HomeMy WebLinkAboutSR - Sale & Issuance of Tax Allocation Revenue Bonds/Res 524/Res FA-51/PA1 Loan AgmntPALM DESERT REDEVELOPMENT AGENCY/PALM DESERT
FINANCING AUTHORITY
STAFF REPORT
REQUEST: APPROVAL OF RESOLUTION NO. 524 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 OF
TAX ALLOCATION REVENUE BONDS (PROJECT AREA NO. 1,AS
AMENDED), 2006 SERIES A (TAX-EXEMPT), AND TAX ALLOCATION
REFUNDING REVENUE BONDS (PROJECT AREA NO. 1, AS AMENDED)
2006 SERIES B (TAXABLE) OF THE PALM DESERT FINANCING
AUTHORITY AND AUTHORIZING CERTAIN OTHER MATTERS
RELATING THERETO
APPROVAL OF RESOLUTION NO. FA-51 OF THE PALM DESERT
FINANCING AUTHORITY 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 REVENUE BONDS (PROJECT AREA
NO. 1, AS AMENDED) 2006 SERIES A (TAX-EXEMPT), AND TAX
ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 1,
AS AMENDED), 2006 SERIES B (TAXABLE), APPOINTING A TRUSTEE,
AND ESCROW AGENT; AND AUTHORIZING CERTAIN OTHER MATTERS
RELATING THERETO
SUBMITTED BY: DAVE YRIGOYEN, DIRECTOR OF REDEVELOPMENT/HOUSING
DATE: APRIL 27, 2006
CONTENTS: PALM DESERT REDEVELOPMENT AGENCY RESOLUTION NO.
PALM DESERT FINANCING AUTHORITY RESOLUTION FA -
LOAN AGREEMENT
CONTINUING DISCLOSURE AGREEMENT
BOND PURCHASE AGREEMENT
ESCROW DEPOSIT AND TRUST AGREEMENT
INDENTURE
OFFICIAL STATEMENT (PRELIMINARY)
Recommendation:
By Minute Motion:
1. That the Palm Desert Redevelopment Agency approve Resolution
No. 524 , approving as to form and authorizing the execution and delivery
of certain documents in connection with the sale and issuance of Tax
Allocation Revenue Bonds (Project Area No. 1, As Amended), 2006 Series
A, and Tax Allocation Refunding Revenue Bonds (Project Area No. 1, as
Amended), 2006 Series B of the Palm Desert Financing Authority and
authorizing certain other matters relating thereto.
GARDA\Arla Scott\Word Files\Staff Repts\PA1-PDRA-PDFA-SalelssuAppt.doc
Staff Report
Approval of Resolutions — PA#1 Tax Allocation Revenue Bonds — 2006 Series A
Page 2 of 4
April 27, 2006
2. That the Palm Desert Financing Authority approve Resolution FA-51 ,
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 Revenue Bonds (Project Area No. 1, As
Amended), 2006 Series A, and Tax Allocation Refunding Revenue Bonds
(Project Area No. 1, as Amended), 2006 Series B, appointing a trustee, and
escrow agent; and authorizing certain other matters relating thereto.
Executive Summary:
The attached resolutions of the Redevelopment Agency and the Financing Authority will allow staff
to take the necessary steps to issue tax-exempt revenue and taxable refunding bonds in Project
Area No. 1, As Amended.
Backaround:
The Series 1997 bonds issued in July 1997 in the original principal amount of $71.955 million
anticipated the private activity use of the Desert Willow Golf Club Project related to the development
of a resort hotel. The current financing plan anticipates refunding the April 1, 2023 term bond in the
amount of $23,595,000 and converting those bonds from tax-exempt to taxable.
There is going to be approximately $47 million of tax-exempt new money bonds including the
refunding of Series 1997 for a total of approximately $72 million.
Staff is utilizing the following financing team:
Stone & Youngberg. - Underwriters, Los Angeles, CA
Richards, Watson & Gershon -Bond Counsel, Los Angeles, CA
Jones Hall, A Professional Law Corporation, - Disclosure Counsel, San Francisco, CA
Kenneth L. Dieker, D.B.A. Del Rio Advisors, LLC - Financial Advisor, Modesto, CA
MuniFinancial, Inc. - Dissemination Agent, Temecula, CA
SUMMARY OF DOCUMENTS TO BE APPROVED:
Indenture of Trust
The indenture is an agreement to be signed by the Authority and the Trustee after the bonds have
been priced and sold to the underwriter, but prior to the closing. The indenture sets forth all of the
terms and conditions of the bond issue (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. As
presented to the Authority Commission, the Indenture is in substantially final form, except for final
dollar amounts (to be added after the bonds have been priced and sold) and except for the addition
of provisions relating to bond insurance (depending on which bond insurance company is to be
involved).
Staff Report
Approval of Resolutions — PA#1 Tax Allocation Revenue Bonds — 2006 Series A
Page 3 of 4
April 27, 2006
Loan Aqreement
This is an agreement between the Authority, the Trustee and the Agency. Pursuant to the Loan
Agreement, the Authority agrees to lend the Agency funds that would be used by the Agency to
refund the 1997 bonds, and fund capital projects for benefit to Project Area No. 1, As Amended. The
Agency agrees to pay the entire debt service cost of the new bonds to the Authority, in order for the
Authority to make the debt service payments.
Bond Purchase Aareement
This is an agreement between the Authority, the Agency and the underwriters for the purchase and
sale of the bonds. Pursuant to the Purchase Contract, the underwriters agree to purchase the
Authority bonds at specified prices and interest rates, subject to the receipt of certain opinions,
certificates and other conditions. The Purchase Contract 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 issue in the market.
Official Statement
As presented to the Authority Commission, an Official Statement for Project Area No.1, As
Amended, has been prepared in preliminary form by the underwriter's counsel, and is substantially
complete, except for pricing information and the addition of language describing bond insurance,
and a rating of the issue. The preliminary Official Statement is designed to provide all material
information to investors with respect to the terms and the security of the bond issue. It includes a
full description of the legal and financial aspects, as well as the various legal documents in regard to
the bond issue. The preliminary Official Statement also includes information regarding the Authority,
the Agency, and the redevelopment project area. The preliminary Official Statement will be utilized
by the underwriters in their efforts to market the bonds to the public. When the bonds have been
priced and the Purchase Agreement has been signed, the Official Statement will be completed in
final form and will be distributed by the Underwriters to the individuals and institutions that
purchased the bonds.
Continuina Disclosure Aareement
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.
The Annual Report contains the Agency's audited financial statements and other pertinent financial
information on the Agency. 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 Deposit and Trust Aareement
The Escrow Deposit and Trust Agreement is an agreement between the Agency, the Authority and
the Trustee. This agreement covers provisions for the selection of the bonds from the 1997 issue to
be refunded. The agreement also covers provisions for the funds to be deposited from the new
issue to cover the refunding, and the verification from a Certified Public Accountant that the funds
placed in escrow are sufficient to cover the refunding. The agreement also governs the investment
and reinvestment of the funds in escrow.
Staff Report
Approval of Resolutions — PA#1 Tax Allocation Revenue Bonds — 2006 Series A
Page 4 of 4
April 27, 2006
The above -mentioned documents are in preliminary stages, and the resolutions allow for staff to
make the necessary changes in order to finalize and execute the documents. Staff is recommending
that the Redevelopment Agency and the Financing Authority approve their respective resolutions
authorizing the sale and issuance of the said bonds, and approving certain documents.
Submitted By:
David Yrigoyen
Director of Red opment/Housing
DY:AKS:mh
AnnrrAl/n1•
aul S. Gibson
Director of Finance/Treasurer
Carlos L. Ortega, Executive DirectorICAO
RESOLUTION NO. 524
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
REVENUE BONDS (PROJECT AREA NO. 1, AS
AMENDED), 2006 SERIES A, AND TAX ALLOCATION
REFUNDING REVENUE BONDS (PROJECT AREA NO. 1,
AS AMENDED), 2006 SERIES B (TAXABLE), AND
AUTHORIZING CERTAIN OTHER MATTERS RELATING
THERETO
RECITALS:
WHEREAS, the Palm Desert Financing Authority (the "Authority") has
determined to sell and issue its Tax Allocation Revenue Bonds (Project Area No. 1, As
Amended), 2006 Series A (the "Series 2006A Bonds") and Tax Allocation Refunding
Revenue Bonds (Project Area No. 1, As Amended), 2006 Series B (Taxable) (the
"Series 2006B Bonds," and together with the Series 2006A Bonds, the "Bonds"); and
WHEREAS, proceeds of the Series 2006A Bonds are to be applied for the
purpose of making a loan (the "Series 2006A Loan") to the Palm Desert Redevelopment
Agency (the "Agency") pursuant to a certain Loan Agreement (as defined below) for the
object and purpose of, among other things, assisting in the financing of certain public
capital improvements of benefit to Project Area No. 1, As Amended, of the Agency; and
WHEREAS, proceeds of the Series 2006B Bonds are to be applied for the
purpose of making a second loan (together with the Series 2006A Loan, the "Loans") to
the Agency pursuant to the Loan Agreement for the object and purpose of, among other
things, effecting the refunding of the portion of the Authority's Tax Allocation Revenue
Bonds (Project Area No. 1, As Amended), Series 1997, scheduled to mature on April 1,
2023;
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.
Section 2. Loan Aqreement. The Project Area No. 1, As Amended, Loan
Agreement (the "Loan Agreement"), proposed to be entered into by and among the
Authority, the Agency and Wells Fargo Bank, N.A., as trustee (the "Trustee"), in the
form presented at this meeting and on file with the Secretary of the Agency (the
P6402.1054\884010.2
Resolution No. 524
Section 3. "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 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 Aareement. The Escrow Agreement (Project Area No.
1, As Amended), 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 of the Authorized Officers, 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. Continuina 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 of the Authorized Officers, 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 Aareement. The Bond Purchase Agreement (the
"Purchase Agreement") proposed to be entered into by the Authority, the Agency and
Stone & Youngberg LLC (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
imposed by the Authority by its Resolution relating to the issuance and sale of the
Bonds, each of the Authorized Officers, 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. Reauisitions. Each of the Authorized 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 Loan Agreement.
P6402.1054\884010.2
Resolution No. 524
Section 8. 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 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 9. Effective Date. This Resolution shall take effect immediately
upon adoption.
APPROVED and ADOPTED this 27th day of April 2006 by the following
vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Jim Ferguson, Chairman
ATTEST:
Rachelle D. Klassen, Secretary
P6402.1054\884010.2
RESOLUTION NO. FA- 51
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 REVENUE BONDS
(PROJECT AREA NO. 1, AS AMENDED), 2006 SERIES A,
AND TAX ALLOCATION REFUNDING REVENUE BONDS
(PROJECT AREA NO. 1, AS AMENDED), 2006 SERIES B
(TAXABLE) 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 its Tax Allocation
Revenue Bonds (Project Area No. 1, As Amended), 2006 Series A (the "Series 2006A
Bonds") and Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As
Amended), 2006 Series B (Taxable) (the "Series 2006B Bonds," and together with the
Series 2006A Bonds, the "Bonds") to be issued and secured pursuant to a certain
Indenture (as defined below); and
WHEREAS, proceeds of the Series 2006A Bonds are to be applied for the
purpose of making a loan to the Agency pursuant to a certain Loan Agreement (as
defined below) for the object and purpose of, among other things, assisting in the
financing of certain public capital improvements of benefit to Project Area No. 1, As
Amended, of the Agency; and
WHEREAS, proceeds of the Series 2006B Bonds are to be applied for the
purpose of making a second loan to the Agency pursuant to the Loan Agreement for the
object and purpose of, among other things, effecting the refunding of the portion of the
Authority's Tax Allocation Revenue Bonds (Project Area No. 1, As Amended), Series
1997, scheduled to mature on April 1, 2023; and
P6402.1054\884009.3
Resolution No. FA-51
WHEREAS, the City Council has made a finding, after a duly noticed
public hearing pursuant to Section 6586.5 of the California Government Code, that the
issuance of the Bonds will result in significant public benefit;
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 Citv Council Findinas. 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 Bonds: Indenture, The Indenture of Trust (the
"Indenture"), proposed to be entered into by and between the Authority and the Trustee
(defined in Section 3 below), 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
$55,000,000, and the issuance of the Series 2006B Bonds, in an aggregate principal
amount not exceeding $30,000,000, pursuant to the Indenture are hereby approved.
Subject to Section 10 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 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.Appointment of Trustee and Escrow Aaent. The appointment of
Wells Fargo Bank, N.A., as trustee (the "Trustee") under the Indenture and as escrow
agent (the "Escrow Agent") under the Escrow Agreement described in Section 6 hereof
is hereby approved.
Section 5. Loan Aareement. The Project Area No. 1, As Amended Loan
Agreement (the "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 of the Authorized Officers,
acting singly, is hereby authorized and directed, for and in the name and on behalf of
the Authority, to execute and deliver the 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 6. Escrow Aareement. The Escrow Agreement (Project Area No.
1, As Amended), proposed to be entered into by and among the Agency, the Authority
P6402.1054\884009.3 2
Resolution No. FA -
and the Escrow Agent, in the form presented to this meeting and on file in the office of
the Secretary, is hereby approved. Each of the Authorized Officers, 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 7. 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 of
the Authorized Officers, 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 1934. The distribution by Stone & Youngberg LLC. (the "Underwriter")
of copies of the Preliminary Official Statement to potential purchasers of the Bonds is
hereby approved.
Section 8.Official Statement. Each of the Authorized Officers, 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 9.Purchase Aareement. 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 10 below, each of the Authorized Officers, 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 10 hereof (such approval to be conclusively evidenced by such
Authorized Officer's execution and delivery thereof).
Section 10. Terms of Sale of Bonds. Each of the Authorized
Officers, acting singly, is hereby authorized and directed to act on behalf of the Authority
to establish and determine (a) the aggregate principal amount of the Series 2006A
Bonds, which amount shall not exceed $55,000,000, (b) the aggregate principal amount
of the Series 2006B Bonds, which amount shall not exceed $30,000,000; (c) interest
rates on the Bonds, provided that the true interest cost with respect to the Series 2006A
Bonds shall not exceed 6.00 percent and the true interest cost with respect to the Series
P6402.1054\884009.3 3
Resolution No. FA-
2006B Bonds shall not exceed 7.00 percent, (d) the Underwriter's compensation (i.e.,
underwriter's discount) with respect to the sale of the Bonds, provided that such
compensation with respect to the Series 2006A Bonds shall not exceed 1.00 percent of
the aggregate principal amount of the Series 2006A Bonds, and such compensation
with respect to the Series 2006E Bonds shall not exceed 1.25 percent of the aggregate
principal amount of the Series 2006B 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 10 shall be valid for a
period of 120 days from the date of adoption of this Resolution.
Section 11. Reauisitions. Each of the Authorized Officers, acting
singly, is hereby authorized and directed to execute one or more requisitions authorizing
the Trustee to pay the costs of issuing the Bonds from the proceeds of the Bonds
pursuant to the Indenture.
Section 12. 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 Indenture, the
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.
Section 13. Effective Date. This Resolution shall take effect
immediately upon adoption.
APPROVED AND ADOPTED this 27th day of April 2006 by the following
vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Jim Ferguson, President
ATTEST:
Rachelle D. Klassen, Secretary
P6402.1054\884009.3 4
Proiect Area No. 1, As Amended, Loan A�reement
with reference to
$ $
Palm Desert Financing Authority Palm Desert Financing Authority
Tax Allocation Revenue Bonds Tax Allocation Refunding Revenue Bonds
(Project Area No. 1, As Amended} (Project Area No. 1, As Amended)
2006 Series A 2006 Series B
(Taxable)
P6401.1054.872544.4
RWG DRAFT: 4/6/2006
TABLE OF CONTENTS
Pa�e
ARTICLE I DEFINITIONS ........................................................................................................... 2
Section1.1. Definitions .................................................................................................... 2
Section 1.2. Rules of Construction . ................................................................................. 5
ARTICLE II THE LOANS; APPLICATION OF LOAN PROCEEDS; PARITY DEBT ............. 6
Section2.1. Authorization . .............................................................................................. 6
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 . .............................................................................................. 8
Section 2.6. Costs of Issuance Fund . ............................................................................... 9
Section2.7. Project Fund ................................................. ........................................... 10
Section2.8. Parity Debt . ................................................................................................ 11
Section 2.9. Issuance of Subordinate Debt . ................................................................... 11
Section 2.10. Validity of Loans . ..................................................................................... 11
ARTICLE III PLEDGE AND APPLICATIQN OF TAX REVENUES ...................................... 12
Section 3.1. Pledge of Tax Revenues ............................................................................. 12
Section 3.2. Special Fund; Deposit of Tax Revenues .................................................... 12
Section 3.3. Transfer of Tax Revenues From Special Pund . ......................................... 12
Section 3.4. Investment of Moneys; Valuation of Investments . .................................... 13
ARTICLE IV OTHER COVENANTS OF THE AGENCY ........................................................ 13
Section 4.1. Punctual Payment; Extension of Payments ................................................ 13
Section 4.2. Limitation on Additional Indebtedness ...................................................... 14
Section 4.3. Payment of Claims ..................................................................................... 14
Section 4.4. Books and Accounts; Financial Statements ............................................... 14
Section 4.5. Protection of Security and Rights . ............................................................. 14
Section 4.6. Payments of Taxes and Other Charges . ..................................................... 14
Section 4.7. Taxation of Leased Property . ..................................................................... 15
Section 4.8. Disposition of Property . ............................................................................. 15
Section 4.9. Maintenance of Tax Revenues ................................................................... 15
Section 4.10. Payment of Expenses; Indemnification . ................................................... 15
5ection 4.11. Tax Covenants . ......................................................................................... 16
Section 4.12. Redevelopment of Project Area . ............................................................... 17
Section 4.13. Low and Moderate Income Housing Fund . .............................................. 17
Section 4.14. Annual Review of Tax Revenues . ............................................................ 17
Section 4.15. Further Assurances .................................................................................... 18
ARTICLE V EVENTS OF DEFAULT AND REMEDIES ......................................................... 18
Section 5.1. Events of Default and Acceleration of Maturities . .................................... 18
Section 5.2. Application of Funds Upon Default ........................................................... 19
Section5.3. No Waiver .................................................................................................. 20
Section 5.4. Agreement to Pay Attorneys' Fees and Expenses . .................................... 20
Section 5.5. Remedies Not Exclusive . ........................................................................... 20
Section 5.6. Control of Remedies by Insurer ................................................................. 20
P64a 1.1054.872544.3
ARTICLE VI MISCELLANEOUS .............................................................................................. 21
Section 6.1. Benefits Limited to Parties ......................................................................... 21
Section 6.2. Successor is Deemed Included in All References to Predecessor . ............ 21
Section 6.3. Discharge of Loan Agreement ................................................................... 21
Section6.4. Amendment ................................................................................................ 22
Section 6.5. Waiver of Personal Liability . ..................................................................... 22
Section 6.6. Payment on Business Days . ....................................................................... 22
Section6.7. Notices . ...................................................................................................... 22
Section 6.8. Surety Bond. [to come] ............................................................................. 22
Section 6.9. Partial Invalidity ......................................................................................... 22
Section 6.10. Article and Section Headings and References . ......................................... 23
Section 6.11. Execution of Counterparts . ....................................................................... 23
Section6.12. Governing Law . ........................................................................................ 23
Section6.13. The Trustee . .............................................................................................. 23
EXHIBIT A— SCHEDULE OF SERIES 2006A LOAN PAYMENTS
EXHIBIT B— SCHEDULE OF SERIES 2006B LOAN PAYMENTS
P6401.1054.872544.3
11
PROJECT AREA NO. 1, AS AMENDED, LOAN AGREEMENT
This Project Area No. 1, as Amended, Loan Agreement (this "Loan AgreemenY')
is made and entered into as of May 1, 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, N.A., 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, as amended, for the Project Area (as defined in
the below-mentioned Indenture) has been duly approved and adopted by the City.
C. The Agency has determined to incur two loans (the "Loans") hereunder
for the object and purpose of financing and refinancing public capital improvements of benefit to
the Project Area, as provided herein, pursuant to the Redevelopment Law and the Marks-Roos
Local Bond Pooling Act of 1985, Article 4, Chapter 5, Division 7, Title 1 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 Revenue Bonds (Project Area No. 1, As
Amended), 2006 Series A and its $ Tax Allocation Refunding Revenue Bonds
(Project Area No. 1, As Amended), 2006 Series B(Taxable) (together, the "Bonds") and
pursuant to the Bond Law and an Indenture of Trust, dated as of May 1, 2006 (the "Indenture"),
by and between the Authority and the Trustee, for the purpose of providing funds to make the
Loans to the Agency.
E. The Agency and the Authority have 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 Authority and the Agency have determined that all acts and
proceedings required by law necessary to make this Loan Agreement, when executed by the
Agency, the Trustee and the Authority, 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.
P6401.1054.872544.3 j
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto do hereb� agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Unless the context clearly requires or unless
otherwise defined herein, the capitalized terms in this Loan Agreement shall have the respective
meanings which 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.
"Bonds" means the Series 2006A Bonds and the 5eries 2006B 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
the Loan Agreement, including but not limited to all compensation, fees and expenses (including
but not limited to fees and expenses for legal caunsel) 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 Fund" means the fund by that name established and held by
the Trustee pursuant to Section 2.6.
"Escrow Fund" means the fund by that name established under the Escrow
Agreement (Project Area No. 1, as Amended), dated as of even date herewith, by and among the
Authority, the Agency and Wells Fargo Bank, N.A., as escrow agent, relating to the refunding of
the portion of the Authority's Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As
Amended) Series 1997, maturing vn April 1, 2023.
"Event of Default" means any of the events described in Section 5.1.
"Indenture" means the Indenture of Trust, dated as of May 1, 2006, by and
between the Authority and the Trustee, authorizing the issuance of the Bonds, as originally
executed or as it may from time to time be supplemented, modified ar amended.
