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HomeMy WebLinkAboutCC AG PKT 2008-06-09 #P . AGENDA STAFF REPORT DATE: June 9, 2008 TO: Honorable Mayor and City Council THRU: David Carmany, City Manager FROM: Robbeyn Bird, CPA Director of Administrative Services/Treasurer SUBJECT: PENSION OBLIGATION BONDS SUMMARY OF REQUEST: . Direct staff to move forward with the pension obligation bond financing with Bank of America, N.A., instead of the pooled bond financing due to increase in savings. Authorize the issuance of pension obligation bonds, approve the form of and authorize the execution and delivery by the City Manager of a Trust Agreement and Bond Purchase Agreement with Bank of America. BACKGROUND: On November 5,2007, the City Council directed staff to pursue a pooled pension obligation bond with the California Statewide Community Development Authority ("CSCDA") as the Pooled Bond Issuer. Due to several delays in the CSCDA pooled transaction and adverse market conditions, the City Council directed staff at the last City Council meeting, to pursue other funding alternatives, including a proposal from Bank of America. After the City performed a side by side comparison of the Statewide Pool and the Bank's proposal, staff has determined that the Bank of America proposal will provide the most savings to the City. ' The City Council is now requested to authorize the issuance of pension obligation bonds, approve the forms of and authorize the execution and delivery of the Trust Agreement and the Bond Purchase Agreement with Bank of America. . Agenda Item P Page 2 . FINANCIAL IMPACT: If the transaction were completed today, the City would yield a net present value savings of approximately $1 million by finalizing the Bank of America proposal as opposed to saving $800,000 with the Statewide pool resulting in an additional $200,000 savings to the City. RECOMMENDATION: The City Council authorize the issuance of pension obligation bonds provided the City achieves a net present value savings of at least $500,000, approve the forms of and authorize the execution and delivery of the Trust Agreement and the Bond Purchase Agreement with Bank of America. SUBMITTED BY: NOTED AND APPROVED: . RO~ Director of Administrative Servicesrrreasurer e..:;I~ David carmanY!City Manager . Attachments: Resolution No. 5743 Bond Purchase Agreement *Copy of the Trust Agreement is available for review in the City Clerk's office . RESOLUTION NUMBER 5743 . RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEAL BEACH AUTHORIZING THE ISSUANCE OF ONE OR MORE SERIES OF PENSION OBLIGATION BONDS, APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF A TRUST AGREEMENT AND A BOND <PURCHASE AGREEMENT, AND OTHER MATTERS RELATED THERETO WHEREAS, the City of Seal Beach (the "City") has previously elected to become a contracting member of the California Public Employees' Retirement System ("PERS"); and WHEREAS, the Public Employees' Retirement Law (commencing with Section 20000 of the California Government Code) (the "Retirement Law") and the contract (the "PERS Contract") between the Board of Administration of PERS and the City Council of the City (the "City Council") obligate the City to (i) make contributions to PERS to fund pension benefits for certain City employees, (ii) amortize the unfunded accrued actuarial liability (the "Unfunded Liability") with respect to such pension benefits, and (iii) appropriate funds for the foregoing purposes; and . WHEREAS, the City desires to issue pension obligation bonds (the "Bonds") in an aggregate principal amount not to exceed the Unfunded Liability, plus an additional amount to pay costs of issuance of the Bonds for the purpose of refunding the City's current obligation to PERS (as evidenced by the PERS Contract) to pay the Unfunded Liability of the City (the "Pension Obligation"); and WHEREAS, on April 8, 2008, the Superior Court of the State of California for the County of Orange entered a default judgment to the effect that, among other things, such Bonds, together with additional bonds which might be issued in the future are valid, legal and binding obligations of the City and that such Bonds are in conformity with all applicable provisions of the law; and WHEREAS, there is on file with the City Council the proposed form of the Trust Agreement relating to the Bonds (the "Trust Agreement"), to be entered into between the City and Wells Fargo Bank, National Association, as trustee (the "Trustee") relating to the BondS; and WHEREAS, there is on file with the City Council the proposed form of the Bond Purchase Agreement (the "Purchase Agreemenf'), to be entered into between the City and Bank of America, NA, as purchaser (the "Purchaser"), pursuant to which the City will sell the Bonds to the Purchaser; and NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SEAL BEACH HEREBY FINDS, DETERMINES, RESOLVES AND ORDERS AS FOLLOWS: Section 1. Recitals True and Correct. The above recitals, and each of them, are true and correct. . Section 2. Savinas. This City Council hereby finds and declares that the issuance of the Bonds to refund the Pension Obligation, and the other actions contemplated by this Resolution are in the best interests of the City and are anticipated to result in savings based on current actuarial assumptions. Section 3. Bonds. This City Council hereby authorizes and approves the issuance of the Bonds and hereby authorizes and directs the City Manager to execute the Bonds, and to cause the Bonds to be authenticated and delivered in accordance with the Trust Agreement. The Bonds shall be in substantially the S7296-1119\lOS8824v2,doc Resolution Number 5743 . forms attached to the Trust Agreement, with such changes therein, deletions therefrom and additions thereto as the City Manager shall approve, such approval to be conclusively evidenced by the execution and delivery of the Bonds; the Bonds may be issued in a single series or in two or more series, at one time or from time to time, provided, however, that the aggregate initial principal amount of the Bonds shall not exceed the amount of the Pension Obligation (as confirmed by PERS or the City's actuary) remaining unpaid on the date of issuance of the Bonds, plus an additional amount to pay costs of issuance of the Bonds; the Bonds shall mature not later than eleven (11) years following their date of issuance; and