HomeMy WebLinkAboutCC AG PKT 2010-12-13 #G )
AGENDA STAFF REPORT
DATE: December 13, 2010
TO: Honorable Mayor and City Council
THRU: David Carmany, City Manager
FROM: Robbeyn Bird, Director of Administrative Services/Treasurer
SUBJECT: ISSUANCE OF SEWER IMPROVEMENT BONDS
SUMMARY OF REQUEST:
That City Council approve Resolution No. 6087 refinancing the Certificates of
Participation for sewer improvements that were originally issued in 2000.
BACKGROUND:
In 2000, the City issued $4,230,000 of Certificates of Participation to finance sewer
improvements. The amount currently outstanding is $3,460,000 at an interest rate
of 5.6 %. At the November 8, 2010 City Council meeting, staff requested that the
City Council authorize the City Manager to pursue refunding the 2000 Sewer
Improvement Bonds Certificates of Participation. At that time, refunding the prior
bonds at an estimated interest rate of 3.77 %, it was estimated that the City Sewer
Enterprise Fund would save $20,000 annually, or about $290,000 net present
value. However, since November 8, 2010, the interest rates have risen. As of
December 3, 2010 the net present value savings would be $233,000.
DISCUSSION:
On October 13 a meeting was held at city hall to discuss the potential savings
from a sewer improvement bond financing. In attendance were Michael
Cavanaugh and Todd Smith of Southwest Securities Group; Robbeyn Bird,
Director of Administrative Services; and David Carmany, City Manager. Based
on the City's consolidated annual financial report and credit factors Southwest
Securities Group considers a refunding transaction viable.
Attached to this report is a synopsis of the savings that the City will obtain by
refinancing the existing debt at a lower interest rate with the same amortization
period as the current debt. It should be noted; however, that interest rates are
starting to increase and these numbers are changing daily.
Agenda Item G
Page 2
FINANCIAL IMPACT:
The City will save a significant amount by refinancing the existing debt with new
debt at a lower interest rate.
RECOMMENDATION:
It is recommended that the City Council approve refunding the 2000 Certificates
of Participation and issue new debt at a lower interest rate resulting in a
substantial savings to the City.
SUBMITTED BY: NOTED AND APPROVED:
Robbe ird, David Orman City Manager
d, CPA a y, Y an ger
Director of Administrative Services/Treasurer
Attachments:
A. City Resolution No. 6087
B. Authority Resolution No PFA 10 -02
C. Continuing Disclosure Agreement
D. Bond Purchase Agreement
E. Installment Sale Agreement
F. Indenture
G. Refunding Instructions
H. Preliminary Official Statement
Attachment "A"
City Resolution No. 6087
RESOLUTION NUMBER 6087
RESOLUTION OF THE CITY OF SEAL BEACH APPROVING,
AUTHORIZING AND DIRECTING EXECUTION OF CERTAIN
FINANCING DOCUMENTS AND DIRECTING CERTAIN
RELATED ACTIONS IN CONNECTION WITH REFINANCING
CERTAIN IMPROVEMENTS TO THE CITY'S WASTEWATER
SYSTEM
WHEREAS, the City of Seal Beach (the "City ") and the Redevelopment Agency
of the City of Seal Beach (the "Agency ") have entered into a Joint Exercise of
Powers Agreement, dated May 8, 2000, establishing the Seal Beach Public
Financing Authority (the "Authority ") for the purpose, among others, of having the
Authority issue bonds to be used to finance and refinance the acquisition,
construction and improvement of certain public capital improvements; and
WHEREAS, for the purpose of raising funds necessary to refinance certain
obligations relating to the City's wastewater system, the Authority proposes to
authorize the issuance of its revenue bonds under the 'provisions of Article 4
(commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the
Government Code of the State of California (the "Act "), to be designated as the
Seal Beach Public Financing Authority 2011 Wastewater Revenue Refunding
Bonds, Series A (the "Bonds "); and
WHEREAS, the proceeds of the Bonds will be used to refund $4,230,000
Certificates of Participation (2000 Sewer System Project), outstanding in the
amount of $3,460,000, evidencing the direct, undivided fractional interests of the
owners thereof in certain installment payments to be made by the City as the
purchase price for certain property pursuant to an installment sale agreement
with the Authority (the "2000 COPs "); and
WHEREAS, pursuant to an Installment Sale Agreement between the City and
the Authority (the "Installment Sale Agreement "), the City will purchase certain
improvements to the City's wastewater system from the Authority, and the
Authority will use the installment payments paid by the City pursuant to the
•
Installment Sale Agreement to pay debt service on the Bonds; and
WHEREAS, in order to assist Southwest Securities, Inc. (the "Underwriter"), as
the underwriters of the Bonds, in complying with Rule 15c2 -12 of the Securities
and Exchange Commission, the City will undertake certain continuing disclosure
obligations pursuant to a continuing disclosure agreement to be executed by the
City (the "Continuing Disclosure Agreement "); and
WHEREAS, there has been prepared a Preliminary Official Statement containing
information to be used in connection with the sale of the Bonds; and
WHEREAS, the City has duly considered such transactions and wishes at this
time to approve certain matters relating to these transactions in the public
interest of the City; •
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF SEAL BEACH,
Section 1. Recitals. The above recitals, and each of them, are true and correct.
Section 2. Installment Sale Agreement. The City Council hereby approves the
form of the Installment Sale Agreement on file with the City Clerk, with such
additions thereto and changes therein as the Mayor or the City Manager, or the
written designee of any of them (each, an "Authorized Officer") deems
necessary, desirable or appropriate upon consultation with bond counsel, the
execution by the City of which shall be conclusive evidence of the approval of
Resolution Number 6087
any such additions and changes. The Authorized Officers and all other
appropriate officials of the City are hereby authorized and directed to execute,
and the City Clerk is hereby authorized to attest, as appropriate, the Installment
Sale Agreement and such other agreements, documents and certificates as may
be necessary or desirable to effectuate the purposes of this resolution and the
financing herein authorized, including, without limitation, such other agreements,
documents and certificates as may be required by the Installment Sale
Agreement. The City Council hereby authorizes the performance by the City of
its obligations under the Installment Sale Agreement. The maximum stated term
of the Installment Sale Agreement shall not exceed 35 years.
Section 3. Bond Purchase Agreement. The City Council hereby approves the
form of the Bond Purchase Agreement on file with the City Clerk. Each
Authorized Officer is hereby authorized and directed, for and in the name and on
behalf of the City, to execute and deliver the Bond Purchase Agreement in
substantially said form, with such changes therein as such Authorized Officer
executing the same may approve (such approval to be conclusively evidenced by
the execution and delivery thereof); provided that the principal amount of Bonds
shall not exceed $4,000,000, the net interest cost shall not exceed 4.55 %, and
the underwriter's discount (exclusive of any original issue discount) shall not be
greater than 0.80 %; provided further, that the 2000 COPs shall be refunded only
if such refunding results in present value savings, as determined by the
Authorized Officers, of at least $250,000.
Section 4. Official Statement. The City Council hereby approves the preparation
of, and hereby authorizes the City Manager and the Director of Administrative
Services of the City, each acting alone, to deem final within the meaning of Rule
15c2 -12 of the Securities Exchange Act of 1934, as amended (except for
permitted omissions), the preliminary form of the Official Statement describing
the Bonds (the "Preliminary Official Statement ") on file with the City Clerk,
together with such changes or additions as the Authorized Officer may deem
necessary, desirable or appropriate upon consultation with bond counsel.
Distribution of the Preliminary Official Statement by the Underwriter is hereby
approved. The Authorized Officers, each acting alone, are hereby authorized to
execute the final form of the Official Statement with such changes or additions as
the Authorized Officers deem necessary, desirable or . appropriate upon
consultation with bond counsel, and the execution of the final Official Statement
by the City shall be conclusive evidence of the approval of any such additions
and changes. The City Council hereby authorizes the distribution of the final
Official Statement.
Section 5. Continuing Disclosure Agreement. The City Council hereby approves
the Continuing Disclosure Agreement in the form on file with the City Clerk.
Each Authorized Officer is hereby authorized and directed, for and in the name
and on behalf of the City, to execute and deliver the Continuing Disclosure
Agreement in substantially said form, with such changes therein as such
Authorized Officer executing the same may approve (such approval to be
conclusively evidenced by the execution and delivery thereof).
Section 6. Irrevocable Refunding Instructions The City Council hereby approves
the form of the Irrevocable Refunding Instructions from the Authority and the City
to BNY Western Trust Company, as trustee for the 2000 COPs (the "Refunding
Instructions "), on file with the City Clerk. Each Authorized Officer is hereby
authorized and directed, for and in the name and on behalf of the City, to
execute and deliver the Refunding Instructions in substantially said form, with
such changes therein as such Authorized Officer executing the same may
approve (such approval to be conclusively evidenced by the execution and
delivery thereof).
Section 7. Other Acts. The Authorized Officers and all other officers of the City
are hereby authorized and directed, jointly and severally, to do any and all things
and to execute and deliver any and all instruments which they may deem
Resolution Number 6087
necessary or proper in order to effectuate the purposes of this Resolution, the
documents approved hereby, and the issuance, sale and delivery of the Bonds
and any such actions previously taken by such officers are hereby ratified and
confirmed.
Section 8. Effective Date. This resolution shall take effect from and after its
passage and adoption by the City.
PASSED, APPROVED and ADOPTED by the City Council at a regular meeting
held on the 13th day of December , 2010 by the following vote:
AYES: Council Members
NOES: Council Members
ABSENT: Council Members
ABSTAIN: Council Members
Mayor
ATTEST:
City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Linda Devine, City Clerk of the City of Seal Beach, do hereby certify that the
foregoing resolution is the original copy of Resolution Number 6087 on file in
the office of the City Clerk, passed, approved, and adopted by the City Council at
a regular meeting held on the 13th day of December , 2010.
City Clerk
Attachment "B"
Authority Resolution No. PFA 10 -02
. RESOLUTION NUMBER PFA 10 -02
A RESOLUTION OF THE SEAL BEACH PUBLIC
FINANCING AUTHORITY AUTHORIZING THE SALE,
ISSUANCE AND DELIVERY OF WASTEWATER REVENUE
REFUNDING BONDS AND APPROVING AS TO FORM AND
AUTHORIZING THE EXECUTION AND DELIVERY OF
DOCUMENTS RELATING THERETO AND AUTHORIZING
CERTAIN OTHER MATTERS RELATING THERETO
WHEREAS, the City of Seal Beach (the "City ") and the Redevelopment
Agency of the City of Seal Beach (the "Agency ") have heretofore executed and
delivered a joint exercise of powers agreement, dated May 8, 2000 (the "Joint
Powers Agreement "), by and between the City and the Agency, which Joint
Powers Agreement created and established the Seal Beach Public Financing
Authority (the "Authority "); and
WHEREAS, for the purpose of raising funds necessary to refinance
certain obligations relating to the City's wastewater system, the Authority
proposes to authorize the issuance of its revenue bonds under the provisions of
Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of
the Government Code of the State of California (the "Act "), to be designated as
the Seal Beach Public Financing Authority 2011 Wastewater Revenue Refunding
Bonds, Series A (the "Bonds "); and
WHEREAS, the proceeds of the Bonds will be used to refund $4,230,000
Certificates of Participation (2000 Sewer System Project), outstanding in the
amount of $3,460,000, evidencing the direct, undivided fractional interests of the
owners thereof in certain installment payments to be made by the City as the
purchase price for certain property pursuant to an installment sale agreement
with the Authority (the '2000 COPs "); and
WHEREAS, pursuant to an Installment Sale Agreement by and between
the City and the Authority (the "Installment Sale Agreement "), the City will
purchase certain improvements to the City's wastewater system from the
Authority, and the Authority will use the installment payments made by the City to
the Authority pursuant to the Installment Sale Agreement to pay debt service on
the Bonds; and •
WHEREAS, the Authority desires to prepare and make available to
potential investors an official statement , relating to the Bonds containing
information to be used in connection with the sale of Bonds; and
WHEREAS, the Board of Directors (the "Board ") of the Authority has duly
considered these transactions and wishes at this time to approve these
transactions;
•
NOW, THEREFORE, BE IT RESOLVED, BY THE BOARD OF
DIRECTORS OF THE SEAL BEACH PUBLIC FINANCING AUTHORITY, as
follows:
Section 1. Recitals. The above recitals, and each of them, are true and
correct.
•
Section 2. Issuance of Bonds; Approval of Indenture. The Board
hereby authorizes the issuance of the Bonds in a maximum aggregate principal
amount not to exceed $4,000,000. The Bonds shall be issued pursuant to an
Indenture of Trust (the "Indenture ") by and between the Authority and the Trustee
(hereinafter defined). The Board hereby approves the Indenture in the form on
file with the Secretary of the Authority (the "Secretary"), together with such
additions thereto and changes therein as the Executive Director or the Chair of
Resolution Number PFA 10 -02
the Authority, or the written designee of any of them (each, an "Authorized
• Officer "), deems necessary, desirable or appropriate upon consultation with bond
counsel to the Authority, the execution of which by the Authority shall be
conclusive evidence of the approval of any such additions and changes. The
Authorized Officers, each acting alone, are hereby authorized and directed to
execute, and the Secretary is hereby authorized and directed to attest, the final
form of the Indenture for and in the name and on behalf of the Authority. The
Board hereby authorizes the performance by the Authority of its obligations under
the Indenture.
Section 3. Installment Sale Agreement. The Board hereby approves
the form of the Installment Sale Agreement, by and between the Authority and
the City on file with the Secretary, together with such additions thereto and
changes therein as the Authorized Officers deem necessary, desirable or
appropriate upon consultation with bond .counsel to the Authority, the execution
of which by the Authority shall be conclusive evidence of the approval of any
such additions and changes. The Authorized Officers, each acting alone; are
hereby authorized and directed to execute, and the Secretary is hereby
authorized and directed to attest, the final form of the Installment Sale Agreement
for and in the name of and on behalf of the Authority. The Authority hereby
authorizes the performance by the Authority of its obligations under the
Installment Sale Agreement.
Section 4. Bond Purchase Agreement. The Authority hereby
authorizes and directs the Executive Director of the Authority to sell the Bonds
pursuant to a negotiated sale to Southwest Securities, Inc., as underwriter of the
Bonds (the "Underwriter "). The Authority hereby approves the form of the Bond
Purchase Agreement on file with the Secretary, with such additions thereto and
changes therein as Authorized Officers deem necessary, desirable or appropriate
upon consultation with bond counsel to the Authority, the execution of which by
the Authority shall be conclusive evidence of the approval of any such additions
or changes; provided that no such addition or change may increase the
aggregate principal amount of Bonds to be in excess of $4,000,000, or may
provide for a net interest cost in excess of 4.55% or an underwriter's discount
(exclusive of any original issue discount) of greater than 0.80 %, provided that the
Authority shall refund the 2000 COPs only if such refunding results in present
value savings, as determined by the Authorized Officers, of at least $250,000.
The Authorized Officers, each acting alone, are hereby authorized and directed
to execute the Bond Purchase Agreement and to take all actions necessary to
fulfill the Authority's obligations thereunder. The Authority hereby authorizes the
performance by the Authority of its obligations under the Bond Purchase
Agreement.
Section 5. Official Statement. The Board hereby approves the form of
Official Statement relating to the Bonds (the "Official Statement ") on file with the
Secretary, together with such changes or additions thereto as the Authorized
Officers deem necessary, desirable or appropriate upon consultation with bond
counsel to the Authority, and authorizes the Authorized Officers, each acting
alone, to deem a preliminary form of the Official Statement final within the
meaning of Rule 15c2 -12 of the Securities Exchange Act of 1934, as amended,
except for omissions permitted therein. Distribution of the preliminary form of
Official Statement by the Underwriters is hereby approved. The Authorized
Officers, each acting alone, are hereby authorized to execute the final form of the
Official Statement with such changes or additions as the Authorized Officers
deem necessary, desirable or appropriate upon consultation with bond counsel to
the Authority, and the execution of the final Official Statement by the Authority
shall be conclusive evidence of the approval of any such additions and changes.
The Board hereby authorizes the distribution of the final Official Statement.
Section 6. Selection of Trustee. The Board hereby approves of the
appointment of Bank of New York Mellon Trust Company, N.A., as trustee (the
'Trustee ") for the Bonds, and authorizes the Authorized Officers to negotiate the
Resolution Number PFA 10 -02
fees for trustee services in the name of and on behalf of the Authority.
Section 7. Irrevocable Refunding Instructions. The Board hereby
approves the form of the Irrevocable Refunding Instructions (the `Refunding
Instructions ") from the Authority and the City to Bank of New York Mellon Trust
Company, N.A. (successor in interest to BNY Western Trust Company, as
trustee for the 2000 COPs), on file with the City Clerk. Each Authorized Officer is
hereby authorized and directed, for and in the name and on behalf of the
Authority, to execute and deliver the Refunding Instructions in substantially said
form, with such changes therein as such Authorized Officer executing the same
may approve (such approval to be conclusively evidenced by the execution and
delivery thereof).
Section 8. Bond Counsel. The appointment of Richards, Watson &
Gershon, A Professional Corporation, to act as bond counsel and disclosure
counsel for the issuance of the Series 2011 Bonds is hereby approved.
Section 9. 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 and to execute and deliver any and all instruments which they may
deem necessary or proper in order to effectuate the purposes of this Resolution,
the documents approved hereby, and the issuance, sale and delivery of the
Series 2011 Bonds and any such actions previously taken by such officers are
hereby ratified and confirmed.
Section 10. Effective Date. This resolution shall take effect from and
after its passage and adoption by the Authority.
PASSED, APPROVED AND ADOPTED by the Seal Beach Public Financing
Authority this 13th day of December , 2010 by the following vote:
AYES: Authority Members
NOES: Authority Members
ABSENT: Authority Members
ABSTAIN: Authority Members
Chair
ATTEST:
Secretary/City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Linda Devine, City Clerk of the City of Seal Beach, California, do hereby certify
that the foregoing Resolution is the original copy of Resolution Number PFA 10-
02 on file in the office of the City Clerk, passed, approved, and adopted by the
Redevelopment Agency of the City of Seal Beach at a meeting held thereof on
the 13th day of December , 2010
Secretary/City Clerk
1306016
Attachment "C"
Continuing Disclosure Agreement
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement ") is executed and
delivered by the City of Seal Beach (the "City ") and Bank of New York Mellon Trust Company,
N.A., as dissemination agent (the "Dissemination Agent ") in connection with the issuance by the
Seal Beach Public Financing Authority (the "Authority ") of its $[principal amount] aggregate
principal amount of 2011 Wastewater Revenue Refunding Bonds, Series A (the "Bonds "). The
Bonds are being issued pursuant to an Indenture of Trust, dated as of January 1, 2011 (the
"Indenture "), by and between the Authority and Bank of New York Mellon Trust Company, N.A., as
trustee (the "Trustee "). The City and the Dissemination Agent covenant and agree as follows:
Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
executed and delivered by the City and the Dissemination Agent for the benefit of the holders and
beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with
the Rule (as defined below).
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 City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Agreement.
"Dissemination Agent" shall mean Bank of New York Mellon Trust Company, N.A., or any
successor Dissemination Agent designated in writing by the City and which has filed with the City
and 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.
"MSRB" shall mean the Municipal Securities Rulemaking Board.
"Obligated Person" shall mean any person, including an issuer of municipal securities, who is
either generally or through an enterprise, fund, or account of such person committed by contract or
other arrangement. to support payment of all, or part of the obligations on the Bonds (other than
providers of municipal bond insurance, letters of credit, or other liquidity facilities).
"Official Statement" shall mean the final Official Statement relating to the Bonds.
"Participating Underwriter" shall mean any of the original underwriters of the Bonds required
to comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 3. Provisions of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than
March 31 of each year, commencing March 31, [2012] with the report for the [2010 -2011] fiscal
year, provide to the MSRB, in an electronic format accompanied by identifying information as
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prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of
this Disclosure Agreement. The Annual Report may be submitted as a single document or as
separate documents comprising a package, and may include by reference other information as
provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of
the City may be submitted separately from the balance of the Annual Report, and later than the date
required above for the filing of the Annual Report if not available by that date.. If the City's fiscal
year changes, it shall give notice of such change in the same manner as for a Listed Event under
Section 5(b).
(b) Not later than fifteen (15) Business Days prior to the date specified in
subsection (a) above for providing the Annual Report to the MSRB, the City shall provide the
Annual Report to the Dissemination Agent (if other than the City). If by such date, the
Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall
contact the City to determine if the City is in compliance with the first sentence of this subsection (b).
The City shall provide a written certification with each Annual Report furnished to the Dissemination
Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished
by it hereunder.
(c) If the Dissemination Agent is unable to verify that an Annual Report has been
provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall send a
notice to the MSRB in substantially the form attached as Exhibit A.
(d) The Dissemination Agent (if other than the City) shall, if and to the extent,
the City has provided an Annual Report in final form to the Dissemination Agent for dissemination,
file a report with the City certifying that the Annual Report has been provided to the MSRB pursuant
to this Disclosure Agreement, and stating the date it was provided.
Section 4. Content of Annual Reports. The City's Annual Report shall contain or
incorporate by reference the following:
(a) Audited financial statements of the City prepared in accordance with
generally accepted accounting principles as promulgated to apply to governmental entities from time
to time by the Governmental Accounting Standards Board. If the City's audited financial statements
are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the
Annual Report shall contain unaudited financial statements in a format similar to the financial
statements contained in the Official Statement, and the audited financial statements shall be filed in
the same manner as the Annual Report when they become available.
(b) The following financial information and operating data set forth in the
Official Statement:
(i) To the extent not contained in the audited financial statements filed
pursuant to the preceding subsection (a) by the date required by Section 3 hereof, updates of
Tables set forth in the section of the Official Statement.
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 City or related public entities, which
have been available to the public on the MSRB's internet web site or filed with the Securities and
2
Exchange Commission. The City shall clearly identify each such other document so included by
reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be
given, notice of the occurrence of any of the following Listed Events with respect to the Bonds,
which notice shall be given in a timely manner, not in excess of ten (10) business days after the
occurrence of such Listed Event:
(1) Principal and interest payment delinquencies;
(2) Non - payment related defaults, if material;
(3) Unscheduled draws on debt service reserves reflecting financial
difficulties;
(4) Unscheduled draws on credit enhancements reflecting financial
difficulties;
(5) Substitution of credit or liquidity providers, or their failure to perform;
(6) Adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue
(IRS Form 5701 -TEB) or other material notices or determinations with
respect to the tax status of the security, or other material events affecting
the tax status of the security;
(7) Modifications to rights of security holders, if material;
(8) Bond calls, if material, and tender offers;
(9) Defeasances;
• (10) Release, substitution, or sale of property securing repayment of the
securities, if material
(11) Rating changes;
(12) Bankruptcy, insolvency, receivership or similar event of the Obligated
Person;
(13) The consummation of a merger, consolidation, or acquisition involving an
Obligated Person or the sale of all or substantially all of the assets of the
Obligated Person, other than in the ordinary course of business, the entry
into a definitive agreement to undertake such an action or the termination
of a definitive agreement relating to any such actions, other than pursuant
to its terms, if material; and
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(14) Appointment of a successor or additional trustee or the change of name of
a trustee, if material.
(b) As soon as reasonably practicable after obtaining knowledge of the
occurrence of any of the events listed in Section 5(a) (1), (3), (4), (5), (6), (9), (11) or (12), the
Dissemination Agent shall inform the City of the occurrence of such event. As soon as reasonably
practicable after obtaining knowledge of the occurrence of such event, the City shall, or shall cause
the Dissemination Agent to, file in a timely manner, not in excess of ten (10) business days after the
occurrence of any such event, a notice of such occurrence with the MSRB, in an electronic format
accompanied by identifying information as prescribed by the MSRB.
(c) As soon as reasonably practicable after obtaining knowledge of the
occurrence of any of any of the events listed in Section 5(a) (2), (7), (8), (10), (13) or (14), the
Dissemination Agent shall inform the City of the occurrence of such event and request that the City
promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to
subsection (d).
(d) Whenever the City obtains knowledge of the occurrence of any event
specified in Section 5(a) (2), (7), (8), (10), (13) or (14), the City shall as soon as possible determine if
such event would be material under applicable Federal securities law. If the City determines that
knowledge of the occurrence of such event would be material under applicable Federal securities
law, the City shall, or shall cause the Dissemination Agent to, file in a timely manner, not in excess
of ten (10) business days after the occurrence of any such event, a notice of such occurrence with the
MSRB, in an electronic format accompanied by identifying information as prescribed by the MSRB.
Section 6. Termination of Reporting Obligation. The City's obligations under this
Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full
of all the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall
give notice of such termination in the same manner as for a Listed Event under Section 5(b).
Section 7. Dissemination Agent.
(a) The City hereby appoints and engages Bank of New York Mellon Trust
Company, N.A. as the Dissemination Agent to assist it in carrying out its obligations under this
Disclosure Agreement. The Dissemination Agent shall not be responsible in any manner for the
content of any notice or report prepared by the City pursuant to this Disclosure Agreement. The City
may replace the Dissemination Agent with or without cause. If at the time there is no designated
Dissemination Agent appointed by the City, the City shall be the Dissemination Agent and undertake
or assume its obligations hereunder.
Any company succeeding to all or substantially all of the Dissemination Agent's
corporate trust business shall be the successor to the Dissemination Agent hereunder without the
execution or filing of any paper or any further act. The Dissemination Agent may resign its duties
hereunder by giving 30 -days written notice to the City.
(b) The Dissemination Agent shall be paid compensation by the City for its
services provided hereunder in accordance with its schedule of fees agreed to between the
Dissemination Agent and the City from time to time and for all expenses, legal fees and advances
made or incurred by the Dissemination Agent in the performance of its duties hereunder. The
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Dissemination Agent shall have no duty or obligation to review any information provided to it by the
City hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, holders or
beneficial owners or any other party. The Dissemination Agent may rely and shall be protected in
acting or refraining from acting upon any direction from the City or an opinion of nationally
recognized bond counsel.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure
Agreement may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or
5(a), it may only be 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 an Obligated Person
with respect to the Bonds, or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the
opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at
the time of the primary offering of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the
Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of
holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the
interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report is
amended pursuant to the provisions hereof, the first annual financial information filed pursuant
hereto containing the amended operating data or financial information shall explain, in narrative
form, the reasons for the amendment and the impact of the change in the type of operating data or
financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be
followed in preparing financial statements, the annual financial information for the year in which the
change is made shall present a comparison between the financial statements or information prepared
on the basis of the new accounting principles and those prepared on the basis of the former
accounting principles. The comparison shall include a qualitative discussion of the differences in the
accounting principles and the impact of the change in the accounting principles on the presentation of
the financial information, in order to provide information to investors to enable them to evaluate the
ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be
quantitative. A notice of the change in the accounting principles shall be sent to the MSRB in the
same manner as for a Listed Event under Section 5(b).
No amendment to this Agreement which modifies the duties or rights of the Dissemination
Agent shall be made without the prior written consent of the Dissemination Agent.
Section 9. Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the City 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
5
addition to that which is required by this Disclosure Agreement. If the City 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 City shall have no obligation under this
Disclosure 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 City or the Dissemination Agent to
comply with any provision of this Disclosure Agreement, any Participating Underwriter or any
holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate,
including seeking mandate or specific performance by court order, to cause the City or the
Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure
Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default
under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure
of the City or the Dissemination Agent to comply with this Disclosure Agreement shall be an action
to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The
Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Agreement, and the City agrees to indemnify and save the Dissemination Agent, its 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 negligence or willful misconduct. The
Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any
direction from the City or an opinion of nationally recognized bond counsel. The obligations of the
City under this Section shall survive resignation or removal of the Dissemination Agent and payment
of the Bonds.
Section 12. Notices. Any notices or communications to or among any of the parties to
this Disclosure Agreement may be given as follows:
To the City: City of Seal Beach
211 Eighth Street
Seal Beach, California 90740
Attention: City Manager
Fax: 562.493.9857
To the Dissemination Agent: Bank of New York Mellon Trust Company, N.A.
700 S. Flower Street, Suite 500
Los Angeles, CA 90017
Attention: Corporate Trust Services
Fax: 213.630.6480
6
Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of
the City, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners
from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 14. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of
the date written below.
Dated: January , 2011 City of Seal Beach
City Manager
Bank of New York Mellon Trust Company, N.A.
as Dissemination Agent
Authorized Officer
•
7
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING
BOARD OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Seal Beach
Name of Bond Issue: $[principal amount] 2011 Wastewater Revenue Refunding Bonds, Series A i'
Date of Issuance: January , 2011
NOTICE IS HEREBY GIVEN that the City of Seal Beach (the "City ") has not provided an
Annual Report with respect to the above -named Bonds as required by the Indenture, dated as of
January 1, 2011, by and between the Authority and Bank of New York Mellon Trust Company, N.A.,
as trustee. The City anticipates that the Annual Report will be filed by
Date: , 20 Bank of New York Mellon Trust Company, N.A.
as Dissemination Agent
By:
Title:
cc: David Carmany, City Manager
A =1
Attachment "D"
Bond Purchase Agreement
Bond Purchase Agreement
$ [principal amount]
Seal Beach Public Financing Authority
2011 Wastewater Revenue Refunding Bonds, Series A
[pricing date], 2011
Seal Beach Public Financing Authority
211 Eight Street
Seal Beach, California 90740
City of Seal Beach
211 Eight Street
Seal Beach, California 90740
Ladies and Gentlemen:
The undersigned, Southwest Securities, Inc. (the "Underwriter "), hereby offers to enter
into the following agreement (this "Purchase Agreement ") with the Seal Beach Public Financing
Authority (the "Authority ") and the City of Seal Beach (the "City "). Upon the acceptance of this
Purchase Agreement by the Authority and the City, this offer will be binding upon the Authority,
the City and the Underwriter. This offer is made subject to (i) the written acceptance of this
Purchase Agreement by the Authority and the City, and (ii) withdrawal by the Underwriter upon
written notice (by telecopy or otherwise) delivered to the Authority and the City at any time prior
to the acceptance of this Purchase Agreement by the Authority and the City
• 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations, warranties and agreements set forth in this Purchase Agreement, the Underwriter
hereby agrees to purchase from the Authority, and the Authority agrees to sell and deliver to the
Underwriter at the Closing Time on the Closing Date (both as defined herein), all and not less
than all, of the $[principal amount] aggregate principal amount of the Authority's 2011
Wastewater Revenue Refunding Bonds, Series A (the "Bonds "). The Bonds shall be dated their
delivery date, shall mature on the dates, and shall bear interest at the rates per annum, shown on
Exhibit A hereto. Interest on the Bonds shall be payable on June 1 and December 1 of each year,
commencing June 1, 2011. The price at which the Underwriter is to purchase the Bonds shall be.
$ in immediately available funds (being the aggregate principal amount thereof [plus /less] an
original issue [premium/discount] of $ and less an Underwriter's discount of $ ). The
date of such payment and delivery is referred to herein as the "Closing Date," the hour and date
of such delivery and payment is referred to herein as the "Closing Time," and the other actions
contemplated hereby to take place at the time of such payment and delivery are sometimes
referred to herein as the "Closing ".
2. The Bonds. The Bonds shall be issued pursuant to the provisions relating to the
joint exercise of powers found in Chapter 5 of Division 7 of Title 1 of the California Government
S7296- 1134 \1306050v2.doc
Code, including the provisions of the Marks -Roos Local Bond Pooling Act of 1985, constituting
Article 4 thereof (the "Law "), and an Indenture of Trust, dated as of January 1, 2011 (the
"Indenture "), by and between the Authority and Bank of New York Mellon Trust Company,
N.A., as trustee (the "Trustee "). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Indenture, or if not in the Indenture, in the Installment Sale
Agreement, dated as of January 1, 2011 (the "Installment Sale Agreement "), by and between the
Authority and the City. Proceeds of the Bonds will be used to (i) current refund the $4,230,000
2000 Certificates of Participation (2000 Sewer System Project), currently outstanding in the
amount of $3,460,000, evidencing the direct, undivided fractional interests of the owners thereof
in certain installment payments to be made by the City as the purchase price for certain property
pursuant to an installment sale agreement with the Authority (the "2000 COPs "); (ii) fund a
deposit to the Reserve Fund in an amount equal to the Reserve Requirement, and (iii) pay costs
of issuance of the Bonds.
The Bonds shall be payable and shall be subject to redemption as provided in the
Indenture and shall be as described in (i) the Preliminary Official Statement, dated
December , 2010 (the "Preliminary Official Statement ") and (ii) the Official Statement, dated
of even date herewith. Such Preliminary Official Statement, including the cover page, the inside
front cover and the appendices thereto, relating to the Bonds, as further amended to include the
terms of this Purchase Agreement with respect to pricing and interest rates and with such
changes and amendments thereto as have been mutually agreed to by the Authority, the City and
the Underwriter, is hereinafter referred to as the "Official Statement."
A portion of the proceeds of the Bonds, together with certain other moneys to be
released from funds relating to the 2000 COPs will be deposited in an escrow fund created
pursuant to Irrevocable Refunding Instructions, dated January_, 2011 (the "Refunding
Instructions "), given by the Authority and the City and accepted by Bank of New York Mellon
Trust Company, N.A. (successor in interest to BNY Western Trust Company, as trustee for the
2000 COPs), as escrow agent (the "Escrow Agent ").
The City and the Trustee will execute a Continuing Disclosure Agreement, dated
January _, 2011 (the "Continuing Disclosure Agreement "), in order to assist the Underwriter in
complying with the requirements of paragraph (b)(5) of Rule 15c2 -12 of the Securities and
Exchange Commission promulgated under the Securities Exchange Act of 1934 ( "Rule 15c2-
12 ").
In connection with the issuance of the Bonds, the City and the Authority shall
enter into the Installment Sale Agreement. The Bonds, when issued, shall be payable from and
secured by a pledge of Revenues, and moneys in certain funds and accounts held under the
Indenture. Revenues shall consist primarily of the Installment Payments to be made by the City
to the Authority pursuant to the Installment Sale Agreement. Pursuant to the Installment Sale
Agreement, the City covenants to take such action necessary to include the Installment Payments
in its annual budget and to make all necessary appropriations therefor.
Herein, the Indenture, the Installment Sale Agreement, the Refunding Instructions
and this Purchase Agreement are referred to as the "Authority Documents." The Installment
S7296- 1134 \1306050v2.doe
2
Sale Agreement, the Refunding Instructions, the Continuing Disclosure Agreement and this
Purchase Agreement are referred to as the "City Documents."
' 3. Offering by the Underwriter. It shall be a condition to the Authority's
obligations to sell and to deliver the Bonds to the Underwriter, and to the Underwriter's
obligation to purchase, to accept delivery of and to pay for the Bonds that the entire principal
amount of the Bonds shall be issued, sold and delivered by the Authority to the Underwriter, and
purchased, accepted and paid for by the Underwriter at the Closing. It is understood that the
Underwriter proposes to offer the Bonds for sale to the public (which may include selected
dealers and special purchasers) at the yield (or price) as set forth in Exhibit A hereto and on the
inside front cover of the Official Statement. Concessions from the public offering price may be
allowed to selected dealers and special purchasers. It is understood that the initial public offering
price and concessions set forth in the Official Statement may vary after the initial public offering.