"Indebendent Redevelobment 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.
P6401.1054.872544.3 2
"Loans" means the Series 2006A Loan and the Series 2006B Loan.
"Loan A�reement" means this Project Area No. 1, As Amended, Loan
Agreement, as it may from time to tirne 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 autstanding 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 Parity Debt, together with 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 which amounts may not be released to the Agency unless the Tax
Revenues for the current Fiscal Year at least equal 115 percent of the amount of Maximum
Annual Debt Service.
"1497 Loan" xneans the laan made by the Authority to the Agency pursuant to the
1997 Loan Agreement.
"1997 Loan A�reement" means the Project Area No. 1, As Amended, Loan
Agreement dated as af July l, 1997, by and among the Agency, the Authority and First Trust of
California, National Association, as succeeded by Wells Fargo Bank, N.A., as trustee.
"Paritv Debt" means the 1997 Loan, the 2002 Loan, the 2003 Loan, the 2004
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 2.8.
"Paritv Debt Instrument" means the 1997 Loan Agreement, the 2002 Loan
Agreement, the 2003 Loan Agreement, the 2004 Loan Agreement and any other resolution,
indenture of trust, trust agreement or other instrument authorizing the issuance of any Parity
Debt.
"Pass-Throu�h A�reements" 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 Mosquito Abatement District, (iii) the
Coachella Valley Recreation and Park District, (iv) the Coachella Valley Water District, (v) the
Desert Community College District, (vi) the Desert Sands Unified School District and {vii) 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
T� 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.
P6401.1054, 872544.3
"Proiect Fund" means the fund by that name established and held by the Trustee
pursuant to Section 2.7.
"Oualified Reserve Fund Credit Instrument" means an irrevocable standby or
direct-pay letter of credit or surety bond issued by a commercial bank or insurance coxnpany and
deposited with the Trustee pursuant to Section 2.5, provided that all of the following
requirernents 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 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).
"Redevelot�ment Fund" means the Project Area No. 1, As Amended,
Redevelopment Fund, heretofore established and held by the Agency.
"Redevelopment Proiect" means the undertaking af the Agency pursuant to the
Redevelopment Plan and the Redevelopment Law for the redevelopment of the Project Area.
"Reserve Fund" means the Project Area No. 1, As Amended, Reserve Fund held
by the Trustee pursuant to Section 2.5.
"Reserve Reauirement," 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 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 request.
"Series 2006A Bonds" means the Palm Desert Financing Authority Tax
Allocation Revenue Bonds (Project Area No. 1, As Amended), 2006 Series A.
"Series 2006A Loan" means the loan made by the Authority to the Agency
pursuant to Section 2.1(a) from the proceeds of the Series 2006A Bonds in the principal amount
of $
"Series 2006B Bonds" means the Palm Desert Financing Authority Tax
Allocation Refunding Revenue Bonds (Project Area No. 1, As Amended), 2006 Series B
(Taxable).
"Series 2006B Loan" means the loan made by the Authority to the Agency
pursuant to Section 2.1(b) from the proceeds of the Series 2006B Bonds in the principal amount
of $ .
P6401.1054.872544.3 4
"Snecial Fund" 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 with the requirements of Section 2.9, which 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 which is subordinate to the pledge of and lien upon the Tax
Revenues hereunder for the security of the Loans and any Parity Debt.
"Suretv Bond" 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 Revenues" 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 Law.
"2004 Loan" means the outstanding balance of the loan made by the Authority to
the Agency pursuant to the 2004 Loan Agreement.
"2004 Loan A�reement" means the Project Area No. 1, as amended, Loan
Agreement dated as of June 1, 2004, by and among the Agency, the Authority and BNY Western
Trust Company, as succeeded by Wells Fargo Bank, N.A., as trustee.
"2003 Loan" means the outstanding balance of the loan made by the Authority to
the Agency pursuant to the 2003 Loan Agreement.
"2003 Loan A�reement" means the Project Area No. 1, As Amended, Loan
Agreement dated as of July 1, 2003, by and among the Agency, the Authority and BNY Western
Trust Company, as succeeded by Wells Fargo Bank, N.A., as trustee.
"2002 Loan" means the outstanding balance of the loan made by the Authority to
the Agency pursuant to the 2002 Loan Agreement.
"2002 Loan A�reemenY' means the Project Area No. 1, As Amended, Loan
Agreement dated as of March 1, 2002, by and among the Agency, the Authority and BNY
Western Trust Company, , as succeeded by Wells Fargo Bank, N.A., as trustee.
Section 1.2. 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 words "herein," "hereof," "hereunder" and other words of similar
import refer to this Loan Agreement as a whole and not to any particular Article, Section or
subdivision hereof.
P6401.1054.872544.3 $
ARTICLE II
THE LOANS; APPLICATION OF LOAN PROCEEDS;
PARITY DEBT
Section 2.1. 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 Law.
(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 principal amount of $ under and subject to the terms of this
Loan Agreement, the Bond Law and the Redevelopment Law.
(c) 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 2Q06A 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 $
Series 2006A Account of the Costs of Issuance Fund.
$
to the
(ii) 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 $
Series 2006B Account of the Costs of Issuance Fund.
(ii) The Trustee shall transfer the remaining amount of $
the Escrow Fund.
to the
to
P6401.1054.872544.3 6
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. Repavrnent 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 April
1 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 2.3(a) 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
principal of the Series 2006B Loan in installments on April 1 in each of the years and in the
amounts, and shall pay interest on the unpaid principal balance of the Series 2006B Loan due on
each Interest Payrnent Date not later than the fifth Business Day preceding such Interest Payrnent
Date in the amounts set forth in Exhibit B 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 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
2.3(a) of the Indenture, the schedule of principal installments set forth in Exhibit B 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 3.1,
absolute and unconditional, and such payments shall not be subject to reduction whether by
offset or otherwise and shall not be conditional upon the performance or nonperformance by any
party to any agreement for any cause whatsoever.
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 with the Trustee at the times, as set forth in Article III.
Notwithstanding the foregoing provisions of this Section 2.3, in lieu of payment
of any installment of principal of the Loans coming due and payable on April 1 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
P6401.1054.872544.3 %
subject to mandatory sinking fund redemption on such April 1, and tender such Bonds for
cancellation, provided that such tender shall be made before the preceding January 15.
Section 2.4. Optional Prepavment.
(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 2.3(a) 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 principal installments of the
Series 2006B 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 2006B Bonds are subject to redemption pursuant to Section 2.3(a) of the Indenture, by
depositing with the Trustee an amount sufficient to redeem a like aggregate principal amount of
Series 2006B Bonds together with the amount of accrued interest and premium, if any, required
to be paid upon such redemption.
(c) 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 will be paid and the order thereof, which date shall be not less than 45
days from the date such notice is given; nrovided, 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 payrnent thereof shall have been made pursuant to Section 6.3).
(d) 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; nrovided, 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. 1, As Amended, 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 the Parity Debt.
The Agency hereby pledges and grants a lien 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.
P6401.1054.872544.3 g
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 less 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 Payrnent Date), nrovided
that the deposits required by Section 3.3(a) have been made, exceeds the Reserve Requirement,
the Trustee shall, at the Request of the Agency, withdraw from the Reserve Fund all amounts in
excess of the Reserve Requirement and either (i) apply such amounts toward the prepayment of
the Loans pursuant to Section 2.4 or the prepayment of any Parity Debt, or (ii) 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 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 fund to be
held by the Trustee known as the "Costs of Issuance Fund" 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
P6401.1054.8725443 9
pursuant to Section 2.2(b). 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. Proiect Fund. There is hereby established a fund to be known as
the "Project Fund", 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 Series 2006A 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 Series 2006A 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 payrnent of money to
be made:
Project Fund.
the Trustee:
(a) the name and address of the person to whom payrnent 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
Each such Request of the Agency shall state and shall be sufficient evidence to
(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 with 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, any of the money payable to the person named in such Request of the
Agency which has not been released or will not be released simultaneously with 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.
P6401.1054.872544.3 1 �
If any moneys deposited in the Project Fund remain therein after the full
accomplishment of the objects and purposes for which the Series 2006A Loan was made, said
moneys shall be transferred to the Special Fund.
Section 2.8. Paritv 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 otherwise 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 written records of the County, and projected annual Tax Revenues over the term
of this Loan Agreement based on current Tax Revenue collections, shall be at least equal to 115
percent of Maximum Annual Debt Service.
(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:
(1) Interest on such Parity Debt shall be payable, except for the first
12-month period thereof, which may be payable at the end of such period, on the same dates that
interest on the Loans is payable and
(2) The principal of such Parity Debt shall not be payable on any date
other than the date on which principal of the Loans is payable.
(e) The issuance of such Parity Debt shall not cause the Agency to exceed any
applicable Plan Limitations.
(� 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 (e), above, have been satisfied.
Section 2.9. 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 the issuance of such Subordinate
Debt shall not cause the Agency to exceed any applicable Plan Limitations.
Section 2.10. Validitv 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 with respect to the Redevelopment Project.
P6401.1054.872544.3 11
ARTICLE III
PLEDGE AND APPLICATION OF TAX REVENUES
Section 3.1. Pled�e of Tax Revenues. The 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 hereunder, 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 Loans.
Section 3.2. Snecial Fund; Deposit of 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 otherwise provided in any Parity Debt Instrument, any Tax Revenues
received during the Bond Year in excess of amounts shall be released from the pledge and lien
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 the Loans and all Parity Debt
and the payrnent in full of all other amounts payable hereunder and under 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 this Loan Agreement and in any Parity Debt
Instrument, and such moneys shall be used and applied as set forth herein and in any Parity Debt
Instrument.
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 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 hereunder 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 pursuant to Section 2.5 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).
P6401.1054.872544.3 12
(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 3.3; and 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 shall be released from the pledge
thereof and lien thereon which is established pursuant hereto. In the event that for any reason
whatsoever any amounts shall remain on deposit in the Special Fund on any Apri12 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 payrnent of any Subordinate Debt or the payment of any amounts due and owing to the
United States pursuant to Section 4.1 l.
Section 3.4. Investment of Monevs; Valuation of Investments. All moneys in
the Special Fund and the Project Fund shall be invested in Permitted Investments. 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 it 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 3.4, 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.
ARTICLE IV
OTHER COVENANTS OF THE AGENCY
Section 4.1. Punctual Pavment; Extension of Pavments. 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 prepayrnent 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.
P6401.1054.872544.3 13
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. Pavrnent 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 payrnent 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 T� 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 will furnish a copy of such statements, upon
reasonable request, to any Owner.
Section 4.5. Protection of Securitv and Ri�hts. 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 whomsoever. 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 Loans and the
discharge of this Loan Agreement.
Section 4.6. Pavments of Taxes and Other Char�es. The Agency will pay and
discharge, or cause to be paid and discharged, all taxes, service charges, assessments and other
governmental charges which may hereafter be lawfully imposed upon the Agency or the
properties then owned by the Agency in the Project Area when the same shall become due.
P6401.1054.872544.3 14
Nothing herein contained shall require the Agency to make any such payrnent so long as the
Agency in good faith shall contest the validity of such taxes, assessments or charges. The
Agency will duly observe and comply with all valid requirements of any governmental authority
relative to the Redevelopment Project or any part thereof.
Section 4.7. Taxation of Leased Propertv. 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. Disnosition of Propertv. The Agency will not participate in the
disposition of any land or real property in the Project Area to anyone which will result in such
property becoming exempt from taxation because of public ownership or use or otherwise
(except property dedicated for public right-of-way and except property planned for public
ownership or use by the Redevelopment Plan in effect on the date of this Loan Agreement) so
that such disposition shall, when 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 4.8. 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 will not be materially impaired by said proposed disposition, the Agency may
thereafter make such disposition. If such Report concludes that such security will 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 payrnent to it of the TaY
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 any
agreement with the County or any other governmental unit, which would 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 (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 was in effect throughout such Fiscal Year), shall be at least
equal to 115 percent 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. Nothing herein is intended or shall
be construed in any way to prohibit or impose any limitations on the entering into by the Agency
of any such agreement, amendment or supplement which by its term is subordinate to the
payment of the Loans and all Parity Debt.
Section 4.10. Pavment 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,
P6401.1054.872544.3 1 S
incurred in and about the performance of its powers and duties hereunder and thereunder. Upon
the occurrence of an Event of Default, the Trustee 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 which it may incur arising out of or in the exercise and performance of its powers
and duties in accordance with 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 which 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 4.11. Tax Covenants.
(a) The Agency covenants that, in order to maintain the exclusion from gross
income for Federal income tax purposes of the interest on the Series 2006A Bonds, and for no
other purpose, the Agency will 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 with such written instructions as may be provided by
Bond Counsel.
(b) The Agency covenants that no part of the proceeds of the Series 2006A
Bonds shall be used, directly or indirectly, to acquire any Investment Property which would
cause the Series 2006A 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 with the rebate
requirements of Section 148 of the Code, the Agency further covenants that it will pay or cause
to be paid to the United States the amounts necessary to satisfy the requirements of Section
148(� of the Code, and that it will 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 with the requirements of Section 148 of the Code, such covenants to
survive the defeasance of the Series 2006A Bonds.
(c) The Agency covenants that it will not take any action or omit to take any
action, which action or omission, if reasonably expected on the date of initial execution and
delivery of the Series 2006A Bonds, would result in a loss of exclusion from gross income for
purposes of Federal income taxation, under Section 103 of the Code, of interest on the Series
2006A Bonds.
(d) The Agency covenants that it will not use or permit the use of any
property financed with the proceeds of the Series 2006A Bonds by any person (other than a state
or local governmental unit) in such manner or to such extent as would result in a loss of
P6401.1054.872544.3 16
exclusion of the interest on the Series 2006A 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 with respect to the Series 2006A Bonds shall be:
(i) used in making loans guaranteed by the United States (or any agency or instrumentality
thereo�, (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 whole or in part) by the United States (or any agency or instrumentality thereo�; 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 21B(d)(3) of the Federal Home Loan Bank Act, as
amended by Section 511(a) of the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989, (e) investments permitted under regulations issued pursuant to Section 149(b)(3)(B) of
the Code, or (� 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 t� purposes of
interest on the Series 2006A Bonds.
Section 4.12. Redevelonment of Proiect Area. The Agency shall ensure that all
activities undertaken by the Agency with respect to the redevelopment of the Project Area are
undertaken and accomplished in conformity with all applicable requirements of the
Redevelopment Plan and the Redevelopment Law. 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 with all valid requirements of any
governmental authority, and will keep such properties insured at all times in conformity with
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
with 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 Law) 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 (e) of said
Section 33334.12.
Section 4.14. Annual Review of Tax Revenues. On or before [June 30th] of
each year commencing [June 30), 2007, the Agency shall submit a Report of an Independent
Redevelopment Consultant to the Insurer, which Report shall show the total amount of Tax
Revenues remaining available to be received by the Agency under the Redevelopment Plan's
cumulative tax increment limitation, as well as future cumulative annual debt service with
respect to the Loans and all Parity Debt. The Agency will not accept Tax Revenues greater than
such annual debt service in any year, if such acceptance will cause the amount remaining under
the tax increment limit to fall below remaining cumulative annual debt service with respect to the
P6401.1054.872544.3 17
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 110 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 Parity Debt.
Section 4.15. Further Assurances. The Agency 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 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 5.1. 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 prepayrnent
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 sha11 become immediately due and
P6401.1054.872544.3 1 g
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.
Section 5.2. Apnlication 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 whole amount of interest on and principal of the
Loans then due and unpaid, with interest on overdue installments of principal and 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 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 payrnent 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
P6401.1054.872544.3 19
(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. A�reement to Pav Attornevs' Fees and Exnenses. 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 nondefaulting party or the Trustee, as the case may be, the reasonable fees of
such attorneys and such other expenses so incurred (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 Trustee is intended to be exclusive of any other remedy. Every such remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter
existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting
and without regard to any other remedy conferred by the Redevelopment Law or any other law.
Section 5.6. Control of Remedies bv Insurer. Notwithstanding the provisions
of Section 5.1 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
P6401.1054.872544.3 2�
pursuant to Section 5.1 shall be subject to the prior written consent of the Insurer. No waiver of
a default shall be effective without the written consent of the Insurer.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Benefits Limited to Parties. Nothing in this Loan Agreement,
expressed or implied, is intended to give to any person other than the Agency, the Trustee, the
Insurer, 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 long 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. Dischar�e of Loan A�reement. If the Agency shall pay and
discharge the indebtedness on the Loans or any portion thereof in any one or more of the
following ways:
(a) by well 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 will, together with 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 payrnent made, the pledge of and lien 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 with respect to the Loans or
P6401.1054.872544.3 21
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 with the Trustee or such other
fiduciary, all sums due with respect to the Loans 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 with the Authority and the Trustee. Any funds thereafter held by
the Trustee hereunder, which 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 with, the
provisions of Section 5.8 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, without the prior written 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 Liabilitv. 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. Pavment on Business Days. Whenever in this Loan Agreement
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
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 11.13 of the Indenture, which is hereby incorporated.
Section 6.8. Suretv Bond. [to come]Partial Invaliditv. 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.
P6401.1054.872544.3 22
Section 6.10. Article and Section Headin�s 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 whole and not to any particular Article, Section or subdivision hereof;
and words of the masculine gender shall mean and include words of the feminine and neuter
genders.
Section 6.11. Execution of Countemarts. This Loan Agreement 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. Governin� Law. This Loan Agreement shall be construed and
governed in accordance with the laws of the State.
Section 6.13. 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.
P6401.1054.872544.3 23
(ProjectArea No. 1, As Amended, Loan Agreerrcent)
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
I�
Executive Director
PALM DESERT FINANCING AUTHORITY
I�
Chief Administrative Officer
WELLS FARGO BANK, N.A.,
as Trustee
:
Authorized Officer
P6401.1054.872544.3 24
EXHIBIT A
SCHEDULE OF SERIES 2006A LOAN PAYMENTS*
Date Princinal Interest Total
* Payable semiannually on the fifth Business Day preceding each Interest Payment
Date
P6401.1054.872544.3 1�-1
EXHIBIT B
SCHEDULE OF SERIES 2006B LOAN PAYMENTS*
Date Principal Interest Total
* Payable semiannually on the fifth Business Day preceding each Interest Payment
Date
P6401.1054.872544.3 A-1
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and
delivered by the Palm Desert Redeveloprnent Agency (the "Agency"j and Wells Fargo Bank,
National Association, as Trustee (the "Trustee°) and Munifinancial (the °Dissemination AgenY')
in connection with the issuance of $ Palm Desert Financing Authority, Tax
A1locatian Revenue Bands (Project Area No. 1, As Amended), 2006 Series A{the "Series A
Bands") and Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As Amended), 2006
Series B(the "Series B Bonds" and togethere with the Series A Bonds, the "Bonds"). The
Bonds are being issued pursuant to an Indenture of Trust datecf as of May 1, 2006, between the.
Palm Desert Financing Autharity (the "Issue�") 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 p�rties agree as follows:
SECTION 1. Purpose of fhe Disclosure Agreement. This Disclosure Agreement is
being executed and delivered by the parties for the benefit of the Owners af the Bands 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, no#ices or disclosures provided o� required under this /�greement, and has no liability to
any person, including any Owner af 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 io any capitalized term used in this Disclosure Agreement unless otherwise defined in this
Section, the following capitalized terms shall have the foflowing meanings:
"An�ual Report" shali 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 AgenY' shalf inean Munifinancial, 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
Enformation Repository for purposes of the Rule.
"Official Statement" shalt mean the final Official Statement with respect to the Bonds.
"Owners" shall mean the regis#ered vwners of the Bonds or, if the Bonds are registered
in the name of a depository, the beneficial owners of the Bonds.
"Participating Underwrite�' shall mean the ariginal 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
Cornmission under the Securities Exchange AcE of 1934.
"State Repository" shall mean any public or private repositary or entity designated by the
State as a state repasitory for the purpose of ti�e Rule. As of the date of this Agreement, there
is no State Repositary.
SECTION 3. Provision of Annual Reports.
(a) The Agency shall, .or upon written direction shall cause the Disseminatian 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 �nancial statements of the Agency may be
submitted separately from the balance of the Annual Report. ?'he Agency shall provide a written
ceriification with each Annual Report furnished to the Dissemination Agent and the Trustee to
the effect that such Annual Report constitutes the Annual ReporE required to be fumished by the
Agency hereunder. The Dissemination Agent and Trustee may conclusively rely upon such
certificatian of the Agency.
(b) If the Dissemination Agent is unable to verify that an Annual Report has been
pravided to the Repositories by the date required in subsection (a), the Dissemination Agent
shall send a noiice ta each National Repositary or to the Municipal Securities Rulemaking Board
and io the appropria#e State Repository, if any, in substant9ally the farm attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) determine each year prior ta the date far pro�iding 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 #urnished to the Dissernination 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 alt 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 fallowing:
(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
#inancial 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
F�
format similar to the fnancial statements contained in the f3fficial Statement, and the audited
financiai 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 "TAX REVENUES -- Schedule of Histarical Tax Revenues" and "-- Top Ten
Taxpayers."
Any or alf 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
materiat:
(1) principal and interest payment delinquencies;
(2) non-payment reEated defaults;
(3) unscheduled draws on debt service resenres reflecting financial
difficulties;
(4) unscheduled draws on credit enhancements reflecting financial
di�culties;
(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 Series.A 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 ac#ual 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 promptiy notify the Dissemination Agent in writing whether
ar not to report the event pursuant to subsection (fi� and promptly notify the 7rustee 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 actuat knowledge by the officer at the Trust Office
of the Trustee with regular responsibitity for the administration of the indenture.
(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.
3
(d) {f the Agency has determined that know}edge of the occurrence of a Listed Event
is material, the Agency shall promptly notify the Dissemir�ation 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 �esponse to a request under subsection (b), the Agency determines that the
Listed Event is not material, the Agency shall sa 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 af 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. ihe notice (if any) of the
underlying event is given to the Owners of affected Bonds pursuant to the Indenture.