the City must achieve a minimum net present value savings of $500,000 as a result of the issuance of the Bonds. The Bonds are an obligation of the City not limited as to payment from any special source of funds. The Bonds shall not, however, constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Section 4. Trust Aareement. The proposed form of Trust Agreement, between the City and the Trustee, on file with the City Clerk, is hereby approved. The City Manager, the Mayor and the Director of Administrative Services (the "Authorized Representatives") are each hereby authorized and directed, severally, or any such officer's designee, for and on behalf of the City, to execute and deliver the Trust Agreement, substantially in the form on file with the City Clerk, with such changes therein, deletions therefrom and additions thereto (including, but not limited to designating the type of bond to be issued and changes, deletions and additions as may be required by the Purchaser) as such Authorized Representative shall approve, such approval to be conclusively evidenced by the execution and delivery of the Trust Agreement. Section 5. Purchase Aareement. The proposed form of Purchase Agreement, between the City and the Purchaser, on file with the City Clerk, is hereby approved. The Authorized Representatives are each hereby authorized and directed, severally, or any such officer's designee, for and on behalf of the City, to execute and deliver the Purchase Agreement, substantially in the form on file with the City Clerk, with such changes therein, deletions therefrom and additions thereto as such Authorized Representative shall approve, such approval to be conclusively evidenced by the execution and delivery of the Purchase Agreement. . Section 6. Bond Counsel. This City Council hereby designates Richards, Watson & Gershon, A Professional Corporation ("Bond Counsel"), as bond counsel for the Bonds, with bond counsel services to consist of and be limited to rendering an opinion on the validity of the Bonds and the preparation of documents providing for the issuance of the Bonds. Section 7. Additional Authoritv. The Authorized Representatives of the City are, and each of them hereby is, authorized and directed to do any and all things, and to take any and all actions (including any required publications of summons or other notice) and execute and deliver any and all documents which they or any of them deem necessary or advisable in order to consummate the transactions contemplated by this Resolution, the Trust Agreement and the Purchase Agreement and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, the Trust Agreement and the Purchase Agreement. Section 8. Effective Date. This Resolution shall take effect immediately from and after its date of adoption. . S7296-1119\lOS8824v2.doc Resolution Number 5743 . PASSED, APPROVED AND ADOPTED by the City Council of Seal Beach, at a meeting hereof held on the 9th day of June , 2008 by the following vote: AYES: COUNCILMEMBERS NOES: COUNCILMEMBERS ABSENT: COUNCILMEMBERS ABSTAIN: COUNCILMEMBERS Mayor ATTEST: City Clerk . STATE OF CALIFORNIA } COUNTY OF ORANGE } SS CITY OF SEAL BEACH } I, Linda Devine, City Clerk of Seal Beach, California, do hereby certify that the foregoing resolution is the original copy of Resolution Number 5743 on file in the office of the City Clerk, passed, approved, and adopted by the City Council of the City of Seal Beach, at a regular meeting thereof held on the 9th day of June , 2008. City Clerk . 57296-1119\1 OS8824v2,doc :0 $ CITY OF SEAL BEACH TAXABLE PENSION OBLIGATION BONDS SERIES 2008 BOND PURCHASE AGREEMENT Dated as of _,2008 Ladies and Gentlemen: The undersigned, Bank of America, N.A. (the "Purchaser"), offers to enter into this Bond Purchase Agreement (the "Bond Purchase Agreement") with City of Seal Beach, a charter city and municipal corporation, duly organized, validly existing under the laws of the State of California (the "City"), which upon the acceptance of this offer and execution of this Bond Purchase Agreement by the City and the Purchaser shan be in fun force and effect in accordance with its terms and shaH be binding upon such parties. For purposes of this Bond Purchase Agreement, an defined terms indicated by the capitalization of the first letter of such term shan have the meaning herein ascribed to such term or as defined in the Trust Agreement (hereinafter defined). SECTION 1. PURCHASE OF BONDS. Upon the basis of the representations and agreements herein contained, but subject to the terms and conditions hereinafter set forth and set forth in the Trust Agreement, the Purchaser hereby agrees to purchase all the City's $ aggregate principal amount of Taxable Pension Obligation Bonds Series 2008, comprised of the Series 2008A-l Bonds and the Series 2008A-2 Bonds (col1ectively, the "Bonds") for a purchase price of$ The Bonds are delivered as funy registered Bonds, and, when delivered initially, shall be registered in the name of, and shall be delivered to, the Purchaser. -1- SECTION 2. THE BONDS. (A) General. The Bonds are being executed and delivered for the purpose of providing funds to (i) refund the City's obligations to the California Public Employees' Retirement System (the "System") as evidenced by the City's contract dated June 1, 1958 with the System (the "PERS Contract"), and (ii) to pay certain costs of issuance relating to the delivery of the Bonds. The Bonds are to be executed and delivered under and are equally and ratably secured by the Trust Agreement, dated as of June 1,2008 (the "Trust Agreement"), between Wells Fargo Bank, National Association, as trustee (the "Trustee") and the City, which will create a lien on all revenues, moneys and securities held from time to time by the Trustee for the holders of the Bonds pursuant to the Trust Agreement. The obligation of the City to pay principal and interest with respect to the Bonds when due will be an absolute and unconditional obligation of the City. (B) Maturities. Amounts and Interest Rates. (i) The Series 2008A-l Bonds shall be dated their date of delivery and shall mature on , 20_ and shall be payable in accordance with the terms set forth in the Trust Agreement. The Series 2008A-l Bonds will bear interest at _% per annum. (ii) The Series 2008A-2 Bonds shall be dated their date of delivery and shall mature on , 20_ and shall