It is further understood that the Bonds may be offered to the public at prices other than the par
value thereof. The Underwriter hereby represents that it has the full right, power and authority to
enter into this Purchase Agreement.
4. Delivery of Official Statement, Use of Documents. (a) The Authority and the
City hereby authorize the use by the Underwriter of the Preliminary Official Statement and the
Official Statement (including any supplements or amendments thereto), the Authority
Documents, the City Documents and the information therein contained, in connection with the
public offering and sale of the Bonds. The Preliminary Official Statement is deemed final by the
Authority and the City as of its date, except for the omission of such information as is permitted
to be omitted in accordance with paragraph (b)(1) of Rule 15c2 -12. The Authority and the City
have delivered to the Underwriter a certificate to such effect in the form attached hereto as
Exhibit E.
(b) The Authority shall deliver to the Underwriter, within seven business days
from the date hereof, such number of copies of the final Official Statement executed on behalf of
and approved for distribution by the Authority and the City as the Underwriter may reasonably
request in order for the Underwriter to comply with the rules of the Municipal Securities
Rulemaking Board and paragraph (b)(4) of Rule 15c2 -12.
(c) As soon as practicable following receipt thereof, the Underwriter shall
deliver the Official Statement, and any supplements or amendments thereto, to the Municipal
Securities Rulemaking Board.
5. Representations, Warranties and Agreements of the Authority. The
Authority represents, warrants and agrees as follows:
(a) The Authority is a joint powers authority duly organized and validly
existing under the laws of the State of California.
(b) • The Authority has full legal right, power and authority to (i) enter into,
execute and deliver the Authority Documents and the Official Statement; (ii) sell, issue
and deliver the Bonds as provided in the Authority Documents; and (iii) carry out and
consummate the transactions on its part contemplated by the Authority Documents.
57296- 1134 \1306050v2.doc
3
(c) By all necessary official action, the Authority has duly authorized and
approved the execution and delivery of the Authority Documents and the Official
Statement and the performance by the Authority of its obligations in connection with the
issuance of the Bonds contained in the Authority Documents, and the consummation by it
of all other transactions contemplated by the Authority Documents in connection with the
issuance of the Bonds.
(d) As of the date hereof, to the best of its knowledge, the Authority is not in
any material respect in breach of or default under any applicable constitutional provision,
law or administrative regulation of any state or the United States, or any agency or
instrumentality of either, or any applicable judgment or decree, or any loan agreement,
indenture, bond, note, resolution, agreement (including, without limitation, the Indenture)
or other instrument to which the Authority is a party, which breach or default has or may
have an adverse effect on the ability of the Authority to perform its obligations under the
Authority Documents, 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. The execution and delivery of the Authority
Documents, and compliance with the provisions on the Authority's part contained in the
Authority Documents, will not conflict in any material way with or constitute a material
breach of or a material default under any constitutional provision, law, administrative
regulation, judgment, decree, loan agreement, indenture, bond, note, resolution,
agreement or other instrument to which the Authority is a party nor will any such
execution, delivery, adoption 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 the property or assets of the Authority or under the terms of any such law, regulation
or instrument, except as provided by the Bonds and the Authority Documents.
(e) To the best of the Authority's knowledge, except as described in or
contemplated by the Official Statement, all authorizations, approvals, licenses, permits,
consents and orders of any governmental authority, legislative body, board, agency or
commission having jurisdiction of the matter which are required for the due authorization
by, or which would constitute a condition precedent to or the absence of which would
materially adversely affect the due performance by, the Authority of its obligations under
the Authority Documents or in connection with the issuance of the Bonds as
contemplated by the Authority Documents have been duly obtained, except for such
approvals, consents and orders as may be required under the Blue Sky or securities laws
of any state in connection with the offering and sale of the Bonds.
(f) The Authority Documents and the Bonds when issued, will conform to the
descriptions thereof contained in the Official Statement under the captions
"INTRODUCTION," "THE BONDS," "SECURITY FOR THE BONDS" and
"APPENDIX D — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS."
(g) The Bonds, when issued, authenticated and delivered in accordance with
the Indenture will be validly issued and outstanding obligations of the Authority, entitled
to the benefits of the Indenture. Upon the issuance and delivery of the Bonds, the
57296- 1134 \1306050v2.doc
4
Indenture will provide, for the benefit of the owners from time to time of the Bonds, the
legally valid and binding pledge of and lien and security interest they purport to create.
(h) As of the date hereof, to the best of the Authority's knowledge, 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 and notice of which has been
received by the Authority or, threatened against the Authority, affecting the existence of
the Authority or the titles of its officers to their respective offices, or affecting or seeking
to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds or the pledge and
lien on the Revenues or any other monies pledged to the payment of the Bonds pursuant
to the Indenture, or contesting or affecting as to the Authority the validity or
enforceability of the Law, the Bonds, the Authority Documents or contesting the tax -
exempt status of interest on the Bonds, or contesting the completeness or accuracy of the
Preliminary Official Statement or the Official Statement, or contesting the powers of the
Authority for the issuance of the Bonds, or the execution and delivery by the Authority of
the Authority Documents, or in any way contesting or challenging the consummation of
the transactions contemplated thereby; nor, to the best knowledge of the Authority, is
there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an
unfavorable decision, ruling or finding would materially adversely affect the validity of
the Law, the issuance of the Bonds or the authorization, execution, delivery or
performance by the Authority of the Authority Documents.
(i) The Authority will furnish such information, execute such instruments and
take such other action in cooperation with the Underwriter as the Underwriter may
reasonably request in order to (i) qualify the Bonds for offer and sale under the Blue Sky
or other securities laws and regulations of such states and other jurisdictions of the United
States as the Underwriter may designate, (ii) determine the eligibility of the Bonds for
investment under the laws of such states and other jurisdictions, and will use its best
efforts to continue such qualifications in effect so long as required for the distribution of
the Bonds; provided, however, that the Authority shall not be required to execute a
general or special consent to service of process or qualify to do business in connection
with any such qualification or determination in any jurisdiction, and provided, further,
that the Underwriter shall bear all costs in connection with the Authority's action under
(i) and (ii) above, and (iii) assure or maintain the tax- exempt status of the interest on the
Bonds.
(j) As of the date of the Preliminary Official Statement, the descriptions in
the Preliminary Official Statement pertaining to the Authority, the Bonds and the
Authority Documents do not, except for the omission of certain information permitted to
be omitted in accordance with Rule 15c2 -12, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(k) At the time of the Authority's acceptance of this Purchase Agreement, and
at all times subsequent thereto up to and including the Closing Date, the descriptions in
the Official Statement pertaining to the Authority; the Bonds and the Authority
Documents do not and will not contain any untrue statement of a material fact or omit to
S7296-1134 \ 13 0605 0 v2. do c
5
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except as the Official
Statement may be supplemented or amended pursuant to paragraph (m) of this Section 5.
(1) If the Official Statement is supplemented or amended pursuant to
paragraph (m) of this Section 5, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such paragraph) at all
times subsequent thereto up to and including the Closing Date, the Official Statement as
so supplemented or amended, to the best of the Authority's knowledge, will not contain
any untrue statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were made, not
misleading.
(m) If between the date of this Purchase Agreement and that date which is 25
days after the end of the underwriting period (as determined in accordance with Section
14 hereof) any event affecting the Authority and known to the Authority shall occur
which might adversely affect the marketability or the market prices of the Bonds, or
which might cause the Official Statement, as then supplemented or amended, to contain
any untrue statement of a material fact or to omit to state a material fact necessary to
make the statements in the Official Statement, in light of the circumstances under which
they were made, not misleading, the Authority shall notify the Underwriter of such event,
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 Authority will at
its expense prepare and furnish to the Underwriter a reasonable number of copies of such
supplement to, or amendment of, the Official Statement in a form and in a manner
approved by the Underwriter.
(n) The Authority will refrain from taking any action, or permitting any action
to be taken, with regard to which the Authority may exercise control, that results in the
loss of the federal tax- exempt status of the interest on the Bonds.
(o) The Authority will cause the proceeds from the sale of the Bonds to be
paid to the Trustee for the purposes specified in the Indenture and the Official Statement.
So long as any of the Bonds are outstanding and except as may be authorized by the
Indenture, the Authority will not issue or sell any bonds or other obligations, other than
the Bonds sold by this Purchase Agreement, the interest on and premium, if any, or
principal of which will be payable senior to or on a parity with the Bonds from the
Revenues securing the payments to be made under the Indenture.
(p) The Authority acknowledges and agrees that (i) the purchase and sale of
the Bonds pursuant to this Agreement is an arm's - length commercial transaction among
the Authority, the City and the Underwriter, (ii) in connection therewith and with the
discussions, undertakings and procedures leading up to the consummation of such
transaction, the Underwriter is and has been acting solely as a principal and is not acting
as the agent or fiduciary of the Authority, (iii) the Underwriter has not assumed an
advisory or fiduciary responsibility in favor of the Authority with respect to the offering
contemplated hereby or the discussions, undertakings and procedures leading thereto
57296- 1134 \1306050v2.doc
6
(irrespective of whether the Underwriter has provided other services or is currently
providing other services to the Authority on other matters) and the Underwriter has no
obligation to the Authority with respect to the offering contemplated hereby except the
obligations expressly set forth in this Agreement and (iv) the Authority has consulted its
own legal, financial and other advisors to the extent it has deemed appropriate.
6. Representations, Warranties and Agreements of the City. The City
represents, warrants and agrees as follows:
(a) The City is a municipal corporation duly organized and validly existing
under the laws of the State of California.
(b) The City has full legal right, power and authority to (i) enter into, execute
and deliver the City Documents; (ii) carry out and consummate the transactions on its
part contemplated by the City Documents.
(c) By all necessary official action, the City has duly authorized and approved
the execution and delivery of the City Documents and the Official Statement and the
performance by the City of its obligations contained in the City Documents, and the
consummation by it of all other transactions contemplated by the City Documents.
(d) As of the date hereof, to the best of its knowledge, the City is not in any
material respect in breach of or default under any applicable constitutional provision, law
or administrative regulation of any state or the United States, or any agency or
instrumentality of either, or any applicable judgment or decree, or any loan agreement,
indenture, bond, note, resolution, agreement or other instrument to which the City is a
party which breach or default has or may have an adverse effect on the ability of the City
to perform its obligations under the City Documents, 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. The execution
and delivery of the City Documents, and compliance with the provisions on the City's
part contained in the City Documents, will not conflict in any material way with or
constitute a material breach of or a material default under any constitutional provision,
law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note,
resolution, agreement or other instrument to which the City is a party.
(e) To the best of the City's knowledge, except as described in or
contemplated by the Official Statement, all authorizations, approvals, licenses, permits,
consents and orders of any governmental authority, legislative body, board, agency or
commission having jurisdiction of the matter which are required for the due authorization
by, or which would constitute a condition precedent to or the absence of which would
materially adversely affect the due performance by, the City of its obligations under the
City Documents have been duly obtained, except for such approvals, consents and orders
as may be required under the Blue Sky or securities laws of any state in connection with
the offering and sale of the Bonds.
S7296- 1134 \1306050v2.doc
7
(f) The City Documents will conform to the descriptions thereof contained in
the Official Statement under the captions "INTRODUCTION," "SECURITY FOR THE
BONDS," "APPENDIX D — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" and
"APPENDIX F — FORM OF CONTINUING DISCLOSURE AGREEMENT."
(g) As of the date hereof, to the best of the City's knowledge, 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 and notice of which has been
received by the City or, threatened against the City, affecting the existence of the City or
the titles of its officers to their respective offices, or affecting the payment of the
Installment Payments pursuant to the Installment Sale Agreement, or contesting or
affecting as to the City the validity or enforceability of the City Documents or contesting
the tax- exempt status of interest on the Bonds, or contesting the completeness or accuracy
of the Preliminary Official Statement, or the Official Statement, or contesting the powers
of the City to make Installment Payments, or the execution and delivery by the City of
the City Documents, or in any way contesting or challenging the consummation of the
transactions contemplated thereby; nor, to the best knowledge of the City, is there any
basis for any such action, suit, proceeding, inquiry or investigation, wherein an
unfavorable decision, ruling or finding would materially adversely affect the
authorization, execution, delivery or performance by the City of the City Documents.
(h) The City will furnish such information, execute such instruments and take
such other action in cooperation with the Underwriter as the Underwriter may reasonably
request in order to (i) qualify the Bonds for offer and sale under the Blue Sky or other
securities laws and regulations of such states and other jurisdictions of the United States
as the Underwriter may designate, (ii) determine the eligibility of the Bonds for
investment under the laws of such states and other jurisdictions, and will use its best
efforts to continue such qualifications in effect so long as required for the distribution of
the Bonds; provided, however, that the City shall not be required to execute a general or
special consent to service of process or qualify to do business in connection with any
such qualification or determination in any jurisdiction, and provided, further, that the
Underwriter shall bear all costs in connection with the City's action under (i) and (ii)
above, and (iii) assure or maintain the tax- exempt status of the interest on the Bonds.
(i) As of the date of the Preliminary Official Statement, the descriptions in
the Preliminary Official Statement pertaining to the City and the City Documents do not,
except for the omission of certain information permitted to be omitted in accordance with
Rule 15c2 -12, contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(j) At the time of the City's acceptance of this Purchase Agreement, and at all
times subsequent thereto up to and including the Closing Date, the descriptions in the
Official Statement pertaining to the City and the City Documents do not and will not
contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were made,
S7296-1 134\ 1306050v2.doc
8
not misleading, except as the Official Statement may -be supplemented or amended
pursuant to paragraph (1) of this Section 6.
(k) If the Official Statement is supplemented or amended pursuant to
paragraph (1) of this Section 6, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such paragraph) at all
times subsequent thereto up to and including the Closing Date, the Official Statement as
so supplemented or amended, to the best of the City's knowledge, will not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading.
(1) If between the date of this Purchase Agreement and that date which is 25
days after the end of the underwriting period (as determined in accordance with Section
14 hereof) any event affecting the City and known to the City shall occur which might
adversely affect the marketability or the market prices of the Bonds, or which might
cause the Official Statement, as then supplemented or amended, to contain any untrue
statement of a material fact or to omit to state a material fact necessary to make the
statements in the Official Statement, in light of the circumstances under which they were
made, not misleading, the City shall notify the Underwriter of such event, 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 City will at its expense prepare
and furnish to the Underwriter a reasonable number of copies of such supplement to, or
amendment of, the Official Statement in a form and in a manner approved by the
Underwriter.
(m) The City will refrain from taking any action, or permitting any action to be
taken, with regard to which the City may exercise control, that results in the loss of the
tax exempt status of the interest on the Bonds.
(n) The City acknowledges and agrees that (i) the purchase and sale of the
Bonds pursuant to this Agreement is an arm's- length commercial transaction among the
Authority, the City and the Underwriter, (ii) in connection therewith and with the
discussions, undertakings and procedures leading up to the consummation of such
transaction, the Underwriter is and has been acting solely as a principal and is not acting
as the agent or fiduciary of the City, (iii) the Underwriter has not assumed an advisory or
fiduciary responsibility in favor of the City with respect to the offering contemplated
hereby or the discussions, undertakings and procedures leading thereto (irrespective of
whether the Underwriter has provided other services or is currently providing other
services to the City on other matters) and the Underwriter has no obligation to the City
with respect to the offering contemplated hereby except the obligations expressly set
forth in this Agreement and (iv) the City has consulted its own legal, financial and other
advisors to the extent it has deemed appropriate.
7. Closing. At 8:00 a.m., California time, on [closing date], 2011, or on such earlier
date or as soon thereafter as practicable, as may be mutually agreed upon by the City, the
Authority and the Underwriter, the Authority will deliver or cause to be delivered (i) the Bonds
57296- 1134 \1306050v2.doc
9
in definitive form, registered in the name of Cede & Co., as the nominee of The Depository Trust
Company ( "DTC "), to the Trustee (so that the Bonds may be authenticated by the Trustee and
credited to the account specified by the Underwriter under DTC's Fast Automated Securities
Transfer procedures), and (ii) the closing documents hereinafter 'mentioned at the offices of
Richards Watson & Gershon, A Professional Corporation ( "Bond Counsel "), in Los Angeles,
California or another place to be mutually agreed upon by the Authority, the City and the
Underwriter. The Underwriter will accept such delivery and pay the purchase price of the Bonds
as set forth in Section 1 of this Purchase Agreement in immediately available funds to the order
of the Trustee. The Bonds will be made available to the Underwriter for inspection: not less than
24 hours prior to the Closing.
8. Closing Conditions. The Underwriter has entered into this Purchase Agreement
in reliance upon the representations and warranties of the Authority and the City contained in
this Purchase Agreement, and in reliance upon the representations and warranties to be contained
in the documents and instruments to be delivered at the Closing and upon the performance by the
Authority and the City of their obligations hereunder, both as of the date hereof and as of the
Closing Date. Accordingly, the Underwriter's obligations under this Purchase Agreement to
purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the
performance by the Authority and the City of their obligations to be performed under this
Purchase Agreement and under such documents and instruments at or prior to the Closing, and
shall also be subject to the following additional conditions:
(a) The representations and warranties of the Authority and the City contained
in this Purchase Agreement shall be true, complete and correct on the date hereof and on
and as of the Closing Date, as if made on the Closing Date;
(b) At the time of the Closing, the Authority Documents and the City
Documents shall be in full force and effect in accordance with their terms and shall not
have been amended, modified or supplemented and the Official Statement shall not have
been supplemented or amended, except in any such case as may have been agreed to by
the Underwriter;
(c) At the time of the Closing, all necessary official action of the Authority,
the City and of the other parties thereto relating to the Authority Documents and the City
Documents shall have been taken and shall be in full force and effect and shall not have
been amended, modified or supplemented in any material respect;
(d) Subsequent to the date hereof, there shall not have occurred any change
affecting particularly the Authority, the City or the , Bonds, as the foregoing matters are
described in the Official Statement, which in the reasonable opinion of the Underwriter
materially impairs the investment quality of the Bonds;
S7296- 1134 \1306050v2.doc
10
(e) At or prior to the Closing, the Underwriter shall have received copies of
each of the following documents:
(1) A certified copy of the resolution adopted by the governing board
of the Authority authorizing the issuance of the Bonds and the execution and
delivery of the Authority Documents by the Authority;
(2) A certified copy of the resolution adopted by the City Council of
the City, authorizing the execution and delivery of the City Documents by the
City;
(3) The Indenture and the Installment Sale Agreement executed by the
parties thereto;
(4) The Official Statement and each supplement or amendment, if any,
thereto, executed by the Authority and the City;
(5) A certificate, dated the Closing Date, signed by a duly authorized
official of the Authority satisfactory in form and substance to the Underwriter to
the effect that the representations and warranties of the Authority contained herein
are true and correct in all material respects as of the Closing Date;
(6) A certificate, dated the Closing Date, signed by a duly authorized
official of the City satisfactory in form and substance to the Underwriter to the
effect that the representations and warranties of the City contained herein are true
and correct in all material respects as of the Closing Date;.
(7) The opinion (the "Final Approving Legal Opinion ") dated the
Closing Date and addressed to the Authority, of Bond Counsel, in substantially
the form included as Appendix C to the Official Statement, accompanied by a
reliance letter from Bond Counsel to the effect that such opinion may be relied
upon by the Underwriter with the same effect as if such opinion were addressed to
the Underwriter (which reliance letter may be incorporated in the supplemental
opinion to be delivered pursuant to Item (8) below);
(8) A supplemental opinion of Bond Counsel dated the Closing Date .
and addressed to the Underwriter, the City and the Authority, in form and
substance acceptable to each of them to the effect that:
(a) the statements in the Official Statement under the captions,
"INTRODUCTION," "THE BONDS," "SECURITY FOR THE BONDS,"
"CONCLUDING MATTERS — Tax Matters," "APPENDIX C — FORM
OF BOND COUNSEL OPINION" and "APPENDIX D — SUMMARY
OF PRINCIPAL LEGAL DOCUMENTS," insofar as such statements
purport to summarize certain provisions of the Bonds, security for the
Bonds, the Indenture, the Installment Sale Agreement and the legal
opinion of Bond Counsel with respect thereto concerning the validity and
tax status of interest on the Bonds, are accurate in all material respects; but
S7296- 1134 \1306050v2.doc
11
excluding therefrom information about DTC and the book -entry only
system;
(b) the Purchase Agreement has been duly authorized, executed and
delivered by the Authority and the City and, assuming due authorization,
execution and delivery by the other respective parties thereto, constitute
valid and binding agreements of the Authority and the City and are
enforceable in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium or other
similar laws affecting enforcement of creditors' rights and by the
application of equitable principles if equitable remedies are sought; and
(c) the Bonds are exempt from registration under the Securities Act of
1933, as amended, and the Indenture is exempt from qualification pursuant
to the Trust Indenture Act of 1939, as amended;
(9) An opinion, dated the Closing Date and addressed to the
Underwriter, the Authority and the City, of Richards, Watson & Gershon, A
Professional Corporation, as Disclosure Counsel, in substantially the form
attached hereto as Exhibit B;
(10) An opinion, dated the Closing Date and addressed to the
Underwriter, of General Counsel to the Authority, in substantially in the form
attached hereto as Exhibit C;
(11) An opinion, dated the Closing Date and addressed to the
Underwriter, of the City Attorney to the City, substantially in the form attached
hereto as Exhibit D;
(12) A certificate of Bank of New York Mellon Trust Company, N.A.,
as Trustee and as Escrow Agent ( "BONY ") in form and substance satisfactory to
the Authority, the City and the Underwriter, dated the Closing Date, that as of the
Closing Date:
(i) BONY is a national banking association organized and
existing under and by virtue of the laws of the United States of America;
(ii) BONY has the full power and has been duly authorized to
(a) authenticate the Bonds, (b) enter into and deliver the Indenture, the
Refunding Instructions and the Continuing Disclosure Agreement (the
`BONY Documents "), and (c) perform its duties under the BONY
Documents;
(iii) BONY has on the Closing Date authenticated and delivered
the Bonds and executed and delivered the BONY Documents;
S7296- 1134 \1306050v2.doc
12
(iv) To the best of the BONY's knowledge, after due inquiry,
no consent, approval, authorization or other action by any governmental or
regulatory authority having jurisdiction over BONY that has not been
obtained by BONY is or will be required for the execution and delivery of
the BONY Documents or the performance by BONY of its duties and
obligations under the BONY Documents;
(v) To the best of BONY's knowledge, the execution and
delivery by BONY of the BONY Documents, the authentication and
delivery of the Bonds, and compliance with the terms of the BONY
Documents do not, in any material respect, conflict with, or result in a
violation or breach of, or constitute a default under, the Articles of
Association or Bylaws of BONY or any loan agreement, indenture, bond,
note, resolution or any other agreement or instrument to which BONY is a
party or by which it is bound, or any law or any rule, regulation, order or
decree of any court or governmental agency or body having jurisdiction
over BONY or any of its activities or properties, or (except with respect to
the lien of the Indenture) result in the creation or imposition of any lien,
charge or other security interest or encumbrance of any nature whatsoever
upon any of the property or assets of BONY;
(vi) To the best of the knowledge of the BONY officer signing
the certificate, after due inquiry, there is no action, suit, proceeding,
inquiry or investigation in law or in equity, before or by any court,
governmental agency, public board or body, nor is any such action or
other proceeding threatened against BONY, affecting the existence of
BONY, or the titles of its officers to their respective offices or seeking to
prohibit, restrain, or enjoin the execution and delivery of the BONY
Documents or the collection of revenues to be applied to pay the principal,
premium, if any, and interest on the Bonds, or the pledge thereof, or in any
way contesting or affecting the validity or enforceability of the BONY
Documents or contesting the powers of BONY or its authority to enter
into, adopt or perform its obligations under any of the foregoing to which
it is a party, wherein an unfavorable decision, ruling or finding would
materially adversely affect the validity or enforceability of the BONY
Documents or the power and authority of BONY to enter into the BONY
Documents and perform its duties under the BONY Documents and to
authenticate and deliver the Bonds;
(13) A copy of the general resolution (or excerpt of bylaws or other
similar instrument) of BONY authorizing the execution and delivery of certain
documents by certain officers of BONY, which resolution authorizes the
authentication of the Bonds and the execution and delivery of the BONY
Documents;
57296- 1134 \1306050v2.doc
13
(14) An opinion of counsel to BONY, dated the Closing Date and
addressed to the Authority, the City and the Underwriter, in form and substance
satisfactory to the Underwriter, to the effect that:
(i) BONY has been duly organized and is validly existing and
in good standing as a national banking association under the laws of the
United States of America with full corporate power to undertake the trust
of the Indenture;
(ii) BONY has duly authorized, executed and delivered the
BONY 'Documents, and by all proper corporate actions has authorized the
authentication and delivery of the Bonds in its capacity as Trustee under
the Indenture and the Refunding Instructions and the acceptance of the
duties and obligations of the Trustee and Escrow Agent under the BONY
Documents;
(iii) Assuming due authorization, execution and delivery by the
other parties thereto, the BONY Documents are valid, legal and binding
agreements of BONY, enforceable in accordance with their terms, except
as such enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights in general and by general equity principles (regardless of whether
such enforcement is considered in a proceeding in equity or at law);
(iv) Exclusive of federal or state securities laws and regulations,
to the best of such counsel's knowledge after reasonable inquiry and
investigation, other than routine filings required to be made with
governmental agencies in order to preserve BONY's authority to perform
a trust business (all of which routine filings such counsel believes, after
reasonable inquiry and investigation, to have been made), no consent,
approval, authorization or other action by any governmental or regulatory
authority having jurisdiction over BONY is or will be required for the
execution and delivery by BONY of the BONY Documents or the
authentication and delivery of the Bonds;
(15) Certificate Regarding Compliance with Certain Tax Matters,
executed by duly authorized officers of the Authority and the City;
(16) Evidence that the Bonds have been assigned the rating specified on
the cover of the Official Statement;
(17) Such additional legal opinions, certificates, instruments and other
documents as Bond Counsel or the Underwriter may reasonably request to
evidence the truth and accuracy, as of the date hereof and as of the Closing Date,
of the Authority's and the City's representations and warranties contained in this
Purchase Agreement and of the statements and information contained in the
Official Statement and the due performance or satisfaction by the Authority and
57296- 1134 \1306050v2.doc
14
the City on or prior to the Closing Date of all the agreements then to be performed
and conditions then to be satisfied by it.
All the opinions, letters, certificates, instruments and other documents mentioned
above or elsewhere in this Purchase Agreement shall be deemed to be in . compliance with the
provisions of this Purchase Agreement if, but only if, they are in form and substance satisfactory
to Bond Counsel and the Underwriter. The opinions and certificates presented as Exhibits hereto
or as Appendices to the Official Statement shall be deemed satisfactory provided they are
substantially in the forms of such exhibits or appendices.
If the Authority or the City shall be unable to satisfy the conditions to the
obligation of the Underwriter to purchase, to accept delivery of and to pay for the Bonds
contained in this Purchase Agreement, or if the obligation of the Underwriter to purchase, to
accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this
Purchase Agreement, this Purchase Agreement shall terminate and none of the Underwriter, the
Authority nor the City shall be under any further obligation under this Purchase Agreement.
9. Termination. The Underwriter shall have the right to terminate the
Underwriter's obligations under this Purchase Agreement to purchase, to accept delivery of and
to pay for the Bonds by notifying the Authority and the City, in writing or by telegram, of their
election to do so, if, after the execution hereof and prior to the Closing:
(a) The United States has become engaged in hostilities which have resulted
in a declaration of war or a national emergency affecting the normal operation of the
government of, or in the financial community in, the United States of America in a
manner that makes it impracticable for the Underwriter to market the Bonds or enforce
the contracts for sale of the Bonds;
(b) There shall have occurred the declaration of a general banking moratorium
by any authority of the United States or the States of New York or California;
(c) An event shall have occurred or been discovered as described in
paragraph (m) of Section 5 or paragraph (1) of Section 6 of this Purchase Agreement
which, in the reasonable opinion of the Underwriter, requires the preparation and
publication of disclosure material or s a supplement or amendment to the Official
Statement, and (i) the Authority and the City refuse to prepare and furnish such
disclosure material, or supplement or amendment to the Official Statement, or (ii) in the
reasonable judgment of the Underwriter, the occurrence or discovery of such event
materially and adversely affects the marketability of the Bonds or renders the
enforcement of contracts for sale of the Bonds impracticable;
(d) Any legislation, ordinance, rule or regulation shall be introduced in, or be
enacted by any governmental body, department or agency in the State of California, or a
decision by any court of competent jurisdiction within the State of California shall be
rendered which, in the Underwriter's reasonable opinion, materially adversely affects the
market price of the Bonds;
S7296- 1134 \1306050v2.doc
15
(e) Legislation shall be introduced, by amendment or otherwise, or be enacted
by the House of Representatives or the Senate of 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 other governmental agency having jurisdiction of the subject matter shall
be made or proposed, to the effect that the issuance, offering or sale of the Bonds or
obligations of the general character of the Bonds, as contemplated hereby or by the
Official Statement, is or would be in violation of any provision of the Securities Act of
1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as
amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as
then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering
or sale of the Bonds or obligations of the general character of the Bonds, as contemplated
hereby or by the Official Statement;
(f) Additional material restrictions not in force as of the date hereof shall have
been imposed upon trading in securities generally by any governmental authority or by
any national securities exchange;
(g) The New York Stock Exchange, or other national securities exchange or
association or any governmental authority, shall impose as to the Bonds, or obligations of
the general character of the Bonds, any material restrictions not now in force, or increase
materially those now in force, with respect to the extension of credit by or the charge to
the net capital requirements of broker dealers;
(h) Trading in securities on the New York Stock Exchange or the American
Stock Exchange shall have been suspended or limited or minimum prices have been
established on either such exchange; or
(i) Any action shall have been taken by any government in respect of its
monetary affairs which, in the reasonable opinion of the Underwriter, has a material
adverse effect on the United States securities market, rendering the marketing and sale of
the Bonds, or enforcement of sale contracts with respect thereto impracticable.
If this Purchase Agreement shall be terminated pursuant to Section 8 or this
Section 9, or if the purchase provided for in this Purchase Agreement is not consummated
because any condition to the Underwriter's obligation hereunder is not satisfied or because of
any refusal, inability or failure on the part of the Authority or the City to comply with any of the
terms or to fulfill any of the conditions of this Purchase Agreement, or if for any reason the
Authority or the City shall be unable to perform all of its obligations under this Purchase
Agreement, neither the Authority nor the City shall be liable to the Underwriter for damages
alleged as loss of anticipated profits arising out of the transactions covered by this Purchase
Agreement.
10. Payment of Costs and Expenses. (a) Subject to Sections 5(i), 6(h) and 10(b),
the Underwriter shall be under no obligation to pay and the Authority and the City shall pay or
cause to be paid the expenses incident to the performance of the obligations of the Authority and
the City hereunder including but not limited to: (i) the fees and expenses of the Authority and
S7296- 1134 \1306050v2.doc
16
•
Authority Counsel; (ii) the fees and expenses of the City and City Attorney; (iii) the fees and
expenses of Bond Counsel and Disclosure Counsel; (iv) the fees and expenses of any accountant,
consultant or other expert retained by the Authority or the City; (v) all costs and expenses
incurred in connection with the preparation and printing of the Bonds; (vi) all expenses in
connection with the preparation, printing, distribution and delivery of the Preliminary Official
Statement, the Official Statement and any amendment or supplement thereto; and (vii) the fees
and expenses of the Trustee.
(b) . The Underwriter shall pay, and the City and the Authority shall be under
no obligation to pay, all expenses incurred by the Underwriter in connection with the public
offering and distribution of the Bonds, including but not limited to CDIAC, DTC, MSRB,
CUSIP Bureau, California Public Securities Association and Public Securities Association fees,
if any, and all advertising expenses in connection with the public offering of the Bonds.
11. Representations, Warranties and Agreements to Survive Delivery. The
representations, warranties, agreements and other statements of the Authority, the City and the
Underwriter or their officers or partners set forth in, or made pursuant to, this Purchase
Agreement will remain operative and in full force and effect regardless of any investigation
made by or on behalf of the `Authority, the City or the Underwriter or any controlling person and
will survive delivery of and payment for the Bonds.
12. Notices. Any notice or other communication to be given under this Purchase
Agreement may be given by delivering the same in writing:
To the Authority: Seal Beach Public Financing Authority
211 Eighth Street
Seal Beach, California 90740
Attention: Financial Services Director
To the City: City of Seal Beach
211 Eighth Street
Seal Beach, California 90740
Attention: City Manager
To the Underwriter: Southwest Securities, Inc.
2533 S. Coast Hwy 101, Suite 210
Cardiff, California 92007
Attention: Michael Cavanaugh, Managing Director
13. Parties in Interest. This Purchase Agreement is made solely for the benefit of
the Authority, the City and the Underwriter (including the successors or assigns of the
Underwriter) and no other person shall acquire or have any right hereunder or by virtue of this
Purchase Agreement. All of the Authority's and the City's representations, warranties and
agreements contained in this Purchase Agreement shall remain operative and in full force and
effect, regardless of: (i) any investigations made by or on behalf of the Underwriter; (ii) delivery
of and payment for the Bonds pursuant to this Purchase Agreement; and (iii) any termination of
this Purchase Agreement.
S7296- 1134 \1306050v2.doc
17
14. Determination of End of the Underwriting Period. For purposes of .this
Purchase Agreement, the End of the Underwriting Period for the Bonds shall mean the earlier of
(a) the day of the Closing unless the Authority and the City have been notified in writing by the
Underwriter, on or prior to the day of the Closing, that the "end of the underwriting period" for
the Bonds for all purposes of Rule 15c2 -12 will not occur on the day of the Closing, or (b) the
date on which notice is given to the Authority and the City by the Underwriter in accordance
with the following sentence. In the event that the Underwriter has given notice to the Authority
and the City pursuant to clause (a) above that the "end of the underwriting period" for the Bonds
will not occur on the day of the Closing, the Underwriter agrees to notify the Authority and the
City in writing as soon as practicable following the "end of the underwriting period" for the
Bonds for all purposes of the Rule; provided, that the End of the Underwriting Period shall in no
event extend beyond 90 days after the Closing.
15. Effectiveness. This Purchase Agreement shall become effective upon the
execution of the acceptance by the designees of the Authority and the City, and shall be valid and
enforceable at the time of such acceptance.
16. Headings. The headings of the sections of this Purchase Agreement are inserted
for convenience only and shall not be deemed to be a part of this Purchase Agreement.
17. Governing Law. This Purchase Agreement shall be construed in accordance
with the laws of the State of California.
18. Counterparts. This Purchase Agreement may be executed in any number of
counterparts.
S7296- 1134 \1306050v2.doc
18
19. If the foregoing is in accordance with your understanding of the Purchase
Agreement please sign and return to us the enclosed duplicate copies of this Purchase
Agreement, whereupon it will become a binding agreement among the Authority, the City and
the Underwriter in accordance with its terms.
Very truly yours,
SOUTHWEST SECURITIES, INC.
