declaration is subject to the condition that if. at any time after such declaration
and before any judgment or decree for the payment of the moneys due shall have been obtained or
entered. the Authority or the Agency shall deposit with the Trustee a sum sufficient to pay all the
principal of and installments of interest on the Bonds payment of which is overdue. with interest on such
overdue principal at the rate borne by the respective Bonds to the extent permitted by law. and the charges
and expenses of the Trustee and its counsel (including the allocated costs and disbursements of in-house
counsel to the extent the services of such counsel are not duplicative of services provided by outside
counsel). and any and all other Events of Default known to the Trustee (other than in the payment of
principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have
been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be
adequate shall have been made therefor. then. and in every such case. the Owners of not less than a
majority in aggregate Principal Amount of the Bonds then Outstanding. by written notice to the
Authority. the Agency and the Trustee. or the Trustee if such declaration was made by the Trustee. may.
on behalf of the Owners of all of the Bonds. rescind and annul such declaration and its consequences and
P6402.1055\872 531.8
-3I-
«waive such Event of Default: but no such rescission and annulment shall extend to or shall affect anv
subsequent Event of Default. or shall impair or exhaust any right or power consequent thereon.
In addition. upon the occurrence and during the continuance of an Event of Default. the
Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of
and interest and premium. if any. on the Bonds. and to enforce any rights of the Trustee under or with
respect to the Loan Agreement and this Indenture.
If an Event of Default shall have occurred and be continuing and if requested so to do by
the Owners of a majority in aggregate Principal Amount of Outstanding Bonds and indemnified as
provided in Section 6.02(I). the Trustee shall be obligated to exercise such one or more of the rights and
powers conferred by this Article VIII. as the Tnistcc. being advised by counsel. shall deem most
expedient in the interest of the Bond Owners.
No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to
the Owners) is intended to be exclusive of any other remedy. but each and every such remedy shall be
cumulative and shall be in addition to anv other remedy given to the Trustee or to the Owners hereunder
or now or hereafter existing at law or in equity.
No delay or omission to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or
acquiescence therein: such right or power may be exercised from time to time as often as may be deemed
expedient.
Section 8.03. Application of Revenues and Other Funds After Default. All amounts
received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of
this Indenture shall be applied by the Trustee in the following order upon presentation of the several
Bonds. and the stamping thereon of the amount of the payment if only partially paid. or upon the
surrender thereof if fully paid:
First. to the payment of the fees. costs and expenses of the Trustee. including reasonable
compensation to its agents. attorneys and counsel (including the allocated costs and disbursements of in-
house counsel to the extent the services of such counsel are not duplicative of services provided by
outside counsel): and
Second. to the payment of the «hole amount of interest on and principal of the Bonds
then due and unpaid. with interest on overdue installments of principal. and such interest to the extent
permitted by law at the net effective rate of interest then borne by the Outstanding Bonds: provided.
however. that in the event such amounts shall be insufficient to pav in full the full amount of such interest
and principal. then such amounts shall be applied in the following order of priority:
(i) first. to the payment of all installments of interest on the Bonds then due
and unpaid. on a pro rata basis in the event that the available amounts are insufficient to pay all such
interest in full.
(ii) second. to the payment of principal of all installments of the Bonds then
due and payable. on a pro rata basis in the event that the available amounts are insufficient to pav all such
principal in full. and
(iii) third. to the payment of interest on overdue installments of principal and
interest. on a pro rata basis in the event that the available amounts are insufficient to pay all such interest
in full.
P6402.1055\872 531.8
-32-
Section 8.04. Power of Trustee to Control Proceedings. Subject to the provisions of
Article IX. in the event that the Trustee. upon the happening of an Event of Default. shall have taken any
action. by judicial proceedings or otherwise. pursuant to its duties hereunder. hether upon its own
discretion or upon the request of the Owners of at least a majority in aggregate Principal Amount of the
Bonds then Outstanding. it shall have full power. in the exercise of its discretion for the best interests of
the Owners. Nvith respect to the continuance. discontinuance. Nvithdrawal. compromise. settlement or other
disposal of such action: provided. how ever. that the Trustee shall not. unless there no longer continues an
Event of Default. discontinue. Nvithdraw. compromise or settle. or othenvise dispose of an litigation
pending at lacy or in equity. if at the time there has been filed \yith it a Nvritten request signed by the
Owners of a majority in aggregate Principal Amount of the Outstanding Bonds hereunder opposing such
discontinuance. Nvithdrawal. compromise. settlement or other disposal of such litigation. Any suit. action
or proceeding which any Owner shall have the right to bring to enforce an right or remedy hereunder
may be brought by the Trustee for the equal benefit and protection of all Owners similarly situated and
the Trustee is hereby appointed (and the successive respective Owners. by taking and holding the same.
shall be conclusively deemed so to have appointed it) the true and (awful attorney -in -fact of the respective
Owners for the purpose of bringing any such suit. action or proceeding and to do and perform any and all
acts and things for an on behalf of the respective Owners as a class or classes. as may be necessary or
advisable in the opinion of the Trustee as such attorney -in -fact.
Section 8.05. Appointment of Receivers. Upon the occurrence of an Event of Default
hereunder. and upon the filing of a suit or other commencement of judicial proceedings to enforce the
rights of the Trustee and of the Owners under this Indenture. the Trustee shall be entitled. as a matter or
right. to the appointment of a receiver or receivers of the Revenues and other amounts pledged hereunder.
pending such proceedings. Nvith such powers as the court making such appointment shall confer.
Section 8.06. Non -Waiver. Nothing in this Article VI I I or in any other provision of this
Indenture. or in the Bonds. shall affect or impair the obligation of the Authority. which is absolute and
unconditional. to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at
the respective dates of maturity. as herein provided. out of the Revenues and other moneys herein pledged
for such payment.
A Nvaiyer of any default or breach of duty or contract by the Trustee or any Owners shall
not affect any subsequent default or breach of duty or contract. or impair any rights or remedies on any
such subsequent default or breach. No delay or omission of the Trustee or any Owner to exercise any
right or power accruing upon any default shall impair any such right or power or shall be construed to be
a Nvaiyer of any such default or any acquiescence therein: and every power and remedy conferred upon
the Trustee or Owners by the Bond Law or by this Article VIII may be enforced and exercised. upon an
Event of Default. from time to time and as often as shall be deemed expedient by the Trustee or the
Owners. as the case may be.
Section 8.07. Limitation on Rights and Remedies of Owners. No Owner shall have the
right to institute any suit. action or proceeding at lacy or in equity. for any remedy under or upon this
Indenture. unless (i) such Owner shall have previously given to the Trustee «rittcn notice of the
occurrence of an Event of Default: (ii) the Owners of a majority in aggregate Principal Amount of all the
Bonds then Outstanding shall have made «rittcn request upon the Trustee to exercise the powers
hereinbefore granted or to institute such action. suit or proceeding in its own name: (iii) said Owners shall
have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs. expenses
and liabilities to be incurred in compliance with such request: and (iv) the Trustee shall have refused or
omitted to comply with such request for a period of 60 days after such «rittcn request shall have been
received by. and said tender of indemnity shall have been made to. the Trustee.
P6402.1055\872 531.8
Such notification. request. tender of indemnity and refusal or omission are hereby
declared. in eyery case. to be conditions precedent to the exercise by an Owner of an remedy
hereunder: it being understood and intended that no one or more Owners shall have any right in any
manner NVhateyer by the Owner or Ow ners" action to enforce an right under this Indenture. except in the
manner herein provided. and that all proceedings at law or in equity to enforce an provision of this
Indenture shall be instituted. had and maintained in the manner herein provided and for the equal benefit
of all Owners.
The right of an Owner of an Bond to receive payment of the principal of and interest
and premium. if an. on such Bond as herein provided or to institute suit for the enforcement of any such
payment. shall not be impaired or affected without the written consent of such Owner. notwithstanding
the foregoing provisions of this Section or any other provision of this Indenture.
Section 8.08. Termination of Proceedings. In case the Trustee shall have proceeded to
enforce any right under this Indenture by the appointment of a receiver or othenvise. and such
proceedings shall have been discontinued or abandoned for any reason. or shall have been determined
adversely. then and in every such case. the Authority. the Trustee and the Owners shall be restored to
their former positions and rights hereunder. respectively. with regard to the property subject to this
Indenture. and all rights. remedies and powers of the Trustcc shall continue as if no such proceedings had
been taken.
ARTICLE IX
BOND INSURANCE
(to come)
ARTICLE X
BOOK -ENTRY SYSTEM
Section 10.01 Book-Entnv System: Limited Obligation of Authority. The Bonds shall be
initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for
each of the maturities of the Bonds. Upon initial delivery. the ownership of each such Bond shall be
registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the
Depository. Except as provided in Section 10.03. all of the Outstanding Bonds shall be registered in the
registration books kept by the Trustee in the name of the Nominee.
With respect to Bonds registered in the registration books kept by the Trustee in the name
of the Nominee. the Authority and the Trustee shall have no responsibility or obligation to any Participant
or to any person on behalf of which such a Participant holds an interest in the Bonds. Without limiting
the immediately preceding sentence. the Authority and the Trustee shall have no responsibility or
obligation with respect to (i) the accuracy of the records of the Depository. the Nominee. or any
Participant with respect to any ownership interest in the Bonds. (ii) the delivery to any Participant or any
other person. other than an Owner as shown in the registration books kept by the Trustee. of any notice
with respect to the Bonds. including any notice of redemption. (iii) the selection by the Depository and its
Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds are redeemed in
part. or (iv) the payment to any Participant or any other person. other than an Owner as shown in the
registration books kept by the Trustee. of any amount with respect to principal of. premium. if any. or
interest due with respect to the Bonds. The Authority and the Trustee may treat and consider the person
in whose name each Bond is registered in the registration books kept by the Trustcc as the holder and
absolute owner of such Bond for the purpose of payment of principal. premium. if any. and interest with
1)6402.10.5.5 \872.531.8 -34-
respect to such Bond. for the purpose of giving notices of redemption and other matters with respect to
such Bond. for the purpose of registering transfers with respect to such Bond. and for all other purposes
Nvhatsoeyer. The Trustee shall pay all principal of. premium. if any. and interest due with respect to the
Bonds only to or upon the order of the respective Owners. as shown in the registration books kept by the
Trustee. or their respective attorneys duly authorized in writing. and all such payments shall be valid and
effective to satisfy and discharge fully the Authority's obligations with respect to payment of the
principal. premium. if any. and interest due with respect to the Bonds to the extent of the sum or sums so
paid. No person other than an Owner. as shown in the registration books kept by the Trustee. shall
receive a Bond evidencing the obligation of the Authority to make payments of principal. premium. if
any. and interest pursuant to this Indenture. Upon delivery by the Depository to the Trustee and the
Authority of written notice to the effect that the Depository has determined to substitute a new nominee in
place of the Nominee. and subject to the provisions herein with respect to Record Dates. the word
Nominee in this Indenture shall refer to such new nominee of the Depository.
Section 10.02 Representation Letter. In order to qualify the Bonds for the Depository's
book entry system. the Authority has heretofore executed and delivered to such Depository the
Representation Letter. The execution and delivery of a Representation Letter shall not in any way impose
upon the Authority or the Tnistee any obligation Nvhatsoeyer with respect to persons having interests in
the Bonds other than the Owners. as shown on the registration books kept by the Trustee. The Trustee
agrees to take all action necessary to continuously comply with the Representation Letter to the extent
that such action is not inconsistent with this Indenture. In addition to the execution and delivery of the
Representation Letter. the officers of the Authority are hereby authorized to take any other actions. not
inconsistent with this Indenture. to qualify the Bonds for the Depository's book entry program.
Section 10.03 Transfers Outside Book -Entry System. In the event (a) the Depository
determines not to continue to act as securities depository for the Bonds. or (b) the Authority determines
that the Depository shall no longer so act. then the Authority NViII discontinue the book -entry system with
the Depository. If the Authority fails to identify another qualified securities depository to replace the
Depository. then the Bonds so designated shall no longer be restricted to being registered in the
registration books kept by the Trustee in the name of the Nominee. but shall be registered in Nvhateyer
name or names persons transferring or exchanging Bonds shall designate. in accordance with the
provisions of Section 2.09.
Section 10.04 Payments to the Nominee. Notwithstanding any other provisions of this
Indenture to the contrary. so long as any Bond is registered in the name of the Nominee. all payments
with respect to principal. premium. if any. and interest due with respect to such Bond and all notices with
respect to such Bond shall be made and given. respectively. as provided in the Representation Letter or as
otherwise instructed by the Depository.
Section 10.05 Initial Depository and Nominee. The initial Depository under this Article
shall be The Depository Trust Company. New York. New York. The initial Nominee shall be Cede K.
Co.. as Nominee of The Depository Trust Company. New York. New York.
ARTICLE XI
MISCELLANEOUS
Section l l .0l . Limited Liability of Authority. Notwithstanding anything in this
Indenture contained. the Authority shall not be required to advance any moneys derived from any source
of income other than the Revenues for the payment of the principal of or interest on the Bonds. or any
premiums upon the redemption thereof. or for the performance of any covenants herein contained (except
to the extent any such covenants are expressly payable hereunder from the Revenues or otherwise from
P6402.1055\872531.8
- 5-
amounts payable under the Loan Agreement). The Authority may. however. advance funds for any such
purpose. provided that such funds are derived from a source legally available for such purpose and may
be used by the Authority for such purpose Nyithout incurring indebtedness.
The Bonds shall be revenue bonds. payable exclusively from the Rcycnucs and other
funds as in this Indenture provided. The general fund of the Authority is not liable. and the credit of the
Authority is not pledged. for the payment of the interest and premium. if any. on or principal of the
Bonds. The Owners of the Bonds shall never have the right to compel the forfeiture of any property of
the Authority. The principal of and interest on the Bonds. and any premiums upon the redemption of any
thereof. shall not be a legal or equitable pledge. charge. Tien or encumbrance upon any property of the
Authority or upon any of its income. receipts or revenues except the Rcycnucs and other funds pledged to
the payment thereof as in this Indenture provided.
Section 11.02. Benefits of Indenture Limited to Parties. Nothing in this Indenture.
expressed or implied. is intended to give to any person other than the Authority. the Trustee. the Agency.
the Insurer. and the Owners of the Bonds. any right. remedy or claim under or by reason of this Indenture.
Any covenants. stipulations. promises or agreements in this Indenture contained by and on behalf of the
Authority shall be for the sole and exclusive benefit of the Trustee. the Agency. the Insurer. and the
Owners of the Bonds.
Section 11.0 3. Discharge of Indenture. If the Authority shall pay and discharge any or
all of the Outstanding Bonds in any one or more of the following \Nays:
(a) By \yell and truly paying or causing to be paid the principal of and
interest and premium. if any. on such Bonds. as and Nyhcn the same become due and payable:
(b) By irrevocably depositing with the Trustee. in trust. at or before maturity.
money which. together with the available amounts then on deposit in the funds and accounts established
with the Trustee pursuant to this Indenture and the Loan Agreement. is fully sufficient to pay such Bonds.
including all principal. interest and premiums. if any: or
(c) By irrevocably depositing with the Trustee or any other fiduciary. in
trust. non -callable Defeasance Obligations in such amount as an Independent Accountant shall determine
\yill. together with the interest to accrue thereon and available moneys then on deposit in the funds and
accounts established with the Trustee pursuant to this Indenture and the Loan Agreement. be fully
sufficient to pay and discharge the indebtedness on such Bonds (including all principal. interest and
redemption premiums) at or before their respective maturity dates: and if such Bonds are to be redeemed
prior to the maturity thereof notice of such redemption shall have been sent pursuant to Section 2.03 or
provision satisfactory to the Trustee shall have been made for the sending of such notice. then. at the
Request of the Authority. and notwithstanding that any of such Bonds shall not have been surrendered for
payment. the pledge of the Rcycnucs and other funds provided for in this Indenture with respect to such
Bonds. and all other pecuniary obligations of the Authority under this Indenture with respect to all such
Bonds. shall cease and terminate. except only the obligation of the Authority to pay or cause to be paid to
the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for
such purpose as aforesaid. and all expenses and costs of the Trustee. Any funds held by the Trustee.
following any payment or discharge of the Outstanding Bonds pursuant to this Section 11.03 and the
payment of the Tnistcc's and the Insurers expenses and costs. shall be paid over to the Authority.
Section 11.04. Successor Is Deemed Included in All References to Predecessor.
Whenever in this Indenture or any Supplemental Indenture the Authority is named or referred to. such
reference shall be deemed to include the successor to the powers. duties and functions. with respect to the
management. administration and control of the affairs of the Authority. that are presently vested in the
P6402.1055\872531.8
-36-
Authority. and all the covenants. agreements and provisions contained in this Indenture by or on behalf of
the Authority shall bind and inure to the benefit of its successors whether so expressed or not.
Section 11.05. Content of Certificates. Every Certificate of the Authority with respect to
compliance with a condition or covenant provided for in this Indenture shall include (i) a statement that
the person or persons making or giving such Certificate have read such covenant or condition and the
definitions herein relating thereto: (ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Certificate are based: (iii) a
statement that. in the opinion of the signers. they have made or caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as to whether or not such
covenant or condition has been complied with: and (iv) a statement as to whether. in the opinion of the
signers. such condition or covenant has been complied with.
Any such certificate made or given by an officer of the Authority may be based. insofar
as it relates to legal matters. upon a certificate or opinion of or representations by counsel. unless such
officer knows that the certificate or opinion or representations with respect to the matters upon \Vhich his
certificate may be based. as aforesaid. are erroneous. or in the exercise of reasonable care should have
known that the same were erroneous. Any such certificate or opinion or representation made or given by
counsel may be based. insofar as it relates to factual matters. on information with respect to which is in
the possession of the Authority. or upon the certificate or opinion of or representations by an officer or
officers of the Authority. unless such counsel knows that the certificate or opinion or representations with
respect to the matters upon which his certificate. opinion or representation may be based. as aforesaid. are
erroneous.
Section 11.06. Execution of Documents by Owners. Any request. consent or other
instrument required by this Indenture to be signed and executed by Bond Owners may be in any number
of concurrent writings of substantially similar tenor and may be signed or executed by such Bond Owners
in person or by their agent or agents duly appointed in writing. Proof of the execution of any such
request. consent or other instrument or of a writing appointing any such agent. shall be sufficient for any
purpose of this Indenture and shall be conclusive in favor of the Trustee and of the Authority if made in
the manner provided in this Section 11.06.
The fact and date of the execution by any person of any such request. consent or other
instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of
any notary public or other officer of any jurisdiction. authorized by the laws thereof to take
acknowledgments of deeds. certifying that the person signing such request. consent or other instrument or
writing acknowledged to him the execution thereof.
The ownership of Bonds shall be proved by the Registration Books. Any request.
consent or vote of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner
of any Bond issued in exchange therefor or in Iicu thereof. in respect of anything done or suffered to be
done by the Trustee or the Authority in pursuance of such request. consent or vote. In Iicu of obtaining
any demand. request. direction. consent or Nvaiyer in writing. the Trustee may call and hold a meeting of
the Bond Owners upon such notice and in accordance with such rules and obligations as the Trustee
considers fair and reasonable for the purpose of obtaining any such action.
Section 11.07. Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand. request. direction. consent or Nvaiyer
under this Indenture. Bonds which are owned or held by or for the account of the Agency or the Authority
(but excluding Bonds held in any employees" retirement fund) shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination. provided. however. only Bonds which a
responsible officer of the Trustee actually knows to be so owned or held shall be disregarded.
P6402.1055\872 S31.8
-37-
Section 11.08. Waiver of Personal Liability. No officer. agent or employee of the
Authority shall be individually or personally liable for the payment of the interest on or principal of the
Bonds: but nothing herein contained shall relieve any such officer. agent or employee from the
performance of any official duty provided by law.
Section 11.09. Partial Invalidity. If any one or more of the covenants or agreements. or
portions thereof. provided in this Indenture on the part of the Authority (or of the Trustee) to be
performed should be contrary to law. then such covenant or covenants. such agreement or agreements. or
such portions thereof. shall be null and void and shall be deemed separable from the remaining covenants
and agreements or portions thereof and shall in no Nvay affect the validity of this Indenture or of the
Bonds: but the Bond Owners shall retain all rights and benefits accorded to them under the Bond Law or
any other applicable provisions of law. The Authority hereby declares that it Nvould have entered into this
Indenture and each and every other section. paragraph. subdivision. sentence. clause and phrase hereof
and Nvould have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that any one
or more sections. paragraphs. subdivisions. sentences. clauses or phrases of this Indenture or the
application thereof to any person or circumstance may be held to be unconstitutional. unenforceable or
invalid.
Section 1 1.10. Destruction of Cancelled Bonds. Whenever in this Indenture provision is
made for the surrender to the Trustee of any Bonds Nvhich have been paid or cancelled pursuant to the
provisions of this Indenture. the Trustee shall. as permitted by law. destroy such cancelled Bonds and.
upon Request of the Authority. provide to the Authority a certificate of destruction duly executed by the
Trustcc. and the Authority shall be entitled to rely upon any statement of fact contained in such certificate
Nvith respect to the destruction of any such Bonds therein referred to: provided. however. the Authority
shall reimburse the Trustee for the Trustees costs incurred in connection Nvith the microfilming or the
required permanent recording. if any. related thereto.
Section 1 1.1 1. Funds and Accounts. Any fund or account required by this Indenture to
be established and maintained by the Authority or the Trustee may be established and maintained in the
accounting records of the Authority or the Trustee. as the case may be. either as a fund or an account. and
may. for the purpose of such records. any audits thereof and any reports or statements Nvith respect
thereto. be treated either as a fund or as an account. All such records Nvith respect to all such funds and
accounts held by the Authority shall at all times be maintained in accordance Nvith generally accepted
accounting principles and all such records Nvith respect to all such funds and accounts held by the Trustee
shall be at all times maintained in accordance Nvith corporate trust industry practices. Any fund or
account required by this Indenture to be established and maintained by the Authority or the Trustee may
be established and maintained in the form of multiple funds. accounts or sub -accounts therein.
Section 11.12. Payment on Business Days. Whenever in this Indenture any amount is
required to be paid on a day Nyhich is not a Business Day. such payment shall be required to be made on
the Business Day immediately following such day. provided that interest shall not accrue from and after
such day.
Section 1 1.1 3. Notices. Any notice. request. complaint. demand or other communication
under this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at
its address set forth below. or by telecopv or other form of telecommunication. confirmed by telephone at
its number set forth below. Notice shall be effective either (i) upon transmission by telecopy or other
form of telecommunication. (ii) 48 hours after deposit in the United States mail. postage prepaid. or
(iii) in the case of personal delivery to any person. upon actual receipt. The Authority. the Agency or the
Trustee may. by Nvritten notice to the other parties. from time to time modify the address or number to
Nvhich communications are to be given hereunder.
P6402.1055\x72; 31.8
-38-
If to the Authority: Palm Desert Financing Authority
7 3-5 10 Fred Waring Drive
Palm Desert. California 92260
Attention: Chief Administrative Officer
Facsimile: (760) 340-0574
If to the Agency: Palm Desert Redevelopment Agency
7 3-5 10 Fred Waring Drive
Palm Desert. California 92260
Attention: Executive Director
Facsimile: (760) 340-0574
If to the Trustee: Wells Fargo Bank. National Association
707 Wilshire Boulevard. 17th Floor
Los Angeles. California 90017
Attention: Corporate Trust Department
Facsimile: (213) 614-3355
If to the Insurer:
Attention:
Facsimile: ( )
The Authority. the Agency. the Trustee and the Insurer may designate anv further or
different addresses to Nyhich subsequent notices. certificates or other communications shall be sent.
Notices to the Insurer shall be governed by Section 9.02.
Section 11.14. Unclaimed Money s. Anything in this Indenture to the contrary
notwithstanding. anv moneys held by the Trustee in trust for the payment and discharge of anv of the
Bonds or the interest thereon which remain unclaimed for two years after the date Nyhen such Bonds or the
interest thereon have become due and payable. either at their stated maturity dates or by call for earlier
redemption. if such moneys \sere held by the Trustee at such date. or for two years after the date of
deposit of such moneys if deposited with the Trustee after said date Nyhen such Bonds or the interest
thereon become due and payable. shall. at the Request of the Authority. be repaid by the Trustee to the
Authority. as its absolute property and free from trust. and the Trustee shall thereupon be released and
discharged with respect thereto and the Owners shall look only to the Authority for the payment of such
Bonds: provided. however. that before making anv such payment to the Authority. the Trustee shall. at the
Request and at the expense of the Authority. cause to be mailed to the Owners of all such Bonds. at their
respective addresses appearing on the Registration Books. a notice that said moneys remain unclaimed
and that. after a date named in said notice. which date shall not be Tess than 30 days after the date of
mailing of such notice. the balance of such moneys then unclaimed Nvill be returned to the Authority.
Section 11.15. Governing, Lary. This Agreement shall be construed and governed in
accordance with the laws of the State of California.
P6402.1055\872 31.x
39
IN WITNESS WHEREOF. the PALM DESERT FINANCING AUTHORITY has caused this
Indenture to be signed in its name by its duly authorized officer and WELLS FARGO BANK.
NATIONAL ASSOCIATION. in token of its acceptance of the trust created hereunder. has caused this
Indenture to be signed in its corporate name by its officer identified below. all as of the day and year first
above Nvritten.
P6402.1055\872531.8
PALM DESERT FINANCING AUTHORITY
By
Chief Administrative Officer
WELLS FARGO BANK. NATIONAL ASSOCIATION.
as Trustee
By
-40-
Authorized Officer
EXHIBIT A
(FORM OF SERIES 2006A BONDS
Unless this certificate is presented by an authorized representative of The Depository Trust Company. a
NOV York corporation ("DTC). to the Authority or its agent for registration of transfer. exchange. or
payment. and any certificate issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative of DTC). ANY TRANSFER. PLEDGE. OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof. Cede & Co.. has an interest herein.
No.
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REFUNDING REVENUE BOND
(PROJECT AREA NO. 2)
2006 SERIES A
RATE OF INTEREST MATURITY DATE ORIGINAL ISSUE DATE CUSIP
August I. 20_
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
The PALM DESERT FINANCING AUTHORITY. a joint powers authority organized and
existing under the laws of the State of California (the "Authority"). for value received. hereby promises to
pay (but only out of the Revenues. as defined in the Indenture hereinafter referred to. and certain other
moneys) to the Registered Owner identified above or registered assigns (the "Registered Owner"). on the
Maturity Date identified above or any earlier redemption date. the Principal Amount identified above in
lawful money of the United States of America: and to pay interest thereon at the Rate of Interest identified
above in like money from the Interest Payment Date (as hereinafter defined) next preceding the date of
authentication of this Series 2006A Bond (unless this Series 2006A Bond is authenticated on or before an
Interest Payment Date and after the fifteenth calendar day of the month preceding such Interest Payment
Date. in which event it shall bear interest from such Interest Payment Date. or unless this Series 2006A
Bond is authenticated on or prior to July 15. 2006. in which event it shall bear interest from the Original
Issue Date identified above: provided. however. that if. at the time of authentication of this Series 2006A
Bond. interest is in default on this Series 2006A Bond. this Series 2006A Bond shall bear interest from
the Interest Payment Date to which interest hereon has previously been paid or made available for
payment). payable semiannually on February I and August I in each year. commencing August I. 2006
(the "Interest Payment Dates) until payment of such Principal Amount in full. The Principal Amount
hereof is payable upon presentation hereof upon maturity or earlier redemption at the corporate trust
office of Wells Fargo Bank. National Association (the "Trustee) in Los Angeles. California or such other
location as the Trustee shall designate (the "Trust Office"). Interest hereon is payable by check or draft of
P6402.1055\872 S31.8
A- I
the Trustee mailed by first class mail on each Interest Payment Date to the Registered Owner hereof at the
address of the Registered Owner as it appears on the registration books of the Trustee as of the fifteenth
calendar day of the month preceding such Interest Payment Date (except in the case of a Registered
Owner of at least $ 1.000.000 in aggregate principal amount. such payment may. at such Registered
Owners option. be made by \sire transfer of immediately available funds in accordance Nyith Nvritten
instructions provided by such Registered Owner prior to the fifteenth calendar day of the month preceding
such Interest Payment Date).
This Series 2006A Bond is one of a duly authorized series of bonds of the Authority designated
the Palm Desert Financing Authority Tax Allocation Refunding Rcycnuc Bonds (Project Area No. 2).
2006 Series A (the "Series 2006A Bonds.). limited in principal amount of $ . The Authority
has issued two other series of bonds concurrently Nyith the issuance of the Series 2006A Bonds.
designated the Palm Desert Financing Authority Tax Allocation Rcycnuc Capital Appreciation Bonds
(Project Area No. 2). 2006 Series B. limited in initial principal amount to $ (the "Series 2006B
Bonds) and the Palm Desert Financing Authority Tax Allocation Rcycnuc Bonds (Project Area No. 2).
2006 Series C. limited in initial principal amount to } (the "Series 2006C Bonds. and
collectively Nyith the Series 2006A Bonds and the Series 2006B Bonds. the "Bonds.). The Series 2006A
Bonds. the Series 2006B Bonds and the Series 2006C Bonds are secured by an Indenture of Trust. dated
as of July I. 2006 (the "Indenture.). by and between the Authority and the Trustee. Unless the context
clearly requires othenvise. capitalized terms used but not defined herein have the meanings ascribed to
them in the Indenture. Reference is hereby made to the Indenture and all indentures supplemental thereto
for a description of the rights thereunder of the owners of the Bonds. of the nature and extent of the
Revenues. of the rights. duties and immunities of the Trustcc and of the rights and obligations of the
Authority thereunder: and all of the terms of the Indenture are hereby incorporated herein and constitute a
contract between the Authority and the Registered Owner hereof. and to all of the provisions of which
Indenture the Registered Owner hereof. by acceptance hereof. assents and agrees.
The Bonds are authorized to be issued pursuant to the provisions of the Marks -Roos Local Bond
Pooling Act of 1985. constituting Article 4. Chapter 5. Division 7. Title I of the Government Code of the
State of California (the "Act.). The Bonds are special obligations of the Authority and. as and to the
extent set forth in the Indenture. are payable solely from and secured by a first lien on and pledge of the
Revenues and certain other moneys and securities held by the Trustee as provided in the Indenture. All of
the Bonds are equally secured by a pledge of. and charge and Tien upon. all of the Revenues and such
other moneys and securities. and the Revenues and such other moneys and securities constitute a trust
fund for the security and payment of the principal of and interest on the Bonds. The full faith and credit
of the Authority is not pledged for the payment of the principal of or interest or premium (if an) on the
Bonds. The Bonds are not secured by a legal or equitable pledge of. or charge. lien or encumbrance upon.
any of the property of the Authority or any of its income or receipts. except the Revenues and such other
moneys and securities as provided in the Indenture.
The Series 2006A Bonds have been issued for the purpose of making a loan (the "Series 2006A
Loan) to the Palm Desert Redevelopment Agency (the "Agency) to finance and refinance certain public
capital improvements with respect to a redevelopment project known and designated as Project Area
No. 2. The Series 2006A Loan has been made by the Authority to the Agency pursuant to a Project Area
No. 2 Loan Agreement (2006 Senior Loans). dated as of July I. 2006 (the "Loan Agreement.). by and
among the Agency. the Authority and the Trustee.
The Series 2006A Bonds maturing on or after August I. 2() are subject to redemption prior to
their respective maturity dates as a Nvhole. or in part among maturities as designated by the Authority and
by lot within a maturity. from prepayments of the Series 2006A Loan made at the option of the Agency
pursuant to the Loan Agreement. on any Interest Payment Date on or after August I. 2() . at the
following respective redemption prices (expressed as a percentage of the principal amount of Series
P6402.1055\872 531.8
A-2
2006A Bonds to be redeemed). plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
August I. 2() and February I. 2() `%)
August I. 2() and February I. 2()
August I. 2() and thereafter
The Series 2006A Bonds maturing on August I. 2() and August I. 2() are also subject to
mandatory sinking fund redemption by lot. on August I in each year commencing August I. 2() and
August I. 20 . respectively. at a redemption price equal to the principal amount thereof to be redeemed.
without premium. plus accrued interest to the date of redemption. in the aggregate respective principal
amounts set forth in the Indenture: provided. however. that in Iicu of redemption thereof. such Series
2006A Bonds may be purchased by the Agency pursuant to the Loan Agreement.
The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of
any redemption to the respective owners of any Series 2006A Bonds designated for redemption. at their
respective addresses appearing on the registration books maintained by the Trustee. and by such means as
acceptable to the following institutions. to the Securities Depositories and to one or more Information
Services. at least 30 but not more than 60 days prior to the redemption date: provided. however. that
neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the
proceedings for the redemption of such Series 2006A Bonds or the cessation of the accrual of interest
thereon. Such notice shall state the date of the notice. the redemption date. the redemption place and the
redemption price and shall designate the CUSIP numbers. the serial numbers of each maturity or
maturities (except that if the event of redemption is of all of the Series 2006A Bonds of such maturity or
maturities in whole. the Trustee shall designate such maturities or the maturity in wvhoIe without
referencing each individual number) of the Series 2006A Bonds to be redeemed. and shall require that
such Series 2006A Bonds be then surrendered at the Tnist Office for redemption at the redemption price.
giving notice also that further interest on such Series 2006A Bonds will not accrue from and after the
redemption date.
Subject to the limitations and upon payment of the charges. if any. provided in the Indenture. this
Series 2006A Bond may be exchanged at the Trust Office for a like aggregate Principal Amount and
maturity of fully registered Series 2006A Bonds of other authorized denominations.
This Series 2006A Bond is transferable by the Registered Owner hereof. in person or by the
Registered Owners attorney duly authorized in writing. at the Trust Office. but only in the manner.
subject to the limitations and upon payment of the charges provided in the Indenture. and upon surrender
and cancellation of this Series 2006A Bond. Upon such transfer a new fully registered Series 2006A
Bond or Series 2006A Bonds. of authorized denomination or denominations. for the same aggregate
principal amount and of the same maturity will be issued to the transferee in exchange therefor. The
Trustee shall not be required to register the transfer or exchange of any Series 2006A Bond during the 15-
day period preceding the selection of Series 2006A Bonds for redemption or any Series 2006A Bond
selected for redemption. The Authority and the Trustee may treat the Registered Owner hereof as the
absolute owner hereof for all purposes. and the Authority and the Trustee shall not be affected by any
notice to the contrary.
The Indenture and the rights and obligations of the Authority and of the owners of the Series
2006A Bonds and of the Trustee may be modified or amended from time to time and at any time in the
manner. to the extent. and upon the terms provided in the Indenture: provided that no such modification
or amendment shall (a) extend the maturity of or reduce the interest rate on any Series 2006A Bond or
P6402.1055\872 S31.8
A-3
othenvise alter or impair the obligation of the Authority to pay the principal. interest or premiums at the
time and place and at the rate and in the currency provided therein of any Series 2006A Bond without the
express written consent of the Owner of such Series 2006A Bond. (b) reduce the percentage of Series
2006A Bonds required for the written consent to any such amendment or modification. or (c) without its
written consent thereto. modify any of the rights or obligations of the Trustee. all as more fully set forth in
the Indenture.
It is hereby certified that all things. conditions and acts required to exist. to have happened and to
have been performed precedent to and in the issuance of this Series 2006A Bond do exist. have happened
and have been performed in due time. form and manner as required by the Constitution and statutes of the
State of California and by the Act and the amount of this Series 2006A Bond. together with all other
indebtedness of the Authority. does not exceed any limit prescribed by the Constitution or statutes of the
State of California or by the Act.
This Series 2006A Bond shall not be entitled to any benefit under the Indenture. or become valid
or obligatory for any purpose. until the certificate of authentication hereon shall have been signed by the
Trustee.
IN WITNESS WHEREOF. the Authority has caused this Series 2006A Bond to be executed in its
name and on its behalf by the manual or facsimile signatures of its President and Secretary_ all as of the
Original Issue Date identified above.
PALM DESERT FINANCING AUTHORITY
By
Attest:
Secretary
President
STATEMENT OF INSURANCE
Ito coma
P6402.1 c055\x72 S31.8
A-4
(FORM OF TRUSTEES CERTIFICATE OF AUTHENTICATION'
This is one of the Series 2006A Bonds described in the Nvithin-mentioned Indenture and
registered on the Bond Registration Books.
WELLS FARGO BANK. NATIONAL
ASSOCIATION. as Trustee
Date: By
Authorized Signatory
(FORM OF ASSIGNMENT'
For value received the undersigned do(es) hereby sell. assign and transfer unto
Nyhose tax identification number is the
Nyithin-mentioned registered Series 2006A Bond and hereby irrevocably constitute(s) and appoint(s)
attorney to transfer the same on the books of the Trustee Nyith full poNNer of substitution in the premises.
Dated:
Signature guaranteed:
NOTE: The signature(s) on this Assignment
must correspond Nyith the name(s) as Nyritten on
the face of the Nyithin Series 2006A Bond in
every particular Nyithout alteration or
enlargement or any change whatsoeyer.
NOTE: Signature(s) must be guaranteed
by a member of an institution Nyhich is a
participant in the Securities Transfer
Agent Medallion Program (STAMP) or other
similar program.
1'6402.1 c h i\872 i 31.8 A-5
EXHIBIT B
(FORM OF SERIES 2006B BONDS
Unless this certificate is presented by an authorized representative of The Depository Trust Company. a
NOV York corporation ("DTC). to the Authority or its agent for registration of transfer. exchange. or
payment. and any certificate issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative of DTC). ANY TRANSFER. PLEDGE. OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof. Cede & Co.. has an interest herein.
No. Maturity Amount: }
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE CAPTIAL APPRECIATION BOND
(PROJECT AREA NO. 2)
2006 SERIES B
YIELD TO
MATURITY MATURITY DATE ORIGINAL ISSUE DATE CUSIP
August I. 20_
REGISTERED OWNER: CEDE & CO.
INITIAL PRINCIPAL AMOUNT:
MATURITY AMOUNT:
The PALM DESERT FINANCING AUTHORITY. a joint powers authority organized and
existing under the laws of the State of California (the "Authority"). for value received. hereby promises to
pay (but only out of the Revenues. as defined in the Indenture hereinafter referred to. and certain other
moneys) to the Registered Owner identified above or registered assigns (the "Registered Owner"). in
lawful money of the United States of America. either the Maturity Amount identified above on the
Maturity Date or the Accreted Value. plus any applicable redemption premium. upon redemption prior to
maturity. "Accreted Value." with respect to any Series 2006B Bond. means as of any date of calculation.
the sum of the Initial Principal Amount thereof and the interest accrued thereon to such date of
calculation. compounded from the Original Issue Date at the stated Yield to Maturity thereof on each
February I and August I. commencing August I. 2006. Interest on each Series 2006B Bond shall be
computed using a year of 360 days of twelve 30-day months and shall be payable (i) at maturity as part of
the Maturity Amount. or (ii) at redemption as part of the Accreted Value to the redemption date. The
Maturity Amount. or the Accreted Value and redemption premium (if any). as applicable. with respect to
any Series 2006B Bond shall be paid upon presentation and surrender thereof. at maturity or the prior
redemption thereof. at the corporate trust office of Wells Fargo Bank. National Association (the
"Trustee) in Los Angeles. California or such other location as the Trustee shall designate (the "Trust
Office).
P64U2. I U.5.5\872.531.8 B-
This Series 2006B Bond is one of a duly authorized series of bonds of the Authority designated
the Palm Desert Financing Authority Tax Allocation Revenue Capital Appreciation Bonds (Project Area
No. 2). 2006 Series B (the "Series 2006B Bonds"). limited in initial principal amount to }
The Authority has issued two other series of bonds concurrently Nyith the issuance of the Series 2006B
Bonds. designated the Palm Desert Financing Authority Tax Allocation Refunding Revenue Bonds
(Project Area No. 2). 2006 Series A. limited in initial principal amount to $ (the "Series 2006A
Bonds) and the Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 2).
2006 Series C. limited in initial principal amount to } (the "Series 2006C Bonds." and
collectively Nyith the Series 2006A Bonds and the Series 2006B Bonds. the "Bonds"). The Series 2006A
Bonds. the Series 2006B Bonds and the Series 2006C Bonds are secured by an Indenture of Trust. dated
as of July I. 2006 (the "Indenture"). by and between the Authority and the Trustee. Unless the context
clearly requires othenvise. capitalized terms used but not defined herein have the meanings ascribed to
them in the Indenture. Reference is hereby made to the Indenture and all indentures supplemental thereto
for a description of the rights thereunder of the owners of the Bonds. of the nature and extent of the
Revenues. of the rights. duties and immunities of the Trustcc and of the rights and obligations of the
Authority thereunder: and all of the terms of the Indenture are hereby incorporated herein and constitute a
contract between the Authority and the Registered Owner hereof. and to all of the provisions of which
Indenture the Registered Owner hereof. by acceptance hereof. assents and agrees.
The Bonds are authorized to be issued pursuant to the provisions of the Marks -Roos Local Bond
Pooling Act of 1985. constituting Article 4. Chapter 5. Division 7. Title I of the Government Code of the
State of California (the "Act.). The Bonds are special obligations of the Authority and. as and to the
extent set forth in the Indenture. are payable solely from and secured by a first lien on and pledge of the
Revenues and certain other moneys and securities held by the Trustee as provided in the Indenture. All of
the Bonds are equally secured by a pledge of. and charge and lien upon. all of the Revenues and such
other moneys and securities. and the Revenues and such other moneys and securities constitute a trust
fund for the security and payment of the principal of and interest on the Bonds. The full faith and credit
of the Authority is not pledged for the payment of the principal of or interest or premium (if an) on the
Bonds. The Bonds are not secured by a legal or equitable pledge of. or charge. Tien or encumbrance upon.
any of the property of the Authority or any of its income or receipts. except the Revenues and such other
moneys and securities as provided in the Indenture.
The Series 2006B Bonds have been issued for the purpose of making a loan (the "Series 2006B
Loan) to the Palm Desert Redevelopment Agency (the "Agency) to finance certain public capital
improvements with respect to a redevelopment project known and designated as Project Area No. 2. The
Series 2006B Loan has been made by the Authority to the Agency pursuant to a Project Area No. 2 Loan
Agreement (2006 Senior Loans). dated as of July I. 2006 (the "Loan Agreement.). by and among the
Agency. the Authority and the Trustee.
The Series 2006B Bonds maturing on or after August I. 2() are subject to redemption prior to
their respective maturity dates as a Nvhole. or in part among maturities as designated by the Authority and
by lot within a maturity. from prepayments of the Series 2006B Loan made at the option of the Agency
pursuant to the Loan Agreement. on any August I or February I on or after August I. 20 . at the
following respective redemption prices (expressed as a percentage of the Accreted Value of the called
Series 2006B Bonds on the date fixed for redemption):
P6402.1055\872 531.8
Redemption Dates Redemption Price
August I. 2() and February I. 2() `N
August I. 2() and February I. 2()
August I. 2() and thereafter
B-2
The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of
any redemption to the respective owners of any Series 2006B Bonds designated for redemption. at their
respective addresses appearing on the registration books maintained by the Trustee. and by such means as
acceptable to the following institutions. to the Securities Depositories and to one or more Information
Services. at least 30 but not more than 60 days prior to the redemption date: provided. however. that
neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the
proceedings for the redemption of such Series 2006B Bonds or the cessation of the accrual of interest
thereon. Such notice shall state the date of the notice. the redemption date. the redemption place and the
redemption price and shall designate the CUSIP numbers. the serial numbers of each maturity or
maturities (except that if the event of redemption is of all of the Series 2006B Bonds of such maturity or
maturities in whole. the Trustee shall designate such maturities or the maturity in wvhoIe without
referencing each individual number) of the Series 2006B Bonds to be redeemed. and shall require that
such Series 2006B Bonds be then surrendered at the Trust Office for redemption at the redemption price.
giving notice also that further interest on such Series 2006B Bonds will not accrue from and after the
redemption date.
Subject to the limitations and upon payment of the charges. if any. provided in the Indenture. this
Series 2006B Bond may be exchanged at the Trust Office for a like aggregate Maturity Amount and
maturity of fully registered Series 2006B Bonds of other authorized denominations.
This Series 2006B Bond is transferable by the Registered Owner hereof. in person or by the
Registered Owners attorney duly authorized in writing. at the Trust Office. but only in the manner.
subject to the limitations and upon payment of the charges provided in the Indenture. and upon surrender
and cancellation of this Series 2006B Bond. Upon such transfer a new fully registered Series 2006B
Bond or Series 2006B Bonds. of authorized denomination or denominations. for the same aggregate
Maturity Amount and of the same maturity will be issued to the transferee in exchange therefor. The
Trustee shall not be required to register the transfer or exchange of an Series 2006B Bond during the 15-
day period preceding the selection of Series 2006B Bonds for redemption or any Series 2006B Bond
selected for redemption. The Authority and the Trustee may treat the Registered Owner hereof as the
absolute owner hereof for all purposes. and the Authority and the Trustee shall not be affected by any
notice to the contrary.
The Indenture and the rights and obligations of the Authority and of the owners of the Series
2006B Bonds and of the Trustee may be modified or amended from time to time and at any time in the
manner. to the extent. and upon the terms provided in the Indenture: provided that no such modification
or amendment shall (a) extend the maturity of or reduce the interest rate on any Series 2006B Bond or
othenyise alter or impair the obligation of the Authority to pay the principal. interest or premiums at the
time and place and at the rate and in the currency provided therein of any Series 2006B Bond without the
express written consent of the Owner of such Series 2006B Bond. (b) reduce the percentage of Series
2006B Bonds required for the written consent to any such amendment or modification. or (c) without its
written consent thereto. modify any of the rights or obligations of the Trustee. all as more fully set forth in
the Indenture.
It is hereby certified that all things. conditions and acts required to exist. to have happened and to
have been performed precedent to and in the issuance of this Series 2006B Bond do exist. have happened
and have been performed in due time. form and manner as required by the Constitution and statutes of the
State of California and by the Act and the amount of this Series 2006B Bond. together with all other
indebtedness of the Authority. does not exceed any limit prescribed by the Constitution or statutes of the
State of California or by the Act.
P6402.1055\872531.8
B-3
This Series 2006B Bond shall not be entitled to any benefit under the Indenture. or become valid
or obligatory for any purpose. until the certificate of authentication hereon shall have been signed by the
Trustee.
IN WITNESS WHEREOF. the Authority has caused this Series 2006B Bond to be executed in its
name and on its behalf by the manual or facsimile signatures of its President and Secretary all as of the
Original Issue Date identified above.
PALM DESERT FINANCING AUTHORITY
By
Attest:
Secretary
President
STATEMENT OF INSURANCE
Ito coma
P6402.1 c055\x72 S31.8
B-4
(FORM OF TRUSTEES CERTIFICATE OF AUTHENTICATION'
This is one of the Series 2006B Bonds described in the Nvithin-mentioned Indenture and registered
on the Bond Registration Books.
WELLS FARGO BANK. NATIONAL
ASSOCIATION. as Trustee
Date: By
Authorized Signatory
(FORM OF ASSIGNMENT'
For value received the undersigned do(es) hereby sell. assign and transfer unto
Nyhose tax identification number is the
Nyithin-mentioned registered Series 2006B Bond and hereby irrevocably constitute(s) and appoint(s)
attorney to transfer the same on the books of the Trustee Nyith full poNNer of substitution in the premises.
Dated:
Signature guaranteed:
NOTE: The signature(s) on this Assignment
must correspond Nyith the name(s) as Nyritten on
the face of the Nyithin Series 2006B Bond in
every particular Nyithout alteration or
enlargement or any change whatsoeyer.
NOTE: Signature(s) must be guaranteed
by a member of an institution Nyhich is a
participant in the Securities Transfer
Agent Medallion Program (STAMP) or other
similar program.
1'6402.1 c h i\872 i 31.8 B-5
EXHIBIT A
(FORM OF SERIES 2006C BONDS
Unless this certificate is presented by an authorized representative of The Depository Trust Company. a
NOV York corporation ("DTC). to the Authority or its agent for registration of transfer. exchange. or
payment. and any certificate issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative of DTC). ANY TRANSFER. PLEDGE. OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof. Cede & Co.. has an interest herein.
No.
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE BOND
(PROJECT AREA NO. 2)
2006 SERIES C
RATE OF INTEREST MATURITY DATE ORIGINAL ISSUE DATE CUSIP
August I. 20_
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
The PALM DESERT FINANCING AUTHORITY. a joint powers authority organized and
existing under the laws of the State of California (the "Authority"). for value received. hereby promises to
pay (but only out of the Revenues. as defined in the Indenture hereinafter referred to. and certain other
moneys) to the Registered Owner identified above or registered assigns (the "Registered Owner"). on the
Maturity Date identified above or any earlier redemption date. the Principal Amount identified above in
lawful money of the United States of America: and to pay interest thereon at the Rate of Interest identified
above in like money from the Interest Payment Date (as hereinafter defined) next preceding the date of
authentication of this Series 2006C Bond (unless this Series 2006C Bond is authenticated on or before an
Interest Payment Date and after the fifteenth calendar day of the month preceding such Interest Payment
Date. in which event it shall bear interest from such Interest Payment Date. or unless this Series 2006C
Bond is authenticated on or prior to July 15. 2006. in which event it shall bear interest from the Original
Issue Date identified above: provided. however. that if. at the time of authentication of this Series 2006C
Bond. interest is in default on this Series 2006C Bond. this Series 2006C Bond shall bear interest from the
Interest Payment Date to which interest hereon has previously been paid or made available for payment).
payable semiannually on February I and August I in each year. commencing August I. 2006 (the
"Interest Payment Dates) until payment of such Principal Amount in full. The Principal Amount hereof
is payable upon presentation hereof upon maturity or earlier redemption at the corporate trust office of
P6402.1055\872531.8
C-1
Wells Fargo Bank. National Association (the "Trustee) in Los Angeles. California or such other location
as the Trustee shall designate (the "Trust Office.). Interest hereon is payable by check or draft of the
Trustee mailed by first class mail on each Interest Payment Date to the Registered Owner hereof at the
address of the Registered Owner as it appears on the registration books of the Trustee as of the fifteenth
calendar day of the month preceding such Interest Payment Date (except in the case of a Registered
Owner of at least $ 1.000.000 in aggregate principal amount. such payment may. at such Registered
Owners option. be made by \sire transfer of immediately available funds in accordance Nyith Nvritten
instructions provided by such Registered Owner prior to the fifteenth calendar day of the month preceding
such Interest Payment Date).
This Series 2006C Bond is one of a duly authorized series of bonds of the Authority designated
the Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 2). 2006 Series C
(the "Series 2006C Bonds.). limited in principal amount of $ . The Authority has issued two
other series of bonds concurrently Nyith the issuance of the Series 2006C Bonds. designated the Palm
Desert Financing Authority Tax Allocation Refunding Revenue Bonds (Project Area No. 2). 2006
Series A. limited in initial principal amount to $ (the "Series 2006A Bonds) and the Palm
Desert Financing Authority Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2).
2006 Series B. limited in initial principal amount to } (the "Series 2006B Bonds. and
collectively Nyith the Series 2006A Bonds and the Series 2006C Bonds. the "Bonds.). The Series 2006A
Bonds. the Series 2006B Bonds and the Series 2006C Bonds are secured by an Indenture of Trust. dated
as of July I. 2006 (the "Indenture.). by and between the Authority and the Trustee. Unless the context
clearly requires othenvise. capitalized terms used but not defined herein have the meanings ascribed to
them in the Indenture. Reference is hereby made to the Indenture and all indentures supplemental thereto
for a description of the rights thereunder of the owners of the Bonds. of the nature and extent of the
Revenues. of the rights. duties and immunities of the Trustcc and of the rights and obligations of the
Authority thereunder: and all of the terms of the Indenture are hereby incorporated herein and constitute a
contract between the Authority and the Registered Owner hereof. and to all of the provisions of which
Indenture the Registered Owner hereof. by acceptance hereof. assents and agrees.
The Bonds are authorized to be issued pursuant to the provisions of the Marks -Roos Local Bond
Pooling Act of 1985. constituting Article 4. Chapter 5. Division 7. Title I of the Government Code of the
State of California (the "Act.). The Bonds are special obligations of the Authority and. as and to the
extent set forth in the Indenture. are payable solely from and secured by a first lien on and pledge of the
Revenues and certain other moneys and securities held by the Trustee as provided in the Indenture. All of
the Bonds are equally secured by a pledge of. and charge and lien upon. all of the Revenues and such
other moneys and securities. and the Revenues and such other moneys and securities constitute a trust
fund for the security and payment of the principal of and interest on the Bonds. The full faith and credit
of the Authority is not pledged for the payment of the principal of or interest or premium (if any) on the
Bonds. The Bonds are not secured by a legal or equitable pledge of. or charge. lien or encumbrance upon.
any of the property of the Authority or any of its income or receipts. except the Revenues and such other
moneys and securities as provided in the Indenture.
The Series 2006C Bonds have been issued for the purpose of making a loan (the "Series 2006C
Loan) to the Palm Desert Redevelopment Agency (the "Agency) to finance certain public capital
improvements with respect to a redevelopment project known and designated as Project Area No. 2. The
Series 2006C Loan has been made by the Authority to the Agency pursuant to a Project Area No. 2 Loan
Agreement (2006 Senior Loans). dated as of July I. 2006 (the "Loan Agreement.). by and among the
Agency. the Authority and the Trustee.
P6402.1055\x72; 31.8
C-2
The Series 2006C Bonds are subject to extraordinary redemption. as a Nvholc or in part among
maturities and by lot within each maturity. on August I. 20 . at a redemption price equal to percent
of the principal amount of the Series 2006C Bonds to be redeemed as more fully set forth in the
Indenture.
The Series 2006C Bonds maturing on or after August I. 2() are subject to redemption prior to
their respective maturity dates as a NvhoIe. or in part among maturities as designated by the Authority and
by lot within a maturity. from prepayments of the Series 2006C Loan made at the option of the Agency
pursuant to the Loan Agreement. on any Interest Payment Date on or after August I. 2() . at the
following respective redemption prices (expressed as a percentage of the principal amount of Series
2006C Bonds to be redeemed). plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
August I. 2() and February I. 2() `%)
August I. 2() and February I. 2()
August I. 2() and thereafter
The Series 2006C Bonds maturing on August I. 2() and August I. 2() are also subject to
mandatory sinking fund redemption by lot. on August I in each year commencing August I. 2() and
August I. 20 . respectively. at a redemption price equal to the principal amount thereof to be redeemed.
without premium. plus accrued interest to the date of redemption. in the aggregate respective principal
amounts set forth in the Indenture: provided. however. that in Iicu of redemption thereof. such Series
2006C Bonds may be purchased by the Agency pursuant to the Loan Agreement.
The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of
any redemption to the respective owners of any Series 2006C Bonds designated for redemption. at their
respective addresses appearing on the registration books maintained by the Trustee. and by such means as
acceptable to the following institutions. to the Securities Depositories and to one or more Information
Services. at least 30 but not more than 60 days prior to the redemption date: provided. however. that
neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the
proceedings for the redemption of such Series 2006C Bonds or the cessation of the accrual of interest
thereon. Such notice shall state the date of the notice. the redemption date. the redemption place and the
redemption price and shall designate the CUSIP numbers. the serial numbers of each maturity or
maturities (except that if the event of redemption is of all of the Series 2006C Bonds of such maturity or
maturities in NvhoIe. the Trustee shall designate such maturities or the maturity in wvhoIe without
referencing each individual number) of the Series 2006C Bonds to be redeemed. and shall require that
such Series 2006C Bonds be then surrendered at the Tnist Office for redemption at the redemption price.
giving notice also that further interest on such Series 2006C Bonds will not accrue from and after the
redemption date.
Subject to the limitations and upon payment of the charges. if any. provided in the Indenture. this
Series 2006C Bond may be exchanged at the Tnist Office for a like aggregate Principal Amount and
maturity of fully registered Series 2006C Bonds of other authorized denominations.
This Series 2006C Bond is transferable by the Registered Owner hereof. in person or by the
Registered Owners attorney duly authorized in writing. at the Trust Office. but only in the manner.
subject to the limitations and upon payment of the charges provided in the Indenture. and upon surrender
and cancellation of this Series 2006C Bond. Upon such transfer a new fully registered Series 2006C
1)6402.10.5.5 \872.531.8 C-3
Bond or Series 2006C Bonds. of authorized denomination or denominations. for the same aggregate
principal amount and of the same maturity Nvill be issued to the transferee in exchange therefor. The
Trustee shall not be required to register the transfer or exchange of an Series 2006C Bond during the 15-
day period preceding the selection of Series 2006C Bonds for redemption or any Series 2006C Bond
selected for redemption. The Authority and the Trustee may treat the Registered Owner hereof as the
absolute owner hereof for all purposes. and the Authority and the Trustee shall not be affected by any
notice to the contrary.
The Indenture and the rights and obligations of the Authority and of the owners of the Series
2006C Bonds and of the Trustee may be modified or amended from time to time and at any time in the
manner. to the extent. and upon the terms provided in the Indenture: provided that no such modification
or amendment shall (a) extend the maturity of or reduce the interest rate on any Series 2006C Bond or
othenvise alter or impair the obligation of the Authority to pay the principal. interest or premiums at the
time and place and at the rate and in the currency provided therein of any Series 2006C Bond Nvithout the
express Nvritten consent of the Owner of such Series 2006C Bond. (b) reduce the percentage of Series
2006C Bonds required for the «rittcn consent to any such amendment or modification. or (c) Nyithout its
«rittcn consent thereto. modify any of the rights or obligations of the Trustee. all as more fully set forth in
the Indenture.
It is hereby certified that all things. conditions and acts required to exist. to have happened and to
have been performed precedent to and in the issuance of this Series 2006C Bond do exist. have happened
and have been performed in due time. form and manner as required by the Constitution and statutes of the
State of California and by the Act and the amount of this Series 2006C Bond. together Nvith all other
indebtedness of the Authority. does not exceed any limit prescribed by the Constitution or statutes of the
State of California or by the Act.
This Series 2006C Bond shall not be entitled to any benefit under the Indenture. or become valid
or obligatory for any purpose. until the certificate of authentication hereon shall have been signed by the
Trustee.
P6402.1055\872531.8
C-4
IN WITNESS WHEREOF. the Authority has caused this Series 2006C Bond to be executed in its
name and on its behalf by the manual or facsimile signatures of its President and Secretary all as of the
Original Issue Date identified above.
PALM DESERT FINANCING AUTHORITY
By
Attest:
Secretary
President
STATEMENT OF INSURANCE
Ito coma
P6402.1 c 0;;\872531.8
C
(FORM OF TRUSTEES CERTIFICATE OF AUTHENTICATION'
This is one of the Series 2006C Bonds described in the within -mentioned Indenture and registered
on the Bond Registration Books.
WELLS FARGO BANK. NATIONAL
ASSOCIATION. as Trustee
Date: By
Authorized Signatory
(FORM OF ASSIGNMENT'
For value received the undersigned do(es) hereby sell. assign and transfer unto
Nvhose tax identification number is the
Nvithin-mentioned registered Series 2006C Bond and hereby irrevocably constitute(s) and appoint(s)
attorney to transfer the same on the books of the Trustee Nvith full power of substitution in the premises.
Dated:
Signature guaranteed:
NOTE: The signature(s) on this Assignment
must correspond Nyith the name(s) as Nyritten on
the face of the Nyithin Series 2006C Bond in
every particular Nyithout alteration or
enlargement or any change whatsoeyer.
NOTE: Signature(s) must be guaranteed
by a member of an institution Nyhich is a
participant in the Securities Transfer
Agent Medallion Program (STAMP) or other
similar program.
P6402.1 c h i\872 i 31.8 C-6
Palm Desert Financing Authority
Tax Allocation
Refunding Revenue Bonds
(Project Area No. 2)
2006 Series A
Project Area No. 2 Loan Agreement
(2006 Senior Loans)
NVith reference to
Palm Desert Financing Authority
Tax Allocation Revenue
Capital Appreciation Bonds
(Project Area No. 2)
2006 Series B
Palm Desert Financing Authority
Tax Allocation
Revenue Bonds
(Project Area No. 2)
2006 Series C
1'6402. 1055\872 i ; 8.8
RWG DRAFT: 5/22/2006
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 2
Section I.I. Definitions 2
Section 1.2. Rules of Construction iS
ARTICLE II THE LOANS: APPLICATION OF LOAN PROCEEDS: PARITY DEBT iS
Section 2.1. Authorization
Section 2.2. Disbursement and Application of Loan Proceeds 6
Section 2.3. Repayment of Loans 7
Section 2.4. Optional Prepayment 8
Section 2.5. Reserve Fund 9
Section 2.6. Costs of Issuance Fund 10
Section 2.7. Special Escrow Fund 10
Section 2.8. Project Fund 11
Section 2.9. Parity Debt 12
Section 2.10. Issuance of Subordinate Debt 13
Section 2.11. Validity of Loans 13
ARTICLE III PLEDGE AND APPLICATION OF TAX REVENUES 13
Section 3.1. Pledge of Tax Revenues 13
Section 3.2. Special Fund: Deposit of Tax Revenues 13
Section 3.3. Transfer of Tax Revenues From Special Fund 13
Section 3.4. Investment of Moneys: Valuation of Investments 14
ARTICLE IV OTHER COVENANTS OF THE AGENCY 15
Section 4.1. Punctual Payment: Extension of Payments 15
Section 4.2. Limitation on Additional Indebtedness 15
Section 4.3. Payment of Claims 15
Section 4.4. Books and Accounts: Financial Statements 15
Section 4.5. Protection of Security and Rights 15
Section 4.6. Payments of Taxes and Other Charges 16
Section 4.7. Taxation of Leased Property 16
Section 4.8. Disposition of Property 16
Section 4.9. Maintenance of Tax Revenues 16
Section 4.10. Payment of Expenses: Indemnification 16
Section 4.11. Tax Covenants 17
Section 4.12. Redevelopment of Project Area 18
Section 4.13. Low and Moderate Income Housing Fund 18
Section 4.14. Annual Review of Tax Revenues 18
Section 4.15. Further Assurances 18
ARTICLE V EVENTS OF DEFAULT AND REMEDIES 19
Section 5.1. Events of Default and Acceleration of Maturities 19
Section 5.2. Application of Funds Upon Default 20
Section 5.3. No Waiver 20
Section 5.4. Agreement to Pay Attorneys' Fees and Expenses 20
Section 5.5. Remedies Not Exclusive 21
Section 5.6. Control of Remedies by Insurer 21
P6402.1055\8725 38.8
ARTICLE VI MISCELLANEOUS 2I
Section 6. I . Benefits Limited to Parties 2I
Section 6.2. Successor is Deemed Included in All References to Predecessor 2I
Section 6.3. Discharge of Loan Agreement 2 I
Section 6.4. Amendment 22
Section 6.5. Waiver of Personal Liability 22
Section 6.6. Payment on Business Days 22
Section 6.7. Notices 22
Section 6.8. Surety Bond 22
Section 6.9. Partial Invalidity 22
Section 6. ID. Article and Section Headings and References 22
Section 6. I I . Execution of Counterparts 23
Section 6.12. Governing Law 23
Section 6.1 3. The Trustee 23
EXHIBIT A — Schedule of Series 2006A Loan Payments
EXHIBIT B — Schedule of Series 2006B Loan Payments
EXHIBIT C — Schedule of Series 2006C Loan Payments
ii
P6402.1055\8725 38.8
PROJECT AREA NO. 2 LOAN AGREEMENT
(2006 Senior Loans)
This Project Area No. 2 Loan Agreement (2006 Senior Loans) (this "Loan Agreement)
is made and entered into as of Jule I. 2006. by and among the Palm Desert Redevelopment Agency. a
public body. corporate and politic. duly organized and validly existing under the laws of the State of
California (the "Agency"). the Palm Desert Financing Authority. a joint powers authority duly organized
and validly existing under the laws of the State of California (the "Authority"). and Wells Fargo Bank.
National Association. a national banking association duly organized and validly existing under the laws of
the United States of America (the "Trustee").
Recitals
A. The Agency is a redevelopment agency. a public body. corporate and politic.
duly created. established and authorized to transact business and exercise its powers. all under and
pursuant to the Redevelopment Law. and the powers of the Agency include the power to borrow money
for any of its corporate purposes.
B. A Redevelopment Plan for Project Area No. 2 of the Agency (the "Project Area)
has been duly approved and adopted by the City.
C. The Agency has determined to incur three loans (the "Loans) hereunder for the
object and purpose of assisting in the financing and refinancing of public capital improvements and
redevelopment activities for the benefit of the Project Area. pursuant to the Redevelopment Law and the
Marks -Roos Local Bond Pooling Act of 1985. Article 4. Chapter 5. Division 7. Title I of the Government
Code of the State of California (the "Bond Law").
D. Concurrently with the execution and delivery of this Loan Agreement. the
Authority has issued its Tax Allocation Refunding Revenue Bonds (Project Area No. 2). 2006 Series A.
in the principal amount of $ . its Tax Allocation Revenue Capital Appreciation Bonds
(Project Area No. 2). 2006 Series B. in the initial principal amount of $ . and its Tax Allocation
Revenue Bonds. 2006 Series C. in the principal amount of $ (collectively. the "Bonds"). all
pursuant to the Bond Law and an Indenture of Trust. dated as of July I. 2006 (the "Indentures). by and
between the Authority and the Trustee. for the purpose of providing funds to make the Loans to the
Agency
E. The Authority has found and determined that there will be significant public
benefits accruing from such borrowing. consisting of demonstrable savings in effective interest rates and
financing costs associated with the issuance of the Bonds pursuant to the Bond Law.
F. The Agency and the Authority have determined that all acts and proceedings
required by law necessary to make this Loan Agreement. when executed by the Agency. the Authority
and Trustee. the valid. binding and legal obligation of the Agency and the Authority. and to constitute this
Loan Agreement a valid and binding agreement for the uses and purposes herein set forth in accordance
with its terms. have been done and taken. and the execution and delivery of this Loan Agreement have
been in all respects duly authorized.
NOW. THEREFORE. in consideration of the premises and the mutual agreements herein
contained. the parties hereto do hereby agree as follows:
1)6402.1055\8725 38.8 1
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Unless the contest clearly requires or unless othenvise defined
herein. the capitalized terms in this Loan Agreement shall have the respective meanings Nyhich such terms
are given in the Indenture. In addition. the following terms defined in this Section 1.1 shall. for all
purposes of this Loan Agreement. have the respective meanings herein specified.
"Additional Reyenues- means. as of the date of calculation. the amount of Tax Revenues
which. as shown in the Report of an Independent Redevelopment Consultant. are estimated to be
receivable by the Agency within the Fiscal Year following the Fiscal Year in which such calculation is
made as a result of increases in the assessed valuation of taxable property in the Project Area due to either
(i) construction which has been completed but which is not then reflected on the tax rolls. or (ii) transfer
of ownership or an other interest in real property which has been recorded but which is not then reflected
on the tax rolls. For purposes of this definition. the term "increases in the assessed valuation means the
amount by which the assessed valuation of taxable property in the Project Area is estimated to increase
above the assessed valuation of taxable property in the Project Area (as reported by an appropriate official
of the County) as of the date on which such calculation is made.
"Bonds means the Series 2006A Bonds. the Series 2006B Bonds and the Series 2006C
Bonds.
"Costs of Issuance means all expenses incurred in connection with the authorization.
issuance. sale and delivery of the Bonds and the making of the Loans pursuant to this Loan Agreement.
including but not limited to all compensation. fees and expenses (including but not limited to fees and
expenses for legal counsel) of the Authority and any trustee. compensation to any financial advisors or
underwriters and their counsel. legal fees and expenses. filing and recording costs. rating agency fees.
credit enhancement fees (including insurance. surety bonds and letters of credit). costs of preparation and
reproduction of documents and costs of printing.
"Costs of Issuance Fundy means the fund by that name established and held by the
Trustee pursuant to Section 2.6.
"Deemed Escrow Portion means a portion of the Series 2006C Bonds in the principal
amount equal to the balance in the Special Escrow Fund (not including any money deposited in the
Escrow Interest Account).
"Escrow Fundy means the fund by that name established under the Escrow Agreement
(Project Area No. 2). dated as of even date herewith. by and among the Authority. the Agency and Wells
Fargo Bank. National Association. as escrow agent. relating to the refunding of the Authority's remaining
outstanding Tax Allocation Rcycnuc Bonds (Project Area No. 2) Series 1995.
"Escrow Interest Account means the account within the Special Escrow Fund by that
name established and held by the Trustee pursuant to Section 2.7.
"Escrow Redemption Date- means August 1. 201091.
"Event of Default means any of the events described in Section 5.1.
P6402.1055\872538.8 2
"Indenture"' means the Indenture of Trust. dated as of Jule I. 2006. by and between the
Authority and the Trustee. authorizing the issuance of the Bonds. as may from time to time be
supplemented. modified or amended.
"Independent Redevelopment Consultant"' means any consultant or firm of such
consultants appointed by or acceptable to the Agency. and \yho. or each of whom: (i) is judged by the
Agency to have experience in matters relating to the collection of Tax Revenues or otherwise with respect
to the financing of redevelopment projects: (ii) is in fact independent and not under the domination of the
Agency: (iii) does not have any substantial interest. direct or indirect. with the Agency. other than as
original purchaser of any obligations of the Agency: and (iv) is not connected with the Agency as an
officer or employee of the Agency. but \yho may be regularly retained to make reports to the Agency.
"Loans means the Series 2006A Loan. the Series 2006B Loan and the Series 2006C
Loan.
"Loan Agreement means this Project Area No. 2 Loan Agreement (2006 Senior Loans).
as may from time to time be amended. modified or supplemented.
"Maximum Annual Debt Service" means. as of the date of calculation. the largest amount
obtained by totaling. for the current or any future Bond Year. the sum of (i) the amount of interest payable
on the Loans and all outstanding Parity Debt in such Bond Year. assuming that principal thereof is paid as
scheduled and that any mandatory sinking fund payments are made as scheduled. and (ii) the amount of
principal payable on the Loans and all outstanding Parity Debt in such Bond Year. including any principal
required to be prepaid by operation of mandatory sinking fund payments. For purposes of such
calculation. there shall be excluded a pro rata portion of each installment of principal of any Loan or
Parity Debt. together with the interest to accrue thereon. in the event and to the extent that the proceeds of
such Loan or Parity Debt are deposited in an escrow fund from which amounts may not be released to the
Agency unless the Tax Revenues for the current Fiscal Year. plus at the option of the Agency the
Additional Revenues, meet the coverage test set forth in Section 2.9(b).
"Parity Debt means the 2002 Loan. the 2003 Loan and any other loans. bonds. notes.
advances. or indebtedness payable from Tax Revenues on a parity with the Loans. issued or incurred
pursuant to and in accordance with the provisions of Section 2.9.