be payable in accordance with the terms set forth in the Trust Agreement. The Series 2008A-2 Bonds will bear interest at _ % per annum. (iii) Upon the occurrence of any Event of Default hereunder, interest shall accrue at a rate per annum equal to three percent (3.0%) above the fixed rate in effect with respect to the Bonds. (iv) Principal and interest with respect to the Bonds shall be payable monthly in arrears in accordance with the amortization schedule attached hereto as Exhibit "A" in lawful money of the United States at the principal office of the Trustee in Los Angeles, California. SECTION 3. PAYMENT. Upon satisfaction of the terms and conditions contained herein and in the Trust Agreement, payment for the Bonds shall be made by or on behalf of the Purchaser to the Trustee in immediately available funds in the amount of the purchase price at the time of the execution and delivery of the Bonds (the "Closing"). SECTION 4. FEES AND EXPENSES. At the time of the Closing, the City shall payor cause to be paid an origination fee of .05% of the principal amount of the Bonds to the Purchaser, all of the fees and expenses incurred in connection with the Closing including the Purchaser's origination fee and out-of-pocket expenses, authentication and acceptance fees of the Trustee, fees and expenses of counsel to the Trustee, fees and expenses of Richards Watson Gershon, Bond Counsel, fees and expenses of Kathleen C. Johnson, Esq., counsel to the Purchaser, fees and expenses of the City and its counsel, and all fees necessary for closing. In addition, the City will pay all fees and expenses incurred by the Purchaser in connection with (a) any amendment of the -2- documents relating to the Bonds, or (b) the exercise of any rights and remedies by or on behalf of the Purchaser under the Trust Agreement or this Agreement. SECTION 5. PURPOSE OF BOND ISSUANCE. The Bonds are being issued by the City to refund certain of its obligations under the PERS Contract and to pay costs of issuance of the Bonds. The proceeds from the offering of the Bonds will be delivered to the Trustee and applied by the Trustee to the obligation of the City to the System and to pay Costs of Issuance pursuant to the terms of the Trust Agreement. SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF CITY. (A) The City represents, warrants and covenants to the Purchaser both as of the time of acceptance hereof and as of the time of the Closing that: (1) The City is duly formed, validly existing and in good standing as a Local Agency (as defined in Section 53570 of the California Government Code) duly organized, existing and operating under the laws of the State of California, and has legal power and authority to undertake the following actions: (a) to enter into this Bond Purchase Agreement; (b) to execute and deliver the Trust Agreement, the Bonds, this Bond Purchase Agreement and all other agreements, documents and Bonds contemplated thereby to which the City is a party in connection with the issuance of the Bonds (collectively hereinafter referred to as the "City's Documents"); and (c) to carry out and to consummate the transactions contemplated by the City's Documents, including making any and all payments as provided therein. (2) The City will apply the proceeds of the Bonds as provided in the Trust Agreement. (3) The audited financial statements of the City for the fiscal year ending June 30, 2007 were prepared in conformity with generally accepted accounting principles applied on a consistent basis in all material respects. Since June 30, 2007, no material or adverse change has occurred in the financial position or results of operations of the City, and the City has not incurred any material liabilities other than in the ordinary course of business as provided for or contemplated herein. (4) There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending and notice of which has been served on and received by the City or, to the best knowledge of the City, threatened against or affecting the City, or to the best knowledge of the City is there any basis therefor, wherein an unfavorable decision, ruling or finding would have a material adverse effect on the validity or -3- enforceability of the Bonds, the City's Documents, or on the existence of the City or seeking to prohibit, restrain or enjoin the sale or delivery of the Bonds or the execution and delivery of any of the City's Documents. (5) The City's Documents, when executed and delivered by an Authorized Representative of the City, will be legal, valid and binding obligations of the City enforceable in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally. (6) The execution and delivery by an Authorized Representative, as such term is hereinafter defined, of the City of the City's Documents and the performance by the City of its obligations under the City's Documents, do not and will not violate any law or any court order by which the City is bound, and such actions do not and will not constitute a default under any material agreement, indenture, mortgage or lease, note or other obligation or instrument to which the City is bound or to which any of its property is subject, and no consent, approval, or other action by or filing with any governmental authority or agency is required in connection therewith, except approvals which have been obtained. Forpurposes of this Bond Purchase Agreement, an Authorized Representative is such person who has been specifically delegated the authority to act on behalf of and to legally bind his or her respective entity by such entity action as is legally required to create such authority. (7) The issuance of the Bonds has been validated pursuant to a validation action filed in the Superior Court of Los Angeles County, California, Case No. 30-2007-00100236, and judgment was entered in connection with such action on April 8, 2008, and all appeals periods have concluded without the fiJing of any appeal to such judgment. (8) The City will deliver or cause to be delivered all opinions, Bonds and other documents as required and as provided for in this Bond Purchase Agreement, including, but not limited to, an opinion of its counsel, dated as of the date of delivery of the Bonds, covering among other things the due authorization, execution and delivery of the City's Documents. (9) The City is not a party to or bound by