By:
Eddie Torres
Senior Vice President
Accepted as of the date first stated above:
SEAL BEACH PUBLIC FINANCING
AUTHORITY
By:
David Carmany
Executive Director
THE CITY OF SEAL BEACH
By:
David Carmany
City Manager
•
11222-0115 \ 1205767 19
Exhibit A
MATURITY SCHEDULE
$[principal amount]
Seal Beach Public Financing Authority
2011 Wastewater Revenue Refunding Bonds, Series A
$ Serial Bonds
Maturity Date Principal Amount Interest Rate Yield Price
(June 1)
$
$ % Term Bond due June 1, 20; Yield %; Price %
57296- 1134 \1306050v2.doc
A -1
Exhibit B
Form of Opinion of Richards, Watson & Gershon, A Professional Corporation,
Disclosure Counsel
[closing date], 2011
Seal Beach Public Financing Authority
Seal Beach, California
City of Seal Beach
Seal Beach, California
Disclosure Counsel Opinion
•
with reference to
$ [principal amount]
Seal Beach Public Financing Authority
2011 Wastewater Revenue Refunding Bonds, Series A
Ladies and Gentlemen:
We have acted as Disclosure Counsel with respect to the above - captioned Bonds (the
"Bonds "). This opinion is rendered to pursuant to the Bond Purchase Agreement, dated [pricing
date], 2011 (the "Purchase Agreement "), by and among the Seal Beach Public Financing
Authority (the "Authority "), the City of Seal Beach (the "City ") and Southwest Securities, Inca
(the "Underwriter "). All capitalized terms used and . not otherwise defined herein have the
meanings ascribed to them in the Purchase Agreement, and if not in the Purchase Agreement, in
the Official Statement, dated [pricing date], 2011, relating to the Bonds (the "Official
Statement ").
In rendering this opinion, we have reviewed such records, documents, certificates and
opinions, and made such other investigations of law and fact as we have deemed necessary or
appropriate. This opinion is limited to matters governed by the federal securities law of the
United States, and we assume no responsibility with respect to the applicability or effect of the
laws of any other jurisdiction.
In our capacity as Disclosure Counsel, we have participated in the preparation of the
Official Statement. Such participation included, among other things, discussions and inquiries
concerning various legal matters, review of certain documents and proceedings, and participation
in conferences with, among others, representatives of the Authority, the City, the Underwriter,
and Richards Watson & Gershon, A Professional Corporation, as bond counsel, at which
conferences the contents of the Official Statement and related matters were discussed. On the
57296 -1134\ 1306050v2.doc
B -1
basis of the information made available to us in the course of the foregoing (but without having
undertaken to determine or verify independently, or assuming any responsibility for, the
accuracy, completeness or fairness of any of the statements contained in the Official Statement),
no facts have come to the attention of the personnel in our firm directly involved in rendering
legal advice and assistance in connection with the preparation of the Official Statement which
cause us to believe that the Official Statement as of its date (excluding therefrom financial
statements, and any other financial, engineering and statistical data; forecasts, projections,
estimates, assumptions and expressions of opinions, including but not limited to those relating to
the finances and operation of the City; information about the Depository Trust Company and the
book -entry only system; statements relating to the treatment of the Bonds or the interest,
discount or premium related thereto for tax purposes under the law of any jurisdiction;' and
without limiting the foregoing, the statements contained in the Official Statement under the
captions "THE BONDS — Book -Entry Only System," "CONCLUDING MATTERS — Tax
Matters" and Appendices A, B, C, D and E; as to all of which we express no view herein)
contained any untrue statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading.
During the period from the date of the Official Statement to the date of this opinion,
except for our review of the certificates and opinions regarding the Official Statement delivered
on the date hereof, we have not undertaken any procedures or taken any actions which were
intended or likely to elicit information concerning the accuracy, completeness or fairness of any
of the statements contained in the Official Statement.
This opinion is furnished by us as Disclosure Counsel to the Authority and the City. No
attorney - client relationship has existed or exists between our firm and the Underwriter in
connection with the Bonds or by virtue of this letter. This opinion is rendered in connection with
the transaction described herein, and may not be relied upon for any other purpose. This opinion
shall not extend to, and may not be used, quoted, referred to, or relied upon by any other person,
firm, corporation or other entity without our prior written consent. Our engagement with respect
to this matter terminates upon the delivery of this opinion to you at the time of the closing
relating to the Bonds, and we have no obligation to update this opinion.
Very truly yours,
S 7296 - 1134 \1306050v2.doc
B -2
Exhibit C
Form of Opinion of Authority Counsel
[closing date], 2011
Seal Beach Public Financing Authority
Seal Beach, California
City of Seal Beach
Seal Beach, California
with reference to
$ [principal amount]
Seal Beach Public Financing Authority
2011 Wastewater Revenue Refunding Bonds, Series A
•
Ladies and Gentlemen:
I serve as General Counsel to the Seal Beach Public Financing Authority (the
"Authority "). In such capacity, in connection with the issuance of the above - referenced bonds
(the "Bonds ") as contemplated by the Bond Purchase Agreement, dated [pricing date], 2011 (the
"Purchase Agreement "), by and among the Authority, the City of Seal Beach (the "City ") and
Southwest Securities, Inc., as the Underwriter, I have examined the original, or a copy otherwise
identified to me as being a true copy of such documents, certificates; and records as I have
deemed relevant and necessary as the basis for the opinion set forth herein. Capitalized terms
not otherwise defined herein shall have the meanings given to such terms in the Purchase
Agreement. Relying on such examination and subject to the limitations and qualifications
hereinafter set forth, I am of the opinion that:
1. The Authority is a joint powers authority duly organized and validly existing
under the laws of the State of California.
2. Resolution No. authorizing the issuance of the Bonds and the execution and
delivery by the Authority of the Authority Documents was duly adopted on November 16, 2011,
at a meeting of the governing body of the Authority, which meeting was called and held pursuant
to law, with all public notice required by law and at which a quorum was present and acting
throughout, and such Resolution has not been amended since its date of adoption and is now in
full force and effect.
3. To the best of my knowledge, the authorization, execution and delivery of the
Bonds and the Authority Documents by the Authority and compliance with the provisions
thereof by the Authority of its obligations thereunder, will not conflict with, or constitute a
breach or default under, any law, administrative regulation, court decree, resolution, ordinance or
other agreement to which the Authority is subject or by which it is bound.
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C -1
4. To the best of my knowledge 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 notice of which has been served on and received by the Authority or
threatened against the Authority, challenging the creation, organization or existence of the
Authority, or seeking to restrain or enjoin the issuance or repayment of the Bonds or in any way
• contesting or affecting the validity of the Authority Documents or contesting the authority of the
Authority to enter into or perform its obligations under any of the Bonds, the Authority
Documents, or the execution and delivery of the Official Statement, or under which a
determination adverse to the Authority would have a material adverse effect on the right or
ability of the Authority to perform under the Bonds, the Authority Documents or the transactions
contemplated thereby, or any other agreement or instrument related to the issuance of the Bonds
to which the Authority is a party, or which, in any manner, questions the right of the Authority to
pledge Revenues for the repayment of the Bonds.
This opinion is based on such examination of the law of the State of California and the
federal law of the United States of America as we deemed relevant for the purposes of this
opinion. We have not considered the effect, if any, of the laws of any other jurisdiction upon
matters covered by this opinion. We express no opinion as to the status of the Bonds or the
interest thereon, or the Authority Documents under any federal securities laws or any state
securities or "Blue Sky" law or any federal, state or local tax law. Further, we express no
opinion with respect to any indemnification, contribution, choice of law, choice of forum or
waiver provisions contained in the Authority Documents. Without limiting any of the foregoing,
we express no opinion as to any matter other than as expressly set forth above.
Whenever a statement herein is qualified by "to the best of our knowledge," it shall be
deemed to indicate that, during the course of our representation of the Authority in connection
with the financing described herein, no information that would give us current, actual knowledge
of the inaccuracy of such statement has come to our attention. We have not, however,
undertaken any independent investigation to determine the accuracy of such statements, and any
limited inquiry undertaken by us during the preparation of this opinion letter should not be
regarded as such investigation. No inference as to our knowledge of any matters bearing upon
the accuracy of any such statement should be drawn from the fact of our representation of the
Authority.
I am furnishing this letter as General Counsel to the Authority. No attorney- client
relationship has existed or exists between me and the Underwriter in connection with the Bonds
or by virtue of this letter. I disclaim any obligation to update this letter. This letter is delivered
to the addressees, is solely for the benefit of the addressees and is not to be used, quoted or
otherwise referred to or relied upon for any other purpose or by any other person. This letter is
not intended to, and may not, be relied upon by owners of the Bonds.
Very truly yours,
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C -2
Exhibit D
Form of Opinion of City Attorney
[closing date], 2011
Seal Beach Public Financing Authority
Seal Beach, California
City of Seal Beach
Seal Beach, California
with reference to
$ [principal amount]
Seal Beach Public Financing Authority.
2011 Wastewater Revenue Refunding Bonds, Series A
Ladies and Gentlemen:
I serve as the City Attorney of the City of Seal Beach (the "City "). In such capacity, in
connection with the issuance of the above - referenced bonds (the "Bonds ") by the Seal Beach
Public Financing Authority (the "Authority "), as contemplated by the Bond Purchase
Agreement, dated [pricing date], 2011 (the "Purchase Agreement "), by and among the Authority,
the City and Southwest Securities, Inc., as the Underwriter, I have examined the original, or a
copy otherwise identified to me as being a true copy of such documents, certificates, and records
as I have deemed relevant and necessary as the basis for the opinion set forth herein. Capitalized
terms not otherwise defined . herein shall have the meanings given to such terms in the Purchase
Agreement. Relying on such examination and subject to the limitations and qualifications
hereinafter set forth, I am of the opinion that:
1. The City is a municipal corporation duly organized and validly existing under the
laws of the State of California.
2. Resolution No. 2010 -_ authorizing the execution and delivery by the City of the
City Documents was duly adopted on December _, 2010, at a meeting of the City Council of
the City (the "City Council "), which meeting was called and held pursuant to law, with all public
notice required by law and at which a quorum was present and acting throughout, and such
Resolution has not been amended since its date of adoption and is now in full force and effect.
3. To the best of my knowledge, the authorization, execution and delivery of the
City Documents by the City and compliance with the provisions thereof by the City of its
obligations thereunder, will not conflict with, or constitute a breach or default under, any law,
S7296- 1134 \1306050v2.doc
D -1
administrative regulation, court decree, resolution, ordinance or other agreement to which the
City is subject or by which it is bound.
4. To the best of my knowledge 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 notice of which has been served on and received by the City or threatened
against the City, challenging the creation, organization or existence of the City, or in any way
contesting or affecting the validity of the City Documents or contesting the authority of the City
to enter into or perform its obligations under any of the City Documents, or the execution and
delivery of the Official Statement, or under which a determination adverse to the City would
have a material adverse effect on the right or ability of the City to perform under the City
Documents or the transactions contemplated thereby, or any other agreement or instrument
related to the issuance of the Bonds to which the City is a party, or which, in any manner,
questions the right of the City to make the Installment Payments.
This opinion is based on such examination of the law of the State of California and the
federal law of the United States of America as we deemed relevant for the purposes of this
opinion. We have not considered the effect, if any, of the laws of any other jurisdiction upon
matters covered by this opinion. We express no opinion as to the status of the Bonds or the
interest thereon, or the City Documents under any federal securities laws or any state securities
or "Blue Sky" law or any federal, state or local tax law. Further, we express no opinion with
respect to any indemnification, contribution, choice of law, choice of forum or waiver provisions
contained in the City Documents. Without limiting any of the foregoing, we express no opinion
as to any matter other than as expressly set forth above.
Whenever a statement herein is qualified by "to the best of our knowledge," it shall be
deemed to indicate that, during the course of our representation of the City in connection with
the financing described herein, no information that would give us current, actual knowledge of
the inaccuracy of such statement has come to our attention. We have not, however, undertaken
any independent investigation to determine the accuracy of such statements, and any limited
inquiry undertaken by us during the preparation of this opinion letter should not be regarded as
such investigation. No inference as to our knowledge of any matters bearing upon the accuracy
of any such statement should be drawn from the fact of our representation of the City.
I am furnishing this letter as the City Attorney to the City. No attorney- client relationship
has existed or exists between me and the Underwriter in connection with the Bonds or by virtue
of this letter. I disclaim any obligation to update this letter. This letter is delivered to the
addressees, is solely for the benefit of the addressees and is not to be used, quoted or otherwise
referred to or relied upon for any other purpose or by any other person. This letter is not
intended to, and may not, be relied upon by owners of the Bonds.
Very truly yours,
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D -2
Exhibit E
RULE 15c2 -12 CERTIFICATE
The undersigned hereby certifies and represents to Southwest Securities, Inc. (the "Underwriter "),
that he is a duly appointed and acting officer of the City of Seal Beach (the "City ") and the Seal Beach
Public Financing Authority (the "Authority), and as such is authorized to execute and deliver this
Certificate and further hereby certifies and reconfirms on behalf of the City and the Authority to the
Underwriter as follows:
(1) This Certificate is delivered to enable the Underwriter to comply with Securities
and Exchange Commission Rule 15c2 -12 under the Securities Exchange Act of 1934 (the "Rule ")
in connection with the offering and sale of the Authority's 2011 Wastewater Revenue Refunding
Bonds, Series A (the "Bonds ").
(2) In connection with the offering and sale of the Bonds, there has been prepared a
Preliminary Official Statement dated December , 2010, 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 and other terms of the Bonds depending on such matters, all with respect to the Bonds.
hall mean the offering prices, interest rates, 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, all with respect to the Bonds.
(4) The Preliminary Official Statement is, except for the Permitted Omissions,
deemed fmal within the meaning of the Rule, and the information therein is accurate and
complete in all material respects except for the Permitted Omissions.
(5) If, at any time prior to the execution of the fmal contract of purchase, any event
occurs 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 Authority and the
City shall promptly notify the Underwriter thereof; provided, however, that the Authority and the
City shall have such obligations with respect to information in the Preliminary Official Statement
concerning and supplied by the Underwriter only to the extent the Authority or the City has actual
knowledge or notice of any such event.
IN WITNESS WHEREOF, I have hereunto set my hand as of the day of December, 2010.
SEAL BEACH PUBLIC FINANCING THE CITY OF SEAL BEACH
AUTHORITY
By:
By: David Carmany
David Carmany City Manager
Executive Director
S7296 1134 \1306050v2.doc
E -1
Attachment "E"
Installment Sale Agreement
INSTALLMENT SALE AGREEMENT
Dated as of January 1, 2011
between the
SEAL BEACH PUBLIC FINANCING AUTHORITY,
as Seller
and the
CITY OF SEAL BEACH,
as Purchaser
Relating to
$[principal amount]
Seal Beach Public Financing Authority
2011 Wastewater Revenue Refunding Bonds, Series A
TABLE OF CONTENTS
ARTICLE I
Definitions; Rules of Interpretation
SECTION 1.1. Definitions 2
SECTION 1.2. Interpretation 2
ARTICLE II
Representations, Covenants and Warranties
SECTION 2.1. Representations, Covenants and Warranties of the City 2
SECTION 2.2. Representations, Covenants and Warranties of Authority 4
ARTICLE III
Issuance of 2011 Bonds
SECTION 3.1. The 2011 Bonds. 5
SECTION 3.2. Deposit and Application of Funds 5
ARTICLE IV
Sale of 2000 Wastewater Project
Installment Payments
SECTION 4.1. Sale of 2000 Wastewater Project 5
SECTION 4.2. Term 5
SECTION 4.3. Title 5
SECTION 4.4. Installment Payments 6
SECTION 4.5. Pledge and Application of Net Revenues 6
SECTION 4.6. Special Obligation of the City; Obligations Absolute 8
SECTION 4.7. Additional Payments 8
ARTICLE V
Covenants of the City
SECTION 5.1. Disclaimer of Warranties; Maintenance, Utilities and Taxes 10
SECTION 5.2. Release and Indemnification Covenants 10
SECTION 5.3. Sale or Eminent Domain of Enterprise 10
SECTION 5.4. Insurance 11
SECTION 5.5. Records and Accounts 11
SECTION 5.6. Rates and Charges 11
SECTION 5.7. Superior and Subordinate Obligations 12
SECTION 5.8. Issuance of Parity Obligations 12
SECTION 5.9. Governmental Loans 13
SECTION 5.10. Operation of Wastewater System in Efficient and Economical Manner 13
SECTION 5.11. Assignment and Amendment. 13
SECTION 5.12. Continuing Disclosure. 14
ARTICLE VI
Events of Default
SECTION 6.1. Events of Default Defined 15
SECTION 6.2. Remedies on Default 16
SECTION 6.3. No Remedy Exclusive 16
SECTION 6.4. Agreement to Pay Attorneys' Fees and Expenses 16
SECTION 6.5. No Additional Waiver Implied by One Waiver 17
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•
SECTION 6.6. Trustee and Bond Owners to Exercise Rights 17
ARTICLE VII
Prepayment of Installment Payments
SECTION 7.1. Security Deposit 17
SECTION 7.2. Optional Prepayment Relating to the 2011 Bonds 17
SECTION 7.3. Mandatory Prepayment From Proceeds of Insurance, Sale or
Condemnation 18
SECTION 7.4. Credit for Amounts on Deposit 18
ARTICLE VIII
Miscellaneous
SECTION 8.1. Further Assurances 18
SECTION 8.2. Notices 18
SECTION 8.3. Governing Law 19
. SECTION 8.4. Binding Effect 19
SECTION 8.5. Severability of Invalid Provisions 19
SECTION 8.6. Article and Section Headings and References 19
SECTION 8.7. Payment on Non - Business Days 19
SECTION 8.8. Execution of Counterparts 19
SECTION 8.9. Waiver of Personal Liability 19
SECTION 8.10. Trustee as Third Party Beneficiary 19
APPENDIX A Schedule of Installment Payments
APPENDIX B Description of 2000 Wastewater Project
•
•
-ii-
INSTALLMENT SALE AGREEMENT
This INSTALLMENT SALE AGREEMENT (this "Agreement "), dated as of January 1,
2011, is between the SEAL BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of
powers authority duly organized and existing under the laws of the State of California (the
"Authority "), as seller, and the CITY OF SEAL BEACH, a municipal corporation duly organized
and existing under the laws of the State of California (the "City "), as purchaser.
BACKGROUND:
1. The City presently operates facilities and property for the collection of
wastewater within the service area of the City (the "Enterprise "), and the City wishes to raise
funds to refinance certain outstanding obligations of the Enterprise.
2. The Authority has previously financed the acquisition and construction of certain
improvements to the Enterprise through the execution and delivery of $4,230,000 Certificates of
Participation (2000 Sewer System Project) evidencing the direct, undivided fractional interests
of the owners thereof in 2000 Installment Payments (defined below) to be made by the City as
the purchase price for certain property pursuant to a 2000 Installment Sale Agreement (defined
below) with the Authority (the "2000 COPs ").
3. In connection with the execution and delivery of the 2000 COPs, the Authority
and the City entered into an Installment Sale Agreement dated as of June 1, 2000 (the "2000
Installment Sale Agreement "), under which the City is obligated to make certain installment
payments (the "2000 Installment Payments ") and certain additional payments to the Authority in
order to provide the Authority with sufficient revenues to pay debt service on the 2000 COPs.
4 The Authority and the City at this time desire to prepay and discharge the 2000
Installment Sale Agreement by refunding, in full, the 2000 COPs.
5. For the purpose of obtaining funds to refund the 2000 COPs, the Authority has
authorized the issuance of its Seal Beach Public Financing Authority 2011 Wastewater
Revenue Refunding Bonds, Series A (the "2011 Bonds "), in the aggregate principal amount of
$[principal amount] under an Indenture of Trust dated as of January 1, 2011, by and between
the Authority and Bank of New York Mellon Trust Company, N.A., as trustee (the "Indenture "),
and under the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of
the State of California, commencing with Section 6584 of said Code (the "Bond Law "). The
2011 Bonds will be payable from Installment Payments made under this Agreement.
AGREEMENT:
In consideration of the foregoing and the material covenants hereinafter contained, the
City and the Authority formally covenant, agree and bind themselves as follows:
ARTICLE
DEFINITIONS; RULES OF INTERPRETATION
SECTION 1.1. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms in this Agreement have the respective meanings
given them in Article I of the Indenture.
SECTION 1.2. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular include
the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are
solely for convenience of reference, do not constitute a part hereof and do not affect the
meaning, construction or effect hereof.
(c) All references herein to "Articles," "Sections" and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Agreement; the words "herein," "hereof,"
"hereby," "hereunder" and other words of similar import refer to this Agreement as a whole and
not to any particular Article, Section or subdivision hereof.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
SECTION 2.1. Representations, Covenants and Warranties of the City. The City
represents, covenants and warrants to the Authority and the Trustee as follows:
(a) Due Organization and Existence. The City is a municipal
corporation duly organized and validly existing under the Taws of the State of
California, has full legal right, power and authority under said laws to enter into
this Agreement and to carry out and consummate all transactions contemplated
hereby and thereby, and by proper action the City Council of the City has duly
authorized the execution and delivery of this Agreement.
(b) Due Execution. The officers of the City executing this Agreement
are fully authorized to execute the same.
(c) Valid, Binding and Enforceable Obligations. This Agreement has
been duly authorized, executed and delivered by the City and constitutes the
legal, valid and binding agreement of the City enforceable against the City in
accordance with its terms; except as the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights heretofore or hereafter ,enacted and except as such
enforceability may be subject to the exercise of judicial discretion in accordance
with principles of equity.
-2-
(d) No Conflicts. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and the fulfillment of or
compliance with the terms and conditions hereof, do not and will not conflict with
or constitute a violation or breach of or default (with due notice or the passage of
time or both) under any applicable law or administrative rule or regulation, or any
applicable court or administrative decree or order, or any indenture, mortgage,
deed of trust, lease, contract or other agreement or instrument to which the City
is a party or by which it or its properties are otherwise subject or bound, or result
in the creation or imposition of any prohibited lien, charge or encumbrance of
any nature whatsoever upon any of the property or assets of the City, which
conflict, violation, breach, default, lien, charge or encumbrance would have
consequences that would materially adversely affect the consummation of the
transactions contemplated by this Agreement or the financial condition, assets,
properties or operations of the City, including but not limited to the performance
of the City's obligations under this Agreement.
(e) Consents and Approvals. No consent or approval of any trustee
or holder of any indebtedness of the City or of the voters of the City, and no
consent, permission, authorization, order or license of, or filing or registration
with, any governmental authority is necessary in connection with the execution
and delivery of this Indenture, or the consummation of any transaction herein
contemplated, except as have been obtained or made and as are in full force
and effect.
(f) No Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court or federal, state, municipal or other
governmental authority pending or, to the knowledge of the City after reasonable
investigation, threatened against or affecting the City or the assets, properties or
operations of the City which, if determined adversely to the City or its interests,
would have a material and adverse effect upon the consummation of the
transactions contemplated by or the validity of this Indenture, or upon the
financial condition, assets, properties or operations of the City, and the City is
not in default with respect to any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or other governmental
authority, which • default might have consequences that would materially
adversely affect the consummation of the transactions contemplated by this
• Indenture, or the financial conditions, assets, properties or operations of the City,
including but not limited to the payment and performance of the City's obligations
under this Indenture.
(g) Encumbrances. There are no easements, encumbrances or
interests with respect to the Enterprise or the 2000 Wastewater Project that
prohibit or materially impair the execution, delivery and performance of this
Installment Sale Agreement or the acquisition or use of the 2000 Wastewater
Project or the use of the Enterprise.
(h) Prior Indebtedness. The City has not issued or incurred any
obligations which are currently outstanding having any priority in payment out of
the Gross Revenues or the Net Revenues over the payment of the Installment
Payments as provided herein.
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SECTION 2.2. Representations, Covenants and Warranties of Authority. The
Authority represents, covenants and warrants to the City and the Trustee as follows:
(a) Due Organization and Existence. The Authority is a joint exercise
of powers authority organized and existing under the laws of the State of
California, and has power to enter into this Agreement and the Indenture and to
perform the duties and obligations imposed on it hereunder and thereunder. The
Board of Directors of the Authority has duly authorized the execution and
delivery of this Agreement and the Indenture.
(b) Due Execution. The representatives of the Authority executing
this Agreement and the Indenture are fully authorized to execute the same.
(c) Valid, Binding and Enforceable Obligations. This Agreement and
the Indenture have been duly authorized, executed and delivered by the
Authority and constitute the legal, valid and binding agreements of the Authority
with the Authority, enforceable against the Authority in accordance with their
respective terms; except as the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights heretofore or hereafter enacted and except as such
enforceability may be subject to the exercise of judicial discretion in accordance
with principles of equity.
(d) No Conflicts. The execution and delivery hereof and of the
Indenture, the consummation of the transactions herein and therein
contemplated and the fulfillment of or compliance with the terms and conditions
hereof and thereof, do not and will not conflict with or constitute a violation or
breach of or default (with due notice or the passage of time or both) under any
applicable law or administrative rule or regulation, or any applicable court or
administrative decree or order, or any indenture, mortgage, deed of trust, lease,
contract or other agreement or instrument to which the Authority is a party or by
which it or its properties are otherwise subject or bound, or result in the creation
or imposition of any prohibited lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the Authority, which conflict,
violation, breach, default, lien, charge or encumbrance would have
consequences that would materially adversely affect the consummation of the
transactions contemplated hereby and by the Indenture or the financial condition,
assets, properties or operations of the Authority, including but not limited to the
performance of the Authority's obligations under this Agreement and the
Indenture.
(e) Consents and Approvals. No consent or approval of any trustee
or holder of any indebtedness of the Authority, and no consent, permission,
authorization, order or license of, or filing or registration with, any governmental
authority is necessary in connection with the execution and delivery hereof or of
the Indenture, or the consummation of any transaction herein or therein
contemplated, except as have been obtained or made and as are in full force
and effect.
(f) No Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court or federal, state, municipal or other
governmental authority pending or, to the knowledge of the Authority after
-4-
reasonable investigation, threatened against or affecting the Authority or the
assets, properties or operations of the Authority which, if determined adversely to
the Authority or its interests, would have a material and adverse effect upon the
consummation of the transactions contemplated by or the validity of this
Agreement or the Indenture, or upon the financial condition, assets, properties or
operations of the Authority, and the Authority is not in default with respect to any
order or decree of any court or any order, regulation or demand of any federal,
state, municipal or other governmental authority, which default might have
consequences that would materially adversely affect the consummation of the
transactions contemplated by this Agreement or the Indenture or the financial
conditions, assets, properties or operations of the Authority, including but not
limited to the performance of the Authority's obligations hereunder and under the
Indenture.
(g) Encumbrances. To the best knowledge of the Authority, there are
no easements, encumbrances or interests with respect to the Enterprise that
prohibit or materially impair the execution, delivery and performance of this
Installment Sale Agreement or the acquisition or use of the Enterprise.
ARTICLE III
ISSUANCE OF 2011 BONDS
SECTION 3.1. The 2011 Bonds. The Authority shall cause the 2011 Bonds to be
issued under the Indenture in the aggregate principal amount of $[principal amount]. The
Trustee shall deposit the proceeds of sale of the 2011 Bonds received by it on the Closing Date
in accordance with the Indenture. The City hereby approves the Indenture, the assignment
thereunder to the Trustee of certain rights of the Authority, and the issuance of the 2011 Bonds.
SECTION 3.2. Deposit and Application of Funds. The proceeds received by the
Trustee from the sale of the 2011 Bonds to the Original Purchaser shall be deposited in the
respective funds and accounts, and in the respective amounts, as set forth in Section 3.02 of
the Indenture.
ARTICLE IV
SALE OF 2000 WASTEWATER PROJECT;
INSTALLMENT PAYMENTS
SECTION 4.1. Sale of 2000 Wastewater Project. The Authority hereby sells, bargains
and conveys the 2000 Wastewater Project to the City, and the City hereby purchases the 2000
Wastewater Project from the Authority, upon the terms and conditions set forth in this
Agreement.
SECTION 4.2. Term. The Term of this Agreement commences on the Closing Date,
and ends on June 1, 20, or such later or earlier date on which the Bonds cease to be
Outstanding under and within the meaning of the Indenture.
SECTION 4.3. Title. Title to the Enterprise, including the 2000 Wastewater Project, and
each component thereof, shall be deemed conveyed by the Authority to and vested in the City
on the Closing Date. The Authority and the City will execute, deliver and cause to be recorded
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any and all documents reasonably required by the City to consummate the transfer of title to the
Enterprise, including the 2000 Wastewater Project to the City. Such title shall be held by the
City in trust pending the satisfaction of the payment obligations under this Agreement.
SECTION 4.4. Installment Payments.
(a) Obligation to Pay. The City hereby agrees to pay to the Authority, as the
purchase price of the 2000 Wastewater Project hereunder, the aggregate principal amount of
$[principal amount], together with interest (calculated on the basis of a 360 -day year of twelve
30 -day months) on the unpaid principal balance thereof, payable in semiannual installment
payments in the respective amounts and on the respective Installment Payment Dates specified
in Appendix A hereto.
The City shall deposit the Installment Payment coming due and payable on any Interest
Payment Date with the Trustee, as assignee of the Authority under the Indenture, on the related
Installment Payment Date (as set forth in Exhibit A hereto) in an amount which, together with
amounts then held by the Trustee in the Bond Fund, is equal to the full amount of such
Installment Payment. The Installment Payments are secured by and payable solely from the
sources specified in Section 4.5.
(b) Effect of Prepayment. If the City prepays all remaining Installment Payments in
full under Section 7.2 or Section 7.3, or under the relevant provisions of any Supplemental
Agreement, the City's obligations under this Agreement shall thereupon cease and terminate,
including but not limited to the City's obligation to pay Installment Payments therefor under this
Section 4.4; provided, however, that the City's obligations to compensate and indemnify the
Trustee under Sections 4.7 and 5.2 will survive such prepayment. If the City prepays the
Installment Payments in part but not in whole under Section 7.2 or Section 7.3, or under the
relevant provisions of any Supplemental Agreement, the principal component of each
succeeding Installment Payment will be reduced as provided in such Sections or in the such
Supplemental Agreement, and the interest component of each remaining Installment Payment
will be reduced by the aggregate corresponding amount of interest which would otherwise be
payable with respect to the Bonds thereby redeemed under the applicable provisions of the
Indenture.
(c) Rate on Overdue Payments. If the City fails to make any of the payments
required in this Section 4.4 and Section 4.8, the payment in default will continue as an
obligation of the City until fully paid, and the City agrees to pay the same with interest thereon,
from the date of default to the date of payment, at the Overdue Rate.
(d) Assignment. The City understands and agrees that certain rights of the
Authority, including but not limited to the right of the Authority to receive payment of the
Installment Payments, have been assigned by the Authority to the Trustee in trust under the
Indenture, for the benefit of the Owners of the Bonds, and the City hereby consents to such
assignment. The Authority hereby directs the City, and the City hereby agrees, to pay to the
Trustee at its Trust Office, all payments payable by the City under this Section 4.4 and all
amounts payable by the City under Article VII.
SECTION 4.5. Pledge and Application of Net Revenues.
(a) Pledge of Net Revenues. All of the Net Revenues and all moneys on deposit in
any of the funds and accounts established and held by the Trustee under the Indenture are
hereby irrevocably pledged, charged and assigned to the punctual payment of the Installment
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Payments. Such pledge, charge and assignment constitute a lien on the Net Revenues and
such other moneys for the payment of the Installment Payments in accordance with the terms
hereof, on a parity with the pledge and lien which secures any Parity Obligations.
(b) Deposit of Net Revenues Into Wastewater Enterprise Fund; Transfers to Make
Payments. The City has previously established the Wastewater Enterprise Fund, which the City
will continue to hold and maintain for the purposes and uses set forth herein. The City shall
deposit all of the Gross Revenues in the Wastewater Enterprise Fund immediately upon receipt.
The City shall apply amounts in the Wastewater Enterprise Fund as set forth in this Agreement
and any Parity Obligations Documents. Amounts on deposit in the Wastewater Enterprise Fund
shall be applied by the City to pay when due the following amounts in the following order of
priority:
(i) all Operation and Maintenance Costs;
(ii) the Installment Payments and all payments of principal of and
interest on any Parity Obligations;
(iii) to the Trustee the amount of any deficiency in the Reserve
Account established for the Bonds and in any reserve fund established for Parity
Obligations, the notice of which deficiency has been given to the City in
accordance with the Indenture and the related Parity Obligations Documents,
respectively;
(iv) any other payments required to comply with the provisions of this
Agreement (including Additional Payments) and any Parity Obligations
Documents; and
(v) any other purposes authorized under subsection (d) of this
Section 4.5.
(c) No Preference or Priority. Payment of the Installment Payments and the
principal of and interest on any Parity Obligations shall be made without preference or priority
among the Installment Payments and such Parity Obligations. If the amount of Net Revenues,
on deposit in the Wastewater Enterprise Fund is any time insufficient to enable the City to pay
when due the Installment Payments and the principal of and interest on any Parity Obligations,
such payments shall be made on a pro rata basis.
(d) Other Uses of Gross Revenues Permitted. The City shall manage, conserve and
apply the Gross Revenues on deposit in the Wastewater Enterprise Fund in such a manner that
all deposits required to be made under the preceding subsection (b) will be made at the times
and in the amounts so required. Subject to the foregoing sentence, so long as no Event of
Default has occurred and is continuing, the City may use and apply moneys in the Wastewater
Enterprise Fund for (i) the payment of any subordinate obligations or any unsecured
obligations, (ii) the acquisition and construction of improvements to the Enterprise, (iii) the
prepayment of any other obligations of the City relating to the Enterprise, or (iv) any other lawful
purposes of the City.
(e) Budget and Appropriation of Installment Payments. During the Term of this
Agreement, the City shall adopt all necessary budgets and make all necessary appropriations
of the Installment Payments from the Net Revenues. If any Installment Payment requires the
adoption by the City of any supplemental budget or appropriation, the City shall promptly adopt
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the same. The covenants on the part of the City contained in this subsection (e) constitute
duties imposed by law and it is the duty of each and every public official of the City to take such
, actions and do such things as are required by law in the performance of the official duty of such
officials to enable the City to carry out and perform the covenants and agreements in this
subsection (e).
SECTION 4.6. Special Obligation of the City; Obligations Absolute. The City's
obligation to pay the Installment Payments and any other amounts coming due and payable
hereunder is a special obligation of the City limited solely to the Net Revenues. Under no
circumstances is the City required to advance moneys derived from any source of income other
than the Net Revenues and other sources specifically identified herein for the payment of the
Installment Payments and such other amounts. No other funds or property of the City are liable
for the payment of the Installment Payments and any other amounts coming due and payable
hereunder.