"Parity Debt Instrument"' means the 2002 Loan Agreement. the 2003 Loan Agreement
and any other resolution. indenture of trust. trust agreement or other instrument authorizing the issuance
of any Parity Debt.
"Pass -Through Agreements means, collectively. the agreements entered into by the
Agency on or prior to the date hereof pursuant to Section 33401 of the Redevelopment Law with (i) the
County of Riverside. (ii) the Coachella Valley Community College District. (iii) the Coachella Valley
Mosquito Abatement District. (iv) the Desert Sands Unified School District. (v) the Palm Springs Unified
School District and (vi) the Riverside County Superintendent of Schools.
"Plan Limitations"' means the limitations contained or incorporated in the Redevelopment
Plan on (i) the aggregate principal amount of bonded indebtedness payable from Tax Revenues which
may be outstanding at any time. (ii) the aggregate amount of taxes which may be divided and allocated to
the Agency pursuant to the Redevelopment Plan. and (iii) the period of time for establishing or repaying
loans. advances and indebtedness payable from Tax Revenues.
P6402.1055\872538.8 3
"Project Fundy means the fund by that name established and held by the Trustee pursuant
to Section 2.8.
"Qualified Reserve Fund Credit Instrument' means an irrevocable standby or direct -pay
letter of credit or surety bond issued by a commercial bank or insurance company and deposited Nvith the
Trustee pursuant to Section 2.5. provided that all of the following requirements are met at the time of
deposit Nvith the Trustee: (i) either (a) the Tong -term credit rating of such bank is Nvithin one of the two
highest rating categories by Moody's or S&P. or the claims paying ability of such insurance company is
rated Nvithin one of the two highest rating categories by Moody's or S&P. at the time of delivery of such
letter of credit or surety bond. or (b) the Authority shall cause to be filed Nvith the Trustee Nvritten
evidence from Moody's and S&P that the delivery of such letter of credit or surety bond Nvill not. of itself.
cause a reduction or Nvithdrawal of any rating then assigned to the Bonds: (ii) such letter of credit or
surety bond has a term of at least 12 months: (iii) such letter of credit or surety bond has a stated amount
at least equal to the portion of the Reserve Requirement Nvith respect to Nvhich funds are proposed to be
released pursuant to Section 2.5: and (iv) the Trustee is authorized pursuant to the terms of such letter of
credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time
to time with respect to deposits required pursuant to Section 3.3(a).
"Redevelopment Fundy means the Project Area No. 2 Redevelopment Fund. heretofore
established and held by the Agency.
"Redevelopment Project means the undertaking of the Agency pursuant to the
Redevelopment Plan and the Redevelopment Law for the redevelopment of the Project Area.
"Reserve Fundy means the "Project Area No. 2 Reserve Fundy held by the Trustee
pursuant to Section 2.5.
"Reserve Requirement means the least of (i) Maximum Annual Debt Service. (ii) 125
percent of average annual debt service on the Loans and all outstanding Parity Debt. and (iii) I0 percent
of the proceeds of the Loans (i.e.. the original Principal Amount of the Bonds) and of the proceeds of any
Parity Debt. The amount of the Reserve Requirement on any date is subject to confirmation by the
Authority to the Trustee upon the Trustees «rittcn request. At the Closing Date. the Reserve
Requirement shall be $
"Series 2006A Bonds means the Palm Desert Financing Authority Tax Allocation
Refunding Revenue Bonds (Project Area No. 2). 2006 Series A.
"Series 2006A Loan means the loan made by the Authority to the Agency pursuant to
Section 2. I (a) from the proceeds of the Series 2006A Bonds in the initial principal amount of
"Series 2006B Bonds means the Palm Desert Financing Authority Tax Allocation
Revenue Capital Appreciation Bonds (Project Area No. 2). 2006 Series B.
"Series 2006B Loan means the loan made by the Authority to the Agency pursuant to
Section 2. I (b) from the proceeds of the Series 2006B Bonds in the initial principal amount of
"Series 2006C Bonds means the Palm Desert Financing Authority Tax Allocation
Revenue Bonds (Project Area No. 2). 2006 Series C.
1)6402. I 055\8725 38.8 4
"Series 2006C Loan means the loan made by the Authority to the Agency pursuant to
Section 2. 1(c) from the proceeds of the Series 2006C Bonds in the initial principal amount of
S
"Special Fundy means the fund by that name held by the Agency pursuant to Section 3.2.
"Subordinate Debt means any loans. advances or indebtedness issued or incurred by the
Agency in accordance Nyith the requirements of Section 2.10. Nvhich are either: (i) payable from. but not
secured by a pledge of or lien upon. the Tax Revenues: or (ii) secured by a pledge of or lien upon the Tax
Revenues Nyhich is subordinate to the pledge of and lien upon the Tax Revenues hereunder for the
security of the Loans and any Parity Debt.
"Surety Bondy means the Qualified Reserve Fund Credit Instrument issued by the Insurer
guaranteeing certain payments into the Reserve Fund as provided therein and subject to the limitations set
forth therein.
"Tax Reyenues- means that portion of the taxes levied upon taxable property in the
Project Area allocated and paid into a special fund of the Agency pursuant to Article 6 of Chapter 6 of the
Redevelopment Law and Section 16 of Article XVI of the California Constitution. exclusive of amounts
placed into the Low and Moderate Income Housing Fund of the Agency pursuant to Sections 33334.2 and
33334.3 of the Redevelopment Lary. and excluding amounts payable to affected taxing agencies pursuant
to the Pass -Through Agreements or pursuant to Section 33607.5 or 33607.7 of the Redevelopment Lary.
"2003 Loan means the outstanding balance of the loan made by the Authority to the
Agency pursuant to the 2003 Loan Agreement.
"2003 Loan Agreements means the Project Area No. 2 Loan Agreement. dated as
January I. 2003. by and between the Authority and the Agency.
"2002 Loan means the outstanding balance of the loan made by the Authority to the
Agency pursuant to the 2002 Loan Agreement.
"2002 Loan Agreements means the Loan Agreement dated as of June, I. 2002. by and
among the Agency. the Authority and BNY Western Trust Company. as succeeded by Wells Fargo Bank.
National Association. as trustee.
Section I.2. Rules of Construction. All references herein to "Articles. "Sections" and
other subdivisions are to the corresponding Articles. Sections or subdivisions of this Loan Agreement.
and the Nyords "herein.- "hereof. "hereunder- and other Nyords of similar import refer to this Loan
Agreement as a Nyhole and not to any particular Article. Section or subdivision hereof.
ARTICLE II
THE LOANS: APPLICATION OF LOAN PROCEEDS:
PARITY DEBT
Section 2. I . Authorization. (a) The Authority hereby agrees to lend to the Agency. from
the proceeds of the sale of the, Series 2006A Bonds deposited in the Series 2006A Loan Fund established
under the Indenture,. the principal amount of $ under and subject to the terms of this
Loan Agreement. the Bond Law and the Redevelopment Lary.
1)6402.1 c155\8725 ;8.8 5
(b) The Authority hereby agrees to lend to the Agency. from the proceeds of the sale
of the Series 2006B Bonds deposited in the Series 2006B Loan Fund established under the Indenture. the
initial principal amount of $ under and subject to the terms of this Loan Agreement. the
Bond Law and the Redevelopment Law.
(c) The Authority hereby agrees to Tend to the Agency. from the proceeds of the sale
of the Series 2006C Bonds deposited in the Series 2006C Loan Fund established under the Indenture. the
principal amount of $ under and subject to the terms of this Loan Agreement. the Bond
Law and the Redevelopment Law.
(d) This Loan Agreement constitutes a continuing agreement to secure the full and
final payment of the Loans. subject to the covenants. agreements. provisions and conditions herein
contained.
Section 2.2. Disbursement and Application of Loan Proceeds.
(a) On the Closing Date. the Authority shall cause to be deposited into the Series
2006A Loan Fund the amount of $ which shall be held by the Trustee and which shall be
disbursed as follows:
(i) The Trustee shall transfer the amount of $ to the Series
2006A Account of the Costs of Issuance Fund.
(ii) The Trustee shall transfer the amount of $ to the Escrow
Fund.
(iii) The Trustee shall transfer the remaining amount of $ to the
Project Fund.
On the Closing Date. the Authority shall also cause the amount of
and the amount of $ to be paid to the Insurer for the costs of a portion of the
premiums for the Insurance Policy and the Surety Bond.
The Trustee may. in its discretion. establish a temporary fund or account to
facilitate or account for the foregoing transfers.
(b) On the Closing Date. the Authority shall cause to be deposited into the Series
2006B Loan Fund the amount of $ which shall be held by the Trustee and which shall be
disbursed as follows:
(i) The Trustee shall transfer the amount of
2006B Account of the Costs of Issuance Fund.
(ii) The Trustee shall transfer the remaining amount of `F
Project Fund.
to the Series
to the
On the Closing Date. the Authority shall also cause the amount of
and the amount of $ to be paid to the Insurer for the costs of a portion of the premiums for the
Insurance Policy and the Surety Bond.
P6-lo2. l c h i\s72 i3 s. s 6
(c) On the Closing Date. the Authority shall cause to be deposited into the Series
2006C Loan Fund the amount of $ which shall be held by the Trustee and which shall be
disbursed as follows:
(i) The Trustee shall transfer the amount of $
2006C Account of the Costs of Issuance Fund.
(ii) The Trustee shall transfer the amount of $
Interest Account of the Escrow Fund.
Escrow Fund.
to the Series
to the Escrow
(iii) The Trustee shall transfer the remaining amount of $ to the
On the Closing Date. the Authority shall also cause the amount of $
and the amount of $ to be paid to the Insurer for the costs of a portion of the premiums for the
Insurance Policy and the Surety Bond.
The Trustee may. in its discretion. establish a temporary fund or account to
facilitate or account for the foregoing transfers.
Section 2.3. Repayment of Loans. The Agency shall. subject to prepayment as provided
in Section 2.4(a). repay the principal of the Series 2006A Loan in installments on August I in each of the
years and in the amounts. and shall pay interest on the unpaid principal balance of the Series 2006A Loan
due on each Interest Payment Date not later than the fifth Business Day preceding such Interest Payment
Date in the amounts set forth in Exhibit A attached hereto and by this reference incorporated herein. Such
interest shall accrue from the Closing Date. Any installment of principal or interest which is not paid
when due shall continue to accrue interest from and including the date on which such principal or interest
is payable to but not including the date of actual payment. In the event any unpaid principal installments
of the Series 2006A Loan shall be prepaid pursuant to Section 2.4(a). or in the event the Series 2006A
Bonds shall be redeemed pursuant to Section 2.0 3(a)(I) of the Indenture. the schedule of principal
installments set forth in Exhibit A hereto shall be reduced as directed by the Agency to the Trustee.
The Agency shall. subject to prepayment as provided in Section 2.4(b). repay the Series
2006B Loan in installments on August I in each of the years and in the amounts set forth in Exhibit B
attached hereto and by this reference incorporated herein. Interest on each installment of the Series
2006B Loan shall accrue in the same manner as the interest accrues on the Series 2006B Bonds pursuant
to the Indenture. The installments payable on the Series 2006B Loan on each August I set forth in
Exhibit B correspond with the aggregate Maturity Amount of Series 2006B Bonds coming due and
payable on such date. Any installment of the Series 2006B Loan which is not paid when due shall
continue to accrue interest from and including the date on which such installment is payable to but not
including the date of actual payment. In the event any unpaid installments of the Series 2006B Loan shall
be prepaid pursuant to Section 2.4(b). or in the event the Series 2006B Bonds shall be redeemed pursuant
to Section 2.03(b)( I) of the Indenture. the schedule of installments set forth in Exhibit B hereto shall be
reduced as directed by the Agency to the Trustee.
The Agency shall. subject to prepayment as provided in Sections 2.4(c) and 2.7. repay the
principal of the Series 2006C Loan in installments on August I in each of the years and in the amounts.
and shall pay interest on the unpaid principal balance of the Series 2006C Loan due on each Interest
Payment Date not later than the fifth Business Day preceding such Interest Payment Date in the amounts
set forth in Exhibit C attached hereto and by this reference incorporated herein. Such interest shall accrue
from the Closing Date. Any installment of principal or interest which is not paid when due shall continue
P6402.1055\872538.8 7
to accrue interest from and including the date on Nvhich such principal or interest is payable to but not
including the date of actual payment. In the event any unpaid principal installments of the Series 2006C
Loan shall be prepaid pursuant to Section 2.4(c) or 2.7. or in the event the Series 2006C Bonds shall be
redeemed pursuant to Section 2.0 3(c)(l) or 2.03(c)(3) of the Indenture. the schedule of principal
installments set forth in Exhibit C hereto shall be reduced as directed by the Agency to the Trustee.
The obligation of the Agency to repay the Loans is. subject to Section 3. I. absolute and
unconditional. and such payments shall not be subject to reduction Nvhether by offset or otherwise and
shall not be conditional upon the performance or nonperformance by any party to any agreement for any
cause Nvhatsoeyer.
Principal of and interest on the Loans shall be payable by the Agency to the Trustee. as
assignee of the Authority under the Indenture in lawful money of the United States. Payment of such
principal and interest shall be secured. and amounts for the payment thereof shall be deposited Nvith the
Trustee at the times. as set forth in Article III.
Notwithstanding the foregoing provisions of this Section 2.3. in Iicu of payment of any
installment of principal of the Loans coming due and payable on August I in any year in which any
Bonds are subject to mandatory sinking fund redemption. the Agency shall have the right to purchase any
of such Bonds in an amount not exceeding the amount thereof which is subject to mandatory sinking fund
redemption on such August I. and tender such Bonds for cancellation. provided that such tender shall be
made before the preceding May 15.
Section 2.4. Optional Prepayment
(a) The Agency shall have the right to prepay principal installments of the Series
2006A Loan. in any integral multiple of $5.000. such prepayment to be allocated among such principal
installments as the Agency may determine upon Request to the Authority and the Trustee provided not
less than 45 days prior to the prepayment date. on any date on which the Series 2006A Bonds are subject
to redemption pursuant to Section 2.03(a)( I) of the Indenture. by depositing with the Trustee an amount
sufficient to redeem a like aggregate principal amount of Series 2006A Bonds together with the amount of
accrued interest and premium. if any. required to be paid upon such redemption.
(b) The Agency shall have the right to prepay installments of the Series 2006B Loan
on any date on which the Series 2006B Bonds are subject to redemption pursuant to Section 2.03(b)( I) of
the Indenture and effect a corresponding redemption of the Series 2006B Bonds. Such prepayment shall
be allocated among such installments of the Series 2006B Loan as the Agency may determine upon
Request to the Authority and the Trustee provided not Tess than 45 days prior to the prepayment date:
provided that such prepayment shall cause redemption of Series 2006 Bonds in integral multiples of
$5.000 Maturity Amount. To effect such prepayment. the Agency shall deposit with the Trustee no later
than the redemption date an amount sufficient to redeem the called Series 2006B Bonds (which amount
shall include the Accreted Value of the called Series 2006B Bonds as of the date of redemption and the
applicable redemption premium. if any).
(c) The Agency shall have the right to prepay principal installments of the Series
2006C Loan. in any integral multiple of $5.000. such prepayment to be allocated among such principal
installments as the Agency may determine upon Request to the Authority and the Trustee provided not
Tess than 45 days prior to the prepayment date. on any date on which the Series 2006C Bonds are subject
to redemption pursuant to Section 2.03(c)( I) of the Indenture. by depositing with the Trustee an amount
sufficient to redeem a like aggregate principal amount of Series 2006C Bonds together with the amount of
accrued interest and premium. if any. required to be paid upon such redemption.
P6402.1055\872538.8 8
(d) Before making any prepayment pursuant to this Section. the Agency shall give
written notice to the Authority and the Trustee describing such event and specifying the date on wvhich the
prepayment will be paid and the order thereof. which date shall be not less than 45 days from the date
such notice is given: provided. that notwithstanding any such prepayment. the Agency shall not be
relieved of its obligations with respect to a Loan hereunder. including specifically its obligations under
this Article. until such Loan shall have been fully paid (or provision for payment thereof shall have been
made pursuant to Section 6.3).
(e) The Authority agrees that upon payment by the Agency to the Trustee of such
amount. the Authority shall take or cause to be taken any and all steps required under the Indenture to
redeem such Outstanding Bonds of the applicable series on the redemption date designated by the
Agency: provided. however. that such date shall be a date of redemption of such Bonds. for which notice
has been timely given pursuant to the Indenture.
Section 2.5. Reserve Fund. There is heretofore established a separate fund known as the
"Project Area No. 2 Reserve Fund." which shall continue to be held by the Trustee in trust for the benefit
of the Authority and the Owners of the Bonds and the registered owners of all other bonds issued by the
Authority in connection with any Parity Debt. The Agency hereby pledges and grants a Tien and a
security interest in the Reserve Fund to the Trustee in order to secure the Agency-s payment obligations
under Sections 2.3 and 3.3(a). The amount on deposit in the Reserve Fund shall be maintained at the
Reserve Requirement at all times. except to the extent required for the purposes set forth in this Section.
In the event that the Agency shall fail to deposit with the Trustee the full amount required
to be deposited pursuant to Section 3.3(a). the Trustee shall withdraw from the Reserve Fund and transfer
to the Interest Account and the Principal Account. in such order. an amount equal to the difference
between (i) the amount required to be deposited pursuant to Section 3.3(a) and (ii) the amount actually
deposited by the Agency. In the event that the amount on deposit in the Reserve Fund shall at any time be
Tess than the Reserve Requirement. the Trustee shall notify the Agency as soon as practicable of the
amount required to be deposited therein to restore the balance to the Reserve Requirement. such notice to
be given by telephone. telefax or other form of telecommunications promptly confirmed in writing. and
the Agency shall thereupon transfer to the Trustee the amount needed to restore the Reserve Fund to the
Reserve Requirement.
In the event that the amount on deposit in the Reserve Fund on the 15th calendar day
preceding any Interest Payment Date (other than the final Interest Payment Date) — provided that the
deposits required by Section 3.3(a) have been made — exceeds the Reserve Requirement. the Trustee shall
withdraw from the Reserve Fund all amounts in excess of the Reserve Requirement and apply such
amounts toward the prepayment of the Loans pursuant to Section 2.4 or the prepayment of any Parity
Debt. unless the Trustee shall have received prior Request of the Agency to pay such amounts to the
Agency to be used for any lawful purpose relating to the Project Area. as specified in such Request of the
Agency. Notwithstanding the foregoing provisions of this paragraph. however. no amounts shall be
withdrawn from the Reserve Fund and transferred to the Agency pursuant to this paragraph during any
period in which an Event of Default shall have occurred and be continuing hereunder.
With the written consent of the Insurer (as long as the Insurance Policy is in full force
and effect) and of the insurer of any Parity Debt (as long as the policy insuring such Parity Debt is in full
force and effect). the Reserve Requirement may be satisfied by crediting to the Reserve Fund moneys or a
Qualified Reserve Fund Credit Instrument or any combination thereof. which in the aggregate make funds
available in the Reserve Fund in an amount equal to the Reserve Requirement. Upon the deposit with the
Trustee of such Qualified Reserve Fund Credit Instrument. the Trustee shall release moneys then on hand
P6402.1055\872538.8 9
in the Reserve Fund to the Agency. to be used for any lawful purpose relating to the Project Area. in an
amount equal to the face amount of the Qualified Reserve Fund Credit Instrument.
If at any time the amount on deposit in. or credited to. the Reserve Fund includes both
cash and the Surety Bond. any draw on the Surety Bond shall be made only after all cash in the Reserve
Fund has been expended. If at any time the amount credited to the Reserve Fund includes the Surety
Bond and one or more other Qualified Reserve Fund Credit Instruments issued by entities other than the
issuer of the Surety Bond. any draw on the Surety Bond shall be made on a pro rata basis with draws on
such other Qualified Reserve Fund Credit Instruments. based on the relative amounts of debt service
covered by the Surety Bond and the debt service covered by such other Qualified Reserve Fund Credit
Instruments in such Fiscal Year.
Section 2.6. Costs of Issuance Fund. There is hereby established a find to be held by the
Trustee known as the "Costs of Issuance Fundy and two accounts therein known as the "Series 2006A
Account and the "Series 2006B Account." A portion of the proceeds of the Series 2006A Loan shall be
deposited in the Series 2006A Account pursuant to Section 2.2(a). A portion of the proceeds of the Series
2006B Loan shall be deposited in the Series 2006B Account pursuant to Section 2.2(b). A portion of the
proceeds of the Series 2006C Loan shall be deposited in the Series 2006C Account pursuant to Section
2.2(c). The moneys in each account of the Costs of Issuance Fund shall be used to pay Costs of Issuance
of the related series of Bonds from time to time upon receipt of a Request of the Agency. On the 90th day
after the Closing Date (or the first Business Day thereafter). or upon the earlier receipt by the Trustee of a
Request of the Agency stating that all Costs of Issuance have been paid. the Trustee shall transfer all
remaining amounts in the accounts of the Costs of Issuance Fund to the Revenue Fund.
Section 2.7. Special Escrow Fund. There is hereby established a separate fund to be
known as the "Special Escrow Fund. and an account therein to be known as the "Escrow Interest
Account which shall be held by the Trustee in trust. On the Closing Date. the Trustee shall transfer
money from the Series 2006B Loan Fund to the Escrow Interest Account and the Special Escrow Fund in
accordance with Section 2.2(b). Amounts in the Special Escrow Fund and the Escrow Interest Account
shall be applied as follows:
(a) On each Interest Payment Date. the Trustee shall transfer from the Escrow
Interest Account to the Interest Account. an amount equal to the interest payable on such date with respect
to the Deemed Escrow Portion of the Series 2006B Bonds.
(b) On or before [January' I of each year up to and including [January' I. 201091. the
Agency shall file with the Trustee a Certificate accompanied by a Report of an Independent
Redevelopment Consultant which identifies (i) the amounts. if any. proposed to be released from the
Special Escrow Fund and the Escrow Interest Account. and (ii) the Reserve Requirement which results
from such release. If an amount is proposed to be released from the Special Escrow Fund. such Report
shall conclude that the amount of Tax Revenues received or to be received for the then current Fiscal
Year. as set forth in a Certificate of the Agency. based on assessed valuation of property in the Project
Area. as evidenced in the records of the County. plus at the option of the Agency the Additional Revenue.
shall be at least equal to 120 percent of the amount of the Maximum Annual Debt Service identified in
such Report. The Agency's Certificate shall also be accompanied by a schedule show ing that the balance
remaining in the Escrow Interest Account [plus the anticipated interest earnings thereon' will be sufficient
to pay interest on the Deemed Escrow Portion of the Series 2006C Bonds after the proposed transfer on
each future Interest Payment Date to and including the Escrow Redemption Date. Promptly following
receipt of any such Report. the Trustee shall withdraw from the Special Escrow Fund and the Escrow
Interest Account the amounts identified in such Report and (subject to the provisions of Paragraph (c)
below) transfer such amount as follows:
P6402.1 0;;\x72;; x. x
10
(I) The Trustee shall deposit into the Reserve Fund an amount required to
cause the balance therein to equal the Reserve Requirement:
(2) The Trustee shall transfer the amount indicated in the Agency's
Certificate to the Interest Account: and
(3) The Trustee shall transfer the remainder of such amounts to the Agency
for deposit in the Project Fund.
(c) On (June I. 20091. the Trustee shall (i) transfer amounts then on deposit in the
Special Escrow- Fund to the Principal Account. to be applied to the extraordinary redemption of the
largest principal amount of Series 2006C Bonds Nyhich can be called pursuant to Section 2.03(c)(3) of the
Indenture. and (ii) transfer amounts then on deposit in the Escrow- Interest Account to the Interest
Account. to be applied to pay accrued interest on the Series 2006C Bonds being redeemed pursuant to
Section 2.03(c)(3) of the Indenture on Escrow- Redemption Date. If the balance in the Special Escrow
Fund exceeds the amount required to call and redeem all Outstanding Series 2006C Bonds. such excess
shall be transferred to the Agency for deposit in the Project Fund. Notwithstanding the foregoing. if the
balance in the Special Escrow- Fund on (June I. 20091 is less than $5.000. then the Trustee shall transfer
all of such balance to the Project Fund and transfer all remaining money in the Special Interest Account to
the Interest Account.
Section 2.8. Proiect Fund. There is hereby established a fund to be known as the "Project
Fundy. which shall be held and maintained by the Trustee. Amounts on deposit in such fund shall be
derived solely from the portion of the proceeds of the Loans transferred thereto and from earnings on the
investment of amounts therein.
Except as provided in this Section. the moneys set aside and placed in the Project Fund
shall remain therein until expended from time to time for the purpose of paying any portion of the costs of
the Redevelopment Project. and other costs related thereto. which other costs may include. but are not
limited to. (a) the cost of improvements and other costs which may not benefit the Redevelopment Project
exclusively but which are necessary to the redevelopment of the Project Area and the disposition of land
therein: (b) the repayment of any advances made by the City for the Redevelopment Project: and (c) to the
extent not paid from the Costs of Issuance Fund. the necessary expenses in connection with the issuance
and sale of the Bonds.
Before any payment of money is made from the Project Fund. the Agency shall file with
the Trustee a Request of the Agency showing with respect to each payment of money to be made:
(a) the name and address of the person to whom payment is due:
(b) the amount of money to be paid:
(c) the purpose for which the obligation to be paid was incurred: and
(d) that such amount has not been paid previously for such purpose from the Project
Fund.
Trustee:
Each such Request of the Agency shall state and shall be sufficient evidence to the
P6402.1055\872538.8
11
(i) that an obligation in the stated amount has been properly incurred under and
pursuant to this Loan Agreement and that such obligation is a proper charge against the Project Fund: and
(ii) that there has not been filed Nyith or served upon the Agency a stop notice or any
other notice of any lien. right to lien or attachment upon. or claim affecting the right to receive payment
of. an of the money payable to the person named in such Request of the Agency Nyhich has not been
released or \\ill not be released simultaneously Nyith the payment of such obligation. other than liens
accruing by mere operation of law.
Upon receipt of each such Request of the Agency. the Trustee shall pay the amount set
forth in such Request of the Agency as directed by the terms thereof within three Business Days.
If any moneys deposited in the Project Fund remain therein after the full accomplishment
of the objects and purposes for which the Loans \sere made. said moneys shall be transferred to the
Special Fund.
Section 2.9. Parity Debt. From time to time. the Agency may issue or incur additional
Parity Debt in such principal amount as shall be determined by the Agency. subject to the following
specific conditions which are hereby made conditions precedent to the issuance and delivery of such
Parity Debt issued under this Section 2.9:
(a) No Event of Default shall have occurred and be continuing. and the Agency shall
othenvise be in compliance with all covenants set forth in this Loan Agreement.
(b) The amount of Tax Revenues for the then current Fiscal Year. as set forth in a
Certificate of the Agency. based on assessed valuation of property in the Project Area as evidenced in the
Nyritten records of the County. plus at the option of the Agency the Additional Revenues. shall be at least
equal to (i) 120 percent of Maximum Annual Debt Service. and (ii) 100 percent of the sum of Maximum
Annual Debt Service (of the Loans and Parity Debt) and maximum annual debt service on all outstanding
Subordinate Debt that is secured by a pledge of or lien upon the Tax Revenues.
(c) The related Parity Debt Instrument shall provide that the balance of the Reserve
Fund shall be increased to the new Reserve Requirement effective after the incurrence of such Parity
Debt.
(d) All amounts held in the Special Escrow Fund shall have been transferred to the
Agency or otherwise applied in accordance with Section 2.7: provided that this condition shall not limit
the authority of the Agency to issue or incur Parity Debt for the purpose of refunding the Loans or other
Parity Debt so long as either (i) the total amount of principal and interest payable with respect to such
proposed refunding Parity Debt shall be Tess than the total amount of principal and interest remaining to
be paid with respect to the Loan or the Parity Debt to be refunded. or (ii) the total amount of principal and
interest payable with respect to such proposed refunding Parity Debt reflects a present value sayings Nwhen
compared wwith the total amount of principal and interest remaining to be paid wwith respect to the Loan or
the Parity Debt to be refunded.
(e) The related Parity Debt Instrument shall provide that:
(I) With respect to any Parity Debt \which bears current interest. interest on
such Parity Debt shall not be payable on a date other than February I and August I of any year. and
(2) The principal of such Parity Debt shall not be payable on any date other
P6402.1 0;;\x72;; x. x
12
than the date on hich principal of the Loans is payable.
(f) The issuance of such Parity Debt shall not cause the Agency to exceed an
applicable Plan Limitations.
(g) The Agency shall deliver to the Trustee a Certificate of the Agency certifying
that the conditions precedent to the issuance of such Parity Debt set forth in Paragraphs (a) through (f)
above have been satisfied. The Agency shall also furnish a cope of an Independent Redevelopment
Consultants report evidencing compliance NVith the condition set forth in Paragraph (b).
Section 2. ID. Issuance of Subordinate Debt. In addition to the Loans and any Parity
Debt. from time to time the Agency may issue or incur Subordinate Debt in such principal amount as
shall be determined by the Agency. provided that (i) the issuance of such Subordinate Debt shall not
cause the Agency to exceed any applicable Plan Limitations. and (ii). Nyith respect to any Subordinate
Debt that is to be secured by a pledge or lien upon Tax Revenues. the amount of Tax Revenues for the
then current Fiscal Year. as set forth in a Certificate of the Agency. based on assessed valuation of
property in the Project Area as evidenced in the Nvritten records of the County. plus at the option of the
Agency the Additional Revenues. shall be at least equal to 100 percent of the sum of Maximum Annual
Debt Service (of the Loans and Parity Debt) and maximum annual debt service on all Outstanding
Subordinate Debt that is secured by a pledge of or Tien upon the Tax Revenues.
Section 2. I I . Validity of Loans. The validity of the Loans shall not be dependent upon
the completion of the Redevelopment Project or upon the performance by any person of any obligation
NVith respect to the Redevelopment Project.
ARTICLE III
PLEDGE AND APPLICATION OF TAX REVENUES
Section 3. I. Pledtze of Tax Revenues. The Loans and all Parity Debt shall be equally
secured by a first pledge of and Tien on all of the Tax Revenues and all of the moneys on deposit in the
Special Fund. Nvithout preference or priority for series. issue. number. dated date. sale date. date of
execution or date of deliver Except for the Tax Reycnues and other funds pledged hereunder. no funds
or properties of the Agency shall be pledged to. or othenyise liable for. the payment of principal of or
interest on or prepayment premium. if any. on the Loans.
Section 3.2. Special Fund: Deposit of Tax Revenues. The Agency has heretofore
established a special fund known as the "Special Fund." Nyhich is and shall continue to be held by the
Agency as a separate fund apart from all other funds and accounts of the Agency. The Agency shall
deposit all Tax Revenues in the Special Fund promptly upon the receipt thereof. Except as may be
othenvise provided in any Parity Debt Instrument. anv Tax Revenues received during the Bond Year in
excess of amounts required to be transferred to the Trustee pursuant to Section 3.3 shall be released from
the pledge and Tien hereunder and may be used for any (awful purposes of the Agency. Prior to the
payment in full of the principal of and interest and prepayment premium. if any. on the Loans and all
Parity Debt and the payment in full of all other amounts payable under this Loan Agreement and anv
Parity Debt Instrument. the Agency shall not have anv beneficial right or interest in the moneys on
deposit in the Special Fund. except only as provided in this Loan Agreement and any Parity Debt
Instrument. and such moneys shall be used and applied as set forth herein and therein.
Section 3.3. Transfer of Tax Revenues From Special Fund. In addition to the transfers
required to be made pursuant to any Parity Debt Instrument. the Agency shall Nvithdraw from the Special
P6402.1055\87253 x. x
13
Fund and transfer to the Trustee the following amounts at the following times and in the following order
of priority:
(a) Interest and Principal Deposits. No later than the fifth Business Day preceding
each date on which the principal of or interest on the Loans or any Parity Debt shall become due and
payable. including but not limited to the principal amounts of the Loans to be prepaid hereunder together
with any prepayment premium thereon. the Agency shall Nvithdraw from the Special Fund and transfer to
the Trustee an amount which. together with the amounts then held on deposit in the Interest Account. the
Principal Account and the Rcycnuc Fund. is equal to the aggregate amount of such principal. interest and
prepayment premium.
(b) Reserve Fund Deposits. In the event that the Trustee shall notify the Agency
pursuant to Section 2.5 that the amount on deposit in the Reserve Fund is Tess than the Reserve
Requirement. the Agency shall immediately Nvithdraw from the Special Fund and transfer to the Tnistcc
for deposit in the Reserve Fund an amount of money necessary to maintain the Reserve Requirement in
the Reserve Fund (including repayment of any draw made under a Qualified Reserve Fund Credit
Instrument. including the Surety Bond. prior to replenishing any cash in the Reserve Fund).
(c) Surplus. Except as may be otherwise provided in any Parity Debt Instrument. the
Agency shall not be obligated to deposit in the Special Fund in any Bond Year an amount of Tax
Revenues which. together with other available amounts in the Special Fund. exceeds the amounts required
in such Bond Year pursuant to this Section. All Tax Revenues which are received by the Agency during
any Bond Year in excess of the amounts required to be deposited in the Special Fund in such Bond Year
pursuant to this Loan Agreement shall be released from the pledge thereof and lien thereon which is
established pursuant hereto. In the event that for any reason Nvhatsoeyer any amounts shall remain on
deposit in the Special Fund on any August 2 after making all of the transfers theretofore required to be
made pursuant to the preceding Paragraphs (a) and (b) and pursuant to any Parity Debt Instrument. the
Agency may Nvithdraw such amounts from the Special Fund. to be used for any lawful purposes of the
Agency. including but not limited to the payment of any Subordinate Debt or the payment of any amounts
due and owing to the United States pursuant to Section 4.1 I.
Section 3.4. Investment of Moneys: Valuation of Investments. Subject to Section 4.03 of
the Indenture. all moneys in the Special Fund. the Project Fund. the Reserve Fund and the Costs of
Issuance Fund shall be invested in Permitted Investments. Absent any prior Nvritten instruction from the
Agency or the Authority. moneys in any fund held by the Trustee hereunder or under the Indenture shall
be invested in Permitted Investments described in clause D of the definition thereof. Obligations
purchased as an investment of moneys in any fund or account established hereunder shall be credited to
and deemed to be part of such fund or account. The Agency or the Trustee. as the case may be. may
commingle any amounts in any of the funds and accounts held hereunder with any other amounts held by
the Agency or the Trustee for purposes of making any investment. provided that the Agency and the
Trustee shall maintain separate accounting procedures for the investment of all funds and accounts held
hereunder. All interest. profits and other income received from the investment of moneys in any fund or
account established hereunder shall be credited to such fund or account. Notwithstanding anything to the
contrary contained in this Section. an amount of interest received with respect to any investment equal to
the amount of accrued interest. if any. paid as part of the purchase price of such investment shall be
credited to the fund or account from which such accrued interest was paid.
For the purpose of determining the amount in any fund or account established hereunder.
any investments credited to such fund shall be valued at least annually at the market value thereof.
P6402.1 0;;\x72;; x. x
14
ARTICLE IV
OTHER COVENANTS OF THE AGENCY
Section 4. I. Punctual Payment: Extension of Payments. The Agency shall punctually pay
or cause to be paid the principal of and interest and prepayment premium. if any. on the Loans in strict
conformity with the terms of this Loan Agreement. and it will faithfully observe and perform all of the
conditions. covenants and requirements of this Loan Agreement. The Agency shall not directly or
indirectly extend or assent to the extension of the maturity of any installment of principal of or interest or
prepayment premium. if any. on the Loans. and in case the principal of or interest or premium. if any. on
the Loans or the time of payment of any such claims therefor shall be extended. such principal. interest.
premium or claims for interest shall not be entitled. in case of any Event of Default hereunder. to the
benefits of this Loan Agreement except for payment of all amounts which shall not have been so
extended.
Section 4.2. Limitation on Additional Indebtedness. The Agency hereby covenants that it
shall not issue any bonds. notes or other obligations. enter into any agreement or otherwise incur any
indebtedness. which is in any case payable from all or any part of the Tax Revenues. excepting only the
Loans. any Parity Debt and any Subordinate Debt. and any other obligations permitted by this Loan
Agreement.
Section 4.3. Payment of Claims. The Agency shall pay and discharge. or cause to be paid
and discharged. any and all lawful claims for labor. materials or supplies which. if unpaid. might become
a lien or charge upon the properties owned by the Agency or upon the Tax Revenues or any part thereof.
or upon any funds in the hands of the Trustee. or which might impair the security of the Loans. Nothing
herein contained shall require the Agency to make any such payment so long as the Agency in good faith
shall contest the validity of said claims.
Section 4.4. Books and Accounts: Financial Statements. The Agency shall keep. or cause
to be kept. proper books of record and accounts. separate from all other records and accounts of the
Agency and the City. in which complete and correct entries shall be made of all transactions relating to
the Redevelopment Project. the Tax Revenues. the Special Fund. the Reserve Fund. the Low and
Moderate Income Housing Fund and the Redevelopment Fund. Such books of record and accounts shall
at all times during business hours be subject. upon prior written request. to the reasonable inspection of
the Authority. the Trustee and the Owners of not less than ten percent in aggregate Principal Amount of a
series of Bonds then Outstanding. or their representatives authorized in writing.
The Agency will cause to be prepared annually. within 180 days after the close of each
Fiscal Year so long as any of the Bonds are Outstanding. complete audited financial statements with
respect to such Fiscal Year showing the Tax Revenues. all disbursements from the Special Fund and the
Redevelopment Fund and the financial condition of the Redevelopment Project. including the balances in
all funds and accounts relating to the Redevelopment Project. as of the end of such Fiscal Year. The
Agency \ III furnish a copy of such statements. upon reasonable request. to any Owner.
Section 4.5. Protection of Security and Rights. The Agency will preserve and protect the
security of the Loans and the rights of the Trustee and the Owners with respect to the Loans. From and
after the Closing Date. the Loans shall be incontestable by the Agency. The Loans and the provisions of
this Loan Agreement are and will be the legal. valid and binding special obligations of the Agency
enforceable in accordance with their terms. and the Agency shall at all times. to the extent permitted by
law. defend. preserve and protect all the rights of the Authority. the Trustee and the Owners under this
Loan Agreement against all claims and demands of all persons Nvhomsoeyer. The Agency's obligations to
P6402. I055\8725 38.8
15
the Trustee under this Section 4.5 shall survive the payment of the Bonds and the discharge of the
Indenture. the removal or resignation of the Tnistcc pursuant to the Indenture or the payment of the Loans
and the discharge of this Loan Agreement.
Section 4.6. Payments of Taxes and Other Charges. The Agency Nvill pay and discharge.
or cause to be paid and discharged. all taxes. service charges. assessments and other governmental
charges Nvhich may hereafter be lawfully imposed upon the Agency or the properties then owned by the
Agency in the Project Area Nyhen the same shall become due. Nothing herein contained shall require the
Agency to make any such payment so long as the Agency in good faith shall contest the validity of such
taxes. assessments or charges. The Agency \\ill duly observe and comply Nvith all valid requirements of
any governmental authority relative to the Redevelopment Project or any part thereof.
Section 4.7. Taxation of Leased Property. All ad valorem property taxes derived by the
Agency pursuant to Section 33673 of the Redevelopment Law Nyith respect to the lease of property for
redevelopment shall be treated as Tax Revenues for all purposes of this Loan Agreement. and shall be
deposited by the Agency in the Special Fund promptly upon receipt.
Section 4.8. Disposition of Property. The Agency Nvill not participate in the disposition
of any land or real property in the Project Area to anyone Nyhich Nvill result in such property becoming
exempt from taxation because of public ownership or use or otherwise (except property dedicated for
public right-of-way and except property planned for public ownership or use by the Redevelopment Plan
in effect on the date of this Loan Agreement) so that such disposition shall. Nyhen taken together Nyith
other such dispositions. aggregate more than ten percent of the land area in the Project Area unless such
disposition is permitted as hereinafter provided in this Section. If the Agency proposes to participate in
such a disposition. it shall thereupon appoint an Independent Redevelopment Consultant to report on the
effect of said proposed disposition. If the Report of the Independent Redevelopment Consultant
concludes that the security of the Loans or the rights of the Authority. the Owners and the Trustee
hereunder Nvill not be materially impaired by said proposed disposition. the Agency may thereafter make
such disposition. If such Report concludes that such security \\ill be materially impaired by such
proposed disposition. the Agency shall disapprove said proposed disposition.
Section 4.9. Maintenance of Tax Revenues. The Agency shall comply Nyith all
requirements of the Redevelopment Law to insure the allocation and payment to it of the Tax Revenues.
including Nyithout limitation the timely filing of any necessary statements of indebtedness Nyith
appropriate officials of the County and (in the case of supplemental revenues and other amounts payable
by the State) appropriate officials of the State. The Agency shall not amend the Redevelopment Plan or
any of the Pass -Through Agreements. or enter into any agreement Nyith the County or any other
governmental unit. Nyhich Nyould have the effect of reducing the amount of Tax Revenues available to the
Agency for payment of the Loans. unless the Agency shall first obtain (i) the Report of an Independent
Redevelopment Consultant stating that the amount of Tax Revenues for the then current Fiscal Year
(calculated on the assumption that such reduction of Tax Revenues was in effect throughout such Fiscal
Year). plus at the option of the Agency the Additional Revenues. shall meet the coverage test set forth in
Section 2.9 (calculated on the assumption that no amounts remain on deposit in the Special Escrow
Fund). and (ii) as Tong as the Insurance Policy is then in full force and effect. the Nvritten consent of the
Insurer. Nothing herein is intended or shall be construed in any Nvay to prohibit or impose any limitations
on the entering into by the Agency of any such agreement. amendment or supplement which by its term is
subordinate to the payment of the Loans and all Parity Debt.
Section 4. ID. Payment of Expenses: Indemnification. The Agency shall pay to the
Trustee from time to time all compensation for all services rendered under this Loan Agreement and the
Indenture. including but not limited to all reasonable expenses. charges. legal and consulting fees and
P6402.1055\872538.8
16
other disbursements and those of its attorneys. agents and employees. incurred in and about the
performance of its powers and duties hereunder and thereunder. Upon the occurrence of an Event of
Default. the Trustcc shall have a first lien on the funds held by it under the Indenture to secure the
payment to the Trustee of all fees. costs and expenses. including reasonable compensation to its experts.
attorneys and counsel (including the allocated costs and disbursements of in-house counsel to the extent
the services of such counsel are not duplicative of services provided by outside counsel) incurred in
performing its duties under the Indenture and this Loan Agreement.
The Agency further covenants and agrees to indemnify. defend and save the Trustee and
its officers. directors. agents and employees. harmless against any losses. expenses and liabilities \yhich it
may incur arising out of or in the exercise and performance of its powers and duties in accordance Nvith
the Indenture and this Loan Agreement. including the costs and expenses of defending against any claim
of liability. but excluding any and all losses. expenses and liabilities Nvhich are due to the negligence or
intentional misconduct of the Trustee. its officers. directors. agents or employees. The obligations of the
Agency under this paragraph shall survive the resignation or removal of the Trustee under the Indenture.
this Loan Agreement and payment of the Loans and the discharge of this Loan Agreement.
Section 4. I I. Tax Covenants. To the extent that bond counsel renders an opinion that
interest on the Bonds (or any of them) is tax-exempt under federal tax lacy:
(a) The Agency covenants that. in order to maintain the exclusion from gross income
for Federal income tax purposes of the interest on the Bonds. and for no other purpose. the Agency NyiII
satisfy. or take such actions as are necessary to cause to be satisfied. each provision of the Code necessary
to maintain such exclusion. In furtherance of this covenant the Agency agrees to comply Nyith such
Nyritten instructions as may be provided by Bond Counsel.
(b) The Agency covenants that no part of the proceeds of the Bonds shall be used.
directly or indirectly. to acquire any Investment Property Nyhich Nyould cause the Bonds to become
arbitrage bonds as that term is defined in Section 148 of the Code. or under applicable Tax Regulations.
In order to assure compliance Nyith the rebate requirements of Section 148 of the Code. the Agency further
covenants that it Nyill pay or cause to be paid to the United States the amounts necessary to satisfy the
requirements of Section 1 48(f) of the Code. and that it \\ill establish such accounting procedures as are
necessary to adequately determine. account for and pay over any such amount required to be paid
thereunder in a manner consistent Nyith the requirements of Section 148 of the Code. such covenants to
survive the defeasance of the Bonds.
(c) The Agency covenants that it Nyill not take any action or omit to take any action.
Nyhich action or omission. if reasonably expected on the date of initial execution and delivery of the
Bonds. Nyould result in a Toss of exclusion from gross income for purposes of Federal income taxation.
under Section 103 of the Code. of interest on the Bonds.
(d) The Agency covenants that it Nyill not use or permit the use of any property
financed Nyith the proceeds of the Bonds by any person (other than a state or local governmental unit) in
such manner or to such extent as Nyould result in a Toss of exclusion of the interest on the Bonds from
gross income for Federal income tax purposes under Section 103 of the Code.
(e) Except as provided below. the Agency covenants that none of the moneys
contained in any of the funds or accounts Nyith respect to the Bonds shall be: (i) used in making loans
guaranteed by the United States (or any agency or instrumentality thereof). (ii) invested directly or
indirectly in a deposit or account insured by the Federal Deposit Insurance Corporation. National Credit
Union Administration or any other similar Federally chartered corporation. or (iii) otherwise invested
P6402.1055\872538.8
17
directly or indirectly in obligations guaranteed (in Nvholc or in part) by the United States (or any agency or
instrumentality thereof): provided. however. that the above restrictions do not apply to: (a) the investment
on moneys held in the Rcycnuc Fund or any other "bona fide debt service fund as defined for purposes
of Section 148 of the Code. (b) investment in direct obligations of the United States Treasury.
(c) investment in obligations guaranteed by the Federal National Mortgage Association. Government
National Mortgage Association. or the Federal Home Loan Mortgage Corporation. (d) investment in
obligations issued pursuant to Section 2 I B(d)(3) of the Federal Home Loan Bank Act. as amended by
Section 5 1 I (a) of the Financial Institutions Reform. Recovery. and Enforcement Act of 1989.
(c) investments permitted under regulations issued pursuant to Section I49(b)(3)(B) of the Code. or
(f) such other investments permitted under the Indenture as. in the opinion of Bond Counsel. do not
jeopardize the exclusion from gross income for Federal income tax purposes of interest on the Bonds.
Section 4.12. Redevelopment of Project Area. The Agency shall ensure that all activities
undertaken by the Agency NVith respect to the redevelopment of the Project Area are undertaken and
accomplished in conformity Nyith all applicable requirements of the Redevelopment Plan and the
Redevelopment Lary. The Agency shall manage and operate all properties owned by the Agency and
comprising any part of the Redevelopment Project in a sound and business -like manner and in conformity
Nyith all valid requirements of any governmental authority. and NyiII keep such properties insured at all
times in conformity Nyith sound business practice.
Section 4.13. Low and Moderate Income Housing Fund. The Agency covenants and
agrees to use the moneys in the Low and Moderate Income Housing Fund in accordance Nyith Sections
33334.2 and 33334.3 of the Redevelopment Law. and further covenants and agrees to disburse. expend or
encumber any "excess surplus" (as defined in Section 33334.12 of the Redevelopment Lary) in the Low
and Moderate Income Housing Fund at such times and in such manner that the Agency shall not be
subject to sanctions pursuant to subdivision (c) of said Section 33334.12.
Section 4.14. Annual Review of Tax Revenues. The Agency hereby covenants that it will
annually cause an Independent Redevelopment Consultant to review the total amount of Tax Revenues
remaining available to be received by the Agency under the Redevelopment Plans cumulative tax
increment limitation. as \Veil as future cumulative annual debt service with respect to the Loans and all
Parity Debt. The Agency II not accept Tax Revenues greater than such annual debt service in any year.
if such acceptance Nyill cause the amount remaining under the tax increment limit to fall below remaining
cumulative annual debt service with respect to the Loans and all Parity Debt. except for the purpose of
depositing such revenues in escrow for the payment of such debt service or for the prepayment or
redemption of the Loans or any Parity Debt. Once it is determined that Tax Revenues available to be
received by the Agency under the aforementioned tax increment limitation in an upcoming year will not
exceed II() percent of aggregate remaining debt service on the Loans and all outstanding Parity Debt. the
Agency shall escrow all current and future Tax Revenues and use such amounts solely for the purpose of
paying (or prepaying) debt service on the Loans and all Parity Debt.
Section 4.15. Further Assurances. The Agency NyiII 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 this Loan Agreement and for the better assuring
and confirming unto the Trustee. the Authority and the Owners of the Bonds of the rights and benefits
provided in this Loan Agreement.
P6402.1 0;;\x72;; x. x
18
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
Section 5. I. Events of Default and Acceleration of Maturities. The following events shall
constitute Events of Default hereunder:
(a) Failure by the Agency to pay the principal of or interest or prepayment premium.
if any. on the Loans or any Parity Debt when and as the same shall become due and payable.
(b) Failure by the Agency to observe and perform any of the covenants. agreements
or conditions on its part contained in this Loan Agreement. other than as referred to in the preceding
Paragraph (a). for a period of 60 days after written notice specifying such failure and requesting that it be
remedied has been given to the Agency by the Trustee: provided. however. that if the failure stated in
such notice can be corrected. but not within such 60 day period. such failure shall not constitute an Event
of Default if corrective action is instituted by the Agency within such 60 day period and thereafter is
diligently pursued until such failure is corrected.
(c) The filing by the Agency of a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law of the United States of
America. or if a court of competent jurisdiction shall approve a petition. filed with or without the consent
of the Agency. seeking reorganization under the federal bankruptcy laws or any other applicable law of
the United States of America. or if. under the provisions of any other law for the relief or aid of debtors.
any court of competent jurisdiction shall assume custody or control of the Agency or of the whole or any
substantial part of its property.
If an Event of Default has occurred and is continuing. the Authority or the Trustee may.
and at the written direction of the Owners of a majority in aggregate Principal Amount of the Outstanding
Bonds the Authority or the Trustee shall. (i) declare the principal of the Loans together with the accrued
interest on all unpaid installments thereof. to be due and payable immediately. and upon any such
declaration the same shall become immediately due and payable. anything in this Loan Agreement to the
contrary notwithstanding. and (ii) subject to the receipt of indemnity as provided in the Indenture.
exercise any other remedies available to the Trustee at law or in equity. Immediately upon becoming
aware of the occurrence of an Event of Default. the Authority. or the Trustee as assignee of the Authority.
shall give notice of such Event of Default to the Agency by telephone. telecopier or other
telecommunication device. promptly confirmed in writing. This provision. however. is subject to the
condition that if. at any time after the principal of the Loans shall have been so declared due and payable.
and before any judgment or decree for the payment of the moneys due shall have been obtained or
entered. the Agency shall deposit with the Trustee a sum sufficient to pay all installments of principal of
the Loans 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 then borne by the Outstanding Bonds. and
the reasonable expenses of the Trustee (including but not limited to attorneys fees). and any and all other
defaults known to the Trustee (other than in the payment of principal of and interest on the Loans due and
payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the
Trustee or provision deemed by the Trustee to be adequate shall have been made therefor. then. and in
every such case. the Owners of a majority in aggregate Principal Amount of the Outstanding Bonds may.
by written notice to the Trustee and the Agency. rescind and annul such declaration and its consequences.
However. no such rescission and annulment shall extend to or shall affect any subsequent default. or shall
impair or exhaust any right or power consequent thereon.
P6402.1 0;;\x72;; x. x
19
Section 5.2. Application of Funds Upon Default. All amounts received by the Trustee.
pursuant to any right given or action taken by the Trustee under the provisions of this Loan Agreement.
shall be applied by the Trustee in the following order:
First. to the payment of the fees. costs and expenses of the Trustee. including reasonable
compensation to its agents. attorneys and counsel (including the allocated costs and disbursements of in-
house counsel to the extent the services of such counsel are not duplicative of services provided by
outside counsel): and
Second. to the payment of the Nvhole amount of interest on and principal of the Loans
then due and unpaid. Nyith interest on overdue installments of principal. and such interest to the extent
permitted by lacy at the net effective rate of interest then borne by the Outstanding Bonds: provided.
however. that in the event such amounts shall be insufficient to pay in full the full amount of such interest
and principal. then such amounts shall be applied in the following order of priority:
(i) first. to the payment of all installments of interest on the Loans then due and
unpaid. on a pro rata basis in the event that the available amounts are insufficient to pay all such interest
in full.
(ii) second. to the payment of all installments of principal of the Loans then due and
payable. on a pro rata basis in the event that the available amounts are installments of principal in full.
and
(iii) third. to the payment of interest on overdue installments of principal and interest.
on a pro rata basis in the event that the available amounts are insufficient to pay all such interest in full.
Section 5.3. No Waiver. Nothing in this Article V or in any other provision of this Loan
Agreement. shall affect or impair the obligation of the Agency. which is absolute and unconditional. to
pay from the Tax Revenues and other amounts pledged hereunder. the principal of and interest and
premium. if any. on the Loans to the Trustee when due. as herein provided. or affect or impair the right of
action. which is also absolute and unconditional. of the Trustee to institute suit to enforce such payment
by virtue of the contract embodied in this Loan Agreement.
A waiver of any default by the Trustee shall not affect any subsequent default or impair
any rights or remedies on the subsequent default. No delay or omission of the Trustee to exercise any
right or power accruing upon any default shall impair any such right or power or shall be construed to be
a waiver of any such default or an acquiescence therein. and every power and remedy conferred upon the
Trustee by the Redevelopment Law or by this Article V may be enforced and exercised from time to time
and as often as shall be deemed expedient by the Trustee.
If a suit. action or proceeding to enforce any right or exercise any remedy shall be
abandoned or determined adversely to the Trustee. the Agency. the Authority and the Trustee shall be
restored to their former positions. rights and remedies as if such suit. action or proceeding had not been
brought or taken.
Section 5.4. Agreement to Pay Attorneys" Fees and Expenses. In the event the Agency or
the Authority should default under any of the provisions hereof and the nondefaulting party or the Trustee
should employ attorneys or incur other expenses for the collection of moneys or the enforcement or
performance or observance of any obligation or agreement on the part of the defaulting party herein
contained. the defaulting party agrees that it will on demand therefor pay to the nondcfaulting party or the
Trustcc. as the case may be. the reasonable fees of such attorneys and such other expenses so incurred
P6402.1 0;;\x72;; x. x
20
(including the allocated costs and disbursements of in-house counsel to the extent the services of such
counsel are not duplicative of services provided by outside counsel).
Section 5.5. Remedies Not Exclusive. No remedy herein conferred upon or reserved to
the Trustcc is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter existing. at lacy or in equity
or by statute or otherwise. and may be exercised Nvithout exhausting and Nvithout regard to any other
remedy conferred by the Redevelopment Law or any other lacy.
Section 5.6. Control of Remedies by Insurer . Notwithstanding the provisions of Section
5. I and subject to any rights heretofore granted by the Authority or the Agency to any insurer of Parity
Debt. as long as Insurance Policy is in full force and effect and the Insurer has not defaulted with respect
to its payment obligations thereunder. upon the occurrence and continuance of an Event of Default. the
Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the
Owners or the Trustee for the benefit of the Owners under this Loan Agreement. Any acceleration of the
Loans or annulment thereof pursuant to Section 5. I shall be subject to the prior Nyritten consent of the
Insurer. No Nyaiyer of a default shall be effective without the «rittcn consent of the Insurer.
ARTICLE VI
MISCELLANEOUS
Section 6. I. Benefits Limited to Parties. Nothing in this Loan Agreement. expressed or
implied. is intended to give to any person other than the Agency. the Tnistcc. the Insurer and the
Authority. any right. remedy or claim under or by reason of this Loan Agreement. All covenants.
stipulations. promises or agreements in this Loan Agreement contained by and on behalf of the Agency
shall be for the sole and exclusive benefit of the Authority. the Trustee acting as trustee for the benefit of
the Owners of the Bonds. and the Insurer so Tong as the Insurance Policy remains in full force and effect.
Section 6.2. Successor is Deemed Included in All References to Predecessor. Whenever
in this Loan Agreement. the Agency. the Authority. the Trustee or the Insurer is named or referred to.
such reference shall be deemed to include the successors or assigns thereof. and all the covenants and
agreements in this Loan Agreement contained by or on behalf of the Agency. the Authority. the Trustee
or the Insurer shall bind and inure to the benefit of the respective successors and assigns thereof whether
so expressed or not.
Section 6.3. Discharze of Loan Agreement. If the Agency shall pay and discharge the
indebtedness on the Loans or any portion thereof in any one or more of the following \Nays:
(a) by \yell and truly paying or causing to be paid the principal of and interest and
prepayment premiums. if any. on the Loans or such portion thereof. as and when the same become due
and payable:
(b) by irrevocably depositing with the Trustee. in trust. at or before maturity. cash in
an amount which. together with the available amounts then on deposit in any of the funds and accounts
established pursuant to the Indenture or this Loan Agreement. in the opinion or report of an Independent
Accountant is fully sufficient to pay all principal of and interest and prepayment premiums. if any. on the
Loans or such portion thereof: or
(c) by irrevocably depositing with the Trustee or any other fiduciary. in trust. non -
callable Defeasance Obligations in such amount as an Independent Accountant shall determine NyiII.
P6402.1 0;;\x72;; x. x
21
together Nyith the interest to accrue thereon and available moneys then on deposit in the funds and
accounts established pursuant to the Indenture or this Loan Agreement. be fully sufficient to pay and
discharge the indebtedness on the Loans or such portion thereof (including all principal. interest and
prepayment premiums) at or before maturity:
then. at the election of the Agency but only if all other amounts then due and payable hereunder shall
have been paid or provision for their payment made. the pledge of and Tien upon the Tax Revenues and
other funds provided for in this Loan Agreement and all other obligations of the Trustee. the Authority
and the Agency under this Loan Agreement Nyith respect to the Loans or such portion thereof shall cease
and terminate. except only the obligation of the Agency to pay or cause to be paid to the Trustee. from the
amounts so deposited Nyith the Trustee or such other fiduciary. all sums due Nyith respect to the Loans or
such portion thereof. and to pay all expenses and costs of the Trustee Nyhen and as such expenses and
costs become due and payable. Notice of such election shall be filed Nyith the Authority and the Trustee.
Any funds thereafter held by the Trustee hereunder. Nyhich are not required for said purpose. shall be paid
over to the Agency.
Section 6.4. Amendment. This Loan Agreement may be amended by the parties hereto
but only under the circumstances set forth in. and in accordance Nyith. the provisions of Section 5.08 of
the Indenture. The Authority and the Trustee covenant that the Indenture shall not be amended. nor shall
the Authority agree or consent to any amendment of the Indenture. Nyithout the prior Nvritten consent of
the Agency (except that such consent shall not be required in the event that an Event of Default shall have
occurred and be continuing hereunder).
Section 6.5. Waiver of Personal Liability. No member. officer. agent or employee of the
Agency shall be individually or personally liable for the payment of the principal of or interest on the
Loans: but nothing herein contained shall relieve any such member. officer. agent or employee from the
performance of any official duty provided by law.
Section 6.6. Payment on Business Days. Whenever in this Loan Agreement any amount
is required to be paid on a day Nyhich is not a Business Day. such payment shall be required to be made on
the Business Day immediately following such day. provided that interest on such payment shall not
accrue from and after such day.
Section 6.7. Notices. Any notice. request. complaint. demand or other communication
under this Loan Agreement shall be given in the same manner as provided in Section I I. 13 of the
Indenture. which is hereby incorporated.
Section 6.8. Surety Bond. Ito coma
Section 6.9. Partial Invalidity . If any Section. paragraph. sentence. clause or phrase of
this Loan Agreement shall for any reason be held illegal. invalid or unenforceable. such holding shall not
affect the validity of the remaining portions of this Loan Agreement. The Agency hereby declares that it
would have adopted this Loan Agreement and each and every other Section. paragraph. sentence. clause
or phrase hereof and authorized the Loans irrespective of the fact that any one or more Sections.
paragraphs. sentences. clauses. or phrases of this Loan Agreement may be held illegal. invalid or
unenforceable.
Section 6.10. Article and Section Headings and References. The headings or titles of the
several Articles and Sections hereof. and any table of contents appended to copies hereof. shall be solely
for convenience of reference and shall not affect the meaning. construction or effect of this Loan
Agreement. All references herein to "Articles." "Sections" and other subdivisions are to the
P6402.1055\872538.8
22
corresponding Articles. Sections or subdivisions of this Loan Agreement: the Nvords "herein. "hereof.
"hereby. "hereunder- and other Nvords of similar import refer to this Loan Agreement as a Nvhole and not
to any particular Article. Section or subdivision hereof: and Nvords of the masculine gender shall mean
and include Nvords of the feminine and neuter genders.
Section 6. I I . Execution of Counterparts. This Loan Agrccmcnt may be executed in any
number of counterparts. each of which shall for all purposes be deemed to be an original and all of which
shall together constitute but one and the same instrument.
Section 6.12. Governing Law. This Loan Agreement shall be construed and governed in
accordance with the Taws of the State.
Section 6.1 3. The Trustee. The Trustee is entering into this Loan Agreement solely in its
capacity as Trustee under the Indenture and all provisions of the Indenture relating to the rights.
privileges. powers and protections of the Trustee shall apply with equal force and effect to all actions
taken by the Trustee in connection with this Loan Agreement. The Trustee shall be responsible only for
the duties of the Trustee expressly set forth herein.
IN WITNESS WHEREOF. the AGENCY. the AUTHORITY and the TRUSTEE have
caused this Loan Agreement to be signed by their respective officers. all as of the day and year first above
Nvritten.
PALM DESERT REDEVELOPMENT AGENCY
By
Executive Director
PALM DESERT FINANCING AUTHORITY
By
Chief Administrative Officer
WELLS FARGO BANK. NATIONAL ASSOCIATION.
as Trustee
By
Authorized Officer
P6402.1055\87253 x. x
23
EXHIBIT A
SCHEDULE OF SERIES 2006A LOAN PAYMENTS'
Date Principal Interest Total
* Payable semiannually on the fifth Business Day preceding each Interest Payment Date
P6402.1055\8725 38.8
A-1
EXHIBIT B
SCHEDULE OF SERIES 2006B LOAN PAYMENTS
Date Total Pa\ meat
P6402.1 c h i\872 i 38.8 B-
EXHIBIT C
SCHEDULE OF SERIES 2006C LOAN PAYMENTS'
Date Principal Interest Total
* Payable semiannually on the fifth Business Day preceding each Interest
Payment Date
P6402.1 0;;\872;3 x. x
c-I
* Payable on the fifth Business Day preceding each August 1st
P6402.1 0;;\x72;; x. x
A-2
Indenture of Trust
Nyith reference to
Palm Desert Financing Authority
Subordinate Tax Allocation Rcycnuc
Capital Appreciation Bonds
(Project Area No. 2)
2006 Series D
P6402.10 \88I 80.; RWG I)RAI' I: 5/22/2006
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS: AUTHORIZATION AND PURPOSE OF BONDS:
EQUAL SECURITY 2
Section 1.01. Definitions 2
Section 1.02. Rules of Construction 9
Section 1.03. Authorization and Purpose of Bonds 9
Section 1.04. Equal Security 9
ARTICLE II ISSUANCE OF BONDS 9
Section 2.01. Designation 9
Section 2.02. Terms of Bonds 9
Section 2.03. Redemption of Bonds 10
Section 2.04. Form of Bonds 11
Section 2.05. Execution of Bonds 11
Section 2.06. Transfer of Bonds 11
Section 2.07. Exchange of Bonds 12
Section 2.08. Temporary Bonds 12
Section 2.09. Registration Books 12
Section 2.10. Bonds Mutilated. Lost. Destroyed or Stolen 12
ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS:
ISSUANCE OF BONDS 13
Section 3.01. Issuance of Bonds 13
Section 3.02. Loan Fund: Application of Proceeds of Sale of Bonds 13
Section 3.03. Validity of Bonds 13
ARTICLE IV REVENUES: FLOW OF FUNDS 13
Section 4.01. Pledge of Revenues: Assignment of Rights 13
Section 4.02. Receipt. Deposit and Application of Revenues 14
Section 4.03. Investments 14
Section 4.04. Valuation and Disposition of Investments 15
ARTICLE V COVENANTS OF THE AUTHORITY 15
Section 5.01. Punctual Payment 15
Section 5.02. Extension of Payment of Bonds 15
Section 5.03. Against Encumbrances 15
Section 5.04. Power to Issue Bonds and Make Pledge and Assignment 16
Section 5.05. Accounting Records and Financial Statements 16
Section 5.06. No Additional Indebtedness 16
Section 5.07. Tax Covenants 16
Section 5.08. Loan Agreement 17
Section 5.09. Further Assurances 18
ARTICLE VI THE TRUSTEE 18
Section 6.01. Appointment of Trustee 18
Section 6.02. Acceptance of Tnists 18
Section 6.03. Fees. Charges and Expenses of Trustee 21
Section 6.04. Notice to Owners of Default 21
P64U2. I 0.5.5\881380.3 -1-
Section 6.05. Intervention by Trustee 21
Section 6.06. Removal of Trustee 21
Section 6.07. Resignation by Trustee 22
Section 6.08. Appointment of Successor Trustee 22
Section 6.09. Merger or Consolidation 22
Section 6.10. Concerning any Successor Trustee 22
Section 6.11. Appointment of Co -Trustee 22
Section 6.12. Indemnification: Limited Liability of Trustee 23
ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE 23
Section 7.01. Amendment Hereof 23
Section 7.02. Effect of Supplemental Indenture 24
Section 7.03. Endorsement or Replacement of Bonds After Amendment 24
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES 2iS
Section 8.01. Events of Default 25
Section 8.02. Remedies Upon Event of Default 25
Section 8.03. Application of Revenues and Other Funds After Default 26
Section 8.04. Power of Trustee to Control Proceedings 27
Section 8.05. Appointment of Receivers 27
Section 8.06. Non -Waiver 27
Section 8.07. Limitation on Rights and Remedies of Owners 27
Section 8.08. Termination of Proceedings 28
ARTICLE IX BOND INSURANCE 28
ARTICLE X BOOK -ENTRY SYSTEM 28
Section 10.01 Book -Entry System: Limited Obligation of Authority 28
Section 10.02 Representation Letter 29
Section 10.03 Transfers Outside Book -Entry System 29
Section 10.04 Payments to the Nominee 29
Section 10.05 Initial Depository and Nominee 29
ARTICLE XI MISCELLANEOUS 29
Section 11.01. Limited Liability of Authority 29
Section 11.02. Benefits of Indenture Limited to Parties 30
Section 11.03. Discharge of Indenture 30
Section 11.04. Successor Is Deemed Included in All References to Predecessor 31
Section 11.05. Content of Certificates 31
Section 1 1.06. Execution of Documents by Owners 31
Section 11.07. Disqualified Bonds 31
Section 11.08. Waiver of Personal Liability 32
Section 11.09. Partial Invalidity 32
Section 1 1.10. Destruction of Cancelled Bonds 32
Section 1 1.1 1. Funds and Accounts 32
Section 11.12. Payment on Business Days 32
Section 11.13. Notices 32
Section 11.14. Unclaimed Moneys 33
Section 11.15. Governing Law 33
EXHIBIT A — FORM OF BOND
P6402.1055\881380.3
Indenture of Trust
This Indenture of Trust (this "Indenture) is made and entered into as of Jule I. 2006. by
and between the Palm Desert Financing Authority. a joint powers authority duly organized and validly
existing under the laws of the State of California (the "Authority) and Wells Fargo Bank. National
Association. a national banking association duly organized and validly existing under the laws of the
United States of America. haying a corporate trust office in Los Angeles. California. and being qualified
to accept and administer the trusts hereby created (the "Trustee.).
Recitals
A. The Palm Desert Redevelopment Agency (the "Agency) is a redevelopment
agency. a public body. corporate and politic. duly created. established and authorized to transact business
and exercise its powers. all under and pursuant to the Redevelopment Law. and the powers of the Agency
include the power to borrow money for any of its corporate purposes.
B. A Redevelopment Plan for Project Area No. 2 of the Agency (the "Project Area)
has been duly approved and adopted by the City.
C. The Authority is authorized to borrow money for the purpose of making loans to
the Agency to provide financing for public capital improvements of the Agency.
D. For the purpose of aiding in the financing of redevelopment projects for the
Project Area. the Authority has determined to make a loan (the "Loan) to the Agency under and pursuant
to the Project Area No. 2 Loan Agreement (2006 Subordinate Loan). dated as of July I. 2006 (the "Loan
Agreement.). by and among the Authority. the Agency and the Trustee.
E. To provide the moneys required to make the Loan under the Loan Agreement.
the Authority has determined to issue its Subordinate Tax Allocation Revenue Capital Appreciation
Bonds (Project Area No. 2). 2006 Series D. in the aggregate initial principal amount of (the
"Bonds.). pursuant to and secured by this Indenture in the manner provided herein.
F. To provide for the authentication and delivery of the Bonds. to establish and
declare the terms and conditions upon which the Bonds are to be issued and to secure the payment of the
principal thereof. premium. if any. and interest thereon. the Authority has authorized the execution and
delivery of this Indenture.
NOW. THEREFORE. THIS INDENTURE WITNESSETH. that in order to secure the
payment of the principal of. premium. if any. and interest on the Bonds at any time issued and
Outstanding under this Indenture. according to their tenor. and to secure the performance and observance
of all the covenants and conditions therein and herein set forth. and to declare the terms and conditions
upon and subject to which the Bonds are to be issued and received. and in consideration of the premises
and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the
Owners thereof. and for other valuable considerations. the receipt whereof is hereby acknowledged. the
Authority hereby covenants and agrees with the Trustee. for the benefit of the Owners of the Bonds. as
follows:
P64U2. ! U.5.5\881380.3 -1-
ARTICLE I
DEFINITIONS: AUTHORIZATION AND PURPOSE
OF BONDS: EQUAL SECURITY
Section 1.01. Definitions. The following terms shall for all purposes of this Indenture
and of any Supplemental Indenture and of any certificate. opinion. request or other documents herein
mentioned have the meanings ascribed thereby. In addition. the terms defined in Section 1.01 of the Loan
Agreement and not otherwise defined in this Section 1.0I shall have the meanings ascribed thereby in the
Loan Agreement.
"Accreted Value means. Nvith respect to any Bond. as of any date of calculation. the sum
of the Initial Principal Amount thereof and the interest accrued thereon to such date of calculation.
compounded from the Closing Date at the stated yield to maturity thereof on each February I and August
I. assuming in any such semiannual period that such Accreted Value increases in equal daily amounts on
the basis of a 360-dav year of twelve 30-dav months.
"Act means Articles I through 4 (commencing Nvith Section 6500) of Chapter 5.
Division 7. Title I of the Government Code of the State. as in existence on the Closing Date or as
thereafter amended from time to time.
..Agency.. means the Palm Desert Redevelopment Agency. a redevelopment agency. a
public body corporate and politic. duly created. established and authorized to transact business and
exercise its powers all under and pursuant to the Redevelopment Law. and any successor to its duties and
functions.