SECTION 6. Termination of Reparting 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 Discfosure
Agreemen#, and may discharge any such Dissemination Agent, with or without appointing a
successor Dissemination Agent. The initial Dissemination Agent shall be Munifinanciai.
The Disseminaiion Agent may resign its duties hereunder at any time upon written notice
to the Agency.
SECTION 8. Amendment. Nofinrithstanding any other provis9on of this �isclosure
Agreement, the parties may amend this Disclosure l�qreement (and the Trustee ar►d the
Dissemination Agent shal{ agree io 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;
(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 wilt explain, in narrative farm, 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 Agreernent shall be
deemed to prevent the Agency fram 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 Even#,
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 ot occurrence of a Listed Event, in
addition to that which is specifically required by this Disclosure Agreement, the Agency shall
have no obligation eander this Agreement to update such information or include it in any future
Annual Report or notice of occurrence of a Listed Evenf.
SECTIC?N 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 C}wners of a majority in aggregate principal amount of
Outstanding Bands (but only to the extent funds have been provided to it or it has been
atherwise indemnified to its satisfaction from any cost, liability, �xpense or additional charges of
the Trustee whatsoever, inctuding, 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 speci�c performance by court arder, to cause the Agency, the Trustee or the
D9ssemination Agent, as the case may be, to comply with its obligations under this Disclosure
Agreement; provided that any such action may be insfituted 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 defauft under this Disclosure Agreement shall not be
deemed an Event of Default under #he Indenture or the Loan Agreement, and the sole remedy
under this Disclosure Agreement in the event of any failure af the Agency, the Trustee or the
Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel
pertormance.
SECTfON 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 offrcers, directors, employees and agents, harmless against any Ioss,
expense and iiabilities which it may incur arising out of or in the exercise or performance of its
pawers and duties hereunder, including the costs and expenses {including at#arneys fees) of
defending against any claim o# liability, but excluding liabilities due to the Dissemina#ion Agent's
or Trustee's negligence or wilful misconduct. The Dissemination Agent may rely on and shall be
protected in acting or refraining from ac#ing 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 7rustee shafl have no duty or obligatian to review any information
provided to them by the Agency hereunder and sha}I not be deemed to be acting in any fiduciary
capacity for the Authority, the �qency, the Owners, or any other party. The obligations of the
Agency under this Section shall survive resignation or remaval 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 liabie under any circumstances for monetary
damages to any person for any breach of this Agreement.
SECTION 12. Beneficiaries. This Disclosure Agreerr►ent shall inure solely to the benefit
of the Issuer, the Agency, the Trustee, the Dissemination Agent, the ?articipating Underwriter
and Owners fram time to time of the Bonds, and shall create no rights in any other person or
entity.
SECTION 13. Natices. Notices should be sent in writing to the following addresses.
The foqowing information may be conclusively relied upon until changed in writing.
Agency: Palm Desert Redevelopment Agency
73-510 Fred Waring Drive
PaEm Desert, Caiifornia 92260
, (760) 346-0611
(760) 346-0574 Fax
Dissemination Agent: MuniFinancial, Inc.
27368 Via lndustria, Suite 110
Temecula, California 92590
(909) 587-3500
(909) 587-3510 fax
Trustee: Wells Fargo Bank, National Association
707 Wilshire Boulevard, '17�' Floor
Los Angeles, CA 90017
(213) 614-3353
(213) 614-3355 Fax
SECTION 14. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which sha11 constitute but one and the
same instrument.
PALM DESER7 REDEVELOPMENi
AGENCY
By
Executive Director
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
By
Authorized Officer
MUNIFINAIVCIAL:, LLC, 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, Tax
Allocation Revenue Bonds (Project Area No. 1, As Amended),
2006 Series A and $ Palm Desert Financing
Authority, Tax Allocation Refunding Revenue Bonds (Project Area
No. 1, As Amended), 2006 Series B(Taxabie)
Date of Delivery.: , 2006
NOTICE {S 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 May 1, 2006 among the Agency, Munifinancial and Wells Fargo Bank,
Natianal Association. [The Agency anticipates that the Annual Report will be filed by
.]
Dated:
MuniFinancial, Inc. on behalf af the Agency
cc: Executive Director, Palm Desert Redevelopment Agency
Jones Hall 4/12/06
�
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REFUNDING REVENUE BONDS
(PROJECT AREA NO. 1, AS AMENDED)
2006 SERIES A
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 Indenture
(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 $ principal amount of the Authority's Tax Allocation Revenue Bonds
(Project Area No. 1, As Amended), 2006 Series A(the "Series A Bonds") and Tax Allocation
Refunding Revenue Bonds (Project Area No. 1, As Amended), 2006 Series B(Taxable) (the
(the "Series B Bonds" and together with the Series A Bonds, the "Bonds"), at a purchase
price for the Series A Bonds of $ (being the aggregate principal amount thereof,
less an underwriter's discount of $ and plus a net original issue premium of
$ ) and for the Series B 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 Bonds will be issued pursuant to an Indenture of
Trust, dated as of May 1, 2006 (the "Indenture"), by and between the Authority and BNY
Western Trust Company, as trustee thereunder (the "Trustee").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 StatemenY').
The proceeds of each series of Bonds will be used by the Authority to make two loans
(the "Series A Loan" and the "Series B Loan", and together, the "Loan") to the Agency pursuant
to a Project Area No. 1 Series A Loan Agreement (the "Series A Loan Agreement") and a
Project Area No. 1 Series B Loan Agreement (the "Series B Loan Agreement" and together with
the Series A Loan Agreement, the "Loan Agreement"), each dated as of May 1, 2006 by and
among the Authority, the Agency and the Trustee for the benefit of the Agency's Project Area
No. 1, As Amended (the "Project Area"). The proceeds of the Series A Loan will be used to
finance redevelopment activities within or of benefit to the Project Area and to pay costs of
issuance of the Series A Bonds. The proceeds of the Series B Loan will be used to refund a
portion of the indebtedness of the Agency under a Loan Agreement entered into in 1997 (the
"1997 Loan Agreement") and to pay costs of issuance of the Series B Bonds. The 1997 Loan
Agreement was entered into to make a loan (the "1997 Loan") to the Agency. The refunding of
the obligations under the refunded portion of the 1997 Loan Agreement will effect a refunding of
the corresponding portion of the Authority's Tax Allocation Refunding Revenue Bonds (Project
Area No. 1, As Amended), Series 1997 (the "1997 Refunded Bonds"). A portion of the 1997
Loan (the "1997 Remaining Loan") and the corresponding remaining 1997 Bonds (the "1997
Remaining Bonds") will remain outstanding, on a parity with the Bonds. Proceeds of each series
of Bonds will also be used to establish respective Reserve Funds or surety replacements
(described in this Official Statement) for the Bonds and to pay costs of issuance.
The Bonds shall be secured by a pledge of and lien on all of the Tax Revenues (as
defined in the Indenture) allocated to the Agency with respect to the Project Area. The
scheduled payment of principal of and interest on the Bonds shall be insured by Ambac
Assurance Corporation (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 Bands 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
StatemenY'). 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.
-2-
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 Indenture and a Continuing Disclosure
Agreement (the "Continuing Disclosure Agreement"), to provide certain annual financial
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 Authorizafion and Approval. By all necessary official action of the
Agency, the Agency has duly authorized and approved the execution and delivery of,
and the pertormance 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
-3-
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 Stafement 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 therein, in the light of the circumstances in which such
statements were made, not misleading.
(d) Underwriter's Consent to Amendments and Supplemenfs 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 pertorm 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
-4-
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.
(fl 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 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 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.
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(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
officer of the Agency and
representation and warranty
made therein.
the Agency. Any certificate signed by an authorized
delivered to the Underwriter shall be deemed a
of the Agency to the Underwriter as to the statements
(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 Series B 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.
Section 7. Authority Representations, Warranties and Covenants. The
Authority represents, warrants and covenants to the Underwriter that:
(a) Due Organization and Existence of Aufhorify. 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.
(fj 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 pertorm under the Indenture or this
Purchase Agreement, 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 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 Lrfigation. 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
-7-
change relating to the Authority which would materially adversely affect the
Authority's ability to perform under the Indenture 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) 8ring-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.
(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 Officiaf 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 Indenture 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 indenture are exempt from
registration under the Securities Act of 1933, as amended, and the {ndenture
is exempt from qualification pursuant to the Trust Indenture Act af 1939, as
amended.
(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 Rgency is a duly organized and vafidly 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
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
-10-
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 Indenture.
(ii) The Indenture has been duly authorized, executed and
delivered by the Trustee and the 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 not been obtained is or will be required for the execution and delivery of
the Indenture by the Trustee or the consummation by the Trustee of the
transactions contemplated by the Indenture.
(fj 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.
-11-
(g) Agency Cerfificate. 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 compfied 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 Tax Revenues for repayment of the Loan or
affects in any manner the right or ability of the Agency to collect or pledge the
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
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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 Indenture.
(ii) The Trustee is duly authorized to enter into the Indenture.
(iii) Compliance with the provisions on the Trustee's part contained
in the Indenture 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 Indenture 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 properties or assets held by the Trustee pursuant
to the lien created by the Indenture 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
Indenture.
(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
-13-
the Trustee would affect the existence af the Trustee or in any way contesting
or affecting the validity or enforceability of the Indenture or contesting the
powers of the Trustee or its authority to enter into and perform its obligation
under the Indenture.
(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 Tax
Revenues, as required in connection with the Prior Bonds, 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) Municipa! Bond lnsurance Policy and Surety Bond. A copy of the
Policy and the debt service reserve fund surety bond, as duly executed and
delivered by the Insurer.
(m� lnsurer Counsel Opinian. The opinion of counsel to the Insurer, in
form and substance acceptable to the Underwriter.
(n) lnsurer 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 Certificafe. 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) Addifional 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 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
-14-
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 the Bonds, or the Bonds, are not exempt from registration
-15-
under, any provision of the federal securities laws, including the Securities Act of
1933, as amended and as then in effect, or that the Indenture needs 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 shail have been imposed upon trading in securities
generally by any governmental authority or by any national securities exchange
which restrictions materia{ly adversely affect the Underwriter's abi{ity to trade the
Bonds; or
(fj 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
resufted in a declaration of war or a nationaf ernergency 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 marketabi{ity 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 shalf be in force a general suspension of trading on the New
York Stock Exchange, or minimum or maximum prices for trading shalf 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
-16-
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 Prelirninary 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 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:
Stone & Youngberg LLC
One Ferry Building
San Francisco, California 94111
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:
STONE & YOUNGBERG LLC
By:
Vice President
PALM DESERT FINANCING AUTHORITY
By:
Chief Administrative Officer
PALM DESERT REDEVELOPMENT AGENCY
By:
Executive Director
-18-
Maturity Date
(Aqril 1�,
Maturity Date
(April 1 �
APPENDIX A
Series A Bonds
Principal
Amount
Series B Bonds
Principal
Amount
A-1
Interest
Rate
Interest
Rate
Yietd
Yield
APPENDIX B
RULE 15c2-12 CERTIFICATE
The undersigned
"Underwriter") that he
Redevelopment Agency
Certificate and further
Underwriter as follows:
hereby certifies and represents to Stone & Youngberg LLC (the
is a duly appointed and acting officer of the Palm Desert
(the "Agency"), and as such is to execute and deliver this
hereby certify and reconfirm on behalf of the Agency to the
(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 Refunding Revenue Bonds (Project Area No. 1,
As Amended) 2006 Series A(the "Bonds").
(2) In connection with the offering and sale of the Bands, 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) ff, 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
ESCROW AGREEMENT
(PROJECT AREA NO. 1, AS AMENDED)
by and among
PALM DESERT FINANCING AUTHORITY
and
PALM DESERT REDEVELOPMENT AGENCY
and
WELLS, FARGO BANK, N.A.
as Escrow Agent
Dated as of May 1, 2006
Relating to the Refunding of
the 5pecial Term Bonds of
Palm Desert Financing Authority
Tax Allocation Refunding Revenue Bonds
(Project Area No. 1, As Amended)
Series 1997
maturing on April 1, 2023
P6402.10541882169.2 RWG DRAFT: 4J6/2006
TABLE OF CONTENTS
Pa�e
Section1. Definitions ..................................................................................................................... 2
Section 2. Appointment of Escrow Agent ..................................................................................... 2
Section3. Escrow Fund ................................................................................................................. 3
Section4. Deposit to Escrow Fund ................................................................................................ 3
Section 5. Investment of Escrow Fund .......................................................................................... 3
Section 6. Reinvestment; Payment of Refunding Requirements ................................................... 3
Section7. Verification ................................................................................................................... 4
Section 8. Compliance with Agreement ........................................................................................ 4
Section9. [Reserved] ..................................................................................................................... 4
Section10. Notices ........................................................................................................................ 4
Section 11. Defeasance of Prior Bonds .......................................................................................... 4
Section12. Nature of Lien ............................................................................................................. 4
Section13. Amendments ............................................................................................................... 5
Section 14. Compensation of Escrow Agent ................................................................................. 5
Section 15. Resignation or Removal of Escrow Agent; Appointment of Successor ..................... 5
Section 16. Limitation of Powers and Duties ................................................................................ 7
Section 17. Indemnification ........................................................................................................... 7
Section 18. Limitation of Liability ................................................................................................. 7
Section19. Termination .............................................:................................................................... 8
Section 20. Governing Law ........................................................................................................... 8
Section21. Severability ................................................................................................................. 8
Section22. Counterparts ................................................................................................................ 9
SCHEDULE A REFUNDING REQUIREMENTS
SCHEDULE B ESCROW SECURITIES
EXHIBIT A FORM OF DEFEASANCE NOTICE
P6402.1054\882169.2
ESCROW AGREEMENT
(Project Area No. 1, As Amended)
'This Escrow Agreement (Project Area No. 1, As Amended) (this "Agreement") is
made and entered into as of May 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, N.A., 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. l, As Amended), Series 1997 (the "Series
1997 Bonds"), pursuant to the Indenture of Trust, dated as of July 1, 1997 (the "Prior
Indenture"), by and between the Authority and Bank of America National Trust and Savings
Association, as succeeded by Wells Fargo Trust, as trustee (the "Prior Bonds Trustee").
B. The Series 1997 Bonds maturing on April 1, 2023 (the "Prior Bonds")
were designated under the Prior Indenture as "Special Term Bonds," subject to redemption on
any interest payment date on or after April 1, 2002, without premium, pursuant to the Prior
Indenture.
C. The Series 1997 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. 1, As Amended), dated as of July 1, 1997 (the "Prior Loan
Agreement"), by and among the Agency, the Authority and the Prior Bonds Trustee.
D. The Agency and the Authority has determined to redeem the Prior Bonds
pursuant to the Prior Indenture and effect a refunding thereof.
E. The Authority has determined to issue its Tax Allocation Refunding
revenue Bonds (Project Area No. 1, As Amended) 2006 Series B(Taxable) (the "Series 2006B
Bonds"), pursuant to the Indenture of Trust, dated as of even date herewith, by and between the
Authority and Wells Fargo Bank, N.A., as trustee (together with any successors and assigns, the
"2006 Trustee").
F. Proceeds of the Series 2006B Bonds will be used to make a loan (the
"Series 2006B Loan") to the Agency pursuant to the Loan Agreement, dated as of event date
herewith (the "2006 Loan Agreement"), by and among the Agency, the Authority and the 2006
Trustee.
G. Pursuant to the 2006 Loan Agreement, proceeds derived from the Series
2006B Loan will be deposited in escrow with the Escrow Agent and applied to the purchase of
P6402.1054\882169.2
noncallable direct obligations of, or noncallable obligations guaranteed by, the United States of
America.
H. 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 any portion of the Series 1997 Bonds, the principal and interest and
premium, if any, to become due thereon, then with respect to such portion of the Series 1997
Bonds the lien of the Prior Indenture will thereupon cease, terminate and become void and be
discharged and satisfied.
I. 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:
"Escrow Fund" means the Escrow Fund established and held by the Escrow
Agent pursuant to Section 3.
hereto.
"Escrow Securities" means the Investment Securities set forth in Schedule B
"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.
"Refundin� Reauirements" means an amount sufficient to pay all installments of
principal and interest of the Prior Bonds on their earliest available optional redemption date, as
set forth in Schedule A attached hereto.
Section 2. Anbointment of Escrow A�ent. The Authority and the Agency hereby
appoint Wells Fargo Bank, N.A. 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
P6402.1054\882169.2
2
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.
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. Denosit to Escrow Fund. Upon the issuance of the Series 2006B
Bonds, the Authority and the Agency shall cause a portion of the sale proceeds of the Series
2006B 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 to 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, 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 counsel to the effect that 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 payrnent when due as provided in Section 6,
shall be transferred to the Agency.
Section 6. Reinvestment; Pavrnent of Refundin� Reauirements. 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
P6402.1054\882169.2
3
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 A�reement 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 pay for the principal
and interest with respect to the Prior Bonds, in order to effectuate this Agreement. The liability
of the Escrow Agent for the payrnent 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. f Reservedl. .
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
or more Information Services (as defined in the Prior Indenture) in the form and manner
prescribed by Section 2.03(e) of the Prior Indenture. The Escrow Agent shall provide copies of
the notices described in this Section 10 the MBIA Insurance Corporation, the insurer of Prior
Bonds.
Section 11. Defeasance of Prior Bonds. The Agency and the Authority represent
and agree that, concurrently with the initial deposit of the Escrow Securities pursuant ta Section
5, 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) all principal installments of the Prior
Loan scheduled to be due on or after April 1, 2019 (including any interest thereon) will be
deemed paid and will no longer be deemed to be outstanding 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
P6402.1054\882169.2
4
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 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; nrovided, 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; and
(d) 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 opinion of counsel
with respect to compliance with this Section, including the extent, if any, to which any change,
modification or addition affects the rights of 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 A�ent. 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. Resi�nation or Removal of Escrow A�ent; Anbointment 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
P6402.1054\882169.2
S
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
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
P6402.10541882169.2
6
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
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 wiliful 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 Liabilitv. 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
P6402.1054\882169.2
%
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.
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 payrnent of any
amounts due the Escrow Agent hereunder shall be released to the Agency.
Section 20. Governin� Law. This Agreement shall be governed by the law of the
State of California.
Section 21. Severabilitv. 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.
P6402.1054\882169.2
g
Section 22. Countemarts. 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.
P6402.1054\882169.2
9
(Escrow Deposit and Trust 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.
PALM DESERT FINANCING AUTHORITY
:
Chief Administrative Officer
PALM DESERT REDEVELOPMENT AGENCY
I�
Executive Director
WELLS FARGO BANK, N.A., as Escrow Agent
:
Authorized Officer
P6402.1054\882169.2
IQ
SCHEDULE A
Redemption
Date
October 1, 2006
REFUNDING REQUIREMENTS
Redemption
Princival Interest Premium
$23,595,000 $ -N/A- $
Escrow
Reauirement
* Consists of the following Prior Bonds to be paid or optionally redeemed on October 1, 2006:
Maturity
Date
A ril 1
2023
Interest
Princinal Rate
$ 23,595,000 5.625%
Redemption
Price
100%
P6402.1054\882169.2
Schedule A-1
SCHEDULE B
ESCROW SECURITIES
P6402.1054\882169.2
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. l, As Amended)
Series 1997
maturing on April 1, 2023
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 l,
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.
DATED this _ day of , 2006
WELLS FARGO BANK, N.A., as Escrow Agent
P6402.1054\882169.2
Exhibit A
Indenture of Trust
with reference to
$ $
Palm Desert Financing Authority Palm Desert Financing Authority
Tax Allocation Revenue Bonds Tax Allocation Refunding Revenue Bonds
(Project Area No. 1, As Amended) (Project Area No. l, As Amended)
2006 Series A 2006 Series B
(Taxable)
P6402.1054/872494.3
RWG DRAFT: 4/6/2006
TABLE OF CONTENTS
Pa�e
ARTICLE I DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS;
EQUALSECURITY ........................................................................................ 2
Section1.1. Definitions .................................................................................................... 2
Section 1.2. Rules of Construction . ............................................................................... 10
Section 1.3. Authorization and Purpose of Bonds . ........................................................ 10
Section 1.4. Equal Security ............................................................................................ 10
ARTICLE II ISSUANCE OF BONDS ........................................................
Section 2.1. Designation . ..............................................................
Section 2.2. Terms of Bonds. (a) .................................................
Section 2.3. Redemption of Bonds . ..............................................
Section 2.4. Form of Bonds . .........................................................
Section 2.5. Execution of Bonds ...................................................
Section 2.6. Transfer of Bonds . ....................................................
Section 2.7. Exchange of Bonds . ..................................................
Section 2.8. Temporary Bonds ......................................................
Section 2.9. Registration Books ....................................................
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen...........