The obligations of the City to pay the Installment Payments from the Net Revenues and
to perform and observe the other agreements contained herein are absolute and unconditional
and are not subject to any defense or any right of set -off, counterclaim or recoupment arising
out of any breach by the Authority or the Trustee of any obligation to the City or otherwise with
respect to the Enterprise, whether hereunder or otherwise, or out of indebtedness or liability at
any time owing to the City by the Authority or the Trustee. Until all of the Installment Payments,
all of the Additional Payments and all other amounts coming due and payable hereunder are
fully paid or prepaid, the City (a) will not suspend or discontinue payment of any Installment
Payments, Additional Payments or such other amounts, (b) will perform and observe all other
agreements contained in this Agreement, and (c) will not terminate this Agreement for any
cause, including, without limiting the generality of the foregoing, the occurrence of any acts or
circumstances that may constitute failure of consideration, eviction or constructive eviction,
destruction of or damage to the Enterprise, sale of the Enterprise, the taking by eminent
domain of title to or temporary use of any component of the Enterprise, commercial frustration
of purpose, any change in the tax or law other laws of the United States of America or the State
of California or any political subdivision of either thereof, or any failure of the Authority or the
Trustee to perform and observe any agreement, whether express or implied, or any duty,
liability or obligation arising out of or connected with the Indenture or this Agreement.
The foregoing provisions of this Section 4.6 do not release the Authority from the
performance of any of the agreements on its part contained herein or in the Indenture, and if
the Authority fails to perform any such agreements, the City may institute such action against
the Authority as the City deems necessary to compel performance, so long as such action does
not abrogate the obligations of the City contained in the preceding paragraph. The City may,
however, at its cost and expense and in its name or in the name of the Authority, prosecute or
defend any action or proceeding or take any other action involving third persons which the City
deems reasonably necessary in order to secure or protect the City's rights hereunder, and in
such event the Authority shall cooperate fully with the City and shall take such action necessary
to effect the substitution of the City for the Authority in such action or proceeding if the City may
request.
SECTION 4.7. Additional Payments. In addition to the Installment Payments, the City
shall pay when due the following amounts to the following parties:
(a) to the Authority, all costs and expenses incurred by the Authority
to comply with the provisions of this Agreement and the Indenture;
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(b) to the Trustee upon request therefor, all of its fees, costs and
expenses payable as a result of the performance of and compliance with its
duties hereunder or under the Indenture or any related documents;
(c) to the Authority and the Trustee, all amounts required to indemnify
the Authority and the Trustee under Section 5.2 hereof and Section 8.07 of the
Indenture; and
(d) all costs and expenses of auditors, engineers and accountants for
professional services relating to the Enterprise or the Bonds.
The Additional Payments shall be payable from, but shall not be secured by a pledge or
lien upon, the Net Revenues. The rights of the Trustee and the Authority under this Section
4.7, and the obligations of the City under this Section 4.7, shall survive the termination of this
Agreement.
SECTION 4.8. Establishment of Rate Stabilization Fund. The City has the right at
any time to establish a fund to be held by it and administered in accordance with this Section
4.8, for the purpose of stabilizing the rates and charges imposed by the City with respect to the
Enterprise. From time to time the City may deposit amounts in the Rate Stabilization Fund,
from any source of legally available funds, including but not limited to Net Revenues which are
released from the pledge and lien which secures the Installment Payments and any Parity Debt,
as the City may determine. The Rate Stabilization Fund shall be accounted for as a separate
fund, although amounts credited to it may be commingled with other funds of the City. The City
may, but is not be required to, withdraw amounts on deposit in the Rate Stabilization Fund and
deposit such amounts in the Wastewater Enterprise Fund in any Fiscal Year for the purpose of
paying the Installment Payments or the principal of and interest on any Parity Debt coming due
and payable in such Fiscal Year. Amounts so transferred from the Rate Stabilization Fund to
the Wastewater Enterprise Fund in any Fiscal Year constitute Gross Revenues for that Fiscal
Year (except as otherwise provided herein), and will be applied for the purposes of the
Wastewater Enterprise Fund. Amounts on deposit in the Rate Stabilization Fund are not
pledged to and do not otherwise secure the Installment Payments or any Parity Debt. All
interest or other earnings on deposits in the Rate Stabilization Fund will be retained therein or,
at the option of the City, be applied for any other lawful purposes. The City has the right at any
time to withdraw any or all amounts on deposit in the Rate Stabilization Fund and apply such
amounts for any other lawful purposes of the City.
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ARTICLE V
COVENANTS OF THE CITY
SECTION 5.1. Disclaimer of Warranties; Maintenance, Utilities and Taxes.
•
(a) The Trustee makes no warranty or representation, either express or implied, as
to the value, design, condition, merchantability or fitness for any particular purpose or fitness for
the use contemplated by the City of the Project or any component thereof, or any other
representation or warranty with respect to any of the Project or any component thereof. In no
event is the Authority liable for incidental, indirect, special or consequential damages, in
connection with or arising out of this Agreement or the Indenture for the existence, furnishing,
functioning or use of the Project.
(b) Throughout the Term of this Agreement, all improvement, repair and .
maintenance of the Enterprise shall be the responsibility of the City, and the City shall pay for or
otherwise; arrange for the payment of all utility services supplied to the Enterprise, which may
include, without limitation, janitor service, security, power, gas, telephone, light, heating, water
and all other utility services, and shall pay for or otherwise arrange for the payment of the cost
of the repair and replacement of the Enterprise resulting from ordinary wear and tear.
The City shall also pay or cause to be paid all taxes and assessments of any type or
nature, if any, charged to the Authority or the City affecting the Enterprise or the respective
interests or estates therein; provided, however, that with respect to special assessments or
other governmental charges that may lawfully be paid in installments over a period of years, the
City shall be obligated to pay only such installments as are . required to be paid during the Term
of this Agreement as and when the same become due.
SECTION 5.2. Release and Indemnification Covenants. The City agrees to
indemnify the Authority and the Trustee and their respective officers, agents, successors and
assigns, against all claims, losses and damages, including legal fees and expenses, arising out
of (a) the use, maintenance, condition or management of, or from any work or thing done on or
about the Enterprise by the City, (b) any breach or default on the part of the City in the
performance of any of its obligations under this Agreement or the Indenture, (c) any act or
omission of the City or of any of its agents, contractors, servants, employees or licensees with
respect to the Enterprise, and (d) any act or omission of any lessee of the City with respect to
the Enterprise. No indemnification is made under this Section 5.2 or elsewhere in this
Agreement for willful misconduct or negligence under this Agreement by the Authority, or the
Trustee, or their respective officers, agents, employees, successors or assigns. The provisions
of this Section 5.2 shall survive the expiration of the Term of this Agreement.
SECTION 5.3. Sale or Eminent Domain of Enterprise. Except as provided herein,
the City covenants that the Enterprise shall not be encumbered, sold, leased, pledged, have
any charge placed thereon, or otherwise be disposed of, as a whole or substantially as a whole,
if such encumbrance, sale, lease, pledge, charge or other disposition would materially impair
the ability of the City to pay the Installment Payments or the principal of or interest on any Parity
Obligations, or would materially adversely affect its ability to comply with the terms of this
Agreement or any Parity Obligations Documents. The City may not enter into any agreement
which impairs the operation of the Enterprise or any part of it necessary to secure adequate Net
Revenues to pay the Installment Payments or any Parity Obligations, or which otherwise would
impair the rights of the Bond Owners or the Trustee with respect to the Net Revenues. If any
substantial part of the Enterprise is sold, the payment therefor shall either (a) be used for the
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acquisition or construction of improvements to the Enterprise, or (b) be applied on a pro rata
basis to (i) prepay the Installment Payments on the next available prepayment date under
Section 7.3, and (ii) redeem any Parity Obligations in accordance with the related Parity
Obligations Documents.
Any amounts received as awards as a result of the taking of all or any part of the
Enterprise by the lawful exercise of eminent domain, if and to the extent that such right can be
exercised against such property of the City, shall either (a) be used for the acquisition or
construction of improvements to the Enterprise, or (b) be applied on a pro rata basis to (i)
prepay the Installment Payments on the next available prepayment date under Section 7.3, and
(ii) redeem any Parity Obligations in accordance with the related Parity Obligations Documents.
SECTION 5.4. Insurance. The City shall at all times maintain with responsible insurers
all such insurance on the Enterprise as is customarily maintained with respect to works and
properties of like character against accident to, loss of or damage to the Enterprise. The City
shall apply any amounts collected from insurance against accident to or destruction of any
portion of the Enterprise, at its option, either (a) to repair or rebuild such damaged or destroyed
portion of the Enterprise, or (b) to prepay on a pro rata basis (i) the Installment Payments on
the next available prepayment date under Section 7.3 or the applicable Supplemental
Agreement, and (ii) any Parity Obligations in accordance with the related Parity Obligations
Documents.
The City shall also maintain, with responsible insurers, worker's compensation insurance
and insurance against public liability and property damage to the extent reasonably necessary
to protect the City, the Authority, the Trustee and the Owners of the Bonds.
Any policy of insurance required under this Section 5.4 may be maintained as part of or
in conjunction with any other insurance coverage carried by the City, and may be maintained in
whole or in part in the form of self- insurance by the City or in the form of the participation by the
City in a joint powers agency or other program providing pooled insurance.
SECTION 5.5. Records and Accounts. The City shall keep proper books of record
and accounts of the Enterprise in which complete and correct entries shall be made of all
transactions relating to the Enterprise. Said books shall, upon prior request, be subject to the
reasonable inspection of the Owners of not less than 10% of the Outstanding Bonds, or their
representatives authorized in writing, upon not less than 2 Business Days' prior notice to the
City.
The City shall cause the books and accounts of the Enterprise to be audited annually by
an Independent Accountant not more than 9 months after the close of each Fiscal Year, and
shall make a copy of such report available for inspection by the Bond Owners at the office of
the City and at the Trust Office of the Trustee. Such report may be part of a combined financial
audit or report covering all or part of the City's finances.
SECTION 5.6. Rates and Charges.
(a) Covenant Regarding Gross Revenues. The City shall fix, prescribe, revise and
collect rates, fees and charges for the services and facilities furnished by the Enterprise during
each Fiscal Year, which are at least sufficient, after making allowances for contingencies and
error in the estimates, to yield Gross Revenues sufficient to pay the following amounts in the
following order of priority:
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(i) All Operation and Maintenance Costs estimated by the City to .
become due and payable in such Fiscal Year;
(ii) All Installment Payments and all payments of principal of and
interest on any Parity Obligations as they become due and payable during such
Fiscal Year, without preference or priority, except to the extent such Installment
Payments or the principal of and interest on such Parity Obligations are payable
from the proceeds of the Bonds or such Parity Obligations, as applicable, or from
any source of legally available funds of the City (other than the Gross Revenues
of the Enterprise) that have been deposited with the Trustee for such purpose
before the beginning of that Fiscal Year;
(iii) All amounts, if any, required to restore the balance in the Reserve
Account to the full amount of the Reserve Requirement; and
(iv) All payments required to meet any other obligations of the City
which are charges, liens, encumbrances upon, or which are otherwise payable
from, the Gross Revenues or the Net Revenues during such Fiscal Year, except
to the extent other sources of funds are reserved or encumbered therefore.
(b) Covenant Regarding Net Revenues. In addition, the City shall fix, prescribe,
revise and collect rates, fees and charges for the services and facilities furnished by the
Enterprise during each Fiscal Year that are sufficient, after making allowances for
contingencies and errors in estimates, to yield Net Revenues that are at least equal to 120% of
the amount described in the preceding clause (a)(ii) and (iii) for such Fiscal Year. For purposes
of this paragraph, the amount of Net Revenues for a Fiscal Year will be computed on the basis
that (1) any transfers into the Wastewater Enterprise Fund in that Fiscal Year from the Rate
Stabilization Fund are included in the calculation of Net Revenues, as provided in Section 4.8,
and (2) any deposits into the Rate Stabilization Fund in that Fiscal Year are deducted from the
amount of Net Revenues, but only to the extent such deposits are made from Gross Revenues
received by the City during that Fiscal Year.
SECTION 5.7. Superior and Subordinate Obligations. The City may not issue or
incur any additional bonds or other obligations during the Term of this Agreement having any
priority in payment of principal or interest out of the Gross Revenues or the Net Revenues over
the Installment Payments. Nothing herein is intended or shall be construed to limit or affect the
ability of the City to issue, enter into or incur (a) Governmental Loans payable on a priority basis
to payments due hereunder or in connection with any Parity Obligations, (b) Parity Obligations
under Section 5.8, or (c) obligations which are either unsecured or which are secured by an
interest in the Net Revenues which is junior and subordinate to the pledge of and lien upon the
Net Revenues established hereunder.
SECTION 5.8. Issuance of Parity Obligations. Except for obligations incurred to
prepay or discharge the Installment Payments or any Parity Obligations, the City may not issue
or incur any Parity Obligations during the Term hereof unless all of the following conditions are
satisfied: .
(a) No Event of Default has occurred and is continuing;
(b) The Net Revenues, calculated in accordance with sound
accounting principles, as shown by the books of the City for the most recent
completed Fiscal Year for which audited financial statements of the City are
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available, or for any more recent consecutive 12 month period selected by the
City, in either case verified by a certificate or an opinion of an Independent
Accountant or a Fiscal Consultant, plus (at the option of the City) any Additional
Revenues, at least equal 120% of Maximum Annual Debt Service (including the
Parity Obligations then proposed to be issued); and
(c) There must be deposited in a reserve fund for the security of such
Parity Obligations, an amount equal to the least of (i) the maximum amount of
debt service required to be paid by the City with respect to such Parity
Obligations during any Fiscal Year, (ii) 125% of average annual debt service
required to be paid by the City with respect to such Parity Obligations during
each fiscal year, and (iii) 10% of the net proceeds of such Parity Obligations; and
In the event the Parity Obligations are being issued solely to refund outstanding Parity
Obligations, and the resulting Annual Debt Service for each Bond Year is less than the Annual
Debt Service for each Bond Year prior to the issuance of the refunding Parity Obligations, the
City need not comply with the provisions of paragraphs (a) and (b) above. The Parity
Obligations may be, but are not required to be, in the form of Supplemental Agreements, and
may, but are not required to, secure the payment of debt service on Bonds.
SECTION 5.9. Governmental Loans.
(a) The City may borrow money from a Governmental Agency and incur a
Governmental Loan to finance improvements to the Enterprise. A Governmental Loan may be
treated as a Parity Obligation for purposes of this Agreement, so long as the City complies with
Sections 5.8 (a), (b) and (d) of this Agreement before incurring the Governmental Loan; the City
need not comply with the provisions of Section 5.8 (c) of this Agreement in order for such
Governmental Loan to be treated as a Parity Obligation hereunder.
(b) (i) A Governmental Agency shall not be entitled to be paid from monies then on
hand in the Reserve Account in the event the Net Revenues are ever insufficient to make a
timely payment on the Governmental Loan, and (ii) the City shall not make a payment on any
Governmental Loan (except as expressly permitted in subsection (c) below) to the extent it
would have the effect of causing the City to fail to make a timely payment on the Bonds.
(c) If Net Revenues are ever insufficient to pay the full amount of Installment
Payments and other Parity Obligations then Outstanding and such Governmental Loan, the City
shall make payments on the Installment Payments and other Parity Obligations and such
Governmental Loan on a pro rata basis.
SECTION 5.10. Operation of Enterprise in Efficient and Economical Manner. The
City covenants and agrees to operate the Enterprise in an efficient and economical manner and
to operate, maintain and preserve the Enterprise in good repair and working order.
SECTION 5.11. Assignment and Amendment. The Authority and the City may at any
time amend or modify any of the provisions of this Agreement, but only: (a) with the prior written
consents of the Owners of a majority in aggregate principal amount of the Outstanding Bonds:
or (b) without the consent of the Trustee or any of the Bond Owners, but only if such
amendment or modification is for any one or more of the following purposes:
(i) to add to the covenants and agreements of the City contained in
this Agreement, other covenants and agreements thereafter to be observed, or
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to limit or surrender any rights or power herein reserved to or conferred upon the
City;
(ii) to make such provisions for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective provision contained
herein, to conform to the original intention of the City and the Authority;
(iii) to modify, amend or supplement this Agreement in such manner
as to assure that the interest on the Bonds remains excluded from gross income
under the Tax Code. (provided that this provision shall not apply to bonds the
interest on which is intended to be included in gross income for purposes of
federal income taxation);
(iv) in any other respect whatsoever as the Authority and the City
deem necessary or desirable, if in the opinion of Bond Counsel such
modifications or amendments do not materially adversely affect the interests of
the Owners of the Bonds; and
(v) to provide for the issuance of Parity Obligations pursuant to
Section 5.8 hereof.
No such modification or amendment may (a) extend or have the effect of extending any
Installment Payment Date or reducing any Installment Payment or any premium payable upon
the prepayment thereof, without the express consent of the Owners of the affected Bonds, or
(b) modify any of the rights or obligations of the Trustee without its written assent thereto.
SECTION 5.12. Continuing Disclosure. The City hereby covenants and agrees to
comply with and carry out all of the provisions of the continuing disclosure agreement (the
"Continuing Disclosure Agreement ") as originally executed as of the date of issuance and
delivery of the Bonds, and as it may be amended from time to time in accordance with its terms.
Notwithstanding any other provision of this Agreement, failure by the City to comply with the
Continuing Disclosure Agreement shall not constitute a default hereunder or under the
Indenture of Trust; provided, however, that any Participating Underwriter or any Owner or
beneficial owner of the Bonds may take such action as may be necessary and appropriate to
compel performance by the City of its obligations under this Section 5.12, including seeking
mandamus or specific performance by court order. All capitalized terms used but not defined in
this Section 5.12 shall have the meanings given in the Continuing Disclosure Agreement.
SECTION 5.13. Tax Covenants. . (a) The City hereby covenants it shall not take any
action, or fail to take any action, if any such action or failure to take action would adversely
affect the tax - exempt status of the interest on the Bonds under Section 103 of the Code.
Without limiting the generality of the foregoing, the City shall comply with the requirements of
the tax certificate, which is incorporated herein as if fully set forth herein.
(b) In the event that at any time the City is of the opinion that, in order to comply with
its obligations under subsection (a) of this Section, it is necessary or helpful to restrict or limit
the, yield on the investment of any moneys in any of the funds or accounts held by the Trustee
pursuant to the Indenture, the City shall so notify the Authority and the Authority then shall
promptly instruct the Trustee in writing, and cause the Trustee to take such action as may be
necessary in accordance with such instructions.
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(c) The City agrees to furnish all information to, and cooperate fully with, the
Authority, the Trustee and their respective officers, employees, agents and attorneys, in order
to assure compliance with the provisions of Section 6.07 of the Indenture. In the event that the
Authority shall determine, pursuant to Section 6.07 of the Indenture, that any amounts are due
and payable to the United States of America thereunder and that neither the Authority nor the
Trustee has on deposit an amount of available moneys (excluding moneys on deposit in the
funds and accounts established for the payment of the principal of or interest or redemption
premium, if any, on the Bonds) to make such payment, the Authority shall promptly notify the
City of such fact. Upon receipt of any such notice, the City shall promptly pay to the Trustee
from any source of legally available funds the amounts determined by the Authority to be due
and payable to the United States of America under Section 6.07 of the Indenture.
The covenants in this Section shall survive payment in full or discharge of the
Installment Payments and the Bonds.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. Events of Default Defined. The following events constitute Events of
Default hereunder:
(a) Failure by the City to pay any Installment Payment when due and
payable hereunder.
(b) Failure by the City to pay any Additional Payment when due and
payable hereunder, and the continuation of such failure for a period of 30 days.
(c) Failure by the City to observe and perform any covenant,
condition or agreement on its part to be observed or performed, other than as
referred to in the preceding clauses (a) or (b), for a period of 60 days after
written notice specifying such failure and requesting that it be remedied has
been given to the City by the Authority or the Trustee; provided, however, that if
the City notifies the Authority and the Trustee that in its reasonable opinion the
failure stated in the notice can be corrected, but not within such 60 -day period,
such failure will not constitute an event of default hereunder if the City
commences to cure such failure within such 60 day period and thereafter
diligently and in good faith cures the failure in a reasonable period of time.
(d) The filing by the City of a voluntary petition in bankruptcy, or
failure by the City promptly to lift any execution, garnishment or attachment, or
adjudication of the City as a bankrupt, or assignment by the City for the benefit
of creditors, or the entry by the City into an agreement of composition with
creditors, or the approval by a court of competent jurisdiction of a petition
applicable to the City in any proceedings instituted under the provisions of the
Federal Bankruptcy Code, as amended, or under any similar acts which may
hereafter be enacted.
(e) The occurrence of any event defined to be an event of default
under any Parity Obligations Documents.
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SECTION 6.2. Remedies on Default. If an Event of Default occurs and is continuing,
the Trustee as assignee of the Authority has the right, at its option and without any further
demand or notice, to take any one or more of the following actions:
(a) Declare all principal components of the unpaid Installment
Payments, together with accrued interest thereon at the Overdue Rate from the
immediately preceding Interest Payment Date on which payment was made, to
be immediately due and payable, whereupon the same shall immediately
become due and payable.
Notwithstanding the foregoing provisions of this subsection (a), the
Trustee shall rescind and annul such declaration and its consequences if, before
any judgment or decree for the payment of the moneys due has been obtained
or entered, if (i) the City deposits with the Trustee a sum sufficient to pay all
principal components of the Installment Payments coming due prior to such
declaration and all matured interest components (if any) of the Installment
Payments, with interest on such overdue principal and interest components
calculated at the Overdue Rate, and (ii) the City pays the reasonable expenses
of the Trustee (including any fees and expenses of its attorneys), and (iii) any
and all other defaults known to the Trustee (other than in the payment of the
principal and interest components of the Installment Payments due and payable
solely by reason of such declaration) have been made good. No such rescission
and annulment will extend to or shall affect any subsequent default, or impair or
exhaust any right or power consequent thereon.
(b) Take whatever action at law or in equity may appear necessary or
desirable to collect the Installment Payments then due or thereafter to become
due during the Term of this Agreement, or enforce performance and observance
of any obligation, agreement or covenant of the City under this Agreement.
(c) As a matter of right, in connection with the filing of a suit or other
commencement of judicial proceedings to enforce the rights of the Trustee and
the Bond Owners hereunder, cause the appointment of a receiver or receivers of
the Gross Revenues and other amounts pledged hereunder, with such powers
as the court making such appointment may confer.
SECTION 6.3. No Remedy Exclusive. No remedy herein conferred upon or reserved
to the Authority is intended to be exclusive. Every such remedy is cumulative and in addition to
every other remedy given under this Agreement or now or hereafter existing at law or in equity.
No delay or omission to exercise any right or power accruing upon any default impairs any such
right or power or operates as a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle the Authority to
exercise any remedy reserved to it in this Article VI, it is not necessary to give any notice, other
than such notice as may be required in this Article VI or by law.
SECTION 6.4. Agreement to Pay Attorneys' Fees and Expenses. If either party to
this Agreement defaults under any of the provisions hereof and the nondefaulting party, the
Trustee or the Owner of any Bonds employs attorneys or incurs 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, the Trustee or such Owner, as the
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case may be, the reasonable fees of such attorneys and such other expenses so incurred. The
provisions of this Section 6.4 survive the expiration of the Term of this Agreement.
SECTION 6.5. No Additional Waiver Implied by One Waiver. If any agreement
contained in this Agreement is breached by either party and thereafter waived by the other
party, such waiver is limited to the particular breach so waived and does not waive any other
breach hereunder.
SECTION 6.6. Trustee and Bond Owners to Exercise Rights. Such rights and
remedies as are given to the Authority under this Article VI have been assigned by the Authority
to the Trustee under the Indenture, to which assignment the City hereby consents. Such rights
and remedies shall be exercised by the Trustee and the Owners of the Bonds as provided in
the Indenture.
ARTICLE VII
PREPAYMENT OF INSTALLMENT PAYMENTS
SECTION 7.1. Security Deposit. Notwithstanding any other provision hereof, the City
may on any date secure the payment of Installment Payments, in whole or in part, by
irrevocably depositing with the Trustee an amount of cash which, together with other available
amounts, is either:
(a) sufficient to pay all such Installment Payments, including the
principal and interest components thereof, when due under Section 4.4(a), or
(b) invested in whole or in part in non - callable Federal Securities in
such amount as will, in the opinion of an Independent Accountant (which opinion
is addressed and delivered to the Trustee), together with interest to accrue
thereon and together with any cash which is so deposited, be fully sufficient to
pay all such Installment Payments when due under Section 4.4(a) or when due
on any optional prepayment date under Section 7.2, as the City instructs at the
time of said deposit.
If the City makes a security deposit under this Section for the payment of all remaining
Installment Payments, all obligations of the City hereunder, and the pledge of Net Revenues
and all other security provided by this Agreement for said obligations, will thereupon cease and
terminate, excepting only the obligation of the City to make, or cause to be made, all Installment
Payments from the security deposit. The security deposit will be deemed to be and will
constitute a special fund for the payment of the Installment Payments in accordance with the
provisions hereof.
SECTION 7.2. Optional Prepayment Relating to the 2011 Bonds. The City may
exercise its option to prepay the principal components of the Installment Payments relating to
the 2011 Bonds in whole or in part on any date on or after June 1, 20 . The City may exercise
such option by payment of a prepayment price equal to the sum of (a) the aggregate principal
components of the Installment Payments relating to the 2011 Bonds to be prepaid, (b) the
interest component of the Installment Payment relating to the 2011 Bonds required to be paid
on or accrued to such date, and (c) the premium (if any) then required to be paid upon the
corresponding redemption of the 2011 Bonds under Section 4.01(a) of the Indenture. The
Trustee shall deposit the prepayment price in the Redemption Fund to be applied to the
redemption of 2011 Bonds under Section 4.01(a) of the Indenture. If the City prepays the
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Installment Payments in part but not in whole, the principal components will be prepaid among
such maturities and in such integral multiples of $5,000 as the City designates in written notice
to the Trustee.
SECTION 7.3. Mandatory Prepayment From Proceeds of Insurance, Sale or
Condemnation. The City shall prepay the Installment Payments on any date, in whole, or in
part among maturities on a pro rata basis in any integral multiple of $5,000, from and to the
extent of any proceeds of insurance, sale or condemnation awards with respect to the
Enterprise theretofore paid to the Trustee for such purpose under Sections 5.3 or 5.4. The City
and the Authority hereby agree that such proceeds, to the extent remaining after payment of
any delinquent Installment Payments, will be deposited in the Water Wastewater Enterprise
Fund and credited towards the City's obligations under this Section 7.3.
SECTION 7.4. Credit for Amounts on Deposit. If the City prepays the Installment
Payments in .full under this Article VII, such that the Indenture is discharged by its terms as a
result of the prepayment, and upon payment in full of all Additional Payments and other
amounts then due and payable hereunder, all available amounts then on deposit in the funds
and accounts established under the Indenture shall be credited towards the amounts then
required to be so prepaid.
•
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Further Assurances. The City agrees that it will execute and deliver
any and all such further agreements, instruments, financing statements or other assurances as
may be reasonably necessary or requested by the Authority or the Trustee to carry out the
intention or to facilitate the performance of this Agreement, including, without limitation, to
perfect and continue the security interests herein intended to be created.
SECTION 8.2. Notices. Any notice, request, complaint, demand or other
communication under this Agreement must be given by first class mail or personal delivery to
the party entitled thereto at its address set forth below, or by telecopier or other form of
telecommunication, at its number set forth below. Notice is effective either (a) upon
transmission by fax or other form of telecommunication, (b) upon actual receipt after deposit in
the United States of America mail, postage prepaid, or (c) in the case of personal delivery to
any person, upon actual receipt. The Authority, the City and 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 City City of Seal Beach
or the Authority: 211 Eight Street
Seal Beach, California 90740
Attention: City Manager
Telephone: (562) 431 -2527 x1300
Fax: (562) 493 -9857
If to the Trustee: Bank of New York Mellon Trust Company, N.A.
700 S. Flower Street, Suite 500r
Los Angeles, California 90017
Attention: Corporate Trust Services
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Telephone: (213) 630 -6249
Fax: (213) 630 -6480
SECTION 8.3. Governing Law. This Agreement will be construed in accordance with
and governed by the laws of the State of California.
SECTION 8.4. Binding Effect. This Agreement inures to the benefit of and is binding
upon the Authority and the City and their respective successors and assigns, subject, however,
to the limitations contained herein.
SECTION 8.5. Severability of Invalid Provisions. If any one or more of the
provisions contained in this Agreement are for any reason held to be invalid, illegal or
unenforceable in any respect, then such provision or provisions will be deemed severable from
the remaining provisions contained in this Agreement and such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement, and this Agreement shall
be construed as if such invalid or illegal or unenforceable provision had never been contained
herein. The Authority and the City each hereby declares that it would have entered into this
Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof
irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or
phrases of this Agreement may be held illegal, invalid or unenforceable.
SECTION 8.6. Article and Section Headings and References. The headings or titles
of the several Articles and Sections hereof, and any table of contents appended to copies
hereof, are solely for convenience of reference and do not affect the meaning, construction or
effect of this Agreement. All references herein to "Articles," "Sections" and other subdivisions
are to the corresponding Articles, Sections or subdivisions of this Agreement; the words
"herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or subdivision hereof; and
words of the masculine gender mean and include words of the feminine and neuter genders.
SECTION 8.7. Payment on Non - Business Days. Whenever any payment is required
to be made hereunder on a day which is not a Business Day, such payment shall be made on
the immediate preceding Business Day.
SECTION 8.8. Execution of Counterparts. This Agreement may be executed in any
number of counterparts, each of which will for all purposes be deemed to be an original and all
of which together constitute but one and the same instrument.
SECTION 8.9. Waiver of Personal Liability. No member of the City Council, officer,
agent or employee of the City has any individual or personal liability for the payment of
Installment Payments or Additional Payments or be subject to any personal liability or
accountability by reason of this Agreement; but nothing herein contained relieves any such
member of the City Council, officer, agent or employee from the performance of any official
duty provided by law or by this Agreement.
SECTION 8.10. Trustee as Third Party•Beneficiary. The Trustee is hereby made a
third party beneficiary hereof and is entitled to the benefits of this Agreement with the same
force and effect as if the Trustee was a party hereto.
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IN WITNESS WHEREOF, the Authority and the City have caused this Agreement to be
executed in their respective names by their duly authorized officers, all as of the date first above
written.
SEAL BEACH PUBLIC FINANCING AUTHORITY,
as Seller
By
Executive Director
•
CITY OF SEAL BEACH, as Purchaser
By
City Manager
Signature Page to Installment Sale Agreement
APPENDIX A
SCHEDULE OF INSTALLMENT PAYMENTS
Interest Principal Interest Total
Payment Date(1) Component Component Payment
6/1/11
12/1/11
6/1/12
12/1/12
6/1/13
12/1/13
6/1/14
12/1/14
6/1/15
12/1/15
6/1/16
12/1/16
6/1/17
12/1/17
6/1/18
12/1/18
6/1/19
12/1/19
6/1/20
12/1/20
6/1/21
12/1/21
6/1/22
(1) Installment Payment Dates are the third (3 Business Day immediately preceding
each Interest Payment Date shown in the table.
A -1
APPENDIX B
DESCRIPTION OF 2000 WASTEWATER PROJECT
The 2000 Wastewater Project consists of all of the land, improvements and other
property of the Enterprise financed with the proceeds of the 2000 COPs
B -1
Attachment "F"
Indenture
INDENTURE OF TRUST
Dated as of January 1, 2011
By and Between
SEAL BEACH PUBLIC FINANCING AUTHORITY
and
BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee
Authorizing the Issuance of
$[principal amount]
Seal Beach Public Financing Authority
2011 Wastewater Revenue Refunding Bonds, Series A
TABLE OF CONTENTS
ARTICLE I:
DEFINITIONS; RULES OF CONSTRUCTION:
SECTION 1.01. Definitions 3
SECTION 1.02. Authorization 13
SECTION 1.03. Interpretation 13
ARTICLE II:
The 2011 Bonds:
SECTION 2.01. Authorization of 2011 Series A Bonds 14
SECTION 2.02. Terms of the 2011 Bonds Error! Bookmark not defined.
SECTION 2.03. Form and Execution of 2011 Bonds Error! Bookmark not defined.
SECTION 2.04. Transfer and Exchange of Bonds Error! Bookmark not defined.
SECTION 2.05. Book -Entry System Error! Bookmark not defined.
SECTION 2.06. Registration Books Error! Bookmark not defined.
SECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen Error! Bookmark not defined.
SECTION 2.08. Applicability to Additional Bonds Error! Bookmark not defined.
ARTICLE III:
Issuance of 2011 Bonds; Application of Proceeds:
SECTION 3.01. Issuance of the 2011 Bonds Error! Bookmark not defined.
SECTION 3.02. Application of Proceeds of Sale of the 2011 BondsError! Bookmark not defined.
SECTION 3.03. Establishment and Application of Costs of Issuance FundError! Bookmark not defined.
SECTION 3.04. Refunding Fund 19
SECTION 3.05. Validity of 2011 Bonds Error! Bookmark not defined.
SECTION 3.06. Additional Bonds. 19
ARTICLE IV:
Redemption of Bonds:
SECTION 4.01. Terms of Redemption Error! Bookmark not defined.
SECTION 4.02. Selection of Bonds for Redemption Error! Bookmark not defined.
SECTION 4.03. Notice of Redemption Error! Bookmark not defined.
SECTION 4.04. Execution of New Bonds Upon Partial Redemption of BondsError! Bookmark not defined.
SECTION 4.05. Effect of Redemption Error! Bookmark not defined.
ARTICLE V:
Revenues; Funds and Accounts; Payment of Principal and
Interest:
SECTION 5.01. Security for the Bonds; Bond Fund 24
SECTION 5.02. Allocation of Revenues Error! Bookmark not defined.
SECTION 5.03. Application of Interest Account Error! Bookmark not defined.
SECTION 5.04. Application of Principal Account Error! Bookmark not defined.
SECTION 5.05. Application of Reserve Account Error! Bookmark not defined.
SECTION 5.06. Application of Redemption Fund Error! Bookmark not defined.
SECTION 5.07. Investments Error! Bookmark not defined.
SECTION 5.08. Valuation and Disposition of Investments Error! Bookmark not defined.
ARTICLE VI:
Covenants of the Authority
SECTION 6.01. Punctual Payment Error! Bookmark not defined.
SECTION 6.02. Extension of Payment of Bonds Error! Bookmark not defined.
SECTION 6.03. Against Encumbrances Error! Bookmark not defined.
SECTION 6.04. Power to Issue Bonds and Make Pledge and AssignmentError! Bookmark not defined.
SECTION 6.05. Accounting Records Error! Bookmark not defined.
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SECTION 6.06. Limitation on Additional Obligations Error! Bookmark not defined.
SECTION 6.07. Tax Covenants Error! Bookmark not defined.
SECTION 6.08. Enforcement of Lease Error! Bookmark not defined.
SECTION 6.09. Waiver of Laws Error! Bookmark not defined.
SECTION 6.10. Further Assurances 30
ARTICLE VII:
Events of Default and Remedies:
SECTION 7.01. Events of Default Error! Bookmark not defined.
SECTION 7.02. Acceleration; Other Remedies 31
SECTION 7.03. Application of Revenues and Other Funds After DefaultError! Bookmark not defined.
SECTION 7.04. Trustee to Represent Bond Owners Error! Bookmark not defined.
SECTION 7.05. Limitation on Bond Owners' Right to Sue Error! Bookmark not defined.
SECTION 7.06. Absolute Obligation of Agency Error! Bookmark not defined.
SECTION 7.07. Termination of Proceedings Error! Bookmark not defined.