any contract, agreement or other instrument, or subject to any judgment, order, writ, injunction, decree, rule or regulation, which, in the reasonable opinion of the City, matelially adversely affects, or in the future may, as far as they can now determine, materially adversely affect, the operations, properties, assets or condition, financial or otherwise, of the City. (10) Neither this Bond Purchase Agreement nor any other document, certificate or statement furnished to the Purchaser by or on behalf of the City contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained therein not misleading. -4- (11) No consent or approval is required to be obtained from, and no action need to be taken by, or document filed with, any governmental body in connection with the execution, delivery and performance of any of the City's Documents by the City, provided, however, that if any such action is required, the same has been duly taken, is in full force and effect and constitutes valid and sufficient consent or approval therefor. (12) Any certificate signed by an Authorized Representative of the City and delivered to the Purchaser is true, correct and complete as to the statements contained therein. (13) The City is not cutTently in default in any material respect under any indenture, trust agreement, mortgage, deed of trust, bank loan or credit agreement or (in any respect that is material in light of the financial condition, taken as a whole, of the City) any other agreement or instrument to which the City is a party or by which it or any of its property may be bound or affected. (B) The City agrees that all representations and warranties made by it herein, and in Bonds or other instruments delivered pursuant hereto or in connection herewith, shall be deemed to have been relied on by the Purchaser, and constitute an inducement to the Purchaser to purchase the Bonds. The City acknowledges and agrees that such reliance shall be made notwithstanding any investigation heretofore or hereafter made by the Purchaser and that all of the Purchaser's rights hereunder and thereunder shall survive delivery of the Bonds. SECTION 7. COVENANTS OF THE CITY The City agrees, so long as the Purchaser is the owner of the Bonds: (A) Use of Proceeds. To use the proceeds of the Bonds solely for the purposes set forth in Section 5 of this Bond Purchase Agreement. (B) Financial Information. To provide the following financial information and statements in form and content acceptable to the Purchaser, and such additional information as requested by the Purchaser from time to time: (1) Within 210 days following the end of each of the City's fiscal years, commencing after the end of the 2007 -2008 fiscal year, the annual financial statements of the City, certified and dated by an authorized financial officer of the City. These financial statements must be audited (with an unqualified opinion) by a certified public accountant of recognized regional or national standing. (2) Within 45 days after the adoption of the City's annual budget, a copy of the adopted budget. -5- (3) Within 60 days after receipt by the City, actuarial valuation and experience studies of the City's pension fund for the most recent period. (4) Within the period(s) provided in (1) above, a compliance certificate of the City signed by an authorized financial officer of the City setting forth whether there existed as of the date of such financial statements and whether there exists as of the date of the certificate, any default under this Agreement and, if any such default exists, specifying the nature thereof and the action the City is taking and proposes to take with respect thereto. (5) Upon the request of the Purchaser, any official statement or similar disclosure document circulated by the City in connection with the offering of any bonds, notes or other evidence of indebtedness of, or issued on behalf of, the City. (6) The City shall give prompt notice in writing to the Purchaser of any litigation, administrative proceeding or business development which may materially adversely affect its business, properties or affairs or the ability of the City to perform its obligations as set forth hereunder or under this Agreement, and shall in all events give prompt notice of any such litigation or proceeding involving a claim in excess of $1,000,000. (7) Such other information regarding the business, affairs and condition of the City as the Purchaser may from time to time reasonably request. (B) Books and Records. To maintain adequate books and records. (C) Inspection Rights. The City shall, at any reasonable time and from time to time, upon reasonable notice, permit the Purchaser or any agents or representatives thereof, at the Purchaser's expense, to examine and make copies of the records and books of account related to the transactions contemplated by this Bond Purchase Agreement, to visit its properties and to discuss its affairs, finances and accounts with any of its officers and independent accountants. The City will not unreasonably withhold its authorization for its independent accountants to discuss its affairs, finances and accounts with the Purchaser. (D) Compliance with Laws. To comply with the laws, regulations and orders of any government body with authority over the City's business or activities, including without limitation, its obligations with respect to the System. (E) Maintenance of Approvals, Etc. The City shall at all times maintain in effect, renew and comply with all the terms and conditions of all approvals and authorizations as may be necessary or appropriate under any applicable law or regulation for its execution, delivery and performance of this Agreement. (F) Cooperation. To take any action reasonably requested by the Purchaser to carry out the intent of this Bond Purchase Agreement and the Trust Agreement. (G) Payment of Obligations. The City will pay and discharge all of its obligations and liabilities when due and will appropriate funds for payment of the Bonds on an annual basis. -6- (H) Amendment of City Documents. The City shall not enter into any amendment of the Trust Agreement, including without limitation any supplemental trust agreement providing for the issuance of Additional Bonds (as defined in the Trust Agreement), or any other City Documents without the prior written consent of the Purchaser. (I) Compliance