................................ 10
................................ 10
................................ 11
................................ 12
................................ 15
................................ 15
................................ 15
................................ 16
................................ 16
................................ 16
................................ 17
ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS;
ISSUANCEOF BONDS ................................................................................ 17
Section 3.1. Issuance of Bonds . ..................................................................................... 17
Section 3.2. Loan Funds; Application of Proceeds of Sale of Bonds . ........................... 17
Section 3.3. Validity of Bonds ....................................................................................... 18
ARTICLE IV REVENUES; FLOW OF FUNDS ......................................................................... 18
Section 4.1. Pledge of Revenues; Assignment of Rights ............................................... 18
Section 4.2. Receipt, Deposit and Application of Revenues . ........................................ 18
Section4.3. Investments . ............................................................................................... 19
Section 4.4. Valuation and Disposition of Investments ................................................. 20
ARTICLE V COVENANTS OF THE AUTHORITY ................................................................. 20
Section 5.1. Punctual Payment ....................................................................................... 20
Section 5.2. Extension of Payment of Bonds ................................................................. 20
Section 5.3. Against Encumbrances ............................................................................... 21
Section 5.4. Power to Issue Bonds and Make Pledge and Assignment . ........................ 21
Section 5.5. Accounting Records and Financial Statements .......................................... 21
Section 5.6. No Additional Indebtedness ....................................................................... 21
Section 5.7. Tax Covenants Regarding Series 2006A Bonds ........................................ 21
Section5.8. Loan Agreement ......................................................................................... 22
Section 5.9. Further Assurances ..................................................................................... 24
P6402.1054/872494.3 i
ARTICLEVI THE TRUSTEE ..................................................................................................... 24
Section 6.1. Appointment of Trustee . ............................................................................ 24
Section 6.2. Acceptance of Trusts .................................................................................. 24
Section 6.3. Fees, Charges and Expenses of Trustee . .................................................... 27
Section 6.4. Notice to Owners of Default . ..................................................................... 27
Section 6.5. Intervention by Trustee . ............................................................................. 28
Section 6.6. Removal of Trustee .................................................................................... 28
Section 6.7. Resignation by Trustee . ............................................................................. 28
Section 6.8. Appointment of Successor Trustee . ........................................................... 28
Section 6.9. Merger or Consolidation ............................................................................ 28
Section 6.10. Concerning any Successor Trustee . ......................................................... 29
Section 6.11. Appointment of Co-Trustee . .................................................................... 29
Section 6.12. Indemnification; Limited Liability of Trustee . ........................................ 30
ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE ..................... 30
Section 7.1. Amendment Hereof .................................................................................... 30
Section 7.2. Effect of Supplemental Indenture . ............................................................. 31
Section 7.3. Endorsement or Replacement of Bonds After Amendment . ..................... 31
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ..................................................... 31
Section8.1. Events of Default . ...................................................................................... 32
Section 8.2. Remedies Upon Event of Default . ............................................................. 32
Section 8.3. Application of Revenues and Other Funds After Default .......................... 33
Section 8.4. Power of Trustee to Control Proceedings . ................................................. 34
Section 8.5. Appointment of Receivers . ........................................................................ 34
Section8.6. Non-Waiver ................................................................................................ 35
Section 8.7. Limitation on Rights and Remedies of Owners ......................................... 35
Section 8.8. Termination of Proceedings ....................................................................... 35
ARTICLE IX BOND 1NSURANCE ............................................................................................ 36
ARTICLE X BOOK-ENTRY SYSTEM ...................................................................................... 36
Section 10.1. Book-Entry System; Limited Obligation of Authority . ........................... 36
Section 10.2. Representation Letter ............................................................................... 37
Section 10.3. Transfers Outside Book-Entry System . ................................................... 37
Section 10.4. Payments to the Nominee . ....................................................................... 37
Section 10.5. Initial Depository and Nominee ............................................................... 37
ARTICLE XI MISCELLANEOUS .............................................................................................. 37
Section 11.1. Limited Liability of Authority . ................................................................ 37
Section 11.2. Benefits of Indenture Limited to Parties .................................................. 38
Section 11.3. Discharge of Indenture ............................................................................. 38
Section 11.4. Successor Is Deemed Included in All References to Predecessor. .......... 39
Section 11.5. Content of Certificates . ............................................................................ 39
Section 11.6. Execution of Documents by Owners . ...................................................... 39
Section 11.7. Disqualified Bonds ................................................................................... 40
P6402.1054/872494.3 11
Section 11.8.
Section 11.9.
Section 11.10.
Section 11.11.
Section 11.12.
Section 11.13.
Section 11.14.
Section 11.15.
Waiver of Personal Liability . ................................................................... 40
PartialInvalidity ....................................................................................... 40
Destruction of Cancelled Bonds . ........................................................... 40
Fundsand Accounts ............................................................................... 41
Payrnent on Business Days . ................................................................... 41
Notices. .................................................................................................. 41
UnclaimedMoneys . ............................................................................... 42
GoverningLaw . ..................................................................................... 43
EXHIBIT A— FORM OF SERIES 2006A BOND
EXHIBIT B— FORM OF SERIES 2006B BOND
P6402.1054/872494.3 111
Indenture of Trust
This Indenture of Trust (this "Indenture") is made and entered into as of May 1, 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, N.A., a national banking association duly organized and validly existing under the laws of
the United States of America, having 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 far any
of its corporate purposes.
B. A Redevelopment Plan, as amended, for the Project Area (hereinafter
defined) 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 for Project Area
No. 1, As Amended, of the Agency, the Authority has made two loans (the "Loans") to the
Agency under and pursuant to the Project Area No. 1, As Amended, Loan Agreement, dated as
of May l, 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 its Tax Allocation Revenue Bands (Project
Area No. 1, As Amended), 2006 Series A, in the aggregate principal amount of $
(the "Series 2006A Bonds") and its Tax Allocation Refunding Revenue Bonds (Project Area
No.l, As Amended), 2006 Series B(Taxable), in the aggregate principal amount of
$ (together with the Series 2006A Bonds, 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 tertns 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
P6402.1 O5A1872494.3 1
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:
ARTICLE I
DEFINITIONS; AUTHORIZATION AND PURPOSE
OF BONDS; EQUAL SECURITY
Section l.l. 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 1.1 of the Loan Agreement and not otherwise defined in this Section 1.1 shall have the
meanings ascribed thereby in the Loan Agreement.
"Act" means Articles 1 through 4(commencing with Section 6500) of chapter 5,
Division 7, Title 1 of the Government Code of the State, as in existence on the Closing Date or
as thereafter amended from time to time.
"A�encv" 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.
"Authoritv" 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.
"Authoritv Commission" means the governing body of the Authority.
"Bond Counsel" means Richards, Watson & Gershon, A Professional
Corporation, Los Angeles, California, or a firm of attorneys of favorable reputation in the field of
municipal bond law.
"Bond Law" means the Marks-Roos Local Bond Pooling Act of 1985, being
Article 4 of the Act (commencing with 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 April 2 in one
calendar year to April 1 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 April 1, 2007.
"Bonds" means the Series 2006A Bonds and the Series 2006B Bonds.
"Business Dav" means any day other than (i) a Saturday or a Sunday or (ii) any
other day on which the New York Stock Exchange or banks are authorized or obligated by law
P6402.1054/872494.3 2
or executive order to close in New York, New York, San Francisco, California, Los Angeles,
California or any city in which the Trust Office is located.
"Certificate" means a certificate in writing signed by any officer of the designated
public entity, duly authorized by its legislative body for that purpose.
"Citv" means the City of Palm Desert, a charter city and municipal corporation
duly organized and validly existing under the laws of the State.
"Closin� Date" means the date of delivery of the Bonds to the Underwriter as the
original purchaser.
"Code" means the Internal Revenue Code of 1986, as amended.
"Countv" means the County of Riverside.
"Defeasance Obli�ations" 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 weekly, rnust be equal to at least 105 percent of
P6402.1054/872494.3 3
the amount of cash transferred by or on behalf of the Authority to
the counterparty plus accrued interest.
"Depositorv" means The Depository Trust Company, New York, New 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 DefaulY' means any of the events described in Section 8.1.
"Fiscal Year" means any twelve-month period extending from July 1 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.
"Indenendent 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, lOth 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.
"Insurance Policv" 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 AccounY' means the account by that name established and held by the
Trustee pursuant to Section 4.2(b)(1).
"Interest Pavment Date" means April 1 and October 1 of each year, commencing
on October 1, 2006.
"Loan A�reement" means the Project Area No. 1, As Amended, Loan Agreement,
dated as of May 1, 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.
P6402.1054/872494.3 4
Fund.
"Loan Funds" means the Series 2006A Loan Fund and the Series 2006B Loan
"Loans" means the Series 2006A Loan and the Series 2006B Loan.
"Moodv'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.
"Outstandin�", when used as of any particular time with reference to Bonds,
means (subject to the provisions of Section 11.7) 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 11.3, and (iii) Bonds in lieu 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.
"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 evidences 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 itsel�:
U.S. Exnort-Imnort Bank (Eximbank)
Direct obligations or fully guaranteed certificates of
beneficial ownership
2. Farmers Home Administration (FHA)
Certificates of beneficial ownership
P6402.1054/872494.3
3. Federal Financin� Bank
4. Federal Housin� Administration Debentures (FHA)
5. General Services Administration
Participation certificates
6. Government National Mort�a�e Association (GNMA or
"Ginnie Mae")
GNMA - guaranteed mortgage-backed bonds
GNMA - guaranteed pass-through obligations
7. U.S. Maritime Administration
Guaranteed Title XI financing
8. U.S. Denartment of Housin� and Urban Develonment
(HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - U.S. government
guaranteed debentures
U.S. Public Housing Notes and Bonds - U.S. government
guaranteed public housing notes and bonds
C. Bonds, debentures, notes or other evidences of indebtedness issued
or guaranteed by any of the following non-full faith and credit U.S. government agencies
(provided that stripped securities are only permitted if they have been stripped by the agency
itsel fl:
1. Federal Home Loan Bank Svstem
Senior debt obligations
2. Federal Home Loan Mort�a�e Corooration (FHLMC or
"Freddie Mac")
Participation Certificates
Senior debt obligations
3. Federal National Mort�a�e Association (FNMA or "Fannie
Mae")
Mortgage-backed securities and senior debt obligations
4. Student Loan Marketin� Association (SLMA or "Sallie
Mae")
Senior debt obligations
5. Resolution Fundin� Coro. (REFCORP) obligations
P6402.1054/872494.3 6
D. Money market funds, including funds for which the Trustee or its
affiliates provide investment advisory or other management services, registered under the
Investment Company Act of 1940, whose 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,
Aal 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 which are fully insured by the Federal Deposit Insurance Corporation,
including those of the Trustee and its affiliates.
G.
acceptable to the Insurer.
H.
Investment agreements, including guaranteed investment contracts,
Commercial paper rated, at the time of purchase, "Prime - 1" by
Moody's and "A-1" 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 - 1" or "A3" or better by Moody's and "A-1" or "A" or
better by S&P.
K. Repurchase Agreements which are acceptable to 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 will 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 "Aa3" by Moody's and "AA-" by S&P at time of purchase, and shall mature within three
years or less.
P6402.1054/872494.3 7
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 4.2(b)(2).
"Proiect Area" means the territory within the project area described and defined in
the Redevelopment Plan approved and adopted by the City by its Ordinance No. 80 and amended
by its Ordinances Nos. 275 and 32�.
"Record Date" means, with respect to any Interest Payment Date, the 15th
calendar day of the month immediately preceding such Interest Payment Date, whether 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 4.2(b)(3).
"Redevelonment Law" means the Community Redevelopment Law, being
California Health and Safety Code Section 33000, et sea., and all future acts supplemental
thereto or amendatory thereof.
"Redevelonment Plan" means the Redevelopment Plan for the Project Area,
approved and adopted by the City by its Ordinance No. 80 and includes any amendment of the
Redevelopment Plan heretofore or hereafter made pursuant to law.
"Re�istration Books" means the records maintained by the Trustee pursuant to
Section 2.9 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 docuxnents 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.
"Reauest" means a request in writing signed by any officer of the designated
public entity duly authorized by its legislative body for that purpose.
"Revenue Fund" means the fund by that name established and held by the Trustee
pursuant to Section 4.2(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
P6402.1054/872494.3 $
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 5.7.
"S&P" means Standard & Poor's Ratings Group and its successors and assigns.
"Securities Denositories" means The Depository Trust Company, 55 Water Street,
SOth Floor, New York, New York, 10041, Attn: Call Notification Department, Fax (212} 855-
7232; 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 Revenue Bonds (Project Area No. 1, As Amended), 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 Fund" means the fund by that name established and held by
the Trustee pursuant to Section 3.2.
"Series 2006A Term Bonds" means the Series 2006A Bonds maturing on April 1,
20_ and April l, 20_.
"Series 2006B Bonds" means the Palm Desert Financing Authority Tax
Allocation Refunding Revenue Bonds (Project Area No. 1, As Amended), 2006 Series B
(Taxable).
"Series 2006B Loan" means the Series 2006B Loan, as defined in the Loan
Agreement, made by the Authority to the Agency.
"Series 2006B Loan Fund" means the fund by that name established and held by
the Trustee pursuant to Section 3.2.
"Series 2006B Term Bonds" means the Series 2006B Bonds maturing on April 1,
20_ and April 1, 20_.
"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 7.1.
"Tax Re�ulations" means temporary and permanent regulations promulgated
under or with respect to Section 103 and Sections 141 through 150, inclusive, of the Code.
P6402.1054/872494.3 9
"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, N.A., 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 Stone & Youngberg LLC.
Section 1.2. 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 1.3. Authorization and Puraose 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 Loans to the Agency pursuant to the Loan Agreement.
Section 1.4. Ectual Securitv. 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 otherwise 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 whatsoever, except as expressly provided therein or herein.
ARTICLE II
ISSUANCE OF BONDS
Section 2.1. Desimation. The Series 2006A Bonds shall be designated the
Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 1, As
Amended), 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 Refunding Revenue Bonds (Project Area No. 1, As Amended), 2006
Series B(Taxable), and shall be issued in the original aggregate principal amount of
$ .
P6402.1054/872494.3 j Q
Section 2.2. 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 long 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 April 1 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
(Abril 1) Amount Rate
(to come)
(b) The Series 2006B 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 2006B
Bond shall have more than one maturity date. The Series 2006B Bonds shall be dated the
Closing Date, shall mature on April 1 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
(April 1) Amount Rate
(to come)
(c) Interest on the 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 Payrnent Date to the Owner at the address of
such Owner as it appears on the Registration Books on such Record Date; urovided, however,
that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of
Outstanding Bonds filed with the Trustee prior to any Record Date, interest on such 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 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
Bonds shall be payable in lawful money of the United States of America.
Each Bond shall bear interest from the Interest Payrnent 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 Payrnent Date, in
which event it shall bear interest from such Interest Payment Date, or (ii) it is authenticated on or
P6402.1054/872494.3 11
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 Bond interest
with respect to such Bond is in default, such Bond shall bear interest from the Interest Payment
Date to which interest has been paid or made available for payment with respect to such Bond.
Section 2.3. Redembtion of Bonds.
(a) Redemntion from Ontional Loan Prepavments. 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 prepayrnent 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 April 1, 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:
Redembtion Dates Redemption Price
April 1, 20_ and October 1, 20 %
April 1, 20_ and October 1, 20_
April 1, 20_ and thereafter 100
In the event that the Agency shall exercise its option to prepay principal
installments of the Series 2006B Loan pursuant to Section 2.4(b) of the Loan Agreement, the
Revenues derived from such prepayrnent 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 $5,000 principal amount, on any Interest Payment
Date on or after April 1, 20_, at the following respective redemption prices (expressed as a
percentage of the principal amount of Series 2006B Bonds to be redeemed), plus accrued interest
thereon to the date of redemption:
Redemption Dates Redembtion Price
April 1, 20_ and October 1, 20 %
April 1, 20_ and October 1, 20_
April 1, 20_ and thereafter 100
The Authority shall provide written notice to the Trustee of any redemption
pursuant to this Section 2.3(a) at least 45 but not more than 90 days prior to the date fixed for
such redemption.
(b) Mandatory Sinkins Fund Redemption. The Series 2006A Term Bonds shall
also be subject to mandatory redemption by lot, on April 1 in each year commencing April l,
20 and April 1, 20_, respectively, from sinking fund payments made by the Authority into the
Principal Account pursuant to Section 4.2(b)(2), at a redemption price equal to the principal
P6402.1054/872494.3 12
amount thereof to be redeemed, without premium, plus accrued interest to the date of
redemption, in the aggregate respective principal amounts and on April 1 in the respective years
as set forth in the following tables; brovided, however, that (i) in lieu of redemption thereof on
April 1 in any year, the Series 2006A Term 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 January 15, and (ii) if some but all of the Series 2006A Term Bonds have been
redeemed pursuant to Paragraph (a) above, the total amount of all future sinking fund payments
shall be reduced by the aggregate principal arnount of the Series 2006A Term Bonds so
redeemed, to be allocated among such sinking fund payrnents on a pro rata basis.
Series 2006A Term Bonds Maturin� Anril 1. 20
Sinking Fund
Redemption Date Principal Amount
(Anril 11 to be Redeemed
Series 2006A Term Bonds Maturins Anril 1, 20
Sinking Fund
Redemption Date Principal Amount
(Anril 11 to be Redeemed
The Series 2006B Term Bonds shall also be subject to mandatory redemption by
lot, on April 1 in each year commencing April l, 20 and April 1, 20_, respectively, from
sinking fund payments made by the Authority into the Principal Account pursuant to Section
4.2(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 April 1 in the respective years as set forth in the following tables; provided,
however, that (i) in lieu of redemption thereof on April 1 in any year, the Series 2006B Term
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 January 15, and (ii) if some
but all of the Series 2006B Term Bonds have been redeemed pursuant to Paragraph (a) above,
the total amount of all future sinking fund payments shall be reduced by the aggregate principal
amount of the Series 2006B Term Bonds so redeemed, to be allocated among such sinking fund
payments on a pro rata basis.
P6402.1054/872494.3 13
Series 2006B Term Bonds Maturins Abril 1, 20
Sinking Fund
Redemption Date Principal Amount
(Abril 1) to be Redeemed
Series 2006B Term Bonds Maturin� Anril l. 20
Sinking Fund
Redemption Date Principal Amount
(April 1) to be Redeemed
(c) Notice of Redemntion. 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, 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; nrovided, 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 whole) 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.
(d) Selection of Bonds for Redemvtion. With respect to the redemption of Bonds
of either series, whenever 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 which the
Trustee in its sole discretion shall deem appropriate under the circumstances. For purposes of
P6402.1054/872494.3 14
such selection, all Bonds of a series shall be deemed to be comprised of separate $5,000 portions
and such portions shall be treated as separate bonds which may be separately redeemed.
(e) Partial Redemntion 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 equal to the unredeemed portion of the Bond to be redeemed.
(� Effect of Redembtion. 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 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. All Bonds redeemed pursuant to this Section shall be destroyed.
Section 2.4. Form of Bonds. The Series 2006A Bonds, the Trustee's certiiicate
of authentication, and the assignment shall be substantially in the respective forms set forth in
Exhibit A attached hereto and by this reference incorporated herein, with necessary or
appropriate variations, omissions and insertions, as permitted or required by this Indenture. The
Series 2006B Bonds, the Trustee's certificate of authentication, and the assignment shall be
substantially in the respective forms set forth in Exhibit B attached hereto and by this reference
incorporated herein, with necessary or appropriate variations, omissions and insertions, as
permitted or required by this �Indenture.
Section 2.5. Execution of Bonds. The Bonds shall be signed in the name and
on behalf of the Authority with the manual or facsimile signatures of its President and attested
with 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 who 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 who 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 who 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 or Exhibit B. as applicable, 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 2.6. Transfer of Bonds. Any Bond may, in accordance with its terms,
be transferred, upon the Registration Books, by the person in whose name it is registered, in
P6402.1054/872494.3 15
person or by his duly authorized attorney, upon surrender of such Bond for cancellation,
accompanied by delivery of a written 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
with 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 with respect to such transfer. The Trustee shall not be required to transfer, pursuant to
this Section 2.6, 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 2.3.
Section 2.7. Exchan�e of Bonds. Bonds may be exchanged at the Trust Office
for the same aggregate principal amount 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 with 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 with
respect to such exchange. The Trustee shall not be required to exchange, pursuant to this Section
2.7, 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 2.3.
Section 2.8. Temborary Bonds. The Bonds may be issued initially in
temporary form exchangeable for definitive Bonds when 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 with 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 will execute and furnish definitive Bonds without 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 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 2.9. Re�istration Books. The Trustee will keep or cause to be kept at
its Trust Office sufficient records for the registration and transfer of the Bonds, which shall at all
times during regular business hours be open to inspection by the Authority with 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.
P6402.1054/872494.3 16
Section 2.10. Bonds Mutilated, Lost, Destroved 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 arnount 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 loss, 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 lieu 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 without 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 2.10 and of the expenses which may be incurred by the Authority and the
Trustee. Any Bond issued under the provisions of this Section 2.10 in lieu of any Bond alleged
to be lost, destroyed or stolen shall constitute an original contractual obligation on the part of the
Authority whether or not the Bond alleged to be lost, destroyed or stolen be at any time
enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this
Indenture with all other Bonds secured by this Indenture.
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS OF
BONDS; ISSUANCE OF BONDS
Section 3.1. 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 principal arnounts 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 3.2. Loan Funds; At�blication 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 payrnent 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.
P6402.1054/872494.3 1 %
Section 3.3. Validitv of Bonds. The validity of the authorization and issuance
of the Bonds shall not be affected in any way by any proceedings taken by the Agency with
respect to the application of the proceeds of the Loans, 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 4.1. Pled�e of Revenues; Assi�nment of Ri�hts. Subject to the
provisions of Section 6.3, 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 lien upon the Revenues. So long 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 4.2.
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 5.4 thereo�. The Trustee 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 4.2. Receint, Deposit and Apnlication of Revenues.
(a) Deposit of Revenues, Revenue Fund. All Revenues described in clause (i) of
the definition thereof in Section 1.1 shall be promptly deposited by the Trustee upon receipt
thereof in a special fund designated as the "Revenue Fund" which the Trustee shall establish,
maintain and hold in trust hereunder.
(b) Annlication of Revenues; Accounts. On or before each Interest Payment
Date, 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:
P6402.1054/872494.3 1$
(1) 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 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 Bonds on the next succeeding Interest Payment Date. All moneys in the
Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying the
interest on the Bonds as it shall become due and payable (including accrued interest on any
Bonds 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 pay any interest then having come due and
payable on the Outstanding Bonds, shall be withdrawn therefrom by the Trustee and transferred
to the Agency to be used for any lawful purposes of the Agency.
(2) Princinal Account. On or before each date on which 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 2.2 and (ii) the
principal amount of the Bonds subject to mandatory sinking fund redemption on such date
pursuant to Section 2.3(b). All moneys in the Principal Account shall be used and withdrawn by
the Trustee solely for the purpose of paying the principal 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 having 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 and rederription
premiums, if any, on the Bonds to be redeemed on their respective redemption dates, as directed
by the Authority.