SECTION 7.08. Remedies Not Exclusive Error! Bookmark not defined.
SECTION 7:09. No Waiver of Default Error! Bookmark not defined.
ARTICLE VIII:
The Trustee:
SECTION 8.01. Appointment of Trustee 33
SECTION 8.02. Acceptance of Trusts; Removal and Resignation of Trustee 33
SECTION 8.03. Merger or Consolidation Error! Bookmark not defined.
SECTION 8.04. Liability of Trustee Error! Bookmark not defined.
SECTION 8.05. Right to Rely on Documents Error! Bookmark not defined.
SECTION 8.06. Preservation and Inspection of Documents Error! Bookmark not defined.
SECTION 8.07. Compensation and Indemnification Error! Bookmark not defined.
ARTICLE IX:
Modification or Amendment Hereof:
SECTION 9.01. Amendments Permitted Error! Bookmark not defined.
SECTION 9.02. Effect of Supplemental Indenture Error! Bookmark not defined.
SECTION 9.03. Endorsement of Bonds; Preparation of New BondsError! Bookmark not defined.
SECTION 9.04. Amendment of Particular Bonds Error! Bookmark not defined.
ARTICLE X:
Defeasance:
SECTION 10.01. Discharge of Indenture Error! Bookmark not defined.
SECTION 10.02. Discharge of Liability on Bonds Error! Bookmark not defined.
SECTION 10.03. Deposit of Money or Securities with Trustee Error! Bookmark not defined.
SECTION 10.04. Unclaimed Funds Error! Bookmark not defined.
ARTICLE XI:
Miscellaneous:
SECTION 11.01. Liability of Authority Limited to Revenues. 43
SECTION 11.02. Limitation of Rights to Parties and Bond OwnersError! Bookmark not defined.
SECTION 11.03. Funds and Accounts Error! Bookmark not defined.
SECTION 11.04. Waiver of Notice; Requirement of Mailed NoticeError! Bookmark not defined.
SECTION 11.05. Destruction of Bonds Error! Bookmark not defined.
SECTION 11.06. Severability of Invalid Provisions Error! Bookmark not defined.
SECTION 11.07. Notices Error! Bookmark not defined.
SECTION 11.08. Evidence of Rights of Bond Owners Error! Bookmark not defined.
SECTION 11.09. Disqualified Bonds Error! Bookmark not defined.
SECTION 11.10. Money Held for Particular Bonds Error! Bookmark not defined.
SECTION 11.11. Waiver of Personal Liability Error! Bookmark not defined.
SECTION 11.12. Successor Is Deemed Included in All References to PredecessorError! Bookmark not del
-ii-
SECTION 11.13. Execution in Several Counterparts Error! Bookmark not defined.
SECTION 11.14. Payment on Non - Business Day Error! Bookmark not defined.
SECTION 11.15. Governing Law Error! Bookmark not defined.
APPENDIX A FORM OF 2011 BOND
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INDENTURE OF TRUST
•
This INDENTURE OF TRUST (this "Indenture "), dated for convenience as of January 1,
2011, is by and between the SEAL BEACH PUBLIC FINANCING AUTHORITY, a joint exercise
of powers authority organized and existing under the laws of the State of California (the
"Authority "), and BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking
association organized and existing under the laws of the United States of America, with a
corporate trust office in Los Angeles, California, being qualified to accept and administer the
trusts hereby created (the "Trustee ").
BACKGROUND
1. The City of Seal Beach (the "City ") presently operates facilities and property for
the collection.of wastewater within the service area of the City (the "Enterprise ").
2. The Authority has previously financed the acquisition and construction of certain
improvements to the Enterprise through the execution and delivery of $4,230,000 Certificates of
Participation (2000 Sewer System Project) evidencing the direct, undivided fractional interests
of the owners thereof in 2000 Installment Payments (defined below) to be made by the City as
the purchase price for certain property pursuant to a 2000 Installment Sale Agreement (defined
below) with the Authority (the "2000 COPs ").
3. In connection with the execution and delivery of the 2000 COPs, the Authority
and the City entered into an Installment Sale Agreement, dated as of June 1, 2000 (the "2000
Installment Sale Agreement "), under which the City is obligated to make certain installment
payments (the "2000 Installment Payments ") and certain additional payments to the Authority in
order to provide the Authority with sufficient revenues to pay debt service on the 2000 COPs.
4 The Authority and the City at this time desire to prepay and discharge the 2000
Installment Sale Agreement by refunding, in full, the 2000 COPs.
5. The City, at this time, is entering into the Installment Sale Agreement dated as of
January 1, 2011 (the Installment Sale Agreement ") with the Authority in order to prepay the
2000 Installment Sale Agreement.
6. For the purpose of obtaining funds to refund the 2000 COPs, the Authority has
authorized the issuance of its Seal Beach Public Financing Authority 2011 Wastewater
Revenue Refunding Bonds, Series A (the "2011 Bonds "), in the aggregate principal amount of
$[principal amount] under this Indenture and under the provisions of Article 4 of Chapter 5,
Division 7, Title 1 of the Government Code of the State of California, commencing with Section
6584 of said Code (the "Bond Law "). The 2011 Bonds will be payable from Installment
Payments made under the Installment Sale Agreement.
7. , In order to provide for the authentication and delivery of the Bonds (including the
2011 Bonds), to establish and declare the terms and conditions upon which the Bonds
(including the 2011 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.
8. The Authority has found and determines, and hereby affirms, that all acts and
proceedings required by law necessary to make the Bonds (including the 2011 Bonds), when
executed by the Authority, authenticated and delivered by the Trustee and duly issued, the
valid, binding and legal special obligations of the Authority, and to constitute this Indenture 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 Indenture have been
in all respects duly authorized.
AGREEMENT:
In order to secure the payment of the principal of and the interest and redemption
premium (if any) on all the Outstanding Bonds under this Indenture according to their tenor, and
to secure the performance and observance of all the covenants and conditions therein and
herein set forth, and to declare the terms and conditions upon and subject to which the Bonds
are to be issued and received, and in consideration of the premises and of the mutual
covenants herein contained and of the purchase and acceptance of the Bonds by the Owners
thereof, and for other valuable considerations, the receipt of which is hereby acknowledged, the
Authority and the Trustee do hereby covenant and agree with one another, for the benefit of the
respective Owners from time to time of the Bonds, as follows:
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ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
SECTION 1.01. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms set forth in this Indenture shall have the
meanings assigned to them in this Section 1.01.
"Additional Bonds" means all bonds ranking on a parity with the 2011 Bonds originally
issued hereunder, issued in accordance with Section 3.06.
"Additional Payments" means the amounts payable by the City under Section 4.7 of the
Installment Sale Agreement.
"Additional Revenues" means, with respect to the issuance of any Parity Obligations,
any or all of the following amounts:
(a) An allowance for Net Revenues from any additions or
improvements to or extensions of the Enterprise to be made with the proceeds of
such Parity Obligations and also for Net Revenues from any such additions,
improvements or extensions which have been made from moneys from any
source but in any case which, during all or any part of the latest Fiscal Year or
for any more recent consecutive 12 -month period selected by the City, were not
in service, all in an amount equal to 90% of the estimated additional average
annual Net Revenues to be derived from such additions, improvements and
extensions for the first 36 -month period in which each addition improvement or
extension is respectively to be in operation, all as shown by the certificate or
opinion of a qualified independent engineer employed by the City.
(b) An allowance for Net Revenues arising from any increase in the
charges made for service from the Enterprise which has been adopted prior to
the incurring of such Parity Obligations but which, during all or any part of the
latest Fiscal Year or for any more recent consecutive 12 -month period selected
by the City, was not in effect, in an amount equal to the total amount by which
the Net Revenues would have been increased if such increase in charges had
been in effect during the whole of such Fiscal Year or 12 -month period, all as
shown by the certificate or, opinion of an Independent Accountant or Fiscal
Consultant employed by the City.
"Agreement" shall mean that certain Joint Exercise of Powers Agreement, dated as of
May 8, 2000, by and between the City and the Redevelopment Agency of the City of Seal
Beach, creating the Authority, together with any amendments thereof and supplements thereto.
"Annual Debt Service" means, as of the date of any calculation and with respect to the
Installment Payments or any Parity Obligations, as the case may be, the sum obtained for the
current or any future Bond Year during the Term of the Installment Sale Agreement by totaling
the following amounts for such Bond Year:
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(a) the aggregate amount of the Installment Payments coming due and
payable in such Bond Year pursuant hereto, except to the extent payable from any
security deposit pursuant to Section 7.1 of the Installment Sale Agreement; and
(b) the principal amount of all outstanding Parity obligations, if any, coming
due and payable by their terms in such Bond Year.
"Authority" means the Seal Beach Public Financing Authority, a joint exercise of powers
authority duly organized and existing under the laws of the State of California and the
Agreement.
"Authorized Representative" means: (a) with respect. to the Authority, its Executive
Director, Chair or any other person designated as an Authorized Representative of the Authority
by a Written Certificate of the Authority signed by its Executive Director or Chief Financial
Officer and filed with the City and the Trustee; and (b) with respect to the City, its City Manager,
Director of Administrative Services and Mayor or any other person designated as an Authorized
Representative of the City by a Written Certificate of the City signed by its City Manager or
Director of Administrative Services and Chief Financial Officer and filed with the Authority and
the Trustee.
"Bond Counsel" means (a) Richards Watson & Gershon, A Professional Corporation, or
(b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of
nationally- recognized experience in the issuance of obligations the interest on which is
excludable from gross income for federal income tax purposes under the Tax Code.
"Bond Fund" means the fund by that name established and held by the Trustee under
Section 5.01.
"Bond Law" means the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the
Government Code of the State of California, commencing with Section 6584 of said Code, as in
effect on the Closing Date or as thereafter amended in accordance with its terms.
"Bond Year" means each twelve -month period extending from June 2 in one calendar
year to June 1 of the succeeding calendar year, both dates inclusive; except that the first Bond
Year with respect to the 2011 Bonds commences on the Closing Date and extends to and
including June 1, 2011.
"Bonds" means the Outstanding 2011 Bonds and any Outstanding Additional Bonds.
"Business Day" means any day (i) other than a Saturday or a Sunday or (ii) any other
day on which commercial banks located in the city in which the Office of the Trustee is located
are authorized or required by law to close.
"City" means the City of Seal Beach, a municipal corporation duly organized and existing
under the laws of the State of California.
"Closing Date" means, with respect to the 2011 Bonds, the date of delivery of the Bonds
to the Original Purchaser of the 2011 Bonds.
"Costs of Issuance" means all items of expense directly or indirectly payable by or
reimbursable to the City relating to the authorization, issuance, sale and delivery of the Bonds,
including but not limited to: printing expenses; rating agency fees; filing and recording fees;
-4-
initial fees, expenses and charges of the Trustee, and the Trustee's counsel, including the
Trustee's first annual administrative fee; fees, charges and disbursements of attorneys,
financial advisors, accounting firms, consultants and other professionals; bond insurance and
surety bond premiums, if any; fees and charges for preparation, execution and safekeeping of
the Bonds; and any other cost, charge or fee in connection with the original issuance of the
Bonds.
"Costs of Issuance Fund" means the fund by that name established and held by the
Trustee under Section 3.03.
"Defeasance Obligations" means:
(a) Cash;
•
(b) Federal Securities;
(c) The interest component of Resolution Funding Corporation strips which
have been stripped by request to the Federal Reserve Bank of New York in book entry
form;
(d) Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies and provided such obligations are
backed by the full faith and credit of the United States of America (stripped securities
are only permitted if they have been stripped by the agency itself): (i) direct obligations
or fully guaranteed certificates of beneficial ownership of the U.S. Export -Import Bank;
(ii) certificates of beneficial ownership of the Farmers Home Administration; (iii) Federal
Housing Administration debentures; (iv) participation certificates of the General Services
Administration; (v) Federal Financing Bank bonds and. debentures; (vi) guaranteed
mortgage- backed bonds or guaranteed pass- through obligations of the Government
National Mortgage Association; (vii) guaranteed Title XI financings of the U.S. Maritime
Administration; and (viii) project notes, local authority bonds, new communities
debentures and U.S. public housing notes and bonds of the U.S. Department of Housing
and Urban Development;
(e) bonds, notes or other evidences of indebtedness rated AAA by S &P and
Aaa by Moody's issued by the Fannie Mae or the Federal Home Loan Mortgage
Corporation; and
(f) any pre- refunded bonds or other obligations of any state of the United
States of America or of any agency, instrumentality or local governmental unit of any
such state which are not callable at the option of the obligor prior to maturity or as to
which irrevocable instructions have been given by the obligor to call on the date
specified in the notice; and (i) which are rated, based on the refunding escrow, in the
highest rating category of S &P and Moody's or (ii)(A) which are fully secured as to
principal and interest and redemption premium (if any) by a fund consisting only of cash
or Federal Securities, which fund may be applied only to the payment of such principal
of and interest and redemption premium (if any) in such bonds or other obligations on
the maturity date or dates thereof or the specified redemption date or dates under such
irrevocable instructions, as appropriate, and (B) which fund is sufficient, as verified by
an Independent Accountant, to pay principal of and interest and redemption premium (if
any) on the bonds or other obligations described in this paragraph on the maturity date
-5-
or dates thereof or on the redemption date or dates specified in the irrevocable
instructions referred to above, as appropriate.
"Depository" means (a) initially, DTC, and (b) any other Securities Depositories acting as
Depository under Section 2.05.
"Depository System Participant" means any participant in the Depository's book -entry
system.
"DTC" means The Depository Trust Company, New York, New York, and its successors
and assigns.
"Enterprise" means the entire wastewater system of the City, including but not limited to
all facilities, properties and improvements at any time owned or operated by the City for the
collection of wastewater from residents served thereby, and any necessary lands, rights,
entitlements and other property useful in connection therewith.
"Event of Default" means any of the events specified in Section 7.01.
"Excess Investment Earnings" means an amount required to be rebated to the United
States of America under Section 148(f) of the Tax Code due to investment of gross proceeds of
the Bonds at a yield in excess of the yield on the Bonds.
"Federal Securities" means: (a) any direct general obligations of the United States of
America (including obligations issued or held in book entry form on the books of the
Department of the Treasury of the United States of America), for which the full faith and credit
of the United States of America are pledged; and (b) obligations of any agency, department or
instrumentality of the United States of America, the timely payment of principal and interest on
which are directly or indirectly secured or guaranteed by the full faith and credit, of the United
States of America.
"Fiscal Consultant" means any consultant or firm of such consultants appointed by the
City and who, or each of whom: (a) is judged by the City to have experience in matters relating
to the financing of wastewater system enterprises; (b) is in fact independent and not under
domination of the City; (c) does not have any substantial interest, direct or indirect, with the City
other than as purchaser of the Bonds or any Parity Obligations; and (d) is not connected with
the City as an officer or employee of the City, but who may be regularly retained to make
reports to the City.
"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.
"Governmental Agency" means the State, and the United States of America, acting
through any of its agencies, to the extent that the State or such agency has loaned money to
the City for the Enterprise.
"Governmental Loan" means any loan made by a Governmental Agency to the City that
is secured by a pledge of Net Revenues and incurred by the City to finance improvements to
the Enterprise pursuant to Section 5.9 of the Installment Sale Agreement.
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"Gross Revenues" means all gross charges received for, and all other gross income and
receipts derived by the City from, the ownership and operation of the Enterprise or otherwise
arising from the Enterprise, including but not limited to investment earnings thereon; but
excluding (a) developer impact fees, (b) the proceeds of any ad valorem property taxes levied
for the purpose of paying general obligation bonds of the City relating to the Enterprise, and (c)
the proceeds of any special assessments or special taxes levied upon real property within any
improvement district served by the City levied for the purpose of paying special assessment
bonds or special tax obligations of the City relating to the Enterprise.
"Indenture" means this Indenture of Trust, as originally executed or as it may from time
to time be supplemented, modified or amended by any Supplemental Indenture under the
provisions hereof.
"Independent Accountant" means any certified public accountant or firm of certified
public accountants appointed and paid by the Authority or the City, and who, or each of whom
(a) is in fact independent and not under domination of the Authority or the City; (b) does not
have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not
connected with the Authority or the City as an officer or employee of the Authority or the City
but who may be regularly retained to make annual or other audits of the books of or reports to
the Authority or the City. •
"Information Services" means the following services:
Bloomberg Municipal Repository
100 Business Park Drive
Skillman, NJ 08558
Financial Information Inc.
Daily Called Bonds
30 Montgomery St.
Jersey City, NJ 07302;
FIS /Mergent
Call Notification
5250 77 Center Dr.
Charlotte, NC 28217;
•
FT Interactive Data
100 William Street
15 Floor
New York, New York 10038
Standard & Poor's Securities Evaluations, Inc.
55 Water Street
45th Floor
New York, NY 10041
Xcitek
5 Hanover Square
New York, NY 10004;
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and, 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 the
redemption of bonds as the City may designate in a Written Request of the City filed with the
Trustee.
"Interest Account" means the account by that name established and held by the Trustee
in the Bond Fund under Section 5.02.
"Installment Payment Date" means, with respect to any Interest Payment Date, the 3rd
Business Day immediately preceding such Interest Payment Date.
"Installment Payments" means all payments required to be paid by the City on any date
under Section 4.4 of the Installment Sale Agreement, including any amounts payable upon
delinquent installments and including any prepayment thereof under Section 7.2 or 7.3 of the
Installment Sale Agreement, but does include Additional Payments.
"Installment Sale Agreement" means the Installment Sale Agreement dated as of
January 1, 2011, between the City and the Authority, together with any duly authorized and
executed amendments thereto.
"Interest Payment Dates" means each June 1 and December 1, commencing June 1,
2011, so long as any Bonds remain unpaid.
"Maximum Annual Debt Service" means, as of the date of any calculation and with
respect to the Installment Payments or any Parity Obligations, as the case may be, the
maximum sum obtained for the current or any future Bond Year during the Term of the
Installment Sale Agreement by totaling the following amounts for such Bond Year:
(a) the aggregate amount of the Installment Payments coming due and
payable in such Bond Year pursuant hereto, except to the extent payable from any
security deposit pursuant to Section 7.1 of the Installment Sale Agreement;
(b) the principal amount of all outstanding Parity Obligations, if any, coming
due and payable by their terms in such Bond Year;
(c) the amount of interest which would be due during such Bond Year on the
aggregate principal amount of all outstanding Parity Obligations, if any, which would be
outstanding in such Bond Year if such Parity Obligations are retired as scheduled; and
(d) loan payments to be made to a Governmental Agency under a
Governmental Loan, if any, coming due and payable by its terms in such Bond Year.
"Moody's" means Moody's Investors Service, a corporation duly organized and existing
under and by virtue of the laws of the State of Delaware, and its successors and assigns,
except that if such corporation shall be dissolved or liquidated or shall no longer perform the --
functions of a securities rating agency, then the term "Moody's" shall be deemed to refer to any
other nationally recognized securities rating agency selected by the Authority or the City.
"Net Revenues" means, for any period, an amount equal to all of the Gross Revenues
received during such period minus the amount required to pay all Operation and Maintenance
Costs becoming payable during such period.
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"Nominee" means (a) initially, Cede & Co. as nominee of DTC, and (b) any other
nominee of the Depository designated under Section 2.04(a).
"Office" means the corporate trust office of the Trustee in Los Angeles, California, or
such other or additional offices as the Trustee may designate in writing to the Corporation from
time to time as the corporate trust office for purposes of the Indenture; except that with respect
to presentation of Bonds for payment or for registration of transfer and exchange such term
means the office or agency of the Trustee at which, at any particular time, its corporate trust
business is conducted.
"Operation and Maintenance Costs" means the reasonable and necessary costs and
expenses paid by the City for maintaining and operating the Enterprise, including but not limited
to (a) costs of utilities, including the costs of electricity and other forms of energy supplied to the
Enterprise, (b) the reasonable expenses of management and repair and other costs and
expenses necessary to maintain and preserve the Enterprise in good repair and working order,
and (c) the reasonable administrative costs of the City attributable to the operation and
maintenance of the Enterprise, including insurance and other costs described in Article V of the
Installment Sale Agreement; but in all cases excluding (i) debt service payable on obligations
incurred by the City with respect to the Enterprise, including but not limited to the Installment
Payments and any Parity Obligations, (ii) depreciation, replacement and obsolescence charges
or reserves therefor, and (iii) amortization of intangibles or other bookkeeping entries of a
similar nature.
"Original Purchaser" means, with respect to the 2011 Bonds, Southwest Securities, Inc.,
• as the original purchaser of the 2011 Bonds at the negotiated sale thereof.
"Outstanding ", when used as of any particular time with reference to Bonds, means,
subject to the last paragraph of Section 10.01 of the Indenture, all Bonds theretofore, or
thereupon being, authenticated and delivered by the Trustee under this Indenture except: (a)
Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b)
Bonds with respect to which all liability of the Authority shall have been discharged in
accordance with Section 10.02, including Bonds (or portions thereof) described in Section
11.09; and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which
other Bonds shall have been authenticated and delivered by the Trustee under this Indenture.
"Overdue Rate" means the highest rate of interest on any of the Outstanding Bonds.
"Owner", whenever used herein with respect to a Bond, means the person in whose
name the ownership of such Bond is registered on the Registration Books.
"Parity Obligations" means (a) any bonds, notes, leases, installment sale agreements or
other obligations of the City payable from and secured by a pledge of and lien upon any of the
Net Revenues on a parity with the Installment Payments, entered into or issued under and in
accordance with Section 5.8 of the Installment Sale Agreement, and (b) any Governmental
Loan that is treated as a Parity Obligation under Section 5.9 of the Installment Sale Agreement.
"Parity Obligations Documents" means, collectively, the indenture of trust, trust
agreement, installment sale agreement, or other document authorizing the issuance of any
P arity Obligations or any securities which evidence Parity Obligations.
"Permitted Investments" means any of the following which at the time of investment are
determined by the Authority to be legal investments under the laws of the State of California for
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the moneys proposed to be invested therein (provided that the Trustee shall be entitled to rely
conclusively upon any such determination by the Authority):
(a) Federal Securities.
(b) obligations of any of the following federal agencies which obligations
represent full faith and credit of the United States of America, including:
Export- Import Bank, Farmers Home Administration, General Services
Administration, U.S. Maritime Administration, Small Business
Administration, Government National Mortgage Association, U.S.
Department of Housing & Urban Development, and Federal Housing
Administration;
(c) bonds, notes or other evidences of indebtedness rated AAA by S &P and
Aaa by Moody's issued by the Fannie Mae or the Federal Home Loan
Mortgage Corporation with remaining maturities not exceeding three years;
(d) U.S. dollar denominated deposit accounts (including those with the Trustee
or with any affiliate of the Trustee), federal funds and banker's acceptances
with domestic commercial banks which have a rating on their short term
certificates of deposit on the date of purchase of A -1 or A -1 + by S &P and
P -1 by Moody's, and maturing no more than 360 days after the date of
purchase;
(e) commercial paper which is rated at the time of purchase in the single
highest classification, A -1+ by S &P and P -1 by Moody's and which matures
not more than 270 days after the date of purchase;
(f) investments in a money market fund rated AAAm or AAAm -G or better by
S &P, which may include funds for which the Trustee or its affiliates provide
investment advisory or other management services;
(g) any pre- refunded bonds or other obligations of any state of the United
States of America or of any agency, instrumentality or local governmental
unit of any such state which are not callable at the option of the obligor
prior to maturity or as to which irrevocable instructions have been given by
the obligor to call on the date specified in the notice; and (i) which are
rated, based on the refunding escrow, in the highest rating category of S &P
and Moody's or (ii)(A) which are fully secured as to principal and interest
and redemption premium (if any) by a fund consisting only of cash or
Federal Securities, which fund may be applied only to the payment of such
principal of and interest and redemption premium (if any) in such bonds or
other obligations on the maturity date or dates thereof or the specified
redemption date or dates under such irrevocable instructions, as
appropriate, and (B) which fund is sufficient, as verified by an Independent
Accountant, to pay principal of and interest and redemption premium (if
any) on the bonds or other obligations described in this paragraph on the
maturity date or dates thereof or on the redemption date or dates specified
in the irrevocable instructions referred to above, as appropriate;
(h) investment agreements, with notice to each rating agency then rating the
Bonds;
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(i) the Local Agency Investment Fund established under Section 16429.1 of
the Government Code of the State of California, provided, however, that
the Trustee must be allowed to make investments and withdrawals in its
own name and the Trustee may restrict investments in the Local Agency
Investment Fund if required to keep moneys available for the purposes of
the Indenture; and
(j) any other investment permitted pursuant to Section 53601 of the California
Government Code.
"Principal Account" means the account by that name established and held by the
Trustee in the Bond Fund under Section 5.02.
"Qualified Reserve Account Credit Instrument" means an irrevocable standby or direct -
pay letter of credit or surety bond issued by a commercial bank or insurance company and
deposited with the Trustee pursuant to Section 5.05(b), provided that all of the following
requirements are met: (a) the long -term credit rating of such bank or insurance company is in
the highest rating category by Moody's and S &P; (b) such letter of credit or surety bond has a
term of at least twelve (12) months; (c) 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 5.05(c); and (d) 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 in the Interest Account or the Principal Account
for the purpose of making payments required pursuant to Sections 5.03 or 5.04.
"Rate Stabilization Fund" means any fund established and held by the City as a fund for
the stabilization of rates and charges imposed by the City with respect to the Enterprise, which
fund is established, held and maintained in accordance with Section 4.8 of the Installment Sale
Agreement.
"Record Date" means, with respect to any Interest Payment Date, the 15 calendar day
of the month preceding such Interest Payment Date, whether or not such day is a Business
Day.
"Redemption Fund" means the fund by that name established and held by the Trustee
under Section 5.06.
"Refunding Instructions" means those Irrevocable Refunding Instructions dated the
Closing Date from the Authority and the City to the 2000 Trustee regarding the refunding and
redemption of the 2000 COPs.
"Registration Books" means the records maintained by the Trustee under Section 2.06
for the registration and transfer of ownership of the Bonds.
"Reserve Account" means the account by that name established and held by the
Trustee in the Bond Fund established under Section 5.02.
"Reserve Requirement" means, subject to the second paragraph of Section 5.05(b), as
of the date of calculation by the Authority or the City, the lesser of (i) Maximum Annual Debt
Service on the Bonds (excluding from the calculation thereof Government Loans and Parity
Obligations other than Bonds), (ii) ten percent (10 %) of the total of the proceeds of the Bonds
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(excluding from the calculation thereof Government Loans and Parity Obligations other than
Bonds), and (iii) one hundred and twenty five percent (125 %) of average Annual Debt Service
on the Bonds (excluding from the calculation thereof Government Loans and Parity Obligations
other than Bonds); provided that in no event shall the Authority or the City, in connection with
the issuance of Parity Obligations in the form of Additional Bonds, be obligated to deposit an
amount in the Reserve Account which is in excess of the amount permitted by the applicable
provisions of the Tax Code to be so deposited from the proceeds of tax - exempt bonds without
having to restrict the yield of any investment purchased with any portion of such deposit and,
that in the event such amount of any deposit into the Reserve Account is so limited, the
Reserve Requirement shall, in connection with the issuance of such Additional Bonds, be
increased only by the amount of such deposit.
"Revenues" means: (a) all amounts received by the Authority or the Trustee pursuant or
with respect to the Installment Sale Agreement, including, without limiting the generality of the
foregoing, all of the Installment Payments (including both timely and delinquent payments, any
late charges, and whether paid from any source, but excluding any Additional Payments),
prepayments, insurance proceeds, condemnation proceeds, and (b) all interest, profits or other
income derived from the investment of amounts in any fund or account established pursuant to
this Indenture.
"Securities Depositories" means The Depository Trust Company; and, in accordance
with then current guidelines of the Securities and Exchange Commission, such other addresses
and /or such other securities depositories as the Authority designates in written notice filed with
the Trustee.
"S &P" means Standard & Poor's, a division of the McGraw Hill Companies, of New York,
New York, its successors and assigns, except that if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating agency, then the term
"S &P" shall be deemed to refer to any other nationally recognized securities rating agency
selected by the Authority or the City.
"Supplemental Indenture" means any indenture hereafter duly authorized and entered
into between the Authority and the Trustee, supplementing, modifying or amending this
Indenture; but only if and to the extent that such Supplemental Indenture is specifically
authorized hereunder.
"Tax Code" means the Internal Revenue Code of 1986 as in effect on the Closing Date
or (except as otherwise referenced herein) as it may be amended to apply to obligations issued
on the Closing Date, together with applicable proposed, temporary and final regulations
promulgated, and applicable official public guidance published, under said Tax Code.
"Term" means, when used with respect to the Installment Sale Agreement, the time
during which the Installment Sale Agreement is in effect, as provided in Section 4.2 thereof.
"Term Bonds" means any Additional Bonds identified as such in the applicable
Supplemental Indenture.
"Trustee" means Bank of New York Mellon Trust Company, N.A., a national banking
association organized and existing under the laws of the United States of America, or its
successor or successors, as Trustee hereunder as provided in Article VIII.
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"2000 COPs" means the $4,230,000 original principal amount of Certificates of
Participation (2000 Sewer System Project) evidencing the direct, undivided fractional interest of
the owners thereof in 2000 Installment Payments to be made by the City as the purchase price
for certain property pursuant to the 2000 Installment Sale Agreement with the Authority.
"2000 Installment Payments" means the installment payments made by the City to the
Authority under the 2000 Installment Sale Agreement.
"2000 Installment Sale Agreement" means the Installment Sale Agreement dated as of
June 1, 2000 between the Authority and the City.
"2000 Trust Agreement" means the Trust Agreement relating to the 2000 COPs dated
as of June 1, 2000 between the Authority and the Trustee.
"2000 Trustee" means BNY Western Trust Company, as trustee under the 2000 Trust
Agreement.
Wastewater Proiect" means the facilities, improvements and other property
financed with the proceeds of the 2000 COPs.
"2011 Bonds" means the Seal Beach Public Financing Authority 2011 Wastewater
Revenue Refunding Bonds, Series A, in the original principal amount of $[principal amount].
"Wastewater Enterprise Fund" means the fund or funds established and held by the City
with respect to the Enterprise for the receipt and deposit of Gross Revenues.
"Written Certificate," "Written Request" and "Written Requisition" of the Authority or the
City mean, respectively, a written certificate, request or requisition signed in the name of the
Authority or the City by its Authorized Representative. Any such instrument and supporting
opinions or representations, if any, may, but need not, be combined in a single instrument with
any other instrument, opinion or representation, and the two or more so combined shall be read
and construed as a single instrument.
SECTION 1.02. Authorization. Each of the parties hereby represents and warrants that
it has full legal authority and is duly empowered to enter into this Indenture, and has taken all .
actions necessary to authorize the execution hereof by the officers and persons signing it.
SECTION 1.03. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to include the neuter, masculine or feminine gender, as
appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are
solely for convenience of reference, do not constitute a part hereof and shall not affect the
meaning, construction or effect hereof.
(c) All references herein to "Articles," "Sections" and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Indenture; the words "herein," "hereof,"
"hereby," "hereunder" and other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or subdivision hereof.
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ARTICLE 11
THE 2011 BONDS
SECTION 2.01. Authorization of 2011 Bonds. The Authority has reviewed all
proceedings heretofore taken 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 or be performed
precedent to and in connection with the issuance of the 2011 Bonds do exist, have happened
and have been performed in due time, form and manner as required by law, and the Authority is
now duly empowered, under each and every requirement of law, to issue the 2011 Bonds in the
manner and form provided in this Indenture.
The Authority hereby authorizes the issuance of the 2011 Bonds in the aggregate
principal amount of $[principal amount] under the Bond Law for the purposes of providing funds
to enable the City to refund the 2000 COPs. The Bonds are authorized and issued under, and
are subject to the terms of, this Indenture and the Bond Law. The Bonds are designated the
"City of Seal Beach Financing Authority 2011 Wastewater Revenue Refunding Bonds, Series
A."
SECTION 2.02. Terms of the 2011 Bonds.
(a) Payment Provisions. The 2011 Bonds shall be issued in fully registered form
without coupons in denominations of $5,000 or any integral multiple thereof. The 2011 Bonds
shall mature on June 1 in each of the years and in the amounts, and 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
(June 1) Amount Rate
Interest on the 2011 Bonds is payable from the Interest Payment Date next preceding
the date of authentication thereof unless:
(a) a 2011 Series A Bond is authenticated on or before an Interest
Payment Date and after the close of business on the preceding Record Date, in
which event it will bear interest from such Interest Payment Date,
(b) a 2011 Series A Bond is authenticated on or before the first
Record Date, in which event interest thereon will be payable from. the Closing
Date, or
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(c) interest on any 2011 Series A Bond is in default as of the date of
authentication thereof, in which event interest thereon will be payable from the
date to which interest has been paid in full, payable on each Interest Payment
Date.
Interest is payable on each Interest Payment Date to the persons in whose names the
ownership of the 2011 Bonds is registered on the Registration Books at the close of business
on the immediately preceding Record Date, except as provided below. Interest on any 2011
Series A Bond which is not punctually paid or duly provided for on any Interest Payment Date is
payable to the person in whose name the ownership of such 2011 Series A Bond is registered
on the Registration Books at the close of business on a special record date for the payment of
such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by
first -class mail not less than 10 days prior to such special record date.
The Trustee will pay interest on the 2011 Bonds by check of the Trustee mailed by first
class mail, postage prepaid, on each Interest Payment Date to the Owners of the 2011 Bonds
at their respective addresses shown on the Registration Books as of the close of business on
the preceding Record Date. At the written request of the Owner of 2011 Bonds in an aggregate
principal amount of at least $1,000,000, which written request is on file with the Trustee as of
any Record Date, the Trustee will pay interest on such 2011 Bonds on each succeeding
•
Interest Payment Date by wire transfer in immediately available funds to such account of a
financial institution within the United States of America as specified in such written request,
which written request will remain in effect until rescinded in writing by the Owner. The Trustee
will pay principal of the 2011 Bonds in lawful money of the United States of America by check of
the Trustee upon presentation and surrender thereof at the Office of the Trustee.
SECTION 2.03. Form and Execution of 2011 Bonds. The 2011 Bonds, the form of
Trustee's certificate of authentication, and the form of assignment to appear thereon, are set
forth in Appendix 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 Chairman, the Executive Director or the Chief Financial Officer of the Authority shall
execute, and the Secretary of the Authority shall attest, each 2011 Series A Bond. Either or
both of such signatures may be made manually or may be affixed by facsimile thereof. If any
officer whose signature appears on any 2011 Series A Bond ceases to be such officer before
the Closing Date, such signature will nevertheless be as effective as if the officer had remained
in office until the Closing Date. Any 2011 Series A Bond may be signed and attested on behalf
of the Authority by such persons as at the actual date of the execution of such 2011 Series A
Bond are the proper officers of the Authority, duly authorized to execute debt instruments on
behalf of the Authority, although on the date of such 2011 Series A Bond any such person was
not an officer of the Authority.
Only those 2011 Bonds bearing a certificate of authentication in the form set forth in
Appendix A, manually executed and dated by the Trustee, are valid or obligatory for any
purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee is
conclusive evidence that such Bonds have been duly authenticated and delivered hereunder
and are entitled to the benefits of this Indenture.