with PERS Contract. The City shall comply with its obligation under the PERS Contract and shall immediately deliver to the Purchaser any notice of default or noncompliance received by the City from the System with respect to the City's obligations to the System. SECTION 8. EVENTS OF DEFAULT. If any of the following events occur, the Purchaser may do one or more of the following: declare the City in default and require the City to repay the Bonds, together with all accrued but unpaid interest, in its entirety immediately and without prior notice. If an event of default occurs under the paragraph entitled "Bankruptcy," below, with respect to the City, then the entire principal amount ofthe Bonds, together with accrued interest and any other amount owed to the Purchaser under this Agreement or any of the other City's Documents will automatically be due immediately. (A) Failure to Pay. Any principal or interest owed to the Purchaser with respect to the Bonds shall not be paid when due and shall remain unpaid for five (5) business days after written notice of such failure has been given to the City, or the City fails to pay any other amounts owing under this Agreement within fifteen (15) after the date when due. (B) False Information. Any representation or warranty made by or on behalf of the City under this Agreement or in any certificate or statement delivered hereunder shall be incorrect or untrue in any material respect when made or deemed to have been made. (C) Bankruptcy. The City files a bankruptcy petition or the City makes a general assignment for the benefit of creditors. (0) Receivers. A receiver or similar official is appointed for a substantial portion ofthe City's business, or the business is terminated. (E) Judgments. Any judgments or arbitration awards are entered against the City, or the City enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount of One Million Dollars ($1,000,000) or more and any such judgment or award shall not have been satisfied, stayed or bonded pending appeal within a period of sixty (60) days from the date it was first so rendered. (F) Material Adverse Chang;e. A material adverse change occurs in the City's financial condition, properties or prospects, or ability to pay the Bonds. (G) Cross-default. Any default occurs under any agreement in connection with any other -7- credit which the City has obtained from the Purchaser, or which an affiliate of the City has obtained from the Purchaser, or which the City or an affiliate of the City has obtained from anyone else, or which the City has guaranteed. (H) Lien Priority. The Purchaser fails to have an enforceable first lien (except for any prior liens to which the Purchaser has consented in writing) on or security interest in any property given as security for this Agreement, if any. (I) Rating Event. If the City should issue bonds or other obligations that are rated by any of the rating agencies, the underlying ratings, if any, assigned by Fitch, Moody's and S&P to such obligations shall, in any such case, be withdrawn (other than by reason of maturity, redemption or defeasance of such debt), suspended, reduced below "BBB-", "Baa3" and "BBB-", respectively, or revoked. (1) Other Breach under Agreement. The City fails to meet the conditions of, or fails to perform any obligation under, any term of this Agreement not specifically referred to in this Article. This includes any failure or anticipated failure by the City to comply with any financial covenants set forth in this Agreement, whether such failure is evidenced by financial statements delivered to the Purchaser or is otherwise known to the City. If, in the Purchaser's opinion, the breach is capable of being remedied, the breach will not be considered an event of default under this Agreement for a period of thirty (30) days after the date on which the Purchaser gives written notice of the breach to the City; provided, however, that the Purchaser will not be obligated to extend any additional credit to the City during that period. SECTION 9. REPRESENT A TIONS AND AGREEMENTS OF THE PURCHASER. The Purchaser does hereby represent to the City as follows: (A) The Purchaser has legal power and authority to enter into this Bond Purchase Agreement and that this Bond Purchase Agreement is a legal, valid and binding obligation of the Purchaser, enforceable in accordance with its terms. (B) The Purchaser will not sell or transfer ownership, of any or all of the Bonds, unless the subsequent Bond purchaser delivers an Investor Letter (as defined in the Trust Agreement) and each successi ve Bond purchaser or successi ve transferee to agree to the requirements of this Section. SECTION 10. CLOSING. On the terms and conditions set forth herein, the Purchaser shall purchase all of the Bonds and the City shall cause the Trustee to sell and deliver the Bonds to the Purchaser. Closing shall be at the offices of Richards Watson Gershon, Los Angeles, California, not later than , 2008. SECTION 11. CONDITIONS OF CLOSING. The obligations of the Purchaser hereunder are subject to the following conditions precedent: (i) the Trust Agreement and all other documents essential to the execution and delivery of the Bonds shall be satisfactory in form and substance to the Purchaser and its counsel, and (ii) the Purchaser's credit committee shall have approved the purchase of the Bonds. -8- The obligations of the Purchaser hereunder are subject to the following conditions: (A) At the time of the Closing (1) the Trust Agreement and all the City's Documents shall be in full force and effect and shall not have been amended, modified or supplemented in any material respect prior to the Closing except as may have been agreed to in writing by the City, the Trustee and the Purchaser and there shall be in full force and effect such resolutions or agreements as shall, in the opinions of the Counsel to the Purchaser, be necessary in connection with the transactions contemplated hereby; (2) the representations and warranties of the City herein contained shall be true and accurate in all material respects; (3) the City shall perform or have performed all of its obligations required under or specified in this Bond Purchase Agreement to be performed at or prior to the Closing; and (4) no litigation shall be threatened or pending in any court (i) to restrain or enjoin the sale or