Section 4.3. 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 Trustee shall invest any such
moneys in Pertnitted 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
P6402.1054/8724943 19
investment was made. For purposes of acquiring any investments hereunder, the Trustee may
commingle funds held by it hereunder. The Trustee 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 l.l 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 waives
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 4.4. Valuation and Disbosition 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 5.1. Punctual Pavment. 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 5.2. Extension of Pavrnent 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
P6402.1054/872494.3 20
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 5.2 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 5.3. A�ainst 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 while 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 5.4. Power to Issue Bonds and Make Pled�e and Assi�nment. 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. T'he Bonds and the provisions of this Indenture are and will be the legal, valid
and binding special obligations of the Authority in accordance with their terms, and the
Authority shall at all times, to the extent permitted by law, defend, preserve and protect said
pledge and assignxnent of Revenues and other assets and all the rights of the Owners under this
Indenture against all claims and demands of all persons whomsoever.
Section 5.5. Accountin� 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
with corporate trust industry standards, in which 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 with reasonable prior notice.
Section 5.6. No Additional Indebtedness. Except for the Bonds, the Authority
shall not incur any indebtedness payable out of the Revenues.
Section 5.7. Tax Covenants Re�ardin� Series 2006A Bonds.
(a) The Authority covenants that, in order to maintain the exclusion from gross
income for Federal income tax purposes of the interest on the Series 2006A Bonds, and for no
other purpose, the Authority will 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 camply with such written instructions as may be provided by
Bond Counsel.
P6402.1054/872494.3 21
(b) The Authority covenants that no part of the proceeds of the Series 2006A
Bonds shall be used, directly or indirectly, to acquire any Investment Property which would
cause the Series 2006A 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 with the rebate
requirements of Section 148 of the Code, the Authority further covenants that it will pay or cause
to be paid to the United States the amounts necessary to satisfy the requirements of Section
148(� of the Code, and that it will 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 with the requirements of Section 148 of the Code, such covenants to
survive the defeasance of the Series 2006A Bonds.
(c) The Authority covenants that it will not take any action or omit to take any
action, which action or omission, if reasonably expected on the date of initial execution and
delivery of the Series 2006A Bonds, would result in a loss of exclusion from gross income for
purposes of Federal income taxation, under Section 103 of the Code, of interest on the Series
2006A Bonds.
(d) The Authority covenants that it will not use or permit the use of any property
financed with the proceeds of the Series 2006A Bonds by any person (other than a state or local
governmental unit) in such manner or to such extent as would result in a loss of exclusion of the
interest on the Series 2006A 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 the Indenture with respect to the Series 2006A Bonds shall be:
(i) used in making loans guaranteed by the United States (or any agency or instrumentality
thereo�, (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 whole or in part) by the United States (or any agency or instrumentality thereo fl; 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 21B(d)(3) of the Federal Home Loan Bank Act, as
amended by Section 511(a) of the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989, (e) investments permitted under regulations issued pursuant to Section 149(b)(3)(B) of
the Code, or (� 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 Series 2006A Bonds.
Section 5.8. Loan A�reement. The Trustee, as assignee of the Authority's
rights pursuant to Section 4.1, shall receive all amounts due from the Agency pursuant to the
Loan Agreement and, upon an Event of Default, shall diligently enforce, and take a11 steps,
P6402.1054/872494.3 22
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 with the written consent of the Insurer (as long as the Insurance
Policy is in full force and effect) and only: (i) if the Authority, the Agency or the Trustee first
obtains the written consent of the Owners of a majority in aggregate principal amount of the
affected Bonds then Outstanding to such amendment or modification; brovided, however, that no
such amendment or modification shall (a) extend the maturity of or reduce the amount of interest
or principal payrnents 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, without the express written consent of the Owner of each
affected Bond, (b) reduce the percentage of the Bonds required for the written consent to any
such modification or amendment thereof or hereof, or (c) without its written consent thereto,
modify any of the rights or obligations of the Trustee; or (ii) without the consent of any of the
Owners, if such amendment or modification does not modify the rights or obligations of the
Trustee without its prior written 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 whatsoever 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 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 Series 2006A 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 5.8 shall prevent the Agency and the Authority, with the
written 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; brovided, however, no sueh amendment or modification shall affect the rights ar
obligations of the Trustee without its prior written consent. The Trustee shall be entitled to rely
upon the opinion of Bond Counsel stating that the requirements of this Section 5.8 have been met
with respect to any amendment or modification of the Loan Agreement.
P6402.1054/872494.3 23
Section 5.9. 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 6.1. Annointment of Trustee. Wells Fargo Bank, N.A., a national
banking association organized and existing under and by virtue of the laws of the United States
of America, 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 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 6.1 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 prior to maturity, and to cancel all Bonds upon payrnent thereof. The Trustee shall
keep accurate records of all funds administered by it and of all Bonds paid and discharged.
Section 6.2. 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 the Indenture against the Trustee. In case an Event of Default
hereunder has occurred (which has not been cured or waived), 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 such advice or an opinion of counsel as full and complete protection for any
action taken or suffered by it hereunder.
P6402.1054/8724943 24
(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 with the same rights which it would have if not the Trustee; may acquire
and dispose of other bonds or evidences of indebtedness of the Authority with the same rights it
would have if it were 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 with respect to, any
committee formed to protect the rights of Owners of Bonds, whether 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 with the Authority.
(e) The Trustee shall be protected in acting upon any Report, notice, request,
consent, certificate, order, affidavit, letter, 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 who 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.
(� 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 which the Trustee has been given notice or is
deemed to have notice, as provided in Section 6.2(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
willful 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 willful 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 payrnents to
P6402.1054/872494.3 2 S
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.
(1) Before taking action referred to in Section 6.5, Section 8.2 or the first
paragraph of Section 5.8, 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 payrnent 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.
P6402.1054/872494.3 26
(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) The Trustee in its capacity as Trustee is authorized and directed to execute the
Loan Agreement.
(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 without
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 6.2(r), the Trustee
notify the Authority and the Agency in writing within five business days after (i) the occurrence
of the event giving rise to the unavoidable delay, (ii) the Trustee's actual knowledge of the
impending unavoidable delay, or (iii) the Trustee's knowledge of sufficient facts under which a
reasonable person would conclude the unavoidable delay will occur.
(s) The Trustee 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 Trustee 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 designated and authorized to
sign for the party signing such instructions and/or directions, and (iii) the Trustee shall have
received a current incumbency certificate containing the specimen signature of such designated
person.
Section 6.3. Fees, Char�es and Expenses of Trustee. The Trustee shall be
entitled to payment and reimbursement for reasonable fees for its services rendered hereunder
and all advances (with interest on such advances at the maximum rate allowed by law), counsel
fees 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 Trustee in connection with such services, which payment and reimbursement
shall not be limited by any provision of law in regard to the compensation of a trustee of an
express trust. Upon the occurrence of an Event of Default hereunder, but only upon an Event of
Default, the Trustee shall have a first lien with right of payment prior to payment of any Bond
upon the amounts held hereunder for the foregoing fees, charges and expenses incurred by it
respectively, which right to payrnent shall survive the resignation or removal of the Trustee.
Section 6.4. Notice to Owners of Default. If an Event of Default hereunder
occurs with respect to any Bonds of which the Trustee has been given or is deemed to have
P6402.1054/872494.3 2%
notice, as provided in Section 6.2(h), then the Trustee shall promptly given written notice thereof
by first-class mail to the Owner of each such Bond, unless such Event of Default shall have been
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 when due, the Trustee may elect not
to give such notice if and so long as the Trustee in good faith determines that such Event of
Default does not materially adversely affect the interests of the Owners or that it is otherwise not
in the best interests of the Owners to give such notice.
Section 6.5. Intervention bv Trustee. In any judicial proceeding to which the
Authority is a party which, in the opinion of the Trustee, has a substantial bearing on the interests
of Owners of any of the Bonds, the Trustee may intervene on behalf of such Owners, and subject
to Section 6.2(1), shall do so if requested in writing by the Owners of a majority in aggregate
principal amount of such Bonds then Outstanding.
Section 6.6. Removal of Trustee. The Owners of a majority in aggregate
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 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 Trustee, whereupon 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 6.1.
Section 6.7. Resi�nation bv 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 6.8. Anpointment of Successor Trustee. In the event of the removal or
resignation of the Trustee pursuant to Sections 6.6 or 6.7, 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 whatsoever fail to appoint a successor Trustee within 60 days
following the delivery to the Trustee of the instrument described in Section 6.6 or within 60 days
following the receipt of notice by the Authority pursuant to Section 6.7, 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 6.1. 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 6.9. Mer�er 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
P6402.1054/872494.3 2 g
substantially all of its corporate trust business, provided such bank or trust company shall be
eligible under Section 6.1, 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. Concernin� anv 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 Trustee's 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 6.11. Anpointment 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 6.11 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
P6402.1454/872494.3 29
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 Liabilitv 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 othenvise 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 Trustee 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 7.1. 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 whatsoever as the Authority may deern 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 judgrnent of the Authority; or
P6402.1054/8724943 30
(c) To amend any provision hereof 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 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 7.1, 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 which shall become binding when
the written 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 with the Trustee. No such modification or amendment shall (i) extend the maturity of or
reduce the interest rate on any Bond or otherwise 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 without the express written consent of the Owner of such
Bond or (ii) reduce the percentage of Bonds required for the written consent to any such
amendment or modification. In no event shall any Supplemental Indenture modify any of the
rights or obligations of the Trustee without its prior written consent.
Section 7.2. 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 7.3. 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
1NSURANCE POLICY REMAINS IN EFFECT AND THE INSURER HAS NOT
DEFAULTED WITH RESPECT TO ITS PAYMENT OBLIGATIONS UNDER THE
1NSURANCE POLICY, ALL PROVISIONS OF THIS ARTICLE VIII SHALL BE SUBJECT
TO, AND QUALIFIED BY, THE PROVISIONS SET FORTH IN ARTICLE IX, 1NCLUDING,
P6402.1054/872494.3 31
WITHOUT LIMITATION, THE INSURER'S RIGHT TO CONSENT TO ACCELERATION
OF THE BONDS, AND THE 1NSURER'S RIGHT TO CONSENT TO OR DIRECT CERTAIN
AUTHORITY, TRUSTEE OR OWNER ACTIONS.
Section 8.1. Events of Default. The following events shall be Events of Default
hereunder:
(a) Default in the due and punctual payment of the principal 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) Default in the due and punctual payment of any installment of interest on any
Bond when and as such interest installment shall become due and payable.
(c) 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 8.2. 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
P6402.1054/872494.3 3 2
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 waive 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 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 6.2(1), the Trustee shall be obligated to exercise such one or
more of the rights and powers conferred by this Article VIII, as the Trustee, 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 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 8.3. Abblication 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
P6402.1054/872494.3 3 3
Second, to the payrnent of the whole amount of interest on and principal of the
Bonds then due and unpaid, with interest on overdue installments of principal and 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 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 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 pay 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.
Section 8.4. Power of Trustee to Control Proceedin�s. 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, whether 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, with respect to the
continuance, discontinuance, withdrawal, 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, withdraw, compromise or settle, or otherwise dispose of any litigation
pending at law or in equity, if at the time there has been filed with it a written request signed by
the Owners of a majority in aggregate principal amount of the Outstanding Bonds hereunder
opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such
litigation. Any suit, action or proceeding which 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, 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 8.5. 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, with such powers as the court
making such appointment shall confer.
P6402.1054/872494.3 34
Section 8.6. Non-Waiver. Nothing in this Article VIII 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 waiver 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 waiver 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 8.7. Limitation on Ri�hts and Remedies of Owners. No Owner shall
have the right to institute any suit, action or proceeding at law or in equity, for any remedy under
or upon this Indenture, unless (i) such Owner shall have previously given to the Trustee written
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 written 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 written request shall have been received by, and said tender of
indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy
hereunder; it being understood and intended that no one or more Owners shall have any right in
any manner whatever by his or their 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 any Bond to receive payrnent of the principal of and
interest and premium, if any, on such Bond as herein provided or to institute suit for the
enforcement of any such payment, sha11 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 8.8. Termination of Proceedin�s. In case the Trustee shall have
proceeded to enforce any right under this Indenture by the appointment of a receiver or
otherwise, 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
P6402.1054/872494.3 3 S
regard to the property subject to this Indenture, and all rights, remedies and powers of the
Trustee shall continue as if no such proceedings had been taken.
ARTICLE IX
BOND INSURANCE
(to come)
ARTICLE X
BOOK-ENTRY SYSTEM
Section 10.1. Book-Entry Svstem; Limited Obli�ation of Authoritv. 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 10.3, 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 Trustee 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 whatsoever. 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,
P6402.1054/872494.3 3 6
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 10.2. Renresentation 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 Trustee any obligation whatsoever 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 all representations made by it in its 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 other 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 10.3. Transfers Outside Book-Entry Svstem. 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 will
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 whatever name or names persons transferring or
exchanging Bonds shall designate, in accordance with the provisions of Section 2.9.
Section 10.4. Pavments 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 10.5. 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 & Co., as Nominee of The Depository Trust Company, New York, New York.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Limited Liabilitv of Authoritv. 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 amounts payable under the Loan Agreement).
P6402.1054/872494.3 3 �
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 without 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;
lien 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 11.2. 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 11.3. Dischar�e 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 well and truly paying or causing to be paid the principal of and interest and
premium, if any, on such Bonds, as and when 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 mailed pursuant to Section 2.3 or provision satisfactory to the Trustee shall have been
made for the mailing 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
P6402.1054/872494.3 3 $
following any payment or discharge of the Outstanding Bonds pursuant to this Section 11.3 and
the payment of the Trustee's expenses and costs, shall be paid over to the Authority.
Section 11.4. 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 11.5. 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 11.6. Execution of Documents bv Owners. Any request, consent or
other instrument required by t}ais 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 11.6.
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. �
P6402.1054/872494.3 3 9
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 lieu 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 lieu of obtaining any demand, request, direction, consent or waiver 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 11.7. Disaualified Bonds. In determining whether the Owners of the
requisite aggregate principal amount of Bonds have concurred in any demand, request, direction,
consent or waiver under this Indenture, Bonds which are owned or held by or for the account of
the Agency or the Authority (but excluding Bonds held in any employees' reti�ement 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 11.8. Waiver of Personal Liabilitv. 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 perfortnance of any official duty provided by law.
Section 11.9. Partial Invaliditv. 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 11.10. 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 Trustee, 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, that the Authority shall reimburse the Trustee
for the Trustee's costs incurred in connection with the microfilming or the required permanent
recording, if any, related thereto.
P6402.1054/872494.3 4�
Section 11.11. 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. Pavment 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 �rom and after such day.
Section 11.13. 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 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
73-510 Fred Waring Drive
Palm Desert, California 92260
Attention: Chief Administrative Officer
Facsimile: (760) 340-0574
If to the Agency: Palm Desert Redevelopment Agency
73-510 Fred Waring Drive
Palm Desert, California 92260
Attention: Executive Director
Facsimile: (760) 340-0574
If to the Trustee: Wells Fargo Bank, N.A.
707 Wilshire Boulevard, 17th Floor
Los Angeles, California 90017
Attention: Corporate Trust Department
Facsimile: (213) 614-3355
If to the Insurer:
P6402.1054/872494.3 41
The Authority, the Agency and the Trustee may designate any further or different
addresses to which subsequent notices, certificates or other communications shall be sent.
Notices to the Insurer shall be governed by Section 9.2.
Section 11.14. Unclaimed Monevs. Anything in this Indenture to the contrary
notwithstanding, any moneys held by the Trustee in trust for the payrnent and discharge of any 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 firom 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 any 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.
P6402.1054/872494.3 42
Section 11.15. Governin� Law. This Agreement shall be construed and governed
in accordance with the laws of the State of California.
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, N.A., 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 written.
PALM DESERT FINANCING AUTHORITY
I�
:
Chief Administrative Officer
WELLS FARGO BANK, N.A.,
as Trustee
Authorized Officer
P6402.1054/872494.3 43
EXHIBIT A
[FORM OF SERIES 2006A BOND]
Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New 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
payrnent 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. 1, AS AMENDED)
2006 SERIES A
Ea
RATE OF MATURITY ORIGINAL ISSUE
INTEREST DATE DATE CUSIP
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 September 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 Payrnent Date to which interest hereon
has previously been paid or made available for payrnent), payable semiannually on April 1 and
P6402.1054/872494.3 A-1
October 1 in each year, commencing October 1, 2006 (the "Interest Payment Dates") until
payrnent 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, N.A. (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 arnount, such payrnent may,
at such Registered Owner's option, be made by wire transfer of immediately available funds in
accordance with written 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 Revenue Bonds (Project Area
No. l, As Amended), 2006 Series A(the "Series 2006A Bonds"), limited in principal amount to
$ . The Authority has issued another series of bonds designated the Palm Desert
Financing Authority, Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As
Amended), 2006 Series B(Taxable) (the "Series 2006B Bonds," and together with the Series
2006A Bonds, the "Bonds"), in principal amount to $ , concurrently with the issuance
of the Series 2006A Bonds. Both the Series 2006A Bonds and the Series 2006B Bonds are
secured by an Indenture of Trust, dated as of May l, 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 lndenture 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 1 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 payrnent of the principal of and interest on the Bonds. T'he 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 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 certain
P6402.1054/872494.3 1�-2
public capital improvements with respect to a redevelopment project known and designated as
Project Area No. 1, As Amended. The Series 2006A Loan has been made by the Authority to
the Agency pursuant to a Project Area No. 1, as Amended, Loan Agreement dated as of May 1,
2006 (the "Loan Agreement"), by and among the Agency, the Authority and the Trustee.
The Series 2006A Bonds are subject to redemption prior to their respective maturity dates
as a whole, or in part among maturities as designated by the Authority and by lot within a
maturity, from prepaynnents 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 April 1, 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:
Redemntion Dates Redemntion Price
April 1, 20_ and October l, 20 %
April 1, 20_ and October l, 20_
April 1, 20_ and thereafter 100
The Series 2006A Term Bonds maturing on April 1, 20 and April 1, 20 are also
subject to mandatory sinking fund redemption by lot, on April 1 in each year commencing April
1, 20 and April l, 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; brovided, however, that in lieu
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 sha11 designate such maturities or the maturity in whole 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 Trust 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.
P6442.1054l872494.3 L�-3
This Series 2006A Bond is transferable by the Registered Owner hereof, in person or by
his 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 otherwise 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 200bA
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.
P6402.1054/872494.3 A-4
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.
Attest:
Secretary
PALM DESERT FINANCING AUTHORITY
:
President
STATEMENT OF INSURANCE
[To come]
P6402.1054/872494.3 A-S
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Series 2006A Bonds described in the within-mentioned Indenture and
registered on the Bond Registration Books.
WELLS FARGO BANK, N.A., as Trustee
Date:
:
Authorized Signatory
[FORM OF ASSIGNMENT]
For value received the undersigned do(es) hereby sell, assign and transfer unto whose tax
identification number is _, the within-mentioned registered Series 2006A Bond and hereby
irrevocably constitute(s) and appoint(s) attorney to transfer the same on the books of the Trustee
with full power of substitution in the premises.
Dated:
Signature guaranteed:
NOTE: Signature(s) must be guaranteed
by a member of an institution which is a
participant in the Securities Transfer
Agent Medallion Program (STAMP) or other
similar program.
NOTE: The signature(s) on this Assignment
must correspond with the name(s) as written
on the face of the within Series 2006A Bond
in every particular without alteration or
enlargement or any change whatsoever.
P6402.1054/872494.3 A-6
. .
_ �_. �_ . •
[FORM OF SERIES 2006B BOND]
Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New 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.
�
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REFUNDING REVENUE BOND
(PROJECT AREA NO. 1, AS AMENDED)
2006 SERIES B
(TAXABLE)
$
RATE OF MATURITY ORIGINAL ISSUE
INTEREST DATE DATE CUSIP
April 1, 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 Payrnent Date (as hereinafter defined) next preceding the date of authentication of
this Series 2006B Bond (unless this Series 2006B 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
2006B Bond is authenticated on or prior to September 15, 2006, in which event it shall bear
interest from the Original Issue Date identified above; �rovided, however, that if, at the time of
authentication of this Series 2006B Bond, interest is in default on this Series 2006B Bond, this
Series 2006B Bond shall bear interest from the Interest Payment Date to which interest hereon
P6402.1054/872494.3 E�-1
has previously been paid or made available for payment), payable semiannually on April 1 and
October 1 in each year, commencing October 1, 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, N.A. (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 Payrnent 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 Owner's option, be made by wire transfer of immediately available funds in
accordance with written instructions provided by such Registered Owner prior to the fifteenth
calendar day of the month preceding such Interest Payrnent Date).
This Series 2006B Bond is one of a duly authorized series of bonds of the Authority
designated the Palm Desert Financing Authority, Tax Allocation Refunding Revenue Bonds
(Project Area No. 1, As Amended), 2006 Series B(Taxable) (the "Series 2006B Bonds"), limited
in principal amount to $ . The Authority has issued another series of bonds designated
the Palm Desert Financing Authority, Tax Allocation Revenue Bonds (Project Area No. 1, As
Amended), 2006 Series A(the "Series 2006A Bonds," and together with the Series 2006B
Bonds, the "Bonds"), in principal amount to $ , concurrently with the issuance of the
Series 2006B Bonds. Both the Series 2006A Bonds and the Series 2006B Bonds are secured by
an Indenture of Trust, dated as of May 1, 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 1 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 payrnent 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.
P6402.1054/872494.3 l,-2
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. 1, As Amended. The Series 2006B Loan has been made by the Authority to the
Agency pursuant to a Project Area No. 1, as Amended, Loan Agreement dated as of
1, 2006 (the "Loan Agreement"), by and arnong the Agency, the Authority and the
Trustee.