"Authority means the Palm Desert Financing Authority. a joint powers authority duly
organized and existing under the Joint Exercise of Powers Agreement. dated January 26. 1989. by and
between the City and the Agency. and under the laws of the State.
"Authority Commission"' means the governing body of the Authority.
"Bond Counsel means Richards. Watson K. Gershon. A Professional Corporation. Los
Angeles. California. or a firm of attorneys of favorable reputation in the field of municipal bond lacy.
"Bond Lary means the Marks -Roos Local Bond Pooling Act of 1985. being Article 4 of
the Act (commencing Nyith Section 6584). as in existence on the Closing Date or as thereafter amended
from time to time.
"Bond Year- means each twelve-month period extending from August 2 in one calendar
year to August I of the succeeding calendar year. both dates inclusive. except that the first Bond Year
shall begin on the Closing Date and extend to and include August I. 2006.
"Bonds means the Palm Desert Financing Authority Subordinate Tax Allocation
Revenue Capital Appreciation Bonds (Project Area No. 2). 2006 Series D.
"Business Day" means any day other than (i) a Saturday or a Sunday or (ii) any other day
on Nyhich the New York Stock Exchange or banks are authorized or obligated by lacy or executive order to
close in New York. New York. San Francisco. California. Los Angeles. California or any city in Nyhich
the Trust Office is located.
P6402. I 055\881380.3 -2-
"Certificate"' means a certificate in writing signed by any officer of the designated public
entity. duly authorized by its legislative body for that purpose.
"City means the City of Palm Desert. a charter city and municipal corporation duly
organized and validly existing under the laws of the State.
purchaser.
"Closing Date means the date of delivery of the Bonds to the Underwriter as the original
"Code" means the Internal Revenue Code of 1986. as amended.
"County" means the County of Riverside.
"Defeasance Obligations means (a) any obligations described in paragraph A or B of the
definition of "Permitted Investments set forth in this Section or (b) collateralized investment agreements.
provided that
(i) the counterparty to any such agreement shall be a domestic bank or
foreign bank with a senior unsecured debt rating of AAA by S&P and
Aaa by Moody's: a domestic or Canadian life insurance company with a
claims -paying or financial strength rating of AAA and Aaa by S&P and
Moody's. respectively: a wholly -owned and guaranteed financial
institution subsidiary of one of the above mentioned institutions: an
insurance holding company. rated AAA and Aaa. by S&P and Moody's
respectively: or a domestic financial guaranty insurance company or an
affiliate of a domestic financial guaranty insurance company. whose
obligations are fully guaranteed by an affiliate or the parent company
which has a rating of AAA and Aaa by S&P and Moody's. respectively:
(ii) any such agreement shall be collateralized by securities issued or
guaranteed by the United States government. the Government National
Mortgage Association. the Federal Home Loan Mortgage Corporation or
the Federal National Mortgage Association. or municipal. corporate.
asset -backed and mortgage -backed obligations rated AAA and Aaa by
S&P and Moody's. respectively: the counterparty must grant to the
Trustee or the agent holding the collateral for the Trustee a first perfected
security interest in all collateral delivered pursuant to the agreement and
in all proceeds of the collateral: and the collateral must be delivered free
and clear of claims of any third parties and must be registered in the
name of the Trustee or agent: and
(iii) the value of the collateral. which shall be valued by the Trustee or the
collateral agent Nveckly. must be equal to at least 105 percent of the
amount of cash transferred by or on behalf of the Authority to the
counterparty plus accrued interest.
"Deuositorv- means The Depository Trust Company. NOV York. NOV York. and its
successors and assigns as securities depository for the Bonds. or any other securities depository acting as
Depository under Article X.
"Event of Default means any of the events described in Section 8.01.
P6402. I clii\881380.3 -3-
"Fiscal Year- means any twelve-month period extending from July I in one calendar year
to June 30 of the succeeding calendar year. both dates inclusive. or any other twelve-month period
selected and designated by the Authority as its official fiscal year period.
"Indenture means this Indenture of Trust. as may from time to time be supplemented.
modified or amended by any Supplemental Indenture pursuant to the provisions hereof.
"Independent Accountant means any certified public accountant or firm of certified
public accountants appointed and paid by the Authority. and who. or each of whom (i) is in fact
independent and not under domination of the Authority. the City or the Agency: (ii) does not have any
substantial interest. direct or indirect. in the Authority. the City or the Agency: and (iii) is not connected
with the Authority. the City or the Agency as an officer or employee of the Authority. the City or the
Agency but whom may be regularly retained to make annual or other audits of the books of or reports to
the Authority. the City or the Agency.
"Information Services" means Financial Information. Inc.'s "Daily Called Bond Service."
30 Montgomery Street. I0th Floor. Jersey City. New Jersey 07302. Attention: Editor: Mergent's
"Municipal and Government."' 5250 77 Center Drive. Suite 150. Charlotte. North Carolina 28217.
Attention: Called Bond Department: and Kenny S&P. 55 Water Street. 45 Floor. New York. New York
10041. Attention: Notification Department: or. in accordance with then -current guidelines of the
Securities and Exchange Commission. such other addresses and/or such other services providing
information with respect to called bonds as the Agency may designate to the Trustee in writing.
"Initial Principal Amount. with respect to any Bond. means the initial principal amount
thereof as of the Closing Date.
"Insurance Paying Agent means or its
successors under the Insurance Policy.
"Insurance Policy means the municipal bond insurance policy issued by the Insurer
insuring the payment when due of the principal of and interest on the Bonds.
"Insurer- means
"Loan Agreement means the Project Area No. 2 Loan Agreement (2006 Subordinate
Loan). dated as of July I. 2006. by and among the Authority. the Agency and the Trustee. relating to the
Loan. as may from time to time be supplemented. modified or amended.
Agency.
to Section 3.02.
maturity.
"Loan means the Loan. as defined in the Loan Agreement. made by the Authority to the
"Loan Fundy means the fund by that name established and held by the Trustee pursuant
"Maturity Amount. with respect to any Bond. means the Accreted Value thereof at
"Moody's' means Moody's Investors Service. its successors and assigns.
"Nominee" means the nominee of the Depository. which may be the Depository. as
determined from time to time pursuant to Article X.
P6402. I clii\881380.3 -4-
"Outstanding. when used as of any particular time with reference to Bonds. means
(subject to the provisions of Section 11.07) all Bonds theretofore executed. issued and delivered by the
Authority under this Indenture except (i) Bonds theretofore cancelled by the Trustee or surrendered to the
Trustee for cancellation. (ii) Bonds paid or deemed to have been paid within the meaning of Section
11.0 3. and (iii) Bonds in Iicu of or in substitution for which other Bonds shall have been executed. issued
and delivered pursuant to this Indenture.
"Owner- means the person in whose name the ownership of any Bond or Bonds shall be
registered on the Registration Books.
"Participants means those broker -dealers. banks and other financial institutions from
time to time for which the Depository holds Bonds as securities depository.
"Paying Agent means the Trustee.
"Permitted Investments means any of the following which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein:
A. Direct obligations of the United States of America (including obligations
issued or held in book -entry form on the books of the Department of the Treasury. and CATS and
TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United
States of America. For purposes of this paragraph A. "obligations the principal of and interest on which
are unconditionally guaranteed by the United States of America include without limitation tax exempt
obligations of a state or a political subdivision thereof which have been defeased under irrevocable
escrow instructions with non -callable obligations for which the full faith and credit of the United States of
America are pledged for the payment of principal and interest and which are rated "Aaa- by Moody's and
"AAA by S&P.
B. Bonds. debentures. notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies. provided such obligations are backed by the full
faith and credit of the United States of America (provided that stripped securities are only permitted if
they have been stripped by the agency itself):
I. United States Export -Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial
ownership
2. Farmers Home Administration (FmHA)
Certificates of beneficial ownership
3. Federal Financing, Bank
4. Federal Housing, Administration Debentures (FHA)
5. General Services Administration
Participation certificates
6. Government National Mortgage Association (GNMA or "Ginnie
Mae-)
GNMA - guaranteed mortgage -backed bonds
GNMA - guaranteed pass -through obligations
P6402. I clii\881380.3 -5-
7. United States Maritime Administration
Guaranteed Title XI financing
8. United States Department of Housing and Urban Development
(HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - United States government
guaranteed debentures
United States Public Housing Notes and Bonds - United States
government guaranteed public housing notes and bonds
C. Bonds. debentures. notes or other evidence of indebtedness issued or
guaranteed by any of the following non -full faith and credit United States government agencies (provided
that stripped securities are only permitted if they have been stripped by the agency itself):
I . Federal Home Loan Bank System
Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie
Mace)
Participation Certificates
Senior debt obligations
3. Federal National Mortgage Association (FNMA or "Fannie
Mae-)
Mortgage -backed securities and senior debt obligations
4. Student Loan Marketing Association (SLMA or "Sallie Mae-)
Senior debt obligations
5. Resolution Funding Corp. (REFCORP) obligations
D. Money market funds. including funds for Nyhich the Trustee or its
affiliates provide investment advisory or other management services. registered under the Investment
Company Act of I940. Nyhose shares are registered under the Securities Act of 1933. and having a rating
by S&P of AAAm-G. AAAm. or AAm and. if rated by Moody's. rated Aaa. Aa I or Aa2.
E. Certificates of deposit secured at all times by collateral described in A
and/or B above: provided that such certificates must be issued by commercial banks (including the
Trustee and its affiliates). savings and loan associations or mutual savings banks and provided further that
the collateral must be held by a third party and the Trustee on behalf of the Owners must have a perfected
first security interest in the collateral.
F. Certificates of deposit. savings accounts. deposit accounts or money
market deposits Nyhich are fully insured by the Federal Deposit Insurance Corporation. including those of
the Trustee and its affiliates.
G. Investment agreements. including guaranteed investment contracts
(GICs). Forward Purchase Agreements and Reserve Fund Put Agreements acceptable to the Insurer.
P6402. I clii\881380.3 -6-
H. Commercial paper rated. at the time of purchase. "Prime - I by
Moody's and "A -I" or better by S&P.
I. Bonds or notes issued by any state or municipality which are rated by
Moody's and S&P in one of the two highest rating categories assigned by such agencies.
J. Federal funds or bankers acceptances with a maximum term of one year
of any bank (including the Trustee and its affiliates) which has an unsecured. uninsured and unguaranteed
obligation rating of "Prime - I.. or "A — or better by Moody's and "A- I.. or "A"' or better by S&P.
K. Repurchase Agreements. which are approved by the Insurer. and which
provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee
or third party custodian. as the case may be (buyer/lender). and the transfer of cash from the Trustee to the
dealer bank or securities firm with an agreement that the dealer bank or securities firm wvill repay the cash
plus a yield to the Trustee in exchange for the securities at a specified date.
L. The Local Agency Investment Fund in the State Treasury or any similar
pooled investment fund administered by the State. to the extent such investment is held in the name and to
the credit of the Trustee.
M. Medium -term notes issued by corporations organized and operating
within the United States or by depository institutions licensed by the United States or any state and
operating within the United States. Such notes shall have a minimum credit rating of "Aa 3.. by Moody's
and "AA by S&P at time of purchase. and shall mature within three years or less.
N. Shares of beneficial interest issued by the California Asset Management
Trust. a common law trust established under the laws of the State.
"Principal Account" means the account by that name established and held by the Trustee
pursuant to Section 4.02(b)(2).
"Principal Amount" means. as of anv date of calculation. with respect to anv portion of
the Bonds. the Accreted Value thereof.
"Project Area means. unless the contest clearly requires otherwise. the project area
described and defined in the Redevelopment Plan approved and adopted by the City by its Ordinance
No. 509.
"Redemption Account" means the account by that name established and held by the
Trustee pursuant to Section 4.02(b)(3).
"Redevelopment Law means the Community Redevelopment Law. being California
Health and Safety Code Section 33000. et seq.. and all future acts supplemental thereto or amendatory_
thereof.
"Redevelopment Plane means the Redevelopment Plan for the Project Area. approved
and adopted by the City by its Ordinance No. 509 and includes any amendment of the Redevelopment
Plan heretofore or hereafter made pursuant to law.
"Registration Books means the records maintained by the Trustee pursuant to Section
2.09 for the registration and transfer of ownership of the Bonds.
P6402. I0ii\xx 1380.3 -7-
"Report means a document in writing signed by an Independent Redevelopment
Consultant and including: (i) a statement that the person or firm making or giving such Report has read
the pertinent provisions of the document or documents to which such Report relates: (ii) a brief statement
as to the nature and scope of the examination or investigation upon which the Report is based: and (iii) a
statement that. in the opinion of such person or firm. sufficient examination or investigation was made as
is necessary to enable said consultant to express an informed opinion with respect to the subject matter
referred to in the Report.
"Representation Letter- means the Blanket Issuer Letter of Representations. dated July 1.
1997. from the Authority to the Depository. qualifying bonds issued by the Authority for the Depository's
book -entry system.
"Request means a request in writing signed by any officer of the designated public entity
duly authorized by its legislative body for that purpose.
"Revenue Fundy means the fund by that name established and held by the Trustee
pursuant to Section 4.02(a).
"Revenues" means (i) all amounts payable by the Agency pursuant to Section 2.3 or
Section 2.4 of the Loan Agreement: (ii) any proceeds of the Bonds originally deposited with the Trustee
and all moneys deposited and held from time to time by the Trustee in the funds and accounts established
hereunder: and (iii) income and gains with respect to the investment of amounts on deposit in the funds
and accounts established hereunder. other than amounts payable to the United States of America pursuant
to Section 5.07.
"S&P- means Standard & Poor's Ratings Services and its successors and assigns.
"Securities Depositories means The Depository Trust Company. ;; Water Street. 50th
Floor. New York. New York. 10041. Attn: CaII Notification Department. Fax (212) 855-72 32: and. in
accordance with then current guidelines of the Securities and Exchange Commission. such other
addresses or such other securities depositories as the Authority may designate in a Certificate of the
Authority delivered to the Trustee.
"State means the State of California.
"Supplemental Indenture- means any indenture. agreement or other instrument hereafter
duly executed by the Authority and the Trustee in accordance with the provisions of Section 7.01.
"Tax Retzulations- means temporary and permanent regulations promulgated under or
with respect to Section 103 and Sections 141 through 150. inclusive. of the Code.
"Trust Office- means the corporate trust office of the Trustee at the address set forth in
Section 11.13 or such other offices as may be specified to the Authority by the Trustee in writing. With
respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall
mean the office or agency of the Trustee at which. at any particular time. its corporate trust business shall
be conducted.
"Trustee" means Wells Fargo Bank. National Association. and its successors and assigns.
and any other corporation or association which may at any time be substituted in its place as provided in
Article VI.
"Underwriter - means Citigroup Global Markets Inc.
P6402. I clii\881380.3 -8-
Section 1.02. Rules of Construction. All references in this Indenture to "Articles."'
"Sections." and other subdivisions. unless indicated otherwise. are to the corresponding Articles. Sections
or subdivisions of this Indenture: and the Nvords "herein. "hereof. "hereunder. and other Nvords of
similar import refer to this Indenture as a Nvhole and not to any particular Article. Section or subdivision
hereof.
Section 1.03. Authorization and Purpose of Bonds. The Authority has reviewed all
proceedings heretofore taken relative to the authorization of the Bonds and has found. as a result of such
review. and hereby finds and determines that all things. conditions. and acts required by law to exist.
happen and be performed precedent to and in the issuance of the Bonds do exist. have happened and have
been performed in due time. form and manner as required by law. and the Authority is now authorized
under the Bond Law and each and every requirement of law. to issue the Bonds in the manner and form
provided in this Indenture. The Authority hereby authorizes the issuance of the Bonds pursuant to the
Bond Law and this Indenture for the purpose of providing funds to make the Loan to the Agency pursuant
to the Loan Agreement.
Section 1.04. Equal Security. In consideration of the acceptance of the Bonds by the
Owners thereof. this Indenture shall be deemed to be and shall constitute a contract among the Authority.
the Trustee and the Owners of the Bonds: and the covenants and agreements herein set forth to be
performed on behalf of the Authority shall be for the equal and proportionate benefit. security and
protection of all Owners of the Bonds Nvithout preference. priority or distinction as to security or
othenvise of any of the Bonds over any of the others by reason of the number or date thereof or the time
of sale. execution or delivery thereof. or otherwise for any cause Nvhatsoeyer. except as expressly
provided therein or herein.
ARTICLE II
ISSUANCE OF BONDS
Section 2.0I I. Desitznation. The Bonds shall be designated the Palm Desert Financing
Authority Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2). 2006
Series D and shall be issued in the aggregate Initial Principal Amount of
Section 2.02. Terms of Bonds.
(a) The Bonds shall be issued in fully registered form in any denominations of Initial
Principal Amount but shall reflect denominations of $5.000 Maturity Amount or any integral multiple
thereof. No Bond shall have more than one maturity date. The Bonds shall be dated the Closing Date.
shall mature on August I in each of the years and in the Maturity Amounts set forth in the following
schedule. The Bonds shall be delivered on the Closing Date in the aggregate Initial Principal Amounts set
forth below. Interest on the Initial Principal Amount of the Bonds shall accrue and compound at the yield
to their maturity set forth below (such interest being equal to the difference between the Maturity
Amounts and the Initial Principal Amounts thereof):
Maturity Initial Initial Principal Yield to
Date Maturity Principal Amount per $5.000 Maturity
(Autzust I) Amount Amount Maturity Amount Date
P6402. I c li i\881380.3 -9-
Interest on each Bond shall be compounded semi-annually at the yield set forth above
from the Closing Date on each February I and August I. commencing August I. 2006. until maturity or
earlier redemption thereof. computed using a year of 360 days of twelve 30-day months and shall be
payable (i) at maturity as part of the Maturity Amount. or (ii) at redemption as part of the Accreted Value
to the redemption date. The Maturity Amount. or the Accreted Value and redemption premium (if any).
as applicable. with respect to any Bond shall be paid upon presentation and surrender thereof. at maturity
or the prior redemption thereof. at the Trust Office. in lawful money of the United States of America
Section 2.03. Redemption of Bonds.
(a) Optional Redemption.
In the event that the Agency shall exercise its option to prepay installments of the
Loan pursuant to Section 2.4(a) of the Loan Agreement. the Revenues derived from such prepayment
shall be applied to the redemption of the Bonds maturing on or after August I. 20 . as a whole. or in part
among maturities as designated in writing by the Authority and by lot within a maturity. in integral
multiples of $5.000 of Maturity Amount. on any February I or August Ion or after August I. 20 . at the
following respective redemption prices (expressed as a percentage of the Accreted Value of the called
Bonds on the date fixed for redemption):
Redemption
Redemption Dates Price
August I. 2() and February I. 2() `N
August I. 2() and February I. 2()
August I. 2() and thereafter
The Authority shall provide written notice to the Trustee of any redemption pursuant to
this Section 2.03(b)( I) at least 45 but not more than 90 days prior to the date fixed for such redemption.
(b) IReseryedi.
(c) General Redemption Provisions
(I) Notice of Redemption. The Tnistcc on behalf and at the expense of the
Authority shall mail (by first class mail) notice of any redemption to the respective Owners of any Bonds
designated for redemption at their respective addresses appearing on the Registration Books and. by such
means acceptable to the following institutions. to the Securities Depositories and to one or more
Information Services. at least 30 but not more than 60 days prior to the date fixed for redemption:
provided. however. that neither failure to receive any such notice so mailed nor any defect therein shall
affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of
interest thereon. Such notice shall state the date of the notice. the redemption date. the redemption place
and the redemption price and shall designate the CUSIP numbers. the Bond numbers (but only if less than
all of the Outstanding Bonds are to be redeemed) and the maturity or maturities of the Bonds (in the event
of redemption of all of the Bonds of such maturity or maturities in NVhoIe) to be redeemed. and shall
require such Bonds be then surrendered at the Trust Office of the Trustee in Los Angeles. California (or
such other location as designated by the Trustee) for redemption at the redemption price. giving notice
also that further interest on such Bonds will not accrue from and after the redemption date.
1)6402.10.5.5 \881380.3 -10-
(2) Selection of Bonds for Redemption. Whenever provision is made in this
Indenture for the redemption of Tess than all of such Bonds of any maturity. the Trustee shall select the
Bonds to be redeemed from all Bonds of such maturity not previously called for redemption. by lot in any
manner Nvhich the Trustee in its sole discretion shall deem appropriate under the circumstances. For
purposes of selecting Bonds Nyithin a maturity for redemption. all Bonds shall be deemed to be comprised
of separate $5.000 Maturity Amount portions and such portions shall be treated as separate bonds Nvhich
may be separately redeemed.
(3) Partial Redemption of Bonds. In the event only a portion of any Bond is
called for redemption. then upon surrender of such Bond the Authority shall execute and the Trustee shall
authenticate and deliver to the Owner thereof. at the expense of the Authority. a new Bond or Bonds of
the like tenor and maturity date. of authorized denominations in aggregate Maturity Amount equal to the
unredeemed portion of the Bond to be redeemed.
(4) Effect of Redemption. From and after the date fixed for redemption. if
funds available for the payment of the principal of. interest on and premium. if any. on the Bonds so
called for redemption shall have been duly provided. such Bonds so called shall cease to be entitled to any
benefit under this Indenture other than the right to receive payment of the redemption price. and no
interest shall accrue thereon from and after the redemption date specified in such notice. All Bonds
redeemed pursuant to this Section shall be destroyed.
Section 2.04. Form of Bonds. The Bonds. the Trustees certificate of authentication. and
the form of assignment to appear thereon shall be substantially in the respective forms set forth in
Exhibit A attached hereto and by this reference incorporated herein. Nyith necessary or appropriate
variations. omissions and insertions. as permitted or required by this Indenture.
Section 2.05. Execution of Bonds. The Bonds shall be signed in the name and on behalf
of the Authority Nyith the manual or facsimile signatures of its President and attested Nyith the manual or
facsimile signature of its Secretary or any deputy duly appointed by the Authority Commission. and shall
be delivered to the Trustee for authentication by it. In case any officer of the Authority \yho shall have
signed any of the Bonds shall cease to be such officer before the Bonds so signed shall have been
authenticated or delivered by the Trustee or issued by the Authority. such Bonds may nevertheless be
authenticated. delivered and issued and. upon such authentication. delivery and issue. shall be as binding
upon the Authority as though the individual \yho signed the same had continued to be such officer of the
Authority. Also. any Bond may be signed on behalf of the Authority by any individual NV110 on the actual
date of the execution of such Bond shall be the proper officer although on the nominal date of such Bond
such individual shall not have been such officer.
Only such of the Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A manually executed by the Trustee. shall be valid or
obligatory for any purpose or entitled to the benefits of this Indenture. and such certificate of the Trustee
shall be conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered
hereunder and are entitled to the benefits of this Indenture.
Section 2.06. Transfer of Bonds. Any Bond may. in accordance Nyith its terms. be
transferred. upon the Registration Books. by the person in Nvhose name it is registered. in person or by the
Owners duly authorized attorney. upon surrender of such Bond for cancellation. accompanied by
delivery of a Nvritten instrument of transfer in a form acceptable to the Trustee. duly executed. Whenever
any Bond shall be surrendered for transfer. the Authority shall execute and the Trustee shall thereupon
authenticate and deliver to the transferee a neW Bond or Bonds of the same series and of like tenor.
maturity and aggregate principal amount. The cost of printing any Bonds and any services rendered or
expenses incurred by the Trustee in connection Nyith any such transfer shall be paid by the Authority.
P64U2. l 0.5.5\xx l 3x0. ; -11-
except that the Trustee shall require the payment by the Owner requesting such transfer of any tax or
other governmental charge required to be paid Nvith respect to such transfer. The Trustee shall not be
required to transfer. pursuant to this Section 2.06. either (i) any Bond during the period established by the
Trustee for the selection of Bonds for redemption. or (ii) any Bond selected for redemption pursuant to
Section 2.03.
Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Trust Office for the
same aggregate Maturity Amount of Bonds of the same tenor and maturity and of other authorized
denominations. The cost of printing any Bonds and any services rendered or expenses incurred by the
Trustee in connection Nvith any such exchange shall be paid by the Authority. except that the Trustee shall
require the payment by the Owner requesting such exchange of any tax or other governmental charge
required to be paid Nvith respect to such exchange. The Trustee shall not be required to exchange.
pursuant to this Section 2.07. either (i) any Bond during the period established by the Trustee for the
selection of Bonds for redemption. or (ii) any Bond selected for redemption pursuant to Section 2.03.
Section 2.08. Temporary Bonds. The Bonds may be issued initially in temporary form
exchangeable for definitive Bonds Nvhen ready for delivery. The temporary Bonds may be printed.
lithographed or typewritten. shall be of such denominations as may be determined by the Authority and
may contain such reference to any of the provisions of this Indenture as may be appropriate. Every
temporary Bond shall be executed by the Authority and be registered and authenticated by the Trustee
upon the same conditions and in substantially the same manner as the definitive Bonds: provided that any
temporary Bond need only be signed in the name and on behalf of the Authority Nvith the manual or
facsimile signature of the Secretary. or any deputy duly appointed by the Authority Commission. and
need not be attested. If the Authority issues temporary Bonds. it NyiII execute and furnish definitive
Bonds Nvithout delay. and thereupon the temporary Bonds shall be surrendered. for cancellation. in
exchange therefor at the Trust Office of the Trustee in Los Angeles. California (or such other location
designated by the Trustee). and the Trustee shall authenticate and deliver in exchange for such temporary
Bonds definitive Bonds of like term. maturity and aggregate Maturity Amount in authorized
denominations. Until so exchanged. the temporary Bonds shall be entitled to the same benefits under this
Indenture as definitive Bonds authenticated and delivered hereunder.
Section 2.09. Registration Books. The Trustee Nvill keep or cause to be kept at its Trust
Office sufficient records for the registration and transfer of the Bonds. Nvhich shall at all times during
regular business hours be open to inspection by the Authority Nvith reasonable prior notice: and. upon
presentation for such purpose. the Trustee shall. under such reasonable regulations as it may prescribe.
register or transfer or cause to be registered or transferred. on such records. Bonds as hereinbefore
provided.
Section 2.10. Bonds Mutilated. Lost. Destroyed or Stolen. If any Bond shall become
mutilated. the Authority. at the expense of the Owner of such Bond. shall execute. and the Trustee shall
thereupon authenticate and deliver. a new Bond of like tenor. maturity and aggregate Maturity Amount in
authorized denominations in exchange and substitution for the Bond so mutilated. but only upon
surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee
shall be cancelled by it and destroyed. If any Bond issued hereunder shall be lost. destroyed or stolen.
evidence of such Toss. destruction or theft may be submitted to the Trustee and. if such evidence be
satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given. the Authority. at the
expense of the Owner. shall execute. and the Trustee shall thereupon authenticate and deliver. a new
Bond of like tenor in Iicu of and in substitution for the Bond so lost. destroyed or stolen (or if any such
Bond shall have matured or shall have been called for redemption. instead of issuing a substitute Bond the
Trustee may pay the same Nvithout surrender thereof upon receipt of indemnity satisfactory to the
Trustee). The Trustee may require payment of a reasonable fee for each new Bond issued under this
Section 2. I0 and of the expenses Nvhich may be incurred by the Authority and the Trustee. Any Bond
P6462. I c );,\881 38c ). ; - 12-
issued under the provisions of this Section 2.10 in Iicu of any Bond alleged to be Iost. destroyed or stolen
shall constitute an original contractual obligation on the part of the Authority Nvhether or not the Bond
alleged to be Iost. destroyed or stolen be at any time enforceable by anyone. and shall be equally and
proportionately entitled to the benefits of this Indenture Nyith all other Bonds secured by this Indenture.
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS OF
BONDS: ISSUANCE OF BONDS
Section 3.01. Issuance of Bonds. Upon the execution and delivery of this Indenture. the
Authority shall execute and deliver the Bonds in the respective aggregate Initial Principal Amounts set
forth herein and shall deliver the Bonds to the Trustee for authentication and delivery to the original
purchaser thereof upon the Request of the Authority.
Section 3.02. Loan Fund: Application of Proceeds of Sale of Bonds. The Trustee shall
establish and maintain a separate fund to be known as the "Loan Fund." Upon the receipt of payment for
the Bonds on the Closing Date. the Trustee shall deposit the proceeds of sale thereof in the amount of
in the Loan Fund. The Trustee shall disburse all amounts in the Loan Fund pursuant to
Section 2.2 of the Loan Agreement.
Section 3.03. Validity of Bonds. The validity of the authorization and issuance of the
Bonds shall not be affected in any Nvay by any proceedings taken by the Agency with respect to the
application of the proceeds of the Loan. and the recital contained in the Bonds that the same are issued
pursuant to the Bond Law shall be conclusive evidence of their validity and of the regularity of their
issuance.
ARTICLE IV
REVENUES: FLOW OF FUNDS
Section 4.01. Pledtze of Revenues: Assiwnment of Rights. Subject to the provisions of
Section 6.03. the Bonds shall be secured by a first lien on and pledge (which shall be effected in the
manner and to the extent hereinafter provided) of all of the Revenues. The Bonds shall be equally
secured by a pledge. charge and Tien upon the Revenues without priority for series. number. date of
Bonds. date of execution or date of delivery: and the payment of the Principal Amount of the Bonds and
any premiums upon the redemption of any thereof shall be and are secured by an exclusive pledge. charge
and Tien upon the Revenues. So Tong as any of the Bonds are Outstanding. the Revenues shall not be used
for any other purpose: except that out of the Revenues there may be apportioned such sums. for such
purposes. as are expressly permitted by Section 4.02.
The Authority hereby transfers in trust and assigns to the Trustee. for the benefit of the
Owners from time to time of the Bonds. all of the Revenues and all of the right. title and interest of the
Authority in the Loan Agreement (other than the rights of the Authority under Section 5.04 thereof). The
Trustcc shall be entitled to and shall receive all of the Revenues. and any Revenues collected or received
by the Authority shall be deemed to be held. and to have been collected or received. by the Authority as
the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also
shall be entitled to and. subject to the provisions hereof. shall take all steps. actions and proceedings
reasonably necessary in its judgment to enforce. either jointly with the Authority or separately. all of the
rights of the Authority and all of the obligations of the Agency under the Loan Agreement.
1)6402. l c h i\881380.3 -1 3 -
Section 4.02. Receipt. Deposit and Application of Revenues.
(a) Deposit of Revenues. Revenue Fund. All Revenues described in clause (i) of the
definition thereof in Section 1.0I shall be promptly deposited by the Trustee upon receipt thereof in a
special fund designated as the "Revenue Fundy which the Trustee shall establish. maintain and hold in
trust hereunder.
(b) Application of Revenues: Accounts. At the times prescribed below. the Trustee
shall transfer from the Revenue Fund and deposit into the following respective accounts (each of which
the Trustee shall establish and maintain within the Revenue Fund). the following amounts in the
following order of priority. the requirements of each such account (including the making up of any
deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required
deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in
priority:
( I ) I Reseryedi.
(2) Principal Account. On or before each maturity date of the Bonds. the
Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on
deposit in the Principal Account to equal the Maturity Amount of the then Outstanding Bonds coming due
and payable on such date pursuant to Section 2.02. All moneys in the Principal Account shall be used and
withdrawn by the Trustee solely for the purpose of paying the Maturity Amount of the Bonds at the
maturity thereof. All amounts on deposit in the Principal Account on the first day of any Bond Year. to
the extent not required to pay the Maturity Amount of any Outstanding Bonds then haying come due and
payable. shall be withdrawn therefrom and transferred to the Agency to be used for any lawful purposes
of the Agency.
(3) Redemption Account. The Trustee. at any time that the Agency shall
exercise its option to prepay installments of the Loan pursuant to Section 2.4 of the Loan Agreement.
shall deposit the Revenues derived from such prepayment in the Redemption Account (which the Tnistcc
shall also establish and maintain within the Rcycnuc Fund). to be used and withdrawn by the Trustee
solely for the purpose of paying the Principal Amount and redemption premiums. if any. on the Bonds to
be redeemed on their respective redemption dates. as directed by the Authority.
Section 4.03. Investments. All moneys in any of the funds or accounts established with
the Trustee pursuant to this Indenture or pursuant to the Loan Agreement shall be invested by the Trustee
solely in Permitted Investments pursuant to the written direction of the Authority given to the Trustee two
Business Days in advance of the making of such investments (and promptly confirmed in writing. as to
any such direction given orally): provided that moneys in the Reserve Fund established pursuant to the
Loan Agreement shall be invested in Permitted Investments which mature not more than five years from
the date of such investment. In the absence of any such direction from the Authority. the Tnistcc shall
invest any such moneys in Permitted Investments described in Paragraph D of the definition thereof.
Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or
account.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder shall be deposited in the fund or account from which such investment was
made. For purposes of acquiring any investments hereunder. the Trustee may commingle funds held by it
hereunder. The Tnistcc may (but shall not be obligated to) act as principal or agent in the acquisition or
disposition of any investment. The Trustee shall incur no liability for losses arising from any investments
made at the direction of the Authority. or otherwise made pursuant to this Section.
1)6402.10.5.5 \881380.3 - 14-
The Trustcc shall be entitled to rely conclusively upon the written instructions of the
Authority directing investments in Permitted Investments as to the fact that each such investment is
permitted by the laws of the State. and shall not be required to make further investigation with respect
thereto. With respect to any restrictions set forth in the definition of Permitted Investments set forth in
Section 1.01 which embody legal conclusions (e.g.. the existence. validity and perfection of security
interests in collateral). the Trustee shall be entitled to rely conclusively on an opinion of counsel or upon a
representation of the provider of such Permitted Investment obtained at the Authority's or the Agency's
expense.
Except as specifically provided in this Indenture. the Trustee shall not be liable to pay
interest on any moneys received by it. but shall be liable only to account to the Authority and the Agency
for earnings derived from funds that have been invested.
The Authority acknowledges that to the extent regulations of the Comptroller of the
Currency or other applicable regulatory entity grant the Authority the right to receive brokerage
confirmations of security transactions as they occur. the Authority specifically \valves receipt of such
confirmations to the extent permitted by law. The Trustee will furnish the Authority periodic cash
transaction statements which include detail for all investment transactions made by the Trustee hereunder.
The Trustee or any of its affiliates may act as sponsor. advisor or manager in connection
with any investments made by the Trustee hereunder.
Section 4.04. Valuation and Disposition of Investments. For the purpose of determining
the amount in any fund or account established hereunder or under the Loan Agreement. any investments
credited to such fund or account shall be valued at least annually. on or before July 1. at the market value
thereof. In making any valuations hereunder the Trustee may utilize computerized securities pricing
services that may be available to it. including those available through its regular accounting system.
ARTICLE V
COVENANTS OF THE AUTHORITY
Section 5.01. Punctual Payment. The Authority shall punctually pay or cause to be paid
the principal. interest and premium. if any. to become due in respect of all the Bonds. in strict conformity
with the terms of the Bonds and of this Indenture. according to the true intent and meaning thereof. but
only out of Revenues and other assets pledged for such payment as provided in this Indenture.
Section 5.02. Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of
any claims for interest by the purchase of such Bonds or by any other arrangement. and in case the
maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended.
such Bonds or claims for interest shall not be entitled. in case of any default hereunder. to the benefits of
this Indenture. except subject to the prior payment in full of the principal of all of the Bonds then
Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this
Section 5.02 shall be deemed to limit the right of the Authority to issue bonds or other obligations for the
purpose of refunding any Outstanding Bonds. and such issuance shall not be deemed to constitute an
extension of maturity of the Bonds.
Section 5.03. Aizainst Encumbrances. The Authority shall not create. or permit the
creation of. any pledge. lien. charge or other encumbrance upon the Revenues and other assets pledged or
assigned under this Indenture Nvhilc any of the Bonds are Outstanding. except the pledge and assignment
created by this Indenture. Subject to this limitation. the Authority expressly reserves the right to enter
1)6402. l c h i\881380.3 -15 -
into one or more other indentures for any of its corporate purposes. including other programs under the
Bond Law. and reserves the right to issue other obligations for such purposes.
Section 5.04. Power to Issue Bonds and Make Pledge and Assignment. The Authority is
duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to pledge and
assign the Revenues. the Loan Agreement and other assets purported to be pledged and assigned.
respectively. under this Indenture in the manner and to the extent provided in this Indenture. The Bonds
and the provisions of this Indenture are and Nyill be the legal. valid and binding special obligations of the
Authority in accordance Nyith their terms. and the Authority shall at all times. to the extent permitted by
law. defend. preserve and protect said pledge and assignment of Revenues and other assets and all the
rights of the Owners under this Indenture against all claims and demands of all persons Nyhomsoeyer.
Section 5.05. Accounting Records and Financial Statements. The Trustee shall at all
times keep. or cause to be kept. proper books of record and account. prepared in accordance Nyith
corporate trust industry standards. in Nyhich complete and accurate entries shall be made of all transactions
made by the Trustee relating to the proceeds of Bonds. the Revenues. the Loan Agreement and all funds
and accounts established pursuant to this Indenture. Such books of record and account shall be available
for inspection by the Authority and the Agency. during regular business hours Nyith reasonable prior
notice.
Section 5.06. No Additional Indebtedness. Except for the Bonds. the Authority shall not
incur any indebtedness payable out of the Revenues. (For clarification. this provision does not prohibit
the Agency from incurring additional debt secured by Tax Revenues. so long as the incurrence of such
debt is in compliance Nyith the Loan Agreement.)
Section 5.07. Tax Covenants.
(a) The Authority covenants that. in order to maintain the exclusion from gross
income for Federal income tax purposes of the Accreted Value of the Bonds Nyhich constitutes the interest
thereon. and for no other purpose. the Authority Nyill satisfy. or take such actions as are necessary to cause
to be satisfied. each provision of the Code necessary to maintain such exclusion. In furtherance of this
covenant the Authority agrees to comply Nyith such Nyritten instructions as may be provided by Bond
Counsel.
(b) The Authority covenants that no part of the proceeds of the Bonds shall be used.
directly or indirectly. to acquire any Investment Property Nyhich Nyould cause the Bonds to become
arbitrage bonds. as that term is defined in Section 148 of the Code. or under applicable Tax Regulations.
In order to assure compliance Nyith the rebate requirements of Section 148 of the Code. the Authority
further covenants that it Nyill pay or cause to be paid to the United States the amounts necessary to satisfy
the requirements of Section 148(f) of the Code. and that it Nyill establish such accounting procedures as
are necessary to adequately determine. account for and pay over any such amount required to be paid
thereunder in a manner consistent Nyith the requirements of Section 148 of the Code. such covenants to
survive the defeasance of the Bonds.
(c) The Authority covenants that it Nyill not take any action or omit to take any
action. Nyhich action or omission. if reasonably expected on the date of initial execution and delivery of
the Bonds. Nyould result in a Toss of exclusion from gross income for purposes of Federal income taxation.
under Section 103 of the Code. of interest on the Bonds.
(d) The Authority covenants that it Nyill not use or permit the use of any property
financed Nyith the proceeds of the Bonds by any person (other than a state or local governmental unit) in
1)6402.10.5.5 \881380.3 - 16-
such manner or to such extent as Nvould result in a Toss of exclusion of the interest on the Bonds from
gross income for Federal income tax purposes under Section 103 of the Code.
(e) Notwithstanding any provision of this Indenture. and except as provided below.
the Authority covenants that none of the moneys contained in any of the funds or accounts created
pursuant to this Indenture Nyith respect to the Bonds shall be: (i) used in making loans guaranteed by the
United States (or any agency or instrumentality thereof). (ii) invested directly or indirectly in a deposit or
account insured by the Federal Deposit Insurance Corporation. National Credit Union Administration or
any other similar Federally chartered corporation. or (iii) otherwise invested directly or indirectly in
obligations guaranteed (in Nvholc or in part) by the United States (or any agency or instrumentality
thereof): provided. however. that the above restrictions do not apply to: (a) the investment on moneys
held in the Rcycnuc Fund or any other "bona fide debt service fund as defined for purposes of Section
148 of the Code. (b) investment in direct obligations of the United States Treasury. (c) investment in
obligations guaranteed by the Federal National Mortgage Association. Government National Mortgage
Association. or the Federal Home Loan Mortgage Corporation. (d) investment in obligations issued
pursuant to Section 2 I B(d)(3) of the Federal Home Loan Bank Act. as amended by Section 5 I I (a) of the
Financial Institutions Reform. Recovery. and Enforcement Act of 1989. (c) investments permitted under
regulations issued pursuant to Section I49(b)(3)(B) of the Code. or (f) such other investments permitted
under this Indenture as. in the opinion of Bond Counsel. do not jeopardize the exclusion from gross
income for Federal income tax purposes of interest on the Bonds.
Section 5.08. Loan Agreement. The Trustee. as assignee of the Authority's rights
pursuant to Section 4.01. shall receive all amounts due from the Agency pursuant to the Loan Agreement
and. upon an Event of Default. shall diligently enforce. and take all steps. actions and proceedings
reasonably necessary for the enforcement of all of the rights of the Authority thereunder and for the
enforcement of all of the obligations of the Agency thereunder.
The Loan Agreement may be amended or modified pursuant to the applicable provisions
thereof. but only Nyith the «rittcn consent of the Insurer (as Tong as the Insurance Policy is in full force
and effect) and only: (i) if the Authority. the Agency or the Trustee first obtains the «rittcn consent of the
Owners of a majority in aggregate Principal Amount of the Bonds then Outstanding to such amendment
or modification. provided. however. that no such amendment or modification shall (a) extend the maturity
of or reduce the amount of interest or principal payments on a Loan. or otherwise alter or impair the
obligation of the Agency to pay the principal. interest or prepayment premiums on a Loan at the time and
place and at the rate and in the currency provided therein. Nvithout the express «rittcn consent of the
Owner of each affected Bond. (b) reduce the percentage of the Bonds required for the «rittcn consent to
any such modification or amendment thereof or hereof. or (c) Nyithout its «rittcn consent thereto. modify
any of the rights or obligations of the Trustee: or (ii) Nyithout the consent of any of the Owners. if such
amendment or modification does not modify the rights or obligations of the Trustee Nyithout its prior
«rittcn consent. and is for any one or more of the following purposes:
(a) to add to the covenants and agreements of the Agency contained in the
Loan Agreement other covenants and agreements thereafter to be observed. or to limit or surrender any
rights or power therein reserved to or conferred upon the Agency so long as such limitation or surrender
of such rights or powers shall not materially adversely affect the Owners of the Bonds:
(b) to make such provisions for the purpose of curing any ambiguity. or of
curing. correcting or supplementing any defective provision contained in the Loan Agreement. or in any
other respect Nvhatsoever as the Agency and the Authority may deem necessary or desirable. provided
under any circumstances that such modifications or amendments shall not materially adversely affect the
interests of the Owners of the Bonds:
1)6402.10.5.5 \881380.3 -17-
(c) to amend any provision thereof relating to the Code. to any extent
whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from
gross income for federal income tax purposes of interest on any of the Bonds under the Code. in the
opinion of Bond Counsel: or
(d) to provide for the issuance of Parity Debt under and in accordance with
the provisions of the Loan Agreement.
Nothing in this Section 5.08 shall prevent the Agency and the Authority. with the «rittcn
consent of the Insurer (as long as the Insurance Policy is in full force and effect). from entering into any
amendment or modification of the Loan Agreement which solely affects a particular Bond or Bonds all of
the Owners of which shall have consented to such amendment or modification: provided. however. no
such amendment or modification shall affect the rights or obligations of the Trustee without its prior
«rittcn consent. The Trustee shall be entitled to rely upon the opinion of Bond Counsel stating that the
requirements of this Section 5.08 have been met with respect to any amendment or modification of the
Loan Agreement.
Section 5.09. Further Assurances. The Authority 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 this Indenture. and for the better assuring and
confirming unto the Owners of the Bonds the rights and benefits provided in this Indenture.
ARTICLE VI
THE TRUSTEE
Section 6.0I I. Appointment of Trustee. Wells Fargo Bank. National Association. a
national banking association organized and existing under and by virtue of the laws of the United States
of America. with a corporate trust office in Los Angeles. California. is hereby appointed Trustee by the
Authority for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and
to allocate. use and apply the same as provided in this Indenture. The Authority agrees that it will
maintain a Trustee which shall be a financial institution haying a corporate trust office in the State. with a
combined capital and surplus of at least $75.000.000. and subject to supervision or examination by federal
or State authority. so long as any Bonds are Outstanding. If such financial institution publishes a report
of condition at least annually pursuant to law or to the requirements of any supervising or examining
authority above referred to. then for the purpose of this Section 6.0I the combined capital and surplus of
such financial institution shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.
The Trustee is hereby authorized to pay the principal of and interest and redemption
premium. if any. on the Bonds when duly presented for payment at maturity. or on redemption or
purchase prior to maturity. and to cancel all Bonds upon payment thereof. The Trustee shall keep
accurate records of all funds administered by it and of all Bonds paid and discharged.
Section 6.02. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon
it by this Indenture. and agrees to perform said trusts. but only upon and subject to the following express
terms and conditions:
(a) The Trustee. prior to the occurrence of an Event of Default and after curing of all
Events of Default which may have occurred. undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture and no implied covenants. duties or obligations shall be read
into this Indenture against the Trustee. In case an Event of Default hereunder has occurred (which has not
P6402.1055\SS 1380.3 -18-
been cured or \valved). the Trustee may exercise such of the rights and powers vested in it by this
Indenture. and shall use the same degree of care and skill and diligence in their exercise. as a prudent
person Nyould use in the conduct of its own affairs.
(b) The Trustee may execute any of the trusts or powers hereof and perform the
duties required of it hereunder by or through attorneys. agents. or receivers. and shall be entitled to advice
of counsel concerning all matters of trust and its duty hereunder. The Trustee may conclusively rely on
an opinion of counsel as full and complete protection for any action taken or suffered by it hereunder.
(c) The Trustee shall not be responsible for any recital herein. in the Loan
Agreement or in the Bonds. or for any of the supplements hereto or thereto or instruments of further
assurance. or for the validity of this Indenture or the Loan Agreement. or for the sufficiency of the
security for the Bonds issued hereunder or intended to be secured hereby. or the tax status of the interest
on the Bonds. and the Trustee shall not be bound to ascertain or inquire as to the observance or
performance of any covenants. conditions or agreements on the part of the Authority hereunder.
(d) The Trustee (including its officers and employees) may become the Owner of
Bonds secured hereby Nvith the same rights Nyhich it Nvould have if not the Trustee: may acquire and
dispose of other bonds or evidences of indebtedness of the Authority Nvith the same rights it Nvould have if
it \sere not the Trustee: and may act as a depositary for and permit any of its officers or directors to act as
a member of. or in any other capacity Nvith respect to. any committee formed to protect the rights of
Owners of Bonds. Nvhether or not such committee shall represent the Owners of the majority in aggregate
Principal Amount of the Bonds then Outstanding. The Trustee. either as principal or agent. may engage
in or be interested in any financial or other transaction Nvith the Authority.
(e) The Trustee shall be protected in acting upon any Report. notice. request.
consent. certificate. order. affidavit. letter. direction. telegram. facsimile transmission. electronic mail or
other paper or document believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons and need not make any investigation into the facts or matters contained therein.
Any action taken or omitted to be taken by the Trustee pursuant to this Indenture upon the request or
authority or consent of any person \yho at the time of making such request or giving such authority or
consent is the Owner of any Bond. shall be conclusive and binding upon all future Owners of the same
Bond and upon Bonds issued in exchange therefor or in place thereof. The Trustee shall not be bound to
recognize any person as an Owner of any Bond or to take any action at his request unless the ownership
of such Bond by such person shall be reflected on the Registration Books.
(f) As to the existence or non-existence of any fact or as to the sufficiency or
validity of any instrument. paper or proceeding. the Trustee shall be entitled to rely upon a Certificate of
the Authority as sufficient evidence of the facts therein contained and prior to the occurrence of an Event
of Default hereunder of Nvhich the Trustee has been given notice or is deemed to have notice. as provided
in Section 6.02(h). shall also be at liberty to accept a Certificate of the Authority to the effect that any
particular dealing. transaction or action is necessary or expedient. but may at its discretion secure such
further evidence deemed by it to be necessary or advisable. but shall in no case be bound to secure the
same.
(g) The permissive right of the Trustee to do things enumerated in this Indenture
shall not be construed as a duty and it shall not be answerable for other than its negligence or �yillfuI
misconduct. The immunities and exceptions from liability of the Trustee shall extend to its officers.
directors. employees and agents. In the absence of negligence or misconduct. the Trustee shall not
be liable for any error of judgment.
1)6402.10.5.5 \881380.3 - 1y-
(h) The Trustee shall not be required to take notice or be deemed to have notice of
any Event of Default hereunder except failure by the Authority to make any of the payments to the
Trustee required to be made by the Authority pursuant hereto. unless the Trustee shall be specifically
notified in writing of such default by the Authority. the Insurer or by the Owners of at least 25 percent in
aggregate principal amount of the Bonds then Outstanding and all notices or other instruments required
by this Indenture to be delivered to the Trustee must. in order to be effective. be delivered at the Trust
Office of the Trustee in Los Angeles. California. and in the absence of such notice so delivered the
Trustee may conclusively assume there is no Event of Default hereunder except as aforesaid.
(i) At any and all reasonable times the Trustee. and its duly authorized agents.
attorneys. experts. accountants and representatives. shall have the right. but not the obligation. fully to
inspect all books. papers and records of the Authority pertaining to the Bonds. and to make copies of any
of such books. papers and records such as may be desired but which is not privileged by statute or by law.
(j) The Trustee shall not be required to give any bond or surety in respect of the
execution of the said trusts and powers or otherwise in respect of the premises hereof.
(k) Notwithstanding anything elsewhere in this Indenture with respect to the
execution of any Bonds. the withdrawal of any cash. the release of any property. or any action whatsoever
within the purview of this Indenture. the Trustee shall have the right. but shall not be required. to demand
any showings. certificates. opinions. appraisals or other information. or corporate action or evidence
thereof. as may be deemed desirable for the purpose of establishing the right of the Authority to the
execution of any Bonds. the withdrawal of any cash. or the taking of any other action by the Trustee.
(I) Before taking action referred to in Section 6.05. Section 8.02 or the first
paragraph of Section 5.08. the Trustee may require that a satisfactory_ indemnity bond be furnished for the
reimbursement of all expenses to which it may be put and to protect it against all liability. except liability
which is adjudicated to have resulted from its negligence or willful misconduct in connection with any
such action.
(m) All moneys received by the Trustee shall. until used or applied or invested as
herein provided. be held in trust for the purposes for which they \were received but need not be segregated
from other funds except to the extent required by law.
(n) The Trustee shall have no liability or obligation to the Bond Owners with respect
to the payment of debt service by the Authority or with respect to the observance or performance by the
Authority of the other conditions. covenants and terms contained in this Indenture. or with respect to the
investment of any moneys in any fund or account established. held or maintained by the Authority
pursuant to this Indenture or otherwise.
(o) The Trustee makes no covenant. representation or warranty concerning the
current or future tax status of interest on the Bonds. The Trustee need only keep accurate records of all
investments and funds. and send rebate payments to the United States in accordance with explicit
instructions from the Authority.
(p) The Trustee shall have no responsibility with respect to any information.
statement. or recital in any official statement. offering memorandum or any other disclosure material
prepared or distributed with respect to the issuance of the Bonds.
(q)
Loan Agreement.
The Trustee in its capacity as Trustee is authorized and directed to execute the
1)6402.10.5.5 \881380.3 -20-
(r) The Trustcc shall not be considered in broach of or in default in its obligations
hereunder or progress in respect thereto in the cycnt of enforced delay ("unavoidable delay) in the
performance of such obligations duo to unforeseeable causcs beyond its control and yithout its fault or
negligence. including. but not Iimitcd to. Acts of God or of the public enemy or terrorists. acts of a
government. acts of the other party. fires. floods. epidemics. quarantine restrictions. strikes. freight
embargoes. earthquakes. explosion. mob violence. riot. inability to procure or general sabotage or
rationing of labor. equipment. facilities. sources of energy. material or supplies in the open market.
litigation or arbitration involving a party or others relating to zoning or other governmental action or
inaction pertaining to the project. malicious mischief. condemnation. and unusually scycrc ycathcr or
delays of suppliers or subcontractors duo to such causcs or any similar cycnt and/or occurrences beyond
the control of the Trustcc: provided that. in the cycnt of any such unavoidable delay undcr this paragraph
6.02(r). the Trustcc notify the Authority and the Agency in «citing «ithin five business days after (i) the
occurrcncc of the cycnt giving rise to the unavoidable delay. (ii) the Trustees actual knowledge of the
impending unavoidable delay. or (iii) the Trustees knowledge of sufficient facts undcr which a
rcasonablc person would conclude the unavoidable delay will occur.
(s) The Trustcc agrees to accept and act upon facsimilc transmission of written
instructions and/or dircctions pursuant to this Indenture. provided. however. that: (i) subsequent to such
facsimilc transmission of written instructions and/or dircctions the Trustcc shall forthwith receive the
originally executed instructions and/or dircctions. (ii) such originally executed instructions and/or
dircctions shall be signed by a person as may be dcsignatcd and authorized to sign for the party signing
such instructions and/or dircctions. and (iii) the Trustcc shall have received a current incumbency
certificate containing the specimen signature of such dcsignatcd person.
Scction 6.03. Fccs. Charzes and Expenses of Trustcc. The Trustcc shall be entitled to
payment and rcimburscmcnt for rcasonablc fccs for its services rendered hcrcundcr and all advances (with
interest on such advances at the maximum rats allowed by lacy). counscl fccs and expenses (including
those of in-house counscl to the extent they arc for services not duplicative of other counsels' work) and
other expenses reasonably and necessarily made or incurrcd by the Trustcc in connection with such
services. which payment and reimbursement shall not be Iimitcd by any provision of lacy in regard to the
compensation of a trustee of an express trust. Upon the occurrcncc of an Eycnt of Dcfault hcrcundcr. but
only upon an Eycnt of Dcfault. the Trustcc shall hays a first lien with right of payment prior to payment
of any Bond upon the amounts hold hcrcundcr for the foregoing fccs. charges and expenses incurrcd by it
respectively. which right to payment shall survive the resignation or removal of the Trustcc.
Section 6.04. Notice to ON\ncrs of Dcfault. If an Eycnt of Dcfault hcrcundcr occurs with
respect to any Bonds of which the Trustcc has been given or is deemed to hays noticc. as provided in
Section 6.02(h). then the Trustcc shall promptly given «cittcn noticc thereof by first-class mail to the
ONyncr of each such Bond. unless such Eycnt of Dcfault shall hays been cured before the giving of such
noticc: provided. however. that unless such Eycnt of Dcfault consists of the failure by the Authority to
make any payment «hen duo. the Trustcc may elect not to give such noticc if and so Tong as the Trustcc
in good faith determines that such Eycnt of Dcfault dots not materially adversely affect the interests of
the ON\ncrs or that it is otherwise not in the best interests of the ON\ncrs to give such noticc.
Section 6.05. Intervention by Trustcc. In any judicial proceeding to which the Authority
is a party which. in the opinion of the Trustcc. has a substantial bearing on the interests of Owners of any
of the Bonds. the Trustcc may intervene on behalf of such Owners. and subject to Section 6.02(I). shall do
so if requested in writing by the Owners of a majority in aggrcgatc Principal Amount of such Bonds then
Outstanding.
Section 6.06. Rcmoyal of Trustcc. The ON\ncrs of a majority in aggrcgatc Principal
Amount of the Outstanding Bonds may at any time. and the Authority may (and at the request of the
P6402.1055\881 3xc). 3 -2 I-
Agency shall) so long as no Event of Default shall have occurred and then be continuing. remove the
Trustee initially appointed. and any successor thereto. by an instrument or concurrent instruments in
writing delivered to the Tnistcc. «hereupon the Authority or such Owners. as the case may be. shall
appoint a successor or successors thereto: provided that any such successor shall be a financial institution
meeting the requirements set forth in Section 6.0I I.
Section 6.07. Resignation by Trustee. The Trustee and any successor Trustee may at any
time give written notice of its intention to resign as Trustee hereunder. such notice to be given to the
Authority and the Agency by registered or certified mail. Upon receiving such notice of resignation. the
Authority shall promptly appoint a successor Trustee. Any resignation or removal of the Trustee and
appointment of a successor Trustee shall become effective upon acceptance of appointment by the
successor Trustee. Upon such acceptance. the Authority shall cause notice thereof to be given by first
class mail. postage prepaid. to the Bond Owners at their respective addresses set forth on the Registration
Books.
Section 6.08. Appointment of Successor Trustee. In the event of the removal or
resignation of the Trustee pursuant to Sections 6.06 or 6.07. respectively. with the prior written consent of
Agency. the Authority shall promptly appoint a successor Trustee. In the event the Authority shall for
any reason Nvhatsoeyer fail to appoint a successor Trustee within 60 days following the delivery to the
Trustee of the instrument described in Section 6.06 or within 60 days following the receipt of notice by
the Authority pursuant to Section 6.07. the Trustee may. at the expense of the Authority. apply to a court
of competent jurisdiction for the appointment of a successor Trustee meeting the requirements of
Section 6.0 I . Any such successor Trustee appointed by such court shall become the successor Trustee
hereunder notwithstanding any action by the Authority purporting to appoint a successor Trustee
following the expiration of such sixty-day period.
Section 6.09. Merger or Consolidation. Any bank or trust company into which the
Trustee may be merged or converted or with which either of them may be consolidated or any bank or
trust company resulting from any merger. conversion or consolidation to which it shall be a party or any
bank or trust company to which the Trustee may sell or transfer all or substantially all of its corporate
trust business. provided such bank or trust company shall be eligible under Section 6.0I. shall be the
successor to such Trustee without the execution or filing of any paper or further act. except as provided in
Section 6.10.
Section 6.10. Concerning, any Successor Trustee. Every successor Trustee appointed
hereunder shall execute. acknowledge and deliver to its predecessor and also to the Authority an
instrument in writing accepting such appointment hereunder and thereupon such successor. without any
further act. deed or conveyance. shall become fully vested with all the estates. properties. rights. powers.
trusts. duties and obligations of its predecessors: but such predecessor shall. nevertheless. on the Request
of the Authority. or of the Trustees successor. execute and deliver an instrument transferring to such
successor all the estates. properties. rights. powers and trusts of such predecessor hereunder: and every
predecessor Trustee shall deliver all securities and moneys held by it as the Trustee hereunder to its
successor. Should any instrument in writing from the Authority be required by any successor Trustee for
more fully and certainly vesting in such successor the estate. rights. powers and duties hereby vested or
intended to be vested in the predecessor Trustee. any and all such instruments in writing shall. on request.
be executed. acknowledged and delivered by the Authority.
Section 6. I I . Appointment of Co -Trustee. It is the purpose of this Indenture that there
shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or
restricting the right of banking corporations or associations to transact business as Trustee in such
jurisdiction. It is recognized that in the case of litigation under this Indenture. and in particular in case of
the enforcement of the rights of the Trustee on default. or in the case the Trustee or the Authority deems
P6402. I Oi;\88I 3x(. ; -22-
that by reason of any present or future law of any jurisdiction it may not exercise any of the powers. rights
or remedies herein granted to the Trustee or hold title to the properties. in trust. as herein granted. or take
any other action which may be desirable or necessary in connection therewith. it may be necessary that
the Trustcc or the Authority appoint an additional individual or institution as a separate co -trustee. The
following provisions of this Section 6. I I are adopted to these ends.
In the event that the Trustee or the Authority appoints an additional individual or
institution as a separate or co -trustee. each and every remedy. power. right. claim. demand. cause of
action. immunity. estate. title. interest and lien expressed or intended by this Indenture to be exercised by
or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co -trustee
but only to the extent necessary to enable such separate or co -trustee to exercise such powers. rights and
remedies. and every covenant and obligation necessary to the exercise thereof by such separate or co -
trustee shall run to and be enforceable by either of them. The Trustee shall not be liable for the acts or
omissions of any separate or co -trustee appointed hereunder.
Should any instrument in writing from the Authority be required by the separate trustee
or co -trustee so appointed by the Trustee for more fully and certainly vesting in and conforming to it such
properties. rights. powers. trusts. duties and obligations. any and all such instruments in writing shall. on
request. be executed. acknowledged and delivered by the Authority. In case any separate trustee or co -
trustee. or a successor to either. shall become incapable of acting. resign or be removed. all the estates.
properties. rights. powers. trusts. duties and obligations of such separate trustee or co -trustee. so far as
permitted by law. shall vest in and be exercised by the Trustee until the appointment of a new trustee or
successor to such separate trustee or co -trustee.
Section 6.12. Indemnification: Limited Liability of Trustee. The Authority further
covenants and agrees to indemnify. defend and save the Trustee and its officers. directors. agents and
employees. harmless against any loss. expense and liabilities which it may incur arising out of or in the
exercise and performance of its powers and duties hereunder. including the costs of expenses of defending
against any claim of liability. but excluding any and all losses. expenses and liabilities which are due to
the negligence or intentional misconduct of the Trustee. its officers. directors or employees. No provision
in this Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial
liability hereunder if it shall have reasonable grounds for believing repayment of such funds or adequate
indemnity against such liability or risk is not assured to it. The Trustee shall not be liable for any action
taken or omitted to be taken by it in accordance with the direction of the Insurer or the Owners of at least
a majority in aggregate Principal Amount of Bonds Outstanding relating to the time. method and place of
conducting any proceeding or remedy available to the Trustee under this Indenture in exercising any trust
or power conferred on the Tnistcc by this Indenture. The obligations of the Authority under this Section
shall survive the payment and discharge of the Bonds or the resignation or removal of the Trustee under
this Indenture.
ARTICLE VII
MODIFICATION AND AMENDMENT OF THE
INDENTURE
Section 7.0I I. Amendment Hereof. This Indenture and the rights and obligations of the
Authority and of the Owners of the Bonds may be modified or amended at any time by a Supplemental
Indenture which shall become binding upon adoption. with the written consent of the Insurer (as long as
the Insurance Policy is in full force and effect) but without consent of any Bond Owners. to the extent
permitted by law but only for any one or more of the following purposes:
P6402. I c li i\881380.3 -2 3 -
(a) To add to the covenants and agreements of the Authority in this Indenture
contained. other covenants and agreements thereafter to be observed. or to limit or surrender any rights or
powers herein reserved to or conferred upon the Authority so Tong as such limitation or surrender of such
rights or powers shall not materially adversely affect the Owners of the Bonds: or
(b) To make such provisions for the purpose of curing any ambiguity. or of curing.
correcting or supplementing any defective provision contained in this Indenture. or in any other respect
Nvhatsoeyer as the Authority may deem necessary or desirable. provided under any circumstances that
such modifications or amendments shall either (i) conform to the original intention of the Authority. or
(ii) not materially adversely affect the interests of the Owners of the Bonds in the reasonable judgment of
the Authority: or
(c) To amend any provision hereof relating to the Code. to any extent Nvhatsoeyer but
only if and to the extent such amendment \\ill not adversely affect the exclusion from gross income of
interest on any of the Bonds under the Code. in the opinion of Bond Counsel.
Except as set forth in the preceding paragraphs of this Section 7.0I. this Indenture and the
rights and obligations of the Authority and of the Owners of the Bonds may only be modified or amended
at any time by a Supplemental Indenture Nvhich shall become binding \yhen the Nvritten consent of the
Insurer (as long as the Insurance Policy is in full force and effect) and of the Owners of a majority in
aggregate Principal Amount of the Bonds then Outstanding are filed Nvith the Trustee. No such
modification or amendment shall (i) extend the maturity of or reduce the interest rate on any Bond or
othenvise alter or impair the obligation of the Authority to pay the principal. interest or premiums. if any.
at the time and place and at the rate and in the currency provided therein of any Bond Nvithout the express
«rittcn consent of the Owner of such Bond or (ii) reduce the percentage of Bonds required for the «rittcn
consent to any such amendment or modification. In no event shall any Supplemental Indenture modify
any of the rights or obligations of the Trustee Nyithout its prior «rittcn consent.
Section 7.02. Effect of Supplemental Indenture. From and after the time any
Supplemental Indenture becomes effective pursuant to this Article VII. this Indenture shall be deemed to
be modified and amended in accordance therewith. the respective rights. duties and obligations of the
parties hereto or thereto and all Owners of Outstanding Bonds. as the case may be. shall thereafter be
determined. exercised and enforced hereunder subject in all respects to such modification and
amendment. and all the terms and conditions of any Supplemental Indenture shall be deemed to be part of
the terms and conditions of this Indenture for any and all purposes.
Section 7.03. Endorsement or Replacement of Bonds After Amendment. After the
effective date of any action taken as hereinaboye provided. the Authority may determine that the Bonds
shall bear a notation. by endorsement in form approved by the Authority. as to such action. and in that
case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his
bond for that purpose at the Trust Office of the Trustee. a suitable notation as to such action shall be made
on such Bond at the expense of the Authority. If the Authority shall so determine. neW Bonds SO
modified as. in the opinion of the Authority. shall be necessary to conform to such Bond Owners" action
shall be prepared and executed. and in that case upon demand of the Owner of any Bond Outstanding at
such effective date such neW Bonds shall be exchanged at the Trust Office of the Trustee. at the expense
of the Authority. for Bonds then Outstanding. upon surrender of such Outstanding Bonds.
P6402. I c li i\881380.3 -24-
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN. SO LONG AS
THE INSURANCE POLICY REMAINS IN EFFECT AND THE INSURER HAS NOT DEFAULTED
WITH RESPECT TO ITS PAYMENT OBLIGATIONS UNDER THE INSURANCE POLICY. ALL
PROVISIONS OF THIS ARTICLE VIII SHALL BE SUBJECT TO. AND QUALIFIED BY. THE
PROVISIONS SET FORTH IN ARTICLE IX. INCLUDING. WITHOUT LIMITATION. THE
INSURERS RIGHT TO CONSENT TO ACCELERATION OF THE BONDS. AND THE INSURERS
RIGHT TO CONSENT TO OR DIRECT CERTAIN AUTHORITY. TRUSTEE OR OWNER ACTIONS.
Section 8.0I I. Events of Default. The following events shall be Events of Default
hereunder:
(a) Default in the due and punctual payment of the Principal Amount of any Bond
when and as the same shall become due and payable. whether at maturity as therein expressed. by
proceedings for redemption. by declaration or otherwise.
(b) IReseryedI
(c) Failure by the Authority to observe and perform any of the covenants.
agreements or conditions on its part in this Indenture or in the Bonds contained. other than as referred to
in the preceding Paragraph (a). for a period of 30 days after written notice. specifying such a failure and
requesting that it be remedied has been given to the Authority by the Trustee. or to the Authority and the
Trustee by the Owners of a majority in aggregate Principal Amount of the Outstanding Bonds: provided.
however. that if in the reasonable opinion of the Authority the failure stated in such notice can be
corrected. but not within such 30 day period. such failure shall not constitute an Event of Default if
corrective action is instituted by the Authority within such 30 day period and diligently pursued until such
failure is corrected.
(d) The filing by the Authority of a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law of the United States of
America. or if a court of competent jurisdiction shall approve a petition. filed with or without the consent
of the Authority. seeking reorganization under the federal bankruptcy laws or any other applicable law of
the United States of America. or if. under the provisions of any other law for the relief or aid of debtors.
any court of competent jurisdiction shall assume custody_ or control of the Authority or of the whole or
any substantial part of its property.
(c) The occurrence of any Event of Default under. and as that term is defined in. the
Loan Agreement.
Section 8.02. Remedies Upon Event of Default. Subject to the provisions of Article IX.
if any Event of Default shall occur. then. and in each and every such case during the continuance of such
Event of Default. the Trustee may. and at the written direction of the Owners of a majority in aggregate
Principal Amount of the Bonds at the time Outstanding shall. upon notice in writing to the Authority and
the Agency. declare the Principal Amount of all of the Bonds then Outstanding. to be due and payable
immediately. and upon any such declaration the same shall become and shall be immediately due and
payable. anything in this Indenture or in the Bonds contained to the contrary notwithstanding.
Any such declaration is subject to the condition that if. at any time after such declaration
and before any judgment or decree for the payment of the moneys due shall have been obtained or
P6402. I clii\881380.3 -25-
entered. the Authority or the Agency shall deposit Nyith the Trustee a sum sufficient to pay the Accreted
Value of the Bonds of which payments are overdue (such Accreted Value. to the extent permitted by lacy.
being calculated to but not including the date of payment by the Authority or the Agency to the Trustee).
and the charges and expenses of the Trustee and its counsel (including the allocated costs and
disbursements of in-house counsel to the extent the services of such counsel are not duplicative of
services provided by outside counsel). and any and all other Events of Default known to the Trustee
(other than in the payment of Principal Amount of the Bonds due and payable solely by reason of such
declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by
the Trustee to be adequate shall have been made therefor. then. and in every such case. the Owners of not
less than a majority in aggregate Principal Amount of the Bonds then Outstanding. by Nyritten notice to
the Authority. the Agency and the Trustee. or the Trustee if such declaration was made by the Trustee.
may. on behalf of the Owners of all of the Bonds. rescind and annul such declaration and its consequences
and \yaiye such Event of Default: but no such rescission and annulment shall extend to or shall affect any
subsequent Event of Default. or shall impair or exhaust any right or power consequent thereon.
In addition. upon the occurrence and during the continuance of an Event of Default. the
Trustee may pursue any available remedy at lacy or in equity to enforce the payment of the Principal
Amount of and premium. if any. on the Bonds. and to enforce any rights of the Trustee under or with
respect to the Loan Agreement and this Indenture.
If an Event of Default shall have occurred and be continuing and if requested so to do by
the Owners of a majority in aggregate Principal Amount of Outstanding Bonds and indemnified as
provided in Section 6.02(I). the Trustee shall be obligated to exercise such one or more of the rights and
powers conferred by this Article VIII. as the Tnistcc. being advised by counsel. shall deem most
expedient in the interest of the Bond Owners.
No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to
the Owners) is intended to be exclusive of any other remedy. but each and every such remedy shall be
cumulative and shall be in addition to any other remedy given to the Trustee or to the Owners hereunder
or now or hereafter existing at lacy or in equity.
No delay or omission to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a Nyaiyer of any such Event of Default or
acquiescence therein: such right or power may be exercised from time to time as often as may be deemed
expedient.
Section 8.03. Application of Revenues and Other Funds After Default. All amounts
received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of
this Indenture shall be applied by the Trustee in the following order upon presentation of the several
Bonds. and the stamping thereon of the amount of the payment if only partially paid. or upon the
surrender thereof if fully paid -
First. to the payment of the fees. costs and expenses of the Trustee. including reasonable
compensation to its agents. attorneys and counsel (including the allocated costs and disbursements of in-
house counsel to the extent the services of such counsel are not duplicative of services provided by
outside counsel): and
Second. to the payment of the amount of Principal Amount of the Bonds then due and
unpaid (such Principal Amount being Accreted Value of such Bonds calculated to but not including the
date of payment by the Authority or the Agency to the Trustee. to the extent permitted by lacy): provided.
however. that in the event such amounts shall be insufficient to pay the full amount. then such amounts
P6402. I clii\881380.3 -26-
shall be applied to the payment of the Principal Amount of all installments of the Bonds then due and
payable on a pro rata basis.