delivery of the Bonds, or the payment, collection or application of the proceeds thereof or monies assigned, pledged or to be pledged under the Trust Agreement, or (ii) in any way questioning or affecting the validity of the Bonds or any of the City's Documents or any proceedings taken by the City with respect to the foregoing, or (iii) questioning the City's creation, organization or existence, or its power to enter into and perform its obligations under the Trust Agreement or this Bond Purchase Agreement. (B) At the Closing, the Purchaser shall have received the following documents in form and substance satisfactory to the Purchaser and its counsel: (1) A certificate, dated the date of the Closing, signed by duly authorized officials of the City and satisfactory in form and substance to the Purchaser to the effect that, to such official's best knowledge, (i) the representations and warranties of the City contained in this Bond Purchase Agreement are true and correct in all material respects on and as of the date of Closing; and (ii) since June 30, 2007, there has been no material adverse change in the financial condition of the City; (2) A closing certificate signed by the Authorized Representative of the City, dated the date of the Closing included in the record of proceedings prepared by Bond Counsel, and including the following points: (a) the City is a charter city and a Local Agency (as defined in Section 53570 of the California Government Code) duly organized, existing and operating under the laws of the State of California; (b) the City has full legal power, right and authority to enter into the Trust Agreement, to issue the Bonds, to own its properties and to carryon its business as then conducted; (c) the Trust Agreement and all other documents essential to the issuance of the Bonds have been duly authorized, executed and delivered by the City and constitute legal, valid and binding agreements of the City, enforceable in accordance -9- with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors' rights generally and by the application of equitable principles if equitable remedies are sought; and to the best knowledge of such counsel, there are no legal or governmental proceedings pending or threatened against the City which, if determined adversely to the City, would materially adversely affect the City's ability to enter into or perform its obligations under the City's Documents. (d) the Resolution of the City has been duly adopted at a meeting of the City' Council, at which a quorum was present and acting throughout; (3) Evidence that the issuance of the Bonds has been properly validated with a final, non-appealable validation judgment regarding the issuance of the Bonds and determining that payment ofthe Bonds is an unconditional obligation ofthe City imposed by law. (4) A closing certificate signed by a duly authorized officer of the Trustee, dated the day of closing, in the form reasonably approved by the Purchaser and its counsel and included in the record of proceedings prepared by Bond Counsel. (5) An opinion of Richards Watson Gershon, Bond Counsel, in substantially the form attached hereto as Exhibit A, dated the date of Closing and addressed to the City and the Purchaser, (6) Two (2) executed or certified copies of the City's Documents; (7) Two certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution and delivery of the Bonds and the Trust Agreement; (8) Two certified copies of the Resolution adopted by the City Council and certified by the City Clerk authOlizing the execution and delivery of the City Documents; (9) The latest pension fund annual reports of the City, most recent actuarial valuation and experience studies, verification ofthe UAAL and other information such as the status of employee contracts, insurance or self-insurance programs, capital improvement plan and expected funding sources, and obligations related to post-employment benefits for retired employees; (10) Such other agreements, Bonds or opinions which in the reasonable judgment ofthe Purchaser as are appropriate and necessary, all in the form and substance acceptable to the Purchaser. -10- (C) At the time of Closing, no default shall have occurred or be existing under the City's Documents or the Trust Agreement, and the City shall not be in default of payment of principal or interest on any of its bonded indebtedness. (0) Since the date of this Bond Purchase Agreement, there shall not have been any change, or any development involving a prospective change, in or affecting the business, financial condition or properties of the City, which change or development makes it impractical or inadvisable in the reasonable judgment of the Purchaser to proceed with the purchase of the delivery of the Bonds as contemplated in this Bond Purchase Agreement. (E) At the time of Closing, the Purchaser shall have delivered to the City an executed Investor Letter (as defined on the Trust Agreement) in the form attached to the Trust Agreement. SECTION 12. INDEMNIFICATION BY THE CITY. To the extent permitted by law, the City agrees to indemnify, hold harmless and defend the Trustee, and the Purchaser, and each director, officer, partner, member, agent, employee and controlling person of the Trustee, or Purchaser, within the meaning of Section 15 of the Securities Act of 1933, as amended, from and against all losses, claims, damages, liabilities and expenses, joint or several, to which the Trustee, or the Purchaser or such director, officer, partner, member, agent employee or controlling person of the Trustee, or the Purchaser (collectively, the "Indemnified Parties" and each an "Indemnified Party") may become subject under the federal securities laws or regulations or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) arise out of the purchase and sale of the Bonds and the transactions contemplated by this Bond Purchase Agreement and the City's Documents for any expenses, including, but not limited to, any legal, professional and other reasonable expenses reasonably incurred by the Indemnified Parties in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever. Promptly after receipt by an Indemnified Party under this Section 12 of notice of the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made against an Indemnified Party under this Section 12, notify the City of the commencement