The Series 2006B Bonds are subject to redemption prior to their respective maturity dates
as a whole, or in part among maturities as designated by the Authority and by lot within a
maturity, from prepayrnents of the Series 2006B Loan made at the option of the Agency pursuant
to the Loan Agreement, on any Interest Payment Date on or after April 1, 20_, at the following
respective redemption prices (expressed as a percentage of the principal amount of Series 2006B
Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemntion Price
April 1, 20_ and October 1, 20_ %
April 1, 20_ and October l, 20_
April 1, 20_ and thereafter 100
The Series 2006B Term Bonds maturing on April 1, 20 and April 1, 20 are also
subject to mandatory sinking fund redemption by lot, on April 1 in each year commencing April
1, 20 and April 1, 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; nrovided, however, that in lieu
of redemption thereof, such Series 2006B 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 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; brovided, 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 whole 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.
P6402.1054/872494.3 L�-3
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
principal 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
his 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 principal amount and of the same maturity will be issued to the transferee in exchange
therefor. T'he Trustee shall not be required to register the transfer or exchange of any 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 2406B Bond or otherwise 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.
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.
P6402.1054/872494.3 A-4
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.
Attest:
Secretary
PALM DESERT FINANCING AUTHORITY
.:
President
STATEMENT OF INSURANCE
[To come]
P6402.1054/872494.3 !�-$
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Series 2006B Bonds described in the within-mentioned Indenture and
registered on the Bond Registration Books.
WELLS FARGO BANK, N.A., as Trustee
Date:
:
Authorized Signatory
[FORM OF ASSIGNMENT]
For value received the undersigned do(es) hereby sell, assign and transfer unto whose tax
identification number is _, the within-mentioned registered Series 2006B Bond and hereby
irrevocably constitute(s) and appoint(s) attorney to transfer the same on the books of the Trustee
with full power of substitution in the premises.
Dated:
Signature guaranteed:
NOTE: Signature(s) must be guaranteed
by a member of an institution which is a
participant in the Securities Transfer
Agent Medallion Program (STAMP) or other
similar program.
NOTE: The signature(s) on this Assignment
must correspond with the name(s) as written
on the face of the within Series 2006B Bond
in every particular without alteration or
enlargement or any change whatsoever.
P6402.1054/872494.3 A-(
Jones Hall Draft 4/13/06
PRELIMINARY OFFICIAL STATEMENT DATED
NEW ISSUE
FULL BOOK ENTRY
. 2006
Ratings: � Insured): Moody's: _
Fitch:
(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 Series A Bonds is exempt from personal income taxes of the State of California and,
assuming compliance with the tax covenants described herein, interest on the Series A 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 altemative minimum tax. The interest on
the Series B Bonds is not excluded from gross income for federal income tax purposes. In the further opinion of Bond
Counsel, interest on both the Series A Bonds and the Series B Bonds is exempt frorn California personal income taxation.
See, however, "CONCLUDING INFORMATION — Tax-Exempt Status of the Series A Bonds" herein regarding certain other
tax considerations.
$ *
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE BONDS
(PROJECT AREA NO. 1, AS AMENDED)
2006 SERIES A
Dated: Date of Delivery
$ "
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REFUNDING REVENUE BONDS
(PROJECT AREA NO. 1, AS AMENDED)
2006 SERIES B (TAXABLE)
Due: April 1, as shown on the inside cover hereof
The captioned bonds (the "Series A Bonds" and the "Series B Bonds", and collectively, the "Bonds") will be issued
by the Palm Desert Financing Authority (the "Authority") under an Indenture of Trust, dated as of May 1, 2006 (the
"indenture"), by and between the Authority and Wells Fargo Bank, National Association, Los Angeles, California as trustee
for the Bonds (the "Trustee"). The proceeds of each series of Bonds will be disbursed to make two loans (the °Series A
Loan" and the "Series B Loan", and together, the "Loans") to the Palm Desert Redevelopment Agency (the "Agency")
pursuant to a loan agreement, dated as of May 1, 2006 (the "Loan AgreemenY') by and among the Authority, the Agency and
the Trustee. The proceeds of the Loans will be used to assist the Agency to (ii) finance certain redevelopment activities
within or of benefit to its Project Area No. 1, as amended (the "Project Area") and (iii) pay costs of issuance of the Bonds and
use proceeds of the Series B Loans to (i) refinance the Agency's obligations incurred under a loan agreement entered into in
1997, as described herein, and (iii) pay costs of issuance of the Bonds. .
The Bonds will be issued as fully registered instruments without coupons, in the denominations of $5,000 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 Bonds will be payable on October 1 and April 1 of each year (the "Interest Payment Dates"),
commencing October 1, 2006. Purchasers will not receive physical certificates representing their interest in the Bonds. For
so long as the Bonds are registered in the name of Cede & Co., all payments of principal and interest on the Bonds will be
made to DTC, which, in turn, is obligated to remit such principal and interest to DTC Participants for subsequent
disbursement to the Beneficial Owners of the Bonds. See "Appendix H— Book-Entry System".
The Bonds are subject to optional redemption and mandatory sinking fund redemption as described herein.
The Bonds are special obligations of the Authority payable from and secured by Revenues, consisting primarily of
amounts payable by the Agency under the Loan Agreement. The Loan Agreement is secured by and payable from Tax
Revenues, as defined herein. The Agency currently has outstanding, and may issue, pursuant to the terms of the Loan
Agreement and the Indenture, additional obligations secured by Tax Revenues on a parity with the Loans (the "Parity DebY').
See "SECURITY FOR THE BONDS".
Payment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance
policy to be issued by simultaneously with the delivery of the Bonds. See "SERIES A BOND
INSURANCE" herein.
[INSURER LOGO]
The Bonds are not a debt of the City of Palm Desert (the "City") or of the State of Califomia 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 are not a liability of the Authority, the State of Califomia or any of its
political subdivisions (other than the Agency). 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, of the Agency, or any
persons executing the Bonds or the Loan Agreement are not personally liable with respect to the Bonds or Loans. in no
event will the obligations of the Agency under the Loan Agreement be payable out of any funds or properties of the Agency
other than Tax Revenues set forth in the 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.
Stone 8� Youngberg LLC
The date of this Official Statement is , 2006.
*Preliminary, subject to change.
$ *
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE BONDS
(PROJECT AREA NO. 1, AS AMENDED)
2006 SERIES A
$ Serial Bonds
(CUSIP Root: )
Maturity Date Principal Interest
(April1l Amount Rate Yield
$
$
% Term Bond due April 1, , Yield
% Term Bond due April 1, , Yield
CUSIP
% (CUSIP: )
% (CUSIP: )
$ *
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REFUNDING REVENUE BONDS
(PROJECT AREA NO. 1, AS AMENDED)
2006 SERIES B (TAXABLE)
$ Serial Bonds
(CUSIP Root: )
Maturity Date Principal Interest
(Anril1l Amount Rate Yield
$
% Term Bond due April 1, , Yield
CUSIP
% (CUSIP: )
*Preliminary, subject to change.
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. Keily, 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 Ciiy Manager Community Services
Paul S. Gibson, Finance Director/Treasurer
David L. Yrigoyen, Director of Redevelopment/Housing
Rachelle Klassen, City Clerk
Jose Luis Espinoza, Assistanf Finance Director
Janet M. Moore, Housing Authority Adminisfrafor
Arla Scott, Senior Financia! Analyst
Veronica Tapia, Redevelopment Accounfant
SPECIAL SERVICES
Bond Counsel
Richards, Watson & Gershon,
A Professional Corporation
Los Angeles, California
Disclosure Counsel
Jones Hall, A Professional
Law Corporation
San Francisco, California
Financial Advisor
Del Rio Advisors, LLC
Modesto, 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",
"expecY', "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, 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, 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 N�T 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 ......................................1
PLAN OF FINANCE .................................5
SOURCES AND USES
OFFUNDS ...............................................6
DEBT SERVICE SCHEDULES ................7
THE BONDS ............................................8
Description of the Bonds ................................8
Redemption of the Bonds ...............................8
SERIES A BOND INSURANCE ..............11
SECURITY FOR THE BONDS ...............12
Revenues and Loan Agreement ..................12
Tax Allocation Financing ..............................12
Allocation of Taxes ........................................12
Tax Revenues ...............................................14
Pass-Through Agreements and
Housing Set-Aside ........................................15
Parity Debt and Existing Parity Lien ............15
Issuance of Additional Parity Debt ...............15
Reserve Fund ................................................17
RISK FACTORS .....................................18
Bonds Are Limited Obligations .....................18
Reduction of Tax Revenues .........................18
Reduction in Inflationary Rate ......................19
Assessment Appeals ....................................19
Proposition 8 Adjustments ............................20
Development Risks .......................................20
Levy and Collection .......................................21
State Budget; ERAF Shift .............................21
Assumptions and Projections .......................21
Bankruptcy and Foreclosure ........................22
Loss of Tax Exemption on the Bonds..........22
PROPERTY TAXATION
IN CALIFORNIA .....................................22
Constitutional Amendments Affecting
Tax Revenues ...............................................22
Implementing �egislation ..............................23
Constitutional Challenges to Property
TaxSystem ....................................................24
Property Tax Collection Procedures............24
Supplemental Assessments .........................24
Tax Collection Fees ..................................... 25
Unitary Property Tax .................................... 25
Business Inventory and Replacement
Revenue........................................................ 25
Proposition 8 ................................................. 26
Future Initiatives ........................................... 26
THE PROJECT AREA ........................... 27
The Original Project Area ............................ 27
The Added Territory ..................................... 27
Limitations and Requirements of the
Redevelopment Plan .................................... 29
S6211............................................................ 30
Added Territory Projected to Reach
Limit in Fiscal Year 2025-26 ........................ 30
TAX REVENUES ................................... 31
The Stipulation Agreement .......................... 31
Schedule of Historical Tax Revenues......... 32
Top Ten Taxpayers ...................................... 34
Filing of Statement of Indebtedness ........... 34
Housing Set-Aside Requirements ............... 35
PALM DESERT FINANCING
AUTHORITY .......................................... 36
PALM DESERT REDEVELOPMENT
AGENCY ......................... .. ..................... 36
Authority and Management ......................... 36
Agency Powers ...................................:......... 38
Financia l Information .................................... 39
Redevelopment Project Areas ..................... 39
Pass-Through Agreements .......................... 39
Regulatory Issues ......................................... 39
VERIFICATION OF
MATHEMATICAL COMPUTATIONS...... 39
CONCLUDING INFORMATION ............. 40
Continuing Disclosure .................................. 40
U nderwriting .................................................. 40
Legal Opinion ................................................ 41
Tax-Exempt Status of the Bonds ................ 41
No Litigation .................................................. 42
Ratings.......................................................... 42
Miscellaneous ............................................... 42
APPENDIX A- FISCAL CONSULTANT'S REPORT
APPENDIX B- FORM OF OPINION OF BOND COUNSEL
APPENDIX C- AGENCY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR
ENDED JUNE 30, 2005
APPENDIX D- CITY OF PALM DESERT GENERAL INFORMATION
APPENDIX E- SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
APPENDIX F- FORM OF MUNICIPAL BOND INSURANCE POLICY
APPENDIX G- FORM OF CONTINUING DISCLOSURE AGREEMENT
APPENDIX H - BOOK-ENTRY SYSTEM
OFFICIAL STATEMENT
$ *
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REVENUE BONDS
(PROJECT AREA NO. 7, AS AMENDED)
2006 SERIES A
$ *
PALM DESERT FINANCING AUTHORITY
TAX ALLOCATION REFUNDING REVENUE BONDS
(PROJECT AREA NO. 1, AS AMENDED)
2006 SERIES B (TAXABLE)
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 Revenue Bonds (Project Area No. 1, As Amended)
2006 Series A(the "Series A Bonds") and
•$ * aggregate principal amount of Palm Desert Financing
Authority, Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As
Amended) 2006 Series B(Taxable) (the "Series B Bonds").
For the definitions of certain capitalized terms used and not otherwise defined, see
"APPENDIX E— SUMMARY OF PRINCIPAL LEGAL DC�CUMENTS."
Any statements made in this Official Stafement 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 estimafes will be realized. Definifions of
certain terms used herein and not defined herein have the meaning set forth in the Indenture.
See "APPEND/X E— Sumrnary of Principal Lega! Documents."
INTRODUCTION
This lnfroduction contains a brief summary of certain informafion contained in this
Official Statement. It is nof intended to be complete and is qualified by the more detailed
information contained elsewhere in this Official Statement.
Aufhorization. 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 May 1, 2006 (the
"Indenture"), by and between the Authority and Wells Fargo Bank, National Association, as
trustee thereunder (the "Trustee").
* Preliminary, subject to change.
Use of Proceeds. The proceeds of each series of Bonds will be used by the Authority
to make two loans (the "Series A Loan" and the "Series B Loan", and together, the "Loans")
to the Palm Desert Redevelopment Agency (the "Agency") pursuant to a Project Area No. 1
Series A Loan Agreement (the "Series A Loan Agreement") and a Project Area No. 1 Series B
Loan Agreement (the "Series B Loan Agreement"), each dated as of May 1, 2006 by and
among the Authority, the Agency and the Trustee for the benefit of the Agency's Project Area
No. 1, As Amended (the "Project Area"). The proceeds of the Series A Loan will be used to
finance redevelopment activities within or of benefit to the Project Area and to pay costs of
issuance of the Series A Bonds.
The proceeds of the Series B Loan will be used to refund a portion of the indebtedness
of the Agency under a Loan Agreement dated as of , 1997 (the "1997 Loan
Agreement") and to pay costs of issuance of the Series B Bonds. The 1997 Loan Agreement
was entered into to make a loan (the "1997 Loan") to the Agency. The refunding of the
obligations under the refunded portion of the 1997 Loan Agreernent will effect a refunding of the
corresponding portion of the Authority's Tax Allocation Refunding Revenue Bonds (Project Area
No. 1, As Amended), Series 1997 (the "1997 Refunded Bonds"). See "PLAN OF FINANCE —
The Redevelopment Project." A portion of the 1997 Loan (the "1997 Remaining Loan") and the
corresponding remaining 1997 Bonds (the "1997 Remaining Bonds") will remain outstanding,
on a parity with the Bonds. Proceeds of each series of Bonds will also be used to establish
respective Reserve Funds or surety replacements (described in this Official Statement) for the
Bonds and to pay costs of issuance.
Security. The Bonds are special obligations of the Authority secured by Revenues, as
defined in the Indenture and described in this Official Statement, consisting primarily of the
amounts paid by the Agency under each Loan Agreement. See "SECURITY FOR THE
BONDS."
Under the Loan Agreement, the Agency has agreed to pay, on a parity with obligations
of the Agency under loan agreements entered into in 1997, 2002, 2003 and 2004, from Tax
Revenues (as defined below) amounts set forth in the Loan Agreement which are to be
sufficient to pay in full when due the principal of and interest and premium (if any) on the 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. 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 (defined below) 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 $4.6 billion, of which tax increment revenue
is generated from the incremental assessed value of approximately $3.9 billion, representing the
excess of the value of the Project Area over the base year value of approximately $684 million.
Tax Revenues are more fully described under the caption "SECURITY FOR THE BONDS —
Revenues and the Loan Agreement."
In addition to the 1997 Loan Agreement, the Agency currently has outstanding the
following loan agreements (together with the 1997 Loan Agreement, the "Parity Loan
Agreements") by and among the Agency, the Authority and BNY Western Trust Company, as
prior trustee:
2
Project Area No. 1, As Amended, Loan Agreement, dated as of March 1, 2002
(the "2002 Loan Agreement"), by and among the Agency, the Authority and
BNY Western Trust Company, as prior Trustee,
• Project Area No. 1, As Amended, Loan Agreement, dated as of July 1, 2003 (the
"2003 Loan Agreement"
• Project Area No. 1, As Amended, Loan Agreement, dated as of June1, 2004 (the
"2004 Loan Agreement".
Each of the Parity Loan Agreements are secured by Tax Revenues on a parity with the
Loans, and the Agency may, pursuant to the terms of the Loan Agreement and the Indenture,
issue additional obligations secured by Tax Revenues on a parity with the Loans (the "Parity
Debt"). See "SECURITY FOR THE BONDS — Existing Parity Debt" and "-- Issuance of
Additional Parity Debt".
Payment of the principal of and interest on the 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 "BOND INSURANCE".
The Project Area. The Project Area consists of the territory described and defined in
the Redevelopment Plan approved and adopted by the City of Palm Desert (the "City") by its
Ordinance No. 80 (the "Original Project Area"), together with territory (the "Added Territory")
added to the Original Project Area pursuant to the amendments to the Redevelopment Plan
approved and adopted by the City Council by Ordinance Nos. 275 and 324 (together, the
"Amendments"). The Project Area contains approximately 5,820 acres (11,235 parcels), and
is situated within the City, the city of Indian Wells, and unincorporated areas of Riverside
County. 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, 2005 was approximately 49,280,
The City occupies an area of 24.75 square miles. 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".
Miscellaneous. There follows in this Official Statement, which includes the cover page
and Appendices, a brief description of the Bonds, the Indenture, the Loan Agreement, the Tax
Revenues, the Project Area, security for the Bonds, risk factors, limitations on Tax Revenues
and certain other information relevant to the issuance of the Bonds. All references to the
Indenture are qualified in their entirety by reference to the definitive form, and all references to
the Bonds are further qualified by references to the information contained in the Indenture. A
summary of certain provisions of the Indenture is included in APPENDIX E. The most recent
audited financial statements of the Agency are included in APPENDIX C. The information set
forth in the Official Statement 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 in this Official Statement and not
normally capitalized have the meanings assigned thereto in the Indenture, unless otherwise
stated.
The information and expressions of opinion in this Official Statement speak only as of its
date and are subject to change without notice. Neither delivery of this Official Statement nor
any subsequent sale 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 its date.
All financial and other information presented in this Official Statement has been provided
by the Agency or the City from fheir records, except for information expressly attrrbuted to other
sources. The presentation of informafion, including the summary 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 ofher information, will necessarily
continue or be repeated in the future.
4
PLAN OF FINANCE
The proceeds of the Bonds will be used by the Authority to make the Loans to the
Agency. 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
Indenture and disbursed by the Trustee pursuant to the Loan Agreement. The amounts in each
Loan Fund are to be transferred by the Trustee pursuant to the Loan Agreement to the
appropriate Costs of Issuance Fund and the Project Fund.
The proceeds of the Series A Loan will be used to finance certain redevelopment
activities within or of benefit to the Project Area. The proceeds of the Series B Loan will be used
to refund a portion of indebtedness of the Agency under the 1997 Loan Agreement. Proceeds
of the Loans will also be used to establish a Reserve Fund or surety replacements (described
herein) for each series of Bonds and to pay related costs of issuance.
New Money Component. Proceeds of the Series A Loan deposited into the Project
Fund are to be disbursed pursuant to the Series A Loan Agreement 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 Series A Loan deposited into the Project Fund primarily for the financing of
in the City and include .
[to come — new money projects]
Refunding of 1997 Loan. In 1997, the Authority issued its $71,955,000 original
principal amount of Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As
Amended), Series 1997 (the "1997 Bonds"), of which $57,515,000 remain outstanding, for the
purpose of funding a loan (the "1997 Loan") to the Agency pursuant to a Loan Agreement
dated as of 1, 1997 (the "1997 Loan Agreement"). The net proceeds of the Series
B Loan will be used by the Agency to refund a portion of the 1997 Loan. The proceeds of the
1997 Loan were primarily used to refinance the 1992 loan related to the Tax Allocation Revenue
Bonds (as amended), 1992 Series A, pursuant to the Indenture of Trust dated as of September
1, 1992. The refunding of the obligations under the 1997 Loan Agreement will effect a refunding
of a corresponding portion of the 1997 Bonds (the "1997 Refunded Bonds").
The Series B Bonds are being issued to refinance the 1997 Refunded Bonds in the
amount of $23,595,000. The Agency and BNY Western Trust Company, as escrow bank (the
"Escrow Agent") will enter into an Escrow Agreement (the "Escrow Agreement") dated as of
May 1, 2006 under which the Escrow Agent will establish an Escrow Fund (the "Escrow
Fund"), into which net proceeds of the Series B Loan and other available funds held for the
1997 Refunded Bonds will be deposited concurrent with the original delivery of the Series B
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 October 1, 2006, the portion of the outstanding 1997
Refunded 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.
5
SOURCES AND USES OF FUNDS
The estimated sources and uses of Bond proceeds is summarized as follows. Ali 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 A Bonds and the Series B Bonds pursuant to the provisions of the Loan Agreement.
Series A Bonds Series B Bonds
Sources:
Principal amount of Bonds
[Net Premium/Discount]
Total Sources
Uses:
Deposit to Project Fund
Costs of Issuance*
Total Uses
" Includes underwriter's 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
Bonds and the making of the Loans.
0
DEBT SERVICE SCHEDULES
Annual debt service for the Bonds is set forth below.
Bond Year
Ending Series A Series A Series A Series 8
April1 Principal Interest Total Principal
Series
B Series B
Interest Total
Combined
Series A
and B
Bonds Debt
Service
7
THE BONDS
Description of the Bonds
The Bonds will be issued in the form of fully registered bonds without coupons and in
denominations or integral multiples of $5,000. The Bonds will be dated their date of inifial
delivery, and will bear interest at the rates per annum and witl 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.
The 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, Sond
certificates will be printed and delivered.
Interest on the Bonds will be payable on October 1 and April 1 of each year,
commencing October 1, 2007 (the "Interest Payment Dates"). Interest on the Bonds will be
computed on the basis of a 360-day year consisting of twelve 30-day months. Each Bond will
bear interest from the Interest Payment Date next preceding the date of authentication unless (i)
it is authenticated after a Record Date and on or prior to the following Interest Payment Date, in
which event it will bear interest from such Interest Payment Date, or (ii) it is authenticated on or
prior to September 15, 2006, in which event it will bear interest from the date of initial delivery of
the Bonds; provided, however, that if at the time of authentication of a Bond, interest is in
default, such Bond shall bear interest from the Interest Payment Date to which interest has
previously been paid or made available for payment. The principal or redemption price of the
Bonds wilf 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 Bonds wil! 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 sysfem of DTC, a!I such payments will be
made fo Cede & Co., as the registered Owner of the Bonds.