Section 8.04. Power of Trustee to Control Proceedings. Subject to the provisions of
Article IX. in the event that the Trustee. upon the happening of an Event of Default. shall have taken an
action. by judicial proceedings or otherwise. pursuant to its duties hereunder. Nvhether upon its own
discretion or upon the request of the Owners of at least a majority in aggregate Principal Amount of the
Bonds then Outstanding. it shall have full power. in the exercise of its discretion for the best interests of
the Owners. Nyith respect to the continuance. discontinuance. Nvithdrawal. compromise. settlement or other
disposal of such action: provided. however. that the Trustee shall not. unless there no longer continues an
Event of Default. discontinue. Nvithdraw. compromise or settle. or othenvise dispose of an litigation
pending at lacy or in equity. if at the time there has been filed Nyith it a Nvritten request signed by the
Owners of a majority in aggregate Principal Amount of the Outstanding Bonds hereunder opposing such
discontinuance. Nvithdrawal. compromise. settlement or other disposal of such litigation. Any suit. action
or proceeding Nvhich any Owner shall have the right to bring to enforce any right or remedy hereunder
may be brought by the Trustee for the equal benefit and protection of all Owners similarly situated and
the Trustee is hereby appointed (and the successive respective Owners hereunder. by taking and holding
the same. shall be conclusively deemed so to have appointed it) the true and lawful attorney -in -fact of the
respective Owners for the purpose of bringing any such suit. action or proceeding and to do and perform
any and all acts and things for an on behalf of the respective Owners as a class or classes. as may be
necessary or advisable in the opinion of the Trustee as such attorney -in -fact.
Section 8.05. Appointment of Receivers. Upon the occurrence of an Event of Default
hereunder. and upon the filing of a suit or other commencement of judicial proceedings to enforce the
rights of the Trustee and of the Owners under this Indenture. the Trustee shall be entitled. as a matter or
right. to the appointment of a receiver or receivers of the Revenues and other amounts pledged hereunder.
pending such proceedings. Nyith such powers as the court making such appointment shall confer.
Section 8.06. Non -Waiver. Nothing in this Article VI I I or in any other provision of this
Indenture. or in the Bonds. shall affect or impair the obligation of the Authority. \yhich is absolute and
unconditional. to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at
the respective dates of maturity. as herein provided. out of the Revenues and other moneys herein pledged
for such payment.
A Nvaiyer of any default or breach of duty or contract by the Trustee or any Owners shall
not affect any subsequent default or breach of duty or contract. or impair any rights or remedies on any
such subsequent default or breach. No delay or omission of the Trustee or any Owner to exercise any
right or power accruing upon any default shall impair any such right or power or shall be construed to be
a Nvaiyer of any such default or any acquiescence therein: and every power and remedy conferred upon
the Trustee or Owners by the Bond Law or by this Article VIII may be enforced and exercised. upon an
Event of Default. from time to time and as often as shall be deemed expedient by the Trustee or the
Owners. as the case may be.
Section 8.07. Limitation on Rights and Remedies of Owners. No Owner shall have the
right to institute any suit. action or proceeding at lacy or in equity. for any remedy under or upon this
Indenture. unless (i) such Owner shall have previously given to the Trustee «rittcn notice of the
occurrence of an Event of Default: (ii) the Owners of a majority in aggregate Principal Amount of all the
Bonds then Outstanding shall have made «rittcn request upon the Trustee to exercise the powers
hereinbefore granted or to institute such action. suit or proceeding in its own name: (iii) said Owners shall
have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs. expenses
and liabilities to be incurred in compliance Nyith such request: and (iv) the Trustee shall have refused or
P6402. I clii\881380.3 -27-
omitted to comply with such request for a period of 60 days after such written request shall have been
received by. and said tender of indemnity shall have been made to. the Trustee.
Such notification. request. tender of indemnity and refusal or omission are hereby
declared. in every case. to be conditions precedent to the exercise by an Owner of an remedy
hereunder: it being understood and intended that no one or more Owners shall have any right in any
manner Nvhateyer by the Owners or Owners action to enforce any right under this Indenture. except in
the manner herein provided. and that all proceedings at law or in equity to enforce any provision of this
Indenture shall be instituted. had and maintained in the manner herein provided and for the equal benefit
of all Owners.
The right of any Owner of an Bond to receive payment of the principal of and interest
and premium. if an. on such Bond as herein provided or to institute suit for the enforcement of any such
payment. shall not be impaired or affected without the «rittcn consent of such Owner. notwithstanding
the foregoing provisions of this Section or any other provision of this Indenture.
Section 8.08. Termination of Proceedings. In case the Trustee shall have proceeded to
enforce any right under this Indenture by the appointment of a receiver or othenvise. and such
proceedings shall have been discontinued or abandoned for any reason. or shall have been determined
adversely. then and in even- such case. the Authority. the Trustee and the Owners shall be restored to
their former positions and rights hereunder. respectively. with regard to the property subject to this
Indenture. and all rights. remedies and powers of the Trustcc shall continue as if no such proceedings had
been taken.
ARTICLE IX
BOND INSURANCE
(to come)
ARTICLE X
BOOK -ENTRY SYSTEM
Section 10.01 Book -Entry System: Limited Obligation of Authority. The Bonds shall be
initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for
each of the maturities of the Bonds. Upon initial delivery. the ownership of each such Bond shall be
registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the
Depository. Except as provided in Section 10.03. all of the Outstanding Bonds shall be registered in the
registration books kept by the Trustee in the name of the Nominee.
With respect to Bonds registered in the registration books kept by the Trustee in the name
of the Nominee. the Authority and the Trustee shall have no responsibility or obligation to any Participant
or to any person on behalf of which such a Participant holds an interest in the Bonds. Without limiting
the immediately preceding sentence. the Authority and the Trustee shall have no responsibility or
obligation with respect to (i) the accuracy of the records of the Depository. the Nominee. or any
Participant with respect to any ownership interest in the Bonds. (ii) the delivery to any Participant or any
other person. other than an Owner as shown in the registration books kept by the Trustee. of any notice
with respect to the Bonds. including any notice of redemption. (iii) the selection by the Depository and its
Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds are redeemed in
part. or (iv) the payment to any Participant or any other person. other than an Owner as shown in the
registration books kept by the Trustee. of any amount with respect to principal of. premium. if any. or
P6402. I Oi;\88I HBO. ; -28-
interest due with respect to the Bonds. The Authority and the Trustee may treat and consider the person
in whose name each Bond is registered in the registration books kept by the Tnistcc as the holder and
absolute owner of such Bond for the purpose of payment of principal. premium. if any. and interest with
respect to such Bond. for the purpose of giving notices of redemption and other matters with respect to
such Bond. for the purpose of registering transfers with respect to such Bond. and for all other purposes
Nvhatsoeyer. The Trustee shall pay all principal of. premium. if any. and interest due with respect to the
Bonds only to or upon the order of the respective Owners. as shown in the registration books kept by the
Trustee. or their respective attorneys duly authorized in writing. and all such payments shall be valid and
effective to satisfy and discharge fully the Authority's obligations with respect to payment of the
principal. premium. if any. and interest due with respect to the Bonds to the extent of the sum or sums so
paid. No person other than an Owner. as shown in the registration books kept by the Trustee. shall
receive a Bond evidencing the obligation of the Authority to make payments of principal. premium. if
any. and interest pursuant to this Indenture. Upon delivery by the Depository to the Trustee and the
Authority of written notice to the effect that the Depository has determined to substitute a new nominee in
place of the Nominee. and subject to the provisions herein with respect to Record Dates. the word
Nominee in this Indenture shall refer to such new nominee of the Depository.
Section 10.02 Representation Letter. In order to qualify the Bonds for the Depository's
book entry system. the Authority has heretofore executed and delivered to such Depository the
Representation Letter. The execution and delivery of a Representation Letter shall not in any way impose
upon the Authority or the Tnistcc any obligation Nvhatsoeyer with respect to persons having interests in
the Bonds other than the Owners. as shown on the registration books kept by the Trustee. The Trustee
agrees to take all action necessary to continuously comply with the Representation Letter to the extent
that such action is not inconsistent with this Indenture. In addition to the execution and delivery of the
Representation Letter. the officers of the Authority are hereby authorized to take any other actions. not
inconsistent with this Indenture. to qualify the Bonds for the Depository's book entry program.
Section 10.03 Transfers Outside Book-Entry System. In the event (a) the Depository
determines not to continue to act as securities depository for the Bonds. or (b) the Authority determines
that the Depository shall no longer so act. then the Authority NViII discontinue the book -entry system with
the Depository. If the Authority fails to identify another qualified securities depository to replace the
Depository. then the Bonds so designated shall no longer be restricted to being registered in the
registration books kept by the Trustee in the name of the Nominee. but shall be registered in Nvhateyer
name or names persons transferring or exchanging Bonds shall designate. in accordance with the
provisions of Section 2.09.
Section 10.04 Payments to the Nominee. Notwithstanding anv other provisions of this
Indenture to the contrary. so long as any Bond is registered in the name of the Nominee. all payments
with respect to principal. premium. if any. and interest due with respect to such Bond and all notices with
respect to such Bond shall be made and given. respectively. as provided in the Representation Letter or as
othenyise instructed by the Depository.
Section 10.05 Initial Depository and Nominee. The initial Depository under this Article
shall be The Depository Trust Company. NOV York. NOV York. The initial Nominee shall be Cede &
Co.. as Nominee of The Depository Trust Company. NOV York. NOV York.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Limited Liability of Authority. Notwithstanding anything in this
Indenture contained. the Authority shall not be required to advance anv moneys derived from any source
P6402. I c);,\xx I 3xc). ; -29-
of income other than the Revenues for the payment of the principal of or interest on the Bonds. or any
premiums upon the redemption thereof. or for the performance of any covenants herein contained (except
to the extent any such covenants are expressly payable hereunder from the Revenues or otherwise from
amounts payable under the Loan Agreement). The Authority may. however. advance funds for any such
purpose. provided that such funds are derived from a source legally available for such purpose and may
be used by the Authority for such purpose Nyithout incurring indebtedness.
The Bonds shall be revenue bonds. payable exclusively from the Revenues and other
funds as in this Indenture provided. The general fund of the Authority is not liable. and the credit of the
Authority is not pledged. for the payment of the interest and premium. if any. on or principal of the
Bonds. The Owners of the Bonds shall never have the right to compel the forfeiture of any property of
the Authority. The principal of and interest on the Bonds. and any premiums upon the redemption of any
thereof. shall not be a legal or equitable pledge. charge. Tien or encumbrance upon any property of the
Authority or upon any of its income. receipts or revenues except the Revenues and other funds pledged to
the payment thereof as in this Indenture provided.
Section 11.02. Benefits of Indenture Limited to Parties. Nothing in this Indenture.
expressed or implied. is intended to give to any person other than the Authority. the Trustee. the Agency.
the Insurer. and the Owners of the Bonds. any right. remedy or claim under or by reason of this Indenture.
Any covenants. stipulations. promises or agreements in this Indenture contained by and on behalf of the
Authority shall be for the sole and exclusive benefit of the Trustee. the Agency. the Insurer. and the
Owners of the Bonds.
Section 11.0 3. Discharge of Indenture. If the Authority shall pay and discharge any or
all of the Outstanding Bonds in any one or more of the following ways:
(a) By \yell and truly paying or causing to be paid the principal of and
interest and premium. if any. on such Bonds. as and Nyhen the same become due and payable:
(b) By irrevocably depositing with the Trustee. in trust. at or before maturity.
money which. together with the available amounts then on deposit in the funds and accounts established
with the Trustee pursuant to this Indenture and the Loan Agreement. is fully sufficient to pay such Bonds.
including all principal. interest and premiums. if any: or
(c) By irrevocably depositing with the Trustee or any other fiduciary. in
trust. non -callable Defeasance Obligations in such amount as an Independent Accountant shall determine
will. together with the interest to accrue thereon and available moneys then on deposit in the funds and
accounts established with the Trustee pursuant to this Indenture and the Loan Agreement. be fully
sufficient to pay and discharge the indebtedness on such Bonds (including all principal. interest and
redemption premiums) at or before their respective maturity dates: and if such Bonds are to be redeemed
prior to the maturity thereof notice of such redemption shall have been sent pursuant to Section 2.03 or
provision satisfactory to the Trustee shall have been made for the sending of such notice. then. at the
Request of the Authority. and notwithstanding that any of such Bonds shall not have been surrendered for
payment. the pledge of the Revenues and other funds provided for in this Indenture with respect to such
Bonds. and all other pecuniary obligations of the Authority under this Indenture with respect to all such
Bonds. shall cease and terminate. except only the obligation of the Authority to pay or cause to be paid to
the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for
such purpose as aforesaid. and all expenses and costs of the Trustee. Any funds held by the Trustee.
following any payment or discharge of the Outstanding Bonds pursuant to this Section 11.03 and the
payment of the Trustees and the Insurers expenses and costs. shall be paid over to the Authority.
1)6402.10.5.5 \881380.3 -30-
Section 11.04. Successor Is Deemed Included in All References to Predecessor.
Whenever in this Indenture or any Supplemental Indenture the Authority is named or referred to. such
reference shall be deemed to include the successor to the powers. duties and functions. with respect to the
management. administration and control of the affairs of the Authority. that are presently vested in the
Authority. and all the covenants. agreements and provisions contained in this Indenture by or on behalf of
the Authority shall bind and inure to the benefit of its successors whether so expressed or not.
Section 11.05. Content of Certificates. Every Certificate of the Authority with respect to
compliance with a condition or covenant provided for in this Indenture shall include (i) a statement that
the person or persons making or giving such Certificate have read such covenant or condition and the
definitions herein relating thereto: (ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Certificate are based: (iii) a
statement that. in the opinion of the signers. they have made or caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as to whether or not such
covenant or condition has been complied with: and (iv) a statement as to whether. in the opinion of the
signers. such condition or covenant has been complied with.
Any such certificate made or given by an officer of the Authority may be based. insofar
as it relates to legal matters. upon a certificate or opinion of or representations by counsel. unless such
officer knows that the certificate or opinion or representations with respect to the matters upon which his
certificate may be based. as aforesaid. are erroneous. or in the exercise of reasonable care should have
known that the same were erroneous. Any such certificate or opinion or representation made or given by
counsel may be based. insofar as it relates to factual matters. on information with respect to which is in
the possession of the Authority. or upon the certificate or opinion of or representations by an officer or
officers of the Authority. unless such counsel knows that the certificate or opinion or representations with
respect to the matters upon which his certificate. opinion or representation may be based. as aforesaid. are
erroneous.
Section 11.06. Execution of Documents by Owners. Any request. consent or other
instrument required by this Indenture to be signed and executed by Bond Owners may be in any number
of concurrent writings of substantially similar tenor and may be signed or executed by such Bond Owners
in person or by their agent or agents duly appointed in writing. Proof of the execution of any such
request. consent or other instrument or of a writing appointing any such agent. shall be sufficient for any
purpose of this Indenture and shall be conclusive in favor of the Trustee and of the Authority if made in
the manner provided in this Section 11.06.
The fact and date of the execution by any person of any such request. consent or other
instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of
any notary public or other officer of any jurisdiction, authorized by the laws thereof to take
acknowledgments of deeds. certifying that the person signing such request. consent or other instrument or
writing acknowledged to him the execution thereof.
The ownership of Bonds shall be proved by the Registration Books. Any request.
consent or vote of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner
of any Bond issued in exchange therefor or in Iicu thereof. in respect of anything done or suffered to be
done by the Trustee or the Authority in pursuance of such request. consent or vote. In Iicu of obtaining
any demand. request, direction. consent or Nvaiyer in writing. the Trustee may call and hold a meeting of
the Bond Owners upon such notice and in accordance with such rules and obligations as the Trustee
considers fair and reasonable for the purpose of obtaining any such action.
Section 11.07. Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand. request. direction. consent or Nvaiyer
P6402. ! U \xx l ). ; -3 I -
under this Indenture. Bonds which are owned or held by or for the account of the Agency or the Authority
(but excluding Bonds held in any employees' retirement fund) shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination. provided. however. only Bonds which a
responsible officer of the Trustee actually knows to be so owned or held shall be disregarded.
Section 11.08. Waiver of Personal Liability. No officer. agent or employee of the
Authority shall be individually or personally liable for the payment of the interest on or principal of the
Bonds: but nothing herein contained shall relieve any such officer. agent or employee from the
performance of any official duty provided by law.
Section 11.09. Partial Invalidity. If any one or more of the covenants or agreements. or
portions thereof. provided in this Indenture on the part of the Authority (or of the Trustee) to be
performed should be contrary to law. then such covenant or covenants. such agreement or agreements. or
such portions thereof. shall be null and void and shall be deemed separable from the remaining covenants
and agreements or portions thereof and shall in no way affect the validity of this Indenture or of the
Bonds: but the Bond Owners shall retain all rights and benefits accorded to them under the Bond Law or
any other applicable provisions of law. The Authority hereby declares that it would have entered into this
Indenture and each and every other section. paragraph. subdivision. sentence. clause and phrase hereof
and would have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that any one
or more sections. paragraphs. subdivisions. sentences. clauses or phrases of this Indenture or the
application thereof to any person or circumstance may be held to be unconstitutional. unenforceable or
invalid.
Section 1 1.10. Destruction of Cancelled Bonds. Whenever in this Indenture provision is
made for the surrender to the Trustee of any Bonds which have been paid or cancelled pursuant to the
provisions of this Indenture. the Trustee shall. as permitted by law. destroy such cancelled Bonds and.
upon Request of the Authority. provide to the Authority a certificate of destruction duly executed by the
Trustcc. and the Authority shall be entitled to rely upon any statement of fact contained in such certificate
with respect to the destruction of any such Bonds therein referred to: provided. however. the Authority
shall reimburse the Trustee for the Trustees costs incurred in connection with the microfilming or the
required permanent recording. if any. related thereto.
Section 1 1.1 1. Funds and Accounts. Any fund or account required by this Indenture to
be established and maintained by the Authority or the Trustee may be established and maintained in the
accounting records of the Authority or the Trustee. as the case may be. either as a fund or an account. and
may. for the purpose of such records. any audits thereof and any reports or statements with respect
thereto. be treated either as a fund or as an account. All such records with respect to all such funds and
accounts held by the Authority shall at all times be maintained in accordance with generally accepted
accounting principles and all such records with respect to all such funds and accounts held by the Trustee
shall be at all times maintained in accordance with corporate trust industry practices. Any fund or
account required by this Indenture to be established and maintained by the Authority or the Trustee may
be established and maintained in the form of multiple funds. accounts or sub -accounts therein.
Section 11.12. Payment on Business Days. Whenever in this Indenture any amount is
required to be paid on a day which is not a Business Day. such payment shall be required to be made on
the Business Day immediately following such day. provided that interest shall not accrue from and after
such day.
Section 1 1.1 3. Notices. Any notice. request. complaint. demand or other communication
under this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at
its address set forth below. or by telecopy or other form of telecommunication. confirmed by telephone at
its number set forth below. Notice shall be effective either (i) upon transmission by telecopy or other
P6402.I055\88I 38c).; -32-
form of telecommunication. (ii) 48 hours after deposit in the United States mail. postage prepaid. or
(iii) in the case of personal delivery to any person. upon actual receipt. The Authority. the Agency or the
Trustee may. by written notice to the other parties. from time to time modify the address or number to
which communications are to be given hereunder.
If to the Authority: Palm Desert Financing Authority
7 3-5 10 Fred Waring Drive
Palm Desert. California 92260
Attention: Chief Administrative Officer
Facsimile: (760) 340-0574
If to the Agency: Palm Desert Redevelopment Agency
7 3-5 10 Fred Waring Drive
Palm Desert. California 92260
Attention: Executive Director
Facsimile: (760) 340-0574
If to the Trustee: Wells Fargo Bank. National Association
707 Wilshire Boulevard. 17th Floor
Los Angeles. California 90017
Attention: Corporate Trust Department
Facsimile: (213) 614-3355
If to the Insurer:
Attention:
Facsimile: ( )
The Authority. the Agency. the Trustee and the Insurer may designate anv further or
different addresses to which subsequent notices. certificates or other communications shall be sent.
Notices to the Insurer shall be governed by Section 9.02.
Section 11.14. Unclaimed Money s. Anything in this Indenture to the contrary
notwithstanding. anv moneys held by the Trustee in trust for the payment and discharge of anv of the
Bonds or the interest thereon which remain unclaimed for two years after the date when such Bonds or the
interest thereon have become due and payable. either at their stated maturity dates or by call for earlier
redemption. if such moneys \were held by the Trustee at such date. or for two years after the date of
deposit of such moneys if deposited with the Trustee after said date when such Bonds or the interest
thereon become due and payable. shall. at the Request of the Authority. be repaid by the Trustee to the
Authority. as its absolute property and free from trust. and the Trustee shall thereupon be released and
discharged with respect thereto and the Owners shall look only to the Authority for the payment of such
Bonds: provided. however. that before making anv such payment to the Authority. the Trustee shall. at the
Request and at the expense of the Authority. cause to be mailed to the Owners of all such Bonds. at their
respective addresses appearing on the Registration Books. a notice that said moneys remain unclaimed
and that. after a date named in said notice. which date shall not be less than 30 days after the date of
mailing of such notice. the balance of such moneys then unclaimed will be returned to the Authority.
Section 11.15. Governing, Law. This Agreement shall be construed and governed in
accordance with the laws of the State of California.
P6402.1055\881380.; -33-
P6402. I Oii\88I 38O. ; -34-
IN WITNESS WHEREOF. the PALM DESERT FINANCING AUTHORITY has caused this
Indenture to be signed in its name by its duly authorized officer and WELLS FARGO BANK.
NATIONAL ASSOCIATION. in token of its acceptance of the trust created hereunder. has caused this
Indenture to be signed in its corporate name by its officer identified below. all as of the day and year first
above Nvritten.
PALM DESERT FINANCING AUTHORITY
By
Chief Administrative Officer
WELLS FARGO BANK. NATIONAL ASSOCIATION.
as Trustee
By
Authorized Officer
P6402.I055\88I 80.; - 5-
EXHIBIT A
IFORM OF BONDS
Unless this certificate is presented by an authorized representative of The Depository Trust Company. a
NOV York corporation ("DTC). to the Authority or its agent for registration of transfer. exchange. or
payment. and any certificate issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative of DTC). ANY TRANSFER. PLEDGE. OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof. Cede & Co.. has an interest herein.
No. Maturity Amount: }
PALM DESERT FINANCING AUTHORITY
SUBORDINATE TAX ALLOCATION REVENUE CAPTIAL APPRECIATION BOND
(PROJECT AREA NO. 2)
2006 SERIES D
YIELD TO
MATURITY MATURITY DATE ORIGINAL ISSUE DATE CUSIP
August I. 20_
REGISTERED OWNER: CEDE & CO.
INITIAL PRINCIPAL AMOUNT:
MATURITY AMOUNT:
The PALM DESERT FINANCING AUTHORITY. a joint powers authority organized and
existing under the laws of the State of California (the "Authority"). for value received. hereby promises to
pay (but only out of the Revenues. as defined in the Indenture hereinafter referred to. and certain other
moneys) to the Registered Owner identified above or registered assigns (the "Registered Owner"). in
lawful money of the United States of America. either the Maturity Amount identified above on the
Maturity Date or the Accreted Value. plus any applicable redemption premium. upon redemption prior to
maturity. "Accreted Value." with respect to any Bond. means as of any date of calculation. the sum of the
Initial Principal Amount thereof and the interest accrued thereon to such date of calculation. compounded
from the Original Issue Date at the stated Yield to Maturity thereof on each February I and August I.
commencing August I. 2006. Interest on each Bond shall be computed using a year of 360 days of
twelve 30-day months and shall be payable (i) at maturity as part of the Maturity Amount. or (ii) at
redemption as part of the Accreted Value to the redemption date. The Maturity Amount. or the Accreted
Value and redemption premium (if any). as applicable. with respect to any Bond shall be paid upon
presentation and surrender thereof. at maturity or the prior redemption thereof. at the corporate trust office
P64U2. l 0.5.5\881380.3 A- I
of Wells Fargo Bank. National Association (the "Trustee") in Los Angeles. California or such other
location as the Trustee shall designate (the "Trust Office").
This Bond is one of a duly authorized series of bonds of the Authority designated the Palm Desert
Financing Authority. Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No.
2). 2006 Series D (the "Bonds"). limited in initial principal amount to } . The Bonds are
secured by an Indenture of Trust. dated as of July I. 2006 (the "Indenture"). by and between the Authority
and the Trustee. Unless the context clearly requires otherwise. capitalized terms used but not defined
herein have the meanings ascribed to them in the Indenture. Reference is hereby made to the Indenture
and all indentures supplemental thereto for a description of the rights thereunder of the owners of the
Bonds. of the nature and extent of the Revenues. of the rights. duties and immunities of the Trustee and of
the rights and obligations of the Authority thereunder: and all of the terms of the Indenture are hereby
incorporated herein and constitute a contract between the Authority and the Registered Owner hereof. and
to all of the provisions of which Indenture the Registered Owner hereof. by acceptance hereof. assents
and agrees.
The Bonds are authorized to be issued pursuant to the provisions of the Marks -Roos Local Bond
Pooling Act of 1985. constituting Article 4. Chapter 5. Division 7. Title I of the Government Code of the
State of California (the "Act"). The Bonds are special obligations of the Authority and. as and to the
extent set forth in the Indenture. are payable solely from and secured by a first lien on and pledge of the
Revenues and certain other moneys and securities held by the Trustee as provided in the Indenture. All of
the Bonds are equally secured by a pledge of. and charge and lien upon. all of the Revenues and such
other moneys and securities. and the Revenues and such other moneys and securities constitute a trust
fund for the security and payment of the principal of and interest on the Bonds. The full faith and credit
of the Authority is not pledged for the payment of the principal of or interest or premium (if an) on the
Bonds. The Bonds are not secured by a legal or equitable pledge of. or charge. lien or encumbrance upon.
any of the property of the Authority or any of its income or receipts. except the Revenues and such other
moneys and securities as provided in the Indenture.
The Bonds have been issued for the purpose of making a loan (the "Loan") to the Palm Desert
Redevelopment Agency (the "Agency") to finance certain public capital improvements with respect to a
redevelopment project known and designated as Project Area No. 2 (the "Project Area"). The Loan has
been made by the Authority to the Agency pursuant to a Project Area No. 2 Loan Agreement (2006
Subordinate Loan). dated as of July I. 2006 (the "Loan Agreement"). by and among the Agency. the
Authority and the Trustee. Repayment of the Loan is secured by Subordinate Tax Revenues (as defined
in the Loan Agreement). consisting of certain tax revenues received by the Agency with respect to the
Project Area. less the amount required to pay certain obligations of the Agency which rank senior to the
Loan.
The Bonds maturing on or after August I. 2() are subject to redemption prior to their respective
maturity dates as a Nvhole. or in part among maturities as designated by the Authority and by lot within a
maturity. from prepayments of the Loan made at the option of the Agency pursuant to the Loan
Agreement. on any August I or February I on or after August I. 20 . at the following respective
redemption prices (expressed as a percentage of the Accreted Value of the called Bonds on the date fixed
for redemption):
P6402. I clii\881380.3 A-2
Redemption Dates Redemption Price
August I. 2() and February I. 2() `%)
August I. 2() and February I. 2()
August I. 2() and thereafter
The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of
any redemption to the respective owners of any Bonds designated for redemption. at their respective
addresses appearing on the registration books maintained by the Trustee. and by such means as acceptable
to the following institutions. to the Securities Depositories and to one or more Information Services. at
least 30 but not more than 60 days prior to the redemption date: provided. however. that neither failure to
receive any such notice so mailed nor any defect therein shall affect the validity of the proceedings for the
redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice shall state the
date of the notice. the redemption date. the redemption place and the redemption price and shall designate
the CUSIP numbers. the serial numbers of each maturity or maturities (except that if the event of
redemption is of all of the Bonds of such maturity or maturities in whole. the Trustee shall designate such
maturities or the maturity in NVhoIe without referencing each individual number) of the Bonds to be
redeemed. and shall require that such Bonds be then surrendered at the Trust Office for redemption at the
redemption price. giving notice also that further interest on such Bonds will not accrue from and after the
redemption date.
Subject to the limitations and upon payment of the charges. if any. provided in the Indenture. this
Bond may be exchanged at the Trust Office for a like aggregate Maturity Amount and maturity of fully
registered Bonds of other authorized denominations.
This Bond is transferable by the Registered Owner hereof. in person or by the Registered
Owners attorney duly authorized in writing. at the Trust Office. but only in the manner. subject to the
limitations and upon payment of the charges provided in the Indenture. and upon surrender and
cancellation of this Bond. Upon such transfer a new fully registered Bond or Bonds. of authorized
denomination or denominations. for the same aggregate Maturity Amount and of the same maturity NViII
be issued to the transferee in exchange therefor. The Trustee shall not be required to register the transfer
or exchange of an Bond during the 15-day period preceding the selection of Bonds for redemption or
any Bond selected for redemption. The Authority and the Trustee may treat the Registered Owner hereof
as the absolute owner hereof for all purposes. and the Authority and the Trustee shall not be affected by
any notice to the contrary.
The Indenture and the rights and obligations of the Authority and of the owners of the Bonds and
of the Trustee may be modified or amended from time to time and at any time in the manner. to the
extent. and upon the terms provided in the Indenture: provided that no such modification or amendment
shall (a) extend the maturity of or reduce the interest rate on any Bond or othenyise alter or impair the
obligation of the Authority to pay the principal. interest or premiums at the time and place and at the rate
and in the currency provided therein of any Bond without the express written consent of the Owner of
such Bond. (b) reduce the percentage of Bonds required for the written consent to any such amendment or
modification. or (c) without its written consent thereto. modify any of the rights or obligations of the
Trustee. all as more fully set forth in the Indenture.
It is hereby certified that all things. conditions and acts required to exist. to have happened and to
have been performed precedent to and in the issuance of this Bond do exist. have happened and have been
performed in due time. form and manner as required by the Constitution and statutes of the State of
P6402. I c li i\881380.3 A-3
California and by the Act and the amount of this Bond. together Nvith all other indebtedness of the
Authority. does not exceed any limit prescribed by the Constitution or statutes of the State of California
or by the Act.
This Bond shall not be entitled to any benefit under the Indenture. or become valid or obligatory
for any purpose. until the certificate of authentication hereon shall have been signed by the Trustee.
IN WITNESS WHEREOF. the Authority has caused this Bond to be executed in its name and on
its behalf by the manual or facsimile signatures of its President and Secretary all as of the Original Issue
Date identified above.
PALM DESERT FINANCING AUTHORITY
By
Attest:
Secretary
President
STATEMENT OF INSURANCE
Ito coma
P6402.I055\881380.3 A-4
(FORM OF TRUSTEES CERTIFICATE OF AUTHENTICATION'
This is one of the Bonds described in the Nvithin-mentioned Indenture and registered on the Bond
Registration Books.
Date:
WELLS FARGO BANK. NATIONAL
ASSOCIATION. as Trustee
By
Authorized Signatory
(FORM OF ASSIGNMENT'
For value received the undersigned do(es) hereby sell. assign and transfer unto
Nvhose tax identification number is . the
within -mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s) attorney to transfer
the same on the books of the Trustee Nvith full power of substitution in the premises.
Dated:
Signature guaranteed:
NOTE: The signature(s) on this Assignment
must correspond Nvith the name(s) as Nvritten on
the face of the Nyithin Bond in every particular
Nvithout alteration or enlargement or any change
Nyhatsoeyer.
NOTE: Signature(s) must be guaranteed
by a member of an institution Nyhich is a
participant in the Securities Transfer
Agent Medallion Program (STAMP) or other
similar program.
P6402.1055\881380.3
A-5
Project Area No. 2 Loan Agreement
(2006 Subordinate Loan)
Nyith reference to
Palm Desert Financing Authority
Subordinate Tax Allocation Rcycnuc
Capital Appreciation Bonds
(Project Area No. 2)
2006 Series D
P6402.I055\88I9I6.3 RWG DRAFT: 5/22/2006
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 2
Section I.I. Definitions 2
Section 1.2. Rules of Construction iS
ARTICLE II THE LOAN: APPLICATION OF LOAN PROCEEDS: INCURRENCE
OF ADDITIONAL DEBT
Section 2. I. Authorization
Section 2.2. Disbursement and Application of Loan Proceeds 6
Section 2.3. Repayment of Loan 6
Section 2.4. Optional Prepayment 6
Section 2.5. Reserve Fund 7
Section 2.6. Costs of Issuance Fund 8
Section 2.7. Project Fund 8
Section 2.8. Parity Debt 9
Section 2.9. Issuance of Additional Senior Debt I0
Section 2.10. Issuance of Subordinate Debt I0
Section 2. I I . Validity of Loan I0
ARTICLE III PLEDGE AND APPLICATION OF SUBORDINATE TAX REVENUES 10
Section 3. I . Pledge of Subordinate Tax Revenues 10
Section 3.2. Special Fund: Deposit of Subordinate Tax Revenues 10
Section 3.3. Transfer of Subordinate Tax Revenues From Special Fund I I
Section 3.4. Investment of Moneys: Valuation of Investments I I
ARTICLE IV OTHER COVENANTS OF THE AGENCY I2
Section 4. I . Punctual Payment: Extension of Payments I2
Section 4.2. Limitation on Additional Indebtedness I2
Section 4.3. Payment of Claims I2
Section 4.4. Books and Accounts: Financial Statements I2
Section 4.5. Protection of Security and Rights I3
Section 4.6. Payments of Taxes and Other Charges 13
Section 4.7. Taxation of Leased Property I3
Section 4.8. Disposition of Property I3
Section 4.9. Maintenance of Tax Revenues 13
Section 4.10. Payment of Expenses: Indemnification 14
Section 4.1 I. Tax Covenants 14
Section 4.12. Redevelopment of Project Area 15
Section 4.1 3. Low and Moderate Income Housing Fund 15
Section 4.1 4. Annual Review of Tax Revenues 15
Section 4.1 5. Further Assurances I6
ARTICLE V EVENTS OF DEFAULT AND REMEDIES I6
Section 5. I . Events of Default and Acceleration of Maturities I6
Section 5.2. Application of Funds Upon Default 17
Section 5.3. No Waiver 17
Section 5.4. Agreement to Pay Attorneys' Fees and Expenses 17
Section 5.5. Remedies Not Exclusive I8
P6402.1 055\881916.
Section 5.6. Control of Remedies by Insurer I8
ARTICLE VI MISCELLANEOUS I8
Section 6. I . Benefits Limited to Parties I
Section 6.2. Successor is Deemed Included in All References to Predecessor I8
Section 6.3. Discharge of Loan Agreement 18
Section 6.4. Amendment 19
Section 6.5. Waiver of Personal Liability 19
Section 6.6. Payment on Business Days 19
Section 6.7. Notices 19
Section 6.8. Partial Invalidity 19
Section 6.9. Article and Section Headings and References 19
Section 6.10. Execution of Counterparts 20
Section 6. I I. Governing Law 20
Section 6.12. The Trustee 20
EXHIBIT A — Schedule of Loan Payments
ii
P64U2. I 055\881916.;
PROJECT AREA NO. 2 LOAN AGREEMENT
(2006 Subordinate Loan)
This Project Area No. 2 Loan Agreement (2006 Subordinate Loan) (this "Loan
Agreement) is made and entered into as of Jule I. 2006. by and among the Palm Desert Redevelopment
Agency. a public body. corporate and politic. duly organized and validly existing under the laws of the
State of California (the "Agency"). the Palm Desert Financing Authority. a joint powers authority duly
organized and validly existing under the laws of the State of California (the "Authority"). and Wells
Fargo Bank. National Association. a national banking association duly organized and validly existing
under the laws of the United States of America (the " Tnisteel.
Recitals
A. The Agency is a redevelopment agency. a public body. corporate and politic.
duly created. established and authorized to transact business and exercise its powers. all under and
pursuant to the Redevelopment Law. and the powers of the Agency include the power to borrow money
for any of its corporate purposes.
B. A Redevelopment Plan for Project Area No. 2 of the Agency (the "Project Area)
has been duly approved and adopted by the City.
C. The Agency has determined to incur a loan (the "Loan) hereunder for the object
and purpose of assisting in the financing of public capital improvements and redevelopment activities for
the benefit of the Project Area. pursuant to the Redevelopment Law and the Marks -Roos Local Bond
Pooling Act of 1985. Article 4. Chapter 5. Division 7. Title I of the Government Code of the State of
California (the "Bond Law").
D. Concurrently with the execution and delivery of this Loan Agreement. the
Authority has issued its Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area
No. 2). 2006 Series D. in the initial principal amount of } (the "Bonds) pursuant to the Bond
Law and an Indenture of Trust. dated as of July I. 2006 (the "Indenture"). by and between the Authority
and the Trustee. for the purpose of providing funds to make the Loan to the Agency
E. The Authority has found and determined that there will be significant public
benefits accruing from such borrowing. consisting of demonstrable savings in effective interest rates and
financing costs associated with the issuance of the Bonds pursuant to the Bond Law.
F. The Agency and the Authority have determined that all acts and proceedings
required by law necessary to make this Loan Agreement. when executed by the Agency. the Authority
and Trustee. the valid. binding and legal obligation of the Agency and the Authority. and to constitute this
Loan Agreement a valid and binding agreement for the uses and purposes herein set forth in accordance
with its terms. have been done and taken. and the execution and delivery of this Loan Agreement have
been in all respects duly authorized.
NOW. THEREFORE. in consideration of the premises and the mutual agreements herein
contained. the parties hereto do hereby agree as follows:
P6402.10ii\881916. i 1
ARTICLE I
DEFINITIONS
Section I. I. Definitions. Unless the contest clearly requires or unless othenvise defined
herein. the capitalized terms in this Loan Agreement shall have the respective meanings Nyhich such terms
are given in the Indenture. In addition. the following terms defined in this Section I. I shall. for all
purposes of this Loan Agreement. have the respective meanings herein specified.
"Additional Reyenues- means. as of the date of calculation. the amount of Tax Revenues
which. as shown in the Report of an Independent Redevelopment Consultant. are estimated to be
receivable by the Agency within the Fiscal Year following the Fiscal Year in which such calculation is
made as a result of increases in the assessed valuation of taxable property in the Project Area due to either
(i) construction which has been completed but which is not then reflected on the tax rolls. or (ii) transfer
of ownership or an other interest in real property which has been recorded but which is not then reflected
on the tax rolls. For purposes of this definition. the term "increases in the assessed valuation means the
amount by which the assessed valuation of taxable property in the Project Area is estimated to increase
above the assessed valuation of taxable property in the Project Area (as reported by an appropriate official
of the County) as of the date on which such calculation is made.
"Bonds means the Palm Desert Financing Authority Subordinate Tax Allocation
Revenue Capital Appreciation Bonds (Project Area No. 2). 2006 Series D.
"Costs of Issuance means all expenses incurred in connection with the authorization.
issuance. sale and delivery of the Bonds and the making of the Loan pursuant to this Loan Agreement.
including but not limited to all compensation. fees and expenses (including but not limited to fees and
expenses for legal counsel) of the Authority and any trustee. compensation to any financial advisors or
underwriters and their counsel. legal fees and expenses. filing and recording costs. rating agency fees.
credit enhancement fees (including insurance. surety bonds and letters of credit). costs of preparation and
reproduction of documents and costs of printing.
"Costs of Issuance Fundy means the fund by that name established and held by the
Trustee pursuant to Section 2.6.
"Event of Default means any of the events described in Section 5.1.
"Indenture' means the Indenture of Trust. dated as of July I. 2006. by and between the
Authority and the Trustee. authorizing the issuance of the Bonds. as may from time to time be
supplemented. modified or amended.
"Independent Redevelopment Consultant means any consultant or firm of such
consultants appointed by or acceptable to the Agency. and \who. or each of whom: (i) is judged by the
Agency to have experience in matters relating to the collection of Tax Revenues or otherwise with respect
to the financing of redevelopment projects: (ii) is in fact independent and not under the domination of the
Agency: (iii) does not have any substantial interest. direct or indirect. with the Agency. other than as
original purchaser of any obligations of the Agency: and (iv) is not connected with the Agency as an
officer or employee of the Agency. but \who may be regularly retained to make reports to the Agency.
"Loan means the loan made by the Authority to the Agency pursuant to Section 2.1 from
the proceeds of the Bonds in the initial principal amount of
P6402.10ii\881916. i 2
"Loan Agreements means this Project Area No. 2 Loan Agreement (2006 Subordinate
Loan). as may from time to time be amended. modified or supplemented.
"Maximum Annual Debt Service" means. as of the date of calculation. the largest amount
obtained by totaling. for the current or any future Bond Year. the sum of (i) the amount of interest payable
on the Loan and all outstanding Parity Debt in such Bond Year. assuming that principal thereof is paid as
scheduled and that any mandatory sinking fund payments are made as scheduled. and (ii) the amount of
principal payable on the Loan and all outstanding Parity Debt in such Bond Year. including any principal
required to be prepaid by operation of mandatory sinking fund payments. For purposes of such
calculation. there shall be excluded a pro rata portion of each installment of principal of any Parity Debt.
together Nvith the interest to accrue thereon. in the event and to the extent that the proceeds of such Parity
Debt are deposited in an escrow fund from Nvhich amounts may not be released to the Agency unless the
Tax Revenues for the current Fiscal Year. plus at the option of the Agency the Additional Revenues. meet
the coverage test set forth in Section 2.8(b).
"Maximum Combined Annual Debt Service" means. as of the date of calculation. the
largest amount obtained by totaling. for the current or any future Bond Year. the sum of (i) the amount of
interest payable on the Loan. all outstanding Parity Debt and all outstanding Senior Debt in such Bond
Year. assuming that principal thereof is paid as scheduled and that any mandatory sinking fund payments
are made as scheduled. and (ii) the amount of principal payable on the Loan. all outstanding Parity Debt
and all outstanding Senior Debt in such Bond Year. including any principal required to be prepaid by
operation of mandatory sinking fund payments. For purposes of such calculation. there shall be excluded
a pro rata portion of each installment of principal of any Senior Debt or Parity Debt. together Nvith the
interest to accrue thereon. in the event and to the extent that the proceeds of such Senior Debt or Parity
Debt are deposited in an escrow fund from Nvhich amounts may not be released to the Agency unless the
Tax Revenues for the current Fiscal Year. plus at the option of the Agency the Additional Revenues. meet
the coverage test set forth in (a) Nvith respect to the release of Senior Debt proceeds from any such escrow
fund. Section 2.9(b) or (b) Nvith respect to the release of Parity Debt proceeds from any such escrow fund.
Section 2.8(b).
"Parity Debt" means any loans. bonds. notes. advances. or indebtedness payable from
Subordinate Tax Revenues on a parity Nvith the Loan. issued or incurred pursuant to and in accordance
Nvith the provisions of Section 2.8.
"Parity Debt Instrument"' means any resolution. indenture of trust. trust agreement or
other instrument authorizing the issuance of any Parity Debt.
"Pass-Throutzh Agreements means. collectively. the agreements entered into by the
Agency on or prior to the date hereof pursuant to Section 33401 of the Redevelopment Law Nyith (i) the
County of Riverside. (ii) the Coachella Valley Community College District. (iii) the Coachella Valley
Mosquito Abatement District. (iv) the Desert Sands Unified School District. (v) the Palm Springs Unified
School District and (vi) the Riverside County Superintendent of Schools.
"Plan Limitations"' means the limitations contained or incorporated in the Redevelopment
Plan on (i) the aggregate principal amount of bonded indebtedness payable from Tax Revenues Nvhich
may be outstanding at any time. (ii) the aggregate amount of taxes Nvhich may be divided and allocated to
the Agency pursuant to the Redevelopment Plan. and (iii) the period of time for establishing or repaying
loans. advances and indebtedness payable from Tax Revenues.
"Project Fundy means the fund by that name established and held by the Trustee pursuant
to Section 2.7.
P6402.10ii\881916. i 3
"Qualified Reserve Fund Credit Instrument' means an irrevocable standby or direct -pay
letter of credit or surety bond issued by a commercial bank or insurance company and deposited Nyith the
Trustee pursuant to Section 2.5. provided that all of the following requirements are met at the time of
deposit Nyith the Trustee: (i) either (a) the long-term credit rating of such bank is within one of the two
highest rating categories by Moody's or S&P. or the claims paying ability of such insurance company is
rated Nyithin one of the two highest rating categories by Moody's or S&P. at the time of delivery of such
letter of credit or surety bond. or (b) the Authority shall cause to be filed Nyith the Trustee Nvritten
evidence from Moody's and S&P that the delivery of such letter of credit or surety bond will not. of itself.
cause a reduction or Nvithdra«al of any rating then assigned to the Bonds: (ii) such letter of credit or
surety bond has a term of at least 12 months: (iii) such letter of credit or surety bond has a stated amount
at least equal to the portion of the Reserve Requirement Nyith respect to Nyhich funds are proposed to be
released pursuant to Section 2.5: and (iv) the Trustee is authorized pursuant to the terms of such letter of
credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time
to time with respect to deposits required pursuant to Section 3.3(a).
"Redevelopment Fundy means the Project Area No. 2 Redevelopment Fund. heretofore
established and held by the Agency.
"Redevelopment Project means the undertaking of the Agency pursuant to the
Redevelopment Plan and the Redevelopment Law for the redevelopment of the Project Area.
"Reserve Fundy means the "Project Area No. 2 Subordinate Reserve Fundy held by the
Trustee pursuant to Section 2.5.
"Reserve Requirement means the least of (i) Maximum Annual Debt Service. (ii) 125
percent of average annual debt service on the Loans and all outstanding Parity Debt. and (iii) 10 percent
of the proceeds of the Loans (i.e.. the original Principal Amount of the Bonds) and of the proceeds of any
Parity Debt. The amount of the Reserve Requirement on any date is subject to confirmation by the
Authority to the Trustee upon the Trustees «rittcn request. At the Closing Date. the Reserve
Requirement shall be $
"Senior Debt means the Senior 2002 Loan. the Senior 2003 Loan and the Senior 2006
Loans and any other loans. bonds. notes. advances. or indebtedness payable from Tax Revenues which
rank senior to the Loan and the Parity Debt. issued or incurred pursuant to and in accordance with the
provisions of Section 2.9.
"Senior Debt Instrument means the Senior 2002 Loan Agreement. the Senior 2003 Loan
Agreement. the Senior 2006 Loan Agreement and any other resolution. indenture of trust. trust agreement
or other instrument authorizing the issuance of any Senior Debt.
"Senior Debt Service" means. for any period of time. the sum of (i) the amount of interest
payable during such period on all outstanding Senior Debt. assuming that principal thereof is paid as
scheduled and that any mandatory sinking fund payments are made as scheduled. (ii) the amount of
principal payable during such period on all outstanding Senior Debt. including any principal required to
be prepaid by operation of mandatory sinking fund payments. and (iii) amounts. if any. required to be
deposited in the debt service reserve funds maintained under the Senior Debt Instruments or paid to the
issuers of surety bonds (or other qualified reserve fund instruments) deposited in the reserve fund relating
to any Senior Debt in lieu of cash pursuant to the agreements between the Agency and such issuers.
"Senior 2006 Loans means the outstanding balance of the loans made by the Authority
to the Agency pursuant to the Senior 2006 Loan Agreement.
P6402.1 c h.5\xx 1916. 3 4
"Senior 2006 Loan Agreements means the Loan Agreement dated as of Jule I. 2006. by
and among the Agency. the Authority and Wells Fargo Bank. National Association. as trustee.
"Senior 2003 Loan means the outstanding balance of the loan made by the Authority_ to
the Agency pursuant to the Senior 2003 Loan Agreement.
"Senior 2003 Loan Agreements means the Project Area No. 2 Loan Agreement. dated as
January I. 2003. by and between the Authority and the Agency.
"Senior 2002 Loan means the outstanding balance of the loan made by the Authority_ to
the Agency pursuant to the Senior 2002 Loan Agreement.
"Senior 2002 Loan Agreements means the Loan Agreement dated as ofJune I. 2002. by
and among the Agency. the Authority and BNY Western Trust Company. as prior trustee. as succeeded
by Wells Fargo Bank. National Association. as trustee.
"Special Fundy means the fund by that name held by the Agency pursuant to Section 3.2.
"Subordinate Debt means any loans. advances or indebtedness issued or incurred by the
Agency in accordance Nyith the requirements of Section 2.10. Nyhich are either: (i) payable from. but not
secured by a pledge of or lien upon. the Tax Revenues: or (ii) secured by a pledge of or lien upon the
Subordinate Tax Revenues Nyhich is subordinate to the pledge of and lien upon the Subordinate Tax
Revenues hereunder for the security of the Loan and any Parity Debt.
"Subordinate Tax Revenues means. for any period of time. the Tax Revenues for such
period. Tess the Senior Debt Service payable during such period.
"Tax Re eiuies- means that portion of the taxes levied upon taxable property in the
Project Area allocated and paid into a special fund of the Agency pursuant to Article 6 of Chapter 6 of the
Redevelopment Law and Section 16 of Article XVI of the California Constitution. exclusive of amounts
placed into the Low and Moderate Income Housing Fund of the Agency pursuant to Sections 33334.2 and
33334.3 of the Redevelopment Law. and excluding amounts payable to affected taxing agencies pursuant
to the Pass -Through Agreements or pursuant to Section 33607.5 or 33607.7 of the Redevelopment Lary.
Section I.2. Rules of Construction. All references herein to "Articles. "Sections" and
other subdivisions are to the corresponding Articles. Sections or subdivisions of this Loan Agreement.
and the Nyords "herein. "hereof. "hereunder- and other Nyords of similar import refer to this Loan
Agreement as a Nyholc and not to any particular Article. Section or subdivision hereof.
ARTICLE II
THE LOAN: APPLICATION OF LOAN PROCEEDS:
INCURRENCE OF ADDITIONAL DEBT
Section 2. I . Authorization. The Authority hereby agrees to lend to the Agency. from the
proceeds of the sale of the Bonds deposited in the Loan Fund established under the Indenture. the initial
principal amount of $ under and subject to the terms of this Loan Agreement. the Bond
Law and the Redevelopment Lary. This Loan Agreement constitutes a continuing agreement to secure the
full and final payment of the Loan. subject to the covenants. agreements. provisions and conditions herein
contained
P64U2. I c .5.5\xx 1916.; 5
Section 2.2. Disbursement and Application of Loan Proceeds.
On the Closing Date. the Authority shall cause to be deposited into the Loan Fund the
amount of $ which shall be held by the Trustee and which shall be disbursed as follows:
(i) The Trustcc shall transfer the amount of $ to the Series the
Costs of Issuance Fund.
(ii) The Trustee shall transfer the amount of $ to the Reserve
Fund (which amount shall equal the initial Reserve Requirement).
(iii) The Trustee shall transfer the remaining amount of $ to the
Project Fund.
On the Closing Date. the Authority shall also cause the amount of $ and
the amount of $ to be paid to the Insurer for the costs of the premium for the Insurance
Policy.
The Trustee may. in its discretion. establish a temporary fund or account to
facilitate or account for the foregoing transfers.
Section 2.3. Repayment of Loan. The Agency shall. subject to prepayment as provided in
Section 2.4(a). repay the Loan in installments on August I in each of the years and in the amounts set
forth in Exhibit A attached hereto and by this reference incorporated herein. Interest on each installment
of the Loan shall accrue in the same manner as the interest accrues on the Bonds pursuant to the
Indenture. The installments payable on the Loan on each August I set forth in Exhibit A correspond with
the aggregate Maturity Amount of the Bonds coming due and payable on such date. Any installment of
the Loan which is not paid when due shall continue to accrue interest from and including the date on
which such installment is payable to but not including the date of actual payment. In the event any unpaid
installments of the Loan shall be prepaid pursuant to Section 2.4(a). or in the event the Bonds shall be
redeemed pursuant to Section 2.03(a) of the Indenture. the schedule of installments set forth in Exhibit A
hereto shall be reduced as directed by the Agency to the Trustee.
The obligation of the Agency to repay the Loan is. subject to Section 3.1. absolute and
unconditional. and such payments shall not be subject to reduction wvhether by offset or otherwise and
shall not be conditional upon the performance or nonperformance by any party to any agreement for any
cause Nvhatsoeyer.
Installments of the Loan shall be payable by the Agency to the Trustee. as assignee of the
Authority under the Indenture in lawful money of the United States. Payment of such installments shall
be secured. and amounts for the payment thereof shall be deposited with the Trustee at the times. as set
forth in Article III.
Section 2.4. Optional Prepayment
(a) The Agency shall have the right to prepay installments of the Loan on any date
on which the Bonds are subject to redemption pursuant to Section 2.03(a) of the Indenture and effect a
corresponding redemption of the Bonds. Such prepayment shall be allocated among such installments of
the Loan as the Agency may determine upon Request to the Authority and the Trustee provided not less
P6402. Ichi\881916. i 6
than 45 days prior to the prepayment date: provided that such prepayment shall cause redemption of
Bonds in integral multiples of $5.000 Maturity Amount. To effect such prepayment. the Agency shall
deposit with the Trustee no later than the redemption date an amount sufficient to redeem the called
Bonds (which amount shall include the Accreted Value of the called Bonds as of the date of redemption
and the applicable redemption premium. if any).
(b) Before making any prepayment pursuant to this Section. the Agency shall give
written notice to the Authority and the Trustee describing such event and specifying the date on which the
prepayment NViII be paid and the order thereof. which date shall be not less than 45 days from the date
such notice is given: provided. that notwithstanding any such prepayment. the Agency shall not be
relieved of its obligations with respect to a Loan hereunder. including specifically its obligations under
this Article. until such Loan shall have been fully paid (or provision for payment thereof shall have been
made pursuant to Section 6.3).
(c) The Authority agrees that upon payment by the Agency to the Trustee of such
amount. the Authority shall take or cause to be taken any and all steps required under the Indenture to
redeem such Outstanding Bonds on the redemption date designated by the Agency: provided. however.
that such date shall be a date of redemption of such Bonds. for which notice has been timely given
pursuant to the Indenture.
Section 2.5. Reserve Fund. There is hereby established a separate fund known as the
"Project Area No. 2 Subordinate Reserve Fund. which shall be held by the Trustee in trust for the benefit
of the Authority and the Owners of the Bonds and the registered owners of all other bonds issued by the
Authority in connection with any Parity Debt. The Agency hereby pledges and grants a Tien and a
security interest in the Reserve Fund to the Trustee in order to secure the Agency's payment obligations
under Sections 2.3 and 3.3(a). The amount on deposit in the Reserve Fund shall be maintained at the
Reserve Requirement at all times. except to the extent required for the purposes set forth in this Section.
In the event that the Agency shall fail to deposit with the Trustee the full amount required
to be deposited pursuant to Section 3.3(a). the Trustee shall withdraw from the Reserve Fund and transfer
to the Principal Account an amount equal to the difference between (i) the amount required to be
deposited pursuant to Section 3.3(a) and (ii) the amount actually deposited by the Agency. In the event
that the amount on deposit in the Reserve Fund shall at any time be Tess than the Reserve Requirement.
the Trustee shall notify the Agency as soon as practicable of the amount required to be deposited therein
to restore the balance to the Reserve Requirement. such notice to be given by telephone. telefax or other
form of telecommunications promptly confirmed in writing. and the Agency shall thereupon transfer to
the Trustee the amount needed to restore the Reserve Fund to the Reserve Requirement.
In the event that the amount on deposit in the Reserve Fund on the 15th calendar day
preceding any repayment date with respect to the Loan (other than the final payment date) — provided that
the deposits required by Section 3.3(a) have been made — exceeds the Reserve Requirement. the Tnistcc
shall withdraw from the Reserve Fund all amounts in excess of the Reserve Requirement and apply such
amounts toward the prepayment of the Loan pursuant to Section 2.4 or the prepayment of any Parity
Debt. unless the Trustee shall have received prior Request of the Agency to pay such amounts to the
Agency to be used for any lawful purpose relating to the Project Area. as specified in such Request of the
Agency. Notwithstanding the foregoing provisions of this paragraph. however. no amounts shall be
withdrawn from the Reserve Fund and transferred to the Agency pursuant to this paragraph during any
period in which an Event of Default shall have occurred and be continuing hereunder.
With the written consent of the Insurer (as long as the Insurance Policy is in full force
and effect) and of the insurer of any Parity Debt (as long as the policy insuring such Parity Debt is in full
P6402.10ii\881916. i 7
force and effect). the Reserve Requirement may be satisfied by crediting to the Reserve Fund moneys or a
Qualified Reserve Fund Credit Instrument or any combination thereof. Nvhich in the aggregate make funds
available in the Reserve Fund in an amount equal to the Reserve Requirement. Upon the deposit Nyith the
Trustee of such Qualified Reserve Fund Credit instrument. the Trustee shall release moneys then on hand
in the Reserve Fund to the Agency. to be used for any lawful purpose relating to the Project Area. in an
amount equal to the face amount of the Qualified Reserve Fund Credit Instrument.
If at any time the amount on deposit in. or credited to. the Reserve Fund includes both
cash and a debt service reserve surety bond. any draw- on such surety bond shall be made only after all
cash in the Reserve Fund has been expended. If at any time the amount credited to the Reserve Fund
includes more than one Qualified Reserve Fund Credit Instruments. any draw- on the Qualified Reserve
Fund Credit Instrument shall be on a pro rata basis based on the relative amounts of debt service covered
by such Qualified Reserve Fund Credit Instruments in such Fiscal Year.
Section 2.6. Costs of issuance Fund. There is hereby established a fund to be held by the
Trustee known as the "Costs of Issuance Fund. A portion of the proceeds of the Loan shall be deposited
in the Costs of Issuance Fund pursuant to Section 2.2. The moneys in the Costs of Issuance Fund shall be
used to pay Costs of Issuance of the Bonds from time to time upon receipt of a Request of the Agency.
On the 90th day after the Closing Date (or the first Business Day thereafter). or upon the earlier receipt by
the Trustee of a Request of the Agency stating that all Costs of Issuance have been paid. the Trustee shall
transfer all remaining amounts in the Costs of Issuance Fund to the Revenue Fund.
Section 2.7. Proiect Fund. There is hereby established a fund to be known as the "Project
Fundy. which shall be held and maintained by the Trustee. Amounts on deposit in such fund shall be
derived solely from the portion of the proceeds of the Loan transferred thereto and from earnings on the
investment of amounts therein.
Except as provided in this Section. the moneys set aside and placed in the Project Fund
shall remain therein until expended from time to time for the purpose of paying any portion of the costs of
the Redevelopment Project. and other costs related thereto. which other costs may include. but are not
limited to. (a) the cost of improvements and other costs which may not benefit the Redevelopment Project
exclusively but which are necessary to the redevelopment of the Project Area and the disposition of land
therein: (b) the repayment of any advances made by the City for the Redevelopment Project: and (c) to the
extent not paid from the Costs of Issuance Fund. the necessary expenses in connection with the issuance
and sale of the Bonds.
Before any payment of money is made from the Project Fund. the Agency shall file with
the Trustee a Request of the Agency showing with respect to each payment of money to be made:
(a) the name and address of the person to whom payment is due:
(b) the amount of money to be paid:
(c) the purpose for which the obligation to be paid was incurred: and
(d) that such amount has not been paid previously for such purpose from the Project
Fund.
Trustee:
Each such Request of the Agency shall state and shall be sufficient evidence to the
P6402.1055\881916. i 8
(i) that an obligation in the stated amount has been properly incurred under and
pursuant to this Loan Agreement and that such obligation is a proper charge against the Project Fund: and
(ii) that there has not been filed Nyith or served upon the Agency a stop notice or any
other notice of any lien. right to lien or attachment upon. or claim affecting the right to receive payment
of. an of the money payable to the person named in such Request of the Agency Nvhich has not been
released or \\ill not be released simultaneously Nyith the payment of such obligation. other than liens
accruing by mere operation of law.
Upon receipt of each such Request of the Agency. the Trustee shall pay the amount set
forth in such Request of the Agency as directed by the terms thereof within three Business Days.
If any moneys deposited in the Project Fund remain therein after the full accomplishment
of the objects and purposes for which the Loan was made. said moneys shall be transferred to the Special
Fund.
Section 2.8. Parity Debt. From time to time. the Agency may issue or incur additional
Parity Debt in such principal amount as shall be determined by the Agency. subject to the following
specific conditions which are hereby made conditions precedent to the issuance and delivery of such
Parity Debt issued under this Section 2.8:
(a) No Event of Default shall have occurred and be continuing. and the Agency shall
othenvise be in compliance with all covenants set forth in this Loan Agreement.
(b) (i) The amount of Tax Revenues for the then current Fiscal Year. as set forth in a
Certificate of the Agency. based on assessed valuation of property in the Project Area as evidenced in the
Nvritten records of the County. plus at the option of the Agency the Additional Revenues. shall be at least
equal to 100 percent of the Maximum Combined Annual Debt Service effective after the issuance of the
proposed Parity Debt: and (ii) the amount of Subordinate Tax Revenues for the then current Fiscal Year.
as set forth in a Certificate of the Agency. based on assessed valuation of property in the Project Area as
evidenced in the «rittcn records of the County. plus at the option of the Agency the Additional Revenues.
shall be at least equal to 110 percent of the Maximum Annual Debt Service effective after the issuance of
the proposed Parity Debt.
(c) The related Parity Debt Instrument shall provide that the balance of the Reserve Fund
shall be increased to the new Reserve Requirement effective after the incurrence of such Parity Debt.
(d) The related Parity Debt Instrument shall provide that:
(I) With respect to any Parity Debt which bears current interest. interest on such
Parity Debt shall not be payable on a date other than February I and August I of any year. and
(2) The principal of such Parity Debt shall not be payable on any date other than
the date on which principal of the Loan is payable.
(c) The issuance of such Parity Debt shall not cause the Agency to exceed any applicable
Plan Limitations.
(f) The Agency shall deliver to the Trustee a Certificate of the Agency certifying that the
conditions precedent to the issuance of such Parity Debt set forth in Paragraphs (a) through (c) above
P6402.10ii\881916. i 9
have been satisfied. The Agency shall also furnish a cope of an Independent Redevelopment Consultants
report evidencing compliance with the condition set forth in Paragraph (b).
Section 2.9. Issuance of Additional Senior Debt. From time to time. the Agency may
issue or incur additional Senior Debt in such principal amount as shall be determined by the Agency. but
solely if the following conditions are satisfied:
(a) The incurrence of such proposed Senior Debt shall not cause the Agency to be in
violation of anv Senior Debt Instrument.
(b) The Agency shall have filed with the Trustee a report of an Independent consultant
which shows that -
(I) The amount of Tax Revenues for the then current Fiscal Year. based on
assessed valuation of property in the Project Area as evidenced in the written records of the County. plus
at the option of the Agency the Additional Revenues. shall be at least equal to percent of the
Maximum Combined Annual Debt Service effective after the issuance of the proposed Senior Debt:
(2) So long as the Series 2006C Bonds shall remain outstanding. projected
Subordinate Tax Revenues for each Fiscal Year shall be at least equal to 100 percent of the scheduled
debt service for the Loan and an outstanding Parity Debt for such Fiscal Year: and
(3) The projected Tax Revenues available to be received by the Agency under the
Plan Limitations in each upcoming Fiscal Year will be at least I I0 percent of aggregate remaining debt
service on the Loan and all outstanding Parity Debt and Senior Debt.
Section 2.10. Issuance of Subordinate Debt. From time to time the Agency may issue or
incur Subordinate Debt in such principal amount as shall be determined by the Agency. provided that the
issuance of such Subordinate Debt shall not cause the Agency to exceed any applicable Plan Limitations.
Section 2. I I . Validity of Loan. The validity of the Loan shall not be dependent upon the
completion of the Redevelopment Project or upon the performance by any person of any obligation with
respect to the Redevelopment Project.
ARTICLE III
PLEDGE AND APPLICATION OF SUBORDINATE TAX REVENUES
Section 3. I . Pledtze of Subordinate Tax Revenues. The Loan and all Parity Debt shall be
equally secured by a first pledge of and lien on all of the Subordinate Tax Revenues and all of the moneys
on deposit in the Special Fund to the extent that such moneys are not required to pay Senior Debt Service.
without preference or priority for series. issue. number. dated date. sale date. date of execution or date of
delivery. Except for the Subordinate Tax Revenues and other funds pledged hereunder. no funds or
properties of the Agency shall be pledged to. or othenyise liable for. the payment of principal of or
interest on or prepayment premium. if any. on the Loan.
Section 3.2. Special Fund: Deposit of Subordinate Tax Revenues. The Agency has
heretofore established a special fund known as the "Special Fund." which is and shall continue to be held
by the Agency as a separate fund apart from all other funds and accounts of the Agency. The Agency
shall deposit all Tax Revenues in the Special Fund promptly upon the receipt thereof. Except as may be
othenyise provided in any Senior Debt Instrument or Parity Debt Instrument. any Subordinate Tax
P64U2. I 05 5\xx 1 9 16.;
10
Revenues received during the Bond Year in excess of amounts required to be transferred to the Trustee
pursuant to Section 3.3 shall be released from the pledge and Tien hereunder and may be used for any
lawful purposes of the Agency. Prior to the payment in full of the principal of and interest and
prepayment premium. if any. on all Senior Debt. the Loan and all Parity Debt and the payment in full of
all other amounts payable under any Senior Debt Instrument. this Loan Agreement and any Parity Debt
Instrument. the Agency shall not have any beneficial right or interest in the moneys on deposit in the
Special Fund. except only as provided in any Senior Debt Instrument. this Loan Agreement and any
Parity Debt Instrument. and such moneys shall be used and applied as set forth herein and therein.
Section 3.3. Transfer of Subordinate Tax Revenues From Special Fund. The Agency
shall Nvithdraw Subordinate Tax Revenues to make transfers. as required to be made pursuant to any
Parity Debt Instrument and to the Trustee the following amounts at the following times and in the
following order of priority:
(a) Interest and Principal Deposits. No later than the fifth Business Day preceding each
date on which an installment on the Loan (in accordance with Exhibit A) or the principal of or interest on
any Parity Debt shall become due and payable. including but not limited to the installment of the Loan to
be prepaid hereunder together with any prepayment premium thereon (provided that the transfers from the
Special Fund for payment of principal. interest. prepayment premium. and replenishment of reserve fund.
if any. with respect to all Senior Debt shall have been made pursuant to the Senior Debt Instruments). the
Agency shall Nvithdraw from the Special Fund and transfer to the Trustee an amount which. together with
the amounts then held on deposit in the Principal Account and the Rcycnuc Fund. is equal to the
aggregate amount of the installment of the Loan (in accordance with Exhibit A). the principal of and
interest on the Parity Debt and prepayment premium with respect to the Loan and the Parity Debt coming
due.
(b) Reserve Fund Deposits. In the event that the Trustee shall notify the Agency
pursuant to Section 2.5 that the amount on deposit in the Reserve Fund is Tess than the Reserve
Requirement. the Agency shall immediately Nvithdraw from the Special Fund and transfer to the Tnistcc
for deposit in the Reserve Fund an amount of money necessary to maintain the Reserve Requirement in
the Reserve Fund (including repayment of any draw made under a Qualified Reserve Fund Credit
Instrument prior to replenishing any cash in the Reserve Fund).
(c) Surplus. Except as may be otherwise provided in any Senior Debt Instrument or any
Parity Debt Instrument. the Agency shall not be obligated to deposit in the Special Fund in any Bond
Year an amount of Subordinate Tax Revenues which. together with other available amounts in the Special
Fund. exceeds the amounts required in such Bond Year pursuant to this Section 3.3. All Subordinate Tax
Revenues which are received by the Agency during any Bond Year in excess of the amounts required to
be deposited in the Special Fund in such Bond Year pursuant to the Senior Debt Instruments. this Loan
Agreement and Parity Debt Instruments shall be released from the pledge thereof and Tien thereon which
is established pursuant hereto. In the event that for any reason Nvhatsoever any amounts shall remain on
deposit in the Special Fund on any August 2 after making all of the transfers theretofore required to be
made pursuant to the preceding Paragraphs (a) and (b) and pursuant to any Senior Debt Instrument or
Parity Debt Instrument. the Agency may Nvithdraw such amounts from the Special Fund. to be used for
any lawful purposes of the Agency. including but not limited to the payment of any Subordinate Debt or
the payment of any amounts due and owing to the United States pursuant to Section 4.1 I .
Section 3.4. Investment of Moneys: Valuation of Investments. Subject to Section 4.03 of
the Indenture. all moneys in the Special Fund. the Project Fund. the Reserve Fund and the Costs of
Issuance Fund shall be invested in Permitted Investments. Absent any prior «ritten instruction from the
Agency or the Authority. moneys in any fund held by the Trustee hereunder or under the Indenture shall
P64U2. I 05 5\xx 1 9 16.;
11
be invested in Permitted Investments described in clause D of the definition thereof. Obligations
purchased as an investment of moneys in any fund or account established hereunder shall be credited to
and deemed to be part of such fund or account. The Agency or the Trustee. as the case may be. may
commingle any amounts in any of the funds and accounts held hereunder w ith any other amounts held by
the Agency or the Trustee for purposes of making any investment. provided that the Agency and the
Trustee shall maintain separate accounting procedures for the investment of all funds and accounts held
hereunder. All interest. profits and other income received from the investment of moneys in any fund or
account established hereunder shall be credited to such fund or account. Notwithstanding anything to the
contrary contained in this Section. an amount of interest received with respect to any investment equal to
the amount of accrued interest. if any. paid as part of the purchase price of such investment shall be
credited to the fund or account from wvhich such accrued interest was paid.
For the purpose of determining the amount in any fund or account established hereunder.
any investments credited to such fund shall be valued at least annually at the market value thereof.
ARTICLE IV
OTHER COVENANTS OF THE AGENCY
Section 4. I. Punctual Payment: Extension of Payments. The Agency shall punctually pay
or cause to be paid the installments and prepayment premium. if any. on the Loan in strict conformity
with the terms of this Loan Agreement. and it will faithfully observe and perform all of the conditions.
covenants and requirements of this Loan Agreement. The Agency shall not directly or indirectly extend
or assent to the extension of the maturity of any installment of or prepayment premium. if any. on the
Loan. and in case the installment or premium. if any. on the Loan or the time of payment of any such
claims therefor shall be extended. such principal. interest. premium or claims for interest shall not be
entitled. in case of any Event of Default hereunder. to the benefits of this Loan Agreement except for
payment of all amounts which shall not have been so extended.