thereof. In case any such action shall be brought against any Indemnified Party and it shall so notify the City of the commencement thereof, (1) the City may assume the defense thereof unless in the reasonable judgment of the Indemnified Patties there is a conflict of interest between the Indemnified Parties and the City, in which event the City shall reimburse such Indemnified Parties for the legal fees reasonably incurred by such Indemnified Parties, or (2) if the City does assume such defense, the Indemnified Parties shall be entitled to participate therein to the extent that they may wish, jointly with any other defense thereof, with counsel reasonably satisfactory to such Indemnified Parties, After notice from the City to such Indemnified Party of their assumption of the defense thereof, The City shall not be liable to such Indemnified Party under this Section 12 for any legal or other expense subsequently incurred by such Indemnified Party, independently, in connection with the defense thereof other than reasonable costs of investigation. The City shall have no obligation with respect to any claim for which it has not recei ved prompt notice thereof, but the failure to give such notice in sufficient time shall not constitute a defense hereunder, nor in any way impair the obligations of the City under this Section 12. Notwithstanding the foregoing provisions of this Section 12, the City -11- shall not be required to indemnify the Purchaser for any claims, damages, losses, liabilities, costs and expenses to the extent caused by the gross negligence or willful misconduct of the Purchaser. SECTION 13. SURVIVAL OF AGREEMENT. The respective agreements, representations and warranties and other statements of the Purchaser and the City set forth in, or made pursuant to, this Bond Purchase Agreement shall remain in full force and effect regardless of any investigations, or statement as to the results thereof, made by or on behalf of the City" the Purchaser or any of their respective directors, officers, partners, members, agents or employees or any controlling person, and shall survive delivery of and any payment for the Bonds. All representations, warranties, covenants and other agreements of the City contained in this Bond Purchase Agreement or in any certificate deli vered pursuant hereto shall remain operati ve and in full force and effect regardless of any investigation made by or on behalf of the Purchaser and shall survi ve the delivery of and payment for the Bonds. SECTION 14. NOTICES. Any notice or other communication to be given to the City under this Bond Purchase Agreement may be given by delivering the same in writing to City of Seal Beach, 211 8th Street, Seal Beach, CA 90740 and any notice or other communication to be given to the Purchaser under this Bond Purchase Agreement may be given by delivering the same in writing to Bank of America, N.A., 333 South Hope Street, 13th floor, CA9-193-13-17, Los Angeles, CA 90071, Attn: Government Banking Credit Products. All notices shall be given by (i) facsimile with verbal confirmation of receipt from the recipient, in which case the notice shall be deemed received upon such confirmation, or (ii) overnight courier to the address indicated herein, in which case the notice shall be deemed received 24 hours after it is sent. SECTION 15. BENEFIT. This Bond Purchase Agreement is made solely for the benefit of the Purchaser and the City and the successors or assigns thereof, and no other person shall acquire or have any right hereunder or by virtue hereof. SECTION 16. APPLICABLE LAW; JURISDICTION. The construction and enforcement of this Bond Purchase Agreement shall be governed by the laws of the State of California. The parties hereto consent to the jurisdiction of any state or federal court located in the State of California for the resolution of any claim or controversy arising directly or indirectly from this Bond Purchase Agreement. SECTION 17. NO RECOURSE; SPECIAL OBLIGATION. The obligations and agreements of the City contained herein and in the Bonds, the Trust Agreement and in the other documents and any other instrument or document executed in connection therewith, and any other instrument or document supplemental thereto, shall be deemed the special obligations and agreements of the City, and not of any member, director, officer, agent or employee of the City and no member, director, officer, agent or employee of the City shall be liable personally hereon or thereon or be subject to any personal liability by reason of any transaction contemplated hereby or thereby. -12- SECTION 18. SEVERABILITY. In the event any provision of this Bond Purchase Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 19. COUNTERPARTS. This Bond Purchase Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 20. DISPUTE RESOLUTION. This paragraph, including the subparagraphs below, is referred to as the "Dispute Resolution Provision." This Dispute Resolution Provision is a material inducement for the parties entering into this agreement. (a) This Dispute Resolution Provision concerns the resolution of any controversies or claims between the parties, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this agreement (including any renewals, extensions or modifications); or (ii) any document related to this agreement (collectively a "Claim"). For the purposes of this Dispute Resolution Provision only, the term "parties" shall include any parent corporation, subsidiary or affiliate of the Purchaser involved in the servicing, management or administration of any obligation described or evidenced by this agreement. (b) At the request of any party to this agreement, any Claim shall be resolved by binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the "Act"). The Act will apply even though this agreement provides that it is governed by the law of a specified state. (c) Arbitration proceedings will be determined in accordance with the Act, the then-current rules and procedures for the arbitration of financial services disputes of the American Arbitration Association or any successor thereof ("AAA"), and the terms of this Dispute Resolution Provision. In the event of any inconsistency, the terms of this Dispute Resolution Provision shall control. If AAA is unwilling or unable to (i) serve as the provider of arbitration or (ii) enforce any provision of