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SECTION 2.04. Transfer and Exchange of Bonds.
(a) Transfer. Any Bond may, in accordance with its terms, be transferred, upon the
Registration Books, by the person in whose name it is registered, in person or by a duly
authorized attorney of such person, upon surrender of such Bond to the Trustee at its Office for
cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to
the Trustee, duly executed. The Trustee shall collect any tax or other governmental charge on
the transfer of any Bonds under this Section 2.03. Whenever any Bond or Bonds shall be
surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and
deliver to the transferee a new Bond or Bonds of like series, interest rate, maturity and
aggregate principal amount. The Authority shall pay the cost of printing Bonds and any
services rendered or expenses incurred by the Trustee in connection with any transfer of
Bonds.
(b) Exchange. The Bonds may be exchanged at the Office of the Trustee for a like
aggregate principal amount of Bonds of other authorized denominations and of the same
series, interest rate and maturity. The Trustee shall collect any tax or other governmental
charge on the exchange of any Bonds under this subsection (b). The Authority shall pay the
cost of printing Bonds and any services rendered or expenses incurred by the Trustee in
connection with any exchange of Bonds.
(c) Limitations. The Trustee may refuse to transfer or exchange, under the
provisions of this Section 2.03, any Bonds selected by the Trustee for redemption under Article
IV, or any Bonds during the period established by the Trustee for the selection of Bonds for
redemption.
SECTION 2.05. Book - Entry System.
(a) Original Delivery. The Bonds will be initially delivered in the form of a separate
single fully registered bond (which may be typewritten) for each maturity of the Bonds. Upon
initial delivery, the Trustee shall register the ownership of each Bond on the Registration Books
in the name of the Nominee. Except as provided in subsection (c), the ownership of all of the
Outstanding Bonds shall be registered in the name of the Nominee on the Registration Books.
With respect to Bonds the ownership of which shall be registered in the name of the
Nominee, the Authority and the Trustee has no responsibility or obligation to any Depository
System Participant or to any person on behalf of which the Nominee holds an interest in the
Bonds. Without limiting the generality of the immediately preceding sentence, the Authority and
the Trustee has no responsibility or obligation with respect to (i) the accuracy of the records of
the Depository, the Nominee or any Depository System Participant with respect to any
ownership interest in the Bonds, (ii) the delivery to any Depository System Participant or any
other person, other than a Bond Owner as shown in the Registration Books, of any notice with
respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of
the beneficial interests in the Bonds to be redeemed if the Authority elects to redeem the Bonds
in part, (iv) the payment to any Depository System Participant or any other person, other than a
Bond Owner as shown in the Registration Books, of any amount with respect to principal,
premium, if any, or interest on the Bonds or (v) any consent given or other action taken by the
Depository as Owner of the Bonds. The Authority and the Trustee may treat and consider the
person in whose name each Bond is registered as the absolute owner of such Bond for the
purpose of payment of principal of and premium, if any, and interest on such Bond, for the
purpose of giving notices of redemption and other matters with respect to such Bond, for the
purpose of registering transfers of ownership of such Bond, and for all other purposes
-16-
whatsoever.. The Trustee shall pay the principal of and the interest and premium, if any, on the
Bonds only to the respective Owners or their respective attorneys duly authorized in writing, and
all such payments shall be valid and effective to fully satisfy and discharge all obligations with
respect to payment of principal of and interest and premium, if any, on the Bonds to the extent
of the sum or sums so paid. No person other than a Bond Owner shall receive a Bond
evidencing the obligation of the Authority to make payments of principal, interest and premium,
if any, under this Indenture. Upon delivery by the Depository to the Authority of written notice to
the effect that the Depository has determined to substitute a new Nominee in its place, and
subject to the provisions herein with respect to Record Dates, such new nominee shall become
the Nominee hereunder for all purposes; and upon receipt of such a notice the Authority shall
promptly deliver a copy of the same to the Trustee.
(b) Representation Letter. In order to qualify the Bonds for the Depository's book -
entry system, the Authority shall execute and deliver to such Depository a letter representing
such matters as shall be necessary to so qualify the Bonds. The execution and delivery of such
letter, shall not in any way limit the provisions of subsection (a) above or in any other way
impose upon the Authority or the Trustee any obligation whatsoever with respect to persons
having interests in the Bonds other than the Bond Owners. Upon the written acceptance by the
Trustee, the Trustee shall agree to take all action reasonably necessary for all representations
of the Trustee in such letter with respect to the Trustee to at all times be complied with. In
addition to the execution and delivery of such letter, the Authority may take any other actions,
not inconsistent with this Indenture, to qualify the Bonds for the Depository's book -entry
program.
(c) Transfers Outside Book -Entry System. If either (i) the Depository determines not
to continue to act as Depository for the Bonds, or (ii) the Authority determines to terminate the
Depository as such, then the Authority shall thereupon discontinue the book -entry system with
such Depository. In such event, the Depository shall cooperate with the Authority and the
Trustee in the issuance of replacement Bonds by providing the Trustee with a list showing the
interests of the Depository System Participants in the Bonds, and by surrendering the Bonds,
registered in the name of the Nominee, to the Trustee on or before the date such replacement
Bonds are to be issued. The Depository, by accepting delivery of the Bonds, agrees to be
bound by the provisions of this subsection (c). If, prior to the termination of the Depository
acting as such, the Authority fails to identify another Securities Depository to replace the
Depository, then the Bonds than no longer be required to be registered in the Registration
Books in the name of the Nominee, but shall be registered in whatever name or names the
Owners transferring or exchanging Bonds shall designate, in accordance with the provisions
hereof.
If the Authority determines that it is in the best interests of the beneficial owners of the
Bonds that they be able to obtain certificated Bonds, the Authority may notify the Depository
System Participants of the availability of such certificated Bonds through the Depository. In
such event, the Trustee will authenticate, transfer and exchange Bonds as required by the
Depository and others in appropriate amounts; and whenever the Depository requests, the
Trustee and the Authority shall cooperate with the Depository in taking appropriate action (y) to
make available one or more separate certificates evidencing the Bonds to any Depository
System Participant having Bonds credited to its account with the Depository, or (z) to arrange
for another Securities Depository to maintain custody of a single certificate evidencing such
Bonds, all at the Authority's expense.
(d) Payments to the Nominee. Notwithstanding any other provision of this Indenture
to the contrary, so long as any 'Bond is registered in the name of the Nominee, all payments.
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with respect to principal of and interest and premium, if any, on such Bond and all notices with
respect to such Bond shall be made and given, respectively, as provided in the letter described
in subsection (b) of this Section or as otherwise instructed by the Depository.
SECTION 2.06. Registration Books. The Trustee will keep or cause to be kept, at the
Office of the Trustee, sufficient records for the registration and transfer of ownership of the
Bonds, which shall upon reasonable notice as agreed to by the Trustee, be open to inspection
during regular business hours by the Authority; 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, the ownership of the Bonds as
hereinbefore provided.
SECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond is
mutilated, the Authority, at the expense of the Owner of such Bond, shall execute, and the
Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and
substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so
mutilated. The Trustee shall cancel every mutilated Bond surrendered to it and deliver such
mutilated Bond to, or upon the order of, the Authority. If any Bond is lost, destroyed or stolen,
evidence of such loss, destruction or theft may be submitted to the Trustee and, if such
evidence is satisfactory and if indemnity satisfactory to the Trustee is given, the Authority, at the
expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver,
a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen.
The Trustee may require payment of a sum not exceeding the actual cost of preparing each
new Bond issued under this Section and of the expenses which may be incurred by the Trustee
in connection therewith. Any Bond issued under the provisions of this Section in lieu of any
Bond alleged to be lost, destroyed or stolen will constitute an original additional contractual
obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed
or stolen be at any time enforceable by anyone, and shall be equally and proportionately
entitled to the benefits of this Indenture with all other Bonds issued under this Indenture.
Notwithstanding any other provision of this Section 2.07, in lieu of delivering a new Bond
for which principal has become due for a Bond which has been mutilated, lost, destroyed or
stolen, the Trustee may make payment of such Bond in accordance with its terms upon receipt
of indemnity satisfactory to the Trustee.
SECTION 2.08. Applicability to Additional Bonds. Unless otherwise specified in the
Supplemental Indenture pursuant to which an issue of Additional Bonds are issued, the
provisions of Sections 2.04 through 2.07 shall apply to such issue of Additional Bonds.
ARTICLE III
ISSUANCE OF 2011 BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of the 2011 Bonds. At any time after the execution of this
Indenture, the Authority may execute and the Trustee shall authenticate and, upon the Written
Request of the Authority, deliver the 2011 Bonds to the Original Purchaser.
SECTION 3.02. Application of Proceeds of Sale of the 2011 Bonds. Upon the
receipt of payment for the 2011 Bonds on the Closing Date, the Trustee shall receive the net
proceeds of sale thereof, being $ , calculated as follows:
• $[principal amount].00 (constituting the par amount of the 2011 Bonds),
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• less original issue discount in the amount of $ , and
• less an underwriters' discount of $ ,
which the Trustee shall apply as follows:
(a) The Trustee shall deposit the amount of $_ in the Costs of
Issuance Fund.
(b) The Trustee shall deposit the amount of $_ in the Reserve
Account.
(c) The Trustee shall transfer the amount of $ to the 2000
Trustee to be used to refund the 2000 COPs in accordance with the Refunding
Instructions.
The Trustee may establish and maintain a temporary account or fund to facilitate and
record such deposits and transfers.
SECTION 3.03. Establishment and Application of Costs of Issuance Fund. The
Trustee shall establish, maintain and hold in trust a separate fund designated as the "Costs of
Issuance Fund" into which the Trustee shall deposit a portion of the proceeds of sale of the
2011 Bonds under Section 3.02(a). The Trustee shall disburse amounts in the Costs of
Issuance Fund from time to time to pay the Costs of Issuance upon submission of a Written
Requisition of the Authority stating the person to whom payment is to be made, the amount to
be paid, the purpose for which the obligation was incurred and that such payment is a proper
charge against said fund. The Trustee may conclusively rely on such Written Requisitions and
shall be fully protected in relying thereon. On April 1, 2011, or upon the earlier Written Request
of the Authority, the Trustee shall transfer all amounts remaining in the Costs of Issuance Fund
to the [City], and shall thereupon close the Costs of Issuance Fund.
SECTION 3.04. Refunding Fund. The Trustee will establish and maintain a separate
fund to be known as the "Refunding Fund" into which the Trustee shall deposit a portion of the
proceeds of sale of the 2011 Bonds under Section 3.02(c). On the Closing Date, all amounts
on deposit in 'the Refunding Fund shall be transferred to the 2000 Trustee to be applied as
provided in the Refunding Instructions.
SECTION 3.05. Validity of 2011 Bonds. The recital contained in the 2011 Bonds that
the same are issued under the Constitution and laws of the State of California shall be
conclusive evidence of their validity and of compliance with the provisions of law in their
issuance.
SECTION 3.06. Additional Bonds. (A) In addition to the 2011 Bonds authorized to be
issued under this Indenture, the Authority, may, by Supplemental Indenture, issue one or more
series of Additional Bonds secured by Revenues on a parity with the 2011 Bonds, and may
issue and deliver such Additional Bonds in such principal amount as shall be determined by the
Authority, but only upon compliance by the Authority with the provisions of this Section,
including the following specific conditions which are hereby made conditions precedent to the
issuance of such Additional Bonds:
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(a) The parties to this Indenture shall have executed a Supplemental
Indenture which (i) sets forth the terms and provisions of such Additional Bonds,
including the establishment of such funds and accounts, which may be separate
and apart from the funds and accounts established hereunder for the 2011
Bonds, as shall be necessary or appropriate, and (ii) requires that prior to or
upon the issuance of such Additional Bonds, an amount shall be deposited in the
Reserve Account to ensure that the amount on deposit in the Reserve Account
upon the issuance of the Additional Bonds shall be at least equal to the Reserve
Requirement;
(b) The scheduled principal and interest payable with respect to such
Additional Bonds shall be payable only on Interest Payment Dates applicable to
the 2011 Bonds;
(c) The Installment Sale Agreement shall have been supplemented or
amended, if necessary, to (i) increase or adjust the Installment Payments due
and payable on each Installment Payment Date to an amount sufficient to pay
the principal, premium (if any) and interest payable with respect to all
Outstanding Bonds, including all Additional Bonds as and when, if any, the same
mature or become due and payable (except to the extent such principal,
premium and interest may be payable out of moneys then on deposit with the
Trustee in accordance with this Indenture), (ii) if appropriate, identify the
additions, betterments, extensions, improvements or replacements to the
Enterprise, or such other real or personal property, to be financed, acquired or
constructed or otherwise made subject to the Installment Sale Agreement, by the
preparation, execution and delivery of such Additional Bonds, and (iii) make such
other revisions to the Installment Sale Agreement as are necessitated by the
issuance of such Additional Bonds (provided, however, that such other revisions
shall not prejudice the rights of the Owners of Outstanding Bonds as granted
them under the terms of this Indenture);
(d) There shall have been delivered to the Trustee a counterpart of
the amendments required by subsection (c) hereof;
(e) The Trustee shall have received a Written Certificate of the
Authority that, except as otherwise permitted under Section 5.8 of the Installment
Sale Agreement in connection with the issuance of refunding Parity Obligations,
no Event of Default hereunder relating to the Authority exists (or any event
which, once all notice or grace periods have passed, would constitute an Event
of Default);
(f) The Trustee shall have received a Written Certificate of the City
that, except as otherwise permitted under Section 5.8 of the Installment Sale
Agreement in connection with the issuance of refunding Parity Obligations, no
Event of Default under the Installment Sale Agreement relating to the City exists
(or any event which, once all notice or grace periods have passed, would
constitute an Event of Default);
(g) The Trustee shall have received an opinion of Bond Counsel
substantially to the effect that (i) said Supplemental Indenture and said
amendments to the Installment Sale Agreement comply in all respects with the
requirements of this Section 3.06, (ii) said Supplemental Indenture and said
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amendments to the Installment Sale Agreement have been duly authorized,
executed and delivered by each of the respective parties thereto (provided that
said opinion of Bond Counsel, in rendering the opinions set forth in this clause
(ii), shall be entitled to rely upon one or more other opinions of counsel, including
counsel to any of the respective parties to said Supplemental Indenture or said
amendments to the Installment Sale Agreement), (iii) assuming that no Event of
Default has occurred and is continuing, this Indenture, as amended by said
Supplemental Indenture, and the Installment Sale Agreement, as amended by
the respective amendments thereto, constitute the legal, valid and binding
obligations of the respective parties thereto, enforceable against said parties in
accordance with their respective terms (except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, moratorium, debt adjustment
or other laws affecting creditors' rights generally, and except to the extent that
enforcement thereof may be limited by general principles of equity, regardless of
whether enforcement is sought in a legal or equitable proceeding) and (iv) the
execution of such Supplemental Indenture and said amendments to the
Installment Sale Agreement, and performance by the parties thereunder, will not,
in and of itself, result in the inclusion of the interest on any Bonds in the gross •
income of the Owners of the Bonds for purposes of federal income taxation;
(h) Upon the execution and delivery of such Additional Bonds, the
amount on deposit in the Reserve Account, taking into account the execution of
the Additional Bonds, shall be at least equal to the Reserve Requirement; and
(i) Such other conditions shall have been satisfied, and such other
instruments shall have been duly executed and delivered to the Trustee, as the
City or the Authority shall have reasonably requested.
(B) Upon delivery to the Trustee of the foregoing instruments, the Trustee shall
authenticate Additional Bonds representing the aggregate principal amount specified in such.
Supplemental Indenture, and such Additional Bonds shall be equally and ratably secured with
all Bonds, including any Additional Bonds, theretofore prepared, executed and delivered, all
without preference, priority or distinction (other than with respect to maturity, payment,
prepayment or sinking fund payment (if any)) of any one Bond, including Additional Bonds, over
any other; provided, however, that no provision of this Indenture shall require the City to
consent to or otherwise permit the preparation, execution and delivery of Additional Bonds, it
being understood and agreed that any such consent or other action of the City to permit the
preparation, execution and delivery of Additional Bonds, or lack thereof, shall be in the sole
discretion of the City.
(C) Whenever the Authority shall have determined to issue Additional Bonds
pursuant to this Section 3.06, the Authority shall adopt a Supplemental Indenture determining
that the issuance of such Additional Bonds is necessary for the purposes specified herein,
specifying the principal amount of such Additional Bonds and prescribing the terms and
conditions of such Additional Bonds and the funds to be established for the security and
payment thereof. Before such Additional Bonds shall be issued and delivered, the Authority
shall file with the Trustee a Certificate of the Authority certifying that the requirements set forth
in Section 3.06 have been either met or provided for, together with a copy of the amendment to
the Installment Sale Agreement required hereby.
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(D) Nothing contained in the Section 3.06 shall restrict the ability of the City to issue
Parity Obligations pursuant to the Installment Sale Agreement that do not secure Additional
Bonds issued pursuant to this Section 3.06.
ARTICLE IV
REDEMPTION OF BONDS
SECTION 4.01. Terms of Redemption.
(a) Optional Redemption from any Source of Available Funds. The 2011 Bonds
maturing on or before June 1, 20_, are not subject to optional redemption prior to their
respective stated maturity dates. The 2011 Bonds maturing on or after June 1, 20_, are
subject to redemption in whole, or in part at the Written Request of the Authority among
maturities on such basis as the Authority may designate and by lot within a maturity, at the
option of the Authority, on any date on or after June 1, 20_, from any available source of
funds, at a redemption price equal to the principal amount of the 2011 Bonds to be redeemed,
plus accrued interest to the date of redemption, without premium.
The Authority must give the Trustee written notice of its intention to redeem Bonds
under this subsection (a), and the manner of selecting such Bonds for redemption from 'among
the maturities thereof, in sufficient time to enable the Trustee to give notice of such redemption
in accordance with Section 4.03.
(b) 6 Redemption From Proceeds of Insurance, Sale and Condemnation. The Bonds,
including the 2011 Bonds, are subject to mandatory redemption, on any date, in whole, or in
part on a pro rata basis among maturities, from the net proceeds of insurance, sale or
condemnation credited towards the prepayment of the Installment Payments by the City under
Section 7.3 of the Installment Sale Agreement. The Bonds, including the 2011 Bonds, are
subject to redemption under this subsection at a redemption price equal to the principal amount
represented thereby to be prepaid, without premium, together with accrued interest represented
thereby to the redemption date.
(c) Mandatory Redemption. The Bonds maturing on June 1, 20 and June 1, 20
are subject to mandatory redemption on June 1 in the following years, from the principal
components of the Installment Payments required to be paid by the City pursuant to the
Installment Sale Agreement with respect to each such redemption date, at a redemption price
equal to the principal amount thereof to be prepaid, together with accrued interest thereon to
the date fixed for redemption, without premium as follows:
Bonds maturing on June 1,
Mandatory Redemption Date Principal Amount to be
(June 1) Prepaid
20_ $
20
•
Bonds maturing on June 1,
Mandatory Redemption Date Principal Amount to be
(June 1) Prepaid
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20_ $
20_ (maturity)
In the event that the Trustee shall redeem the Bonds maturing on June 1, 20_, or June
1, 20_, in part but not in whole pursuant to subsections (a) or (b) of this Section 4.01, the
amount of such Bonds to be redeemed in each subsequent year pursuant to this subsection (c)
shall be reduced pro rata to correspond to the principal components of the Installment
Payments prevailing following such redemption, determined as set forth in Section 4.4(b) of the
Installment Sale Agreement.
SECTION 4.02. Selection of Bonds for Redemption. Whenever provision is made in
this Indenture for the redemption of less than all of the Bonds of a single maturity of the same
issue, the Trustee shall select the Bonds of that maturity to be redeemed by lot in any manner
which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the
Trustee shall treat each Bond as consisting of separate $5,000 portions and each such portion
shall be subject to redemption as if such portion were a separate Bond.
SECTION 4.03. Notice of Redemption. The Trustee shall mail notice of redemption of
the Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before
any redemption date, to the respective Owners of any Bonds designated for redemption at their
addresses appearing on the Registration Books and to one or more Securities Depositories and
to the Information Services. Each notice of redemption shall state the date of the notice, the
redemption date, the place or places of redemption, whether less than all of the Bonds (or all
Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not
all Bonds within a maturity are called for redemption) Bond numbers of the Bonds to be
redeemed and the maturity or maturities of the Bonds to be redeemed, and in the case of
Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be
redeemed. Each such notice shall also state that on the redemption date there will become due
and payable on each of said Bonds the redemption price thereof, and that from and after such
redemption date interest thereon shall cease to accrue, and shall require that such Bonds be
then surrendered. Each notice relating to a redemption pursuant to Section 4.01(a) or Section
4.01(b) shall further state that such redemption may be rescinded by the Authority on or prior to
the date set for redemption. Neither the failure to receive any notice nor any defect therein shall
affect the sufficiency of the proceedings for such redemption or the cessation of accrual of
interest from and after the redemption date. Notice of redemption of Bonds shall be given by
the Trustee, at the expense of the Authority, for and on behalf of the Authority.
The Authority shall have the right to rescind any redemption pursuant to Section 4.01(a)
or Section 4.01(b) by written notice to the Trustee on or prior to the date fixed for redemption.
Any notice of redemption shall be cancelled and annulled if for any reason funds are not
available on the date fixed for redemption for the payment in full of the Bonds then called for
redemption, and such cancellation shall not constitute an Event of Default hereunder. The
Trustee shall mail notice of rescission of redemption in the same manner notice of redemption
was originally provided.
SECTION 4.04. Execution of New Bonds Upon Partial Redemption of Bonds. Upon
surrender of any Bonds redeemed in part only, 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 authorized denominations equal in aggregate principal amount to the unredeemed
portion of the Bonds surrendered.
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SECTION 4.05. Effect of Redemption. Notice of redemption having been duly given as
aforesaid, and moneys for payment of the redemption price of, together with interest accrued to
the date fixed for redemption on, including any applicable premium, the Bonds (or portions
thereof) so called for redemption being held by the Trustee, on the redemption date designated
in such notice, the Bonds (or portions thereof) so called for redemption shall become due and
payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or
portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and
the Owners of said Bonds shall have no rights in respect thereof except to receive payment of
the redemption price thereof.
All Bonds redeemed under the provisions of this Article shall be canceled by the Trustee
upon surrender thereof and destroyed in accordance with the retention policy of the Trustee
then in effect.
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL
AND INTEREST
SECTION 5.01. Security for the Bonds; Bond Fund.
(a) Pledge of Revenues and Other Amounts. Subject only to the provisions of this
Indenture permitting the application thereof for the purposes and on the terms and conditions
set forth herein, all of the Revenues and all amounts held in any fund or account established
under this Indenture are hereby pledged to secure the payment of the principal of and interest
and premium (if any) on the Bonds in accordance with their terms and the provisions of this
Indenture. Said pledge constitutes a lien on and security interest in the Revenues and such
amounts and shall attach, be perfected and be valid and binding from and after the Closing
Date, without the need for any physical delivery thereof or further act.
(b) Assignment to Trustee. The Authority hereby irrevocably transfers, assigns and
sets over to the Trustee, without recourse to the Authority, all of its rights in the Installment Sale
Agreement (excepting only the Authority's rights under Sections 4.7, 5.2 and 6.4 thereof),
including but not limited to all of the Authority's rights to receive and collect all of the Installment
Payments, and the Trustee hereby accepts such assignment. The Trustee is entitled to collect
and receive all of the Installment Payments, and any Installment Payments 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 is also entitled to and shall, subject to the provisions of Article VIII, take
all steps, actions and proceedings which the Trustee determines to be 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 City under the Installment Sale Agreement.
(c) Deposit of Revenues in Bond Fund. All Revenues shall be promptly deposited
by the Trustee upon receipt thereof in a special fund designated as the "Bond Fund" which the
Trustee shall establish, maintain and hold in trust; except that all moneys received by the
Trustee and required hereunder or under the Installment Sale Agreement to be deposited in the
Redemption Fund shall be promptly deposited in such funds. All Revenues deposited with the
Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in this
Indenture. Any surplus remaining in the Bond Fund, after payment in full of (i) the principal of
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and interest on the Bonds or provision therefore under Article X, and (ii) any applicable fees and
expenses of the Trustee, shall be withdrawn by the Trustee and remitted to the City.
SECTION 5.02. Allocation of Revenues. On or before each Interest Payment Date,
the Trustee shall transfer from the Bond Fund and deposit into the following respective
accounts (each of which the Trustee shall establish and maintain within the Bond Fund), the
following amounts in the following order of priority:
•
(a) Deposit to Interest Account. The Trustee shall deposit in the
Interest Account an amount required to cause the aggregate amount on deposit
in the Interest Account to be at least equal to the amount of interest becoming
due and payable on such Interest Payment Date on all Bonds then Outstanding.
(b) Deposit. to Principal Account. The Trustee shall deposit in the
Principal Account an amount required to cause the aggregate amount on deposit
in the Principal Account to equal the principal amount of the Bonds coming due
and payable on each June 1, including the aggregate principal amount of the
Term Bonds (if any) which are subject to mandatory sinking fund redemption on
such June 1.
(c) Deposit to Reserve Account. The Trustee shall deposit in the
Reserve Account an amount, if any, required to cause the amount on deposit in
the Reserve Account to be equal to the Reserve Requirement.
SECTION 5.03. Application of Interest Account. All amounts in the Interest Account
shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the
Bonds as it comes due and payable (including accrued interest on any Bonds purchased or
redeemed prior to maturity).
SECTION 5.04. Application of Principal Account. All amounts in the Principal
Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the
Bonds on their respective maturity dates, including the aggregate principal amount of the Term
Bonds (if any) which are subject to mandatory sinking fund redemption on such June 1
pursuant to Section 4.01(c).
SECTION 5.05. Application of Reserve Account.
(a) Application of Reserve Account. All amounts in the Reserve Account shall be
used and withdrawn by the Trustee solely for the purpose of (i) paying principal of or interest on
the Bonds, including the principal amount of any Term Bonds subject to mandatory sinking fund
redemption under Section 4.01(c), when due and payable to the extent that moneys deposited
in the Interest Account or Principal Account are not sufficient for such purpose, and (ii) making
the final payments of principal of and interest on the Bonds. If the amounts on deposit in the
Reserve Account are insufficient at any time to pay the full amount of principal of and interest
on the Bonds then required to be paid from the Reserve Account, the Trustee shall apply such
amounts first, to the payment of interest and second, to the payment of principal. On the date
on which all Bonds are retired hereunder or provision is made therefor under Article X, after
payment of any amounts then owed to the Trustee, all moneys then on deposit in the Reserve
Account shall be withdrawn by the Trustee and paid to the City as a refund of overpaid
Installment Payments.
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If, on any date, moneys on deposit in the Reserve Account, together with amounts then
on deposit in the Bond Fund, are sufficient to pay all Outstanding Bonds, including all principal
thereof, and interest thereon, the Trustee shall, at the Written Request of the Authority, transfer
all amounts then on deposit in the Reserve Account, together with such amounts in the Bond
Fund, to the Redemption Fund to be applied to the redemption of the Bonds in accordance with
the provisions of Section 4.01(a). The Trustee shall be entitled to conclusively rely on any such
Written Request and shall be fully protected in relying thereon. On each June 1, the Trustee
shall transfer any amounts on deposit in the Reserve Account in excess of the Reserve
Requirement, including amounts derived from the investment of moneys in the Reserve
Account, to the Bond Fund.
(b) Qualified Reserve Account Credit Instrument. The Authority shall have the right
at any time to release any cash (including Permitted Investments) on deposit from the Reserve
Account, in whole or in part, by tendering to the Trustee: (1) a Qualified Reserve Account Credit
Instrument, and (2) an opinion of Bond Counsel stating that such release will not, of itself,
cause the interest on the Bonds to become includable in gross income for purposes of federal
income taxation. Upon tender of such items to the Trustee, the Trustee shall transfer such
funds from the Reserve Account to or upon the direction of the authority. Prior to the expiration
of any Qualified Reserve Account Credit Instrument, or to the reduction of the rating of the
provider thereof below the rating on the Bonds, the Authority shall be obligated either (a) to
replace such Qualified Reserve Account Credit Instrument with a new Qualified Reserve
Account Credit Instrument, or (b) to deposit or cause to be deposited with the Trustee an
amount of funds such that the funds on deposit in the Reserve Account, together with all
Qualified Reserve Account Credit Instruments held by the Trustee, is at least equal to the
Reserve Requirement.
In the event that a Qualified Reserve Account Credit Instrument is available to be drawn
upon for only one or more particular issues of Bonds, a separate subaccount in the Reserve
Account may be established for such issue or issues. In such case, the calculation of the
Reserve Requirement for such issue of Bonds shall be made only with respect to such issue,
and the calculation of the Reserve Requirement with respect to all other Bonds shall exclude
the debt service on such issue of Bonds. Additionally, the Reserve Account may be maintained
in the form of one combined Reserve Account or in the form of one or more separate sub -
accounts established for the purpose of holding the proceeds of separate issues of Bonds in
conformity with applicable provisions of the Code to the extent directed by the Authority or the
City in writing to the Trustee.
SECTION 5.06. Application of Redemption Fund. The Trustee shall establish and
maintain the Redemption Fund, into which the Trustee shall deposit a portion of the Revenues
received representing optional prepayments of the Installment Payments, in accordance with a
Written Request of the Authority. Amounts on deposit in the Redemption Fund shall be used
and withdrawn by the Trustee solely for the purpose of paying the principal and premium (if
any) of the Bonds to be redeemed under Sections 4.01(a) or (b); provided, however, that at any
time prior to the selection of Bonds for redemption, the Trustee may apply such amounts to the
purchase of Bonds at public or private sale, when and at such prices (including brokerage and
other charges, but excluding accrued interest, which is payable from the Interest Account) as
shall be directed under a Written Request of the Authority, except that the purchase price
(exclusive of accrued interest) may not exceed the redemption price then applicable to the
Bonds. The Trustee shall be entitled to conclusively rely on any Written Request of the
Authority received under this Section 5.06, and shall be fully protected in relying thereon.
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SECTION 5.07. Investments. All moneys in any of the funds or accounts established
with the Trustee under this Indenture shall be invested by the Trustee solely in Permitted
Investments. Such investments shall be directed by the Authority under a Written Request of
the Authority filed with the Trustee at least 2 Business Days in advance of the making of such
investments. In the absence of any such directions from the Authority, the Trustee shall invest
any such moneys in Permitted Investments described in clause (f) of the definition thereof.
Permitted Investments purchased as an investment of moneys in any fund shall be deemed to
be part of such fund or account. To the extent Permitted Investments are registrable, such
Permitted Investments must be registered in the name of the Trustee.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder shall be deposited in the Bond Fund, provided, however, that
earnings on the investment of the amount in the Reserve Account shall be retained therein to
the, extent required to maintain the Reserve Requirement, and otherwise shall be transferred to
the Bond Fund in accordance with Section 5.05(b). For purposes of acquiring any investments
hereunder, the Trustee may commingle funds held by it hereunder. The Trustee or any of its
affiliates may act as principal or agent in the acquisition or disposition of any investment and
may impose its customary charges therefor. The Trustee shall incur no liability for losses
arising from any investments made under this Section 5.07.
The Trustee may make any investments hereunder through its own bond or investment
department or trust investment department, or those of its parent or any affiliate. The Trustee
or any of its affiliates may act as sponsor, advisor or manager in connection with any
investments made by the Trustee hereunder. The Trustee is hereby authorized, in making or
disposing of any investment permitted by this Section, to deal with itself (in its individual
capacity) or with any one or more of its affiliates, whether it or such affiliate is acting as an
agent of the Trustee or for any third person or is dealing as a principal for its own account.
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 will not receive 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 moneys on deposit in the funds and accounts established under this Indenture shall
not be deemed "surplus" under Section 53601 of the Government Code.
SECTION 5.08. Valuation and Disposition of Investments.
(a) Except as otherwise provided in subsection (b) of this Section, the Authority
covenants that all investments of amounts deposited in any fund or account created by or under
this Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of
Section 148 of the Tax Code) shall be acquired, disposed of and valued at the Fair Market
Value thereof as such term is defined in subsection (d) below. The Trustee shall have no duty
in connection with the determination of Fair Market Value other than to follow the investment
directions of the Authority in any Written Request of the Authority.
(b) Investments in funds or accounts (or portions thereof) that are subject to a yield
restriction under applicable provisions of the Tax Code and investments in the Reserve Account
shall be valued at cost thereof, (consisting of present value thereof within the meaning of
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Section 148 of the Tax Code); provided that the Authority shall inform the Trustee which funds
(other than the Reserve Account) are subject to a yield restriction.
(c) Except as provided in the preceding subsection (b), for the purpose of
determining the amount in any fund or account established hereunder, the value of Permitted
Investments credited to such fund shall be valued by the Trustee at least annually on or before
June 1. The Trustee may sell or present for redemption, any Permitted Investment so
purchased by the Trustee whenever it shall be necessary in order to provide moneys to meet
any required payment, transfer, withdrawal or disbursement from the fund to which such
Permitted Investment is credited, and the Trustee shall not be liable or responsible for any loss
resulting from any such Permitted Investment.
(d) For purposes of this Section 5.09, the term "Fair Market Value" means the price
at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's
length transaction (determined as of the date the contract to purchase or sell the investment
becomes binding) if the investment is traded on an established securities market (within the
meaning of Section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means
the acquisition price in a bona fide arm's length transaction (as referenced above) if •(i) the
investment is a certificate of deposit that is acquired in accordance with applicable regulations
under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal
or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed
investment contract, a forward supply contract or other investment agreement) that is acquired
in accordance with applicable regulations under the Tax Code, or (iii) the investment is a United
States Treasury Security -- State and Local Government Series which is acquired in
accordance with applicable regulations of the United States Bureau of Public Debt.
(e) To the extent of any valuations made by the Trustee hereunder, the Trustee may
utilize and rely upon computerized securities pricing services that may be available to it,
including those available through its regular accounting system.
ARTICLE VI
COVENANTS OF THE AUTHORITY
SECTION 6.01. Punctual Payment. The Authority shall punctually pay or cause to be
paid the principal of and interest and premium (if any) on 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 the Revenues and other amounts pledged for such payment as provided in this
Indenture.
SECTION 6.02. Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase of such Bonds or by any other arrangement,
and in case the maturity of any of the Bonds or the time of payment of any such claims for
interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any
default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of
the principal of all of the Bonds then Outstanding and of all claims for interest thereon which
have not been so extended. Nothing in this Section 6.02 limits the right' of the Authority to issue
Bonds for the purpose of refunding any Outstanding Bonds, and such issuance does not
constitute an extension of maturity of the Bonds.
SECTION 6.03. Against Encumbrances. The Authority shall not create, or permit the
creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other
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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, and reserves the right to issue other obligations for such purposes.
SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment. The
Authority is duly authorized under law to issue the Bonds and to enter into this Indenture and to
pledge and assign the Revenues and other amounts purported to be pledged and assigned,
respectively, under this Indenture in the manner and to the extent provided in this Indenture.