Section 4.2. Limitation on Additional Indebtedness. The Agency hereby covenants that it
shall not issue any bonds. notes or other obligations. enter into any agreement or otherwise incur any
indebtedness. which is in any case payable from all or any part of the Tax Revenues. excepting only the
Loan. any Parity Debt. any Senior Debt and any Subordinate Debt. and any other obligations permitted by
this Loan Agreement.
Section 4.3. Payment of Claims. The Agency shall pay and discharge. or cause to be paid
and discharged. any and all lawful claims for labor. materials or supplies which. if unpaid. might become
a lien or charge upon the properties owned by the Agency or upon the 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
herein contained shall require the Agency to make any such payment so long as the Agency in good faith
shall contest the validity of said claims.
Section 4.4. Books and Accounts: Financial Statements. The Agency shall keep. or cause
to be kept. proper books of record and accounts. separate from all other records and accounts of the
Agency and the City. in wvhich complete and correct entries shall be made of all transactions relating to
the Redevelopment Project. the Tax Revenues. the Special Fund. the Reserve Fund. the Low and
Moderate Income Housing Fund and the Redevelopment Fund. Such books of record and accounts shall
at all times during business hours be subject. upon prior written request. to the reasonable inspection of
the Authority. the Trustee and the Owners of not Tess than ten percent in aggregate Principal Amount of a
series of Bonds then Outstanding. or their representatives authorized in writing.
P64U2. I 05 5\xx 1 9 16.;
12
The Agency \VIII cause to be prepared annually. Nyithin 180 days after the close of each
Fiscal Year so Tong as any of the Bonds are Outstanding. complete audited financial statements Nyith
respect to such Fiscal Year showing the Tax Reyenucs. all disbursements from the Special Fund and the
Redevelopment Fund and the financial condition of the Redevelopment Project. including the balances in
all funds and accounts relating to the Redevelopment Project. as of the end of such Fiscal Year. The
Agency Nvill furnish a copy of such statements. upon reasonable request. to any Owner.
Section 4.5. Protection of Security and Rights. The Agency \VIII preserve and protect the
security of the Loan and the rights of the Trustee and the Owners Nyith respect to the Loan. From and
after the Closing Date. the Loan shall be incontestable bv the Agency. The Loan and the provisions of
this Loan Agreement arc and \VIII be the legal. valid and binding special obligations of the Agency
enforceable in accordance Nyith their terms. and the Agency shall at all times. to the extent permitted bv
lacy. defend. preserve and protect all the rights of the Authority. the Trustee and the Owners under this
Loan Agreement against all claims and demands of all persons Nyhomsoeyer. The Agency's obligations to
the Trustee under this Section 4.5 shall survive the payment of the Bonds and the discharge of the
Indenture. the removal or resignation of the Trustee pursuant to the Indenture or the payment of the Loan
and the discharge of this Loan Agreement.
Section 4.6. Payments of Taxes and Other Charges. The Agency Nyill pay and discharge.
or cause to be paid and discharged. all taxes. service charges. assessments and other governmental
charges \yhich may hereafter be lawfully imposed upon the Agency or the properties then owned by the
Agency in the Project Area Nyhen the same shall become due. Nothing herein contained shall require the
Agency to make any such payment so long as the Agency in good faith shall contest the validity of such
taxes. assessments or charges. The Agency \yiII duly observe and comply with all valid requirements of
any governmental authority relative to the Redevelopment Project or anv part thereof.
Section 4.7. Taxation of Leased Property. All ad valorem property taxes derived by the
Agency pursuant to Section 33673 of the Redevelopment Law with respect to the lease of property for
redevelopment shall be treated as Tax Revenues for all purposes of this Loan Agreement. and shall be
deposited by the Agency in the Special Fund promptly upon receipt.
Section 4.8. Disposition of Property. The Agency will not participate in the disposition
of any land or real property in the Project Area to anyone which \yiII result in such property becoming
exempt from taxation because of public ownership or use or otherwise (except property dedicated for
public right-of-way and except property planned for public ownership or use by the Redevelopment Plan
in effect on the date of this Loan Agreement) so that such disposition shall. Nyhen taken together with
other such dispositions. aggregate more than ten percent of the land area in the Project Area unless such
disposition is permitted as hereinafter provided in this Section. If the Agency proposes to participate in
such a disposition. it shall thereupon appoint an Independent Redevelopment Consultant to report on the
effect of said proposed disposition. If the Report of the Independent Redevelopment Consultant
concludes that the security of the Loan or the rights of the Authority. the Owners and the Trustee
hereunder \yiII not be materially impaired by said proposed disposition. the Agency may thereafter make
such disposition. If such Report concludes that such security Nyill be materially impaired by such
proposed disposition. the Agency shall disapprove said proposed disposition.
Section 4.9. Maintenance of Tax Revenues. The Agency shall comply with all
requirements of the Redevelopment Law to insure the allocation and payment to it of the Tax Revenues.
including without limitation the timely filing of any necessary statements of indebtedness with
appropriate officials of the County and (in the case of supplemental revenues and other amounts payable
by the State) appropriate officials of the State. The Agency shall not amend the Redevelopment Plan or
any of the Pass -Through Agreements. or enter into anv agreement with the County or anv other
P6402. I 05 5\881 9 16.3
13
governmental unit. Nyhich Nvould have the effect of reducing the amount of Subordinate Tax Revenues
available to the Agency for payment of the Loan. unless the Agency shall first obtain (i) the Report of an
Independent Redevelopment Consultant stating that the amount of Tax Revenues for the then current
Fiscal Year (calculated on the assumption that such reduction of Tax Revenues was in effect throughout
such Fiscal Year). plus at the option of the Agency the Additional Revenues. shall meet the coverage test
set forth in Section 2.8. and (ii) as long as the Insurance Policy is then in full force and effect. the Nvritten
consent of the Insurer. Nothing herein is intended or shall be construed in any Nvay to prohibit or impose
any limitations on the entering into by the Agency of any such agreement. amendment or supplement
Nyhich by its term is subordinate to the payment of the Loan and all Parity Debt.
Section 4. ID. Payment of Expenses: Indemnification. The Agency shall pay to the
Trustee from time to time all compensation for all services rendered under this Loan Agreement and the
Indenture. including but not limited to all reasonable expenses. charges. legal and consulting fees and
other disbursements and those of its attorneys. agents and employees. incurred in and about the
performance of its powers and duties hereunder and thereunder. Upon the occurrence of an Event of
Default. the Trustcc shall have a first Tien on the funds held by it under the Indenture to secure the
payment to the Trustee of all fees. costs and expenses. including reasonable compensation to its experts.
attorneys and counsel (including the allocated costs and disbursements of in-house counsel to the extent
the services of such counsel are not duplicative of services provided by outside counsel) incurred in
performing its duties under the Indenture and this Loan Agreement.
The Agency further covenants and agrees to indemnify. defend and save the Trustee and
its officers. directors. agents and employees. harmless against any losses. expenses and liabilities Nyhich it
may incur arising out of or in the exercise and performance of its powers and duties in accordance Nyith
the Indenture and this Loan Agreement. including the costs and expenses of defending against any claim
of liability. but excluding any and all losses. expenses and liabilities Nyhich are due to the negligence or
intentional misconduct of the Trustee. its officers. directors. agents or employees. The obligations of the
Agency under this paragraph shall survive the resignation or removal of the Trustee under the Indenture.
this Loan Agreement and payment of the Loan and the discharge of this Loan Agreement.
Section 4. I I. Tax Covenants. To the extent that bond counsel renders an opinion that
interest on the Bonds (or any of them) is tax-exempt under federal tax law:
(a) The Agency covenants that. in order to maintain the exclusion from gross income for
Federal income tax purposes of the portion of the Accreted Value of the Bonds Nyhich constitute interest
thereon. and for no other purpose. the Agency Nvill satisfy. or take such actions as are necessary to cause
to be satisfied. each provision of the Code necessary to maintain such exclusion. In furtherance of this
covenant the Agency agrees to comply Nyith such «rittcn instructions as may be provided by Bond
Counsel.
(b) The Agency covenants that no part of the proceeds of the Bonds shall be used.
directly or indirectly. to acquire any Investment Property Nyhich Nvould cause the Bonds to become
arbitrage bonds as that term is defined in Section 148 of the Code. or under applicable Tax Regulations.
In order to assure compliance Nyith the rebate requirements of Section 148 of the Code. the Agency further
covenants that it Nvill pay or cause to be paid to the United States the amounts necessary to satisfy the
requirements of Section I48(f) of the Code. and that it Nvill establish such accounting procedures as are
necessary to adequately determine. account for and pay over any such amount required to be paid
thereunder in a manner consistent Nyith the requirements of Section 148 of the Code. such covenants to
survive the defeasance of the Bonds.
P64U2. I 05 5\881 9 16.;
14
(c) The Agency covenants that it Nvill not take any action or omit to take any action.
\yhich action or omission. if reasonably expected on the date of initial execution and delivery of the
Bonds. Nvould result in a Toss of exclusion from gross income for purposes of Federal income taxation.
under Section 103 of the Code. of interest on the Bonds.
(d) The Agency covenants that it Nvill not use or permit the use of any property financed
Nyith the proceeds of the Bonds by any person (other than a state or local governmental unit) in such
manner or to such extent as Nvould result in a Toss of exclusion of the interest on the Bonds from gross
income for Federal income tax purposes under Section 103 of the Code.
(c) Except as provided below. the Agency covenants that none of the moneys contained
in any of the funds or accounts Nyith respect to the Bonds shall be: (i) used in making loans guaranteed by
the United States (or any agency or instrumentality thereof). (ii) invested directly or indirectly in a deposit
or account insured by the Federal Deposit Insurance Corporation. National Credit Union Administration
or any other similar Federally chartered corporation. or (iii) othenvise invested directly or indirectly in
obligations guaranteed (in NyhoIe or in part) by the United States (or any agency or instrumentality
thereof): provided. however. that the above restrictions do not apply to: (a) the investment on moneys
held in the Revenue Fund or any other "bona fide debt service fund as defined for purposes of Section
148 of the Code. (b) investment in direct obligations of the United States Treasury. (c) investment in
obligations guaranteed by the Federal National Mortgage Association. Government National Mortgage
Association. or the Federal Home Loan Mortgage Corporation. (d) investment in obligations issued
pursuant to Section 2 I B(d)(3) of the Federal Home Loan Bank Act. as amended by Section 5 I I (a) of the
Financial Institutions Reform. Recover'. and Enforcement Act of 1989. (c) investments permitted under
regulations issued pursuant to Section I49(b)(3)(B) of the Code. or (f) such other investments permitted
under the Indenture as. in the opinion of Bond Counsel. do not jeopardize the exclusion from gross
income for Federal income tax purposes of interest on the Bonds.
Section 4.12. Redevelopment of Proiect Area. The Agency shall ensure that all activities
undertaken by the Agency Nyith respect to the redevelopment of the Project Area are undertaken and
accomplished in conformity Nyith all applicable requirements of the Redevelopment Plan and the
Redevelopment Lary. The Agency shall manage and operate all properties oNyned by the Agency and
comprising any part of the Redevelopment Project in a sound and business -like manner and in conformity
ith all valid requirements of any governmental authority. and Nyill keep such properties insured at all
times in conformity Nyith sound business practice.
Section 4.1 3. Low and Moderate Income Housing Fund. The Agency covenants and
agrees to use the moneys in the Low and Moderate Income Housing Fund in accordance Nyith Sections
33334.2 and 33334.3 of the Redevelopment Law. and further covenants and agrees to disburse. expend or
encumber any "excess surplus" (as defined in Section 33334.12 of the Redevelopment Lary) in the Low
and Moderate Income Housing Fund at such times and in such manner that the Agency shall not be
subject to sanctions pursuant to subdivision (c) of said Section 3334.12.
Section 4.14. Annual Review of Tax Revenues. The Agency hereby covenants that it Nyill
annually cause an Independent Redevelopment Consultant to review the total amount of Tax Revenues
remaining available to be received by the Agency under the Redevelopment Plans cumulative tax
increment limitation. as \yell as future cumulative annual debt service Nyith respect to all Senior Debt. the
Loan and all Parity Debt. Subject to any limitations set forth in the Senior Debt Instruments. the Agency
II not accept Tax Revenues greater than such annual debt service in any year. if such acceptance \\ill
cause the amount remaining under the tax increment limit to fall below remaining cumulative annual debt
service Nyith respect to all Senior Debt. the Loan and all Parity Debt. except for the purpose of depositing
P6402.1 c 1.5.5\881916. 3 15
such revenues in escrow for the payment of such debt service or for the prepayment or redemption of an
Senior Debt. the Loan and any Parity Debt.
Section 4. 15. Further Assurances. The Agency NViII 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 this Loan Agreement and for the better assuring
and confirming unto the Trustee. the Authority and the Owners of the Bonds of the rights and benefits
provided in this Loan Agreement.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
Section 5. I. Events of Default and Acceleration of Maturities. The following events shall
constitute Events of Default hereunder:
(a) Failure by the Agency to pay the principal of or interest or prepayment premium. if
any. on the Loan. any Parity Debt or Senior Debt when and as the same shall become due and payable.
(b) Failure by the Agency to observe and perform any of the covenants. agreements or
conditions on its part contained in this Loan Agreement. other than as referred to in the preceding
Paragraph (a). for a period of 60 days after written notice specifying such failure and requesting that it be
remedied has been given to the Agency by the Trustee: provided. however. that if the failure stated in
such notice can be corrected. but not within such 60 day period. such failure shall not constitute an Event
of Default if corrective action is instituted by the Agency within such 60 day period and thereafter is
diligently pursued until such failure is corrected.
(c) The filing by the Agency of a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law of the United States of
America. or if a court of competent jurisdiction shall approve a petition. filed with or without the consent
of the Agency. seeking reorganization under the federal bankruptcy laws or any other applicable law of
the United States of America. or if. under the provisions of any other law for the relief or aid of debtors.
any court of competent jurisdiction shall assume custody or control of the Agency or of the whole or any
substantial part of its property.
If an Event of Default has occurred and is continuing. the Authority or the Trustee may.
and at the written direction of the Owners of a majority in aggregate Principal Amount of the Outstanding
Bonds the Authority or the Trustee shall. (i) declare the Loan (in the amount equal to the corresponding
Principal Amount of the Bonds being declared due and payable under the Indenture) to be due and
payable immediately. and upon any such declaration the same shall become immediately due and payable.
anything in this Loan Agreement to the contrary notwithstanding. and (ii) subject to the receipt of
indemnity as provided in the Indenture. exercise any other remedies available to the Trustee at law or in
equity. Immediately upon becoming aware of the occurrence of an Event of Default. the Authority. or the
Trustee as assignee of the Authority. shall give notice of such Event of Default to the Agency by
telephone. telecopier or other telecommunication device. promptly confirmed in writing. This provision.
however. is subject to the condition that if. at any time after the Loan shall have been so declared due and
payable. and before any judgment or decree for the payment of the moneys due shall have been obtained
or entered. the Agency shall deposit with the Trustee a sum sufficient to pay all unpaid installments of the
Loan matured prior to such declaration (such sum being equal to the Accreted Value. calculated to but not
including the date of payment by the Agency to the Trustee. of the corresponding portion of the
Outstanding Bonds that matured prior to such declaration). and the reasonable expenses of the Trustee
P64U2.I055\xx1916.;
16
(including but not limited to attorneys fees). and any and all other defaults known to the Trustee (other
than in the payment of the installments of the Loan due and payable solely by reason of such declaration)
shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee
to be adequate shall have been made therefor. then. and in every such case. the Owners of a majority in
aggregate Principal Amount of the Outstanding Bonds may. by Nvritten notice to the Trustee and the
Agency. rescind and annul such declaration and its consequences. However. no such rescission and
annulment shall extend to or shall affect any subsequent default. or shall impair or exhaust any right or
power consequent thereon.
Section 5.2. Application of Funds Upon Default. Subject to the payment of funds with
respect to the Senior Debt under the Senior Debt Instruments. all amounts received by the Trustee
pursuant to any right given or action taken by the Trustee under the provisions of this Loan Agreement.
shall be applied by the Trustee in the following order:
First. to the payment of the fees. costs and expenses of the Trustee. including reasonable
compensation to its agents. attorneys and counsel (including the allocated costs and disbursements of in-
house counsel to the extent the services of such counsel are not duplicative of services provided by
outside counsel): and
Second. to the payment of the installments of the Loan then due and unpaid (being equal
to the Accreted Value of the Bonds declared due and payable calculated to but not including the date of
payment by the Authority or the Agency to the Trustee. to the extent permitted by lacy): provided.
however. that in the event such amounts shall be insufficient to pay the full amount. then such amounts
shall be applied to the payment of all installments of the Loan then due and payable on a pro rata basis.
Section 5.3. No Waiver. Nothing in this Article V or in any other provision of this Loan
Agreement. shall affect or impair the obligation of the Agency. which is absolute and unconditional. to
pay from the Subordinate Tax Revenues and other amounts pledged hereunder. the installments and
premium. if any. on the Loan to the Trustee Nyhen due. as herein provided. or affect or impair the right of
action. which is also absolute and unconditional. of the Trustee to institute suit to enforce such payment
by virtue of the contract embodied in this Loan Agreement.
A Nyaiyer of any default by the Trustee shall not affect any subsequent default or impair
any rights or remedies on the subsequent default. No delay or omission of the Trustee to exercise any
right or power accruing upon any default shall impair any such right or power or shall be construed to be
a Nyaiyer of any such default or an acquiescence therein. and every power and remedy conferred upon the
Trustee by the Redevelopment Law or by this Article V may be enforced and exercised from time to time
and as often as shall be deemed expedient by the Trustee.
If a suit. action or proceeding to enforce any right or exercise any remedy shall be
abandoned or determined adversely to the Trustee. the Agency. the Authority and the Trustee shall be
restored to their former positions. rights and remedies as if such suit. action or proceeding had not been
brought or taken.
Section 5.4. Agreement to Pay Attorneys" Fees and Expenses. In the event the Agency or
the Authority should default under any of the provisions hereof and the nondefaulting party or the Trustee
should employ attorneys or incur other expenses for the collection of moneys or the enforcement or
performance or observance of any obligation or agreement on the part of the defaulting party herein
contained. the defaulting party agrees that it NyiII on demand therefor pay to the nondcfaulting party or the
Trustee. as the case may be. the reasonable fees of such attorneys and such other expenses so incurred
P64U2. I 05 5\xx 1 9 16.;
17
(including the allocated costs and disbursements of in-house counsel to the extent the services of such
counsel are not duplicative of services provided by outside counsel).
Section 5.5. Remedies Not Exclusive. No remedy herein conferred upon or reserved to
the Trustcc is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter existing. at lacy or in equity
or by statute or otherwise. and may be exercised \wthout exhausting and \wthout regard to any other
remedy conferred by the Redevelopment Law or any other lacy.
Section 5.6. Control of Remedies by Insurer . Notwithstanding the provisions of Section
5. I and subject to any rights heretofore granted by the Authority or the Agency to any insurer of Parity
Debt. as long as Insurance Policy is in full force and effect and the Insurer has not defaulted with respect
to its payment obligations thereunder. upon the occurrence and continuance of an Event of Default. the
Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the
Owners or the Trustee for the benefit of the Owners under this Loan Agreement. Any acceleration of the
Loan or annulment thereof pursuant to Section 5. I shall be subject to the prior \yritten consent of the
Insurer. No \yaiyer of a default shall be effective without the «rittcn consent of the Insurer.
ARTICLE VI
MISCELLANEOUS
Section 6. I. Benefits Limited to Parties. Nothing in this Loan Agreement. expressed or
implied. is intended to give to any person other than the Agency. the Tnistcc. the Insurer and the
Authority. any right. remedy or claim under or by reason of this Loan Agreement. All covenants.
stipulations. promises or agreements in this Loan Agreement contained by and on behalf of the Agency
shall be for the sole and exclusive benefit of the Authority. the Trustee acting as trustee for the benefit of
the Owners of the Bonds. and the Insurer so Tong as the Insurance Policy remains in full force and effect.
Section 6.2. Successor is Deemed Included in All References to Predecessor. Whenever
in this Loan Agreement. the Agency. the Authority. the Trustee or the Insurer is named or referred to.
such reference shall be deemed to include the successors or assigns thereof. and all the covenants and
agreements in this Loan Agreement contained by or on behalf of the Agency. the Authority. the Trustee
or the Insurer shall bind and inure to the benefit of the respective successors and assigns thereof whether
so expressed or not.
Section 6.3. Discharze of Loan Agreement. If the Agency shall pay and discharge the
indebtedness on the Loan or any portion thereof in any one or more of the following \Nays:
(a) by \yell and truly paying or causing to be paid the principal of and interest and
prepayment premiums. if any. on the Loan or such portion thereof. as and \yhen the same become due and
payable:
(b) by irrevocably depositing with the Trustee. in trust. at or before maturity. cash in an
amount which. together with the available amounts then on deposit in any of the funds and accounts
established pursuant to the Indenture or this Loan Agreement. in the opinion or report of an Independent
Accountant is fully sufficient to pay all principal of and interest and prepayment premiums. if any. on the
Loan or such portion thereof: or
(c) by irrevocably depositing with the Trustee or any other fiduciary. in trust. non -
callable Defeasance Obligations in such amount as an Independent Accountant shall determine \yiII.
P64U2. I 05 5\xx 1 9 16.;
18
together Nyith the interest to accrue thereon and available moneys then on deposit in the funds and
accounts established pursuant to the Indenture or this Loan Agreement. be fully sufficient to pay and
discharge the indebtedness on the Loan or such portion thereof (including all principal. interest and
prepayment premiums) at or before maturity:
then. at the election of the Agency but only if all other amounts then due and payable hereunder shall
have been paid or provision for their payment made. the pledge of and Tien upon the Subordinate Tax
Revenues and other funds provided for in this Loan Agreement and all other obligations of the Trustee.
the Authority and the Agency under this Loan Agreement Nyith respect to the Loan or such portion thereof
shall cease and terminate. except only the obligation of the Agency to pay or cause to be paid to the
Trustee. from the amounts so deposited Nyith the Trustee or such other fiduciary. all sums due Nyith respect
to the Loan or such portion thereof. and to pay all expenses and costs of the Trustee when and as such
expenses and costs become due and payable. Notice of such election shall be filed Nyith the Authority and
the Trustee. Any funds thereafter held by the Trustee hereunder. Nyhich are not required for said purpose.
shall be paid over to the Agency.
Section 6.4. Amendment. This Loan Agreement may be amended by the parties hereto
but only under the circumstances set forth in. and in accordance Nyith. the provisions of Section 5.08 of
the Indenture. The Authority and the Trustee covenant that the Indenture shall not be amended. nor shall
the Authority agree or consent to any amendment of the Indenture. Nyithout the prior Nvritten consent of
the Agency (except that such consent shall not be required in the event that an Event of Default shall have
occurred and be continuing hereunder).
Section 6.5. Waiver of Personal Liability. No member. officer. agent or employee of the
Agency shall be individually or personally liable for the repayment of the Loan: but nothing herein
contained shall relieve any such member. officer. agent or employee from the performance of any official
duty provided by law.
Section 6.6. Payment on Business Days. Whenever in this Loan Agreement any amount
is required to be paid on a day Nyhich is not a Business Day. such payment shall be required to be made on
the Business Day immediately following such day. provided that interest on such payment shall not
accrue from and after such day.
Section 6.7. Notices. Any notice. request. complaint. demand or other communication
under this Loan Agreement shall be given in the same manner as provided in Section I I. 13 of the
Indenture. which is hereby incorporated.
Section 6.8. Partial Invalidity . If any Section. paragraph. sentence. clause or phrase of
this Loan Agreement shall for any reason be held illegal. invalid or unenforceable. such holding shall not
affect the validity of the remaining portions of this Loan Agreement. The Agency hereby declares that it
would have adopted this Loan Agreement and each and every other Section. paragraph. sentence. clause
or phrase hereof and authorized the Loan irrespective of the fact that any one or more Sections.
paragraphs. sentences. clauses. or phrases of this Loan Agreement may be held illegal. invalid or
unenforceable.
Section 6.9. Article and Section Headings and References. The headings or titles of the
several Articles and Sections hereof. and any table of contents appended to copies hereof. shall be solely
for convenience of reference and shall not affect the meaning. construction or effect of this Loan
Agreement. All references herein to "Articles." "Sections" and other subdivisions are to the
corresponding Articles. Sections or subdivisions of this Loan Agreement: the words "herein. "hereof.
"hereby. "hereunder- and other words of similar import refer to this Loan Agreement as a Nvhole and not
P64U2. I 05 5\881 9 16.;
19
to any particular Article. Section or subdivision hereof: and words of the masculine gender shall mean
and include words of the feminine and neuter genders.
Section 6.10. Execution of Counterparts. This Loan Agrccmcnt may be executed in any
number of counterparts. each of which shall for all purposes be deemed to be an original and all of which
shall together constitute but one and the same instrument.
Section 6. I I. Governing, Law. This Loan Agreement shall be construed and governed in
accordance with the laws of the State.
Section 6.12. The Trustee. The Trustee is entering into this Loan Agreement solely in its
capacity as Trustee under the Indenture and all provisions of the Indenture relating to the rights.
privileges. powers and protections of the Trustee shall apply with equal force and effect to all actions
taken by the Trustee in connection with this Loan Agreement. The Trustee shall be responsible only for
the duties of the Trustee expressly set forth herein.
IN WITNESS WHEREOF. the AGENCY. the AUTHORITY and the TRUSTEE have
caused this Loan Agreement to be signed by their respective officers. all as of the day and year first above
written.
PALM DESERT REDEVELOPMENT AGENCY
By
Executive Director
PALM DESERT FINANCING AUTHORITY
By
Chief Administrative Officer
WELLS FARGO BANK. NATIONAL ASSOCIATION.
as Trustee
By
Authorized Officer
P64U2. I 05 5\xx 1 9 16.;
20
EXHIBIT A
SCHEDULE OF LOAN PAYMENTS
Date Total Pa\ meat
* Payable on the fifth Business Day preceding each August 1st
P6402.1055\881916. i
A-1
ESCROW AGREEMENT
(PROJECT AREA NO. 2)
by and among
PALM DESERT FINANCING AUTHORITY
and
PALM DESERT REDEVELOPMENT AGENCY
and
WELLS, FARGO BANK, N.A.
as Escrow Agent
Dated as of July 1, 2006
Relating to the Refunding of
Palm Desert Financing Authority
Tax Allocation Refunding Revenue Bonds
(Project Area No. 2)
Series 1995
P6402.1055\882127.3 RWG DRAFT: 5/22/2006
TABLE OF CONTENTS
Paue
Section 1. Definitions 2
Section 2. Appointment of Escrow Agent 2
Section 3. Escrow Fund 3
Section 4. Deposit to Escrow Fund 3
Section 5. Investment of Escrow Fund 3
Section 6. Reinvestment; Payment of Refunding Requirements 4
Section 7. Verification 4
Section 8. Compliance with Agreement 4
Section 9. Tax Covenant 4
Section 10. Notices 4
Section 1 1. Defeasance of Prior Bonds 5
Section 12. Nature of Lien 5
Section 13. Amendments 5
Section 14. Compensation of Escrow Agent 6
Section 15. Resignation or Removal of Escrow Agent; Appointment of Successor 6
Section 16. Limitation of Powers and Duties 7
Section 17. Indemnification 7
Section 18. Limitation of Liability 8
Section 19. Termination 9
Section 20. Governing Law 9
Section 21. Severability 9
Section 22. Counterparts 9
SCHEDULE A
SCHEDULE B
EXHIBIT A
P6402. 1055\882127.3
REFUNDING REQUIREMENTS
ESCROW SECURITIES
FORM OF DEFEASANCE NOTICE
ESCROW AGREEMENT
(Project Area No. 2)
This Escrow Agreement (Project Area No. 2) (this "Agreement") is made and
entered into as of July 1, 2006, by and among the Palm Desert Financing Authority, a joint
powers authority duly organized and existing pursuant to the laws of the State of California (the
"Authority"), the Palm Desert Redevelopment Agency, a public body corporate and politic
organized and existing pursuant to the laws of the State of California (the "Agency"), and Wells
Fargo Bank, National Association, a national banking association duly organized and existing
under the laws of the United States of America, as Escrow Agent (together with any successors
and assigns, the "Escrow Agent").
RECITALS:
A. The Authority has heretofore issued its Palm Desert Financing Authority
Tax Allocation Revenue Bonds (Project Area No. 2), Series 1995, of which $3,870,000 in
principal amount remain outstanding (the "Prior Bonds"), pursuant to the Indenture of Trust,
dated as of June 1, 1995 (the "Prior Indenture"), by and between the Authority and Bank of
America National Trust and Savings Association, as succeeded by Wells Fargo Bank, National
Association, as trustee (the "Prior Bonds Trustee").
B. The Prior Bonds were secured by revenues consisting of amounts payable
to the Authority by the Agency with respect to a loan (the "Prior Loan") pursuant to the Loan
Agreement (Project Area No. 2), dated as of June 1, 1995 (the "Prior Loan Agreement"), by and
among the Agency, the Authority and the Prior Bonds Trustee.
C. The Agency and the Authority have determined that, by refunding the
Prior Bonds, costs to the Agency and the Authority will be reduced.
D. The Authority has determined to issue its Tax Allocation Refunding
Revenue Bonds (Project Area No. 2) 2006 Series A (the "Series 2006A Bonds"), pursuant to the
Indenture of Trust, dated as of even date herewith (the "2006 Indenture"), by and between the
Authority and Wells Fargo Bank, National Association, as trustee (together with any successors
and assigns, the "2006 Trustee").
E. A portion of the proceeds from the sale of the Series 2006A Bonds will be
used to make a loan (the "Series 2006A Loan") to the Agency pursuant to the Loan Agreement
(2006 Senior Loans), dated as of event date herewith (the "2006 Loan Agreement") (the "2006
Loan Agreement"), by and among the Agency, the Authority and the 2006 Trustee.
F. Pursuant to the 2006 Loan Agreement, a portion of the proceeds derived
from the Series 2006A Loan will be deposited in escrow with the Escrow Agent and applied to
the purchase of noncallable direct obligations of, or noncallable obligations guaranteed by, the
United States of America.
P6402.1055\882127.3
1
G. In accordance with the Prior Indenture, if the Authority will pay or cause
to be paid, or will have made provisions to pay, or there will have been set aside in trust funds to
pay, to the holders of Prior Bonds, the principal and interest and premium, if any, to become due
thereon, then with respect to such Prior Bonds the lien of the Prior Indenture will thereupon
cease, terminate and become void and be discharged and satisfied.
H. In order to provide for the proper and timely application of the moneys
deposited in said escrow to the payment of the Prior Bonds, it is necessary to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
Section 1. Definitions. Unless the context clearly requires otherwise, capitalized
terms used in this Agreement shall have the meanings ascribed to them in the introductory
paragraph and the Recitals hereof. In addition, as used herein, the following terms shall have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Escrow Fund" means the Escrow Fund established and held by the Escrow
Agent pursuant to Section 3.
"Escrow Securities" means the Investment Securities set forth in Schedule B
hereto.
"Investment Securities" means noncallable direct obligations of the United States
of America, or bonds or other obligations which are noncallable and for which the full faith and
credit of the United States of America are pledged for the payment of principal and interest, to
mature or be withdrawable, as the case may be, not later than the time when needed for the
payment or redemption of the Prior Bonds in order to discharge the pledge and lien securing the
Prior Bonds.
"Refunding, Requirements" means an amount sufficient to pay all installments of,
principal, interest and the redemption premium of the Prior Bonds on their earliest available
optional redemption date, as set forth in Schedule A attached hereto.
Section 2. Appointment of Escrow Ag,ent. The Authority and the Agency hereby
appoint Wells Fargo Bank, National Association, as Escrow Agent under this Agreement for the
benefit of the holders of the Prior Bonds. The Escrow Agent hereby accepts the duties and
obligations of Escrow Agent under this Agreement and agrees that the irrevocable instructions to
the Escrow Agent herein provided are in a form satisfactory to it. The applicable and necessary
provisions of the Prior Indenture, including particularly redemption provisions set forth in
Article II thereof, are incorporated herein by reference. Reference herein to, or citation herein
of, any provisions of the Prior Indenture shall be deemed to incorporate the same as a part hereof
in the same manner and with the same effect as if the same were fully set forth herein.
P6402.1055\882127.3
2
Section 3. Escrow Fund. There is hereby created and established with the
Escrow Agent a special and irrevocable trust fund designated the "Escrow Fund" (the "Escrow
Fund") to be held by the Escrow Agent separate and apart from all other funds of the Agency,
the Authority or the Escrow Agent and used only for the purposes and in the manner provided in
this Agreement.
Section 4. Deposit to Escrow Fund. Upon the issuance of the Series 2006A
Bonds, the Authority and the Agency shall cause a portion of the sale proceeds of the Series
2006A Bonds, in the amount of $ , to be transferred to the Escrow Agent, for deposit
in the Escrow Fund. Moneys on deposit in the Escrow Fund shall be held in irrevocable trust by
the Escrow Agent and applied solely as provided in this Escrow Agreement.
Section 5. Investment of Escrow Fund. The Escrow Agent, upon receipt of the
moneys described in Section 4, shall immediately invest $ of such moneys in the
Escrow Securities, to deposit such Escrow Securities in the Escrow Fund and to deposit the
remaining $ in the Escrow Fund to hold uninvested. The Escrow Agent is hereby
authorized and empowered to deposit uninvested monies held hereunder from time to time in
demand deposit accounts, without payment for interest thereon as provided hereunder,
established at commercial banks that are corporate affiliates of the Escrow Agent.
Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, at the written request of the Agency and upon compliance with the conditions
hereinafter set forth, the Escrow Agent shall have the power to sell, transfer, request the
redemption of or otherwise dispose of some or all of the Escrow Securities in the Escrow Fund
and to substitute Investment Securities. The foregoing may be effected only if: (a) the
substitution of Investment Securities for the substituted Escrow Securities occurs simultaneously;
(b) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the
Prior Bonds Trustee for the payment of the principal of, premium and/or interest on the Prior
Bonds will not be diminished or postponed thereby, as shown in the certification (described
below) of an independent certified public accountant; (c) the Escrow Agent shall receive the
unqualified opinion of nationally recognized bond counsel to the effect that (i) such disposition
and substitution would not cause any of the Prior Bonds or the Series 2006A Bonds to be an
"arbitrage bond" within the meaning of Section 148 of the Code and the regulations thereunder
in effect on the date of such disposition and substitution and applicable to obligations issued on
the respective issue dates of the Prior Bonds and the Series 2006A Bonds, such disposition or
substitution would not be inconsistent with the tax covenants of the Authority and the Agency
contained in the 2006 Indenture and the 2006 Loan Agreement and that the conditions of this
Section as to the disposition and substitution have been satisfied and (ii) the Agency has the right
and power to effect such disposition and substitution; and (d) the Escrow Agent shall receive
from an independent certified public accountant a certification that, immediately after such
transaction, the principal of and interest on the Investment Securities in the Escrow Fund will,
together with other moneys available for such purpose, be sufficient to pay the Refunding
Requirements. Any cash received from the disposition and substitution of Escrow Securities
pursuant to this Section to the extent that, as shown in such certification, such cash will not be
required, in accordance with the Prior Indenture and this Agreement, at any time for the payment
when due as provided in Section 6, shall be transferred to the Agency.
P6402.1055\882127.3
3
Section 6. Reinvestment: Payment of Refunding, Requirements. As the principal
of the Escrow Securities shall mature and be paid, and the investment income and earnings
thereon are paid, the Escrow Agent shall reinvest such moneys in accordance with the written
instructions of the Agency. On the redemption date of the Prior Bonds as set forth Schedule A,
the Escrow Agent shall transfer an amount sufficient to pay the Refunding Requirements from
the Escrow Fund to the Prior Bonds Trustee. Such amounts shall be applied by the Prior Bonds
Trustee to the payment of the Refunding Requirements for the equal and ratable benefit of the
holders of the Prior Bonds.
Section 7. Verification. The Agency has caused schedules to be prepared relating
to the sufficiency of the anticipated receipts from the Escrow Securities to pay the Refunding
Requirements. The Agency shall furnish the Escrow Agent with the report of Grant Thornton
LLP, verifying the mathematical accuracy of the computations contained in such schedules.
Section 8. Compliance with Agreement and Prior Indenture. The Authority and
the Agency hereby direct, and the Escrow Agent, in its capacities as escrow agent hereunder and
as the Prior Bonds Trustee, hereby agrees that the Escrow Agent will take all the actions required
to be taken by it hereunder, including the timely transfer of moneys for the payment of principal,
interest and redemption premium with respect to the Prior Bonds, in order to effectuate this
Agreement. The liability of the Escrow Agent for the payment of the Refunding Requirements,
pursuant to this Section and, in its capacity as Prior Bonds Trustee, the Prior Indenture, shall be
limited to the application, in accordance with this Agreement, of moneys and the Escrow
Securities in the Escrow Fund (including interest earnings thereon, if any) available for the
purposes of and in accordance with this Agreement.
Section 9. Tax Covenant. Notwithstanding any other provision of this
Agreement, the Authority and the Agency hereby covenant that no part of the proceeds of the
Series 2006A Loan or of the moneys or funds held by the Escrow Agent hereunder shall be used,
and that it shall not direct the Escrow Agent to use any of such moneys or funds at any time,
directly or indirectly, in a manner that would cause any of the Series 2006A Bonds to be an
"arbitrage bond" under Section 148 of the Code and the regulations of the Treasury Department
thereunder proposed or in effect at the time of such use and applicable to obligations issued on
the date of issuance of the Series 2006A Bonds. None of the Authority, the Agency nor the
Escrow Agent shall, except as permitted by Sections 5 and 6, sell, transfer or otherwise dispose
of the Escrow Securities, except that the Escrow Agent may effectuate the transfer of such
Escrow Securities to a successor escrow agent in accordance with the provisions of Section 15
relating to the transfer of rights and property to successor escrow agents.
Section 10. Notices. The Authority hereby instructs the Escrow Agent, in its
capacity as the Prior Bonds Trustee, to mail to the registered owners of the Prior Bonds, as soon
as practicable upon receipt of the deposit of moneys in the Escrow Fund pursuant to Section 4, a
notice substantially in the form set forth in Exhibit A attached hereto. The Authority also hereby
instructs the Escrow Agent, in its capacity as the Prior Bonds Trustee, to send redemption
notices, at least 30 days but no more than 60 days before the redemption date set forth in
Schedule A, to the registered owners of the Prior Bonds, the Securities Depositories and to one
P6402.1055\882127.3
4
or more Information Services (as defined in the Prior Indenture) in the form and manner
prescribed by Section 2.02(e) of the Prior Indenture. The Escrow Agent shall provide copies of
the notices described in this Section 10 to MBIA Insurance Corporation, the insurer of Prior
Bonds.
Section 1 1. Defeasance of Prior Bonds. The Agency and the Authority represent
and agree that, concurrently with the initial deposit of the Escrow Securities pursuant to Section
5, (i) the Prior Bonds will no longer be deemed to be outstanding and unpaid within the meaning
and with the effect expressed in the Prior Indenture, and (ii) the Prior Loan will no longer be
deemed to be outstanding and unpaid within the meaning and with the effect expressed in the
Prior Loan Agreement.
Section 12. Nature of Lien. The trust hereby created shall be irrevocable and the
holders of the Prior Bonds shall have an express lien on all moneys and Escrow Securities in the
Escrow Fund, including the interest earnings thereon, until paid out, used and applied in
accordance with this Agreement.
Section 13. Amendments. This Agreement is made pursuant to and in
furtherance of the Prior Indenture and the 2006 Loan Agreement and for the benefit of the
Agency, the Authority and the holders from time to time of the Prior Bonds and it shall not be
repealed, revoked, altered, amended or supplemented without the written consent of all such
holders and the written consent of the Escrow Agent, the Authority and the Agency; provided,
however, that the Agency, the Authority and the Escrow Agent may, without the consent of, or
notice to, such holders, enter into such agreement supplemental to this Agreement as shall not
materially adversely affect the rights of such holders and as shall not be inconsistent with the
terms and provisions of this Agreement, for any one or more of the following purposes:
(a) To cure any ambiguity or formal defect or omission in this Agreement;
(b) To grant to, or confer upon, the Escrow Agent for the benefit of the
holders of the Prior Bonds, any additional rights, remedies, powers or authority that may
lawfully be granted to, or conferred upon, such holders or the Escrow Agent;
(c) To transfer to the Escrow Agent and make subject to this Agreement
additional funds, securities or properties;
(d) To conform the Escrow Agreement to the provisions of any law or
regulations governing the tax-exempt status of the Prior Bonds and the Series 2006A Bonds in
order maintain their tax-exempt status; and
(e) To make any other change determined by the Authority and the Agency to
be not materially adverse to the holders of the Prior Bonds.
The Escrow Agent shall be entitled to rely exclusively upon an unqualified
opinion of nationally recognized bond counsel with respect to compliance with this Section,
including the extent, if any, to which any change, modification or addition affects the rights of
P6402.1055\882127.3
5
the holders of the Prior Bonds, or that any instrument executed hereunder complies with the
conditions and provisions of this Section.
Section 14. Compensation of Escrow Aizent. In consideration of the services
rendered by the Escrow Agent under this Agreement, the Agency agrees to and shall pay to the
Escrow Agent its proper fees and expenses in accordance with the agreement therefor reached by
the Escrow Agent and the Agency, including all reasonable expenses, charges, counsel fees and
other disbursements incurred by it or by its attorneys, agents and employees in and about the
performance of their powers and duties hereunder, from any moneys of the Agency lawfully
available therefor and the Escrow Agent shall have no lien whatsoever upon any of the moneys
or Escrow Securities in the Escrow Fund for the payment of such proper fees and expenses.
Section 15. Resig,nation or Removal of Escrow Aizent; Appointment of
Successor. The Escrow Agent at the time acting hereunder may at any time resign and be
discharged from the trusts hereby created by giving written notice to the Agency, the Authority
and the Prior Bonds Trustee (if different from the Escrow Agent) specifying the date when such
resignation will take effect, but no such resignation shall take effect unless a successor Escrow
Agent shall have been appointed by the holders of the Prior Bonds or by the Agency as
hereinafter provided and such successor Escrow Agent shall have accepted such appointment, in
which event such resignation shall take effect immediately upon the appointment and acceptance
of a successor Escrow Agent. The Escrow Agent may be removed at any time by an instrument
or concurrent instruments in writing, delivered to the Escrow Agent and to the Agency and the
Authority and signed by the registered holders of a majority in principal amount of each series of
the Prior Bonds. The Escrow Agent may also be removed at any time by the Agency with not
less than 30 days' written notice to the Escrow Agent, the Authority, the Prior Bonds Trustee (if
different from the Escrow Agent) and the registered holders of the Prior Bonds.
In the event the Escrow Agent hereunder shall resign or be removed, or be
dissolved, or shall be in the course of dissolution or liquidation, or otherwise become incapable
of acting hereunder, or in case the Escrow Agent shall be taken under the control of any public
officer or officers, or of a receiver appointed by a court, a successor Escrow Agent may be
appointed by the holders of a majority in principal amount of the Prior Bonds, by an instrument
or concurrent instruments in writing, signed by such holders, or by their attorneys in fact, duly
authorized in writing; provided, nevertheless, that in any such event, the Agency shall appoint a
temporary Escrow Agent to fill such vacancy until a successor Escrow Agent shall be appointed
by the holders of a majority in principal amount of each series of the Prior Bonds, and any such
temporary Escrow Agent so appointed by the Agency shall immediately and without further act
be superseded by the Escrow Agent so appointed by such holders. The Agency shall give
written notice of any such appointment made by it to the Authority and the Prior Bonds Trustee.
In the event that no appointment of a successor Escrow Agent or a temporary
successor Escrow Agent shall have been made by such holders or the Agency pursuant to the
foregoing provisions of this Section within 60 days after written notice of the removal or
resignation of the Escrow Agent has been given to the Agency, the holder of any of the Prior
Bonds or any retiring Escrow Agent may apply to any court of competent jurisdiction for the
appointment of a successor Escrow Agent, and such court may thereupon, after such notice, if
P6402.1055\882127.3
6
any, as it shall deem proper, appoint a successor Escrow Agent.
No successor Escrow Agent shall be appointed unless such successor Escrow
Agent shall be a corporation with trust powers organized under the banking laws of the United
States or any state, and shall have at the time of appointment capital and surplus of not less than
$75,000,000.
Every successor Escrow Agent appointed hereunder shall execute, acknowledge
and deliver to its predecessor and to the Agency, an instrument in writing accepting such
appointment hereunder and thereupon such successor Escrow Agent without any further act,
deed or conveyance, shall become fully vested with all the rights, immunities, powers, trusts,
duties and obligations of its predecessor; but such predecessor shall, nevertheless, on the written
request of such successor Escrow Agent or the Agency execute and deliver an instrument
transferring to such successor Escrow Agent all the estates, properties, rights, powers and trusts
of such predecessor hereunder; and every predecessor Escrow Agent shall deliver all securities
and moneys held by it to its successor. Should any transfer, assignment or instrument in writing
from the Agency be required by any successor Escrow Agent for more fully and certainly vesting
in such successor Escrow Agent the estates, rights, powers and duties hereby vested or intended
to be vested in the predecessor Escrow Agent, any such transfer, assignment and instrument in
writing shall, on request, be executed, acknowledged and delivered by the Agency.
Any entity into which the Escrow Agent, or any successor to it in the trusts
created by this Agreement, may be merged or converted or with which it or any successor to it
may be consolidated, or any entity resulting from any merger, conversion, consolidation or tax-
free reorganization to which the Escrow Agent or any successor to it shall be a party, shall, if it
meets the qualifications set forth in the fifth paragraph of this Section, and if it is otherwise
satisfactory to the Agency, be the successor Escrow Agent under this Agreement without the
execution or filing of any paper or any other act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 16. Limitation of Powers and Duties. The Escrow Agent shall have no
power or duty to invest any funds held under this Agreement except as provided in Sections 5
and 6. The Escrow Agent shall have no power or duty to transfer or otherwise dispose of the
moneys held hereunder except as provided in this Agreement.
Section 17. Indemnification. To the extent permitted by law, the Agency hereby
assumes liability for, and hereby agrees (whether or not any of the transactions contemplated
hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Agent and
its respective successors, assigns, agents, employees and servants, from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and
disbursements (including reasonable legal fees and disbursements) of whatsoever kind and
nature which may be imposed on, incurred by, or asserted against, the Escrow Agent at any time
(whether or not also indemnified against the same by the Agency or any other person under any
other agreement or instrument, but without double indemnity) in any way relating to or arising
out of the execution, delivery and performance of this Agreement, the establishment hereunder
of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of
P6402.1055\882127.3
7
any securities to be purchased pursuant thereto, the retention of such securities or the proceeds
thereof and any payment, transfer or other application of moneys or securities by the Escrow
Agent in accordance with the provisions of this Agreement; provided, however, that the Agency
shall not be required to indemnify the Escrow Agent against the Escrow Agent's own negligence
or willful misconduct or the negligence or willful misconduct of the Escrow Agent's employees.
In no event shall the Authority, the Agency or the Escrow Agent be liable to any person by
reason of the transactions contemplated hereby other than as set forth in this Section. The
indemnities contained in this Section shall survive the termination of this Agreement and
removal or resignation of the Escrow Agent.
Section 18. Limitation of Liability. The Escrow Agent and its respective
successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in
tort, contract, or otherwise, in connection with the execution and delivery of this Agreement, the
establishment of the Escrow Fund, the acceptance of the moneys or any securities deposited
therein, the purchase of the securities to be purchased pursuant hereto, the retention of such
securities or the proceeds thereof, the sufficiency of the securities or any uninvested moneys held
hereunder to accomplish the payment and redemption of the Prior Bonds, or any payment,
transfer or other application of moneys or securities by the Escrow Agent in accordance with the
provisions of this Agreement or by reason of any non -negligent act, non -negligent omission or
non -negligent error of the Escrow Agent made in good faith in the conduct of its duties. The
recitals of fact contained in the Recitals of this Agreement shall be taken as the statements of the
Agency or the Authority, and the Escrow Agent assumes no responsibility for the correctness
thereof. The Escrow Agent makes no representation as to the sufficiency of the securities to be
purchased pursuant hereto and any uninvested moneys to accomplish the payment and
redemption of the Prior Bonds pursuant to the Prior Indenture or to the validity of this
Agreement as to the Agency or the Authority and, except as otherwise provided herein, the
Escrow Agent shall incur no liability in respect thereof. The Escrow Agent shall not be liable in
connection with the performance of its duties under this Agreement except for its own
negligence, willful misconduct or default, and the duties and obligations of the Escrow Agent
shall be determined by the express provisions of this Agreement. The Escrow Agent may
consult with counsel, who may or may not be counsel to the Agency, and in reliance upon the
written opinion or advice of such counsel shall have full authorization and protection in respect
of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever
the Escrow Agent shall deem it necessary or desirable that a matter be proved or established
prior to taking, suffering, or omitting any action under this Agreement, such matter (except the
matters set forth herein as specifically requiring a certificate of a nationally recognized firm of
independent certified public accountants or an opinion of nationally recognized bond counsel)
may be deemed to be conclusively established by a written certification of the Agency or the
Authority, as applicable. Whenever the Escrow Agent shall deem it necessary or desirable that a
matter specifically requiring a certificate of a nationally recognized firm of independent certified
public accountants or an opinion of nationally recognized bond counsel be proved or established
prior to taking, suffering, or omitting any such action, such matter may be established only by
such a certificate or such an opinion. No provision of this Agreement shall require the Escrow
Agent to expend or risk its own funds or otherwise incur any financial liability in the
performance or exercise of any of its duties in accordance with this Agreement, or in the exercise
of its rights or powers.
P6402. 1055\882127.3
8
Section 19. Termination. This Agreement shall terminate when moneys have
been transferred pursuant to Section 6 to the Prior Bonds Trustee sufficient to pay all Prior
Bonds. Upon such termination, all moneys remaining in the Escrow Fund after payment of any
amounts due the Escrow Agent hereunder shall be released to the Agency.
Section 20. Governing, Law. This Agreement shall be governed by the law of the
State of California.
Section 21. Severability. If any one or more of the covenants or agreements
provided in this Agreement on the part of the Agency, the Authority or the Escrow Agent to be
performed should be determined by a court of competent jurisdiction to be contrary to law, such
covenant or agreement shall be deemed and construed to be severable from the remaining
covenants and agreements herein contained and shall in no way affect the validity of the
remaining provisions of this Agreement.
All the covenants, promises and agreements in this Agreement contained by or on
behalf of the Agency, the Authority or the Escrow Agent shall bind and inure to the benefit of
their respective successors and assigns, whether so expressed or not.
Section 22. Counterparts. This Agreement may be executed in several
counterparts, all or any of which shall be regarded for all purposes as one original and shall
constitute and be but one and the same instrument.
P6402.1055\882127.3
9
(l;scro►r Deposit and 1rusi Agreement)
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be executed by their duly authorized officers and appointed or elected officials as of the date first
written above.
P6402.1055\882127.3
PALM DESERT FINANCING AUTHORITY
By:
Chief Administrative Officer
PALM DESERT REDEVELOPMENT AGENCY
By:
Executive Director
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Escrow Agent
By:
Authorized Officer
10
SCHEDULE A
REFUNDING REQUIREMENTS
Redemption Redemption Escrow
Date Principal Interest Premium Requirement
August 1, 2006 $3,870,000 $ $ $
* Consists of the following Prior Bonds to be paid or optionally redeemed on August I. 2006:
Maturity
Date Interest Redemption
(August I) Principal Rate Price
2024 $ 80.000** 5.950% 100%
2024 2.410.000 5.950 101
2025 1.380.000 6.250 101
$ 3.870.000
** scheduled 2006 mandatory sinking fund redemption
P64U2. I O55\882127.3
Schedule A-1
P6402. 1055\882127.3
SCHEDULE B
ESCROW SECURITIES
Schedule B-1
EXHIBIT A
[FORM OF DEFEASANCE NOTICE]
PALM DESERT FINANCING AUTHORITY
Notice to the Holders of
Palm Desert Financing Authority
Tax Allocation Refunding Revenue Bonds
(Project Area No. 2)
Series 1995
CUSIP No.
NOTICE IS HEREBY GIVEN on behalf of the Palm Desert Financing Authority
(the "Authority"), that pursuant to Section 10.03 of the Indenture of Trust, dated as of June 1,
1995 (the "Indenture"), pertaining to the above -captioned Bonds, the lien of such Indenture has
been discharged through the irrevocable deposit in escrow of cash and Federal Securities.
P6402. 1055\882127.3
DATED this day of , 2006
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Escrow Agent
Exhibit A
Jones Hall Draft 5/22/06
PRELIMINARY OFFICIAL STATEMENT DATED , 2006
NEW ISSUE Senior Bonds Ratings (_ Insured): Moody's:
FULL BOOK ENTRY S&P:
(See "RATINGS" herein)
In the opinion of Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel,
under existing law, the interest on the Bonds is exempt from personal income taxes of the State of California and, assuming
compliance with the tax covenants described herein, interest on the Bonds is excluded pursuant to section 103(a) of the
Internal Revenue Code of 1986, as amended, from the gross income of the owners thereof for federal income tax purposes
and is not an item of tax preference for purposes of the federal alternative minimum tax. See, however, "CONCLUDING
INFORMATION — Tax -Exempt Status of the Bonds" herein regarding certain other tax considerations.
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION
REFUNDING REVENUE BONDS
(PROJECT AREA NO. 2)
2006 SERIES A
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE CAPITAL
APPRECIATION BONDS
(PROJECT AREA NO. 2)
2006 SERIES B
PALM DESERT FINANCING AUTHORITY
SUBORDINATE TAX ALLOCATION REVENUE
CAPITAL APPRECIATION BONDS
(PROJECT AREA NO. 2)
2006 SERIES D
$
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE BONDS
(PROJECT AREA NO. 2)
2006 SERIES C
Dated: Date of Delivery Due: August 1, as shown on the inside cover hereof
The captioned bonds (the "Series 2006A Bonds", the "Series 2006B Bonds", and the "Series 2006C Bonds", and
collectively, the "Senior Bonds") will be issued by the Palm Desert Financing Authority (the "Authority") under an Indenture of
Trust, dated as of July 1, 2006 (the "Senior Indenture"), by and between the Authority and Wells Fargo Bank, National
Association, Los Angeles, California as trustee for the Bonds (the "Trustee"). The captioned Series 2006D Bonds (the
"Subordinate Bonds", and together with the Senior Bonds, the "Bonds") will be issued by the Authority under an Indenture of
Trust, dated as of July 1, 2006 (the "Subordinate Indenture"), by and between the Authority and the Trustee. The proceeds
of the Senior Bonds will be used to make three loans (together, the "Senior Loans") to the Palm Desert Redevelopment
Agency (the "Agency") pursuant to a loan agreement, dated as of July 1, 2006 (the "Senior Loan Agreement") by and among
the Authority, the Agency and the Trustee. The proceeds of the Subordinate Bonds will be used to make a loan (the
"Subordinate Loan", and together with the Senior Loan, the "Loans") to the Agency pursuant to a loan agreement, dated as
of July 1, 2006 (the "Subordinate Loan Agreement") by and among the Authority, the Agency and the Trustee. The Agency
will use proceeds of the Loans to (i) refinance the Agency's obligations under a loan agreement entered into in 1995, (ii)
finance certain redevelopment activities within or of benefit to its Project Area No. 2 (the "Project Area"), (iii) make a deposit
into a special escrow fund to be released to the Agency if and when certain conditions are met, and (iv) pay costs of
issuance of the Bonds.
The Series 2006A Bonds and the Series 2006C Bonds are being issued as Current Interest Bonds. The Series
2006B Bonds and the Series 2006D Bonds are being issued as Capital Appreciation Bonds. The Current Interest Bonds will
be issued as fully registered instruments without coupons, in the denomination of $5,000 or any integral multiple thereof, in
book -entry form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York,
New York ("DTC"). Interest on the Current Interest Bonds will be payable on August 1 and February 1 of each year (the
"Interest Payment Dates"), commencing August 1, 2006. Purchasers will not receive physical certificates representing their
interest in the Bonds. The Capital Appreciation Bonds are dated their date of delivery and accrete interest from such date,
compounded semiannually on February 1 and August 1 of each year, commencing August 1, 2006. The Capital
Appreciation Bonds will be issued in denominations of $5,000 Maturity Value or any integral multiple thereof. For so long as
the Bonds are registered in the name of Cede & Co., all payments of principal and interest or Maturity Value on the Bonds
will be made to DTC, which, in turn, is obligated to remit such principal and interest to DTC Participants (defined herein) for
subsequent disbursement to the Beneficial Owners (defined herein) of the Bonds. See "THE BONDS — Book -Entry Only
System" herein.
The Bonds are subject to optional redemption and mandatory sinking fund redemption as described herein.
The Series 2006C Bonds are also subject to extraordinary redemption from unreleased escrow funds, as described
herein.
The Senior Bonds are special obligations of the Authority payable from and secured by Revenues, as defined
herein, consisting primarily of amounts payable by the Agency under the Senior Loan Agreements, and the Subordinate
Bonds are special obligations of the Authority payable from and secured by Subordinate Revenues, as defined herein,
consisting primarily of amounts payable by the Agency under the Subordinate Loan Agreement. The Senior Loan Agreement
is secured by and payable from Tax Revenues, as defined herein, derived from the Project Area. The Subordinate Loan
Agreement is secured by and payable from Subordinate Tax Revenues, as defined herein, which are Tax Revenues pledged
on a subordinate basis to the Agency's obligations under loan agreements entered into in 2002 and 2003, the Senior Loan
Agreement, and any future obligations secured on a parity to such loan agreements. The Agency may issue, pursuant to the
terms of the Senior Loan Agreement and the Senior Indenture, additional obligations secured by Tax Revenues on a parity
with the Senior Loan (the "Senior Parity Debt"), or, pursuant to the terms of the Subordinate Loan Agreement and the
Subordinate Indenture, additional obligations secured by Subordinate Tax Revenues on a parity with the Subordinate Loan
(the "Subordinate Parity Debt"), . See "SECURITY FOR THE BONDS" herein.
Payment of the principal of and interest on the Senior Bonds when due will be insured by a municipal bond
insurance policy to be issued by simultaneously with the delivery of the Senior Bonds. See "SENIOR
BONDS MUNICIPAL BOND INSURANCE" herein. The Subordinate Bonds are not insured.
[INSURER LOGO]
The Bonds are not a debt of the City of Palm Desert (the "City") or of the State of California or any of its political
subdivisions (other than the Authority), and are not a liability of the City, the State of California or any of its political
subdivisions (other than the Authority). The Loans are not a debt of the Authority or of the State of California or any of its
political subdivisions (other than the Agency), and neither the Authority nor the State of California nor any of its political
subdivisions (other than the Agency) is liable therefor. Neither the Bonds nor the Loans constitute an indebtedness within
the meaning of any constitutional or statutory debt limitation or restriction. The members of the Authority, the Agency or any
persons executing the Bonds or the Loan Agreements are not personally liable with respect to the Bonds or Loans. In no
event will the obligations of the Agency under the Loan Agreements be payable out of any funds or properties of the Agency
other than Tax Revenues or Subordinate Tax Revenues (as the case may be) set forth in the applicable Loan Agreement.
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to the approval as to
legality by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel. Certain legal
matters will be passed on for the Authority and the Agency by Jones Hall, A Professional Law Corporation, San Francisco,
California, as Disclosure Counsel. It is anticipated that the Bonds will be available for delivery in New York, New York
through the facilities of DTC on or about , 2006.
CITIGROUP
The date of this Official Statement is , 2006.
*Preliminary, subject to change.
$
$
$
$ *
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REFUNDING REVENUE BONDS
(PROJECT AREA NO. 2)
2006 SERIES A
(CUSIP Base: )
Maturity Date Principal Interest
(Auaust 11 Amount Rate Yield CUSIP
% Term Bond due August 1, , Yield % (CUSIP:
$ *
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE CAPITAL APPRECIATION BONDS
(PROJECT AREA NO. 2)
2006 SERIES B
(CUSIP Base: )
Maturity Date Principal Interest
(Auaust 11 Amount Rate Yield CUSIP
% Term Bond due August 1, , Yield % (CUSIP:
$ *
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE BONDS
(PROJECT AREA NO. 2)
2006 SERIES C
(CUSIP Base: )
Maturity Date Principal Interest
(Auaust 11 Amount Rate Yield CUSIP
% Term Bond due August 1, , Yield % (CUSIP:
$ *
PALM DESERT FINANCING AUTHORITY
SUBORDINATE TAX ALLOCATION REVENUE BONDS
CAPITAL APPRECIATION BONDS
(PROJECT AREA NO. 2)
2006 SERIES D
(CUSIP Base: )
Maturity Date Principal Interest
(Auaust 11 Amount Rate Yield CUSIP
$ % Term Bond due August 1, , Yield % (CUSIP: )
PALM DESERT FINANCING AUTHORITY
PALM DESERT REDEVELOPMENT AGENCY
CITY OF PALM DESERT
PALM DESERT FINANCING AUTHORITY COMMISSION MEMBERS AND STAFF
James Ferguson, President
Richard S. Kelly, Vice President
Jean M. Benson, Commissioner
Buford A. Crites, Commissioner
Robert A. Spiegel, Commissioner
Carlos L. Ortega, City Manager
CITY COUNCIL/AGENCY MEMBERS
James Ferguson, Mayor/Chairman
Richard S. Kelly, Mayor Pro Tem/Vice Chairman
Jean M. Benson, Councilmember/Member
Buford A. Crites, Councilmember/Member
Robert A. Spiegel, Councilmember/Member
AGENCY STAFF
Carlos L. Ortega, City Manager/Executive Director
Stephen Aryan, Assistant to the City Manager
Homer Croy, Assistant City Manager Development Services
Justin McCarthy, Assistant City Manager/Redevelopment
Sheila R. Gilligan, Assistant City Manager Community Services
Paul S. Gibson, Finance Director/Treasurer
David L. Yrigoyen, Director of Redevelopment/Housing
Rachelle Klassen, City Clerk
Arla K. Scott, Senior Financial Analyst
Veronica Tapia, Redevelopment Accountant
SPECIAL SERVICES
Bond Counsel
Richards, Watson & Gershon,
A Professional Corporation
Los Angeles, California
Financial Advisor
Del Rio Advisors, LLC
Modesto, California
Disclosure Counsel
Jones Hall, A Professional
Law Corporation
San Francisco, California
Fiscal Consultant
Rosenow Spevacek Group Inc.
Santa Ana, California
Trustee
Wells Fargo Bank, National Association
Los Angeles, California
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement. This Official Statement is submitted in connection with the offer and
sale of the Bonds and may not be reproduced or used, in whole or in part, for any other purpose. This
Official Statement is not to be construed as a contract with the purchasers of the Bonds.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure
by the Agency in any press release and in any oral statement made with the approval of an authorized
officer of the Agency or any other entity described or referenced in this Official Statement, the words or
phrases "will likely result," "are expected to", "will continue", "is anticipated", "estimate", "project," "forecast",
"expect", "intend" and similar expressions identify "forward looking statements." Such statements are
subject to risks and uncertainties that could cause actual results to differ materially from those
contemplated in such forward -looking statements. Any forecast is subject to such uncertainties.
Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events
and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual
results, and those differences may be material. The information and expressions of opinion in this Official
Statement are subject to change without notice, and neither the delivery of this Official Statement nor any
subsequent sale under any circumstances, give rise to any implication that there has been no change in
the affairs of the Authority or the Agency or any other entity described or referenced herein since the date
of this Official Statement.
The information and expressions of opinions in this Official Statement are subject to change
without notice and neither delivery of this Official Statement nor any subsequent sale shall, under any
circumstances, create any implication that there has been no change in the affairs of the Agency any other
entity described or referenced in this Official Statement since its date. All summaries of the documents
referred to in this Official Statement are made subject to the provisions of such documents, respectively,
and do not purport to be complete statements of any or all of such provisions.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the
Authority or the Agency to give any information or to make any representations in connection with the offer
or sale of the Bonds other than those contained in this Official Statement and if given or made, such other
information or representation must not be relied upon as having been authorized by the Authority, the
Agency or the Underwriter. 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.
Involvement of Underwriter. The Underwriter has provided the following sentence for inclusion in
this Official Statement: The Underwriter has reviewed the information in this Official Statement in
accordance with and as part of its responsibilities to investors under the federal securities laws as applied
to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or
completeness of such information.
Stabilization of Prices. 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.
The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the public
offering prices set forth on the cover page hereof and said public offering prices may be changed from time
to time by the Underwriter.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS
CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE.
TABLE OF CONTENTS
INTRODUCTION 2
PLAN OF FINANCE 5
SOURCES AND USES OF FUNDS 6
DEBT SERVICE SCHEDULES 8
THE BONDS 11
Description of the Bonds 11
Redemption of the Bonds 12
SENIOR BONDS MUNICIPAL
BOND INSURANCE 15
SECURITY FOR THE BONDS 16
Revenues and Loan Agreement 16
Tax Allocation Financing 17
Allocation of Taxes 17
Tax Revenues and Subordinate Tax
Revenues 18
Special Escrow Fund for Series 2006C
Bonds 20
Pass -Through Agreements and Housing
Set -Aside 21
Parity Debt and Existing Parity Lien 22
Issuance of Additional Parity Debt 22
Issuance of Additional Subordinate Debt 25
Reserve Funds 25
RISK FACTORS 26
Bonds Are Limited Obligations 26
Reduction of Tax Revenues 26
Reduction in Inflationary Rate 27
Concentration of Ownership 27
Assessment Appeals 27
Proposition 8 Adjustments 28
Subordinate Nature of Series 2006B Bonds28
No Rating of Series 2006B Bonds 28
Development Risks 29
Seismic Factors 29
Flood Risk Considerations 29
Levy and Collection 29
State Budget; ERAF Shift 30
Assumptions and Projections 30
Bankruptcy and Foreclosure 30
Loss of Tax Exemption on the Bonds 31
PROPERTY TAXATION IN
CALIFORNIA 31
Constitutional Amendments Affecting Tax
Revenues 31
APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D -
APPENDIX E -
APPENDIX F -
APPENDIX G -
APPENDIX H -
APPENDIX I -
Implementing Legislation 32
Constitutional Challenges to Property
Tax System 32
Property Tax Collection Procedures 33
Supplemental Assessments 33
Tax Collection Fees 33
Unitary Property Tax 34
Business Inventory and Replacement
Revenue 34
Proposition 8 34
Future Initiatives 35
THE PROJECT AREA 35
Establishment of the Project Area 35
Limitations and Requirements of the
Redevelopment Plan 36
SB211 37
SUBORDINATE TAX REVENUES 37
Pass -Through Agreements 38
Schedule of Historical Tax Revenues 38
Top Ten Taxpayers 41
Filing of Statement of Indebtedness 41
Housing Set -Aside Requirements 42
PALM DESERT FINANCING
AUTHORITY 43
PALM DESERT REDEVELOPMENT
AGENCY 43
Authority and Management 43
Agency Powers 45
Financial Information 46
Redevelopment Project Areas 46
Pass -Through Agreements 46
Regulatory Issues 46
VERIFICATION OF
MATHEMATICAL COMPUTATIONS 46
CONCLUDING INFORMATION 47
Continuing Disclosure 47
Underwriting 47
Legal Opinion 47
Tax -Exempt Status of the Bonds 47
No Litigation 49
Ratings 49
Miscellaneous 50
FISCAL CONSULTANT'S REPORT
FORM OF OPINION OF BOND COUNSEL
AGENCY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR
ENDED JUNE 30, 2005
CITY OF PALM DESERT GENERAL INFORMATION
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
FORM OF MUNICIPAL BOND INSURANCE POLICY FOR SENIOR BONDS
FORM OF CONTINUING DISCLOSURE AGREEMENT
BOOK -ENTRY SYSTEM
TABLES OF ACCRETED VALUES
OFFICIAL STATEMENT
$ $ $
PALM DESERT FINANCING AUTHORITY PALM DESERT FINANCING AUTHORITY PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION TAX ALLOCATION REVENUE CAPITAL TAX ALLOCATION REVENUE BONDS
REFUNDING REVENUE BONDS APPRECIATION BONDS (PROJECT AREA NO. 2)
(PROJECT AREA NO. 2) (PROJECT AREA NO. 2) 2006 SERIES C
2006 SERIES A 2006 SERIES B
PALM DESERT FINANCING AUTHORITY
SUBORDINATE TAX ALLOCATION REVENUE
CAPITAL APPRECIATION BONDS
(PROJECT AREA NO. 2)
2006 SERIES D
This Official Statement, including the cover page, is provided to furnish information in
connection with the sale by the Palm Desert Financing Authority (the "Authority") of:
$ * aggregate principal amount of Palm Desert Financing
Authority, Tax Allocation Refunding Revenue Bonds (Project Area No. 2) 2006
Series A (the "Series 2006A Bonds"),
• $ * aggregate principal amount of Palm Desert Financing
Authority, Tax Allocation Revenue Capital Appreciation Bonds (Project Area No.
2) 2006 Series B (the "Series 2006B Bonds"),
$ * aggregate principal amount of Palm Desert Financing
Authority, Tax Allocation Revenue Bonds (Project Area No. 2) 2006 Series B (the
"Series 2006C Bonds"), and
$ * aggregate principal amount of Palm Desert Financing
Authority, Subordinate Tax Allocation Revenue Capital Appreciation Bonds
(Project Area No. 2) 2006 Series D (the "Series 2006D Bonds", or the
"Subordinate Bonds").
*Preliminary, subject to change.
The Series 2006A Bonds, the Series 2006B Bonds and the Series 2006C Bonds are
collectively referred to as the "Senior Bonds". For the definitions of certain capitalized terms
used and not otherwise defined, see "APPENDIX E — SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS."
Any statements made in this Official Statement involving matters of opinion or of
estimates, whether or not so expressly stated, are set forth as such and not as representations
of fact, and no representation is made that any of the estimates will be realized. Definitions of
1
certain terms used herein and not defined herein have the meaning set forth in the Indenture.
See "APPENDIX E — Summary of Principal Legal Documents."
INTRODUCTION
This Introduction contains a brief summary of certain information contained in this
Official Statement. It is not intended to be complete and is qualified by the more detailed
information contained elsewhere in this Official Statement.
Authorization. The Bonds will be issued under the provisions of the Marks -Roos Local
Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1
(commencing with Section 6584) of the California Government Code (the "Bond Law"). The
Bonds will be issued pursuant to an Indenture of Trust, dated as of July 1, 2006 (the
"Indenture"), by and between the Authority and Wells Fargo Bank, National Association, as
trustee thereunder (the "Trustee").
Use of Proceeds. The proceeds of each series of Senior Bonds will be used by the
Authority to fund three loans (the "Series A Loan", the "Series B Loan", and the "Series C
Loan", and together, the "Senior Loans") to the Palm Desert Redevelopment Agency (the
"Agency") pursuant to a Loan Agreement (the "Senior Loan Agreement"), dated as of July
1, 2006 by and among the Authority, the Agency and the Trustee for the benefit of the Agency's
Project Area No. 2 (the "Project Area").