Redemption of the Bonds
Series A Bonds Redemption From Optional Series A Loan Prepayments. Under the
Series A Loan Agreement, the Agency is given the option to prepay principal installments of the
Series A Loan. The Revenues derived from such prepayment shall be applied to the
redemption of the Series A 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 April 1, 2012, at the folfowing respective
redemption prices (expressed as percentages of the principal amount of the Series A Bonds to
be redeemed), plus accrued interest to the date of redemption:
Redemption Dates
April 1, 2010 and October 1, 2010
April 1, 2011 and October 1, 2011
April 1, 2012 and thereafter
Redemqtion Price
102%
101
100
Series A Bonds Mandatory Sinking Fund Redemption. The Series A Bonds due April 1,
20_ and April 1, 20_ shall be subject to mandatory redemption by lot, on April 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 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 April 1 in any year, such Series A Bonds may be purchased by the
Agency pursuant to the Loan Agreement and tendered to the Trustee for cancellation not later
than the preceding January 15, and (ii) if some but not all of such Series A Bonds have been
redeemed pursuant to the paragraph above entitled "Redemption From Opfional Loan
Prepayments," the total amount of all future sinking fund payments shall be reduced by the
aggregate principal amount of such Series A Bonds so redeemed, to be allocated among such
sinking fund payments on a pro rata basis.
Term Series A Bonds Due April 1, 20
Sinking Fund Principal Amount
Redemption Date to be Redeemed
A ril 1 or Purchased
Term Series A Bonds Due April 1, 20
Sinking Fund Principal Amount
Redemption Date to be Redeemed
A ril 1 or Purchased
Series B Bonds Redemption From Optiona/ 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 B 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 April 1, 20_, at the following respective
redemption prices (expressed as percentages of the principal amount of the Series B Bonds to
be redeemed), plus accrued interest to the date of redemption:
Redemption Dates
April 1, 20, and October 1, 20
April 1, 20_ and October 1, 20,_
April 1, 20y and thereafter
Redemption Price
102%
101
100
Series B Bonds Mandatory Sinking Fund Redempfion. The Series B Bonds due Aprii 1,
20_, and April 1, 20_ shall be subject to mandatory redemption by lot, on April 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 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 B Bonds may be purchased by the
Agency pursuant to the Loan Agreement and tendered to the Trustee for cancellation not later
than the preceding Jufy15, and (ii} if some but not all of such Series B 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 B Bonds so redeemed, to be allocated among such
sinking fund payments on a pro rata basis.
Term Series B Bonds Due April , 20
Sinking Fund Principal Amount
Redemption Date to be Redeemed
(April 11 or Purchased
Term Series B Bonds Due April 1, 20,
Sinking Fund Principal Amount
Redemption Date to be Redeemed
A ril 1 or Purchased
Notice of Redemption. The Trustee on behalf and at the expense of the Authority will
mail (by first class mai!) 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 natice 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 a 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
redempiion price, giving notice also thai further interest on such Bonds will not accrue from and
after the redemptian date.
10
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 to be redeemed from all Bonds of such series and maturity 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 wiil be treated as separate bonds
which may be separatety 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 shali accrue
thereon from and after the redemption date specified in such notice.
BONDINSURANCE
The information relating fo the Insurer set forth in this section enfitled "BOND
INSURANCE," and the specimen lnsurance Policy set forth in Appendix F hereto, has been
furnished by the lnsurer. Na representafion is made herein as to the accuracy or adequacy of
such information or as to fhe absence of materral adverse changes in such information
subsequent to the date hereof.
[to come from Insurer...J
11
SECURITY FOR THE BONDS
Revenues and Loan Agreement
The Bonds are secured by a first lien on and pledge of the Revenues, which are defined
in the Indenture to include (i) all amounts payable by the Agency as payments or prepayments
for the Loans pursuant to the Loan Agreement; (ii) any proceeds of the Bonds originally
deposited with the Trustee and all moneys deposited and held from time to time in the funds
and accounts established under the Indenture; and (iii) income and gains with respect to the
investment of amounts on deposit in the funds and accounts established under the Indenture,
other than amounts payable to the United States of America pursuant to the tax covenants
contained in the Indenture. The primary security for the Bonds, therefore, consists of amounts
payable by the Agency under the Loan Agreement, amounts held in the Reserve Fund and
amounts held by the Trustee under the Indenture. The Loans are secured by a first pledge of
and lien on the Tax Revenues, on a parity basis with each other, as more fully described under
"SECURITY FOR THE BONDS — Tax Revenues." The Agency may, pursuant to the terms of
the Loan Agreement and the Indenture, issue additional obligations secured by Tax Revenues
on a parity with the Loan and the outstanding Parity Debt. See "SECURITY FOR THE BONDS
— Issuance of Additional Parity Debt."
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 autharized to receive. See "TAX
REVENUES — Housing Set-Aside Requirements" and �THE PROJECT AREA — Limitations
and Requirements of the Redevelopment Plan".
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
(collectively referred to as "taxing agencies") f�r 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
12
equalized prior to the effective date of the ordinance approving the Redevelopment Plan shal!
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 shatl be allocated to and
when collected shall be paid to such taxing agency, that portion of 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 bonds, loans, advances, and indebtedness, of the Agency, and related or
accrued interest, 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.
The Agency is authorized to make pledges o
described in paragraph (2) above to repay specific
appropriate in carrying out the Redevelopment Plan.
f the portion of taxes aHocated to it as
advances, loans and indebtedness as
Teeter Plan
In 1949, the California �egislature enacted an alternative method for the distribution of
secured property taxes to local agencies. This method, known as the Teeter Ptan, 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 fihe county bears the risk of loss
on delinquent taxes which go unpaid, it afso benefits from the penalties associated with these
delinquent taxes when they are paid. In tum, the i"eeter Plan provides participating locai
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 Teeter Plan in 1992-93, 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 fiscai year, elects to discontinue the
procedure with respect to such levying agency and the rate of secured tax delinquencies in that
13
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°/a 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°/a 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 recvrds 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
The "Tax Revenues" which the Agency has pledged to the payment of the Loans are
defined in the Loan Agreement as that portion of the taxes levied upon taxable property in the
Project Area, 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."
All Tax Revenues received by the Agency are required to be deposited in the Special
Fund until such time as the amounts on deposit in the Special Fund equal the aggregate
amounts required to be transferred to the Trustee pursuant to the Loan Agreement and any
Parity Debt Instrument.
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 w�uld otherwise be available to pay the Loans and, consequently, the
principal of, and interest on, the Bonds. Likewise, broadened property tax exemptions could
have a similar effect. See "RISK FACTORS" herein.
THE BONDS ARE NOT A DEBT OF THE CITY OF PALM DESERT, THE STATE OF
CALIFORNIA OR ANY OF ITS POLITICA� SUBDIVISIONS (OTHER THAN THE AUTHORITY),
AND ARE NOT A LIABILITY OF THE CITY, THE STATE OR ANY OF ITS POLITICAL
SUBDIVISIONS (OTHER THAN THE AUTHORITY). 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 AGREEMENT
AND ANY PARITY DEBT OF THE AGENCY ARE PAYABLE SOLELY FROM 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.
14
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
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 Loan. 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 �oans are repayable on a parity with Parity Debt, which
consists of any indebtedness payable from Tax Revenues on a parity with the Loans. Existing
Parity Debt consists of:
• the remaining 1997 Loan, which is currently outstanding in the aggregate
principal amount of $57,575,000,
• the 2002 Loan, which is currently outstanding in the aggregate principal amount
of $22,070,000,
• the 2003 Loan, which is currently outstanding in the aggregate principal amount
of $19,000,000, and
• the 2004 Loan, which is currently outstanding in the aggregate principal amount
of $23,595,�00.
For a description of the debt service requirements of the Parity Loans, 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 the Indenture that except for the Bonds, it will not incur
any other indebtedness payable out of Revenues.
15
So long as any of the Parity Loan Agreements remain outstanding, any additional Parity
Debt must also meet the requirements for issuance of additional Parity Debt.
The Agency has covenanted in each 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
Loan; (ii) additional Parity Debt subject to the conditions described below; and (iii) any debt
secured by a pledge of Tax Revenues which is Taxable to the pledge of Tax Revenues created
by the 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 available to the
Agency for payment of the 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 was in
effect throughout such Fiscal Year), shall be at least equal to 115 percent 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.
Pursuant to each 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 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, shall be at least equal to 115°/a of Maximum
Annual Debt Service.
(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) Interest on such Parity Debt shall be payable, except for the first 12-month period
thereof, which may be payable at the end of such period, on the same dates that interest on the
Loans is payable and
(ii) The principal of such Parity Debt shall not be payable on any date other than the
date on which principal of the Loans 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 Debt set forth in subparagraphs (a)
through (e), above, have been satisfied.
16
Reserve Fund
In order to further secure the payment of principal of and interest on the Bonds, the
Agency is required to maintain an amount equal to the Reserve Requirement in the Reserve
Fund held by the Trustee. Upon the delivery of the Bonds, the reserve requirement is
$ for the Series A Loan and $ for the Series B Loan. Amounts in the
Reserve Funds are to be held by the Trustee for the benefit of the Authority, Bondowners, and
the owners of any Parity Debt pursuant to the respective Loan Agreement, and are pledged by
the Agency to secure the Agency's payment obligations under the respective 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 Requirement on deposit in the Reserve Fund at all
times so long as any Bonds or Parity Debt remain outstanding. As defined in each Loan
Agreement, the Reserve Requirement means, as of the date of calculation and as certified in
writing to the Trustee by the Agency, an amount equal to the least of (i) Maximum Annual Debt
Service, (ii) 125% of average annual debt service, and (iii) 10% of the proceeds of the Loan and
of the proceeds of any Parity Debt.
The Loan Agreement permits the Agency to fund all or a portion of the Reserve
Requirement by means of a Qualified Reserve Fund Credit Instrument. The Debt Service
Reserve Fund Surety Bond described in the succeeding paragraphs constitutes a Qualified
Reserve Fund Credit Instrument.
17
RISK FACTORS
The fol/owing is a discussion of certain risk facfors which should be considered, in
addition to other matters set forth in this Officia! Statement, 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 in this section could adversely affect fhe
ability of the Agency to make the paymenfs required to repay the Bonds and their interest on a
timely manner. ln addition, the occurrence of one or more of the events discussed in this
section could adversely affect the value of the property in fhe Project Area.
Bonds Are Limited Obligations
The Bonds and related interest 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,) represent 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,
see "PROPERTY TAXATION IN CA�IFORNIA — 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
18
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°/a 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.
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
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
19
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.
Development Risks
Generally, the Agency's ability to make payments under the Loan Agreement 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. [ADD
SPECIFIC DETAILS FROM CITY'S GENERAL PLAN]. 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. [ADD SPECIFIC
DETAILS FROM CITY'S GENERAL PLAN]
2�
Levy and Collection
Neither the Agency nor the Authority has any independent power to levy and coliect
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 Agreement
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. 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.
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
$2,432,531. The Agency's estimated ERAF payments for 2005-06 are $3,995,041, with the
Project Area's proportionate share being $2,411,186. 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
21
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 fuii
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. See
"SECURITY AND SOURCE OF PAYMENT FOR THE BONDS".
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 lndustries 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
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 Series A 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 Series A Bonds could
become includable in gross income for purposes of federal income taxation retroactive to the
date of issuance of the Series A 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
Series A 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°/o 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
22
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 trans,action 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.
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°/a 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.
23
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 appeai 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.
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.
24
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.
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
cou nty.
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
25
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
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.
+�.
��;1�1:��a1=L�ii�1:���1
In connecfion with the issuance of the Bonds, the Agency caused Rosenow Spevacek
Group lnc., Santa Ana, California, to prepare a Fiscal Consulfant's Report dated April ,
2006, which sets forth current �nancial and other information on fhe Project Area. The
information below and under the caption "TAX REVENUES" includes information contained in
the Fisca! Consulfant's Report. The Fiscal Consultant's Report is included herein as
APPENDIX A.
The Original Project Area
On July 3, 1975, the Planning Commission approved the preliminary plan for the
redevelopment of the Original Project Area. The Agency's report to the City Council requesting
the proposed Redevelopment Plan for Project Area No. 1 indicated that the area had been
selected because of the existence of lots which were subject to being submerged by water, lots
of inadequate size for proper usefulness and development, inadequate streets, a problem of
traffic congestion, faulty interior arrangement of lots and buildings and exterior spacing,
inadequate parking facilities and mixed character of development and shifting of land uses. The
Original Project Area encompasses primarily the City's commercial strip along State Highway
111. The area includes mostly retail, office space and other commercial development and
includes 580 acres within its boundaries.
Following Agency meetings and hearings on the Redevelopment Plan, a joint public
hearing was held with the City Council on June 12, 1975. On July 16, 1975 the Redevelopment
Plan was adopted.
The Original Project Area is generally bounded by the Palm Valley Stormwater Channel
on the west, Alessandro on the north, EI Paseo on the south and Deep Canyon Road on the
east. Parcels range in size from 5,000 square feet on the north side of Highway 111 to large
undeveloped and developing parcels at the northwestern fringe of the Original Project Area.
The Added Territory
On November 25, 1981, the Planning Commission approved an amended preliminary
plan in connection with the amendment to the Redevelopment Plan. The Agency's report to the
City Council requesting the proposed amendment indicated that the amendment was necessary
to add territory because (1) there existed commercial property and residential units subject to
being submerged, inundated, damaged or destroyed by flood waters and accompanying debris,
(2) there existed a lack of adequate flood control facilities designed to protect property and to
insure access along roadways which cannot be remedied by private or governmental action
without redevelopment and (3) there existed an economic dislocation throughout the Project
Area, resulting from the clear and present danger of flash flooding, threats to public health,
safety and welfare throughout the area. The area added by the amendment (the "Added
Territory") included lands located within the Cities of Palm Desert, Indian Wells and
unincorporated territory within the County of Riverside. The amendment added 5,240 acres to
the existing 580 acres in the Original Project Area.
The primary objectives of the Redevelopment Plan include the provision of flood control
facilities to eliminate or alleviate flooding within the Project Area, the provision of drainage
facilities; the provision of bridges across the Whitewater Channel at Monterey Avenue and
Portola Avenue; and the provision of public safety buildings, correctional facilities, parking
facilities, child care facilities and affordable housing, and the implementation of the City's Civic
P�i
Center Master Plan and other Master Plans. The Redevelopment Plan also provides for the
rehabilitation of public and private structures.
Since its inception, the Project Area has experienced a diversity of development.
Residential development has been predominant. Specific projects include: One Quail Place, an
apartment project with 384 units; Palm Lake Village, a 220 unit apartment project; Hacienda De
Monterey, a 180 unit congregate care and 99 bed nursing facility; and Canyon Cove, a 231 unit
single family development, and 161 single family residential units in the Desert Rose
development for resale to low and moderate income households. Current development includes
Canyons at Bighorn, a 275 unit luxury home development with an estimated total projected
project value of $500,000,000. The City has also developed a 70-acre Civic Center Civic
Center campus, which includes County Sheriff's facilities. The Project Area has gained a
predominance of new residential developments including multifamily rental, townhouse and
single-family developments. Also located in the Project Area are the Canyons at Bighorn, a 275-
unit luxury custom home development. The Project Area also contains over two million square
feet of retail space, including three major retail malls. The Westfield Shoppingtown was recently
expanded to include the construction of two parking garages totaling 1,000 added parking
spaces, the expansion of Robinsons-May and Macy's Department Stores along with an
additional 40,000 square feet of retail space including Barnes & Noble.
The table below shows land use by assessed value for the parcels in the Project Area.
The majority of land in the Project Area Original Area is utilized for commercial purposes,
however, the Added Area, as well as the Project Area as a whole, is primarily used for
residential purposes.
PA�M DESERT REDEVELOPMENT AGENCY
Project Area No. 1- Original Area
Summary of Land Use in 2005-06
Land
U se
Commercial
Industrial
Professional/Office
Recreational
Residential
Vacant Land
Misc. Utilities
Unknown
Tota I
No.
of Parcels
292
1
60
15
14
49
1
12
444
Secured
Value
$647, 318, 766
5,933,186
69,832,601
5,601,244
2,771,868
9,288,755
88,183
$740,834,603
% of Total
Assessed Value
87.4 %
0.8
9.4
0.8
0.4
1.3
0.0
0.0
100.0 %
Source: Rosenow Spevacek Group Inc.; derived from Metroscan TRW Database based on County of Riverside
Assessor information, does not include possessory interest.
28
PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 1- Added Area
Summary of �and Use in 2005-06
Land
Use
Commercial
Government
Institutional
Professional/Office
Recreational
Residential
Vacant Land
Misc. Utilities
Unknown
Total
No.
of Parcels
76
2
20
84
128
10,764
1,224
2
81
12,381
Secured
Value
$ 147,162,802
35,660,062
71,582,069
99,087,087
3,240,077,821
220,211,767
27,105
3,124,048
$3,816,932,761
% of Total
Assessed Value
3.9 °/a
0.0
0.9
1.9
2.6
84.9
5.8
0.0
0.1
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
Origina/ Territory. On December 11, 1986, the City adopted Ordinance No. 484 which
limits the amount of tax revenues which can be divided and allocated to the Agency from the
Original Project Area pursuant to the Redevelopment Plan to a maximum of $758,000,000.
On December 8, 1994, the City adopted Ordinance No. 765 establishing Plan limits
required by Assembly Bill 1290 (Statutes of 1993, Chapter 942) ("AB 1290") for Project Area No.
1, the Original and Added Territory. On February 27, 2003 the City adopted Ordinance No.
1035, amending the Redevelopment Plan as permitted by SB 211 to eliminate the time limit on
incurring indebtedness (see below). Pursuant to Senate Bill 1045 the Agency has amended the
limits of the Project Area by adopting Ordinance 1082, adding one year to the term of
effectiveness and the time limit to collect tax increment. For the Original Territory the AB 1290
and SB 211 Plan limits are as follows:
1. the term of the effectiveness of the Redevelopment Plan for the Original Territory
of July 16, 2016; and
2. the time limit to receive tax increment generated from the Original Territory at ten
years beyond the termination of the effectiveness of the Redevelopment Plan, which is July 16,
2026, except that the Agency may continue to receive such necessary tax increment to pay
indebtedness or other obligations issued or incurred prior to January 1, 1994 and for the
financing of required housing and the elimination of deficits created pursuant to section 33334.6
of the Redevelopment Law.
Added Territory. On January 24, 1991, the City approved the Sixth Amendment to the
Redevelopment Plan (the "Amendment") which limits the amount of tax revenues which can be
divided and allocated to the Agency from the Added Territory to a maximum of $500,000,000
(exclusive of amounts paid to any taxing agency, and exclusive of amounts used to pay debt
service, directly or indirectly, on obligations of the Agency or any taxing agency, to finance the
acquisition of land or the construction of buildings, facilities, structures, or improvements of such
taxing agencies). To date, the Added Territory has received $136,530,504 in net tax increment
revenue. (Both amounts are prior to the allowed adjustment of dollars received pursuant to
29
Section 33683 of the Redevelopment Law which provides for an adjustment based on payments
made to ERAF. (See "RISK FACTORS — State Budget; ERAF Shift".) The Sixth Amendment
also limits the amount of bonded indebtedness which can be outstanding at one time to
$200,000,000 (exclusive of bonds issued to finance the acquisition of land or the construction of
buildings, facilities, structures or improvements of taxing agencies).
For the Added Territory, the following AB 1290 Plan limits were adopted by Ordinance
No. 765, and the SB 211 Plan limits were adopted by Ordinance No. 1035:
1. the term of the effectiveness of the Amended Redevelopment Plan for the Added
Territory of November 25, 2022; and
2. the time limit to receive tax increment revenue generated from the Added
Territory at ten years beyond the termination of the effectiveness of the Amended
Redevelopment Plan, which is November 25, 2031, except that the Agency may continue to
receive such necessary tax increment to pay indebtedness or other obligations issued or
incurred prior to January 1, 1994 and for the financing of required housing and the elimination of
deficits created pursuant to section 33334.6 of the Redevelopment Law.
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. On February 27, 2003 the City adopted Ordinance No. 1035,
amending the Redevelopment Plan to eliminate the time limit on incurring indebtedness as
permitted under SB 211. Pursuant to SB 211 and Ordinance No. 1035, the time limit to issue or
incur debt of January 1, 2006 for both the Original and Added Territory previously established
pursuant to AB 1290 has been eliminated. SB 211 provides that when a redevelopment plan is
amended to eliminate the time limit to issue or incur debt, all existing pass-through agreements
that provide for sharing of tax increment revenue shall remain unaffected, and certain statutory
tax sharing for entities without tax sharing agreements will commence in the year following the
year the former limitation would have taken effect. Thus, both the Original and Added Territory
are subject to Section 33607.7 of the Redevelopment Law and the imposition of statutory pass-
through payments for all those taxing entities with which the Agency has not entered into a tax
sharing agreement (a "Statutory Entity"). These statutory payments are based upon new
incremental revenue, above that which was received in the year the old limit would have taken
effect (adjusted base year revenue). The statutory pass-through payments begin with first tier
payments equal to 25°/a of the Redevelopment ProjecYs annual non-housing tax increment
revenue (in excess of the adjusted base year revenue), applied to each Statutory Entity's share
of the 1% levy. These statutory payments are subject to one subsequent increase that would
become effective in the eleventh payment year, when the Agency will be required to pay an
additional 21% of the incremental increase in non-housing tax increment revenues exceeding
amounts collected in the tenth payment year.