this arbitration clause, the Purchaser may designate another arbitration organization with similar procedures to serve as the provider of arbitration. (d) The arbitration shall be administered by AAA and conducted, unless otherwise required by law, in any U.S. state where real or tangible personal property collateral for this credit is located or if there is no such collateral, in the state specified in the governing law section of this agreement. All Claims shall be determined by one arbitrator; however, if Any Claim which is not arbitrated and which is brought in California state court will be resolved by a general reference to a referee (or a panel of referees) as provided in California Code of Civil Procedure Section 638. The referee (or presiding referee of the panel) shall be a retired Judge or Justice. The referee (or panel of referees) shall be selected by mutual written agreement of the parties. If the parties do not agree, the referee shall be selected by the Presiding Judge of the Court (or his or her representative) as provided in California Code of Civil Procedure Section 638 and the following related -13- sections. The referee shall determine all issues in accordance with existing California law and the California rules of evidence and civil procedure. The referee shan be empowered to enter equitable as well as legal relief, provide all temporary or provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including without limitation motions for summary judgment or summary adjudication. The award that results from the decision of the referee(s) will be entered as a judgment in the court that appointed the referee, in accordance with the provisions of California Code of Civil Procedure Sections 644(a) and 645. The parties reserve the right to seek appellate review of any judgment or order, including but not limited to, orders pertaining to class certification, to the same extent permitted in a court of law. (i) This Dispute Resolution Provision does not limit the right of any party to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure against any real or personal property colIateral; (iii) exercise any judicial or power of sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies. The filing of a court action is not intended to constitute a waiver of the right of any party, including the suing party, thereafter to require submittal of the Claim to arbitration or judicial reference. G) Any arbitration, judicial reference or trial by a judge of any Claim will take place on an individual basis without resort to any form of class or representative action (the "Class Action Waiver"). Regardless of anything else in this Dispute Resolution Provision, the validity and effect of the Class Action Waiver may be determined only by a court or referee and not by an arbitrator. The parties to this Agreement acknowledge that the Class Action Waiver is material and essential to the arbitration of any disputes between the parties and is nonseverable from the agreement to arbitrate Claims. If the Class Action Waiver is limited, voided or found unenforceable, then the parties' agreement to arbitrate shall be null and void with respect to such proceeding, subject to the right to appeal the limitation or invalidation of the Class Action Waiver. The Parties acknowledge and agree that under no circumstances will a class action be arbitrated. (k) By agreeing to binding arbitration or judicial reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury as permitted by law in respect of any Claim. Furthermore, without intending in any way to limit this Dispute Resolution Provision, to the extent any Claim is not arbitrated or submitted to judicial reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury to the extent permitted by law in respect of such Claim. This waiver of jury trial shall remain in effect even if the Class Action Waiver is limited, voided or found unenforceable. WHETHER THE CLAIM IS DECIDED BY ARBITRATION, BY JUDICIAL REFERENCE, OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW. -14- " IN WITNESS WHEREOF, the City and the Purchaser have caused this Bond Purchase Agreement to be executed in their respective names by their respective duty authorized officers all as of the date first above written. "City" CITY OF SEAL BEACH By: Name: Title: Approved as to Form City Attorney By: City Attorney "Purchaser" BANK OF AMERICA, N.A. By: Name: Title: -15- EXHIBIT A [Letterhead of Richards Watson Gershon] ,2008 City of Seal Beach 211 8th Street Seal Beach, CA 90740 Bank of America, N.A. 333 South Hope Street, 13th floor Los Angeles, CA 90071 $ City of Seal Beach Taxable Pension Obligation Bonds Series 2008 Ladies and Gentlemen: We have acted as special counsel in connection with the delivery by the City of Seal Beach (the "City"), of the Trust Agreement, dated as of June 1, 2008 (the "Trust Agreement") by and between the City and Wells Fargo Bank, National Association, as Trustee. Pursuant to the Trust Agreement, the City has issued $ 'principal amount of its Taxable Pension Obligation Bonds, Series 2008A-l and 2008A-2 (collectively, the "Bonds"). We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Trust Agreement and the Bond Purchase Agreement, and in certified proceedings and other certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The City is a charter city and municipal corporation and a Local Agency (as defined in Section 53570 of the California Government Code), duly organized and validly existing under the laws of the State of California, with the full power to enter into the Trust Agreement and the Bond Purchase Agreement dated , 2008 (the "Bond Purchase Agreement") between the City and Bank of America, N.A., as purchaser, and to perform the agreements on its part contained therein. Ci ty of Seal Beach Bank of America, N.A. _,2008 Page 2 2. The Trust Agreement, the Bonds and the Bond Purchase Agreement have been duly approved by the City, and constitute valid and binding obligations of the City, enforceable against the City in accordance with their respective terms. 3. The Bonds have been validly issued by the City and constitute an obligation imposed by law. The rights of the owners of the Bonds and the enforceability of the Trust Agreement, the Bonds and the Bond Purchase Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases. Respectfully submitted,