The proceeds of the Series A Loan will be used:
• to refund the indebtedness of the Agency under a Loan Agreement dated as of June 1,
1995 (the "1995 Loan Agreement");
• to finance certain redevelopment activities within or of benefit to the Project Area; and
• to pay costs of issuance of the Series 2006A Bonds (including the premium for a reserve
fund surety bond).
The proceeds of the Series B Loan will be used:
• to finance certain redevelopment activities within or of benefit to the Project Area; and
• to pay costs of issuance of the Series 2006B Bonds (including the premium for a reserve
fund surety bond).
The proceeds of the Series C Loan will be used:
• to deposit funds into a special escrow fund, to be released to the Agency if and when
certain conditions are met; and
• to pay costs of issuing the Series 2006C Bonds (including the premium for a reserve
fund surety bond).
The refunding of the obligations under the 1995 Loan Agreement will effect a refunding
of the Authority's corresponding Subordinate Tax Allocation Refunding Revenue Bonds (Project
Area No. 2), Series 1995 (the "1995 Bonds"). See "PLAN OF FINANCE — The
2
Redevelopment Project." Proceeds of the Senior Bonds will also be used to establish a parity
Reserve Fund (described herein) for the Senior Bonds and to pay costs of issuance.
The proceeds of the Series 2006D Bonds will be used by the Authority to fund a loan
(the "Subordinate Loan" to the Agency pursuant to a Loan Agreement (the "Subordinate
Loan Agreement"), dated as of July 1, 2006 by and among the Authority, the Agency and the
Trustee for the benefit of the Project Area. The proceeds of the Subordinate Loan will be used:
• to finance certain redevelopment activities within or of benefit to the Project Area; and
• to pay costs of issuance of the Series 2006D Bonds (including a reserve fund surety
bond).
Security. The Senior Bonds are special obligations of the Authority secured by a parity
pledge of Revenues, as defined in the Senior Indenture and described herein, consisting
primarily of the amounts paid by the Agency under the Senior Loan Agreement. The pledge of
Revenues under the Senior Loan Agreement is on a parity with the Agency's pledge of
Revenues under loan agreements entered into in 2002 and 2003 (the "Prior Loan
Agreements", as described below.
The Subordinate Bonds are special obligations of the Authority secured by a parity
pledge of Subordinate Revenues, as defined in the Subordinate Indenture. The Subordinate Tax
Revenues securing the Series D Bonds consist of the Tax Revenues remaining after payment of
the Senior Loan and the Prior Loans. Amounts payable under each respective Loan Agreement
are calculated to be sufficient to pay in full when due the principal of and interest and premium
(if any) on the related Bonds.
In California, the financing and refinancing of redevelopment projects may be provided
by the issuance of tax allocation bonds. Such bonds are payable from property taxes collected
within a redevelopment project area attributable to the increase in assessed valuation of
property over the valuation as of the date of establishment of the project area, as explained in
greater detail herein. Tax Revenues is defined in the Indenture and generally includes certain
ad valorem property taxes attributable to increases in the assessed valuation of certain property
(except public property and property exempt from taxation) in the Project Area (described
herein) over that shown on the assessment rolls for the adjusted base year. Such taxes are
eligible for allocation to the Agency pursuant to the Redevelopment Law in connection with the
Project Area. The fiscal year 2005-06 total assessed value of the Project Area is approximately
$1.5 billion, of which tax increment revenue is generated from the incremental assessed value
of approximately $13.8 million, representing the excess of the value of the Project Area over the
base year value of approximately $102 million. Tax Revenues and Subordinate Tax Revenues
are more fully described under the caption "SECURITY FOR THE BONDS — Revenues and the
Loan Agreements."
In addition to the 1995 Loan Agreement to be refunded, the Agency currently has
outstanding its (i) Project Area No. 2, Loan Agreement, dated as of March 1, 2002 (the "Senior
2002 Loan Agreement"), by and among the Agency, the Authority and BNY Western Trust
Company, as prior trustee (the "Prior Trustee"), and (ii) Project Area No. 2, Loan Agreement,
dated as of July 1, 2003 (the "Senior 2003 Loan Agreement" and together with the Senior
2002 Loan Agreement, the "Prior Loan Agreements"), by and among the Agency, the
Authority and the Prior Trustee. Each loan under the Prior Loan Agreements (the "Senior 2002
Loan" and "Senior 2003 Loan" and together, the "Prior Loans") is secured by Tax Revenues
on a parity with the pledge of Tax Revenues pledged to pay the Senior Loans and on senior
3
priority to the pledge of Subordinate Tax Revenues pledged to pay the Subordinate Loan. The
Agency may, pursuant to the terms of the Senior Loan Agreement and the Senior Indenture,
issue additional obligations secured by Tax Revenues on a parity with the Senior Loans and the
Prior Loans, and may under the Prior Loan Agreements, issue additional obligations secured by
Tax Revenues on a parity with the obligations under the Prior Loan Agreements. See
"SECURITY FOR THE BONDS — Existing Parity Debt" and "-- Issuance of Additional Parity
Debt" herein.
In addition, the Agency may, pursuant to the terms of the Subordinate Loan Agreement
and the Subordinate Indenture, issue additional obligations secured by Subordinate Tax
Revenues on a parity with the Subordinate Loan.
Payment of the principal of and interest on the Senior Bonds when due will be insured by
a municipal bond insurance policy to be issued by (the "Insurer")
simultaneously with the delivery of the Bonds. See "SENIOR BONDS MUNICIPAL BOND
INSURANCE" herein. The Subordinate Bonds are not insured.
The Project Area. The Agency's Project Area No. 2 (the "Project Area") consists of the
territory described and defined as such in the Redevelopment Plan of the City of Palm Desert
(the "City") approved and adopted by the City by its Ordinance No. 509 on July 15, 1987. See
"THE PROJECT AREA."
Risk Factors. Risks of investment in the Bonds include the possibility of future
decreases in the taxable valuation in the Project Area or in the applicable tax rates, which could
reduce the Tax Revenues allocated to the Agency and correspondingly could have an adverse
impact on the ability of the Agency to pay debt service on the Bonds. See "RISK FACTORS"
herein.
The City. The City of Palm Desert (the "City"), is located in the Coachella Valley and is
approximately midway between the cities of Indio and Palm Springs, 117 miles east of
Los Angeles, 118 miles northeast of San Diego and 515 miles southeast of San Francisco. The
City was incorporated on November 26, 1973, as a general law city. In 1997 the City became a
charter city. The estimated City population as of January 1, 2006 was approximately 49,539,
The City occupies an area of 24.75 square miles. For certain information regarding the City,
see "APPENDIX D - City of Palm Desert General Information." The Bonds are not an obligation
of the City.
The Agency. The Agency is a redevelopment agency existing under the Community
Redevelopment Law of the State of California (the "State"), constituting Part 1 of Division 24
(commencing with Section 33000) of the California Health and Safety Code, as amended (the
"Redevelopment Law"). The Agency was established by ordinance of the City Council adopted
in 1974. See "PALM DESERT REDEVELOPMENT AGENCY" below.
Miscellaneous. There follows in this Official Statement, which includes the cover page
and Appendices hereto, a brief description of the Bonds, the Indentures, the Loan Agreements,
the Tax Revenues and Subordinate Tax Revenues, the Project Area, security for the Bonds, risk
factors, limitations on Revenues and Subordinate Revenues and certain other information
relevant to the issuance of the Bonds. All references herein to the Indentures are qualified in
their entirety by reference to the definitive form thereof, and all references to the Bonds are
further qualified by references to the information with respect thereto contained in the respective
Indentures. A summary of certain provisions of the Indentures is included in APPENDIX E. The
most recent audited financial statements of the Agency are included in APPENDIX C. The
4
information set forth herein and in the Appendices hereto has been furnished by the Agency and
includes information which has been obtained from other sources which are believed to be
reliable but is not guaranteed as to accuracy or completeness and is not to be construed as a
representation by the Underwriter. All capitalized terms used herein and not normally
capitalized have the meanings assigned thereto in the Indenture, unless otherwise stated
herein.
The information and expressions of opinion herein speak only as of the date of this
Official Statement and are subject to change without notice. Neither delivery of this Official
Statement nor any sale made hereunder nor any future use of this Official Statement shall,
under any circumstances, create any implication that there has been no change in the affairs of
the Agency since the date hereof.
All financial and other information presented in this Official Statement has been provided
by the Agency or the City from their records, except for information expressly attributed to other
sources. The presentation of information, including the table of receipts from tax increment
revenues, is intended to show recent historic information and is not intended to indicate future or
continuing trends in the financial or other affairs of the Agency or the City. No representation is
made that past experience, as it might be shown by such financial and other information, will
necessarily continue or be repeated in the future.
PLAN OF FINANCE
The proceeds of the Bonds will be used by the Authority to make the Loans to the
Agency. A portion of the proceeds of the Series A Loan will be used to refund indebtedness of
the Agency under the 1995 Loan Agreement, and proceeds of the Series A Loan, the Series B
Loan and the Series D Loan will be used to finance certain redevelopment activities within or of
benefit to the Project Area. The proceeds of the Series C Loan will be deposited into a special
escrow fund, to be released to the Agency if and when certain conditions are met, whereupon
the money released will be used to finance additional redevelopment activities. Upon receipt of
payment for the Bonds on the date of their initial delivery, the Trustee is required to deposit the
net proceeds of the Bonds into the Loan Funds created under the Indentures and disbursed by
the Trustee pursuant to the respective Loan Agreements. The amounts in each Loan Fund are
to be transferred by the Trustee pursuant to the Loan Agreement to the appropriate Project
Fund, Escrow Fund, Special Escrow Fund and/or Costs of Issuance Fund. Proceeds of the
Loans will also be used to establish a Reserve Fund (described herein) for each series of Bonds
and to pay costs of issuance.
Refunding of 1995 Loan. In 1997, the Authority issued its $4,090,000 original principal
amount of Subordinate Tax Allocation Refunding Revenue Bonds (Project Area No. 2), Series
1995 (the "1995 Bonds"), of which $3,870,000 remain outstanding, for the purpose of funding a
loan (the "1995 Loan") to the Agency pursuant to a Loan Agreement dated as of June 1, 1995
(the "1995 Loan Agreement"). A portion of the proceeds of the Series A Loan will be used by
the Agency to refund the 1995 Loan. The proceeds of the 1995 Loan were primarily used to
finance certain redevelopment activities within or of benefit to the Project Area. The refunding
of the obligations under the 1995 Loan Agreement will effect a refunding of the 1995 Bonds.
The Agency and Wells Fargo Bank, National Association, as escrow bank (the "Escrow
Agent") will enter into an Escrow Agreement (the "Escrow Agreement") dated as of July 1,
2006 under which the Escrow Agent will establish an Escrow Fund (the "Escrow Fund"), into
which a portion of the Loan and other available funds held for the 1995 Bonds will be deposited
5
concurrent with the original delivery of the Bonds. Amounts in the Escrow Fund will be invested
in certain United States Treasury securities, the principal of and interest on which, together with
any uninvested cash therein, will be sufficient to pay and redeem, on August 1, 2006, the
outstanding 1995 Bonds to be refunded. Sufficiency of the deposits and investment earnings
for those purposes will be verified by Grant Thornton, Minneapolis, Minnesota. See
"VERIFICATION OF MATHEMATICAL COMPUTATIONS" below. Amounts on deposit in the
Escrow Fund are not available for payment of the Bonds or the Loan.
New Money Component. Proceeds of the Loans deposited into the Project Fund are to
be disbursed pursuant to the Loan Agreements from time to time by the Trustee for the purpose
of paying any portion of the costs of the Agency for the redevelopment of the Project Area (the
"Redevelopment Project"). The Agency anticipates using the proceeds of the Loans
deposited into the Project Fund primarily for the financing of in the City
and include
[to come from Agency — new money projects...]
SOURCES AND USES OF FUNDS
The estimated sources and uses of Bond proceeds is summarized as follows. All of the
proceeds of each series of Bonds are used to fund the respective Loans.
The uses of funds shown below represent the estimated use of the proceeds of the
Series 2006A Bonds pursuant to the provisions of the Senior Loan Agreement.
Sources:
Principal amount of Series 2006A Bonds
[Series 2006A Bonds Premium/Discount]
Total Sources
Uses:
Deposit to Escrow Fund
Deposit to Project Fund
Series A Costs of Issuance*
Total Uses
* Includes underwriters' discount, municipal bond insurance premium and reserve fund
surety bond premium, fees and expenses of Bonds Counsel and Disclosure Counsel, and any
other expenses incurred in connection with the issuance of the Series 2006A Bonds and the
making of the Series A Loan.
6
The uses of funds shown below represent the estimated use of the proceeds of the
Series 2006B Bonds pursuant to the provisions of the Senior Loan Agreement.
Sources:
Principal amount of Series 2006B Bonds
[Series 2006B Bonds Premium/Discount]
Total Sources
Uses:
Deposit to Project Fund
Series B Costs of Issuance*
Total Uses
* Includes underwriters' discount, municipal bond insurance premium and reserve fund
surety bond premium, fees and expenses of Bonds Counsel and Disclosure Counsel, and any
other expenses incurred in connection with the issuance of the Series 2006B Bonds and the
making of the Series B Loan.
The uses of funds shown below represent the estimated use of the proceeds of the
Series 2006C Bonds pursuant to the provisions of the Senior Loan Agreement.
Sources:
Principal amount of Series 2006C Bonds
[Series 2006C Bonds Premium/Discount]
Total Sources
Uses:
Deposit to Special Escrow Fund
Series C Costs of Issuance*
Total Uses
* Includes underwriters' discount, reserve fund surety bond premium, fees and expenses of
Bonds Counsel and Disclosure Counsel, and any other expenses incurred in connection with
the issuance of the Series 2006C Bonds and the making of the Series C Loan.
The uses of funds shown below represent the estimated use of the proceeds of the
Series 2006B Bonds pursuant to the provisions of the Subordinate Loan Agreement.
Sources:
Principal amount of Series 2006D Bonds
[Series 2006D Bonds Premium/Discount]
Total Sources
Uses:
Deposit to Project Fund
Series D Costs of Issuance*
Total Uses
* Includes underwriters' discount, municipal bond insurance premium and reserve fund
surety bond premium, fees and expenses of Bonds Counsel and Disclosure Counsel, and any
other expenses incurred in connection with the issuance of the Series 2006D Bonds and the
making of the Series D Loan.
7
DEBT SERVICE SCHEDULES
Annual debt service for the Series 2006A Bonds is set forth below.
Bond Year
Ending Series A Series A Series A
August 1 Principal Interest Total
Annual debt service for the Series 2006B Bonds is set forth below.
Bond Year
Ending Series B Series B Series B
August 1 Principal Interest Total
8
Annual debt service for the Series 2006C Bonds is set forth below.
Bond Year
Ending Series C Series C Series C
August 1 Principal Interest Total
Annual debt service for the Series 2006D Bonds is set forth below.
Bond Year
Ending Series D Series D Series D
August 1 Principal Interest Total
The following table shows the aggregate debt service for the Senior Bonds, the
Prior Loans, and the Subordinate Bonds.
9
Bond Year Series A Series B Series C Parity Prior Total Senior Subordinate
Ending Total Debt Total Debt Total Debt Loans Debt Debt Series D Debt
August 1 Service Service Service Service Service Service
10
THE BONDS
Description of the Bonds
The Series 2006A Bonds and the Series 2006C Bonds will be issued as current interest
bonds (the "Current Interest Bonds"). The Series 2006B Bonds and the Series 2006D Bonds
will be issued as capital appreciation bonds (the "Capital Appreciation Bonds").
Current Interest Bonds. The Current Interest Bonds will be issued in the form of fully
registered bonds without coupons and in the denomination of $5,000 or any integral multiple
thereof. The Current Interest Bonds will be dated their date of initial delivery, and will bear
interest at the rates per annum and will mature, subject to redemption provisions set forth
below, on the dates and in the principal amounts, all as set forth on the inside front cover page
hereof.
The Current Interest Bonds will be issued only as one fully registered Bond for each
maturity, in the name of Cede & Co., as nominee for The Depository Trust Company, New York,
New York ("DTC"), as registered owner of all Bonds. See "APPENDIX H - Book -Entry System."
Ownership may be changed only upon the registration books maintained by the Trustee as
provided in the Indenture. The Authority may decide to discontinue use of the system of book -
entry transfers through DTC (or a successor securities depository). In that event, Bond
certificates will be printed and delivered.
Each Current Interest Bond shall bear interest from the Interest Payment Date next
preceding the date of authentication thereof, unless (i) it is authenticated during the period from
the day after the Record Date for an Interest Payment Date to and including such Interest
Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) it is
authenticated on or prior to the Record Date for the first Interest Payment Date, in which event it
shall bear interest from the date of delivery of the Bonds (the "Closing Date"); provided,
however, that if, at the time of registration of any Current Interest Bond interest with respect to
such Current Interest Bond is in default, such Current Interest Bond shall bear interest from the
Interest Payment Date to which interest has been paid or made available for payment with
respect to such Current Interest Bond.
Interest on the Current Interest Bonds shall be payable on each Interest Payment Date
to the person whose name appears on the Registration Books as the Owner thereof as of the
close business on the Record Date, such interest to be paid by check or draft of the Trustee
mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owner at the
address of such Owner as it appears on the Registration Books on such Record Date; provided,
however, that at the written request of the Owner of at least $1,000,000 in aggregate principal
amount of Outstanding Current Interest Bonds filed with the Trustee prior to any Record Date,
interest on such Current Interest Bonds shall be paid to such Owner on each succeeding
Interest Payment Date by wire transfer of immediately available funds to an account in the
United States designated in such written request (unless and until such request has been
revoked in writing). Principal of and premium, if any, on any Current Interest Bond shall be paid
upon presentation and surrender thereof, at maturity or the prior redemption thereof, at the Trust
Office. The principal of and interest and premium, if any, on the Current Interest Bonds shall be
payable in lawful money of the United States of America.
Capital Appreciation Bonds. The Capital Appreciation Bonds shall be issued in fully
registered form in any denominations of Initial Principal Amount but shall reflect denominations
of $5,000 Maturity Amount or any integral multiple thereof. No Capital Appreciation Bond shall
11
have more than one maturity date. The Capital Appreciation Bonds shall be dated the Closing
Date, shall mature on August 1 in each of the years and in the Maturity Amounts set forth in the
following schedule. The Capital Appreciation Bonds shall be delivered on the Closing Date in
the aggregate Initial Principal Amounts set forth below. Interest on the Initial Principal Amount
of the Capital Appreciation Bonds shall accrue and compound at the yield to their maturity set
forth in "APPENDIX I — ACCRETED VALUE TABLES".
Interest on each Capital Appreciation Bond shall be compounded semi-annually at the
yield set forth above from the Closing Date on each February 1 and August 1, commencing
August 1, 2006, until maturity or earlier redemption thereof, computed using a year of 360 days
of twelve 30-day months and shall be payable (i) at maturity as part of the Maturity Amount, or
(ii) at redemption as part of the Accreted Value to the redemption date. The Maturity Amount, or
the Accreted Value and redemption premium (if any), as applicable, with respect to any Capital
Appreciation Bond shall be paid upon presentation and surrender thereof, at maturity or the
prior redemption thereof, at the Trust Office, in lawful money of the United States of America
The principal or redemption price, or Maturity Amounts of the Bonds will be payable at
the maturity or earlier redemption upon presentation and surrender of the Bonds at the
corporate trust office of the Trustee in Los Angeles, California and interest on the Current
Interest Bonds will be payable by check or draft, mailed on the Interest Payment Date to each
Owner of the Bonds (an "Owner") as of the Record Date preceding such Interest Payment
Date. While the Bonds are held in the book -entry only system of DTC, all such payments will be
made to Cede & Co., as the registered Owner of the Bonds.
Redemption of the Bonds
Series 2006A Bonds Redemption From Optional Senior Loan Prepayments. Under
the Senior Loan Agreement, the Agency is given the option to prepay principal installments of
the Senior Loan. The Revenues derived from such prepayment shall be applied to the
redemption of the Series 2006A Bonds, as a whole, or in part among maturities as designated in
writing by the Authority and by lot within a maturity, in integral multiples of $5,000 principal
amount, on any Interest Payment Date on or after August 1, 20_, at the following respective
redemption prices (expressed as percentages of the principal amount of the Series 2006A
Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates
August 1, 20_ and February 1, 20_
August 1, 20_ and February 1, 20_
August 1, 20_ and thereafter
Redemption Price
Series 2006A Bonds Mandatory Sinking Fund Redemption. The Series 2006A
Bonds due August 1, 20_ and August 1, 20_ shall be subject to mandatory redemption by lot, on
August 1 in each year as shown on the tables below, from sinking fund payments made by the
Authority, at a redemption price equal to the principal amount thereof to be redeemed, without
premium, plus accrued interest to the date of redemption as shown in the following table;
provided, however, that (i) in lieu of redemption thereof on August 1 in any year, such Series
2006A Bonds may be purchased by the Agency pursuant to the Loan Agreement and tendered
to the Trustee for cancellation not later than the preceding May 15, and (ii) if some but not all of
such Series 2006A Bonds have been redeemed pursuant to the paragraph above entitled
"Redemption From Optional Loan Prepayments," the total amount of all future sinking fund
payments shall be reduced by the aggregate principal amount of such Series 2006A Bonds so
redeemed, to be allocated among such sinking fund payments on a pro rata basis.
12
Term Series 2006A Bonds Due August 1, 20
Sinking Fund
Redemption Date
(August 1)
Principal Amount
to be Redeemed
or Purchased
Term Series 2006A Bonds Due August 1, 20
Sinking Fund
Redemption Date
(August 1)
Principal Amount
to be Redeemed
or Purchased
Series 2006B Bonds Redemption From Optional Series B Loan Prepayments.
Under the Series B Loan Agreement, the Agency is given the option to prepay principal
installments of the Series B Loan. The Revenues derived from such prepayment shall be
applied to the redemption of the Series 2006B Bonds, as a whole, or in part among maturities
as designated in writing by the Authority and by lot within a maturity, in integral multiples of Five
Thousand Dollars ($5,000) Maturity Amount, on any February 1 or August 1 on or after August 1,
20_, at the following respective redemption prices (expressed as percentages of the Accreted
Value of the called Series 2006B Bonds on the date fixed for redemption:
Redemption Dates
August 1, 20_ and February 1, 20_
August 1, 20_ and February 1, 20_
August 1, 20_ and thereafter
Redemption Price
102%
101
100
No Series 2006B Bonds Mandatory Sinking Fund Redemption. The Series 2006B
Bonds are not subject to mandatory sinking fund redemption prior to maturity.
Series 2006C Bonds Redemption From Optional Series C Loan Prepayments.
Under the Series C Loan Agreement, the Agency is given the option to prepay principal
installments of the Series C Loan. The Revenues derived from such prepayment shall be
applied to the redemption of the Series 2006C Bonds, as a whole, or in part among maturities
as designated in writing by the Authority and by lot within a maturity, in integral multiples of
$5,000 principal amount, on any Interest Payment Date on or after August 1, 20_, at the
following respective redemption prices (expressed as percentages of the principal amount of the
Series 2006C Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates
August 1, 20_ and February 1, 20_
August 1, 20_ and February 1, 20_
August 1, 20_ and thereafter
Redemption Price
102%
101
100
Series 2006C Bonds Mandatory Sinking Fund Redemption. The Series 2006C
Bonds due August 1, 20_ and August 1, 20_ shall be subject to mandatory redemption by lot, on
August 1 in each year as shown on the tables below, from sinking fund payments made by the
Authority, at a redemption price equal to the principal amount thereof to be redeemed, without
13
premium, plus accrued interest to the date of redemption as shown in the following table;
provided, however, that (i) in lieu of redemption thereof on August 1 in any year, such Series
2006C Bonds may be purchased by the Agency pursuant to the Loan Agreement and tendered
to the Trustee for cancellation not later than the preceding May 15, and (ii) if some but not all of
such Series 2006C Bonds have been redeemed pursuant to the paragraph above entitled
"Redemption From Optional Loan Prepayments," the total amount of all future sinking fund
payments shall be reduced by the aggregate principal amount of such Series 2006C Bonds so
redeemed, to be allocated among such sinking fund payments on a pro rata basis.
Term Series 2006C Bonds Due August 1, 20
Sinking Fund
Redemption Date
(August 1)
Principal Amount
to be Redeemed
or Purchased
Term Series 2006C Bonds Due August 1, 20
Sinking Fund
Redemption Date
(August 1)
Principal Amount
to be Redeemed
or Purchased
Extraordinary Redemption From Unreleased Special Escrow Fund. The Series
2006C Bonds are subject to extraordinary redemption in whole or in part among maturities and
by lot within each maturity as designated in writing by the Authority from amounts transferred
from the Special Escrow Fund to the Principal Account for such purpose pursuant to the Senior
Loan Agreement, on August 1, , at a redemption price equal to % of the principal
amount thereof to be redeemed, together with the accrued interest thereof to the redemption
date.
Notice of Redemption. The Trustee on behalf and at the expense of the Authority will
mail (by first class mail) notice of any redemption to the respective Owners of any Bonds
designated for redemption at their respective addresses appearing on the Registration Books,
and to the Securities Depositories and to one or more Information Services, at least 30 but not
more than 60 days prior to the date fixed for redemption; provided, however, that neither failure
to receive any such notice so mailed nor any defect therein will affect the validity of the
proceedings for the redemption of such Bonds or the cessation of the accrual of interest
thereon. Such notice will state the date of the notice, the redemption date, the redemption place
and the redemption price and will designate the CUSIP numbers, the series designation, the
Bond numbers (but only if less than all of the Outstanding Bonds of each series are to be
redeemed) and the maturity or maturities (in the event of redemption of all of the Bonds of such
maturity or maturities in whole) of the Bonds of such series to be redeemed, and will require that
such Bonds be then surrendered at the trust office of the Trustee for redemption at the
redemption price, giving notice also that further interest on such Bonds will not accrue from and
after the redemption date.
Partial Redemption of Bonds. In the event only a portion of any Bond is called for
redemption, then upon surrender of such Bond the Authority shall execute and the Trustee shall
14
authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or
Bonds of the same series, tenor and maturity date, of authorized denominations in aggregate
Principal Amount or Maturity Amount, as the case may be, equal to the unredeemed portion of
the Bond to be redeemed.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for
less than all of the Bonds of a series of any maturity to be redeemed, the Trustee will select the
Bonds of such series and maturity to be redeemed from all Bonds not previously called for
redemption, by lot in any manner which the Trustee in its sole discretion shall deem appropriate
under the circumstances. For purposes of such selection, all Bonds will be deemed to be
comprised of separate $5,000 portions and such portions will be treated as separate bonds
which may be separately redeemed.
Effect of Redemption. From and after the date fixed for redemption, if notice of
redemption shall have been duly mailed and funds available for the payment of the principal of
and interest (and premium, if any) on the Bonds so called for redemption shall have been duly
provided, such Bonds so called shall cease to be entitled to any benefit under the Indenture
other than the right to receive payment of the redemption price, and no interest shall accrue
thereon from and after the redemption date specified in such notice.
SENIOR BONDS MUNICIPAL BOND INSURANCE
The information relating to the Insurer set forth in this section entitled "SENIOR BONDS
MUNICIPAL BOND INSURANCE," and the specimen Insurance Policy set forth in Appendix F
hereto, has been furnished by the Insurer. No representation is made herein as to the accuracy
or adequacy of such information or as to the absence of material adverse changes in such
information subsequent to the date hereof. The Subordinate Bonds are not insured.
[to come from Insurer...]
15
SECURITY FOR THE BONDS
Revenues and Loan Agreement
Senior Bonds. The Senior Bonds are secured by a first lien on and pledge of the
Revenues, which are defined in the Senior Indenture to include (i) all amounts payable by the
Agency as payments or prepayments for the respective Senior Loans pursuant to the Senior
Loan Agreement; (ii) any proceeds of the Senior Bonds originally deposited with the Trustee
and all moneys deposited and held from time to time in the funds and accounts established
under the Senior Indenture; and (iii) income and gains with respect to the investment of
amounts on deposit in the funds and accounts established under the Senior Indenture, other
than amounts payable to the United States of America pursuant to the tax covenants contained
in the Senior Indenture.
The primary security for the Senior Bonds, therefore, consists of amounts payable by the
Agency under the Senior Loan Agreement, amounts held in the Reserve Fund and amounts
held by the Trustee under the Senior Indenture. The Senior Loans are secured by a parity (to
the Prior Loans, plus any future obligations secured by a parity pledge of Tax Revenues) pledge
of and lien on the Tax Revenues, as more fully described under "SECURITY FOR THE BONDS
— Tax Revenues." The Agency may, pursuant to the terms of the Senior Loan Agreement and
the Senior Indenture, issue additional obligations secured by Tax Revenues on a parity with the
Senior Loan. See "SECURITY FOR THE BONDS — Issuance of Additional Parity Debt."
Subordinate Bonds. The Subordinate Bonds are secured by a first lien on and pledge
of the Subordinate Revenues, which are defined in the Subordinate Indenture to include (i) all
amounts payable by the Agency as payments or prepayments for the Subordinate Loan
pursuant to the Subordinate Loan Agreement; (ii) any proceeds of the Subordinate Bonds
originally deposited with the Trustee and all moneys deposited and held from time to time in the
funds and accounts established under the Subordinate Indenture; and (iii) income and gains
with respect to the investment of amounts on deposit in the funds and accounts established
under the Subordinate Indenture, other than amounts payable to the United States of America
pursuant to the tax covenants contained in the Subordinate Indenture.
The primary security for the Subordinate Bonds, therefore, consists of amounts payable
by the Agency under the Subordinate Loan Agreement, amounts held in the Reserve Fund and
amounts held by the Trustee under the Subordinate Indenture. The Subordinate Loan defines
"Subordinate Tax Revenues" as, for any period of time, the Tax Revenues for such period,
less the Senior Debt Service payable during such period, where "Senior Debt Service" generally
means all payments due on the Senior Bonds and the Parity Loans, and any other loans,
bonds, notes, advances, or indebtedness payable from Tax Revenues which rank senior to the
Subordinate Loan.
The Subordinate Loan is secured by a subordinate (to the Senior Bonds, the Prior
Loans, plus any future obligations secured by a parity pledge of Tax Revenues) pledge of and
lien on the Tax Revenues, as more fully described under "SECURITY FOR THE BONDS — Tax
Revenues." The Agency may, pursuant to the terms of the Subordinate Loan Agreement and
the Subordinate Indenture, issue additional obligations secured by Subordinate Tax Revenues
on a parity with the Subordinate Loan. See "SECURITY FOR THE BONDS — Issuance of
Additional Parity Debt."
16
Tax Allocation Financing
The Redevelopment Law provides a means for financing redevelopment projects based
upon an allocation of taxes collected within a project area. The taxable valuation of a project
area last equalized prior to adoption of the redevelopment plan, or base roll, is established.
Thereafter, except for any period during which the taxable valuation drops below the base roll,
the state and local governments for the benefit of which taxes are levied and collected on
property within the project area receive the taxes produced by the levy of the then current tax
rate upon the base roll. Taxes collected upon any increase in taxable valuation over the base
roll are allocated to a redevelopment agency and may be pledged by a redevelopment agency
to the repayment of any indebtedness incurred in financing or refinancing a redevelopment
project. Redevelopment agencies themselves have no authority to levy property taxes and
must look specifically to the allocation of taxes produced as above indicated. Further, the
Redevelopment Law requires that certain amounts of tax increment be used by a
redevelopment agency for low and moderate income housing projects, and places certain limits
on the tax increment which a redevelopment agency is authorized to receive. See "TAX
REVENUES — Housing Set -Aside Requirements" and "THE PROJECT AREA — Limitations
and Requirements of the Redevelopment Plan" herein.
Allocation of Taxes
As provided in the Redevelopment Plan, and pursuant to Article 6 of Chapter 6 of the
Redevelopment Law and Section 16 of Article XVI of the Constitution of the State of California,
taxes levied upon taxable property in the Project Area, each year by or for the benefit of the
State of California and any city, county, city and county, district or other public corporation
(herein collectively referred to as "taxing agencies") for fiscal years beginning after the effective
date of the Project Area, are divided as follows:
(1) To Taxing Agencies: That portion of the taxes which would be produced by the
rate upon which the tax is levied each year by or for each of said taxing agencies upon the total
sum of the assessed value of the taxable property in the Project Area, as shown upon the
assessment roll used in connection with the taxation of such property by such taxing agency last
equalized prior to the effective date of the ordinance approving the Redevelopment Plan shall
be allocated to, and when collected shall be paid into, the funds of the respective taxing
agencies as taxes by or for said taxing agencies on all other property are paid; and
(2) To the Agency: Except for taxes which are attributable to a tax rate levy by a
taxing agency for the purpose of producing revenues to repay bonded indebtedness approved
by the voters of the taxing agency on or after January 1, 1989, which shall be allocated to and
when collected shall be paid to such taxing agency, that portion of said levied taxes each year in
excess of the amounts provided for in (1) above, shall be allocated to, and when collected shall
be paid into, a special fund of the Agency to pay the principal of and interest on bonds, loans,
moneys advanced to, or indebtedness (whether funded, refunded, assumed, or otherwise)
incurred by the Agency to finance or refinance, in whole or in part, the Project Area. Unless and
until the total assessed valuation of the taxable property in the Project Area exceeds the total
assessed value of the taxable property in the Project Area as shown by the last equalized
assessment roll referred to in paragraph (1) above, all of the taxes levied and collected upon the
taxable property in the Project Area, shall be paid into the funds of the respective taxing
agencies. When said bonds, loans, advances, and indebtedness, if any, and interest thereon,
have been paid, all moneys thereafter received from taxes upon the taxable property in the
Project Area, shall be paid into the funds of the respective taxing agencies as taxes on all other
property are paid.
17
The Agency is authorized to make pledges of the portion of taxes allocated to it as
described in paragraph (2) above to repay specific advances, loans and indebtedness as
appropriate in carrying out the Redevelopment Plan.
Teeter Plan
In 1949, the California Legislature enacted an alternative method for the distribution of
secured property taxes to local agencies. This method, known as the Teeter Plan, is now set
forth in Sections 4701-4717 of the California Revenue and Taxation Code. Upon adoption and
implementation of this method by a county board of supervisors, local agencies for which the
county acts as "bank" and certain other public agencies and taxing areas located in the county
receive annually the full amount of their share of property taxes on the secured roll, including
delinquent property taxes which have yet to be collected. While the county bears the risk of loss
on delinquent taxes which go unpaid, it also benefits from the penalties associated with these
delinquent taxes when they are paid. In turn, the Teeter Plan provides participating local
agencies with stable cash flow and the elimination of collection risk.
To implement a Teeter Plan, the board of supervisors of a county generally must elect to
do so by July 15 of the fiscal year in which it is to apply. As a separate election, a county may
elect to have the Teeter Plan procedures also apply to assessments on the secured roll. The
Board of Supervisors of Riverside County adopted the Alternative Method of Distribution of Tax
Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan") in 1993-94, and the City is
a participant under the Teeter Plan.
Once adopted, a county's Teeter Plan will remain in effect in perpetuity unless the board
of supervisors orders its discontinuance or unless, prior to the commencement of a fiscal year, a
petition for discontinuance is received and joined in by resolutions of the governing bodies of not
less than two-thirds of the participating districts in the county. An electing county may, however,
opt to discontinue the Teeter Plan with respect to any levying agency in the county if the board
of supervisors, by action taken not later than July 15 of a fiscal year, elects to discontinue the
procedure with respect to such levying agency and the rate of secured tax delinquencies in that
agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured
roll by that agency.
Upon making a Teeter Plan election, a county must initially provide a participating local
agency with 95% of the estimated amount of the then -accumulated tax delinquencies (excluding
penalties) for that agency. After the initial distribution, each participating local agency receives
annually 100% of the secured property tax levies to which it is otherwise entitled, regardless of
whether the county has actually collected the levies.
If any tax or assessment which was distributed to a Teeter Plan participant is
subsequently changed by correction, cancellation or refund, a pro rata adjustment for the
amount of the change is made on the records of the treasurer and auditor of the county. Such
adjustment for a decrease in the tax or assessment is treated by the County as an interest -free
offset against future advances of tax levies under the Teeter Plan.
Tax Revenues and Subordinate Tax Revenues
Tax Revenues Pledged to Senior Bonds. The "Tax Revenues" which the Agency has
pledged, on a parity (to the Prior Loans, plus any future obligations secured by a parity pledge
of Tax Revenues) basis, to the payment of the Senior Loans are defined in the Senior Loan
Agreement as that portion of the taxes levied upon taxable property in the Project Area,
18
allocated and paid into a special fund of the Agency (the "Special Fund"), pursuant to Article 6 of
Chapter 6 of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the
State, exclusive of (i) amounts placed into the Low and Moderate Income Housing Fund of the
Agency pursuant to Sections 33334.2 and 33334.3 of the Redevelopment Law, and (ii) amounts
payable to affected taxing agencies pursuant to the Pass -Through Agreements (hereinafter
described), or pursuant to sections 33607.5 and 33607.7 of the Redevelopment Law. See
"SECURITY FOR THE BONDS — Pass -Through Agreements and Housing Set -Aside" and
"APPENDIX A — Fiscal Consultant's Report."
Tax Revenues Pledged to Subordinate Bonds. The pledge for payment of the
Subordinate Loan is of "Subordinate Tax Revenues" which is defined as Tax Revenues
available after payment of "Senior Debt Service." Senior Debt Service is defined in the Loan
Agreement as, for any period of time, the sum of (i) the amount of interest payable during such
period on all outstanding Senior Debt, assuming that principal thereof is paid as scheduled and
that any mandatory sinking fund payments are made as scheduled, (ii) the amount of principal
payable during such period on all outstanding Senior Debt, including any principal required to be
prepaid by operation of mandatory sinking fund payments, and (iii) amounts, if any, required to
be deposited in the debt service reserve funds maintained under the Senior Debt Instruments
(as defined in the Subordinate Loan Agreement) or paid to the issuers of surety bonds (or other
qualified reserve fund instruments) deposited in the reserve fund relating to any Senior Debt in
lieu of cash pursuant to the agreements between the Agency and such issuers.
The Senior Loans, together with the Prior Loans and all Parity Debt, shall be equally
secured by a first pledge of and lien on all of the Tax Revenues and all of the moneys on
deposit in the Special Fund, without preference or priority for series, issue, number, dated date,
sale date, date of execution or date of delivery. Except for the Tax Revenues and other funds
pledged under the Senior Loan Agreement, no funds or properties of the Agency shall be
pledged to, or otherwise liable for, the payment of principal of or interest on or prepayment
premium, if any, on the Senior Loans
In connection with the Prior Loans, the Agency has established a "Special Fund," which
is and will continue to be held by the Agency as a separate fund apart from all other funds and
accounts of the Agency. The Agency is required to deposit all Tax Revenues in the Special
Fund promptly upon the receipt thereof. Except as may be otherwise provided in any Parity
Debt Instrument, any Tax Revenues received during the Bond Year in excess of amounts
required to be transferred to the Trustee to meet the Agency's obligations with regard to the
Senior Loans and Prior Loans (as well as any future Parity Debt) shall be released from the
pledge and lien for such obligations and may be used for any lawful purposes of the Agency.
Prior to the payment in full of the principal of and interest and prepayment premium, if any, on
the Loans and all Parity Debt and the payment in full of all other amounts payable under the
Senior Loan Agreement and any Parity Debt Instrument, the Agency shall not have any
beneficial right or interest in the moneys on deposit in the Special Fund, except only as provided
in the Senior Loan Agreement and any Parity Debt Instrument.
In addition to the transfers required to be made pursuant to any Parity Debt Instrument,
the Agency will withdraw from the Special Fund and transfer to the Trustee the following
amounts at the following times and in the following order of priority:
(a) Interest and Principal Deposits. No later than the fifth Business Day preceding
each date on which the principal of or interest on the Loans or any Parity Debt shall become
due and payable, including but not limited to the principal amounts of the Loans to be prepaid
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together with any prepayment premium thereon, the Agency shall withdraw from the Special
Fund and transfer to the Trustee an amount which, together with the amounts then held on
deposit in the Interest Account, the Principal Account and the Revenue Fund, is equal to the
aggregate amount of such principal, interest and prepayment premium.
(b) Reserve Fund Deposits. In the event that the Trustee shall notify the Agency
that the amount on deposit in the Reserve Fund is less than the Reserve Requirement, the
Agency shall immediately withdraw from the Special Fund and transfer to the Trustee for
deposit in the Reserve Fund an amount of money necessary to maintain the Reserve
Requirement in the Reserve Fund (including repayment of any draw made under a Qualified
Reserve Fund Credit Instrument, including the Surety Bond, prior to replenishing any cash in the
Reserve Fund).
(c) Surplus. All Tax Revenues which are received by the Agency during any Bond
Year in excess of the amounts required to be deposited in the Special Fund in such Bond Year
pursuant to the Senior Loan Agreement shall be released from the pledge and lien thereof. In
the event that for any reason whatsoever any amounts shall remain on deposit in the Special
Fund on any August 2 after making all of the transfers theretofore required to be made pursuant
to the preceding Paragraphs (a) and (b) and pursuant to any Parity Debt Instrument, the Agency
may withdraw such amounts from the Special Fund, to be used for any lawful purposes of the
Agency, including but not limited to the payment of the Subordinate Loan any other Subordinate
Debt.
The Agency has no power to levy and collect property taxes, and any property tax
limitation, Legislative measure, voter initiative or provisions of additional sources of income to
taxing agencies having the effect of reducing the property tax rate, could reduce the amount of
Tax Revenues that would otherwise be available to pay a Loan and, consequently, the principal
of, and interest on, the related Bonds. Likewise, broadened property tax exemptions could have
a similar effect. See "RISK FACTORS" herein. For information on Tax Revenues and
Subordinate Tax Revenues available for payment of the Loans, see "TAX REVENUES" below.
THE BONDS ARE NOT A DEBT OF THE CITY OF PALM DESERT, THE STATE OF
CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AUTHORITY),
AND NEITHER THE CITY NOR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS
(OTHER THAN THE AUTHORITY) IS LIABLE THEREON. NEITHER THE AUTHORITY NOR
THE AGENCY HAS ANY TAXING POWER. THE BONDS ARE REVENUE BONDS, PAYABLE
EXCLUSIVELY FROM THE REVENUES AND OTHER FUNDS AS PROVIDED IN THE
INDENTURE, INCLUDING PAYMENTS TO BE MADE BY THE AGENCY UNDER THE LOAN
AGREEMENT. THE OBLIGATIONS OF THE AGENCY UNDER THE LOAN AGREEMENTS
AND ANY PARITY DEBT OF THE AGENCY ARE PAYABLE SOLELY FROM TAX REVENUES
OR SUBORDINATE TAX REVENUES ALLOCATED TO THE AGENCY FROM THE PROJECT
AREA. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING
OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION.
Special Escrow Fund for Series 2006C Bonds
There is established under the Senior Loan Agreement a separate fund to be known as
the "Special Escrow Fund," and an account therein to be known as the "Escrow Interest
Account" which shall be held by the Trustee in trust. On the Closing Date, the Trustee shall
transfer money from the Series 2006C Loan Fund to the Escrow Interest Account and the
Special Escrow Fund in accordance with the Senior Loan Agreement. Amounts in the Special
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Escrow Fund and the Escrow Interest Account shall be applied as follows (for certain defined
terms, see Appendix E):
(a) On each Interest Payment Date, the Trustee shall transfer from the Escrow
Interest Account to the Interest Account, an amount equal to the interest payable on such date
with respect to the Deemed Escrow Portion of the Series 2006C Bonds (where, generally, the
"Deemed Escrow Portion" is the aggregate principal balance of Series 2006C Bonds in the
Special Escrow Fund).
(b) On or before [January] 1 of each year up to and including [January] 1, 20[09], the
Agency shall file with the Trustee a Certificate accompanied by a Report of an Independent
Redevelopment Consultant which identifies (i) the amounts, if any, proposed to be released
from the Special Escrow Fund and the Escrow Interest Account, and (ii) the Reserve
Requirement which results from such release. If an amount is proposed to be released from the
Special Escrow Fund, such Report shall conclude that the amount of Tax Revenues received or
to be received for the then current Fiscal Year, as set forth in a Certificate of the Agency, based
on assessed valuation of property in the Project Area, as evidenced in the records of the
County, plus at the option of the Agency the Additional Revenue, shall be at least equal to 120
percent of the amount of the Maximum Annual Debt Service identified in such Report. The
Agency's Certificate shall also be accompanied by a schedule showing that the balance
remaining in the Escrow Interest Account [plus the anticipated interest earnings thereon] will be
sufficient to pay interest on the Deemed Escrow Portion of the Series 2006C Bonds after the
proposed transfer on each future Interest Payment Date to and including the Escrow
Redemption Date. Promptly following receipt of any such Report, the Trustee shall withdraw
from the Special Escrow Fund and the Escrow Interest Account the amounts identified in such
Report and (subject to the provisions of Paragraph (c) below) transfer such amount as follows:
(1) The Trustee shall deposit into the Reserve Fund an amount required to
cause the balance therein to equal the Reserve Requirement;
(2) The Trustee shall transfer the amount indicated in the Agency's
Certificate to the Interest Account; and
(3) The Trustee shall transfer the remainder of such amounts to the Agency
for deposit in the Project Fund.
(c) On [June 1, 2009], the Trustee shall (i) transfer amounts then on deposit in the
Special Escrow Fund to the Principal Account, to be applied to the extraordinary redemption of
the largest principal amount of Series 2006C Bonds which can be called pursuant to the
Indenture, and (ii) transfer amounts then on deposit in the Escrow Interest Account to the
Interest Account, to be applied to pay accrued interest on the Series 2006C Bonds being
redeemed pursuant to the Indenture on Escrow Redemption Date. If the balance in the Special
Escrow Fund exceeds the amount required to call and redeem all Outstanding Series 2006C
Bonds, such excess shall be transferred to the Agency for deposit in the Project Fund.
Notwithstanding the foregoing, if the balance in the Special Escrow Fund on [June 1, 2009] is
less than $5,000, then the Trustee shall transfer all of such balance to the Project Fund and
transfer all remaining money in the Special Interest Account to the Interest Account.
Pass -Through Agreements and Housing Set -Aside
Pass -Through Agreements. The Agency has entered into several agreements (the
"Pass -Through Agreements") in connection with the Project Area, whereby portions of the tax
increment revenues which would otherwise be received by the Agency as described above are
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paid to certain other taxing entities. Amounts paid under the Pass -Through Agreements are not
Tax Revenues and, therefore, are not pledged to secure the Loans. See "TAX REVENUES —
Projected Taxable Valuation and Tax Revenues" herein, and see "APPENDIX A — Fiscal
Consultant's Report" for a description of the Pass -Through Agreements.
Statutory Pass-Throughs. Certain provisions were added to the Redevelopment Law
by the adoption of AB 1290 in 1994. Under Section 33607.5 of the Law, any new project area
formed after 1994 is required to share in tax increment revenues generated pursuant to a
statutory formula ("Statutory Tax Sharing"). Although the Project Area has existing tax -sharing
agreements with the majority of its taxing agencies there are an additional 10 agencies without
agreements. Commencing in fiscal year 2008-09, the Agency will begin making payments to
these agencies pursuant to Section 33607.7 of the Redevelopment Law. The projections
prepared by the Fiscal Consultant incorporated those expected payments.
Housing Set -Aside. Excluded from the Tax Revenues are those amounts received by
the Agency and placed into the Low and Moderate Income Housing Fund of the Agency
pursuant to Sections 33334.2 and 33334.3 of the Redevelopment Law (the "Housing Set -
Aside"). For a discussion of Housing Set -Aside requirements, see "TAX REVENUES —
Housing Set -Aside Requirements."
Parity Debt and Existing Parity Lien
The Agency's obligations on the Senior Loans are repayable on a parity with the Prior
Loans, as well as possible future Parity Debt, which consists of any indebtedness payable from
Tax Revenues on a parity with the Senior Loans. The Senior 2002 Loan is currently outstanding
in the aggregate principal amount of $ and the Senior 2003 Loan is currently
outstanding in the aggregate principal amount of $ . See "DEBT SERVICE
SCHEDULES" herein for the scheduled payments due on the Prior Loans. Other than the
Senior Loans, the Senior 2002 Loan and the Senior 2003 Loan, there is currently no existing
senior Parity Debt. In addition, the Agency's obligations on the Subordinate Loan is repayable
on a parity with possible future Parity Subordinate Debt, which consists of any indebtedness
payable from Subordinate Tax Revenues on a parity with the Subordinate Loan which includes
Subordinate Parity Debt issued in the future. See "TAX REVENUES - Projected Taxable
Valuation and Tax Revenue" herein. See "SECURITY FOR THE BONDS — Issuance of
Additional Parity Debt."
Issuance of Additional Parity Debt
The Authority has covenanted in each of the Indentures that except for the Bonds, it will
not incur any other indebtedness payable out of Revenues (where "Revenues" are the amounts
payable to the Authority under the respective Loan Agreements).
So long as the Senior 2002 Loan or the Senior 2003 Loan remains outstanding, any
additional Parity Debt must also meet the requirements thereunder for issuance of additional
Parity Debt.
The Agency has covenanted in the Senior Loan Agreement that it will not incur any
indebtedness which is payable from all or any part of the Tax Revenues, other than: (i) the
Senior Loans; (ii) additional Parity Debt subject to the conditions described below; and (iii) any
debt secured by a pledge of Tax Revenues which is subordinate to the pledge of Tax Revenues
created by the Senior Loan Agreement. Similarly, the Agency has covenanted in the
Subordinate Loan Agreement that it will not incur any indebtedness which is payable from all or
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any part of the Subordinate Tax Revenues, other than: (i) the Subordinate Loan; (ii) additional
Parity Debt subject to the conditions described below; and (iii) any debt secured by a pledge of
Subordinate Tax Revenues which is subordinate to the pledge of Subordinate Tax Revenues
created by the Subordinate Loan Agreement
The Agency has further covenanted in each Loan Agreement that it will not amend the
Redevelopment Plan (except for the purpose of extending or eliminating the time limit on the
establishment of loans, advances, and indebtedness, extending the time limit on the
effectiveness of the Redevelopment Plan, extending the time limit on the payment of
indebtedness, extending the time limit for the receipt of tax increment, or increasing the
limitation on the number of dollars of taxes to be allocated to the Agency) or any of the Pass -
Through Agreements, or enter into any agreement with the County or any other governmental
unit, which would have the effect of reducing the amount of Tax Revenues (or Subordinate Tax
Revenues in the case of the Subordinate Loan) available to the Agency for payment of such
Loan, unless the Agency shall first obtain (a) the Report of an Independent Redevelopment
Consultant stating that the amount of Tax Revenues for the then current Fiscal Year (calculated
on the assumption that such reduction of Tax Revenues (or Subordinate Tax Revenues) was in
effect throughout such Fiscal Year), shall be at least equal to 120 percent (in the case of the
Senior Loans) or % (in the case of the Subordinate Loan) of Maximum Annual Debt Service
and (b), as long as the Insurance Policy is in full force and effect, the written consent of the
Insurer.
Issuance of Senior Parity Debt. Pursuant to the Senior Loan Agreement, the Agency
may issue or incur additional Parity Debt subject to the following specific conditions:
(a) No Event of Default shall have occurred and be continuing, and the Agency shall
otherwise be in compliance with all covenants set forth in the Senior Loan Agreement.
(b) The amount of Tax Revenues for the then current Fiscal Year as set forth in a
Certificate of the Agency, based on assessed valuation of property in the Project Area as
evidenced in the written records of the County, plus at the option of the Agency the Additional
Revenues, shall be at least equal to (i) 120 percent of Maximum Annual Debt Service, and (ii)
100 percent of the sum of Maximum Annual Debt Service (of the Senior Loans and Parity Debt)
and maximum annual debt service on all outstanding Subordinate Debt that is secured by a
pledge of or lien upon the Tax Revenues.
(c) The balance in the Reserve Fund shall be increased to an amount which equals
the Reserve Requirement.
(d) All amounts held in the Special Escrow Fund shall have been transferred to the
Agency or otherwise applied in accordance with the Loan Agreement; provided that this
condition shall not limit the authority of the Agency to issue or incur Parity Debt for the purpose
of refunding the Loans or other Parity Debt so long as either (i) the total amount of principal and
interest payable with respect to such proposed refunding Parity Debt shall be less than the total
amount of principal and interest remaining to be paid with respect to the Loan or the Parity Debt
to be refunded, or (ii) the total amount of principal and interest payable with respect to such
proposed refunding Parity Debt reflects a present value savings when compared with the total
amount of principal and interest remaining to be paid with respect to the Loan or the Parity Debt
to be refunded.
(e) The related Parity Debt Instrument shall provide that:
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(i) With respect to any Parity Debt which bears current interest, interest on
such Parity Debt shall not be payable on a date other than February 1 and August 1 of
any year and
(ii) The principal of such Parity Debt shall not be payable on any date other
than the date on which principal of the Loan is payable.
(f) The issuance of such Parity Debt shall not cause the Agency to exceed any
applicable Plan Limitations.
(g) The Agency shall deliver to the Trustee a Certificate of the Agency certifying that
the conditions precedent to the issuance of such Parity Debt set forth in subparagraphs (a)
through (e), above, have been satisfied. The Agency shall also furnish a copy of an
Independent Redevelopment Consultant's report evidencing compliance with the conditions set
forth in subparagraph (b) above.
Issuance of Subordinate Parity Debt. Pursuant to the Subordinate Loan Agreement,
the Agency may issue or incur additional Parity Subordinate Debt subject to the following
specific conditions:
(a) No Event of Default shall have occurred and be continuing, and the Agency shall
otherwise be in compliance with all covenants set forth in the Subordinate Loan Agreement.
(b) The amount of Subordinate Tax Revenues for the then current Fiscal Year as set
forth in a Certificate of the Agency, based on assessed valuation of property in the Project Area
as evidenced in the written records of the County, plus at the option of the Agency the
Additional Revenues, shall be at least equal to percent of Maximum Combined Annual
Debt Service (as defined in the Subordinate Loan Agreement).
(c) The balance in the Reserve Fund shall be increased to an amount which equals
the Reserve Requirement.
(d) The related Parity Debt Instrument shall provide that:
(i) With respect to any Parity Debt which bears current interest, interest on
such Parity Debt shall not be payable on a date other than February 1 and August 1 of
any year and
(ii) The principal of such Parity Debt shall not be payable on any date other
than the date on which principal of the Subordinate Loan is payable.
(e) The issuance of such Parity Debt shall not cause the Agency to exceed any
applicable Plan Limitations.
(f) The Agency shall deliver to the Trustee a Certificate of the Agency certifying that
the conditions precedent to the issuance of such Parity Subordinate Debt set forth in
subparagraphs (a) through (e), above, have been satisfied. The Agency shall also furnish a
copy of an Independent Redevelopment Consultant's report evidencing compliance with the
conditions set forth in subparagraph (b) above.
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Issuance of Additional Subordinate Debt
Issuance of Additional Debt Subordinate to the Senior Loans. In addition to the
Senior 2002 Loan, the Senior 2003 Loan, the Senior Loans and any Parity Senior Debt, from
time to time the Agency may issue or incur Subordinate Debt in such principal amount as shall
be determined by the Agency, provided that (i) the issuance of such Subordinate Debt shall not
cause the Agency to exceed any applicable Plan Limitations, and (ii), with respect to any
Subordinate Debt that is to be secured by a pledge or lien upon Tax Revenues, the amount of
Tax Revenues for the then current Fiscal Year, as set forth in a Certificate of the Agency, based
on assessed valuation of property in the Project Area as evidenced in the written records of the
County, plus at the option of the Agency the Additional Revenues, shall be at least equal to 100
percent of the sum of Maximum Annual Debt Service (of the Senior Loans and Parity Senior
Debt) and maximum annual debt service on all Outstanding Subordinate Debt that is secured by
a pledge of or lien upon the Tax Revenues.
Issuance of Additional Debt Subordinate to the Subordinate Loan. From time to
time the Agency may issue or incur debt which is subordinate to the Subordinate Loan, in such
principal amount as shall be determined by the Agency, provided that (i) the issuance of such
subordinate debt shall not cause the Agency to exceed any applicable Plan Limitations.
Reserve Funds
In order to further secure the payment of principal of and interest on the Bonds, the
Agency is required by the Loan Agreements to maintain an amount equal to the respective
Reserve Requirement for the respective Senior Bonds and Subordinate Bonds in a separate
respective "Senior Reserve Fund" and "Subordinate Reserve Fund"held by the Trustee. The
Reserve Requirement for the respective Senior Loans and Subordinate Loan is the least of (i)
Maximum Annual Debt Service, (ii) 125 percent of average annual debt service on the Loans
and all outstanding Parity Debt, and (iii) 10 percent of the proceeds of the Loans (i.e., the
original Principal Amount of the Bonds) and of the proceeds of any Parity Debt. The amount of
the Reserve Requirement on any date is subject to confirmation by the Authority to the Trustee
upon the Trustee's written request. Amounts in each Reserve Fund are to be held by the
Trustee for the benefit of the Authority, the respective Bondowners, and the owners of any
Parity Debt pursuant to the corresponding Loan Agreement, and are pledged by the Agency to
secure the Agency's payment obligations under such Loan Agreement. The Agency is required
to set aside from the Special Fund and deposit in the Reserve Fund an amount sufficient to
maintain the Reserve Requirements on deposit in the Reserve Funds at all times so long as any
Bonds remain outstanding.
The Loan Agreements permit the Agency to fund all or a portion of a Reserve
Requirement by means of a "Qualified Reserve Fund Credit Instrument" which is an irrevocable
standby or direct -pay letter of credit or surety bond issued by a commercial bank or insurance
company and deposited with the Trustee, provided that all of the following requirements are met
at the time of deposit with the Trustee: (i) either (a) the long-term credit rating of such bank is
within one of the two highest rating categories by Moody's or S&P, or the claims paying ability of
such insurance company is rated within one of the two highest rating categories by Moody's or
S&P, at the time of delivery of such letter of credit or surety bond, or (b) the Authority shall
cause to be filed with the Trustee written evidence from Moody's and S&P that the delivery of
such letter of credit or surety bond will not, of itself, cause a reduction or withdrawal of any
rating then assigned to the Bonds; (ii) such letter of credit or surety bond has a term of at least
12 months; (iii) such letter of credit or surety bond has a stated amount at least equal to the
portion of the Reserve Requirement with respect to which funds are proposed to be released;
25
and (iv) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to
draw thereunder an amount equal to any deficiencies which may exist from time to time with
respect to deposits required pursuant to the applicable Indenture.
On the date of issuance of the Bonds, the Reserve Requirement for the Senior Loans
will be met with a Qualified Reserve Fund Credit Instrument in the form of a
issued by
RISK FACTORS
The following is a discussion of certain risk factors which should be considered, in
addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This
discussion does not purport to be comprehensive or definitive. The occurrence of one or more
of the events discussed herein could adversely affect the ability of the Agency to make the
payments required to repay the Bonds and their interest on a timely manner. In addition, the
occurrence of one or more of the events discussed herein could adversely affect the value of
the property in the Project Area.
Bonds Are Limited Obligations
The Bonds and the interest thereon are limited obligations of the Agency and do not
constitute a general obligation of the Agency. See "SECURITY FOR THE BONDS" herein. No
Owner of the Bonds may compel exercise of the taxing power of the State of California or any of
its political subdivisions or agencies to pay the principal of, premium, if any, or interest due on
the Bonds. The Bonds do not evidence a debt of the Agency within the meaning of any
constitutional or statutory debt limitation provision.
Reduction of Tax Revenues
Tax Revenues (which constitute the source of repayment of the Loans and indirectly of
the Bonds, as discussed herein) are a portion of the taxes allocated to the Agency each year
which are determined by the amount of incremental valuation of taxable property in the Project
Area, the current rate or rates at which property in the Project Area, is taxed and the percentage
of taxes collected in the Project Area. Neither the Agency nor the Authority has taxing power,
nor does the Agency have the power to affect the rate at which property is taxed.
Events beyond the control of the Agency could cause a reduction in Tax Revenues,
thereby impairing the ability of the Agency to make payments under the Loan Agreement
sufficient to pay principal of and interest and premium (if any) when due on the Bonds.
A reduction of taxable values of property or tax rates in the Project Area or a reduction of
the rate of increase in taxable values of property in the Project Area caused by economic or
other factors beyond the Agency's control (such as a relocation out of the Project Area by one
or more major property owners, successful appeals by property owners for a reduction in a
property's assessed value, a reduction of the general inflationary rate, a reduction in transfers of
property, reduction of property values, events that permit reassessment of property at lower
values, or the destruction of property caused by natural or other disasters, including earthquake)
could occur, thereby causing a reduction in Tax Revenues.
The California electorate or legislature could adopt limitations with the effect of reducing
Tax Revenues. Such limitation already exists under Article XIIIA of the California Constitution,
which was adopted pursuant to the initiative process. For a further description of Article XIIIA,
26
see "PROPERTY TAXATION IN CALIFORNIA — Constitutional Amendments Affecting Tax
Revenues," herein.
A reduction in the tax rate applicable to property in the Project Area by reason of
discontinuation of certain override tax levies in excess of the 1 % basic levy will reduce tax
increment revenues. Such override tax levies can be expected to decline over time until the tax
rate in the Project Area reaches the 1 % basic levy. Such overrides may be discontinued at any
time, which may cause a reduction in Tax Revenues. The Agency does not receive any Tax
Revenues attributable to tax override levies.
The current practice of the County under the Teeter Plan is to calculate 100% of the
gross tax increment payable annually to the Agency and to retain any penalties or delinquencies
collected to offset such gross payment. There can be no assurances that the County will
continue this practice in the future, or that the County will not discontinue the Teeter Plan or
remove the Agency from the Teeter Plan in the future.
Other events beyond the control of the Agency could also cause a reduction in Tax
Revenues.
Tax increment revenues allocated to the Agency are distributed throughout the year in
installments. The payments are adjusted to reflect actual collections. Any reduction in tax
increment revenues, whether for any of the foregoing reasons or any other reason, could have
an adverse effect on the Agency's ability to make payments under the Loan Agreement
sufficient to pay the principal of and interest on the Bonds.
Reduction in Inflationary Rate
As described in greater detail below, Article XIIIA of the California Constitution provides
that the full cash value basis of real property used in determining taxable value may be adjusted
from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year,
or may be reduced to reflect a reduction in the consumer price index or comparable local data.
Such measure is computed on a calendar year basis. The Agency has projected Tax Revenues
to be received by it based, among other things, upon such 2% inflationary increases. Should
the assessed value of real property not increase at the allowed annual rate of 2%, the Agency's
receipt of future Tax Revenues may be adversely affected. See "PROPERTY TAXATION IN
CALIFORNIA - Constitutional Amendments Affecting Tax Revenues" herein.
Concentration of Ownership
The largest secured local taxpayer in the Project Area (constituting approximately
16.17% of the Fiscal Year 2005-06 secured assessed value in the Project Area) is Desert
Spring Hotel/Marriott. See "THE PROJECT AREA - Largest Taxable Property Owners" above.
While the Agency believes that Desert Spring Hotel/Marriott to be a viable and profitable
enterprise, its business, by nature, is dependent upon various unpredictable economic and
market forces. The impact of various other risks described in this section could be exaggerated
should any such risk negatively impact Desert Spring Hotel/Marriott.
Assessment Appeals
Property taxable values may be reduced as a result of a successful appeal of the taxable
value determined by the County Assessor. An appeal may result in a reduction to the County
Assessor's original taxable value and a tax refund to the applicant property owner. Appeal and
27
refund activity within the Project Area may result in resolved appeals which reduce the
assessed value of parcels within the Project Area. See APPENDIX A - "Fiscal Consultant's
Report - Assessment Appeals."
An assessee may contest either (i) the original determination of the "base assessment
value" of a parcel (i.e., the value assigned after a change of ownership or completion of new
construction), or (ii) the "current assessment value" (i.e., the value as determined by the County
Assessor, which may be no more than the base assessment value plus the compounded 2%
annual inflation factor) when specified factors have caused the market value of the parcel to
drop below current assessment value.
At the time of reassessment, after a change of ownership or completion of new
construction, the assessee may appeal the base assessment value of the property. Under an
appeal of a base assessment value, the assessee appeals the actual underlying market value of
the sales transaction or the recently completed improvement. A successful appeal of the base
assessment value of a parcel has significant future revenue impacts, because a reduced base
year assessment will reduce the compounded future value of the property prospectively. Except
for the two percent inflation factor, the value of the property cannot be increased until a change
in ownership occurs or additional improvements are added.
Assessment appeals are currently pending in the Project Area, and the Agency cannot
predict whether such appeals, or any future appeals, will be successful. Future reductions in
taxable values in the Project Area resulting from successful appeals by property owners will
reduce the amount of Tax Revenues available to pay the principal of and interest on the Bonds.
Proposition 8 Adjustments
Proposition 8, approved in 1978 (California Revenue and Taxation Code Section 51(b)),
provides for the assessment of real property at the lesser of its originally determined (base year)
full cash value compounded annually by the inflation factor, or its full cash value as of the lien
date, taking into account reductions in value due to damage, destruction, obsolescence or other
factors causing a decline in market value. Reductions based on Proposition 8 do not establish
new base year values, and the property may be reassessed on a following lien date up to the
lower of the then -current fair market value or the factored base year value. Properties in the
Project Area have not been subject to Proposition 8 adjustments made by the County Assessor
in any significant amount.
Subordinate Nature of Series 2006D Bonds
The Series 2006D Bonds are subordinate to the Senior Bonds in priority and right of
payment. Subordinate Revenues will be available to pay obligations on the Series 2006D
Bonds only after all payments and deposits in respect of the Senior Bonds have been made as
set forth herein and in the Senior Indenture. In the event of delinquencies in the payment of the
Senior Loans, there may not be sufficient Subordinate Revenues available to pay interest or
principal due on any or all of the Series 2006D Bonds then Outstanding.
No Rating of Series 2006D Bonds
The Series 2006D Bonds are not rated by any rating agency, and the Authority does not
presently intend to seek any rating of the Series 2006D Bonds [[[nor does the Authority
anticipate that the Series 2006D Bonds would qualify for an investment grade rating due to the
structure and size of the Senior Bonds.]]]
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Development Risks
Generally, the Agency's ability to make payments under the Loan Agreements will be
dependent upon the economic strength of the Project Area. The general economy of the
Project Area will be subject, in part, to the development risks generally associated with real
estate development projects. Projected development within the Project Area may be subject to
unexpected delays, disruptions and changes. For example, real estate development operations
may be adversely affected by changes in general economic conditions, fluctuations in the real
estate market, fluctuations in interest rates, unexpected increases in development costs and by
other factors. Further, real estate development operations within the Project Area could be
adversely affected by future governmental policies, including governmental policies to restrict or
control development. If projected development in the Project Area is delayed or halted, the
economy of the Project Area could be adversely affected, causing a reduction of the Tax
Revenues available ultimately to pay debt service on the Bonds.
Seismic Factors
The assessed valuation of properties in the Project Area could be substantially reduced
as a result of a major earthquake proximate to the Project Area. The area in and surrounding
the Project Area, like much of California, may be subject to unpredictable seismic activity. If
there were to be an occurrence of severe seismic activity in the Project Area, there could be a
negative impact on assessed values of taxable values of property in the Project Area, and a
corresponding reduction in Tax Revenues. Such reduction of Tax Revenues could have an
adverse effect on the Agency's ability to make timely payments of principal of and interest on a
Loan.
Flood Risk Considerations
In and around the City, flooding caused by river overflow or heavy rainfall could cause
possible damage to property in the City, including property in the Project Area.
Levy and Collection
Neither the Agency nor the Authority has any independent power to levy and collect
property taxes. Any reduction in the tax rate or the implementation of any constitutional or
legislative property tax decrease could reduce the Tax Revenues, and accordingly, could have
an adverse impact on the ability of the Agency to make payments under the Loan Agreements
sufficient to pay debt service on the Bonds. Likewise, delinquencies in the payment of property
taxes could have an adverse effect on the Agency's ability to make timely payments. The
County currently allocates to the Agency 100% of tax increment revenues without regard to
delinquencies. However, there is no assurance that the County will continue to allocate Tax
Revenues in this manner. To estimate the Tax Revenues available to pay debt service on the
Bonds, the Agency has made certain assumptions with regard to the assessed valuation of
property within the Project Area and future tax rates. The Agency believes these assumptions
to be reasonable, but to the extent that the assessed valuation and the tax rates are less than
the Agency's assumptions, the Tax Revenues available to pay debt service on the Bonds may
be less than those projected herein.
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State Budget; ERAF Shift
In connection with its approval of the budget for the 1992-93, 1993-94 and 1994-95 fiscal
years, the State Legislature enacted legislation which, among other things, reallocated funds
from redevelopment agencies to school districts by shifting a portion of each agency's tax
increment, net of amounts due to other taxing agencies, to school districts for such fiscal years
for deposit in the Education Revenue Augmentation Fund ("ERAF"). The amount required to be
paid by a redevelopment agency under such legislation was apportioned among all of its
redevelopment project areas on a collective basis, and was not allocated separately to
individual project areas. Faced with a projected $23.6 billion budget gap for Fiscal Year 2002-
03, the State Legislature adopted and sent to the Governor of the State as urgency legislation,
AB 1768 requiring redevelopment agencies to pay into ERAF in Fiscal Year 2002-03 an
aggregate amount of $75 million.
In 2003, the State Legislature adopted SB 1045 which required redevelopment agencies
to make ERAF transfers in Fiscal Year 2003-04, based on a statewide aggregate transfer by
redevelopment agencies of $135 million. Due to continuing state budget problems, the State
Legislature adopted SB 1096, Chapter 211, Statutes of 2004 ("SB 1096"), which required an
ERAF shift of $250 million for 2004-05 and 2005-06. As with previous ERAF shifts, SB 1096
requires that half of the shift be calculated on the basis of the gross tax increment of a project
area and the other half on net revenues after tax sharing payments. The Agency's ERAF
payment for 2004-05 was $3,887,133, and the proportionate share for Project Area was
$788,700. The Agency's estimated ERAF payments for 2005-06 are $3,995,041, with the
Project Area's proportionate share being $871,272 SB 1096 provides that the Agency's ERAF
payment obligations are subordinate to the payment of debt service on the Bonds.
The Agency cannot predict whether the State Legislature will adopt legislation requiring
other shifts of redevelopment property tax increment revenues in future fiscal years beyond
2005-06 to the State and/or to schools, whether by the ERAF mechanism or by other
arrangement. Should such legislation be enacted, Tax Revenues available for payment of the
Bonds may, in the future, be substantially reduced and the Agency's ability to pay debt service
on the Bonds may be impaired.