Added Territory Projected to Reach �imit in Fiscal Year 2025-26
Based on the growth projections used in the Fiscal Consultant's Report, the Added
Territory will reach its $500,000,000 tax increment limit in fiscal year 2025-26. The Agency has
covenanted that it will annually review the total amount of Tax Revenues remaining available
under the tax increment limit and under certain circumstances deposit current and future Tax
Increment into a separate escrow account to be used exclusively to pay debt service on the
Loan and all Parity Debt. See APPENDIX E"Summary of Principal Legal Documents - The
30
Loan Agreement - Other Covenants of the Agency - Annual Review of Tax Revenues." There
can be no assurance that this limit will be reached, or that it will not be reached at a date earlier
or later than that projected in the Fiscal ConsultanYs Report. Furthermore, the tax increment
limit may be changed by future acts of the State Legislature or amendments to the
Redevelopment Plan by the Agency.
TAX REVENUES
Tax Revenues (as described in the section "SECURITY FOR THE BONDS") 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.
The Stipulation Agreement
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 �aw and Poverty, Inc. and California Rural Legal Assistance in connection
with litigation filed over the adoption of the Redevelopment Plan for Project Area No. 1, As
Amended (City of Palm Springs v. A!I Persons lnterested, 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 when compared with the total amount of debt service remaining to be
paid on the refunded obligations.
31
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."
PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 1, Original Territory
Historical Tax Increment Revenues
Fiscal Years 2001-02 through 2005-06
Secured Valuation
Unsecured Valuation
Total Valuation
Less Base Year Value
Incremental Valuation
Total Estimated Revenue�'�
Percent change
Actual Receipts
2001-02 2002-03 2003-04 2004-05 2005-06
$564,983,710 $582,303,437 $614,105,002 $665,801,195 $729,583,351
98.578.075 95.533.915 106.856.251 102.344.827 96.184.531
663,561,785 677,837,352 720,961,253 768,146,022 825,767,882
(27.485.836) 798.282.046 798.282.046 798.282.046 (27.485.8361
636,075,949 650,351,516 693,475,417 740,660,186 798,282,046
6,588,464 6,690,207
-- 1.5%
6,643,213 6,740,057
8,177,274
7.5%
n/a
7,119,050 7,605,880
6.4 6.8%
6,976,051 7,806,758
(1) Before payment of Pass-Through Agreements, Housing Set-Aside; after payment of County administration charge.
Source: Rosenow 5pevacek Group Inc.
Secured Valuation
Unsecured Valuation
Total Valuation
Less Base Year Value
Incremental Valuation
Total Estimated Revenue"�
Percent change
Actual Receipts
PALM DESERT REDEVE�O.PMENT AGENCY
Project Area No. 1, Added Territory
Historical Tax Increment Revenues
Fiscal Years 2001-02 through 2005-06
2001-02 2002-03 2003-04 2004-05 2005-06
$2,578,872,509 $2,885,218,745 $3,101,000,504 $3,353,983,977 $3,693,561,100
59.818.257 67.614.013 79.783.947 79.970.509 79.183.032
2,638,690,766 2,952,832,758 3,180,784,451 3,433,954,486 3,772,744,132
(656.065.0591 (656.065.0591 (656.065.059) f656.065.0591 (656.065.059�
1,982,625,707 2,296,767,699 2,524,719,392 2,777,889,427 3,116,679,073
19,639,510 22,757,788 25,027,427 27,552,820 30,912,150
-- 15.9% 10.0% 10.1% 12.2%
21,650,828 23,668,606 25,769,052 29,055,011 n/a
(1) Before payment of Pass-Through Agreements, Housing Set-Aside; after payment of County administration charge.
Source: Rosenow Spevacek Group Inc.
Changes of Ownership
The Fiscal Consultant's Report identified changes in ownership based on actual sales
(properties sold after January 1, 2005, the assessor's cutoff date for the 2004-05 roll). Based on
this data, the Fiscal Consultant has added approximately $20 million in value increases for the
Original Area and approximately $148 million in value increases for the Added Area.
See APPENDIX A—"FISCAL CONSULTANT'S REPORT — Future Tax Increment
Projections".
32
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;
• Annual increases of 0.25% in the unsecured roll,
• 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 �oans, the Remaining 1997
Loan, the 2002 Loan, the 2003 Loan and the 2004 Loan) is set forth in the following tables. For
additional information regarding projected tax increment revenues see "APPENDIX A— Fiscal
ConsultanYs Report. "
PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 1, As Amended
Projected Tax Increment Revenues And Debt Service Coverage
Fiscal Years 2005-06 through 2012-13
Fiscal Year
Ending
June 30
2005
2006
2007
2008
2009
2000
2011
2012
2013
Total Project
Area Net Tax
Increment �'�
$17,053,170
18,213,234
19,291,951
19,566,152
19,955,815
20,142,611
20,535,247
20,858,018
21,241,268
Existing Parit�r
Debt Service �
$9,273,626
9,277,801
9,276,081
9,274,871
9,275,621
9,275,616
9,276,274
9,275,764
9,276,849
Total Parity
Series A and Coverage
Series B Loan Total Parity Ratio
Debt Service Debt Service �3�
(1) Amounts are net of pass-through agreement payments and low and moderate income housing fund payments.
(2) Combined debt service on the Parity Loans.
(3) Combined debt service on the Loans and the Parity Loans.
Sources: Rosenow Spevacek Group Inc., and Stone & Youngberg LLC.
33
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
10.5% 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 oniy see
"APPENDIX A—Fiscal ConsultanYs Report — Top Ten Taxpayers".
PALM DESERT REDEVELOPMENT AGENCY
Project Area No. 1, As Amended
Top Ten Taxpayers in Fiscal Year 2005-06
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Owner
WEA Palm Desert
PRU of Desert Crossing LLC
Elisabeth Stewart
Gardens SPE II LLC
Big Horn Development
NSHE III Town Center/Harsch Inv
CC Palm Lake
May Department Stores
Nationwide Health Properties Inc.
Sears Roebuck & Co.
Total
Use
WestField Shopping Mall
Shopping Center
Residential/Condos
Shopping Center
Custom Home Site
Shopping Center
Apartment
Robinsons May
Senior Residential
Sears
Assessed
Value
$106,583,542
81,568,478
75,763,941
72,733,037
49,323,265
27652,200
21,369,000
18,615,576
15,259,332
14.410.000
$483,278,371
Percentage
of Total Roll
2.32%
1.77
1.65
1.58
1.07
0.60
0.46
0.40
0.33
0.31
Fiscal Year 2005-06 Total Assessed Value: $825,767,882.
Source: Rosenow Spevacek Group Inc.
Filing of Statement of Indebtedness
10.51 %
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.
34
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 availabie 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 20°/a 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 20°/a 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 irnpact to 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 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 20°/a 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.
35
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 Term Expires Occupation
James C. Ferguson, Chairman November, 2006 Attorney at Law
Richard S. Kelly, Vice Chairman November, 2008 Retired Businessman
Jean M. Benson, Commissioner November, 2006 Retired Businesswoman
Buford A. Crites, Commissioner November, 2008 College Professor
Robert A. Spiegel, November, 2008 Retired Businessman
The professional staff of the Agency presently includes the following: [TO BE UPDATED
IF NECESSARY]
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.
Aria Scott
[to come...]
36
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 th�e 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 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.
Rache//e 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 sarne,
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, lowa, 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.
37
Jose Luis Espinoza, CPA, was promoted to Assistant Finance Director in June 2003,
before which he served as the Finance Operations Manager for the City, a position he held
since 1998. He is responsible for preparing the Agency's and the City's Finance Statements,
federal and state reports, and supervising the day-to-day operations of the Finance Department
staff with the assistance of the Director of Finance. Prior to this position, Mr. Espinoza spent
four years as an auditor focusing on governmental agency audits. Mr. Espinoza received a
Bachelor of Science in Business Administration with an emphasis in Accounting from Humboldt
State University.
Janet M. Moore has been with the Agency for over fifteen years and currently holds the
position of Housing Authority Administrator. She is responsible for compiling the federal and
state reports for the Agency's housing department, and oversees the accounting duties for the
Housing Department. Ms. Moore assists the Director of Housing with the administration of all
housing programs and projects. Ms. Moore received a Bachelor of Arts degree, with honors, in
Business Administration from California State University at San Bernardino.,
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 appiicable redevelopment plan, and may specify a period within
which such redevelopment must begin and be completed.
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 ReporY' 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 1997 Refunded Bonds and the forecasted
payments of principal and interest to redeem the 1997 Refunded 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.
39
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.
Financial Advisor
Del Rio Advisors, LLC (formerly Munisoft), Modesto, California, has served as Financial
Advisor to the City with respect to the sale of the Bonds. The Financial Advisor has assisted the
Agency in the review of this Official Statement and in other matters relating to the planning,
structuring, execution and delivery of the Bonds. The Financial Advisor has not independently
verified any of the data contained herein or conducted a detailed investigation of the affairs of
the Agency to determine the accuracy or completeness of this Official Statement. Due to their
limited participation, the Financial Advisor assumes no responsibility for the accuracy or
completeness of any of the information contained herein.
40
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
Series A Bonds. The Internal Revenue Code of 1986, as amended (the "Code"),
imposes certain requirements that must be met subsequent to the issuance and delivery of the
Series A Bonds for interest thereon to be and remain excluded pursuant to section 103(a) of the
Code from the gross income of the owners thereof for federal income tax purposes.
Noncompliance with such requirements could cause the interest on the Series A Bonds to be
included in the gross income of the owners thereof for federal income tax purposes retroactive
to the date of issuance of the Series A Bonds. The Authority and the City have covenanted to
maintain the exclusion of the interest on the Series A Bonds from the gross income of the
owners thereof for federal income tax purposes.
In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond
Counsel, under existing law, interest on the Series A Bonds is exempt from personal income
taxes of the State of California and, assuming compliance with the aforementioned covenant,
interest on the Series A Bonds is excluded pursuant to section 103(a) of the Code from the
gross income of the owners thereof for federal income tax purposes. Bond Counsel is also of
the opinion that, assuming compliance with the aforementioned covenant, the Series A Bonds
are not "specified private activity bonds" within the meaning of section 57(a)(5) of the Code and,
therefore, the interest on the Series A Bonds will not be treated as an item of tax preference for
purposes of computing the alternative minimum tax imposed by section 55 of the Code. The
receipt or accrual of interest on the Series A Bonds owned by a corporation may affect the
computation of its alternative minimum taxable income, upon which the alternative minimum tax
is imposed, to the extent that such interest is taken into account in determining the adjusted
current earnings of that corporation (75 percent of the excess, if any, of such adjusted current
earnings over the alternative minimum taxable income being an adjustment to alternative
minimum taxable income (determined without regard to such adjustment or to the alternative tax
net operating loss deduction)).
Bond Counsel has not undertaken to advise in the future whether any events after the
date of issuance of the Series A Bonds may affect the tax status of interest on the Series A
Bonds or the tax consequences of the ownership of the Series A Bonds. No assurance can be
given that future legislation, or amendments to the Code, if enacted into law, will not contain
provisions that could directly or indirectly reduce the benefit of the exemption of interest on the
Series A Bonds from personal income taxation by the State of California or of the exclusion of
the interest on the Series A Bonds from the gross income of the owners thereof for federal
income tax purposes. Furthermore, Bond Counsel expresses no opinion as to any federal, state
or local tax law consequences with respect to the Series A Bonds, or the interest thereon, if any
action is taken with respect to the Series A Bonds or the proceeds thereof predicated or
permitted upon the advice or approval of counsel other than Bond Counsel.
Although Bond Counsel is of the opinion that interest on the Series A Bonds is exempt
from state personal income tax and excluded from the gross income of the owners thereof for
federal income tax purposes, an owner's federal, state or local tax liability may be otherwise
41
affected by the ownership or disposition of the Series A Bonds. The nature and extent of these
other tax consequences will depend upon the owner's other items of income or deduction.
Without limiting the generality of the foregoing, prospective purchasers of the Series A Bonds
should be aware that (i) section 265 of the Code denies a deduction for interest on
indebtedness incurred or continued to purchase or carry the Series A Bonds or, in the case of a
financial institution, that portion of an owner's interest expense allocated to interest on the
Series A Bonds, (ii) with respect to insurance companies subject to the tax imposed by section
831 of the Code, section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent
of the sum of certain items, including interest on the Series A Bonds, (iii) interest on the Series
A Bonds earned by certain foreign corporations doing business in the United States could be
subject to a branch profits tax imposed by section 884 of the Code, (iv) passive investment
income, including interest on the Series A Bonds, may be subject to federal income taxation
under section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings
and profits at the close of the taxable year if greater than 25% of the gross receipts of such
Subchapter S corporation is passive investment income, (v) section 86 of the Code requires
recipients of certain Social Security and certain Railroad Retirement benefits to take into
account, in determining the taxability of such benefits, receipts or accruals of interest on the
Series A Bonds and (vi) under section 32(i) of the Code, receipt of investment income, including
interest on the Series A Bonds, may disqualify the recipient thereof from obtaining the earned
income credit. Bond Counsel has expressed no opinion regarding any such other tax
consequences.
Series B Bonds. Interest on the Series B Bonds is not excluded from gross income for
federal income tax purposes. However, interest on the Series B Bonds is exempt from California
personal income taxes.
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.
Rati ngs
The Bonds are rated " " 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 Fitch
Ratings, One State Street Plaza, New York, New York 10004 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.
Miscellaneous
All of the preceding summaries of the Loan Agreement, the Indenture, the Bond �aw, the
Redevelopment Law, other applicable legislation, the Redevelopment Plan for the Project Area,
42
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 �fficial Statement by the Chief Administrative Officer
of the Authority have been duly authorized by the Authority.
PALM DESERT FINANCING AUTHORITY
Chief Administrative Officer
43
APPENDIX A
FISCAL CONSULTANT'S REPORT
A-1
APPENDIX B
FORM OF OPINION OF BOND COUNSEL
B-1
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 fhe 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 Cify.
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 are not a liability of the City, the State, or any of its political subdivisions . See
the section herein entitled "SECURITY FOR THE BONDS ."
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 2001 to 2005:
CITY OF PALM DESERT, RIVERSIDE COUNTY AND STATE OF CALIFORNIA
Estimated Population
Year
(January 1)
2001
2002
2003
2004
2005
City of
Palm Desert
42,099
43,129
44,490
45,610
49,280
Riverside
Coun
1,590,473
1,654,220
1,726,754
1,807,858
1,877,000
State of
California
34,441,561
35,088,671
35,691,442
36,271,091
36,810,358
Source: State of California Department of Finance, Demographic Research Unit.
Commerce
Total taxable sales reported during the first quarter of calendar year 2005 in the City
were reported to be $407,291,000, a 5.9°/o increase over the total taxable sales of $384,566,000
reported during the first quarter calendar year 2003. The number of establishments selling
D-1
merchandise 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)
Retail Stores
Number
of Permits
2000 1,376
2001 1,529
2002 1,532
2003 1,538
2004 1,684
Taxable %
Transactions ChanQe
$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 %
of Permits Transactions Chanae
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)
Retail Stores
Number Taxable %
of Permits Transactions Chanae
2000 16,309 �$12,190,474 --
2001 17,403 13,173,281 8.1 %
2002 17,646 14,250,733 8.2%
2003 18, 300 16,030,952 12.5%
2004 20,642 18,715,949 16.7%
Total All Outlets
Number Taxable %
of Permits Transactions ChanQe
36,117 $16,979,449 --
38,011 18,231,555 7.4%
38,767 19,498,994 7.0%
40,833 21,709,135 11.3%
42,$26 25,237,148 16.3%
Source: California State Board of Equalization, Taxable Sales in Califomia (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 ���
Employment
Unemployment
Unemployment Rate
Wape and Salary Emplovment: �Z�
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
1,562,300
1,484,100
78,200
5.0%
20,900
1,200
88,400
118,600
41,600
132,200
45,600
14,600
22,900
15,300
101,700
106,000
104,400
37,100
16,900
25,800
157,600
1,050,700
2002
1,639,700
1,543,400
96,300
5.9°/a
20,300
1,200
90,900
115,400
41,900
137,500
46,800
14,100
23,500
15,900
106,800
112,400
107,200
38,100
16,900
26,600
169,300
1,084,800
2003
1,688,300
1,588,700
99,600
5.9%
20,300
1,200
99,000
116,100
43,500
142,700
50,100
13,900
25,700
16,900
115,400
115,800
109,000
38,400
17,000
26,600
167,900
1,119,400
2004
1,650, 500
1,556,100
94,400
5.7%
18,700
1,200
111,800
120,100
45,600
153,800
55,500
14,000
28,000
17,700
125,500
118,400
116,700
39,300
17,300
26,500
168,700
1,178,700
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
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
Source: State of California Employment Development Department.
Major Employers
The following table lists the largest employers within the County, listed alphabetically:
COUNTY OF RIVERSIDE
D-3
Major Employers
(As of January 2006)
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
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
Govemment 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.
Construction Activity
The following is a five year summary of the valuation of building permits issued in the
City and the County.
D-4
City of Palm Desert
Building Permit Valuation
(Valuation in Thousands of Dollars)
Permit Valuation
New Single-family
New Multi-family
Res. AlterationslAdditions
Total Residential
New Commercial
New Industrial
New Other
Com. Alterations/Additions
Total Nonresidential
New Dwellinp Units
Single Family
Multiple Family
TOTAL
2000
$136,189.3
14,548.3
7.684.4
158,422.0
19,855.9
7,561.9
316.0
10.686.2
38,419.9
417
116
533
2001
$82,145.0
28,885.0
9,043.2
120,0732
11,177.0
5,438.4
1,264.2
18.439.4
36,319.0
255
411
666
2002
$60,526.9
27,001.6
12.957.5
100,486.0
14,707.5
3,012.0
1,160.0
22,534.2
41,413.7
221
310
531
Source: Construction Industry Research Board, Building Permit Summary
County of Riverside
Building Permit Valuation
(Valuation in Thousands of Doilars)
Permit Valuation
New Single-family
New Multi-family
Res. Alterations/Additions
Total Residential
New Commercial
New Industrial
New Other
Com. Alterations/Additions
Total Nonresidential
New Dwellina Units
Single Family
Multiple Family
TOTAL
2000
$2,519,841.4
125,296.2
67.303.7
2,712,441.4
393,509.9
98,621.8
119, 978.4
157.802.1
769,912.2
13,630
1.780
15,410
2001
$3,051,190.4
174,628.0
70.849.7
3,296,668.2
287,068.6
74,766.3
152,854.0
143.351.7
658,040.6
16,556
2,458
19,014
2002
$3,670,371.4
165,413.0
87.842.9
3,923,627.4
297,963.6
80,881.6
187,510.6
174.785.7
741,141.5
20,591
2,073
22,664
Source: Constructron lndustry Research 8oard, Building Permit Summary
Effective Buying Income
2003
$65,066.1
11,992.5
9,328.9
86,387.6
7,272.6
712.6
1,249.8
10.888.0
20,123.0
237
101
338
2003
$4,665,675.7
406,483.0
106,855.8
5,179,014.5
360,707.4
112,706.6
261,793.6
173.165.5
908,373.1
25,137
5.224
30,361
2004
$81,436.8
11,198.0
11,103.3
103,738.2
19,863.5
3,005.1
7,896.1
12.347.4
43,112.1
325
111
436
2004
$5,997,513.2
404,615.9
135.176.6
6,537,305.6
580,057.8
203,311.9
334,001.0
222,495.5
1,339,866.1
29,478
4,748
34,226
"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.
D-5
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
Total Effective
Buying Income
Year Area (000's Omitted)
Median Household
Effective Buying
Income
2000 City of Palm Desert
Riverside County
California
United States
2001 City of Palm Desert
Riverside County
California
United States
2002 City of Palm Desert
Riverside County
California
United States
2003 City of Palm Desert
Riverside County
California
United States
2004 City of Palm Desert
Riverside County
California
United States
$1,109,327
25,144,120
652,190,282
5,230,824,904
$1,008,568
23,617,301
650,521,407
5,303,481,498
$1,184,128
25,180,040
647,879,427
5,340,682,818
$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
Source: Sales & Marketing Management Survey of Buying Power
Utilities Services
$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
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.
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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.
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APPENDIX F
FORM OF MUNICIPAL BOND INSURANCE POLICY
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APPENDIX G
FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure AgreemenY') is executed and
delivered by the Palm Desert Redevelopment Agency {the "Agency") and Wells Fargo Bank,
National Association, as Trustee (the "Trustee") and Munifinancial (the "Dissemination AgenY')
in connection with the issuance of $ Palm Desert Financing Authority, Tax
Allocation Revenue Bonds (Project Area No. 1, As Amended), 2006 Series A(the "Series A
Bonds") and Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As Amended), 2006
Series B(the "Series B Bonds" and togethere with the Series A Bonds, the "Bonds"). The
Bonds are being issued pursuant to an Indenture of Trust dated as of May 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, 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 StatemenY' 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.
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"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:
(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
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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 "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 Repositaries 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 �nancial
difficulties;
(4) unscheduled draws on credit enhancements reflecting financial
difficulties;
(5) substitution of credit or liquidity providers, or their failure to pertorm; and
(6) adverse tax opinions or events adversely affecting the tax-exempt status
of the Series A 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.
(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.
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(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 (� 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.
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;
(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
G-4
the "impacY' (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
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
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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 lndustria, 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 originai 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, LLC, as Dissemination
Agent
By
Authorized Officer
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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, Tax
Allocation Revenue Bonds (Project Area No. 1, As Amended),
2006 Series A and $ Palm Desert Financing
Authority, Tax Allocation Refunding Revenue Bonds (Project Area
No. 1, As Amended), 2006 Series B(Taxable)
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 May 1, 2006 among the Agency, Munifinancial and Wells Fargo Bank,
National Association. [The Agency anticipates that the Annual Report will be filed by
.j
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
bene�cial 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.
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