The Bonds and the provisions of this Indenture are and will be the legal, valid and binding
special obligations of the Authority in accordance with their terms, and the Authority and the
Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by
law, defend, preserve and protect said pledge and assignment of Revenues and other assets
and all the rights of the Bond Owners under this Indenture against all claims and demands of all
persons whomsoever.
SECTION 6.05. Accounting Records. 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 it relating to the proceeds of Bonds and all funds and accounts established under this
Indenture. The Trustee shall make such books of record and account available for inspection
by the Authority and the City during business hours, upon reasonable notice, and under
reasonable circumstances.
SECTION 6.06. Limitation on Additional Obligations. The Authority covenants that
no additional bonds, notes or other indebtedness, other than Additional Bonds, shall be issued
or incurred which are payable out of the Revenues in whole or in part.
SECTION 6.07. Tax Covenants.
(a) Private Business Use Limitation. The Authority shall assure that the proceeds of
the Bonds are not used in a manner which would cause the Bonds to satisfy the private
business tests of Section 141(b) of the Tax Code or the private loan financing test of Section
141(c) of the Tax Code.
(b) Federal Guarantee Prohibition. The Authority may not take any action or permit
or suffer any action to be taken if the result of the same would be to cause the Bonds to be
"federally guaranteed" within the meaning of Section 149(b) of the Tax Code.
(c) No Arbitrage. The Authority may not take, or permit or suffer to be taken by the
Trustee or otherwise, any action with respect to the proceeds of the Bonds or of any other
obligations which, if such action had been reasonably expected to have been taken, or had
been deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to
be "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code.
(d) Maintenance of Tax Exemption. The Authority shall take all actions necessary to
assure the exclusion of interest on the Bonds from the gross income of the Owners of the
Bonds to the same extent as such interest is permitted to be excluded from gross income under
the Tax Code as in effect on the Closing Date.
(e) Rebate of Excess Investment Earnings to United States. The Authority shall
calculate or cause to be calculated all amounts of excess investment earnings with respect to
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the Bonds which are required to be rebated to the United States of America under Section
148(f) of the Tax Code, at the times and in the manner required under the Tax Code. The
Authority shall pay when due an amount equal to excess investment earnings to the United
States of America in such amounts, at such times and in such manner as may be required
under the Tax Code, such payments to be made from any source of legally available funds of
the Authority. The Authority shall keep or cause to be kept, and retain or cause to be retained
for a period of 6 years following the retirement of the Bonds, records of the determinations
made under this subsection (e).
SECTION 6.08. Enforcement of Installment Sale Agreement. The Trustee shall
promptly collect all amounts (to the extent any such amounts are available for collection) due
from the City under the Installment Sale Agreement. Subject to the provisions of Article VIII,
the Trustee shall enforce, and take all steps, actions and proceedings which the Trustee
determines to be reasonably necessary for the enforcement of all of its rights thereunder as
assignee of the Authority and for the enforcement of all of the obligations of the City under the
Installment Sale Agreement.
SECTION 6.09. Waiver of Laws. The Authority shall not at any time insist upon or
plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or
extension law now or at any time hereafter in force that may affect the covenants and
agreements contained in this Indenture or in the Bonds, and all benefit or advantage of any
such law or laws is hereby expressly waived by the Authority to the extent permitted by law.
SECTION 6.10. Further Assurances. The Authority will make, execute and deliver any
and all such further indentures, instruments and assurances as may be reasonably necessary
or proper to carry out the intention or to facilitate the performance of this Indenture and for the
better assuring and confirming unto the Owners of the Bonds of the rights and benefits
provided in this Indenture.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. Events of Default. The following events constitute Events of Default
hereunder:
(a) Failure to pay any installment of the principal of any Bonds when
due, whether at maturity as therein expressed, by proceedings for redemption,
by acceleration, or otherwise.
(b) Failure to pay any installment of interest on the Bonds when due.
(c) Failure by the Authority to observe and perform any of the other
covenants, agreements or conditions on its part contained in this Indenture or in
the Bonds, if such failure has continued for a period of 60 days after written
notice thereof, specifying such failure and requiring the same to be remedied,
has been given to the Authority by the Trustee provided, however, if in the
reasonable opinion of the Authority the failure stated in the notice can be
corrected, but not within such 60 day period, such failure shall not constitute an
Event of Default if the Authority institutes corrective action within such 60 day
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period and thereafter diligently and in good faith cures the failure in a reasonable
period of time.
(d) The commencement by the Authority of a voluntary case under
Title 11 of the United States Code or any substitute or successor statute.
(e) The occurrence and continuation of an event of default under and
as defined in the Installment Sale Agreement.
SECTION 7.02. Acceleration; Other Remedies. If any Event of Default occurs, then,
and in each and every such case during the continuance of such Event of Default, the Trustee
may, and shall, at the written direction of the Owners of a majority in aggregate principal
amount of the Bonds at the time Outstanding shall, in each case, upon receipt of
indemnification satisfactory to Trustee against the costs, expenses and liabilities to be incurred
in connection with such action, upon notice in writing to the Authority, 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.
The foregoing provision, however, is subject to the condition that if, at any time after the
principal of the Bonds shall have been so declared due and payable, the Authority shall pay to
or shall deposit with the Trustee a sum sufficient to pay all principal of the Bonds maturing prior
to such declaration and all matured installments of interest (if any) upon all the Bonds, and any
and all other defaults known to the Trustee (other than in the payment of principal of and
interest on the Bonds due and payable solely by reason of such declaration) shall have been
made good or cured to the satisfaction of the Trustee, or provision deemed by the Trustee to be
adequate shall have been made therefor, then, and in every such case, the Trustee, on behalf
of the Owners of all of the Bonds, shall rescind and annul such declaration and its
consequences; but no such rescission and annulment shall extend to or shall affect any
subsequent default, or shall impair or exhaust any right or power consequent thereon; provided,
however, that 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 to declaring the principal of all of the Bonds, and the interest accrued
thereon, to be immediately due and payable as set forth above, the Trustee shall have the right
to pursue any other remedy provided by law or in equity or otherwise after an Event of Default
has occurred.
SECTION 7.03. Application of Revenues and Other Funds After Default. If an Event
of Default occurs and is continuing, all Revenues and any other funds then held or thereafter
received by the Trustee under any of the provisions of this Indenture shall be applied by the
Trustee in the following order of priority:
(a) To the payment of reasonable fees, charges and expenses of the
Trustee (including reasonable fees and disbursements of its legal counsel
including outside counsel and the allocated costs of internal attorneys) incurred
in and about the performance of its powers and duties under this Indenture; and
(b) To the payment of the principal of and interest then due on the
Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise
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noting thereon of the payment if only partially paid, or surrender thereof if fully
paid) in accordance with the provisions of this Indenture, as follows:
First: To the payment to the persons entitled thereto of all
installments of interest then due in the order of the maturity of such
installments, and, if the amount available shall not be sufficient to pay in
full any installment or installments maturing on the same date, then to the
payment thereof ratably, according to the amounts due thereon, to the
persons entitled thereto, without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the
unpaid principal of any Bonds which shall have become due, whether at
maturity or by acceleration or redemption, with interest on the overdue
principal at the rate borne by the respective Bonds (to the extent
permitted by law), and, if the amount available shall not be sufficient to
pay in full all the Bonds, together with such interest, then to the payment
thereof ratably, according to the amounts of principal due on such date to
the persons entitled thereto, without any discrimination or preference.
SECTION 7.04. Trustee to Represent Bond Owners. The Trustee is hereby
irrevocably appointed (and the successive respective Owners of the Bonds, by taking and
holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee
and true and lawful attorney -in -fact of the Owners of the Bonds for the purpose of exercising
and prosecuting on their behalf such rights and remedies as may be available to such Owners
under the provisions of the Bonds, this Indenture and applicable provisions of any law. All
rights of action under this Indenture or the Bonds or otherwise may be prosecuted and enforced
by the Trustee without the possession of any of the Bonds or the production thereof in any
proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee
shall be brought in the name of the Trustee for the benefit and protection of all the Owners of
such Bonds, subject to the provisions of this Indenture.
SECTION 7.05. Limitation on Bond Owners' Right to Sue. Notwithstanding any other
provision hereof, no Owner of any Bonds has the right to institute any suit, action or proceeding
at law or in equity, for the protection or enforcement of any right or remedy under this
Indenture, the Installment Sale Agreement or any other applicable law with respect to such
Bonds, unless (a) such Owner has given to the Trustee written notice of the occurrence of an
Event of. Default; (b) the Owners of a majority in aggregate principal amount of the Bonds then
Outstanding have requested the Trustee in writing to exercise the powers hereinbefore granted
or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners have
tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request; (d) the Trustee has failed to comply with such request
for a period of 60 days after such written request has been received by, and said tender of
indemnity has been made to, the Trustee; and (e) no direction inconsistent with such written
request has been given to the Trustee during such 60 day period by the Owners of a majority in
aggregate principal amount of the Bonds then Outstanding.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of
any remedy hereunder or under law; it being understood and intended that no one or more
Owners of Bonds shall have any right in any manner whatever by his or their action to affect,
disturb or prejudice the security of this Indenture or the rights of any other Owners of Bonds, or
to enforce any right under the Bonds, this Indenture, the Installment Sale Agreement or other
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applicable law with respect to the Bonds, except in the manner herein provided, and that all
proceedings at law or in equity to enforce any such right shall be instituted, had and maintained
in the manner herein provided and for the benefit and protection of all Owners of the
Outstanding Bonds, subject to the provisions of this Indenture.
SECTION 7.06. Absolute Obligation of Authority. Nothing in Section 7.06 or in any
other provision of this Indenture or in the Bonds contained affects or impairs the obligation of
the Authority, which is absolute and unconditional, to pay the principal of and interest and
premium (if any) on the Bonds to the respective Owners of the Bonds at their respective dates
of maturity; or upon acceleration or call for redemption, as herein provided, but only out of the
Revenues and other assets herein pledged therefor, or affect or impair the right of such
Owners, which is also absolute and unconditional, to enforce such payment by virtue of the
contract embodied in the Bonds.
SECTION 7.07. Termination of Proceedings. In case any proceedings taken by the
Trustee or by any one or more Bond Owners on account of any Event of Default have been
discontinued or abandoned for any reason or have been determined adversely to the Trustee or
the Bond Owners, then in every such case the Authority, the Trustee and the Bond Owners,
subject to any determination in such proceedings, shall be restored to their former positions and
rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the
Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had
been taken.
SECTION 7.08. Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the. Trustee or any other Bond Insurer, or to the Owners of the Bonds is intended to
be exclusive of any other remedy or remedies, and each and every such remedy, to the extent
permitted by law, shall be cumulative and in addition to any other remedy given hereunder or
now or hereafter existing at law or in equity or otherwise.
SECTION 7.09. No Waiver of Default. No delay or omission of the Trustee or any
Owner of the Bonds to exercise any right or power arising upon the occurrence of any default or
Event of Default shall impair any such right or power or shall be construed to be a waiver of any
such default or. Event of Default or an acquiescence therein; and every power and remedy
given by this Indenture to the Trustee or to the Owners' of the Bonds may be exercised from
time to time and as often as may be deemed expedient by the Trustee or the Bond Owners.
• ARTICLE VIII,
THE TRUSTEE
SECTION 8.01. Appointment'of Trustee. Bank of New York Mellon Trust Company,
N.A. 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 will maintain a Trustee which is qualified under the
provisions of the foregoing provisions of this Article VIII so long as any Bonds are Outstanding.
SECTION 8.02. Acceptance of Trusts; Removal and Resignation of Trustee. The
Trustee hereby accepts the express 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:
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(a) The Trustee shall, prior to an Event of Default, and after the
curing or waiver of all Events of Default which may have occurred, perform such
duties and only such duties as are expressly and specifically set forth in this
Indenture and no implied duties or covenants shall be read into this Indenture
against the Trustee.
(b) The Authority may remove the Trustee at any time, unless an
Event of Default has occurred and is then continuing, and shall remove the
Trustee (a) if at any time requested to do so by the Owners of a majority in
aggregate principal amount of the Bonds then Outstanding (or their attorneys
duly authorized in writing) or (b) if at any time the Trustee ceases to be eligible in
accordance with Section 8.02, or becomes incapable of acting, or is adjudged a
bankrupt or insolvent, or a receiver of the Trustee or its property is appointed, or
any public officer takes control or charge of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation.
(c) The Trustee may at any time resign by giving written notice of
such resignation to the Authority and the City, and by giving the Bond Owners
notice of such resignation by mail at the addresses shown on the Registration
Books.
(d) Any removal or resignation of the Trustee and appointment of a
successor Trustee shall become effective upon acceptance of appointment by
the successor Trustee. If no successor Trustee has been appointed and
accepted appointment within 45 days of giving notice of removal or notice of
resignation as aforesaid, the Authority, upon its own direction or the direction of
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee, and such court may thereupon, after such
notice (if any) as it may deem proper, appoint such successor Trustee. Any
successor Trustee appointed under this Indenture, must signify its acceptance of
such appointment by executing and delivering to the Authority and to its
predecessor Trustee a written acceptance thereof, and after payment by the
Authority of all unpaid fees and expenses of the predecessor Trustee, and
thereupon such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the moneys, estates, properties, rights, powers,
trusts, duties and obligations of such predecessor Trustee, with like effect as if
originally named Trustee herein. At the Written Request of the Authority or the
request of the successor Trustee, such predecessor Trustee shall pay over,
transfer, assign and deliver to the successor Trustee any money or other
property subject to the trusts and conditions herein set forth. Upon request of
the successor Trustee, the Authority shall execute and deliver any and all
instruments as may be reasonably required for more fully and certainly vesting in
and confirming to such successor Trustee all such moneys, estates, properties,
rights, powers, trusts, duties and obligations. Upon acceptance of appointment
by a successor Trustee as provided in this subsection, the Authority shall
promptly mail or cause the successor trustee to mail a notice of the succession
of such Trustee to the trusts hereunder to each rating agency which is then
rating the Bonds and to the Bond Owners at the addresses shown on the
Registration Books. If the Authority fails to mail such notice within 15 days after
acceptance of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be mailed at the expense of the Authority.
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(e) Any Trustee appointed under this Indenture shall be a corporation
or association organized and doing business under the laws of any state or the
United States of America or the District of Columbia, shall be authorized under
such laws to exercise corporate trust powers, shall have (or, in the case of a
corporation or association that is a member of a bank holding company system,
the related bank holding company has) a combined capital and surplus of at
least $50,000,000, and shall be subject to supervision or examination by a
federal or state agency, so long as any Bonds are Outstanding. If such
corporation or association publishes a report of condition at least annually under
law or to the requirements of any supervising or examining agency above
referred to, then for the purpose of this subsection (e), the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If the Trustee at any time ceases to be eligible in accordance with the
provisions of this subsection (e), the Trustee shall resign immediately in the
manner and with the effect specified in this Section.
SECTION 8.03. Merger or Consolidation. Any bank, federal savings association, or
trust company into which the Trustee may be merged or converted or with which it may be
consolidated or any bank, federal savings association, or trust company resulting from any
merger, conversion or consolidation to which it shall be a party or any bank, federal savings
association, or trust company to which the Trustee may sell or transfer all or substantially all of
its corporate trust business, provided such bank, federal savings association, or trust company
shall be eligible under subsection (e) of Section 8.02 shall be the successor to such Trustee,
without the execution or filing of any paper or any further act, anything herein to the contrary
notwithstanding.
•
SECTION 8.04. Liability of Trustee.
(a) The recitals of facts herein and in the Bonds contained shall be taken as
statements of the Authority, and the Trustee shall not assume responsibility for the correctness
of the same, or make any representations as to the validity or sufficiency of this Indenture, the
Bonds or the Installment Sale Agreement, nor shall the Trustee incur any responsibility in
respect thereof, other than as expressly stated herein in connection with the respective duties
or obligations of Trustee herein or in the Bonds assigned to or imposed upon it. The Trustee
shall, however, be responsible for its representations contained in its certificate of
authentication on the Bonds. The Trustee shall not be liable in connection with the
performance of its duties hereunder, except for its own negligence. The Trustee may become
the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent
permitted by law, may act as depository 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 Bond Owners, whether or not such committee shall represent the Owners of a majority in
principal amount of the Bonds then Outstanding.
(b) The Trustee is not liable for any error of judgment made by a responsible officer,
unless it is proved that the Trustee was grossly negligent in ascertaining the pertinent facts.
(c) The Trustee is not liable with respect to any action taken or omitted to be taken
by it in accordance with the direction of the Owners of a majority in aggregate principal amount
of the Bonds at the time Outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee under this Indenture or assigned to it hereunder.
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(d) The Trustee is not liable for any action taken by it and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by this Indenture.
(e) The Trustee shall not be deemed to have knowledge of any Event of Default
hereunder, or any other event which, with the passage of time, the giving of notice, or both,
would constitute an Event of Default hereunder unless and until it shall have actual knowledge
thereof, or a corporate trust officer shall have received written notice thereof at its Office from
the City, the Authority or the Owners of at least 25% in aggregate principal amount of the
Outstanding Bonds. Except as otherwise expressly provided herein, the Trustee shall not be
bound to ascertain or inquire as to the performance or observance by the Authority or the City
of any of the terms, conditions, covenants or agreements herein, under the Installment Sale
Agreement or the Bonds or of any of the documents executed in connection with the Bonds, or
as to the existence of a default or an Event of Default or an event which would, with the giving
of notice, the passage of time, or both, constitute an Event of Default. The Trustee is not
responsible for the validity, effectiveness or priority of any collateral given to or held by it.
Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or
inquire as to the performance or observance by the City or the Authority of the terms,
conditions, covenants or agreements set forth in the Installment Sale Agreement, other than the
covenants of the City to make Installment Payments to the Trustee when due and to file with
the Trustee when due, such reports and certifications as the City is required to file with the
Trustee thereunder.
(f) No provision of this Indenture requires the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers.
(g) The Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or through agents, receivers or attorneys and the Trustee shall
not be responsible for any misconduct or negligence on the part of any agent, receiver or
attorney appointed with due care by it hereunder.
(h) The Trustee has no obligation to exercise any of the rights or powers vested in it
by this Indenture at the request or direction of the Bond Owners under this Indenture, unless
the such Owners have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities (including but not limited to fees and expenses of its attorneys)
which might be incurred by it in compliance with such request or direction. No permissive
power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a
duty to exercise such power, right or remedy.
(i) Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to the Trustee is subject
to the provisions of Section 8.02(a), this Section 8.04 and Section 8.05, and shall be applicable
to the assignment of any rights to the Trustee hereunder.
(j) The Trustee is not accountable to anyone for the subsequent use or application
of any moneys which are released or withdrawn in accordance with the provisions hereof.
(k) The Trustee makes no representation or warranty, expressed or implied as to
the title, value, design, compliance with specifications or legal requirements, quality, durability,
operation, condition, merchantability or fitness for any particular purpose for the use
contemplated by the Authority or the City of the 2000 Wastewater Project. In no event shall the
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Trustee be liable for incidental, indirect, special or consequential damages in connection with or
arising from the Installment Sale Agreement or this Indenture for the existence, furnishing or
use of the 2000 Wastewater Project.
(I) The Trustee has 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 Bonds.
(m) 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 or 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.
(n) The Trustee agrees to accept and act upon facsimile transmission of written
instructions and /or directions pursuant to this Indenture of Trust, provided, however, that: (a)
subsequent to such facsimile transmission of written instructions and /or directions the Trustee
shall forthwith receive the originally executed instructions and /or directions, (b) 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 (c) the Trustee
shall have received a current incumbency certificate containing the specimen signature of such
designated person.
(o) The Trustee covenants to inform the Authority within one business day of the
appointment of a successor or additional trustee or the change in the name of the Trustee.
SECTION 8.05. Right to Rely on Documents. The Trustee shall be protected and
shall incur no liability in acting or refraining from acting in reliance upon any notice, resolution,
request, consent, order, certificate, report, opinion, bonds, requisition, facsimile transmission,
electronic mail or other paper or document believed by them to be genuine and to have been
signed or presented by the proper party or parties. The Trustee is under no duty to make any
investigation or inquiry as to any statements contained or matter referred to in any paper or
document but may accept and conclusively rely upon the same as conclusive evidence of the
truth and accuracy of any such statement or matter and shall be fully protected in relying
thereon. The Trustee may consult with counsel, who may be counsel of or to.the Authority, with
regard to legal questions, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance therewith.
The Trustee may treat the Owners of the Bonds appearing in the Registration Books as
the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any
notice to the contrary.
Whenever in the administration of the trusts imposed upon it by this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or established prior to
taking or suffering any action hereunder, such matter (unless other evidence in respect thereof
-37-
be herein specifically prescribed) may be deemed to be conclusively proved and established by
a Written Certificate, Written Request or Written Requisition of the Authority or the City, and
such Written Certificate, Written Request or Written Requisition shall be full warrant to the
Trustee for any action taken or suffered under the provisions of this Indenture in reliance upon
such Written Certificate, Written Request or Written Requisition, and the Trustee shall be fully
protected in relying thereon, but in its discretion the Trustee may, in lieu thereof, accept other
evidence of such matter or may require such additional evidence as to it may deem reasonable.
SECTION 8.06. Preservation and Inspection of Documents. All documents received
by the Trustee under the provisions of this Indenture shall be retained in its respective
possession and in accordance with its retention policy then in effect and shall, upon reasonable
notice to Trustee, be subject to the inspection of the Authority, the City, and any Bond Owner,
and their agents and representatives duly authorized in writing, during business hours and
under reasonable conditions as agreed to by the Trustee.
SECTION 8.07. Compensation and Indemnification. The Authority shall pay to the
Trustee from time to time, on demand, the compensation for all services rendered under this
Indenture and also all reasonable expenses, advances (including any interest on advances),
charges, legal (including outside counsel and the allocated costs of internal attorneys) and
consulting fees and other disbursements, incurred in and about the performance of its powers
and duties under this Indenture.
The Authority shall indemnify the Trustee, its officers, directors, employees and agents
against any cost, loss, liability or expense whatsoever (including but not limited to fees and
expenses of its attorneys) incurred without negligence or willful misconduct on its part, arising
out of or in connection with the acceptance or administration of this trust and this Indenture,
including costs and expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers hereunder or under the Installment Sale
Agreement. As security for the performance of the obligations of the Authority under this
Section 8.07, the Trustee shall have a lien prior to the lien of the Bonds upon all property and
funds held or collected by the Trustee as such. The rights of the Trustee and the obligations of
the Authority under this Section 8.07 shall survive the resignation or removal of the Trustee or
the discharge of the Bonds and this Indenture and the Installment Sale Agreement.
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ARTICLE IX
MODIFICATION OR AMENDMENT HEREOF
SECTION 9.01. Amendments Permitted.
(a) Amendments With Bond Owner Consent. This Indenture and the rights and
obligations of the Authority and of the Owners of the Bonds and of the Trustee may be modified
or amended from time to time and at any time by Supplemental Indenture, which the Authority
and the Trustee may enter into when the written consents of the Owners of a majority in
aggregate principal amount of all Bonds then Outstanding are filed with the Trustee. No such
. modification or amendment may (i) extend the fixed maturity of any Bonds, or reduce the
amount of principal thereof or extend the time of payment, or change the method of computing
the rate of interest thereon, or extend the time of payment of interest thereon, without the
consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of
Bonds the consent of the Owners of which is required to effect any such modification or
amendment, or permit the creation of any lien on the Revenues and other assets pledged under
this Indenture prior to or on a parity with the lien created by this Indenture except as permitted
herein, or deprive the Owners of the Bonds of the lien created by this Indenture on such
Revenues and other assets (except as expressly provided in this Indenture),' without the
consent of the Owners of all of the Bonds then Outstanding. It is not necessary for the consent
of the Bond Owners to approve the particular form of any Supplemental Indenture, but it is
sufficient if such consent approves the substance thereof.
(b) Amendments Without Owner Consent. This Indenture and the rights and
obligations of the Authority, of the Trustee and the Owners of the Bonds may also be modified
or amended from time to time and at any time by a Supplemental Indenture, which the Authority
and the Trustee may enter into without the consent of any Bond Owners if the Trustee has
been furnished an opinion of counsel that the provisions of such. Supplemental Indenture shall
not materially adversely affect the interests of the Owners of the Bonds, including, without
limitation, for any one or more of the following purposes: .
(i) to add to the covenants and agreements of the Authority in this
Indenture contained, other covenants and agreements thereafter to be observed,
to pledge or assign additional security for the Bonds (or any portion thereof), or
to surrender any right or power herein reserved to or conferred upon the
Authority;
(ii) to cure any ambiguity, inconsistency or omission, or to cure or
correct any defective provision, contained in this Indenture, or in regard to
matters or questions arising under this Indenture, as the Authority deems
necessary or desirable, provided that such modification or amendment does not
materially adversely affect the interests of the Bond Owners, in the opinion of.
Bond Counsel filed with the Trustee;
(iii) to modify, amend or supplement this Indenture in such manner as
to permit the qualification hereof under the Trust Indenture Act of 1939, as
amended, or any similar federal statute hereafter in effect, and to add such other
terms, conditions and provisions as may be permitted by said act or similar
federal statute;
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•
(iv) to modify, amend or supplement this Indenture in such manner as
to assure that the interest on the Bonds remains excluded from gross income
under the Tax Code;
(v) to modify any of the provisions of this Indenture in any other
respect, including the substitution of a Qualified Reserve Account Credit
Instrument as set forth in Section 5.05(c), provided that such modifications shall
not have a material adverse effect on the interests of the Owners of the Bonds;
or
(vi) to provide for the issuance of Additional Bonds pursuant to
Section 3.06 hereof.
(c) Limitation. The Trustee is not obligated to enter into any Supplemental
Indenture authorized by subsections (a) or (b) of this Section 9.01 which materially adversely
affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
(d) Bond Counsel Opinion Requirement. Prior to the Trustee entering into any
Supplemental Indenture hereunder, the Authority shall deliver to the Trustee an opinion of Bond
Counsel stating, in substance, that such Supplemental Indenture has been adopted in
compliance with the requirements of this Indenture and that the adoption of such Supplemental
Indenture will not, in and of itself, adversely affect the exclusion from gross income for purposes
of federal income taxes of interest on the Bonds.
(e) Notice of Amendments. The Authority shall deliver or cause to be delivered a
draft of any Supplemental Indenture to each rating agency which then maintains a rating on the
Bonds, at least 10 days prior to the effective date of such Supplemental Indenture under this
Section 9.01.
SECTION 9.02. Effect of Supplemental Indenture. Upon the execution of any
Supplemental Indenture under this Article IX, this Indenture shall be deemed to be modified and
amended in accordance therewith, and the respective rights, duties and obligations under this
Indenture of the Authority, the Trustee, and all Owners of Bonds Outstanding shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such modification and
amendment, and all the terms and conditions of any such Supplemental Indenture shall be
deemed to be part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds
delivered after the execution of any Supplemental Indenture under this Article may, and if the
Authority so determines shall, bear a notation by endorsement or otherwise in form approved by
the Authority as to any modification or amendment provided for in such Supplemental
Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time
of such execution and presentation of his Bonds for the purpose at the Office of the Trustee or
at such additional offices as the Trustee may select and designate for that purpose, a suitable
notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new
Bonds so modified as to conform, in the opinion of the Authority, to any modification or
amendment contained in such Supplemental Indenture, shall be prepared and executed by the
Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds
then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond
Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal
aggregate principal amount of the same maturity.
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SECTION 9.04. Amendment of Particular Bonds. The provisions of this Article IX do
not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by
such Owner.
ARTICLE X
DEFEASANCE
SECTION 10.01. Discharge of Indenture. Any or all of the Outstanding Bonds may be
paid by the Authority in any of the following ways, provided that the Authority also pays or
causes to be paid any other sums payable hereunder by the Authority:
(a) by 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 depositing with the Trustee, in trust, at or before maturity,
money or securities in the necessary amount (as provided in Section - 10.03) to
pay or redeem such Bonds; or
•
(c) by delivering to the Trustee, for cancellation by it, such Bonds.
If the Authority pays all outstanding Bonds as provided above and also pays or causes
to be paid all other sums payable hereunder by the Authority, then and in that case, at the
election of the Authority (evidenced by a Written Certificate of the Authority, filed • with the
Trustee, signifying the intention of the Authority to discharge all such indebtedness and this
Indenture), and notwithstanding that any of such Bonds shall not have been surrendered for
payment, this Indenture and the pledge of Revenues and other assets made under this
Indenture with respect to such Bonds and all covenants, agreements and other obligations of
the Authority under this Indenture with respect to such Bonds shall cease, terminate, become
void and be completely discharged and satisfied, subject to Section 10.02. In such event, upon
the Written Request of the Authority, the Trustee shall execute and deliver to the Authority all
such instruments as may be necessary or desirable to evidence such discharge and
satisfaction, and the Trustee shall pay over, transfer, assign or deliver to the City all moneys or
securities or other property held by it under this Indenture which are not required for the
payment or redemption of any of such Bonds not theretofore surrendered for such payment or
redemption. The Trustee is entitled to conclusively rely on any such Written Certificate or
Written Request and, in each case, is fully protected in relying thereon.
- SECTION 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee,
in trust, at or before maturity, of money or securities in the necessary amount (as provided in
Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity
or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to
maturity, notice of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of
the Authority in respect of such Bonds shall cease, terminate and be completely discharged,
and the Owners thereof shall thereafter be entitled only to payment out of such money or
securities deposited with the Trustee as aforesaid for their payment, subject, however, to the
provisions of Section 10.04.
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The Authority may at any time surrender to the Trustee, for cancellation by Trustee, any
Bonds previously issued and delivered, which the Authority may have acquired in any manner
whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be
paid and retired.
SECTION 10.03. Deposit of Money or Securities with Trustee. Whenever in this
Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee
money or securities in the necessary amount to pay or redeem any Bonds, the money or
securities so to be deposited or held may include money or securities held by the Trustee in the
funds and accounts established under this Indenture and shall be:
(a) lawful money of the United States of America in an amount equal
to the principal amount of such Bonds and all unpaid interest thereon to maturity,
except that, in the case of Bonds which are to be redeemed prior to maturity and
in respect of which notice of such redemption shall have been given as provided
in Article IV or provision satisfactory to the Trustee shall have been made for the
giving of such notice, the amount to be deposited or held shall be the principal
amount of such Bonds, premium, if any, and all unpaid interest thereon to the
redemption date; or
(b) non- callable Defeasance Obligations, the principal of and interest
on which when due will, in the written opinion of an Independent Accountant filed
with the City, the Authority and the Trustee, provide money sufficient to pay the
principal of and interest and premium (if any) on the Bonds to be paid or
redeemed, as such principal, interest and premium become due, provided that in
the case of Bonds which are to be redeemed prior to the maturity thereof, notice
of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee has been made for the giving of such notice;
provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms
of this Indenture or by Written Request of the Authority) to apply such money to the payment of
such principal, interest and premium (if any) with respect to such Bonds, and (ii) the Authority
shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds
have been discharged in accordance with this Indenture (which opinion may rely upon and
assume the accuracy of the Independent Accountant's opinion referred to above). The Trustee
shall be entitled to conclusively rely on such Written Request or opinion and shall be fully
protected, in each case, in relying thereon.
SECTION 10.04. Unclaimed Funds. Notwithstanding any provisions of this Indenture,
any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any
Bonds and remaining unclaimed for 2 years after the principal of all of the Bonds has become
due and payable (whether at maturity or upon call for redemption or by acceleration as provided
in this Indenture), if such moneys were so held at such date, or 2 years after the date of deposit
of such moneys if deposited after said date when all of the Bonds became due and payable,
shall be repaid to the Authority free from the trusts created by this Indenture, and all liability of
the Trustee with respect to such moneys shall thereupon cease; provided, however, that before
the repayment of such moneys to the Authority as aforesaid, the Trustee shall (at the cost of
the Authority) first mail to the Owners of Bonds which have not yet been paid, at the addresses
shown on the Registration Books, a notice, in such form as may be deemed appropriate by the
Trustee with respect to the Bonds so payable and not presented and with respect to the
provisions relating to the repayment to the Authority of the moneys held for the payment
thereof.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Liability of Authority Limited to Revenues. Notwithstanding
anything in this Indenture or in the Bonds contained, the Authority is not required to advance
any moneys derived from any source other than the Revenues and other assets pledged under
this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of
the principal of or interest on the Bonds or for any other purpose of this Indenture.
Nevertheless, the Authority may, but is not required to, advance for any of the purposes hereof
any funds of the Authority which may be made available to it for such purposes.
SECTION 11.02. Limitation of Rights to Parties and Bond Owners. Nothing in this
Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any
person other than the Authority, the Trustee, the City and the Owners of the Bonds, any legal or
equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition
or provision therein or herein contained; and all such covenants, conditions and provisions are
and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the City
and the Owners of the Bonds.
SECTION 11.03. Funds and Accounts. Any fund or account required by this Indenture
to be established and maintained by the Trustee may be established and maintained in the
accounting records of the Trustee, either as a fund or an account, and may, for the purposes of
such records, any audits thereof and any reports or statements with respect thereto, be treated
either as a fund or as an account; but all such records with respect to all such funds and
accounts shall at all times be maintained in accordance with corporate trust industry standards
to the extent practicable, and with due regard for the requirements of Section 6.05 and for the
protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may
establish such funds and accounts as it deems necessary or appropriate to perform its
obligations under this Indenture.
SECTION 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this
Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the person entitled to receive such notice and in any such case the giving
or receipt of such notice shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. Whenever in this Indenture any notice is required to be given by
mail, such requirement may be satisfied by the deposit of such notice in the United States mail,
postage prepaid, by first class mail.
SECTION 11.05. Destruction of Bonds. Whenever in this Indenture provision is made
for the cancellation by the Trustee, and the delivery to the Authority, of any Bonds, the Trustee
may, in lieu of such cancellation and delivery, destroy such Bonds as may be allowed by law,
and at the written request of the Authority the Trustee shall deliver a certificate of such
destruction to the Authority.
SECTION 11.06. Severability of Invalid Provisions. If any one or more of the
provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid,
illegal or unenforceable in any respect, then such provision or provisions shall be deemed
severable from the remaining provisions contained in this Indenture and such invalidity, illegality
or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall
-43-
be construed as if such invalid or illegal or unenforceable provision had never been contained
herein. The Authority hereby declares that it would have entered into this Indenture and each
and every other Section, paragraph, sentence, clause or phrase hereof and authorized the
issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections,
paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or
unenforceable.
SECTION 11.07. Notices. All notices or communications to be given 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 at such address as the party may provide to the other party in
writing from time to time. Notice shall be effective either (a) upon transmission by facsimile
transmission or other form of telecommunication, confirmed by telephone, (b) 48 hours after
deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any
person, upon actual receipt. The Authority, the City 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 City City of Seal Beach
or the Authority: 211 Eight Street
Seal Beach, California 90740
Attention: City Manager
Telephone: (562) 431 -2527 x1300
Fax: (562) 493 -9857
If to the Trustee: Bank of New York Mellon Trust Company, N.A.