Assumptions and Projections
To estimate the total Tax Revenues available to pay debt service on the Bonds, the
Agency's Fiscal Consultant has made certain assumptions with regard to the assessed
valuation in the Project Area, future tax rates, the percentage of taxes collected, the likelihood
of appeals, the amount of funds available for investment and the interest rate at which those
funds will be invested. See APPENDIX A — "FISCAL CONSULTANT'S REPORT" for a full
discussion of the assumptions underlying the projections set forth herein and therein with
respect to Tax Revenues. The Agency believes these assumptions to be reasonable, but to the
extent that the payment of any revenues that constitute Tax Revenues is less than such
assumptions, the total Tax Revenues available may be less than those projected herein. See
"SECURITY AND SOURCE OF PAYMENT FOR THE BONDS" herein.
Bankruptcy and Foreclosure
On July 30, 1992 the United States Court of Appeals for the Ninth Circuit issued an
opinion in a bankruptcy case entitled In re Glasply Marine Industries holding that ad valorem
property taxes levied by a county in the State of Washington after the date that the property
owner filed a petition for bankruptcy would not be entitled to priority over the claims of a secured
30
creditor with a prior lien on the property. Similar results were reached by several circuit courts
in other circuits. Subsequently, however, section 362(b)(18) of the Bankruptcy Code was
enacted, effectively overturning this line of decisions and providing that local governments may
rely on statutory property tax liens to secure payment of property taxes after the filing of a
bankruptcy petition.
Loss of Tax Exemption on the Bonds
In order to maintain the exclusion from gross income for federal income tax purposes of
the interest on the Bonds, the Agency has covenanted in the Loan Agreement to comply with
each applicable requirement of Section 103 and Sections 141 through 150 of the Internal
Revenue Code of 1986, as amended. The interest on the Bonds could become includable in
gross income for purposes of federal income taxation retroactive to the date of issuance of the
Bonds, as a result of acts or omissions of the Agency in violation of covenants in the Loan
Agreement. Should such an event of taxability occur, the Bonds are not subject to acceleration,
redemption or any increase in interest rates and will remain Outstanding until maturity or until
redeemed under one of the redemption provisions contained in the Indenture. See
"CONCLUDING INFORMATION — Tax -Exempt Status of the Bonds" herein.
PROPERTY TAXATION IN CALIFORNIA
Constitutional Amendments Affecting Tax Revenues
Article XIIIA of the California Constitution limits the amounts of ad valorem tax on real
property to 1 % of "full cash value" as determined by the county assessor. Article XIIIA defines
"full cash value" to mean "the County Assessor's valuation of real property as shown on the
1975-76 tax bill under 'full cash value', or thereafter the appraised value of real property when
purchased, newly constructed, or a change in ownership has occurred after the 1975
assessment period." Furthermore, all real property valuation may be increased to reflect the
inflationary rate, as shown by the consumer price index, not to exceed 2% per year, or may be
reduced in the event of declining property values caused by damage, destruction or other
factors.
Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness
approved by the voters prior to July 1, 1978, and any bonded indebtedness for the acquisition or
improvement of real property approved on or after July 1, 1978 by two-thirds of the voters voting
on the proposition approving such bonds, and 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. In addition, Article XIIIA requires the
approval of two-thirds of all members of the State legislature to change any State tax law
resulting in increased tax revenues.
Article XIIIB of the California Constitution limits the annual appropriations from the
proceeds of taxes of the State and 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 governmental entity.
Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amount
permitted to be spent, the excess would have to be returned by revising tax or fee schedules
over the subsequent two years.
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Section 33678 of the Redevelopment Law provides that the allocation of taxes to a
redevelopment agency for the purpose of paying principal of, or interest on, loans, advances or
indebtedness incurred for redevelopment activity shall not be deemed the receipt by such
agency of proceeds of taxes within the meaning of Article XIIIB, nor shall such portion of taxes
be deemed receipt of proceeds of taxes by, or any appropriation subject to the limitation of, any
other public body within the meaning or the purpose of the Constitution and laws of the State,
including Section 33678 of the Redevelopment Law. Two California appellate court decisions
have upheld the constitutionality of Section 33678, and in the one case in which a petition for
review was filed in the California Supreme Court, such petition was denied.
Implementing Legislation
Legislation enacted by the California Legislature to implement Article XIIIA (Statutes of
1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agencies
may not levy any property tax, except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article
XIIIA of $4.00 per $100 assessed valuation (based on the traditional practice of using 25% of
full cash value as the assessed value for tax purposes). The legislation further provided that, for
Fiscal Year 1978-79 only, the tax levied by each county was to be appropriated among all taxing
agencies within the county in proportion to their average share of taxes levied in certain
previous years.
Effective as of the 1981-82 Fiscal Year, assessors in California no longer record
property values in the tax rolls at the assessed value of 25% of market values. All taxable
property value is shown at full market value. In conformity with this change in procedure, all
taxable property value included in this Official Statement (except as noted) is shown at 100% of
market value and all general tax rates reflect the $1 per $100 of taxable value.
Future assessed valuation growth allowed under Article XIIIA (i.e., new construction,
change of ownership, and 2% annual value growth) will be allocated on the basis of "situs"
among the jurisdictions that serve the tax rate area within which the growth occurs. Local
agencies and schools will share the growth of "base" revenue from the tax rate area. Each
year's growth allocation becomes part of each agency's allocation in the following year. The
Agency is unable to predict the nature or magnitude of future revenue sources which may be
provided by the State to replace lost property tax revenues. Article XIIIA effectively prohibits the
levying of any other ad valorem property tax above those described above, even with the
approval of the affected voters.
Constitutional Challenges to Property Tax System
There have been many challenges to Article XIIIA of the California Constitution.
Recently, the United States Supreme Court heard the appeal in Nordlinger v. Hahn, a challenge
relating to residential property. Based upon the facts presented in Nordlinger, the United States
Supreme Court held that the method of property tax assessment under Article XIIIA did not
violate the federal Constitution. The Agency cannot predict whether there will be any future
challenges to California's present system of property tax assessment and cannot evaluate the
ultimate effect on the Agency's receipt of tax increment revenues should a future decision hold
unconstitutional the method of assessing property.
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Property Tax Collection Procedures
In California, property that is subject to ad valorem taxes is classified as "secured" or
"unsecured." The secured classification includes property on which any property tax levied by a
county becomes a lien on that property sufficient, in the opinion of the county assessor, to
secure payment of the taxes. Every tax levied by a county that becomes a lien on secured
property has priority over all present and future private liens arising pursuant to State law on the
secured property, regardless of the time of the creation of the other liens. A tax levied on
unsecured property does not become a lien against the taxed unsecured property, but may
become a lien on other property owned by the taxpayer.
Secured and unsecured property are entered on separate parts of the assessment roll
maintained by the county assessor. The payment of delinquent taxes with respect to property
on the secured roll may be enforced only through the sale of the property securing the taxes to
the State for the amount of taxes that are delinquent. Such property may thereafter be
redeemed by payment of the delinquent taxes and penalties. Unsecured personal property
taxes may be collected, in the absence of timely payment by the taxpayer, through (1) a civil
action against the taxpayer; (2) filing a certificate of delinquency for record in the county
recorder's office, in order to obtain a lien on property of the taxpayer; (3) seizure and sale of
personal property, improvements or possessory interests belonging or assessed to the
taxpayer; and (4) 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.
The valuation of taxable property is determined as of January 1 each year, and equal
installments of taxes levied upon secured property become delinquent on the following
December 10 and April 10. Taxes on unsecured property are due on the lien date and become
delinquent August 31, and such taxes are levied at the prior year's secured tax rate.
Supplemental Assessments
A bill enacted in 1983, SB 813 (Statutes of 1983, Chapter 498), provides for the
supplemental assessment and taxation of property as of the occurrence of a change of
ownership or completion of new construction. Previously, statutes enabled the assessment of
such changes only as of the next tax lien date following the change, and thus delayed the
realization of increased property taxes from the new assessments for up to 14 months. As
enacted, Chapter 498 provides increased revenue to redevelopment agencies to the extent that
supplemental assessments as a result of new construction or changes of ownership occur
within the boundaries of redevelopment projects subsequent to the lien date. To the extent
such supplemental assessments occur within the Project Area, Tax Revenues may increase.
Collection of taxes based on supplemental assessments will occur throughout the year.
Taxes due will be pro -rated according to the amount of time remaining in the tax year, with the
exception of tax bills dated the lien date through May 31, which will be calculated on the basis of
the remainder of the current fiscal year and the full twelve months of the next fiscal year.
Tax Collection Fees
County auditors are authorized to determine property tax administration costs
proportionately attributable to local jurisdictions, including redevelopment agencies, and to
submit invoices to the jurisdictions for such costs. The projections of tax revenues take such
administrative costs into account.
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Unitary Property Tax
AB 454 (Statutes of 1987, Chapter 921) provides a revised method of reporting and
allocating property tax revenues generated from most State -assessed unitary properties
commencing with Fiscal Year 1988-89. Under AB 454, the State reports to each county auditor -
controller only the county -wide unitary taxable value of each utility, without an indication of the
distribution of the value among tax rate areas. AB 454 provides two formulas for auditor -
controllers to use in order to determine the allocation of unitary property taxes generated by the
county -wide unitary value, which are: (i) for revenue generated from the 1 % tax rate, each
jurisdiction is to receive up to 102% of its prior year unitary property tax increment revenue;
however, if county -wide revenues generated from unitary properties are greater than 102% of
prior year revenues, each jurisdiction receives a percentage share of the excess unitary
revenues equal to the percentage of each jurisdiction's share of secured property taxes; (ii) for
revenue generated from the application of the debt service tax rate to county -wide unitary
taxable value, each jurisdiction is to receive a percentage share of revenue based on the
jurisdiction's annual debt service requirements and the percentage of property taxes received by
each jurisdiction from unitary property taxes.
The provisions of AB 454 apply to all State -assessed property, except railroads and non -
unitary properties the valuation of which will continue to be allocated to individual tax rate areas.
The provisions of AB 454 do not constitute an elimination or a revision of the method of
assessing utilities by the State Board of Equalization. AB 454 allows, generally, valuation
growth or decline of State -assessed unitary property to be shared by all jurisdictions within a
county.
Business Inventory and Replacement Revenue
Prior to 1979, the State reimbursed cities, counties, special districts and redevelopment
agencies that portion of taxes which would have been generated by the exempted portion of
business inventory value (50%). In 1979, the California Legislature enacted AB 66 (Statutes of
1979, Chapter 1150), eliminating the assessment and taxation of business inventory property
and providing for replacement revenue for local agencies, except redevelopment agencies. In
1980, the California Legislature enacted AB 1994 (Statutes of 1980, Chapter 610), providing
partial replacement revenue for the loss of business inventory revenues by redevelopment
agencies.
In 1990, the California Legislature amended Section 16112.7 of the California
Government Code (Chapter 449, Statutes of 1990) which precludes redevelopment agencies
from pledging special subvention revenues toward the payment of debt service for bonded
indebtedness incurred after July 31, 1990 (the effective date of the legislation). The 1992-93
State Budget reduced the State's funding for the special subvention. As enacted under AB 222
(Chapter 188, Statutes of 1991), the Budget Act eliminated 1991-92 subvention payments for
most redevelopment projects, including the Project Area. Additionally, the 1992-93 State
Budget implemented further cuts in funding for the State's special subvention to redevelopment
agencies. As a result, these revenues are not included in the projections of estimated tax
revenues.
Proposition 87
Under prior State law, if a taxing entity increased its tax rate to obtain revenues to repay
general obligation bonds approved by two-thirds of the voters, the redevelopment agency with a
34
project area which includes property affected by the tax rate increase would realize a
proportionate increase in tax increment.
Proposition 87, approved by the voters of the State on November 8, 1988, requires that
all revenues produced by a tax rate increase (approved by the voters on or after January 1,
1989) go directly to the taxing entity which increases the tax rate to repay the general obligation
bonded indebtedness. As a result, redevelopment agencies no longer receive an increase in
tax increment when taxes on property in the project area are increased to repay voter approved
general obligation debt.
Future Initiatives
Article XIIIA, Article XIIIB and Proposition 87 were each adopted as measures that
qualified for the ballot pursuant to California's initiative process. From time to time other
initiative measures could be adopted, further affecting revenues of the Agency or the Agency's
ability to expend revenues. The nature and impact of these measures cannot be anticipated by
the Authority or Agency.
THE PROJECT AREA
In connection with the issuance of the Bonds, the Agency caused Rosenow Spevacek
Group Inc., Santa Ana, California, to prepare a Fiscal Consultant's Report dated April 10, 2006,
which sets forth current financial and other information on the Project Area. The information
below and under the caption "SUBORDINATE TAX REVENUES" includes information contained
in the Fiscal Consultant's Report. The Fiscal Consultant's Report is included herein as
APPENDIX A.
Establishment of the Project Area
On July 7, 1987, the Planning Commission approved the preliminary plan for the
redevelopment of Project Area No. 2. The Agency's report to the City Council requesting the
proposed redevelopment plan indicated that the area had been selected because of the
existence of lots of inadequate size for proper usefulness and development; inadequate traffic
circulation; numerous obsolete and dilapidated residential structures subject to mixed character
and shifting of land uses; above ground voltage transmission lines which are not only unsightly,
but because of high winds in the area, a threat to public safety.
Following Agency meetings and hearings on the Redevelopment Plan, a joint public
hearing was held with the City Council on July 9, 1987. On July 15, 1987, the Redevelopment
Plan (the "Redevelopment Plan") for Project Area No. 2 was adopted by the City of Palm
Desert pursuant to the adoption of Ordinance No. 509 ("Project Area No. 2"). The
Redevelopment Plan was adopted in order to eliminate conditions of blight existing in Project
Area No. 2 and to prevent their recurrence by undertaking appropriate redevelopment projects
pursuant to the Redevelopment Law.
The primary objectives of the Redevelopment Plan include the improvement of traffic
circulation; the undergrounding of utilities and the elimination of drainage deficiencies; the
elimination of irregularly shaped and inadequate sized parcels of land and the rehabilitation or
removal of substandard buildings. The Redevelopment Plan also provides for the expansion of
recreational facilities and open space and other public improvements.
35
Adopted on July 15, 1987, the Project Area encompasses approximately 2,927 acres
(6,195 parcels) of residential, hotel/resort, office and undeveloped uses. The Project Area is
generally bounded by the Palm Desert city limits and Interstate 10 to the north, portions of the
City limits to the east, Country Club Drive and Hovely Lane to the south and Portola and
Monterey Avenues to the west. There are three other project areas of the Agency.
The table below shows land use by assessed value for the parcels in the Project Area.
The majority of land in the Project Area is used for residential purposes.
PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 2
Summary of Land Use in 2005-06
Land No. Secured % of Total
Use of Parcels Value Assessed Value
Commercial 17 $253,735,686 26.3%
Institutional 1 2,992,024 0.3
Professional/Office 10 16,135,679 1.7
Recreational 17 38,187,084 4.0
Residential 1,695 536,001,080 55.5
Vacant Land 490 119,221,517 12.3
Unknown 15 279.353 0.0
Total 2,245 $966,552,423 100.0%
Source: Rosenow Spevacek Group Inc.; derived from Metroscan TRW Database based on County of Riverside
Assessor information, does not include possessory interest.
Limitations and Requirements of the Redevelopment Plan
The Redevelopment Plan limits the amount of tax revenues which can be divided and
allocated to the Agency from Project Area No. 2 pursuant to the Redevelopment Law to a
maximum of $800,000,000 (in 1987 dollars), and limits the amount of bonded indebtedness (to
be repaid in whole or in part from such allocation of taxes) which can be outstanding at one time
to $150,000,000 (in 1987 dollars). Each of the foregoing maximum amounts is expressed in
1987 dollars and adjusted annually thereafter in accordance with changes in the Consumer
Price Index for the nearest area to Project Area No. 2, as maintained by the Bureau of Labor
Statistics, United States Department of Labor. The total gross tax increment revenue collected
in Project Area No. 2 through 2004-05 is $109,686,684. The cap limitation, when adjusted by
the CPI is $1.36 billion for fiscal year 2005-06. Based upon the growth projections utilized in the
Fiscal Consultant's Report, Project Area No. 2 will not reach its limit through the end of its term
to collect tax increment (fiscal year 2037-38).
Pursuant to City Ordinance No. 766, adopted December 8, 1994, the Redevelopment
Plan also establishes the following limitations:
1. time limit to issue or incur debt has been eliminated by the adoption of Ordinance
1036 on February 27, 2003;
2. the term of the effectiveness of the Redevelopment Plan of July 15, 2028; and
3. the time limit to receive tax increment generated from the Project Area at ten (10)
years beyond the effectiveness date of the Redevelopment Plan, which is July 15, 2037, except
that the Agency may continue to receive such necessary tax increment to pay indebtedness or
36
other obligations issued or incurred prior to January 1, 1994 and for the financing of required
housing attributable to housing set -aside funds.
SB211
SB 211 (Statutes of 2001 Chapter 741) amended the Redevelopment Law by providing
cities and redevelopment agencies with an alternative method of determining certain limitations
of their redevelopment plans. First, a city may eliminate the time limit to establish indebtedness
in project areas adopted prior to January 1, 1994 by ordinance. If a redevelopment plan is so
amended, existing tax sharing agreements will continue and certain statutory tax sharing for
entities without tax sharing agreements will commence in the year the former limitation would
have taken effect. Second, an agency may extend the time limit for plan effectiveness and
repayment of debt for up to ten years if it can make certain specified findings. Project areas that
have been adopted after January 1, 1994 may only extend the limitation on incurring new debt
by making specific findings. On February 27, 2003 the City adopted Ordinance No. 1036,
amending the Redevelopment Plan to adopt the plan limitations permitted under SB 211. The
ordinance is subject to a 30-day referendum period, after which it will become law. If it becomes
law, the ordinance is expected to result in a slight reduction in Tax Revenues beginning in 2008.
For further information on the impact that SB 211 would have on the tax increment receipts of
the Project Area, see "APPENDIX A — Fiscal Consultant's Report."
TAX REVENUES
Tax Revenues (as described in the section "SECURITY FOR THE BONDS" herein)
derived each year from the levy and collection of taxes on any increase in the taxable valuation
of land, improvements, personal property and public utility property in the Project Area, over and
above the base year valuation for such property are to be deposited in the Special Fund,
administered by the Agency and applied to the payment of the principal of and interest on the
Loan.
On May 15, 1991, the Riverside County Superior Court entered a final judgment
incorporating a Stipulation for Entry of Judgment (the "Stipulation") among the Agency, the
Western Center on Law and Poverty, Inc. and California Rural Legal Assistance in connection
with litigation filed over the adoption of the Redevelopment Plan for Project Area No. 2 (City of
Palm Springs v. All Persons Interested, etc., Case No. Indio 51143). On June 18, 1997 and
again on September 20, 2002, the Court entered amendments to its 1991 judgment,
incorporating Stipulations Amending Stipulation for Entry of Judgment. Under the terms of the
Stipulation, as amended, the Agency has generally agreed to use its 20 percent set aside funds,
and other tax increment revenues, if necessary, to develop, rehabilitate, or otherwise financially
assist a certain number of affordable housing units and to meet certain housing needs of the
City. See "TAX REVENUES - Housing Set -Aside Requirements." The Stipulation, as amended,
provides that future indebtedness incurred by the Agency will be payable on a basis which is
prior to the obligations imposed by the Stipulation, as amended, if the Agency makes a finding
by resolution, based upon a report, that the Agency will have sufficient revenues to meet that
indebtedness as well as its obligations under the Stipulation, as amended. Under the terms of
the Stipulation, as amended, notwithstanding its other terms, the Agency may incur
indebtedness and pledge tax increment revenues to refinance its obligations, so long as (i) the
total amount of debt service payable in connection with such refinancing is less than the total
amount of debt service remaining to be paid on the refunded obligations, or (ii) the total amount
of debt service payable in connection with such refinancing reflects a present value savings
37
when compared with the total amount of debt service remaining to be paid on the refunded
obligations.
Pass -Through Agreements
Pursuant to Section 33607.7 of the Redevelopment Law, a redevelopment agency that
extends the original time limit to incur debt becomes required to share certain tax increment
revenues with any taxing agency having territory located within the redevelopment project area
for which the Agency has not previously entered into pass -through agreements.("Statutory Tax
Sharing").
In the Project Area, the Agency has entered into six tax sharing agreements (each, a
"Cooperative Agreement"), the provisions of which are summarized in "APPENDIX A — FISCAL
CONSULTANT'S REPORT — Payments to Project Area Taxing Agencies."
[Add further discussion if Cooperative Agreements are revenues for coverage purposes]
Schedule of Historical Tax Revenues
The following tables provide a schedule of the historical tax increment revenues
attributable to the Project Area for the fiscal years shown. For further information regarding the
historical tax increment revenues for the Project Area see "APPENDIX A — Fiscal Consultant's
Report."
Secured Valuation
Unsecured Valuation
Total Valuation
Incremental Valuation
PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 2
Historical Tax Increment Revenues
Fiscal Years 2001-02 through 2005-06
2001-02 2002-03 2003-04 2004-05 2005-06
$948,228023 $1,134,005,914 $1,257974,957 $1,347,408,182 $1,451,555,514
11.464.203 10.426.145 15.969.361 17.745.052 16.317.319
959,692,226 1,144,432,059 1,273,944,318 1,365,153,234 1,467,872,833
857,534,779 1,042,274,612 1,171,786,871 1,262,995,787 1,365,715,386
Total Estimated Revenue") 8,459,376
Actual Receipts
10,289,020 11,574,903
12,486,136 $13,510,987
$8,717,272 $10,681,120 $12,387,750 $13,490,609 N/A
(1) Before payment of Pass -Through Agreements, Housing Set -Aside; after payment of County administration charge.
Source: Rosenow Spevacek Group Inc.
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Current and Planned Development
The Fiscal Consultant's Report identified development currently approved and/or
underway in the Project Area, indicating the use, square footage, projected value, and projected
approximate completion time of the new development. The Fiscal Consultant identified the
planned projects as shown in the following table.
PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 2
Projected New Development
2007-08 2008-09 2009-10
Residential $14,698,200 $35,448,100 $173,606,913
Commercial 18,312,140 42,593,000 0
Industrial 6,582,000 3,913,000 0
Total $39,592,340 $81,954,100 $173,606,913
Source: Rosenow Spevacek Group Inc.
See APPENDIX A — "FISCAL CONSULTANT'S REPORT — Future Tax Increment
Projections" attached hereto.
Projected Taxable Valuation and Tax Revenue
The Agency has retained Rosenow Spevacek Group Inc., Santa Ana, California to
provide projections of tax increment revenues in the Project Area. Projections of tax increment
growth are based upon:
• Proposition 13 inflationary adjustments of 2% annually;
• Valuation increases based on ownership changes;
• Valuation increases caused by new construction.
The Agency believes the assumptions (set forth in APPENDIX A) upon which the
projections are based are reasonable; however, some assumptions may not materialize and
unanticipated events and circumstances may occur (see "RISK FACTORS"). Therefore, the
actual tax increment revenues received during the forecast period may vary from the projections
and the variations may be material. A summary of the projected tax increment revenues for the
Project Area and the debt service coverage on the Parity Debt (the Loan, the Senior 2002 Loan,
and the Senior 2003 Loan) is set forth in the following table. For additional information
regarding projected tax increment revenues see "APPENDIX A — Fiscal Consultant's Report. "
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PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 2
Projected Tax Increment Revenues And Debt Service Coverage- Bonds
Fiscal Years 2005-06 through 2012-13
Fiscal Subordinate
Year Total Project Senior Senior Loan Subordinate Loan
Ending Area Net Tax Existing Parity Loan Total Parity Coverage Loan Debt Coverage
June 30 Increment (1) Debt Service (2) Debt Service Debt Service (3) Ratio Service Ratio
2006 $5,596,977 $2,413,989
2007 6,269,216 2,070,339
2008 6,539,590 2,072,084
2009 6,916,638 2,075,859
2010 7,598,670 2,071,874
2011 7,730,926 2,070,504
2012 7,876,824 2,077,644
2013 8,126,125 2,073,769
2014 8,266,469 2,076,359
(1) Amounts are net of pass -through agreement payments and low and moderate income housing fund payments.
(2) Combined debt service on the Senior 2002 Loan and the Senior 2003 Loan.
(3) Combined debt service on the Loan, the Senior 2002 Loan and the Senior 2003 Loan.
Sources: Rosenow Spevacek Group Inc., and Citigroup.
40
Top Ten Taxpayers
The following table lists the ten largest property tax payers in the Project Area, based on
combined secured and unsecured assessed valuation. The top ten taxpayers account for
27.31 % of the total property tax roll in the Project Area. For tables showing the top ten
taxpayers based on secured value only and the top ten taxpayers based on unsecured value
only see "APPENDIX A —Fiscal Consultant's Report — Top Ten Taxpayers".
PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 2
Top Ten Taxpayers in Fiscal Year 2005-06
Assessed Percentage
Owner Value of Total Roll
1. Desert Spring Hotel/Marriott $237,366,747 16.17%
2. Marriott Ownership Resorts Inc. 55,540,166 3.78
3. Ashford Ruby Palm Desert I 30,267,496 2.06
4. Palm Desert Funding Co 18,403,763 1.25
5. Desert Falls County Club 11,934,000 0.81
6. Sinatra/Cook Project LLC 11,102,261 0.76
7. Resort Ventures 11,042,983 0.75
8. BNY Western Trust 9,086,716 0.62
9. Manor Healthcare Corp 8,672,821 0.59
10. Villas At Desert Dalis 7,519,695 0.51
Total
Fiscal Year 2005-06 Total Assessed Value: $1,467,872,833.
Source: Rosenow Spevacek Group Inc.
Filing of Statement of Indebtedness
$400,936,648 27.31
Section 33675 of the Redevelopment Law requires that the Agency file, not later than
the first day of October of each year with the county auditor, a statement of indebtedness
certified by the chief financial officer of the Agency for each redevelopment project for which the
redevelopment plan provides for the division of taxes pursuant to section 33670 of the
Redevelopment Law. The statement of indebtedness is required to contain, among other
things, the date on which the bonds were delivered, the principal amount, term, purpose,
interest rate and total interest of the bonds, the principal amount and the interest due in the
fiscal year in which the statement of indebtedness is filed and the outstanding balance and
amount due on the bonds. Similar information must be given for each loan, advance or
indebtedness that the Agency has incurred or entered into which is payable from tax increment.
Section 33675(g) has been amended by AB 1290 to provide that payments of tax
increment revenues from the county auditor to a redevelopment agency may not exceed the
redevelopment agency's aggregate total outstanding debt service obligations minus the
available revenues of the redevelopment agency, and establishes certain procedures under
which a county auditor may, in certain cases, dispute the amount of indebtedness shown on the
statement of indebtedness. Payments to a trustee under a bond resolution or indenture or
payments to a public agency in connection with payments by such public agency pursuant to a
bond issue may not be disputed in any action under Section 33675.
41
The Agency has determined that the amendments to Section 33675 limiting the payment
of tax revenues to an amount not greater than the difference between a redevelopment
agency's total outstanding debt obligations and total available revenues, as reported on the
redevelopment agency's reconciliation statement, will not have an adverse impact on the
Agency's ability to meet its debt service obligations.
Housing Set -Aside Requirements
In accordance with Section 33334.2 of the Redevelopment Law, not less than twenty
percent (20%) of all taxes which are allocated to the Agency shall be used by the Agency for
purposes of improving, increasing and preserving the City's supply of housing for persons and
families of low or moderate income (including the payment of indebtedness issued or incurred
for such purposes). This requirement is applicable unless the Agency makes the finding that:
1. No need for such housing exists in the City;
2. Less than twenty percent (20%) is sufficient to meet such housing needs of the
City; or
3. A substantial effort is presently being carried out with other funds (either local,
State or federal) and that such efforts are equivalent in impact to twenty percent
(20%) of all taxes which are allocated to the Agency.
Both the "no need" finding (item 1 above) and the "less than 20% finding" (item 2 above)
must apply to very low income as well as low and moderate income households, must be
consistent with the housing element of the community's general plan and the annual report of its
planning agency, and do not become effective until after certain filings have been made with the
State Department of Housing and Community Development ("HCD"). Neither finding can be
made unless the housing element is in proper form and up to date and has been filed with HCD.
The "equivalent effort" finding (item 3 above) must apply to the community's share of
regional housing needs as well as its own existing and projected needs. After June 30, 1993,
no agency may make this finding unless it can show evidence that it is required in order to meet
contractual obligations to bondholders or other private entities incurred prior to May 1, 1991 and
made in reliance on the on the ability to make the finding. The Agency has made no such
findings.
Funds available from the twenty percent (20%) requirement may be used outside the
Project Area on a finding by the Agency and the City Council that such use will be of benefit to
the Project Area. The Redevelopment Law also permits agencies with more than one project
area to set aside less than twenty percent (20%) of the taxes allocated to the agency from one
project area if the difference is made up from another project area in the same year and if the
agency and the legislative body of the community find that such use of funds will benefit such
other project area.
42
PALM DESERT FINANCING AUTHORITY
The Authority is a joint powers authority whose members are the City and the Agency.
The Authority is duly organized and existing under a Joint Exercise of Powers Agreement dated
January 26, 1989, by and between the City and the Agency, and under the provisions of
Chapter 5 of Division 7 of Title 1 of the California Government Code. The officers of the City
and the Agency serve as the officers of the Authority. The Authority has no taxing power, and
has no source of revenue other than the Revenues for paying the debt service on the Bonds.
PALM DESERT REDEVELOPMENT AGENCY
Authority and Management
The Agency was established pursuant to the Redevelopment Law. The City Council
adopted Ordinance No. 53 on October 24, 1974, which activated the Agency. The Agency is
governed by a five -member board which consists of all members of the City Council of the City
of Palm Desert. The Mayor who acts as Chairperson of the Agency is appointed by the City
Council. City Council members, their occupations and term expiration dated are as follows:
Board Member
James C. Ferguson, Chairman
Richard S. Kelly, Vice Chairman
Jean M. Benson, Commissioner
Buford A. Crites, Commissioner
Robert A. Spiegel,
Term Expires
November, 2006
November, 2008
November, 2006
November, 2008
November, 2008
Occupation
Attorney at Law
Retired Businessman
Retired Businesswoman
College Professor
Retired Businessman
The professional staff of the Agency presently includes the following:
Carlos L. Ortega was appointed City Manager in August 2000. He has also served as
Executive Director of the Agency, a position he has held since 1983. Mr. Ortega has also
served as Assistant City Manager from 1980 until 1995, and Assistant to the City Manager from
1977 to 1980. Prior to 1977, he served as Interim City Manager (one year) and Assistant City
Manager/Finance Director (five years) for the City of Coachella, California. Mr. Ortega received
a Bachelor of Science degree in Economics from University of California, Riverside, and has
completed graduate studies in Public Administration and Management at University of
California, Riverside and the University of Redlands.
Justin McCarthy has served as the Assistant City Manager for Redevelopment since
November, 2001. Mr. McCarthy began his career as an analyst in the City of Long Beach
implementing redevelopment projects in the downtown central business district, the port
industrial area and Long Beach Airport. He served for two years as the Redevelopment
Manager for the San Diego Southeast Economic Development Corporation managing industrial
and commercial projects. For the last thirteen years Mr. McCarthy served as the Deputy
Executive Director and Community Development Director for the City of Commerce. During his
career he has implemented millions of square feet of public/private projects valued at
approximately $1 billion.
43
Aria K. Scott serves as the Senior Financial Analyst for Redevelopment. Ms. Scott was
previously with JPMorgan Chase Bank. She began her tenure there in the Trust Operations
Department, and later moved on to a Relationship Manger position in their Treasury and
Security Services Department. Within Treasury and Security Services, she worked in their
Municipal and Corporate Debt Department, where she worked with various municipalities and
corporations serving as their bond trustee. Later she moved into the Trust Compliance
Department where she dealt with mitigating risk to JPMorgan Chase on a daily basis, by
reviewing documents, laws and regulations. She received her BBA in Finance from University
of Houston.
Veronica Tapia has been with the City for over nine years, and for the last two years has
served as the Accountant for the Agency. She is responsible for compiling the federal and state
mandated reports for the Agency, the administration of the Agency's outstanding bond issues of
approximately $245 million, and the overall accounting duties for both the Agency and the
Housing Department. Ms. Tapia received a Bachelor of Science degree, graduating Summa
Cum Laude, in Business and Management from the University of Redlands and currently is
completing graduate studies in Management at the University of Redlands.
Homer Croy serves as the Assistant City Manager for Development Services. The
Development Services Division is comprised of three departments: Building and Safety,
Community Development and Public Works. Mr. Croy has been employed by the City since
2000, when he was hired to serve as the Director of Building and Safety. Mr. Croy has been
employed in city government service since 1985, having served in the cities of Pomona, San
Gabriel, and Simi Valley. During his tenure in government service, Mr. Croy has had direct
experience with earthquake disaster recovery, project design and construction, FEMA floodplain
management, and construction management.
Sheila R. Gilligan serves as the Assistant City Manager for Community Services, a
position she has held since 2000. She is responsible for the areas of Administration (including
grants and franchise agreements), Human Resources, City Clerk, Civic Arts, Marketing and
Promotion, Public Information, the Visitor's Information Center, and special events for the City.
Prior to her current position, Ms. Gilligan served as the Director of Community Affairs while also
serving as the City Clerk. Ms. Gilligan served as City Clerk from 1976 to June, 2001. Ms.
Gilligan has been active in the civic affairs for the City, and, is the Past President of Soroptimist
International of Palm Desert and also served on the Board of Directors of the Family Y.M.C.A.,
the Palm Desert Youth Center, the Haymen Center, and is currently President of the Desert
Cancer Foundation.
Paul S. Gibson serves as Treasurer/Finance Director of the Agency and the City of Palm
Desert, a position he has held since 1988. Prior to this position, Mr. Gibson served for three
years as the Accounting Supervisor for the City. Subsequent to this date, Mr. Gibson spent five
years with Imperial County as the Accountant -Auditor for the Auditor Controller's office. Mr.
Gibson holds a Bachelor of Science degree in Accounting from San Diego State University.
David L. Yrigoyen serves as the Director of Redevelopment/Housing with the Agency.
Prior to his current position and beginning in 1985, Mr. Yrigoyen served as the Senior
Administrative Assistant to the Agency and then as Redevelopment Manager. Prior service
includes work with the City of Coachella, California, as the Economic Development Coordinator,
a position he held since 1982. Mr. Yrigoyen received a Bachelor of Arts degree in Political
Science from University of California, Berkeley, and a Master of Arts degree in Management
from National University, San Diego.
44
Rachelle D. Klassen started with the City's Finance Department in June, 1995. Since
1997 she has worked in the City Clerk's Office; initially as the Records Technician, appointed
Deputy City Clerk in 1998, and City Clerk on July 1, 2002. She received Certified Municipal
Clerk status from the International Institute of Municipal Clerks in October, 2001. As City Clerk,
she also serves as Secretary to the Redevelopment Agency, Housing and Financing
Authorities, with responsibilities of preparing and presenting all agendas and minutes for same,
maintaining all official City/Agency/Authority records, as well as the related duties of City
elections and being available to the public for information on legislative and administrative
actions. Her background includes an Associate in Arts Degree, with honors, from Waldorf
College, Forest City, Iowa, with continuing units obtained at College of the Desert since
relocating to the Coachella Valley. For the 12 years before relocating to California, she was
administrative assistant to both the president and vice president of the world's largest
manufacturer of grain drying and handling equipment.
Agency Powers
The Agency is charged with the responsibility of eliminating blight within its
redevelopment project areas through the process of redevelopment. Generally, this process
culminates when the Agency disposes of land for development by the private sector. Before
this can be accomplished, the Agency must complete the process of acquiring and assembling
the necessary sites, relocating residents and businesses, demolishing the deteriorated
improvements, grading and preparing the sites for purchase by developers and providing for
ancillary offsite improvements.
All powers of the Agency are vested in its five members. The Agency exercises all of
the governmental functions authorized under the Redevelopment Law in carrying out projects
and has sufficient broad authority to acquire, develop, administer and sell or lease property,
including the right of eminent domain and the right to issue bonds, notes and other evidences of
indebtedness and expend their proceeds.
The Agency can clear buildings and other improvements and develop as a building site
any real property owned or acquired, and in connection with such development, cause streets,
highways and sidewalks to be constructed or reconstructed and public utilities to be installed.
Redevelopment in the State of California may be carried out pursuant to the
Redevelopment Law. Section 33020 of the Redevelopment Law defines redevelopment as the
planning, development, replanning, redesign, clearance, reconstruction or rehabilitation, or any
combination of these, of all or part of a survey area and the provision of such residential,
commercial, industrial, public or other structures or spaces as may be appropriate or necessary
in the interest of the general welfare, including recreational and other facilities incidental or
appurtenant to them.
The Agency may, out of the funds available to it for such purposes, pay for all or part of
the cost of land and buildings, facilities, structures or other improvements to be publicly owned,
to the extent that such improvements are of benefit to the relevant project area or the immediate
neighborhood in which the project is located no other reasonable means of financing is available
and the payment of funds will assist in the elimination of one or more blighting conditions inside
the project area or provide housing for low and moderate income persons and is consistent with
the implementation plan adopted pursuant to section 33490 of the Redevelopment Law. The
Agency must sell or lease remaining property within a project area for redevelopment by others
in strict conformity with the applicable redevelopment plan, and may specify a period within
which such redevelopment must begin and be completed.
45
Financial Information
Included in this Official Statement, as APPENDIX C, are the audited financial statements
of the Agency for the Fiscal Year ended June 30, 2005.
Redevelopment Project Areas
The Agency is presently charged with the responsibility of the ongoing administration
and implementation of four redevelopment project areas within the City.
Pass -Through Agreements
The Agency has entered into several agreements to pay tax increment revenues to
certain taxing agencies entitled to receive ad valorem taxes from property located within the
Project Area in an amount which in the Agency's determination is appropriate to alleviate any
financial burden or detriment caused by redevelopment activities within the Project Area. These
agreements normally provide for a pass -through of tax increment revenues directly to the
affected taxing agency, and therefore are commonly referred to as "pass -through agreements"
or "tax -sharing agreements." See "APPENDIX A — Fiscal Consultant's Report" for a description
of these pass -through agreements.
Regulatory Issues
The Agency is in compliance with the provisions of the California Environmental Quality
Act, constituting Division 13 (commencing with Section 21000) of the California Public
Resources Code with respect to the Project Area.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
The arithmetical accuracy of certain computations included in the schedules provided by
the Agency or the Authority relating to (a) computation of forecasted receipts of principal and
interest on amounts deposited with the trustee for the 1995 Bonds and the forecasted payments
of principal and interest to redeem the 1995 Bonds, and (b) computation of the yields on the
Bonds will be examined by Grant Thornton, Minneapolis, Minnesota (the "Verification Agent").
Such computations are based solely upon assumptions and information supplied by the Agency
or the Authority. The Verification Agent has restricted its procedures to examining the
arithmetical accuracy of certain computations and has not made any study or evaluation of the
assumptions and information upon which the computations are based and, accordingly, has not
expressed an opinion on the data used, the reasonableness of the assumptions, or the
achievability of the forecasted outcome.
46
CONCLUDING INFORMATION
Continuing Disclosure
The Agency will undertake all responsibilities for continuing disclosure to Owners of the
Bonds as described below. The Insurer as a provider of municipal bond insurance is not subject
to the continuing disclosure requirements of Securities and Exchange Commission Rule 15c2-
12, and the Agency will not provide any ongoing disclosure with respect to the Insurer.
The Agency will covenant for the benefit of Bondholders to provide certain financial
information and operating data relating to the Agency and the Project Area by not later than six
months after the end of the Fiscal Year to which such information pertains, commencing with
the 2005-06 Fiscal Year (the "Annual Report"), and to provide notices of the occurrence of
certain enumerated events, if material. The Annual Report will be filed with each Nationally
Recognized Municipal Securities Information Repository and with any then existing State
Repository (collectively, the "Repositories"). Currently, there is no State Repository. The
notices of material events will be filed with the Municipal Securities Rulemaking Board. The
specific nature of the information to be contained in the Annual Report or the notices of material
events is described in "APPENDIX G - FORM OF CONTINUING DISCLOSURE AGREEMENT"
attached hereto. These covenants will be made in order to assist the Underwriter in complying
with Securities and Exchange Commission Rule 15c2-12(b)(5). The Agency has not failed to
comply in any material respect with any of its other continuing disclosure undertakings under
Rule 15c2-12(b)(5).
Underwriting
The Underwriter expects to purchase the Bonds at a purchase price of
$ , representing the principal amount of the Bonds, less an Underwriter's
discount of $ , plus an initial issue premium of $ . The
Underwriter intends to offer the Bonds to the public initially at the prices set forth on the inside
front cover page of this Official Statement, which prices may subsequently change without any
requirement of prior notice.
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 the 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.
Legal Opinion
The Bond Counsel firm of Richards, Watson & Gershon, A Professional Corporation, Los
Angeles, California, will render its final approving legal opinion with respect to the Bonds
substantially in the form set forth in APPENDIX B hereto. The legal opinion is only as to legality
of the Bonds and is not intended to be nor is it to be interpreted or relied upon as a disclosure
document or an express or implied recommendation as to the investment quality of the Bonds.
Tax -Exempt Status of the Bonds
In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond
Counsel, under existing law interest on the Bonds is excluded from gross income for federal
income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended
(the "Code"), and is not an item of tax preference for purposes of the federal alternative
47
minimum tax imposed on individuals and corporations. Bond Counsel will express no opinion
as to any other federal tax consequences regarding the Bonds.
The opinion on federal tax matters will be based on and will assume the accuracy of
certain representations and certifications, and continuing compliance with certain covenants, of
the Agency and the Authority that are intended to assure the foregoing, including that the Bonds
are and will remain obligations, the interest on which is excluded from gross income for federal
income tax purposes. Bond Counsel will not independently verify the accuracy of those
representations and certifications.
The Code prescribes a number of qualifications and conditions for the interest on state
and local government obligations to be and to remain excluded from gross income for federal
income tax purposes. Some of these qualifications and conditions require future or continued
compliance after issuance of the obligations for the interest to be and to continue to be excluded
from the date of issuance. Noncompliance with these qualifications and conditions by the
Authority or the Agency may cause the interest on the Bonds to be included in gross income for
federal income tax purposes retroactively to the date of issuance of the Bonds. The Authority
and the Agency have covenanted to take the actions required of them for the interest on the
Bonds to be and to remain excluded from gross income for federal income tax purposes, and
not to take any actions that would adversely affect that exclusion.
Under the Code, a portion of the interest on the Bonds earned by certain corporations
may be subject to a corporate alternative minimum tax. In addition, interest on the Bonds may
be subject to a branch profits tax imposed on certain foreign corporations doing business in the
United States and to a tax imposed on excess net passive income of certain S corporations.
Under the Code, the exclusion of interest from gross income for federal income tax
purposes may have certain adverse federal income tax consequences on items of income,
deduction or credit for certain taxpayers, including financial institutions, certain insurance
companies, recipients of Social Security and Railroad Retirement benefits, those that are
deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and
individuals otherwise eligible for the earned income tax credit. The applicability and extent of
these and other tax consequences will depend upon the particular tax status or other tax items
of the owners of the Bonds. Bond Counsel will express no opinion regarding those
consequences.
Any excess of the stated redemption price at maturity of the Bonds over the initial
offering price to the public of the Bonds set forth on the inside cover of this Official Statement is
"original issue discount." Such original issue discount accruing on a Bond is treated as interest
excluded from the gross income of the owner thereof for federal income tax purposes and
exempt from California personal income tax. Original issue discount on any Bond purchased at
such initial offering price and pursuant to such initial offering will accrue on a semiannual basis
over the term of the Bond on the basis of a constant yield method and, within each semiannual
period, will accrue on a ratable daily basis. The amount of original issue discount on such a
Bond accruing during each period is added to the adjusted basis of such Bond to determine
taxable gain upon disposition (including sale, redemption or payment on maturity) of such Bond.
The Code includes certain provisions relating to the accrual of original issue discount in the
case of purchasers of the Bonds who purchase the Bonds other than at the initial offering price
and pursuant to the initial offering. Any person considering purchasing a Bond should consult
his or her own tax advisors with respect to the tax consequences of ownership of bonds with
original issue discount, including the treatment of purchasers who do not purchase in the
original offering and the original offering price, the allowance of a deduction for any loss on a
48
sale or other disposition, and the treatment of accrued original issue discount on such bonds
under federal individual and corporate alterative minimum taxes.
If the Bonds were offered and sold to the public at a price in excess of their stated
redemption price (the principal amount) at maturity, that excess constitutes "premium." For
federal income tax purposes, that premium is amortized over the period to maturity of the
Bonds, based on the yield to maturity of the Bonds, compounded semiannually. No portion of
that premium is deductible by the owner of a Bond. For purposes of determining the owner's
gain or loss on the sale, redemption (including redemption at maturity) or other disposition of a
Bond, the owner's tax basis in the Bond is reduced by the amount of premium that accrues
during the period of ownership. As a result, an owner may realize taxable gain for federal
income tax purposes from the sale or other disposition of a Bond for an amount equal to or less
than the amount paid by the owner for that Bond. A purchaser of a Bond in the initial public
offering at the price for that Bond stated on the inside cover of this Official Statement who holds
that Bond to maturity will realize no gain or loss upon the retirement of that Bond. Owners of
the Bonds should consult their own tax advisers as to the determination for federal income tax
purposes of the amount of premium properly accruable in any period with respect to the Bonds
and as to other federal tax consequences and the treatment of premium for purposes of state
and local taxes on, or based on, income.
Purchasers of the Bonds at other than their original issuance at the respective prices
indicated on the inside cover of this Official Statement should consult their own tax advisers
regarding other tax considerations such as the consequences of market discount or premium.
In the further opinion of Bond Counsel, interest on the Bonds is exempt from personal
income taxation imposed by the State of California.
A copy of the proposed form of Bond Counsel's final approving opinion with respect to
the Bonds is attached hereto as APPENDIX B.
No Litigation
There is no action, suit or proceeding known to the Authority to be pending or
threatened, restraining or enjoining the execution or delivery of the Bonds or the Indenture or in
any way contesting or affecting the validity of the foregoing or any proceedings of the Authority
taken with respect to any of the foregoing.
Ratings
The Bonds are rated " " by Moody's Investors Service and " " by
Standard & Poor's Ratings Group and " " by Fitch Ratings. The ratings reflect the
coverage of payment when due of principal of and interest on the Bonds by a municipal bond
insurance policy to be issued by the Insurer simultaneously with the issuance of the Bonds. The
ratings reflect only the views of the rating organizations, and explanations of the significance of
the ratings may be obtained from Moody's Investors Service, Inc., 99 Church Street, New York,
New York 10007 and Standard & Poor's Ratings Group, 55 Water Street, New York, New York,
10041. There is no assurance that the ratings will continue for any given period of time or that
they will not be revised downward or withdrawn entirely by the rating agencies, if in the
judgment of the rating agencies circumstances so warrant. Any such downward revision or
withdrawal of the ratings may have an adverse effect on the market price of the Bonds.
49
Miscellaneous
All of the preceding summaries of the Loan Agreement, the Indenture, the Bond Law, the
Redevelopment Law, other applicable legislation, the Redevelopment Plan for the Project Area,
agreements and other documents are made subject to the provisions of such documents
respectively and do not purport to be complete statements of any or all of such provisions.
Reference is hereby made to such documents on file with the Authority for further information in
connection therewith.
This Official Statement does not constitute a contract with the purchasers of the Bonds.
Any statements made in this Official Statement involving matters of opinion or estimates,
whether or not expressly stated, are set forth as such and not as representations of fact, and no
representation is made that any of the estimates will be realized.
The execution and delivery of this Official Statement by the Chief Administrative Officer
of the Authority have been duly authorized by the Authority.
PALM DESERT FINANCING AUTHORITY
Chief Administrative Officer
50
APPENDIX A
FISCAL CONSULTANT'S REPORT
A-1
APPENDIX B
FORM OF OPINION OF BOND COUNSEL
[Closing Date]
Palm Desert Financing Authority
73-519 Fred Waring Drive
Palm Desert, California 92260
Opinion of Bond Counsel
with reference to
$
Palm Desert Financing Authority
Subordinate Tax Allocation Refunding Revenue Bonds
(Project Area No. 2)
2006 Series A
Ladies and Gentlemen:
We have examined (i) a record of proceedings relating to the issuance of the above -
captioned bonds (the "Bonds") of the Palm Desert Financing Authority, a public entity of the
State of California (the "Authority"); (ii) the Indenture of Trust, dated as of July 1, 2006 (the
"Indenture"), by and between the Authority and Wells Fargo Bank, National Association, as
trustee (the "Trustee"); (iii) the Project Area No. 2, Loan Agreement, dated as of July 1, 2006
(the "Loan Agreement"), by and among the Authority, the Palm Desert Redevelopment Agency
(the "Agency") and the Trustee; and (iv) such other matters of law as we have deemed
necessary to enable us to render the opinions expressed herein. As to questions of fact
material to this opinion, we have relied upon such certificates and documents without
undertaking to verify the same by independent investigation.
The Bonds are issued under and pursuant to the Indenture and the provisions relating to
the joint exercise of powers found in Chapter 5 of Division 7 of Title 1 of the Government Code
of California, as amended (the "Act"), including the provisions of the Marks -Roos Local Bond
Pooling Act of 1985, constituting Article 4 of the Act. The Bonds are issued for the purpose of
making a Loan to the Agency to finance certain public capital improvements for the benefit of
the Project Area.
Capitalized terms used herein which are not defined herein shall have the meanings
given such terms in the Indenture.
We are of the opinion that:
1. The Authority is duly created and validly existing under the provisions of the Act.
2. The Authority has the right and power to enter into and carry out its obligations
under the Loan Agreement and has duly authorized, executed and delivered the Loan
B-1
Agreement, which (assuming due authorization, execution and delivery by the Trustee)
constitutes a valid and binding agreement of the Authority enforceable in accordance with its
terms.
3. The Authority has the right and power to enter into the Indenture, and the
Indenture has been duly and lawfully authorized, executed and delivered by the Authority, and
(assuming due authorization, execution and delivery by the Trustee) is in full force and effect in
accordance with its terms and is valid and binding upon the Authority and enforceable in
accordance with its terms, and no other authorization for the Indenture is required. The
Indenture creates the valid pledge which it purports to create of (i) the Revenues (as defined in
the Indenture) and (ii) certain funds established by the Indenture, including the investments, if
any, thereof; subject only to the provisions of the Indenture permitting the application thereof for
the purposes and on the terms and conditions set forth in the Indenture.
4. The Authority is duly authorized and entitled to issue the Bonds, and the Bonds
have been duly and validly authorized and issued by the Authority in accordance with the
Constitution and statutes of the State of California, including the Act, and in accordance with the
Indenture. The Bonds constitute the valid and binding obligations of the Authority as provided in
the Indenture, are enforceable in accordance with their terms and the terms of the Indenture
and are entitled to the benefits of the Act and the Indenture. The Bonds are not an obligation of
the State of California, any public agency thereof (other than the Authority), or any member of
the Authority and neither the faith and credit nor the taxing power of the State of California or
any public agency thereof or any member of the Authority is pledged for the payment of the
Bonds. The Authority has no taxing power.
5. The Agency has the right and power to enter into and carry out its obligations
under the Loan Agreement and has duly authorized, executed and delivered the Loan
Agreement, which (assuming due authorization, execution and delivery by the Trustee)
constitutes a valid and binding agreement of the Agency enforceable in accordance with its
terms. The Loan Agreement creates the valid pledge which it purports to create of the Tax
Revenues (as defined in the Loan Agreement) and the Reserve Fund, subject only to the
provisions of the Loan Agreement permitting the application thereof for the purposes and on the
terms and conditions set forth in the Loan Agreement.
6. Interest on the Bonds is exempt from personal income taxes of the State of
California and, assuming compliance with the covenant described below, is excluded from gross
income for Federal income tax purposes. The Bonds are not "specified private activity bonds"
within the meaning of Section 57(a)(5) of the Internal Revenue Code of 1986, as amended (the
"Code") and, therefore, the interest on the Bonds will not be treated as a preference item for
purposes of computing the alternative minimum tax imposed by Section 55 of the Code.
However, we note a portion of the interest on Bonds owned by corporations may be subject to
the Federal alternative minimum tax, which is based in part on adjusted current earnings.
The Code sets forth certain requirements which must be met subsequent to the issuance
and delivery of the Bonds for interest thereon to be and remain excluded from gross income for
Federal income tax purposes. Noncompliance with such requirements could cause the interest
on the Bonds to be included in gross income retroactive to the date of issue of the Bonds. The
Authority has covenanted in the Indenture to satisfy, or take such actions as may be necessary
to cause to be satisfied, each provision of the Code necessary to maintain the exclusion of the
interest on the Bonds from gross income for Federal income tax purposes pursuant to
Section 103(a) of the Code.
B-2
Certain requirements and procedures contained or referred to in the Indenture and other
relevant documents may be changed and certain actions may be taken, under the
circumstances and subject to the terms and conditions set forth in such documents, upon the
advice or with the approving opinion of nationally recognized bond counsel. We express no
opinion as to any Bond, or the interest thereon, if any change occurs or action is taken upon the
advice or approval of other bond counsel.
Except as stated in the foregoing paragraph numbered 6 and the paragraph immediately
following paragraph 6, we express no opinion as to any Federal or state tax consequences of
the ownership or disposition of the Bonds.
The opinions expressed in the paragraphs numbered 2, 3, 4 and 5 hereof are qualified to
the extent that the enforceability of the Loan Agreement, the Indenture and the Bonds may be
limited by any applicable bankruptcy, insolvency, debt adjustment, moratorium, reorganization
or other similar laws affecting creditors' rights generally or as to the availability of any particular
remedy.
Respectfully submitted,
B-3
APPENDIX C
AGENCY AUDITED FINANCIAL STATEMENTS FOR
FISCAL YEAR ENDED JUNE 30, 2005
C-1
APPENDIX D
CITY OF PALM DESERT GENERAL INFORMATION
The following information concerning the City of Palm Desert, the County of Riverside
and surrounding areas is included only for the purpose of supplying general information
regarding the community. The Bond and the Loan are not an obligation of the City.
The following information concerning the City and surrounding areas are included only
for the purpose of supplying general information regarding the community. The Local
Obligations and the Bonds are not a debt of the City, the State, or any of its political
subdivisions and neither said City, said State, nor any of its political subdivisions is liable
therefor. See the section herein entitled "SECURITY FOR THE BONDS AND SOURCES OF
PAYMENT THEREFOR."
General Description and Background
The City of Palm Desert (the "City") is located in the Coachella Valley and is
approximately midway between the cities of Indio and Palm Springs, 117 miles east of Los
Angeles, 118 miles northeast of San Diego and 515 miles southeast of San Francisco. The City
was incorporated on November 26, 1973, as a general law city. In 1997 the City became a
charter city.
Elevation of the City is 243 feet and the mean temperature is 73.1 degrees. Except for
the summers, the weather is mild and annual average rainfall is 3.38 inches. According to State
Department of Finance estimates, the City population as of January 1, 2005 was 49,280. The
City covers an area of 24.75 square miles.
Population
The following sets forth the City, the County and the State population estimates as of
January 1 for the years 2002 to 2006:
CITY OF PALM DESERT, RIVERSIDE COUNTY AND STATE OF CALIFORNIA
Estimated Population
Year City of Riverside State of
(January 1) Palm Desert County California
2002 43,129 1,654,220 35,088,671
2003 44,490 1,726,754 35,691,442
2004 45,604 1,807,624 36,245,016
2005 49,595 1,888,311 36,728,196
2006 49,539 1,953,330 37,172,015
Source: State of California Department of Finance, Demographic Research Unit.
Commerce
Total taxable sales reported during calendar year 2004 in the City were reported to be
$1,433,296,000, a 10.5% increase over the total taxable sales of $1,296,730,000 reported
during the first quarter calendar year 2003. The number of establishments selling merchandise
D-1
subject to sales tax and the valuation of taxable transactions in the City is presented in the
following table.
CITY OF PALM DESERT
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
(Dollars in thousands)
Number
of Permits
2000 1,376
2001 1,529
2002 1,532
2003 1,538
2004 1,684
Retail Stores
Taxable Change
Transactions
$1,020,025 --
1,015,932 -0.4%
1,019,327 0.3%
1,103,689 8.3%
1,228,411 11.3%
Total All Outlets
Number Taxable Change
of Permits Transactions
2,627 $1,217,986 --
2,833 1,211,069 -0.6%
2,979 1,209,385 -0.1 %
3,146 1,296,730 7.2%
3,254 1,433,296 10.5%
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).
The number of establishments selling merchandise subject to sales tax and the valuation
of taxable transactions within the County is presented in the following table.
COUNTY OF RIVERSIDE
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
(Dollars in thousands)
Number
of Permits
2000 16,309
2001 17,403
2002 17,646
2003 18,300
2004 20,642
Retail Stores
Taxable Change
Transactions
$12,190,474 --
13,173,281 8.1
14,250,733 8.2%
16,030,952 12.5%
18,715,949 16.7%
Number
of Permits
36,117
38,011
38,767
40,833
42,826
Total All Outlets
Taxable Change
Transactions
$16,979,449 --
18,231,555 7.4%
19,498,994 7.0%
21,709,135 11.3%
25,237,148 16.3%
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).
D-2
Employment and Industry
The City is included in the Riverside -San Bernardino labor market area. The
unemployment rate in Riverside County was 4.7 percent in February 2006, up from a revised
4.5 percent in January 2006, and below the year-ago estimate of 5.5 percent. This compares
with an unadjusted unemployment rate of 5.4 percent for California during the same period.
The following table shows the average annual estimated numbers of wage and salary
workers by industry. Does not include proprietors, the self-employed, unpaid volunteers or
family workers, domestic workers in households, and persons in labor management disputes.
RIVERSIDE-SAN BERNARDINO METROPOLITAN STATISTICAL AREA
(RIVERSIDE COUNTY)
Civilian Labor Force, Employment and Unemployment
(Annual Averages)
Civilian Labor Force (1)
Employment
Unemployment
Unemployment Rate
Wage and Salary Employment: (2)
Agriculture
Natural Resources and Mining
Construction
Manufacturing
Wholesale Trade
Retail Trade
Transportation, Warehousing and Utilities
Information
Finance and Insurance
Real Estate and Rental and Leasing
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Federal Government
State Government
Local Government
Total All Industries
2001 2002 2003 2004
1,562,300 1,639,700 1,688,300 1,650,500
1,484,100 1,543,400 1,588,700 1,556,100
78,200 96,300 99,600 94,400
5.0% 5.9% 5.9% 5.7%
20,900 20,300 20,300 18,700
1,200 1,200 1,200 1,200
88,400 90,900 99,000 111,800
118,600 115,400 116,100 120,100
41,600 41,900 43,500 45,600
132,200 137,500 142,700 153,800
45,600 46,800 50,100 55,500
14,600 14,100 13,900 14,000
22,900 23,500 25,700 28,000
15,300 15,900 16,900 17,700
101,700 106,800 115,400 125,500
106,000 112,400 115,800 118,400
104,400 107,200 109,000 116,700
37,100 38,100 38,400 39,300
16,900 16,900 17,000 17,300
25,800 26,600 26,600 26,500
157,600 169,300 167,900 168,700
1,050,700 1,084,800 1,119,400 1 178,700
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid
household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid
household domestic workers, and workers on strike.
Source: State of California Employment Development Department.
2005
1,714,000
1,627,700
86,300
5.0
18,200
1,300
122,200
120,200
49,200
165,000
59,700
14,400
29,900
18,700
132,500
120,000
122,400
41,200
18,600
27,000
174,800
1,235,400
family workers,
family workers,
D-3
Major Employers
The following table lists the largest employers within the County, listed alphabetically:
Employer Name
C A State Transportation
Casino Morongo
Chase Manhattan Mortgage Corp
Crossroads Truck Dismantling
Desert Regional Medical Ctr
Eisenhower Medical Ctr
Guidant Corp
Jw Marriott Desert Springs Rst
La Quinta Resort & Club
Labtechniques
Mountain & Dunes Golf Courses
Oasis Distributing
Parkview Community Hospital
Pechanga Resort & Casino
Riverside Community College
Riverside Community Hospital
Riverside County Regional Med
Signatures
Spa Resort Casino
Starcrest
Starcrest Products Of Ca
Sun World Intl Inc
University Of California
Valley Health System
Watson Pharmaceuticals Inc
COUNTY OF RIVERSIDE
Major Employers
(As of January 2006)
Location
Lake Elsinore
Cabazon
Moreno Valley
Mira Loma
Palm Springs
Rancho Mirage
Temecula
Palm Desert
La Quinta
Rancho Mirage
La Quinta
Thermal
Riverside
Temecula
Riverside
Riverside
Moreno Valley
Perris
Palm Springs
Perris
Perris
Coachella
Riverside
Hemet
Corona
Industry
Government Offices -State
Tourist Attractions
Real Estate Loans
Automobile Dismantling/Recycling (Whol)
Hospitals
Clinics
Physicians & Surgeons Equip & Supls-Mfrs
Hotels & Motels
Hotels & Motels
Laboratories -Medical
Golf Courses -Private
Fruits & Vegetables -Growers & Shippers
Hospitals
Casinos
Schools -Universities & Colleges Academic
Hospitals
Hospitals
Mail Order & Catalog Shopping
Casinos
Mail Order & Catalog Shopping
Mail Order & Catalog Shopping
Fruits & Vegetables -Growers & Shippers
Schools -Universities & Colleges Academic
Hospitals
Drug Millers
Source: California Employment Development Department, extracted from The America's Labor Market Information
System (ALMIS) Employer Database.
D-4
Construction Activity
The following is a five year summary of the valuation of building permits issued in the
City and the County.
Permit Valuation
New Single-family
New Multi -family
Res. Alterations/Additions
Total Residential
New Commercial
New Industrial
New Other
Com. Alterations/Additions
Total Nonresidential
City of Palm Desert
Building Permit Valuation
(Valuation in Thousands of Dollars)
2001 2002 2003 2004 2005
$82,145.0 $60,526.9 $65,066.1 $81,436.8 $46,917.6
28,885.0 27,001.6 11,992.5 11,198.0 17,553.1
9,043.2 12,957.5 9,328.9 11,103.3 13,660.2
120,073.2 100,486.0 86,387.6 103,738.2 78,130.9
11,177.0 14,707.5 7,272.6 19,863.5 60,005.2
5,438.4 3,012.0 712.6 3,005.1 13,495.5
1,264.2 1,160.0 1,249.8 7,896.1 5,278.0
18,439.4 22,534.2 10,888.0 12,347.4 13,756.7
36,319.0 41,413.7 20,123.0 43,112.1 92,535.4
New Dwelling Units
Single Family 255 221 237 325 100
Multiple Family 411 310 101 111 135
TOTAL 666 531 338 436 235
Source: Construction Industry Research Board, Building Permit Summary.
Permit Valuation
New Single-family
New Multi -family
Res. Alterations/Additions
Total Residential
COUNTY of Riverside
Building Permit Valuation
(Valuation in Thousands of Dollars)
2001 2002 2003 2004 2005
$3,051,190.4 $3,670,371.4 $4,665,675.7 $5,997,513.2 $6,243,791.7
174,628.0 165,413.0 406,483.0 404,615.9 407,432.1
70,849.7 87.842.9 106.855.8 135,176.6 164.312.5
3,296,668.2 3,923,627.4 5,179,014.5 6,537,305.6 6,815,536.3
New Commercial 287,068.6 297,963.6 360,707.4 580,057.8 552,666.9
New Industrial 74,766.3 80,881.6 112,706.6 203,311.9 120,367.6
New Other 152,854.0 187,510.6 261,793.6 334,001.0 344,703.2
Com. Alterations/Additions 143,351.7 174,785.7 173.165.5 222,495.5 274.337.7
Total Nonresidential 658,040.6 741,141.5 908,373.1 1,339,866.1 1,292,075.4
New Dwelling Units
Single Family 16,556 20,591 25,137 29,478 29,994
Multiple Family 2,458 2,073 5,224 4,748 4,140
TOTAL 19,014 22,664 30,361 34,226 34,134
Source: Construction Industry Research Board, Building Permit Summary.
D-5
Effective Buying Income
"Effective Buying Income" is defined as personal income less personal tax and nontax
payments, a number often referred to as "disposable" or "after-tax" income. Personal income is
the aggregate of wages and salaries, other labor -related income (such as employer
contributions to private pension funds), proprietor's income, rental income (which includes
imputed rental income of owner -occupants of non -farm dwellings), dividends paid by
corporations, interest income from all sources, and transfer payments (such as pensions and
welfare assistance). Deducted from this total are personal taxes (federal, state and local),
nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.
According to U.S. government definitions, the resultant figure is commonly known as
"disposable personal income."
CITY OF PALM DESERT; COUNTY OF RIVERSIDE
Effective Buying Income
2000 through 2004
Year Area
2000 City of Palm Desert
Riverside County
California
United States
Total Effective
Buying Income
(000's Omitted)
$ 1,109, 327
25,144,120
652,190,282
5,230,824,904
2001 City of Palm Desert $ 1,008,568
Riverside County 23,617,301
California 650,521,407
United States 5,303,481,498
2002 City of Palm Desert $ 1,184,128
Riverside County 25,180,040
California 647,879,427
United States 5,340,682,818
2003 City of Palm Desert
Riverside County
California
United States
2004 City of Palm Desert
Riverside County
California
United States
$ 1,238,323
27,623,743
674,721,020
5,466,880,008
$ 1,295,785
29,468,208
705,108,410
5,692,909,567
Median Household
Effective Buying
Income
$46,046
39,293
44,464
39,129
$37,975
37,480
43,532
38,365
$42,299
38,691
42,484
38,035
$41,699
39,321
42,924
38,201
$42,769
40,275
43,915
39,324
Source: Sales & Marketing Management Survey of Buying Power
D-6
Utilities Services
Water is supplied to the City by the Coachella Valley Water District. Sewage treatment
and disposal is provided by the Coachella Valley Water District. Southern California Gas
Company supplies natural gas to the City and electric power is provided by the Southern
California Edison Company. Telephone service is available through Verizon. Cable television
services are provided by Time Warner.
Transportation
Inter -City transportation is provided by Greyhound Bus which provides service from its
connection points in the City to its lines located outside of the City in addition to the community
owned and operated Sunline Bus System which provides service throughout the entire
Coachella Valley. IntraCity transportation is provided by Tel -a -Ride and local taxi firms. The
City's central highways are California Highway 111 and 74 which connect to US Interstate 10
and to California Highway 63 and 86.
A full service airport is located in Palm Springs, twelve miles northwest of the City, with
approximately seven carriers providing service. The airport has an 8,500-foot runway and
general aviation facilities. There is also a private airport in Bermuda Dunes, eight miles
northeast of the City. In addition, shipping is provided by numerous truck carriers which have
overnight service to Los Angeles, San Francisco, San Diego and Phoenix. Rail transportation is
provided by the Southern Pacific Railroad located in Indio, 10 miles east of the City, and by
Amtrak, which has two stations located in the Coachella Valley.
Community Service Facilities
The City provides both police and fire protection through contracts with the County of
Riverside . Educational services are provided through the Desert Sands Unified School District.
The College of Desert is the Coachella Valley's Community College and is located in Palm
Desert. A satellite campus of Cal State University, San Bernardino is located on the College of
the Desert Campus. Cultural and recreational facilities include sixteen churches. The City has
library services provided by the Riverside County Public Library System. The City has one
public library located on the College of the Desert campus. This 43,000 square foot library is
jointly used by the College of the Desert and the public library system.
D-7
APPENDIX E
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
The following is a brief summary of the provisions of the Indenture and the Loan
Agreement. Such summary is not intended to be definitive, and reference is made to the
complete documents for the complete terms thereof.
E-1
APPENDIX F
FORM OF MUNICIPAL BOND INSURANCE POLICY
F-1
APPENDIX G
FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and
delivered by the Palm Desert Redevelopment Agency (the "Agency") and Wells Fargo Bank,
National Association, as Trustee (the "Trustee") and MuniFinancial, Inc. (the "Dissemination
Agent") in connection with the issuance of $ Palm Desert Financing Authority,
Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A,
$ Palm Desert Financing Authority, Tax Allocation Capital Appreciation
Revenue Bonds (Project Area No. 2), 2006 Series B, $ Palm Desert Financing
Authority, Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C, and
$ Palm Desert Financing Authority, Subordinate Tax Allocation Capital
Appreciation Revenue Bonds (Project Area No. 2), 2006 Series D (together, the "Bonds"). The
Bonds are being issued pursuant to an Indenture of Trust dated as of July 1, 2006, between the
Palm Desert Financing Authority (the "Issuer") and the Trustee (the "Indenture"). The proceeds
of the Bonds are being loaned by the Issuer to the Agency pursuant to a Loan Agreement (as
defined in the Indenture). The parties agree as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is
being executed and delivered by the parties for the benefit of the Owners of the Bonds and in
order to assist the Participating Underwriter in complying with the Rule (defined below). The
Agency acknowledges that the Issuer has undertaken no responsibility with respect to any
reports, notices or disclosures provided or required under this Agreement, and has no liability to
any person, including any Owner of Bonds, with respect to any such reports, notices or
disclosures.
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Agency pursuant to, and
as described in, Sections 3 and 4 of this Disclosure Agreement.
"Disclosure Representative" shall mean the Executive Director of the Agency or his or
her designee, or such other person as the Agency shall designate in writing to the Trustee and
Dissemination Agent from time to time.
"Dissemination Agent" shall mean MuniFinancial, Inc., acting in its capacity as
Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by
the Agency and which has filed with the Trustee a written acceptance of such designation.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure
Agreement.
"National Repository" shall mean any Nationally Recognized Municipal Securities
Information Repository for purposes of the Rule.
"Official Statement" shall mean the final Official Statement with respect to the Bonds.
G-1
"Owners" shall mean the registered owners of the Bonds or, if the Bonds are registered
in the name of a depository, the beneficial owners of the Bonds.
"Participating Underwriter" shall mean the original underwriters of the Bonds required to
comply with the Rule in connection with the offering of the Bonds.
"Repository" shall mean each National Repository and each State Repository.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
"State Repository" shall mean any public or private repository or entity designated by the
State as a state repository for the purpose of the Rule. As of the date of this Agreement, there
is no State Repository.
SECTION 3. Provision of Annual Reports.
(a) The Agency shall, or upon written direction shall cause the Dissemination Agent
to, not later than six months after the end of the Agency's Fiscal Year (which currently would be
December 31 of each year), commencing with the report for the 2005-2006 Fiscal Year, provide
to each Repository an Annual Report which is consistent with the requirements of Section 4 of
this Disclosure Agreement. Not later than fifteen (15) Business Days prior to said date, the
Agency shall provide the Annual Report to the Dissemination Agent and the Trustee. In each
case, the Annual Report may be submitted as a single document or as separate documents
comprising a package, and may cross-reference other information as provided in Section 4 of
this Disclosure Agreement; provided that the audited financial statements of the Agency may be
submitted separately from the balance of the Annual Report. The Agency shall provide a written
certification with each Annual Report furnished to the Dissemination Agent and the Trustee to
the effect that such Annual Report constitutes the Annual Report required to be furnished by the
Agency hereunder. The Dissemination Agent and Trustee may conclusively rely upon such
certification of the Agency.
(b) If the Dissemination Agent is unable to verify that an Annual Report has been
provided to the Repositories by the date required in subsection (a), the Dissemination Agent
shall send a notice to each National Repository or to the Municipal Securities Rulemaking Board
and to the appropriate State Repository, if any, in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name and
address of each National Repository and each State Repository, if any; and
(ii) if the Annual Report has been furnished to the Dissemination Agent, file a report with
the Agency, the Issuer and the Trustee certifying that the Annual Report has been provided
pursuant to this Disclosure Agreement, stating the date it was provided, and listing all the
Repositories to which it was provided.
SECTION 4. Content of Annual Reports. The Agency's Annual Report shall contain or
incorporate by reference the following:
G-2
(i) the audited financial statements of the Agency, prepared in accordance with
generally accepted accounting principles in effect from time to time. If the Agency's audited
financial statements are not available by the time the Annual Report is required to be filed
pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a
format similar to the financial statements contained in the Official Statement, and the audited
financial statements shall be filed in the same manner as the Annual Report when they become
available.
(ii) An update of the tabular information set forth in the Official Statement under the
captions "SUBORDINATE TAX REVENUES -- Schedule of Historical Tax Revenues" and "--
Top Ten Taxpayers."
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the Agency or related public entities,
which have been submitted to each of the Repositories or the Securities and Exchange
Commission. If the document incorporated by reference is a final official statement, it must be
available from the Municipal Securities Rulemaking Board. The Agency shall clearly identify
each such other document so incorporated by reference.
SECTION 5. Reporting of Material Events.
(a) Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the Bonds, if
material:
(1) principal and interest payment delinquencies;
(2) non-payment related defaults;
(3) unscheduled draws on debt service reserves reflecting financial
difficulties;
(4) unscheduled draws on credit enhancements reflecting financial
difficulties;
(5) substitution of credit or liquidity providers, or their failure to perform; and
(6) adverse tax opinions or events adversely affecting the tax-exempt status
of the Bonds;
(7) modifications to rights of security holders;
(8) unscheduled bond calls;
(9) defeasances;
(10) release, substitution or sale of property securing repayment of the
securities; and
(11) rating changes.
(b) The Trustee shall, promptly upon obtaining actual knowledge of the occurrence
of any of the Listed Events contact the Disclosure Representative, inform such person of the
event, and request that the Agency promptly notify the Dissemination Agent in writing whether
or not to report the event pursuant to subsection (f) and promptly notify the Trustee in writing
whether or not to report the event to the Owners (unless notice to the Owners is required by
either of the Indentures). For purposes of this Disclosure Agreement, "actual knowledge" of the
occurrence of such Listed Events shall mean actual knowledge by the officer at the Trust Office
of the Trustee with regular responsibility for the administration of the Indenture.
G-3
(c) Whenever the Agency obtains knowledge of the occurrence of a Listed Event,
whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the
Agency shall as soon as possible determine if such event is material under applicable federal
securities laws.
(d) If the Agency has determined that knowledge of the occurrence of a Listed Event
is material, the Agency shall promptly notify the Dissemination Agent and the Trustee in writing.
Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to
subsection (f) and shall instruct the Trustee to report the occurrence to Owners.
(e) If in response to a request under subsection (b), the Agency determines that the
Listed Event is not material, the Agency shall so notify the Dissemination Agent and the Trustee
in writing and instruct the Dissemination Agent and the Trustee not to report the occurrence.
(f) If the Dissemination Agent has been instructed by the Agency to report the
occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with
the Municipal Securities Rulemaking Board and each State Repository, with a copy to the
Agency. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8)
and (9) need not be given under this subsection any earlier than the notice (if any) of the
underlying event is given to the Owners of affected Bonds pursuant to the Indenture.
SECTION 6. Termination of Reporting Obligation. The obligations of the Agency, the
Trustee and the Dissemination Agent under this Disclosure Agreement shall terminate upon the
defeasance, prior redemption or payment in full of all of the Bonds; provided that the obligations
of the Trustee and the Dissemination Agent hereunder shall also terminate upon the resignation
or removal of such Trustee or Dissemination Agent.
SECTION 7. Dissemination Agent. The Agency may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Agreement, and may discharge any such Dissemination Agent, with or without appointing a
successor Dissemination Agent. The initial Dissemination Agent shall be MuniFinancial, Inc.
The Dissemination Agent may resign its duties hereunder at any time upon written notice
to the Agency.
SECTION 8. Amendment. Notwithstanding any other provision of this Disclosure
Agreement, the parties may amend this Disclosure Agreement (and the Trustee and the
Dissemination Agent shall agree to any amendment so requested by the Agency provided that
neither the Trustee nor the Dissemination Agent shall be obligated to enter into any such
amendment that modifies or increases its duties or obligations hereunder) only if:
(a) the amendment is made in connection with a change in circumstances that arises
from a change in legal requirements, change in law, or change in the identity, nature, or status
of the Agency, or type of business conducted;
(b) this Disclosure Agreement, as amended, would have complied with the
requirements of the Rule at the time of sale of the Bonds, after taking into account any
amendments or interpretations of the Rule, as well as any change in circumstances;
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(c) the amendment does not materially impair the interests of Owners, as
determined by parties unaffiliated with the Agency (such as, but without limitation, the Agency's
bond counsel) or by Owners' consent pursuant to Section 7.01 of the Indenture; and
(d) the annual financial information containing (if applicable) the amended operating
data or financial information will explain, in narrative form, the reasons for the amendment and
the "impact" (as that word is used in the letter from the staff of the Securities and Exchange
Commission to the National Association of Bond Lawyers dated June 23, 1995) of the change in
the type of operating data or financial information being provided.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the Agency from disseminating any other information, using the means of
dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Agreement. If the Agency chooses to
include any information in any Annual Report or notice of occurrence of a Listed Event, in
addition to that which is specifically required by this Disclosure Agreement, the Agency shall
have no obligation under this Agreement to update such information or include it in any future
Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the Agency to comply with any
provision of this Disclosure Agreement, the Trustee shall, at the written direction of any
Participating Underwriter or the Owners of a majority in aggregate principal amount of
Outstanding Bonds (but only to the extent funds have been provided to it or it has been
otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges of
the Trustee whatsoever, including, without limitation, fees and expenses of its attorneys), or any
Owner may, take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the Agency, the Trustee or the
Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure
Agreement; provided that any such action may be instituted only in the Federal or State Court
located in the County of Los Angeles, State of California and no remedy other than specific
performance may be sought or granted. A default under this Disclosure Agreement shall not be
deemed an Event of Default under the Indenture or the Loan Agreement, and the sole remedy
under this Disclosure Agreement in the event of any failure of the Agency, the Trustee or the
Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel
performance.
SECTION 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent.
The Dissemination Agent shall have only such duties as are specifically set forth in this
Disclosure Agreement, and the Agency agrees to indemnify and save the Dissemination Agent
and the Trustee, their officers, directors, employees and agents, harmless against any loss,
expense and liabilities which it may incur arising out of or in the exercise or performance of its
powers and duties hereunder, including the costs and expenses (including attorneys fees) of
defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's
or Trustee's negligence or wilful misconduct. The Dissemination Agent may rely on and shall be
protected in acting or refraining from acting upon any direction from the Issuer or an opinion of
nationally recognized bond counsel. The Dissemination Agent and the Trustee shall be paid
compensation by the Agency for its services provided hereunder in accordance with its
schedule of fees as amended from time to time and all expenses, legal fees and advances
made or incurred by the Dissemination Agent in the performance of its duties hereunder. The
Dissemination Agent and the Trustee shall have no duty or obligation to review any information
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provided to them by the Agency hereunder and shall not be deemed to be acting in any fiduciary
capacity for the Authority, the Agency, the Owners, or any other party. The obligations of the
Agency under this Section shall survive resignation or removal of the Dissemination Agent and
payment of the Bonds. No person shall have any right to commence any action against the
Dissemination Agent seeking any remedy other than to compel specific performance of this
Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary
damages to any person for any breach of this Agreement.
SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit
of the Issuer, the Agency, the Trustee, the Dissemination Agent, the Participating Underwriter
and Owners from time to time of the Bonds, and shall create no rights in any other person or
entity.
SECTION 13. Notices. Notices should be sent in writing to the following addresses.
The following information may be conclusively relied upon until changed in writing.
Agency: Palm Desert Redevelopment Agency
73-510 Fred Waring Drive
Palm Desert, California 92260
(760) 346-0611
(760) 346-0574 Fax
Dissemination Agent: MuniFinancial, Inc.
27368 Via Industria, Suite 110
Temecula, California 92590
(909) 587-3500
(909) 587-3510 fax
Trustee: Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, CA 90017
(213) 614-3353
(213) 614-3355 Fax
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SECTION 14. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
PALM DESERT REDEVELOPMENT
AGENCY
By
Executive Director
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
By
Authorized Officer
MUNIFINANCIAL, INC., as Dissemination
Agent
By
Authorized Officer
G-7
EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Obligated Party: Palm Desert Redevelopment Agency (the "Agency")
Name of Bond Issue: Palm Desert Financing Authority
$ Series 2006 A Bonds
$ Series 2006 B Bonds
$ Series 2006 C Bonds
$ Series 2006 D Bonds
Date of Delivery: , 2006
NOTICE IS HEREBY GIVEN that the Agency has not provided an Annual Report with
respect to the above -named Bonds as required by Section 3 of the Continuing Disclosure
Agreement dated as of July 1, 2006 between the Agency and Wells Fargo Bank, National
Association. [The Agency anticipates that the Annual Report will be filed by
Dated:
.]
MuniFinancial, Inc. on behalf of the Agency
cc: Executive Director, Palm Desert Redevelopment Agency
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APPENDIX H
BOOK -ENTRY SYSTEM
The information set forth below has been provided by DTC. The Authority and the
Underwriters make no representation as to the accuracy or the completeness of such
information. All Beneficial Owners should confirm the following information with DTC or the
DTC Participants.
The Depository Trust Company ("DTC"), New York, NY, will act as securities depository
for the Bonds. The Bonds will be issued as fully registered securities registered in the name of
Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully registered Bond certificate will be issued for each
maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited
with DTC.
DTC, the world's largest depository, is a limited -purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
and provides asset servicing for over two million issues of U.S. and non-U.S. equity issues,
corporate and municipal debt issues, and money market instruments from over 85 countries that
DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade
settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book -entry transfers and pledges between Direct
Participants' accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -
owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is
owned by a number of Direct Participants of DTC and members of the National Securities
Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation,
and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC, and EMCC, are also
subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock
Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies, and clearing corporations that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to
its Participants are on file with the Securities and Exchange Commission. More information
about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest
of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Bonds are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive
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certificates representing their ownership interests in Bonds, except in the event that use of the
book -entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. or such other name as
requested by an authorized representative of DTC. The deposit of Bonds with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds;
DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds
are credited, which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue
are being redeemed, DTC's practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with
respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts Bonds are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to Cede &Co. or such other
nominee as may be requested by an authorized representative of DTC. DTC's practice is to
credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail
information from the Authority or the Trustee, on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC (nor its nominee), the Trustee, or the Authority,
subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to Cede &Co. (or such other nominee as may be requested by
an authorized representative of DTC) is the responsibility of the Authority or the Trustee,
disbursement of such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with respect to the
Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such
circumstances, in the event that a successor securities depository is not obtained, Bond
certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book -entry transfers
through DTC (or a successor securities depository). In that event, Bond certificates will be
printed and delivered.
H-2
APPENDIX I
TABLES OF ACCRETED VALUES
Jones Hall Draft 5/25/06
$
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION
REFUNDING REVENUE BONDS
(PROJECT AREA NO. 2)
2006 SERIES A
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION
REVENUE BONDS
(PROJECT AREA NO. 2)
2006 SERIES C
$
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE CAPTIAL
APPRECIATION BONDS
(PROJECT AREA NO. 2)
2006 SERIES B
PALM DESERT FINANCING AUTHORITY
SUBORDINATE TAX ALLOCATION
REVENUE CAPTIAL APPRECIATION
BONDS
(PROJECT AREA NO. 2)
2006 SERIES D
BOND PURCHASE AGREEMENT
, 2006
Palm Desert Financing Authority
73-510 Fred Waring Drive
Palm Desert, CA 92260-2578
Ladies and Gentlemen:
The undersigned (the "Underwriter") offers to enter into this bond purchase agreement
(this "Purchase Agreement") with the Palm Desert Financing Authority (the "Authority") and the
Palm Desert Redevelopment Agency (the "Agency") which will be binding upon the Authority,
the Agency and the Underwriter upon the acceptance hereof by the Authority and the Agency.
This offer is made subject to its acceptance by the Authority and the Agency by execution of this
Purchase Agreement and its delivery to the Underwriter on or before 11:59 p.m., California time,
on the date hereof. All terms used herein and not otherwise defined shall have the respective
meanings given to such terms in the Indentures (as hereinafter defined).
Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis
of the representations, warranties and agreements hereinafter set forth, the Underwriter hereby
agrees to purchase from the Authority for offering to the public, and the Authority hereby agrees
to sell to the Underwriter for such purpose, all (but not less than all) of the (collectively referred
to herein as the "Bonds"):
Series 2006A Bonds: $ principal amount of the Authority's
Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A (the
"2006A Bonds") at a purchase price for the 2006A Bonds of $ (being
the aggregate principal amount thereof, less an underwriter's discount of
$ and plus a net original issue premium of $ );
Series 2006B Bonds: $ principal amount of the Authority's
Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2), 2006 Series B
(the "2006B Bonds") at a purchase price for the 2006B Bonds of $
(being the aggregate principal amount thereof, less an underwriter's discount of
$ and plus a net original issue premium of $ );
Series 2006C Bonds: $ principal amount of the Authority's
Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C (the "2006C Bonds")
at a purchase price for the 2006C Bonds of $ (being the aggregate
principal amount thereof, less an underwriter's discount of $ and
plus a net original issue premium of $ ); and
Series 2006D Bonds: $ principal amount of the Authority's
Subordinate Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2),
2006 Series D (the "2006D Bonds") at a purchase price for the 2006D Bonds of
$ (being the aggregate principal amount thereof, less an
underwriter's discount of $ and plus a net original issue premium of
$ ).
Section 2. Description of the Bonds. The Bonds will be issued under the
provisions of the Marks -Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5
of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the
"Bond Law"). The 2006A Bonds, 2006B Bonds and 2006C Bonds will be issued pursuant to an
Indenture of Trust, dated as of July 1, 2006 (the "Senior Indenture"), by and between the
Authority and Wells Fargo Bank, National Association, as trustee thereunder (the "Trustee") The
2006D Bonds will be issued pursuant to an Indenture of Trust, dated as of July 1, 2006 (the
"Subordinate Indenture" and together with the Senior Indenture, the "Indentures"), by and
between the Authority the Trustee. The 2006A Bonds and 2006C Bonds are issued as current
interest bonds and the 2006B Bonds and 2006D Bonds are issued as capital appreciation
bonds. The Bonds shall mature and shall be subject to redemption on the dates and in the
amounts and shall bear interest at the rates set forth in the Indenture and the Official Statement
dated the date hereof relating to the Bonds (which, together with all exhibits and appendices
included therein or attached thereto and such amendments or supplements thereto which shall
be approved by the Underwriter, is hereinafter called the "Official Statement").
The proceeds of the 2006A Bonds, 2006B Bonds and 2006C Bonds (the "Senior
Bonds") will be used by the Authority to make three loans (collectively, the "Senior Loan") to the
Palm Desert Redevelopment Agency (the "Agency") pursuant to a Loan Agreement (the
"Senior Loan Agreement"), dated as of July 1, 2006 by and among the Authority, the Agency
and the Trustee for the benefit of the Agency's Project Area No. 2 (the "Project Area"). The
proceeds of the 2006D Bonds (the "Subordinate Bonds") will be used by the Authority to make a
loan (the "Subordinate Loan" and together with the Senior Loan", the "Loans") to the Agency
pursuant to a Loan Agreement (the "Subordinate Loan Agreement"), dated as of July 1, 2006 by
and among the Authority, the Agency and the Trustee for the benefit of the Project Area.
A portion of the proceeds of the 2006A Loan will be used to refund the indebtedness of
the Agency under a Loan Agreement dated as of June 1, 1995 (the "1995 Loan Agreement"), to
finance certain redevelopment activities within or of benefit to the Project Area and a portion of
the proceeds of all the Loans will be used to finance certain redevelopment activities within or of
benefit to the Project Area, provided that proceeds of the loan related to the 2006C Bonds is
subject to release from an escrow if and when the conditions for release set forth in the Senior
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Loan Agreement are met. The refunding of the obligations under the 1995 Loan Agreement will
effect a refunding of the corresponding portion of the Authority's Subordinate Tax Allocation
Refunding Revenue Bonds (Project Area No. 2), Series 1995 (the "1995 Bonds").
The Senior Bonds are secured by a pledge of and lien on all of the Tax Revenues (as
defined in the Senior Indenture) allocated to the Agency with respect to the Project Area. The
Subordinate Bonds are secured by a pledge of and lien on surplus Tax Revenues after payment
of the Senior Bonds. The Agency currently has outstanding its (i) Project Area No. 2, Loan
Agreement, dated as of March 1, 2002 (the "Senior 2002 Loan Agreement"), by and among the
Agency, the Authority and BNY Western Trust Company, as prior trustee (the "Prior Trustee"),
and (ii) Project Area No. 2, Loan Agreement, dated as of July 1, 2003 (the "Senior 2003 Loan
Agreement" and together with the Senior 2002 Loan Agreement, the "Prior Loan Agreements"),
by and among the Agency, the Authority and the Prior Trustee. Each loan under the Prior Loan
Agreements is secured by Tax Revenues on parity with the pledge of Tax Revenues pledged to
pay the Senior Loan.
The scheduled payment of principal of and interest on the Senior Bonds will be insured
by (the "Insurer") by the issuance of a bond insurance policy (the
"Policy").
Section 3. Public Offering. The Underwriter agrees to make a bona fide public
offering of all the Bonds initially at the public offering prices (or yields) set forth on Appendix A
attached hereto and incorporated herein by reference. Subsequent to the initial public offering,
the Underwriter reserves the right to change the public offering prices (or yields) as it deems
necessary in connection with the marketing of the Bonds, provided that the Underwriter shall not
change the interest rates set forth on Appendix A. The Bonds may be offered and sold to
certain dealers at prices lower than such initial public offering prices.
Section 4. Delivery of Official Statement. The Agency has delivered or caused to
be delivered to the Underwriter prior to the execution of this Purchase Agreement, copies of the
Preliminary Official Statement relating to the Bonds (the "Preliminary Official Statement"). Such
Preliminary Official Statement is the official statement deemed final by the Agency for purposes
of Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule") and approved for
distribution by resolution of the Agency. The Agency hereby ratifies, approves and confirms the
distribution of the Preliminary Official Statement in connection with the public offering and sale
of the Bonds by the Underwriter. The Agency shall have executed and delivered to the
Underwriter a certification to such effect in the form attached hereto as Appendix B and hereby
ratifies the information contained therein.
Within seven (7) business days from the date hereof, the Agency shall deliver to the
Underwriter a final Official Statement, executed on behalf of the Agency by an authorized
representative of the Agency and dated the date hereof, which shall include information
permitted to be omitted by paragraph (b) (1) of the Rule and with such other amendments or
supplements as shall have been approved by the Agency and the Underwriter. The Agency
also agrees to deliver to the Underwriter, at the Agency's' sole cost and at such address as the
Underwriter shall specify, as many copies of the Official Statement as the Underwriter shall
reasonably request as necessary to comply with paragraph (b) (4) of the Rule and with Rule C-
32 and all other applicable rules of the Municipal Securities Rulemaking Board.
The Agency shall undertake, pursuant to the Indentures and a Continuing Disclosure
Agreement (the "Continuing Disclosure Agreement"), to provide certain annual financial
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information and notices of the occurrence of certain events, if material. The form of the
Continuing Disclosure Agreement is appended to the Official Statement.
Section 5. The Closing. At 8:00 a.m., California time, on , 2006, (the
"Closing"), or at such other time or on such earlier or later business day as shall have been
mutually agreed upon by the Agency and the Underwriter, the Authority and the Agency shall
deliver (i) the Bonds in definitive form (one bond for each maturity) for the Underwriter to the
Trustee at the Closing or to The Depository Trust Company ("DTC") in New York, New York, or
such other location as may be specified by the Underwriter, with CUSIP identification numbers
thereon, in fully registered form and registered in the name of Cede & Co., and (ii) the closing
documents hereinafter mentioned at the offices of Richards, Watson & Gershon, A Professional
Corporation, Bond Counsel (the "Bond Counsel") in Los Angeles, California, or another place to
be mutually agreed upon by the Agency and the Underwriter. The Underwriter will accept such
delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof by federal
funds wire payable to the order of the Trustee on behalf of the Agency. This payment and
delivery, together with the delivery of the aforementioned documents, is herein called the
"Closing."
Section 6. Agency Representations, Warranties and Covenants. The Agency
represents, warrants and covenants to the Underwriter that:
(a) Due Organization and Existence of Agency. The Agency is a public body
corporate and politic, organized and existing under the laws of the State, including the
Community Redevelopment Law of the State, constituting Part 1 of Division 24 of the
Health and Safety Code (the "Redevelopment Law"), with full right, power and authority
to execute, deliver and perform its obligations under this Purchase Agreement, the
Continuing Disclosure Agreement, and the Loan Agreement (collectively, the "Agency
Documents") and to carry out and consummate the transactions contemplated by the
Agency Documents and the Official Statement.
(b) Due Authorization and Approval. By all necessary official action of the
Agency, the Agency has duly authorized and approved the execution and delivery of,
and the performance by the Agency of the obligations contained in, the Agency
Documents and as of the date hereof, such authorizations and approvals are in full force
and effect and have not been amended, modified or rescinded. When executed and
delivered, the Agency Documents will constitute the legally valid and binding obligations
of the Agency enforceable in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or affecting creditors' rights generally. The
Agency has complied, and will at the Closing be in compliance in all respects, with the
terms of the Agency Documents. The Agency has duly authorized and approved the
Preliminary Official Statement and the Official Statement.
(c) Official Statement Accurate and Complete. The Preliminary Official
Statement was as of its date, and the final Official Statement will be, and at all times
subsequent to the date of the final Official Statement up to and including the Closing will
be, true and correct in all material respects, and the Preliminary Official Statement
contains and the final Official Statement will contain, and up to and including the Closing
will contain, no misstatement of any material fact and do not, and up to and including the
Closing will not, omit any statement necessary to make the statements contained
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therein, in the light of the circumstances in which such statements were made, not
misleading.
(d) Underwriter's Consent to Amendments and Supplements to Official
Statement. The Agency covenants with the Underwriter that during the period of 25
days after the end of the "underwriting period" (as defined in the Rule), if an event
occurs, of which the Agency has knowledge, which might or would cause the information
contained in the Official Statement, as then supplemented or amended, to contain an
untrue statement of a material fact or to omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, the Agency shall notify the Underwriter,
and if, in the opinion of the Underwriter, such event requires the preparation and
publication of a supplement or amendment to the Official Statement, the Agency shall
cooperate with the Underwriter in the preparation of an amendment or supplement to the
Official Statement in a form and in a manner approved by the Underwriter, and all
printing expenses thereby incurred shall be paid for by the Agency. The Agency will
advise the Underwriter promptly of the institution of any proceedings known to it by any
governmental agency prohibiting or otherwise affecting the use of the Official Statement
in connection with the offering, sale or distribution of the Bonds.
(e) No Breach or Default. As of the time of acceptance hereof and as of the
time of the Closing, except as otherwise disclosed in the Official Statement, the Agency
is not and will not be in breach of or in default under any applicable constitutional
provision, law or administrative rule or regulation of the State or the United States, or
any applicable judgment or decree or any trust agreement, loan agreement, bond, note,
resolution, ordinance, agreement or other instrument to which the Agency is a party or is
otherwise subject which breach or default would materially adversely affect the Agency's
ability to perform under the Agency Agreements, and no event has occurred and is
continuing which, with the passage of time or the giving of notice, or both, would
constitute such a default or event of default under any such instrument; and, as of such
times, except as disclosed in the Official Statement, the authorization, execution and
delivery of the Agency Documents and the Official Statement and compliance with the
provisions of each of such agreements or instruments do not and will not conflict with or
constitute a breach of or default under any applicable constitutional provision, law or
administrative rule or regulation of the State or the United States, or any applicable
judgment, decree, license, permit, trust agreement, loan agreement, bond, note,
resolution, ordinance, agreement or other instrument to which the Agency (or any of its
officers in their respective capacities as such) is subject, or by which it or any of its
properties is bound, nor will any such authorization, execution, delivery or compliance
result in the creation or imposition of any lien, charge or other security interest or
encumbrance of any nature whatsoever upon any of its assets or properties or under the
terms of any such law, regulation or instrument, except as may be provided by the
Agency Documents.
(0 No Litigation. As of the time of acceptance hereof and the Closing,
except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry
or investigation, at law or in equity, before or by any court, government agency, public
board or body, pending or threatened (i) in any way questioning the corporate existence
of the Agency or the titles of the officers of the Agency to their respective offices;
(ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery
of any of the Bonds, or the payment or collection of any amounts pledged or to be
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pledged to pay the principal of and interest on the Bonds, or in any way contesting or
affecting the validity of the Agency Documents, the power of the Agency to execute and
deliver the Agency Documents or the Official Statement or the consummation of the
transactions contemplated thereby, or contesting the exclusion of the interest on the
Bonds from taxation or contesting the powers of the Agency and its authority to pledge
the Subordinate Tax Revenues; (iii) which may result in any adverse change relating to
the Agency which would materially adversely affect the Agency's ability to perform under
the Agency Documents; or (iv) contesting the completeness or accuracy of the
Preliminary Official Statement or the final Official Statement or any supplement or
amendment thereto or asserting that the Preliminary Official Statement or the final
Official Statement contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
(g) Preliminary Official Statement. For purposes of the Rule, the Agency has
heretofore deemed final the Preliminary Official Statement prior to its use and
distribution by the Underwriter, except for the information specifically permitted to be
omitted by paragraph (b) (1) of the Rule. The Agency has never failed to comply timely
with any filing requirements under the Rule.
(h) Excess Surplus. The Agency's Low and Moderate Income Housing Fund
established pursuant to Section 33334.3 of the Law does not, on the date hereof,
contain an "excess surplus" (within the meaning of Section 33334.12 of the Law) that
would cause the Agency to be subject to the sanctions contained in Section 33334.12(e)
(1) of the Law.
(i) Arbitrage Certificate. The Agency has not been notified of any listing or
proposed listing by the Internal Revenue Service to the effect that it is a bond issuer
whose arbitrage certificates may not be relied upon.
(j) No Required Consents. All approvals, consents and orders of any
governmental authority, board, agency or commission having jurisdiction which would
constitute a condition precedent to the execution and delivery by the Agency of the
Agency Documents and the Official Statement have been obtained or will be obtained
prior to the Closing (provided the Agency shall not be responsible for state blue sky
filings).
(k) Certificates of the Agency. Any certificate signed by an authorized officer
of the Agency and delivered to the Underwriter shall be deemed a representation and
warranty of the Agency to the Underwriter as to the statements made therein.
(1) Tax Exemption. The Agency covenants that it will not take any action
which would cause interest on the Bonds to be subject to federal income taxation or
California personal income taxes (other than to the extent the Bonds will be subject to
federal income taxation as described under the caption "Tax Matters" in the Official
Statement).
(m) Compliance with Rule. There has been no instance in which the Agency
has failed to comply in all respects with any undertakings with regard to the Rule.
-6-
Section 7. Authority Representations, Warranties and Covenants. The Authority
represents, warrants and covenants to the Underwriter that:
(a) Due Organization and Existence of Authority. The Authority is a joint
exercise of powers authority, duly organized and existing, and authorized to transact
business and exercise of powers under and pursuant to the provisions of the laws of the
State of California and the joint exercise of powers agreement pursuant to which the
Authority was created and has, and on Closing Date for each respective series of Bonds
will have, full legal right, power and authority to enter into this Purchase Agreement, and
to carry out and to consummate the transactions contemplated by this Purchase
Agreement and the Official Statement.
(b) Due Authorization and Approval. By all necessary official action of the
Authority, the Authority has duly authorized and approved the execution and delivery of,
and performance by the Authority of the obligations contained in, this Purchase
Agreement and as of the date hereof, such authorizations and approvals are in full force
and effect and have not been amended, modified or rescinded. When executed and
delivered, this Purchase Agreement will constitute the legally valid and binding obligation
of the Authority enforceable in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or affecting creditors' rights generally. The Authority has complied,
and will at the Closing be in compliance in all respects, with the terms of this Purchase
Agreement.
(c) Official Statement Accurate and Complete. The information relating to
the Authority contained in the Preliminary Official Statement and the final Official
Statement as amended or supplemented, is correct in all material respects and does not
contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading.
(d) Purchase and Sale of Bonds. The Bonds will be purchased and sold by
the Authority pursuant to the Mark -Roos Local Bond Pooling Act of 1985, constituting
Article 4 of Chapter 5, Division 7 of Title 1 (commencing with Section 6584) of the
California Government Code (the "JPA Act").
(e) Compliance with Law and Joint Exercise of Powers Agreement. The
Authority has complied, and will on the Closing Date for each respective series of Bonds
be in compliance, in all respects, with the JPA Act and all other applicable laws of the
State of California and the joint exercise of powers agreement pursuant to which the
Authority was created.
(0 No Breach or Default. As of the time of acceptance hereof and as of the
time of the Closing, except as otherwise disclosed in the Official Statement, the Authority
is not and will not be in breach of or in default under any applicable constitutional
provision, law or administrative rule or regulation of the State or the United States, or
any applicable judgment or decree or any trust agreement, loan agreement, bond, note,
resolution, ordinance, agreement or other instrument to which the Authority is a party or
is otherwise subject which breach or default would materially adversely affect the
Agency's ability to perform under the Indentures or this Purchase Agreement, and no
event has occurred and is continuing which, with the passage of time or the giving of
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notice, or both, would constitute such a default or event of default under any such
instrument; and, as of such times, except as disclosed in the Official Statement, the
authorization, execution and delivery of this Purchase Agreement and compliance with
the provisions hereof do not and will not conflict with or constitute a breach of or default
under any applicable constitutional provision, law or administrative rule or regulation of
the State or the United States, or any applicable judgment, decree, license, permit, trust
agreement, loan agreement, bond, note, resolution, ordinance, agreement or other
instrument to which the Authority (or any of its officers in their respective capacities as
such) is subject, or by which it or any of its properties is bound, nor will any such
authorization, execution, delivery or compliance result in the creation or imposition of
any lien, charge or other security interest or encumbrance of any nature whatsoever
upon any of its assets or properties or under the terms of any such law, regulation or
instrument, except as may be provided by this Purchase Agreement.
(g) No Litigation. As of the time of acceptance hereof and the Closing,
except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry
or investigation, at law or in equity, before or by any court, government agency, public
board or body, pending or threatened (i) in any way questioning the corporate existence
of the Authority or the titles of the officers of the Authority to their respective offices;
(ii) seeking to restrain or enjoin the sale of the Bonds or in any way contesting or
affecting the validity of this Purchase Agreement, the power of the Authority to execute
and deliver this Purchase Agreement or the consummation of the transactions
contemplated hereby; or (iii) which may result in any adverse change relating to the
Authority which would materially adversely affect the Authority's ability to perform under
the Indentures and this Purchase Agreement.
(h) No Required Consents. All approvals, consents and orders of any
governmental authority, board, agency or commission having jurisdiction which would
constitute a condition precedent to the execution and delivery by the Authority of this
Purchase Agreement have been obtained.
(i) Certificates of the Authority. Any certificate signed by an authorized
officer of the Authority and delivered to the Underwriter shall be deemed a
representation and warranty of the Authority to the Underwriter as to the statements
made therein.
Section 8. Closing Conditions. The Underwriter has entered into this Purchase
Agreement in reliance upon the representations, warranties and covenants herein and the
performance by the Agency of their respective obligations hereunder, both as of the date hereof
and as of the date of the Closing. Accordingly, the Underwriter's obligations under this
Purchase Agreement to purchase, accept delivery of, and pay for the Bonds on the Closing
Date for each respective series of Bonds are subject to the performance by the Agency and the
Authority of their respective obligations hereunder at or prior to the Closing. The Underwriter's
obligations under this Purchase Agreement to purchase and pay for the Bonds shall be subject
to the following additional conditions:
(a) Bring -Down Representation. The representations, warranties and
covenants of the Authority and the Agency contained herein shall be true, complete and
correct at the date hereof and at the time of the Closing, as if made on the date of the
Closing.
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(b) Executed Agreements and Performance Thereunder. At the time of the
Closing (i) the Agency Documents shall be in full force and effect, and shall not have
been amended, modified or supplemented except with the written consent of the
Underwriter and (ii) there shall be in full force and effect such resolutions of the Agency
and the Authority (the "Resolutions") as, in the opinion of Bond Counsel, shall be
necessary in connection with the transactions contemplated by this Purchase
Agreement, the Official Statement and the Agency Documents.
(c) Closing Documents. At or prior to the Closing, the Underwriter shall
receive each of the documents identified in Section 9, such documents shall be in full
force and effect and shall not have been amended, modified or supplemented, except as
therein permitted or as may have been agreed to in writing by the Underwriter.
Section 9. Closing Documents. In addition to the other conditions to the
Underwriter's obligations under this Purchase Agreement to purchase and pay for the Bonds, at
or before the Closing of each series of Bonds the Underwriter shall receive each of the following
documents as to each respective series, provided the Underwriter may in its sole discretion
waive one or more of the conditions imposed by this Purchase Agreement for the protection of
the Underwriter and proceed with the Closing.
(a) Bond Counsel Opinion. An approving opinion of Bond Counsel dated the
date of the Closing and substantially in the form appended to the Official Statement,
together with a letter from such counsel, dated the date of the Closing and addressed to
the Underwriter, to the effect that the foregoing opinion may be relied upon by the
Underwriter to the same extent as if such opinion were addressed to it.
(b) Supplemental Opinion. A supplemental opinion or opinions of Bond
Counsel addressed to the Underwriter, in form and substance acceptable to the
Underwriter, and dated the date of the Closing substantially to the following effect:
(i) This Purchase Agreement has been duly authorized, executed
and delivered by the Agency and the Authority, as applicable, and constitute the
valid, legal and binding agreements of the Agency and the Authority, as
applicable, enforceable in accordance with its terms.
(ii) The statements contained in the Official Statement under the
captions "INTRODUCTION", "THE BONDS", "SECURITY FOR THE BONDS",
CONCLUDING INFORMATION — "Tax -Exempt Status of the Bonds" and
Appendices B and E, insofar as such statements purport to summarize certain
provisions of the Bonds, the Indentures or federal tax law, accurately summarize
the information presented therein; provided that Bond Counsel need not express
any opinion with respect to any financial or statistical information contained
therein.
(iii) The Agency's obligations under the Indentures are exempt from
registration under the Securities Act of 1933, as amended, and the Indentures
are exempt from qualification pursuant to the Trust Indenture Act of 1939, as
amended.
-9-
(c) Agency Counsel Opinion. An opinion of Counsel to the Agency, dated
the date of the Closing and addressed to the Underwriter, in form and substance
acceptable to the Underwriter substantially to the following effect:
(i) The Agency is a duly organized and validly existing public body,
corporate and politic, organized and existing under the Community
Redevelopment Law (Part 1 of Division 24 of the Health and Safety Code of the
State of California) with full legal right, power and authority to perform all of its
obligations under the Loan Agreement and this Purchase Agreement
(collectively, the "Legal Documents"). The Agency has duly authorized executed
and delivered the Legal Documents and assuming due authorization execution
and delivery by the other parties thereto, as necessary, the Legal Documents
constitute legal, valid and binding agreements of the Agency enforceable against
the Agency in accordance with their terms, except as the enforceability thereof
may be limited by bankruptcy, moratorium, insolvency, equitable remedies and
other laws affecting creditors' rights or remedies.
(ii) To the best of our knowledge, there is no action, suit or
proceeding before or by a court, public board of body pending or threatened
wherein an unfavorable decision, ruling or finding would ( a) affect the creation,
organization existence or powers of the Agency or the titles of its officers to their
respective offices, (b) in any way question or affect the validity or enforceability of
the Legal Documents, or (c) find illegal, invalid or unenforceable the Purchase
Contract or the transactions contemplated thereby, or any other agreement or
instrument related to the issuance of the Bonds to which the Agency is a party.
(iii) The execution and delivery of the Legal Documents and
compliance with the provisions of each thereof, will not conflict with or constitute
a breach of or default under any applicable law or administrative rule or
regulation of the State of California, the United States or any department,
division, agency or instrumentality of either thereof, or any applicable court or
administrative decree or order or any loan agreement, note, resolution, indenture,
contract, agreement or other instrument to which the Agency is a party or is
otherwise subject or bound in a manner which would materially adversely affect
the Agency s performance under the Legal Documents.
(iv) Any approvals, consents, authorizations, elections and orders of
or filings or registrations with any governmental authority, board, agency or
commission having jurisdiction which would constitute a condition precedent to,
the absence of which would materially adversely affect, the performance by the
Agency of its obligations under the Legal Documents have been obtained and
are in full force and effect.
(d) Authority Counsel Opinion. An opinion of Counsel to the Authority, dated
the date of the Closing and addressed to the Underwriter, in form and substance
acceptable to the Underwriter substantially to the following effect:
(i) The Agency is a duly organized and validly existing public body,
corporate and politic, organized and existing under the Community
Redevelopment Law (Part 1 of Division 24 of the Health and Safety Code of the
State of California) with full legal right, power and authority to perform all of its
-10-
obligations under the Loan Agreement and this Purchase Contract (collectively,
the "Legal Documents). The Agency has duly authorized executed and delivered
the Legal Documents and assuming due authorization execution and delivery by
the other parties thereto, as necessary, the Legal Documents constitute legal,
valid and binding agreements of the Agency enforceable against the Agency in
accordance with their terms, except as the enforceability thereof may be limited
by bankruptcy, moratorium, insolvency, equitable remedies and other laws
affecting creditors' rights or remedies.
(ii) To the best of our knowledge, there is no action, suit or
proceeding before or by a court, public board of body pending or threatened
wherein an unfavorable decision, ruling or finding would ( a) affect the creation,
organization existence or powers of the Agency or the titles of its officers to their
respective offices, (b) in any way question or affect the validity or enforceability of
the Legal Documents, or (c) find illegal, invalid or unenforceable the Purchase
Contract or the transactions contemplated thereby, or any other agreement or
instrument related to the issuance of the Bonds to which the Agency is a party.
(iii) The execution and delivery of the Legal Documents and
compliance with the provisions of each thereof, will not conflict with or constitute
a breach of or default under any applicable law or administrative rule or
regulation of the State of California, the United States or any department,
division, agency or instrumentality of either thereof, or any applicable court or
administrative decree or order or any loan agreement, note, resolution, indenture,
contract, agreement or other instrument to which the Agency is a party or is
otherwise subject or bound in a manner which would materially adversely affect
the Agency s performance under the Legal Documents.
(iv) Any approvals, consents, authorizations, elections and orders of
or filings or registrations with any governmental authority, board, agency or
commission having jurisdiction which would constitute a condition precedent to,
the absence of which would materially adversely affect, the performance by the
Agency of its obligations under the Legal Documents have been obtained and
are in full force and effect.
(e) Trustee Counsel Opinion. The opinion of counsel to the Trustee, dated
the date of the Closing, addressed to the Underwriter, to the effect that:
(i) The Trustee is a banking corporation, duly organized and validly
existing under the laws of the State of California, having full power to enter into,
accept and administer the trust created under the Indentures.
(ii) The Indentures have been duly authorized, executed and
delivered by the Trustee and each Indenture constitutes the legal, valid and
binding obligation of the Trustee enforceable in accordance with its terms, except
as enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights generally and by the application of
equitable principles, if equitable remedies are sought.
(iii) No consent, approval, authorization or other action by any
governmental or regulatory authority having jurisdiction over the Trustee that has
-11-
not been obtained is or will be required for the execution and delivery of the
Indentures by the Trustee or the consummation by the Trustee of the
transactions contemplated by the Indentures.
(0 The opinion of Jones Hall, A Professional Law Corporation, San
Francisco, California, Counsel to the Underwriter, dated the Closing date, addressed to
the Agency, and to the Underwriter, to the effect that based upon an examination which
they have made, and without having undertaken to determine independently the
accuracy or completeness of the statements contained in the Official Statement, they
have no reason to believe that the Official Statement (other than financial statements
and other statistical and financial data and information relating to The Depository Trust
Company, New York, New York, and its book -entry system contained therein and
incorporated therein by reference, and information regarding the municipal bond
insurance policy and the issuer thereof, as to which no view need be expressed)
contains any untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(g) Agency Certificate. A certificate of the Agency, dated the date of the
Closing, signed on behalf of the Agency by the Executive Director or other duly
authorized officer of the Agency to the effect that:
(i) The representations, warranties and covenants of the Agency
contained herein are true and correct in all material respects on and as of the
date of the Closing as if made on the date of the Closing and the Agency has
complied with all of the terms and conditions of this Purchase Agreement
required to be complied with by the Agency at or prior to the date of the Closing.
(ii) No event affecting the Agency, of which the Agency has actual
knowledge, has occurred since the date of the Official Statement which has not
been disclosed therein or in any supplement or amendment thereto which event
should be disclosed in the Official Statement in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(iii) The Agency Documents are in full force and effect and none has
been amended in any respect, except as approved in writing by the Underwriter.
(iv) Except as otherwise disclosed in the Official Statement and to the
best knowledge of such signing officer after due inquiry, there is no litigation,
proceeding, action, suit, or investigation at law or in equity before or by any court,
governmental agency or body, pending and served on the Agency or threatened
against the Agency, challenging the creation, organization or existence of the
Agency, or the validity of the Agency Documents or seeking to restrain or enjoin
the repayment of the Bonds or in any way contesting or affecting the validity of
the Agency Documents or contesting the authority of the Agency to enter into or
perform its obligations under any of the Agency Documents, or under which a
determination adverse to the Agency would have a material adverse effect upon
the financial condition or the revenues of the Agency, or which, in any manner,
questions the right of the Agency to use the Subordinate Tax Revenues for
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repayment of the Loan or affects in any manner the right or ability of the Agency
to collect or pledge the Subordinate Tax Revenues.
(h) Authority Certificate. A certificate of the Authority, dated the date of the
Closing, signed on behalf of the Authority by the Executive Director or other duly
authorized officer of the Authority to the effect that:
(i) The Authority is a joint exercise of powers agency, duly organized
and existing under the laws of the State, including the JPA Act.
(ii) The resolution of the Authority approving and authorizing the
execution and delivery of this Purchase Agreement (the "Authority Resolution")
was duly adopted at a meeting of the Authority which was called and held
pursuant to law and with all public notice required by law and at which a quorum
was present and acting throughout and the Authority Resolution is in full force
and effect and has not been modified, amended or rescinded.
(iii) The representations, warranties and covenants of the Authority
contained herein are true and correct in all material respects on and as of the
date of the Closing as if made on the date of the Closing and the Authority has
complied with all of the terms and conditions of this Purchase Agreement
required to be complied with by the Authority at or prior to the date of the Closing.
(iv) There is no litigation, proceeding, action, suit, or investigation at
law or in equity before or by any court, governmental Authority or body, pending
and served on the Authority or, to the best of such signing officer's knowledge
after due inquiry, threatened against the Authority, challenging the creation,
organization or existence of the Authority, or the validity of this Purchase
Agreement or contesting the authority of the Authority to enter into or perform its
obligations under this Purchase Agreement.
(i) Trustee's Certificate. A certificate of the Trustee, dated the date of
Closing, in form and substance acceptable to counsel for the Underwriter, to the
following effect:
(i) The Trustee is duly organized and existing as a banking
corporation in good standing under the laws of the State of California, having the
full power and authority to accept the trusts and to enter into and perform its
duties under the Indentures.
(ii) The Trustee is duly authorized to enter into the Indentures.
(iii) Compliance with the provisions on the Trustee's part contained in
the Indentures will not conflict with or constitute a breach of or default under any
judgment, decree, loan agreement, indenture, bond, note, resolution, agreement
or other instrument to which the Trustee is a party or is otherwise subject, or, to
the best knowledge of the Trustee, any material law or administrative regulation
to which the Trustee is subject, as a result of which the Trustee's ability to
perform its obligations under the Indentures would be impaired, nor will any such
compliance result in the creation or imposition of any lien, charge or other
security interest or encumbrance of any nature whatsoever upon any of the
-13-
properties or assets held by the Trustee pursuant to the lien created by the
Indentures under the terms of any such law, administrative regulation, judgment,
decree, loan agreement, indenture, bond, note, resolution, agreement or other
instrument, except as provided by the Indentures.
(iv) There is no action, suit, proceeding or investigation, at law or in
equity, before or by any court or governmental agency, public board or body that
has been served upon the Trustee or to the best knowledge after due inquiry,
threatened against the Trustee which in the reasonable judgment of the Trustee
would affect the existence of the Trustee or in any way contesting or affecting the
validity or enforceability of the Indentures or contesting the powers of the Trustee
or its authority to enter into and perform its obligation under the Indentures.
(j) A certificate of Rosenow Spevacek Group, Inc., dated the date of Closing,
signed by an authorized representative thereof, to the effect that that the Tax Revenues
coverage test for the issuance of additional bonds secured by Subordinate Tax
Revenues, as required in connection with the Prior Loan Agreements, has been met.
(k) Documents. An original executed copy of each of the Agency
Documents, the Official Statement and a certified copy of each of the Resolutions,
except that it shall be sufficient to provide a copy of the Bonds marked "specimen.
(1) Municipal Bond Insurance Policy. A copy of the Policy, as duly executed
and delivered by the Insurer.
(m) Insurer Counsel Opinion. The opinion of counsel to the Insurer, in form
and substance acceptable to the Underwriter.
(n) Insurer Certificate. A certificate of the Insurer, in form and substance
acceptable to the Underwriter.
(o) Ratings. Evidence that the Bonds have been rated "AAA" by S&P and
"AAA" by Fitch Ratings.
(p) Fiscal Consultant Consent and Certificate. The consent of Rosenow
Spevacek Group, Inc. to the use of their report entitled "Fiscal Consultant Report" dated
May 26, 2006, in the Preliminary Official Statement and the Official Statement and their
affirmation of the accuracy of the data in the tables in the Official Statement which
reference such fiscal consultant report.
(q) Additional Documents. Such additional certificates, instruments and other
documents as Bond Counsel, the Agency or the Underwriter may reasonably deem
necessary.
If the Agency or the Authority shall be unable to satisfy the conditions contained in this
Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason
permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the
Underwriter nor the Agency or the Authority shall be under further obligation hereunder.
Section 10. Termination Events. The Underwriter has entered into this Purchase
Agreement in reliance upon the representations, warranties and agreements of the Agency and
-14-
the Authority contained herein and upon the accuracy of the statements to be contained in the
documents, opinions, and instruments to be delivered at the Closing. Accordingly, the
Underwriter's obligations under this Purchase Agreement to purchase, accept delivery of, and
pay for the Bonds on the Closing Date for each respective series of Bonds is subject to the
performance by the Agency and the Authority of their respective obligations hereunder at or
prior to the Closing. The Underwriter shall have the right to terminate this Purchase Agreement,
without liability therefor, by notification to the Agency and the Authority if at any time between
the date hereof and prior to the Closing:
(a) any event shall occur which causes any statement contained in the
Official Statement to be materially misleading or results in a failure of the Official
Statement to state a material fact necessary to make the statements in the Official
Statement, in the light of the circumstances under which they were made, not
misleading; or
(b) the marketability of the Bonds or the market price thereof, in the
reasonable opinion of the Underwriter, has been materially adversely affected by an
amendment to the Constitution of the United States or by any legislation in or by the
Congress of the United States or by the State, or the amendment of legislation pending
as of the date of this Purchase Agreement in the Congress of the United States, or the
recommendation to Congress or endorsement for passage (by press release, other form
of notice or otherwise) of legislation by the President of the United States, the Treasury
Department of the United States, the Internal Revenue Service or the Chairman or
ranking minority member of the Committee on Finance of the United States Senate or
the Committee on Ways and Means of the United States House of Representatives, or
the proposal for consideration of legislation by either such Committee or by any member
thereof, or the presentment of legislation for consideration as an option by either such
Committee, or by the staff of the Joint Committee on Taxation of the Congress of the
United States, or the favorable reporting for passage of legislation to either House of the
Congress of the United States by a Committee of such House to which such legislation
has been referred for consideration, or any decision of any federal or State court or any
ruling or regulation (final, temporary or proposed) or official statement on behalf of the
United States Treasury Department, the Internal Revenue Service or other federal or
State authority materially adversely affecting the federal or State tax status of the
Agency, or the interest on bonds or notes or obligations of the general character of the
Bonds; or
(c) any legislation, ordinance, rule or regulation shall be introduced in, or be
enacted by any governmental body, department or agency of the State, or a decision by
any court of competent jurisdiction within the State or any court of the United States shall
be rendered which, in the reasonable opinion of the Underwriter, materially adversely
affects the market price of the Bonds; or
(d) legislation shall be enacted by the Congress of the United States, or a
decision by a court of the United States shall be rendered, or a stop order, ruling,
regulation or official statement by, or on behalf of, the Securities and Exchange
Commission or any other governmental agency having jurisdiction of the subject matter
shall be issued or made to the effect that the issuance, offering or sale of obligations of
the general character of the Bonds, or the issuance, offering or sale of the Bonds,
including all underlying obligations, as contemplated hereby or by the Official Statement,
is in violation or would be in violation of, or that obligations of the general character of
-15-
the Bonds, or the Bonds, are not exempt from registration under, any provision of the
federal securities laws, including the Securities Act of 1933, as amended and as then in
effect, or that the Indentures need to be qualified under the Trust Indenture Act of 1939,
as amended and as then in effect; or
(e) additional material restrictions including without limitation those relating to
the extension of credit by, or the charge to the net capital requirements of, not in force as
of the date hereof shall have been imposed upon trading in securities generally by any
governmental authority or by any national securities exchange which restrictions
materially adversely affect the Underwriter's ability to trade the Bonds; or
(0 a general banking moratorium shall have been established by federal or
State authorities; or
(g) the United States has become engaged in hostilities which have resulted
in a declaration of war or a national emergency or there has occurred any other outbreak
of hostilities or a national or international calamity or crisis, or there has occurred any
escalation of existing hostilities, calamity or crisis, financial or otherwise, the effect of
which on the financial markets of the United States being such as, in the reasonable
opinion of the Underwriter, would affect materially and adversely the ability of the
Underwriter to market the Bonds or enforce contracts for sale of the Bonds; or
(h) any rating of the Bonds shall have been downgraded, suspended or
withdrawn by a national rating service, which, in the Underwriter's reasonable opinion,
materially adversely affects the marketability or market price of the Bonds; or
(i) the commencement of any action, suit or proceeding described in
Section 6(1) hereof which, in the reasonable judgment of the Underwriter, materially
adversely affects the market price of the Bonds; or
(j) there shall be in force a general suspension of trading on the New York
Stock Exchange, or minimum or maximum prices for trading shall have been fixed and
be in force, or maximum ranges for prices for securities shall have been required and be
in force on the New York Stock Exchange, whether by virtue of determination by that
Exchange or by order of the Securities and Exchange Commission of the United States
or any other governmental authority having jurisdiction; or
(k) there shall have been any materially adverse change in the affairs of the
Authority or the Agency which in the Underwriter's reasonable judgment materially
adversely affects the market for the Bonds.
Section 11. Expenses. Subject to the immediately following paragraph, the
Underwriter shall be under no obligation to pay and the Agency shall pay or cause to be paid
the expenses incident to the performance of the obligations of the Agency and the Authority
hereunder including but not limited to (a) the costs of the preparation and printing, or other
reproduction (for distribution on or prior to the date hereof) of the Agency Documents and the
cost of preparing, printing, issuing and delivering the definitive Bonds, (b) the fees and
disbursements of any counsel, financial advisors, accountants or other experts or consultants
retained by the Agency; (c) the fees and disbursements of Bond Counsel; (d) the cost of printing
the Preliminary Official Statement and any supplements and amendments thereto and the cost
of printing the Official Statement, including the requisite number of copies thereof for distribution
-16-
by the Underwriter; (e) charges of rating agencies for the rating of the Bonds; (f) the premium
payable to the Insurer in consideration of the issuance by the Insurer of the Policy; and (g) the
fees and disbursements of the Trustee, including but not limited to, fee and disbursements of its
counsel, travel and other expenses.
The Underwriter shall pay all expenses incurred by it in connection with the public
offering and distribution of the Bonds, travel, and miscellaneous fees of the California Debt and
Investment Advisory Commission, the fees of Underwriter's counsel and the CUSIP Service
Bureau charge for the assignment of CUSIP numbers to the Bonds. Such amounts will be billed
separately by the Underwriter and will be payable from the proceeds of the Bonds.
Section 12. Notice. Any notice or other communication to be given to the Agency
and the Authority under this Purchase Agreement may be given by delivering the same in
writing to such entity at the address set forth above. Any notice or other communication to be
given to the Underwriter under this Purchase Agreement may be given by delivering the same in
writing to:
Citigroup Global Markets Inc.
350 California Street, 21st Floor
San Francisco, California 94104
Section 13. Entire Agreement. This Purchase Agreement, when accepted by the
Agency and the Authority, shall constitute the entire agreement between the Agency, the
Authority and the Underwriter and is made solely for the benefit of the Agency, the Authority and
the Underwriter (including the successors or assigns of any Underwriter). No other person shall
acquire or have any right hereunder by virtue hereof, except as provided herein. All the
Agency's and the Authority's representations, warranties and covenants in this Purchase
Agreement shall remain operative and in full force and effect, regardless of any investigation
made by or on behalf of the Underwriter.
Section 14. Counterparts. This Purchase Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the same instrument.
Section 15. Severability. In case any one or more of the provisions contained herein
shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof.
Section 16. State of California Law Governs. The validity, interpretation and
performance of this Purchase Agreement shall be governed by the laws of the State.
-17-
Section 17. No Assignment. The rights and obligations created by this Purchase
Agreement shall not be subject to assignment by the Underwriter, the Authority or the Agency
without the prior written consent of the other parties hereto.
Accepted as of the date first stated above:
CITIGROUP GLOBAL MARKETS INC.
By:
Vice President
PALM DESERT FINANCING AUTHORITY
By:
Chief Administrative Officer
PALM DESERT REDEVELOPMENT AGENCY
By:
Executive Director
-18-
APPENDIX A
MATURITY SCHEDULE
2006 SERIES A
Current Interest Bonds
Maturity Date Principal Interest
(April 1) Amount Rate
2006 SERIES B
Capital Appreciation Bonds
Yield
Initial Approximate Reoffering Maturity
Maturity Date Principal Amount Yield To Maturity Value
2006 SERIES C
Current Interest Bonds (Escrowed Proceeds)
Maturity Date Principal Interest
(April 1) Amount Rate
2006 SERIES D
Subordinate Capital Appreciation Bonds
Yield
Initial Approximate Reoffering Maturity
Maturity Date Principal Amount Yield To Maturity Value
A-1
APPENDIX B
RULE 15c2-12 CERTIFICATE
The undersigned hereby certifies and represents to Citigroup Global Markets Inc. (the
"Underwriter") that he is a duly appointed and acting officer of the Palm Desert Redevelopment
Agency (the "Agency"), and as such is to execute and deliver this Certificate and further hereby
certify and reconfirm on behalf of the Agency to the Underwriter as follows:
(1) This Certificate is delivered to enable the Underwriter to comply with
Securities and Exchange Commission Rule 15c2- 12 under the Securities Exchange Act
of 1934 (the "Rule") in connection with the offering and sale of the Palm Desert
Financing Authority, Tax Allocation Revenue Bonds (Project Area No. 2) 2006 Series A,
Tax Allocation Revenue Capital Appreciation Bonds (Project Area No. 2) 2006 Series B,
Tax Allocation Revenue Bonds (Project Area No. 2) 2006 Series C, and Tax Allocation
Revenue Capital Appreciation Bonds (Project Area No. 2) 2006 Series D (collectively,
the "Bonds").
(2) In connection with the offering and sale of the Bonds, there has been
prepared a Preliminary Official Statement, setting forth information concerning the Bonds
and the issuer of the Bonds (the "Preliminary Official Statement").
(3) As used herein, "Permitted Omissions" shall mean the offering price(s),
interest rate(s), selling compensation, aggregate principal amount, principal amount per
maturity, delivery dates, ratings and other terms of the Bonds depending on such
matters and the identity of the underwriter(s), all with respect to the Bonds.
(4) The Preliminary Official Statement is, except for the Permitted Omissions,
deemed final within the meaning of the Rule and has been, and the information therein is
accurate and complete except for the Permitted Omissions.
(5) If, at any time prior to the execution of the final contract of purchase, the
Agency gains actual knowledge of the occurrence of any event as a result of which the
Preliminary Official Statement might include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the Agency shall promptly
notify the underwriter thereof.
Dated: , 2006.
PALM DESERT REDEVELOPMENT
AGENCY
By:
Executive Director
B-1
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and
delivered by the Palm Desert Redevelopment Agency (the "Agency") and Wells Fargo Bank,
National Association, as Trustee (the "Trustee") and MuniFinancial, Inc. (the "Dissemination
Agent") in connection with the issuance of $ Palm Desert Financing Authority,
Tax Allocation Refunding Revenue Bonds (Project Area No. 2), 2006 Series A,
$ Palm Desert Financing Authority, Tax Allocation Capital Appreciation
Revenue Bonds (Project Area No. 2), 2006 Series B, $ Palm Desert Financing
Authority, Tax Allocation Revenue Bonds (Project Area No. 2), 2006 Series C, and
$ Palm Desert Financing Authority, Subordinate Tax Allocation Capital
Appreciation Revenue Bonds (Project Area No. 2), 2006 Series D (together, the "Bonds"). The
Bonds are being issued pursuant to an Indenture of Trust dated as of July 1, 2006, between the
Palm Desert Financing Authority (the "Issuer") and the Trustee (the "Indenture"). The proceeds
of the Bonds are being loaned by the Issuer to the Agency pursuant to a Loan Agreement (as
defined in the Indenture). The parties agree as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is
being executed and delivered by the parties for the benefit of the Owners of the Bonds and in
order to assist the Participating Underwriter in complying with the Rule (defined below). The
Agency acknowledges that the Issuer has undertaken no responsibility with respect to any
reports, notices or disclosures provided or required under this Agreement, and has no liability to
any person, including any Owner of Bonds, with respect to any such reports, notices or
disclosures.
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Agency pursuant to, and
as described in, Sections 3 and 4 of this Disclosure Agreement.
"Disclosure Representative" shall mean the Executive Director of the Agency or his or
her designee, or such other person as the Agency shall designate in writing to the Trustee and
Dissemination Agent from time to time.
"Dissemination Agent" shall mean MuniFinancial, Inc., acting in its capacity as
Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by
the Agency and which has filed with the Trustee a written acceptance of such designation.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure
Agreement.
"National Repository" shall mean any Nationally Recognized Municipal Securities
Information Repository for purposes of the Rule.
"Official Statement" shall mean the final Official Statement with respect to the Bonds.
"Owners" shall mean the registered owners of the Bonds or, if the Bonds are registered
in the name of a depository, the beneficial owners of the Bonds.
"Participating Underwriter" shall mean the original underwriters of the Bonds required to
comply with the Rule in connection with the offering of the Bonds.
"Repository" shall mean each National Repository and each State Repository.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
"State Repository" shall mean any public or private repository or entity designated by the
State as a state repository for the purpose of the Rule. As of the date of this Agreement, there
is no State Repository.
SECTION 3. Provision of Annual Reports.
(a) The Agency shall, or upon written direction shall cause the Dissemination Agent
to, not later than six months after the end of the Agency's Fiscal Year (which currently would be
December 31 of each year), commencing with the report for the 2005-2006 Fiscal Year, provide
to each Repository an Annual Report which is consistent with the requirements of Section 4 of
this Disclosure Agreement. Not later than fifteen (15) Business Days prior to said date, the
Agency shall provide the Annual Report to the Dissemination Agent and the Trustee. In each
case, the Annual Report may be submitted as a single document or as separate documents
comprising a package, and may cross-reference other information as provided in Section 4 of
this Disclosure Agreement; provided that the audited financial statements of the Agency may be
submitted separately from the balance of the Annual Report. The Agency shall provide a written
certification with each Annual Report furnished to the Dissemination Agent and the Trustee to
the effect that such Annual Report constitutes the Annual Report required to be furnished by the
Agency hereunder. The Dissemination Agent and Trustee may conclusively rely upon such
certification of the Agency.
(b) If the Dissemination Agent is unable to verify that an Annual Report has been
provided to the Repositories by the date required in subsection (a), the Dissemination Agent
shall send a notice to each National Repository or to the Municipal Securities Rulemaking Board
and to the appropriate State Repository, if any, in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name and
address of each National Repository and each State Repository, if any; and
(ii) if the Annual Report has been furnished to the Dissemination Agent, file a report with
the Agency, the Issuer and the Trustee certifying that the Annual Report has been provided
pursuant to this Disclosure Agreement, stating the date it was provided, and listing all the
Repositories to which it was provided.
SECTION 4. Content of Annual Reports. The Agency's Annual Report shall contain or
incorporate by reference the following:
2
(i) the audited financial statements of the Agency, prepared in accordance with
generally accepted accounting principles in effect from time to time. If the Agency's audited
financial statements are not available by the time the Annual Report is required to be filed
pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a
format similar to the financial statements contained in the Official Statement, and the audited
financial statements shall be filed in the same manner as the Annual Report when they become
available.
(ii) An update of the tabular information set forth in the Official Statement under the
captions "SUBORDINATE TAX REVENUES -- Schedule of Historical Tax Revenues" and "--
Top Ten Taxpayers."
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the Agency or related public entities,
which have been submitted to each of the Repositories or the Securities and Exchange
Commission. If the document incorporated by reference is a final official statement, it must be
available from the Municipal Securities Rulemaking Board. The Agency shall clearly identify
each such other document so incorporated by reference.
SECTION 5. Reporting of Material Events.
(a) Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the Bonds, if
material:
(1) principal and interest payment delinquencies;
(2) non-payment related defaults;
(3) unscheduled draws on debt service reserves reflecting financial
difficulties;
(4) unscheduled draws on credit enhancements reflecting financial
difficulties;
(5) substitution of credit or liquidity providers, or their failure to perform; and
(6) adverse tax opinions or events adversely affecting the tax-exempt status
of the Bonds;
(7) modifications to rights of security holders;
(8) unscheduled bond calls;
(9) defeasances;
(10) release, substitution or sale of property securing repayment of the
securities; and
(11) rating changes.
(b) The Trustee shall, promptly upon obtaining actual knowledge of the occurrence
of any of the Listed Events contact the Disclosure Representative, inform such person of the
event, and request that the Agency promptly notify the Dissemination Agent in writing whether
or not to report the event pursuant to subsection (f) and promptly notify the Trustee in writing
whether or not to report the event to the Owners (unless notice to the Owners is required by
either of the Indentures). For purposes of this Disclosure Agreement, "actual knowledge" of the
occurrence of such Listed Events shall mean actual knowledge by the officer at the Trust Office
of the Trustee with regular responsibility for the administration of the Indenture.
.3
(c) Whenever the Agency obtains knowledge of the occurrence of a Listed Event,
whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the
Agency shall as soon as possible determine if such event is material under applicable federal
securities laws.
(d) If the Agency has determined that knowledge of the occurrence of a Listed Event
is material, the Agency shall promptly notify the Dissemination Agent and the Trustee in writing.
Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to
subsection (f) and shall instruct the Trustee to report the occurrence to Owners.
(e) If in response to a request under subsection (b), the Agency determines that the
Listed Event is not material, the Agency shall so notify the Dissemination Agent and the Trustee
in writing and instruct the Dissemination Agent and the Trustee not to report the occurrence.
(f) If the Dissemination Agent has been instructed by the Agency to report the
occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with
the Municipal Securities Rulemaking Board and each State Repository, with a copy to the
Agency. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8)
and (9) need not be given under this subsection any earlier than the notice (if any) of the
underlying event is given to the Owners of affected Bonds pursuant to the Indenture.
SECTION 6. Termination of Reporting Obligation. The obligations of the Agency, the
Trustee and the Dissemination Agent under this Disclosure Agreement shall terminate upon the
defeasance, prior redemption or payment in full of all of the Bonds; provided that the obligations
of the Trustee and the Dissemination Agent hereunder shall also terminate upon the resignation
or removal of such Trustee or Dissemination Agent.
SECTION 7. Dissemination Agent. The Agency may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Agreement, and may discharge any such Dissemination Agent, with or without appointing a
successor Dissemination Agent. The initial Dissemination Agent shall be MuniFinancial, Inc.
The Dissemination Agent may resign its duties hereunder at any time upon written notice
to the Agency.
SECTION 8. Amendment. Notwithstanding any other provision of this Disclosure
Agreement, the parties may amend this Disclosure Agreement (and the Trustee and the
Dissemination Agent shall agree to any amendment so requested by the Agency provided that
neither the Trustee nor the Dissemination Agent shall be obligated to enter into any such
amendment that modifies or increases its duties or obligations hereunder) only if:
(a) the amendment is made in connection with a change in circumstances that arises
from a change in legal requirements, change in law, or change in the identity, nature, or status
of the Agency, or type of business conducted;
(b) this Disclosure Agreement, as amended, would have complied with the
requirements of the Rule at the time of sale of the Bonds, after taking into account any
amendments or interpretations of the Rule, as well as any change in circumstances;
4
(c) the amendment does not materially impair the interests of Owners, as
determined by parties unaffiliated with the Agency (such as, but without limitation, the Agency's
bond counsel) or by Owners' consent pursuant to Section 7.01 of the Indenture; and
(d) the annual financial information containing (if applicable) the amended operating
data or financial information will explain, in narrative form, the reasons for the amendment and
the "impact" (as that word is used in the letter from the staff of the Securities and Exchange
Commission to the National Association of Bond Lawyers dated June 23, 1995) of the change in
the type of operating data or financial information being provided.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the Agency from disseminating any other information, using the means of
dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Agreement. If the Agency chooses to
include any information in any Annual Report or notice of occurrence of a Listed Event, in
addition to that which is specifically required by this Disclosure Agreement, the Agency shall
have no obligation under this Agreement to update such information or include it in any future
Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the Agency to comply with any
provision of this Disclosure Agreement, the Trustee shall, at the written direction of any
Participating Underwriter or the Owners of a majority in aggregate principal amount of
Outstanding Bonds (but only to the extent funds have been provided to it or it has been
otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges of
the Trustee whatsoever, including, without limitation, fees and expenses of its attorneys), or any
Owner may, take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the Agency, the Trustee or the
Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure
Agreement; provided that any such action may be instituted only in the Federal or State Court
located in the County of Los Angeles, State of California and no remedy other than specific
performance may be sought or granted. A default under this Disclosure Agreement shall not be
deemed an Event of Default under the Indenture or the Loan Agreement, and the sole remedy
under this Disclosure Agreement in the event of any failure of the Agency, the Trustee or the
Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel
performance.
SECTION 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent.
The Dissemination Agent shall have only such duties as are specifically set forth in this
Disclosure Agreement, and the Agency agrees to indemnify and save the Dissemination Agent
and the Trustee, their officers, directors, employees and agents, harmless against any loss,
expense and liabilities which it may incur arising out of or in the exercise or performance of its
powers and duties hereunder, including the costs and expenses (including attorneys fees) of
defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's
or Trustee's negligence or wilful misconduct. The Dissemination Agent may rely on and shall be
protected in acting or refraining from acting upon any direction from the Issuer or an opinion of
nationally recognized bond counsel. The Dissemination Agent and the Trustee shall be paid
compensation by the Agency for its services provided hereunder in accordance with its
schedule of fees as amended from time to time and all expenses, legal fees and advances
made or incurred by the Dissemination Agent in the performance of its duties hereunder. The
Dissemination Agent and the Trustee shall have no duty or obligation to review any information
5
provided to them by the Agency hereunder and shall not be deemed to be acting in any fiduciary
capacity for the Authority, the Agency, the Owners, or any other party. The obligations of the
Agency under this Section shall survive resignation or removal of the Dissemination Agent and
payment of the Bonds. No person shall have any right to commence any action against the
Dissemination Agent seeking any remedy other than to compel specific performance of this
Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary
damages to any person for any breach of this Agreement.
SECTION 12. Beneficiaries, This Disclosure Agreement shall inure solely to the benefit
of the Issuer, the Agency, the Trustee, the Dissemination Agent, the Participating Underwriter
and Owners from time to time of the Bonds, and shall create no rights in any other person or
entity.
SECTION 13. Notices. Notices should be sent in writing to the following addresses.
The following information may be conclusively relied upon until changed in writing.
Agency:
Dissemination Agent:
Trustee:
Palm Desert Redevelopment Agency
73-510 Fred Waring Drive
Palm Desert, California 92260
(760) 346-0611
(760) 346-0574 Fax
MuniFinancial, Inc.
27368 Via Industria, Suite 110
Temecula, California 92590
(909) 587-3500
(909) 587-3510 fax
Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, CA 90017
(213) 614-3353
(213) 614-3355 Fax
6
SECTION 14. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
PALM DESERT REDEVELOPMENT
AGENCY
By
Executive Director
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
By
Authorized Officer
MUNI FINANCIAL, INC., as Dissemination
Agent
By
Authorized Officer
7
EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Obligated Party: Palm Desert Redevelopment Agency (the "Agency")
Name of Bond Issue:
Palm Desert Financing Authority
$ Series 2006 A Bonds
$ Series 2006 B Bonds
$ Series 2006 C Bonds
$ Series 2006 D Bonds
Date of Delivery: , 2006
NOTICE IS HEREBY GIVEN that the Agency has not provided an Annual Report with
respect to the above -named Bonds as required by Section 3 of the Continuing Disclosure
Agreement dated as of July 1, 2006 between the Agency and Wells Fargo Bank, National
Association. [The Agency anticipates that the Annual Report will be filed by
.]
Dated:
MuniFinancial, Inc. on behalf of the Agency
cc: Executive Director, Palm Desert Redevelopment Agency
8