700 S. Flower Street, Suite 500r
Los Angeles, California 90017
Attention: Corporate Trust Services
Telephone: (213) 630 -6249
Fax: (213) 630 -6480
SECTION 11.08. Evidence of Rights of Bond Owners. Any request, consent or other
instrument required or permitted by this Indenture to be signed and executed by Bond Owners
may be in any number of concurrent instruments of substantially similar tenor and shall be
signed or executed by such Bond Owners in person or by an agent or agents duly appointed in
writing. Proof of the execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the holding by any person of Bonds transferable by delivery,
shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the
Trustee and the Authority if made in the manner provided in this Section 11.08.
The fact and date of the execution by any person of any such request, consent or other
instrument or writing may be proved by the certificate of any notary public or other officer of any
jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that
the person signing such request, consent or other instrument acknowledged to him the
execution thereof, or by an affidavit of a witness of such execution duly sworn to before such
notary public or other officer.
The ownership of Bonds shall be proved by the Registration Books.
Any request, consent, or other instrument or writing of the Owner of any Bond shall bind
every future Owner of the same Bond and the Owner of every Bond issued in exchange
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therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or
the Authority in accordance therewith or reliance thereon.
SECTION 11.09. Disqualified Bonds. In determining whether the Owners of the
requisite aggregate principal amount of Bonds have concurred in any demand, request,
direction, consent or waiver under this Indenture, Bonds which are known by the Trustee to be
owned or held by or for the account of the Authority or the City, or by any other obligor on the
Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, the Authority or the City or any other obligor on the Bonds, shall
be disregarded and deemed not to be Outstanding for the purpose of any such determination.
Bonds so owned which have been pledged in good faith may be regarded as Outstanding for
the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the
pledgee's right to vote such Bonds and that the pledgee is not a person directly or indirectly
controlling or controlled by, or under direct or indirect common control with, the Authority or the
City or any other obligor on the Bonds. In case of a dispute as to such right, the Trustee shall
be entitled to rely upon the advice of counsel in any decision by Trustee and shall be fully
protected in relying thereon.
Upon request, the Authority shall specify to the Trustee those Bonds disqualified under
this Section 11.09.
SECTION 11.10. Money Held for Particular Bonds. The money held by the Trustee
for the payment of the interest, premium, if any, or principal due on any date with respect to
particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and
after such date and pending such payment, be set aside on its books and held in trust by it for
the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04
but without any liability for interest thereon.
SECTION 11.11. Waiver of Personal Liability'. No member, officer, agent or employee
of the Authority shall be individually or personally liable for the payment of the principal of or
interest or premium (if any) on the Bonds or be subject to any personal liability or accountability
by reason of the issuance thereof; but nothing herein contained shall relieve any such member,
officer, agent or employee from the performance of any official duty provided by law or by this
Indenture.
SECTION 11.12. Successor Is Deemed Included in All References to Predecessor.
Whenever in this Indenture either the Authority, the City or the Trustee is named or referred to,
such reference shall be deemed to include the successors or assigns thereof, and all the
covenants and agreements in this Indenture contained by or on behalf of the Authority, the City
or the Trustee shall bind and inure to the benefit of the respective successors and assigns
thereof whether so expressed or not.
SECTION 11.13. Execution in Several Counterparts. This Indenture may be
executed in any number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original; and all such counterparts, or as many of them as the Authority and
the Trustee shall preserve undestroyed, shall together constitute but one and the same
instrument.
SECTION 11.14. Payment on Non - Business Day. In the event any payment is
required to be made hereunder on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day and with the same effect as if made on such
preceding non - Business Day.
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SECTION 11.15. Governing Law. This Indenture shall be governed by and construed
in accordance with the laws of the State of California.
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IN WITNESS WHEREOF, the Seal Beach Public FINANCING AUTHORITY has caused
this Indenture to be signed in its name by its Executive Director and attested to by its Secretary,
and BANK OF NEW YORK MELLON TRUST COMPANY, N.A., in token of its acceptance of the
trusts created hereunder, has caused this Indenture to be signed in its corporate name by its
officer thereunto duly authorized, all as of the day and year first above written.
SEAL BEACH PUBLIC FINANCING AUTHORITY,
as Seller
By
Chair
BANK N YO
COMPANY , N .A., as Trustee RK MELLON TRUST
By
Authorized Officer
Signature Page to Indenture
APPENDIX A
BOND FORM
NO. R- * * *$ * **
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
SEAL BEACH PUBLIC FINANCING AUTHORITY
2011 WASTEWATER REVENUE REFUNDING BONDS, SERIES A
INTEREST RATE: MATURITY DATE: ORIGINAL ISSUE DATE: CUSIP:
June1, _,2011
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: * ** * **
The SEAL BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers
authority duly organized and existing under the laws of the State of California (the "Authority "),
for value received, hereby promises to pay to the Registered Owner specified above or
registered assigns (the "Registered Owner"), on the Maturity Date specified above (subject to
any right of prior redemption hereinafter provided for), the Principal Amount specified above, in
lawful money of the United States of America, and to pay interest thereon in like lawful money
from the Interest Payment Date (as hereinafter defined) next preceding the date of
authentication of this Bond unless (i) this Bond is authenticated on or before an Interest
Payment Date and after the close of business on the 15 day of the month preceding such
interest payment date, in which event it shall bear interest from such Interest Payment Date, or
(ii) this Bond is authenticated on or before May 15, 2011, in which event it shall bear interest
from the Original Issue Date specified above; provided, however, that if at the time of
authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from
the Interest Payment Date to which interest has previously been paid or made available for
payment on this Bond, at the Interest Rate per annum specified above, payable semiannually
on June 1 and December 1 in each year, commencing June 1, 2011 (the "Interest Payment
Dates "), calculated on the basis of a 360 -day year composed of twelve 30 -day months.
Principal hereof and premium, if any, upon early redemption hereof are payable upon
presentation and surrender hereof at the corporate trust office of Bank of New York Mellon
Trust Company, N.A., in Los Angeles, California, (the "Trust Office "), as trustee (the "Trustee ").
Interest hereon is payable by check of the Trustee mailed to the Registered Owner hereof at
the Registered Owner's address as it appears on the registration books of the Trustee as of the
close of business on the fifteenth day of the month preceding each Interest Payment Date (a
"Record Date "), or, upon written request filed with the Trustee as of such Record Date by a
registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire
B -1
transfer in immediately available funds to an account in the United States designated by such
registered owner in such written request.
This Bond is not a debt of the City of Seal Beach (the "City "), the County of Orange, the
State of California, or any of its political subdivisions, and neither the City, said County, said
State, nor any of its political subdivisions, is liable hereon nor in any event shall this Bond be
payable out of any funds or properties of the Authority other than the Revenues.
This Bond is one of a duly authorized issue of bonds of the Authority designated as the
"Seal Beach Public Financing Authority 2011 Wastewater Revenue Refunding Bonds, Series A
(the "Bonds "), in an aggregate principal amount of $[principal amount], all of like tenor and date
(except for such variation, if any, as may be required to designate varying numbers, maturities,
interest rates or redemption provisions) and all issued pursuant to the provisions of Articles 4 of
Chapter 5, Division 7, Title 1 of the California Government Code, commencing with Section
6584 of said Code, and under an Indenture of Trust dated as of January 1, 2011 (the
"Indenture "), between the Authority and the Trustee, and a resolution of the Authority adopted
on , 2010, authorizing the issuance of the Bonds. Reference is hereby made to the
Indenture (copies of which are on file at the office of the Authority) and all supplements thereto
for a description of the terms on which the Bonds are issued, the provisions with regard to the
nature and extent of the Revenues, and the rights thereunder of the owners of the Bonds and
the rights, duties and immunities of the Trustee and the rights and obligations of the Authority
thereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance
hereof, assents and agrees.
The Bonds have been issued by the Authority to refinance certain improvements to the
City's Enterprise. This Bond and the interest and premium, if any, hereon are special
obligations of the Authority, payable from the Revenues, and secured by a charge and lien on
the Revenues as defined in the Indenture, consisting principally of installment payments made
by the City under an Installment Sale Agreement dated as of January 1, 2011, between the
Authority and the City (the "Installment Sale Agreement "). As and to the extent set forth in the
Indenture, all of the Revenues are • exclusively and irrevocably pledged in accordance with the
terms hereof and the provisions of the Indenture, to the payment of the principal of and interest
and premium (if any) on the Bonds and any Additional Bonds, which may be issued only in
accordance with the terms of the Indenture.
The rights and obligations of the Authority and the owners of the Bonds may be modified
or amended at any time in the manner, to the extent and upon the terms provided in the
Indenture, but no such modification or amendment shall extend the fixed maturity of any Bonds,
or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of
payment, or change the method of computing the rate of interest thereon, or extend the time of
payment of interest thereon, without the consent of the owner of each Bond so affected.
The Bonds maturing on or before June 1, 20_, are not subject to optional redemption
prior to their respective stated maturity dates. The Bonds maturing on or after June 1, 20,
are subject to redemption in whole, or in part at the Written Request of the Authority among
maturities on such basis as the Authority may designate and by lot within a maturity, at the
option of the Authority, on any Interest Payment Date on or after June 1, 20, from any
available source of funds, at a redemption price equal the principal amount of the Bonds to be
redeemed, plus accrued interest to the date of redemption, without premium.
The Bonds are also subject to redemption as a whole, or in part by lot, on any date, to
the extent of any net proceeds of hazard or title insurance with respect to the wastewater
B -2
system of the City (the "Enterprise ") or any portion thereof which are not used to repair or
replace the System pursuant to the Installment Sale Agreement, or to the extent of any net
proceeds arising from the disposition of the Enterprise or any portion thereof in eminent domain
proceedings which the City elects to be used for such purpose pursuant to the Installment Sale
Agreement, at a redemption price equal to the principal amount thereof plus interest accrued
thereon to the date fixed for redemption, without premium.
As provided in the Indenture, notice of redemption will be mailed by the Trustee by first
class mail not less than 30 nor more than 60 days prior to the redemption date to the respective
owners of any Bonds designated for redemption at their addresses appearing on the
registration books of the Trustee, but neither failure to receive such notice nor any defect in the
notice so mailed shall affect the sufficiency of the proceedings for redemption or the cessation
of accrual of interest thereon from and after the date fixed for redemption.
If this Bond is called for redemption and payment is duly provided therefor as specified
in the Indenture, interest shall cease to accrue hereon from and after the date fixed for
redemption.
This 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 Bond. Upon registration of such transfer, a new Bond or 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 herefor. This Bond may be
exchanged at the Trust Office for Bonds of the same tenor, aggregate principal amount,
interest rate and maturity, of other authorized denominations.
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.
Unless this Bond is presented by an authorized representative of The Depository Trust
Company to the Authority or the Trustee for registration of transfer, exchange or payment, and
any Bond issued is registered in the name of Cede & Co. or such other name as requested by
an authorized representative of The Depository Trust Company and any payment is made to
Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.
It is hereby certified by the Authority that all of the things, conditions and acts required to
exist, to have happened or to have been performed precedent to and in the issuance of this
Bond do exist, have happened or have been performed in due and regular time, form and
manner as required by the Indenture and the laws of the State of California and that the amount
of this Bond, together with all other indebtedness of the Authority, does not exceed any limit
prescribed by the Indenture or any laws of the State of California, and is not in excess of the
amount of Bonds permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until the certificate of authentication hereon endorsed shall have
been manually signed by the Trustee.
B -3
IN WITNESS WHEREOF, the Seal Beach Public Financing Authority has caused this
Bond to be executed in its name and on its behalf with the facsimile signature of its Executive
Director and attested to by the facsimile signature of its Secretary, all as of the Original Issue
Date specified above.
SEAL BEACH PUBLIC FINANCING
AUTHORITY
By
Executive Director
Attest:
Secretary
B-4
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within - mentioned Indenture.
Dated:
BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
By
Authorized Signatory
B -5
ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto
whose address and social security or other tax
identifying number is , the within - mentioned Bond and hereby
irrevocably constitute(s) and appoint(s)
attorney, to transfer the same on the registration books of the Trustee with full power of
substitution in the premises.
Dated:
•
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an eligible Note: The signature(s) on this Assignment must
guarantor institution. correspond with the name(s) as written on the face of
the within Bond in every particular without alteration or
enlargement or any change whatsoever.
B -6
Attachment "G"
Refunding Instructions
IRREVOCABLE REFUNDING INSTRUCTIONS
•
Relating to
City of Seal Beach
Certificates of Participation
• (2000 Sewer System Project)
These IRREVOCABLE REFUNDING INSTRUCTIONS (these "Instructions "), are dated
January 2011, and are given by the SEAL BEACH PUBLIC FINANCING AUTHORITY, a
joint exercise of powers authority organized and existing under the laws of the State of California
(the "Authority "), the CITY OF SEAL BEACH, a municipal corporation duly organized and
existing under the laws of the State of California (the "City "), to BANK OF NEW YORK
MELLON TRUST COMPANY (as successor in interest to BNY Western Trust Company), a
national banking association organized and existing under the laws of the United States of
America, acting as trustee (the "2000 Trustee ") for the 2000 COPs (as defined below).
BACKGROUND:
1. The City previously financed the acquisition and construction of certain
improvements to the City's wastewater. enterprise (the "Wastewater Enterprise ") through the
execution and delivery $4,230,000 Certificates of Participation (2000 Sewer System Project),
outstanding in the amount of $3,460,000, evidencing the direct, undivided fractional interests of
the owners thereof in 2000 Installment Payments (defined below) to be made by the City as the
purchase price for certain property pursuant to the 2000 Installment Sale Agreement (defined
below) with the Authority (the "2000 COPs "), pursuant to a Trust Agreement, dated as of June 1,
2000, between the Authority and the 2000 Trustee (the "2000 Trust Agreement ").
2. The principal of and interest with respect to the 2000 COPs were payable from
certain payments made by the City pursuant to an Installment Sale Agreement dated as of June 1,
2000 (the "2000 Installment Sale Agreement "), between the Authority and the City, under which
the City was obligated to make certain installment payments (the "2000 Installment Payments ")
and certain additional payments to the Authority in order to provide the Authority with sufficient
revenues to pay debt service on the 2000 COPs.
3. The 2000 COPs are subject to redemption, as a whole or in part, on any date on or
after June 1, 2010, without premium.
4. In order to raise funds to provide for the redemption of the 2000 COPs the Authority
has authorized the issuance of its bonds captioned "Seal Beach Public Financing Authority 2011
Wastewater Revenue Refunding Bonds, Series A," in the aggregate principal amount of $
(the "2011 Bonds ") under an Indenture of Trust, dated as of January 1, 2011 (the "2011
Indenture "), between the Authority and Bank of New York Mellon Trust Company, N.A., as
trustee (the "2011 Trustee ").
5. The Authority and the City wish to apply a portion of the proceeds of the 2011
Bonds, together with certain other moneys, to redeem the 2000 COPs maturing on and after June
1, 2011, as set forth in Exhibit B hereto, on February , 2011, and to discharge the City's
obligations to make the corresponding 2000 Installment Payments under the 2000 Installment
Sale Agreement.
6. The City and the Authority have determined that it is in their best financial interests
at this time to reduce the interest rate on its obligations by the current refunding and discharge of
all obligations with respect to the outstanding 2000 COPs and the 2000 Installment Sale
Agreement.
7. The Authority and the City wish to give these Instructions to the 2000 Trustee for the
purpose of establishing an irrevocable escrow fund and providing the terms and conditions
relating to the deposit and application of moneys and securities to provide for the prepayment of
the 2000 Installment Payments under the 2000 Installment Sale Agreement (under Sections 10.01
and 10.02 of the 2000 Installment Sale Agreement) and the redemption in full of the 2000 COPs
(under Section 4.01 of the 2000 Trust Agreement) on February , 2011.
NOW, THEREFORE, the Authority and the City hereby irrevocably instruct the 2000
Trustee as follows:
Section 1. Establishment of Escrow Fund. The 2000 Trustee is hereby directed to
establish and hold a special fund to be known as the "Escrow Fund." All cash and securities in
the Escrow Fund are hereby irrevocably pledged as a special trust fund for the prepayment of the
City's obligations under the 2000 Installment Sale Agreement pursuant to Sections 10.01 and
10.02 thereof, and the redemption of the outstanding 2000 COPs in accordance with Section 4.01
of the 2000 Trust Agreement. The 2000 Trustee shall have no lien upon or right of set off
against the securities and cash at any time on deposit in the Escrow Fund.
Section 2. Deposit into Escrow Fund; Investment of Amounts. (a) Concurrently with
delivery of the Bonds, the Authority shall cause the 2011 Trustee to transfer to the 2000 Trustee
for deposit into the Escrow Fund the amount of $ in immediately available funds to be
derived from a portion of the proceeds of sale of the 2011 Bonds. Additionally, the 2000 Trustee
shall transfer the following amounts into the Escrow Fund: (i) $ on deposit in the
Installment Payment Fund established under the 2000 Trust Agreement, and (ii) $ on deposit
in the Reserve Fund established under the 2000 Trust Agreement. As a result, the total amount
on deposit in the Escrow Fund as of the date hereof shall be $ .
[(b) The 2000 Trustee shall invest $_ of the amounts deposited in the Escrow Fund in
the securities described in Exhibit A hereto (the "Investment Security "). The Investment
Security shall be deposited with and held by the 2000 Trustee in the Escrow Fund solely for the
uses and purposes set forth herein. Earnings on the investment of amounts deposited in the
Escrow Fund shall be credited to and deposited in the Escrow Fund. Upon the receipt by the
2000 Trustee of any cash from the maturity of the Investment Security or otherwise, the 2000
Trustee shall hold such cash uninvested until required to make a payment pursuant to Section 4
hereof. The remaining amount on deposit in the Escrow Fund, being $0., shall be held by the
Trustee uninvested.]
•
2
Section 3. Proceedings for Redemption of 2000 COPs. The City hereby irrevocably
elects, and directs the 2000 Trustee, to redeem, on February , 2011, the outstanding 2000
COPs pursuant to the provisions of Section 4.01 of the 2000 Trust Agreement. The 2000 Trustee
shall give notice of this redemption on a timely basis in accordance with Section 4.03 of the 2000
Trust Agreement. 1
Section 4. Application of Funds to Redeem 2000 COPs. The 2000 Trustee shall apply
the amounts on deposit in the Escrow Fund to redeem the 2000 COPs maturing on and after June
1, 2011, on February _, 2011, at a redemption price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon.
Section 5. Transfer of Remaining Funds. On February ^, 2011, following the
payment, prepayment and redemption described above, and payment of any amounts then owed
to the 2000 Trustee, the 2000 Trustee shall withdraw any amounts remaining on deposit in the
Escrow Fund or in any other funds or accounts established under the 2000 Trust Agreement and
transfer those amounts, if any, to the Interest Account of the Bond Fund established under the
2011 Indenture, to be applied to pay interest next coming due and payable on the 2011 Bonds.
Once the amounts remaining in the Escrow Fund are transferred to the Interest Account pursuant
to the preceding sentence, the Escrow Fund shall be closed.
Section 6. Amendment. These Instructions shall be irrevocable by the Authority and the
City. These Instructions may be amended or supplemented by the Authority and the City, but
only if the Authority and the City file with the 2000 Trustee (a) an opinion of nationally
recognized bond counsel engaged by the Authority or the City stating that such amendment or
supplement will not, of itself, adversely affect the exclusion from gross income of interest
represented by the 2000 COPs or the 2011 Bonds under federal income tax law, and (b) a
certification of an independent accountant or independent financial adviser engaged by the
Authority or the City stating that such amendment or supplement will not affect the sufficiency of
funds invested and held hereunder to make the payments required by Section 4.
Section 7. Concerning the 2000 Trustee. The 2000 Trustee shall not be liable for any
loss from any investment made by it in accordance with the terms of these Instructions.
The 2000 Trustee shall not be liable for the recitals or representations contained in these
Instructions and shall not be responsible for the sufficiency of the Escrow Fund or the moneys
and Investment Security to pay the principal, interest and redemption premium on the 2000
COPs.
The protections, limitations from liability and indemnities provided to the 2000 Trustee
under the 2000 Trust Agreement shall be afforded to the 2000 Trustee in acting pursuant to these
Instructions and such provisions of the 2000 Trust Agreement are incorporated by reference
herein, including, without limitation, Article IX of the 2000 Trust Agreement.
3
Section 8. Governing Law. These Instructions shall be construed in accordance with
and governed by the Constitution and laws of the State of California.
Dated: January , 2011
CITY OF SEAL BEACH
By
City Manager
SEAL BEACH PUBLIC FINANCING
AUTHORITY
By
Executive Director
Accepted:
BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.
as 2000 Trustee
By: 3
Authorized Officer
4
EXHIBIT A
DESCRIPTION OF INVESTMENT SECURITY
Type Coupon Maturity Par Amount Total Purchase Price
A -1
EXHIBIT B
Outstanding 2000 COPs
Maturity Date Principal
(June 1) Amount Coupon
2011 $ 100,000
2012 105,000
2013 110,000
2014 115,000
2015 120,000
2016 130,000
2017 135,000
2018 145,000
2019 150,000
2020 160,000
2026 1,170,000
2030 1,120,000
B -1
Attachment "H"
Preliminary Official Statement
PRELIMINARY OFFICIAL STATEMENT DATED JANUARY _, 2011
o .o NEW ISSUE - BOOK -ENTRY ONLY RATING: S&P:" _ "
E See "CONCLUDING MATTERS — Rating."
0b
In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under existing law
u .0 (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the
. 0 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of
„
° the federal alternative minimum tax imposed on individuals and corporations, and (ii) interest on the Bonds is exempt
° from personal income taxation by the State of California. Interest on the Bonds may be subject to certain federal taxes
imposed only on certain corporations including the corporate alternative minimum tax on a portion of that interest. For
a more complete discussion of the tax aspects, see "CONCLUDING MATTERS — Tax Matters" herein."
p o $[principal amount]*
SEAL BEACH PUBLIC FINANCING AUTHORITY
o 2011 WASTEWATER REVENUE REFUNDING BONDS, SERIES A
o • Dated: Delivery Date Due: June 1, as shown on the inside front cover
The Seal Beach Public Financing Authority (the "Authority") will issue its 2011 Wastewater Revenue Refunding Bonds, Series
° N A (the "Bonds ") pursuant to an Indenture of Trust, dated as of January 1, 2011 (the "Indenture "), between the Authority and
o c Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee "). Proceeds of the Bonds will be used to (i) current
refund the City's outstanding 2000 Certificates of Participation (2000 Sewer System Project), originally issued in the aggregate
c o principal amount of $4,230,000, of which $3,460,000 is outstanding; (ii) fund the Reserve Account; and (iii) pay costs of
issuance of the Bonds. See "PLAN OF FINANCING."
• o
Pursuant to the Indenture, the Bonds are payable from and secured by, a pledge of Revenues received by the Authority under an
Installment Sale Agreement, dated as of January 1, 2011 (the "Installment Sale Agreement "), between the Authority and the
.y City of Seal Beach (the "City"), consisting primarily of installment payments (the "Installment Payments ") made by the City
under the Installment Sale Agreement. The City's Installment Payments are payable from and secured by Net Revenues of the
• U
H .y City's wastewater enterprise (the "Enterprise "), which are generally defined as Gross Revenues received from the Enterprise
cct
minus the amount required to pay all Operation and Maintenance Costs of the Enterprise. The Bonds are also secured by
° amounts on deposit in certain funds and accounts established pursuant to the Indenture. See "SECURITY FOR THE BONDS."
o The Bonds are subject to optional redemption, mandatory redemption from insurance, sale or condemnation proceeds,
.
and mandatory sinking fund redemption prior to their maturity as described herein.
`o
. o g The Bonds will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of
a g The Depository Trust Company, New York, New York ( "DTC "). DTC will act as securities depository of the Bonds.
o 'y Individual purchases of the Bonds may be made in book -entry form only in integral multiples of $5,000. Purchasers will not
0 receive certificates representing their interest in the Bonds purchased. Principal of and interest on the Bonds will be paid directly
to DTC by the Trustee. Principal of the Bonds is payable on their maturity dates set forth on the inside cover hereof. Interest on
the Bonds is payable on June 1 and December 1 of each year, commencing June 1, 2011. Upon its receipt of payments of
principal and interest, DTC is in turn obligated to remit such principal and interest to DTC participants for subsequent
• disbursement to the beneficial owners of the Bonds as described herein.
o THE BONDS ARE PAYABLE SOLELY FROM REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE.
THE BONDS DO NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO
czt
•� LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM
OF TAXATION. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, CITY, STATE OR
g a `," ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY
▪ 3 DEBT LIMITATIONS.
• g MATURITY SCHEDULE
En -
(see inside front cover)
E 3 This cover page contains information for quick reference only. It is not a summary of this issue. Potential purchasers
7,', read the entire Official Statement to obtain information essential to making an informed investment decision. See
„ ▪ o the section of this Official Statement entitled "BONDOWNERS' RISKS" for a discussion of certain of the risk factors
A o that should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the
:'. Bonds.
o
O Y The Bonds are offered, when, as and if issued, subject to the approval of Richards Watson & Gershon, A Professional Corporation,
Z a; Los Angeles, California, Bond CounseL In addition, certain legal natters will be passed on for the City by Richards, Watson &
5 o Gershon, A Professional Corporation, Los Angeles, California, as Disclosure CounseL It is anticipated that the Bonds will be
g , -F., vailable for delivery to DTC in New York, New York on or about January _ , 2011.
75 w • 2 Southwest Securities, Inc. • E - O 3 Dated: , 2011
S7296- 1134 \1305678v2.doc
$[principal amount]*
SEAL BEACH PUBLIC FINANCING AUTHORITY
2011 WASTEWATER REVENUE REFUNDING BONDS
SERIES A
MATURITY SCHEDULE*
$ Serial Bonds
Maturity Date Principal Interest CUSIPt
(June 1) Amount Rate Yield (Base: )
$ % Term Bonds due June 1, 20 Yield: % CUSIPt
•
Preliminary, subject to change.
t CUSIP Copyright 2011, American Bankers' Association. CUSIP data is provided by Standard & Poor's CUSIP Service
Bureau, a division of The McGraw -Hill Companies, Inc. Neither the City nor the City guarantees the accuracy of the
CUSIP data.
S7296-1 134\ 1305678v2. doc
CITY OF SEAL BEACH, CALIFORNIA
SEAL BEACH PUBLIC FINANCING AUTHORITY
CITY COUNCIL/BOARD OF DIRECTORS
David W. Sloan, Mayor
Michael P. Levitt, Vice Mayor
Charles J. Antos, Councilmember
Gordon A. Shanks, Councilmember
Gary A. Miller, Councilmember
CITY /AUTHORITY OFFICIALS
David Carmany, City Manager and Authority Executive Director
Robbeyn Bird, Director of Administrative Services and Authority Treasurer
Linda Devine, City Clerk/Authority Secretary
Sean Crumby, Public Works Director
Quinn Barrow, City Attorney
SPECIAL SERVICES
Bond Counsel
Richards Watson & Gershon
A Professional Corporation
Los Angeles, California
Disclosure Counsel
Richards, Watson & Gershon
A Professional Corporation
Los Angeles, California
Financial Advisor
M F Whipple & Associates
Laguna Hills, California
Trustee/Escrow Agent
Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
57296- 1134 \1305678v2. doc
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. Certain statements included or incorporated by reference in this Official
Statement and in any continuing disclosure by the City, any press release and in any oral statement made with the
approval of an authorized officer of the City or the Authority or any other entity described or referenced herein,
constitute "forward - looking statements." Certain statements included or incorporated by reference in this Official
Statement constitute "forward- looking statements." Such statements are generally identifiable by the terminology
used such as "plan," "expect," "anticipate," "estimate," "budget" or other similar words and include, but are not
limited to, statements under the caption "THE ENTERPRISE." The achievement of certain results or other
expectations contained in such forward - looking statements involves known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements described to be materially different from
any future results, performance or achievements expressed or implied by such forward - looking statements. While
the City has undertaken to provide certain on -going financial and other data pursuant to a continuing disclosure
agreement (see "CONCLUDING MATTERS — Continuing Disclosure" and APPENDIX F), the City does not plan
to issue any updates or revisions to those forward - looking statements if or when their expectations or events,
conditions or circumstances on which such statements are based change.
Preparation of this Official Statement. The information contained in this Official Statement has been
obtained from sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness.
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.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the City or the
Authority 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 City, the Authority 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.
•
Information as of Dated Date of 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 sale
made of the Bonds shall, under any circumstances, create any implication that there has been no change in the affairs
of the City or any other entity described or referenced in this Official Statement since the dated date shown on the
front cover. 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.
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
inside front cover and said public offering prices may be changed from time to time by the Underwriter.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS
CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES LAW OF ANY STATE.
S7296-1 134\ 1305678v2. doc
TABLE OF CONTENTS
INTRODUCTION 3 Budget Process and Billing
General 3 Procedures 3
Security for the Bonds 3 Rates and Charges 3
The City and the Enterprise 3 Enterprise User Composition 3
Continuing Disclosure 3 Connection Charges 3
Summaries of Documents 3 Financial Statements 3
Other Information 3 SEAL BEACH PUBLIC FINANCING
PLAN OF FINANCING 3 AUTHORITY 3
General 3 BONDOWNERS' RISKS 3
Plan of Refunding 3 Limited Obligations with Respect
Estimated Sources and Uses of to the Bonds 3
Funds 3 Forecasts 3
Annual Debt Service 3 Wastewater System Expenses And
THE BONDS 3 Collections 3
General 3 Casualty Risk; Earthquakes 3
Redemption* 3 Additional Bonds and Future Rate
Book -Entry Only System 3 Increases 3
Transfer, Registration and Limitations on Remedies 3
Exchange 3 Investment of Funds 3
Voter Initiatives -- State
SECURITY FOR THE BONDS 3 Constitutional Amendment 3
Revenues; Pledge of Revenues 3 Loss of Tax Exemption 3
Installment Payments; Application Secondary Market 3
of System Revenues 3 CONSTITUTIONAL PROVISIONS
Covenant to Budget and AFFECTING ENTERPRISE
Appropriate 3 REVENUES AND
Allocation of Revenues by Trustee 3 EXPENDITURES 3
Reserve Account 3 Article XIIIA and Article XIIIB 3
Installment Payments as Special
Obligation of the City; Proposition 218: Article XIIIC and
Obligations Absolute 3 Article XIIID 3
Additional Payments 3 CONCLUDING MATTERS 3
Rate Covenants 3 Absence of Litigation 3
Additional Debt 3 Continuing Disclosure 3
Proceeds of Insurance, Sale or Certain Legal Matters 3
Condemnation Awards 3 Tax Matters 3
Establishment of Rate Stabilization Financial Advisor 3
Fund 3 Underwriting 3
THE ENTERPRISE 3 Rating 3
General 3 Financial Statements 3
Existing Facilities 3 Miscellaneous 3
Capital Improvement Program 3 APPENDIX A — CITY OF SEAL BEACH
Management and Employee GENERAL INFORMATION A -1
Relations 3
Outstanding Indebtedness 3 APPENDIX B — CITY OF SEAL BEACH
Historical Number of Customers 3 COMPREHENSIVE ANNUAL
Top Ten Customers 3 FINANCIAL REPORT FOR FISCAL
i
S7296-1 134\ 13 05678v2. doc
YEAR ENDED JUNE 30, 2010
(EXCERPTS) B -1
APPENDIX C - FORM OF BOND
COUNSEL OPINION C -1
APPENDIX D - SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS D -1
APPENDIX E - DTC'S BOOK -ENTRY
ONLY SYSTEM E -1
APPENDIX F - FORM OF CONTINUING
DISCLOSURE AGREEMENT F -1
ii
S7296-1134 \ 1305 678v2. doc
[insert map]
S7296- 1134 \1305678v2.doc
$[principal amount]
SEAL BEACH PUBLIC FINANCING AUTHORITY
2011 WASTEWATER REVENUE REFUNDING BONDS
SERIES A
INTRODUCTION
This introduction does not purport to be complete, and reference is made to the body of this
Official Statement, appendices and the documents referred to herein for more complete information with
respect to matters concerning the Bonds. Potential investors are encouraged to read the entire Official
Statement. Capitalized terms used and not defined in this Introduction shall have the meanings assigned
to then elsewhere in this Official Statement.
General
This Official Statement, including the cover page, inside cover page and appendices, is provided
to furnish information in connection with the sale by the Seal Beach Public Financing Authority (the
"Authority ") of its $[principal amount]* aggregate principal amount of 2011 Wastewater Revenue
Refunding Bonds, Series A (the "Bonds "). The Bonds are being issued pursuant to (i) Title 1, Division 7,
Chapter 5, Article 4 of the Government Code (the "Act "), (ii) an Indenture of Trust, dated as of January 1,
2011 . (the "Indenture "), by and between the Authority and Bank of New York Mellon Trust Company,
N.A., as trustee (the "Trustee "), and (iii) an Installment Sale Agreement, dated as of January 1, 2011 (the
"Installment Sale Agreement "), between the Authority and the City of Seal Beach (the "City').
Proceeds from the sale of the Bonds will be used to (i) current refund the City's outstanding
Certificates of Participation (2000 Sewer System Project), originally issued in the aggregate principal
amount of $4,230,000, of which $3,460,000 is outstanding (the "2000 COPs "); (ii) fund the Reserve
Account; and (iii) pay costs of issuance of the Bonds. See "PLAN OF FINANCING."
The Bonds will be dated their date of delivery and will mature on June 1 in the years and in the
amounts shown on the inside front cover of this Official Statement. Interest on the Bonds will be
calculated at the rates shown on the inside cover page of this Official Statement, payable semiannually on
June 1 and December 1 (each, an "Interest Payment Date ") in each year, commencing on June 1, 2011, by
check mailed to the registered owners or upon the written request of the registered owner of $1,000,000 or
more in principal amount of Bonds, by wire transfer to an account in the United States which shall be
designated in such written request to the Trustee on or before the 15th day of the calendar month
immediately preceding the Interest Payment Date.
The Bonds will be executed and delivered 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 "THE BONDS — Book -Entry Only System" and "APPENDIX E —
DTC'S BOOK -ENTRY ONLY SYSTEM."
Security for the Bonds
Pursuant to the Indenture, the Bonds are payable from and secured by a first pledge of and lien on
Revenues received by the Authority under the Installment Sale Agreement, consisting primarily of
Installment Payment made by the City under the Installment Sale Agreement. The City's Installment
Payments are payable from and secured by Net Revenues of the City's wastewater enterprise ( "Net
• Preliminary, subject to change.
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Revenues "), which are generally defined as Gross Revenues received from the Enterprise minus the
amount required to pay all Operation and Maintenance Costs of the Enterprise. See "SECURITY FOR
THE BONDS."
The City will make certain covenants in the Installment Sale Agreement with respect to rates, fees
and charges for the use or service of the Enterprise, all as further described under "SECURITY FOR THE
BONDS — Rate Covenant."
A Reserve Account (the "Reserve Account ") will be established pursuant to the Indenture and
maintained by the Trustee. Upon issuance of the Bonds, the Trustee will deposit into the Reserve
Account from the sale proceeds of the Bonds, an amount equal to the initial Reserve Requirement for the
Bonds. See "SECURITY FOR THE BONDS" and "BONDOWNERS' RISKS — Limited Obligations
with Respect to the Bonds."
Under the terms of the Indenture, the City may at any time issue Additional Bonds on a parity
with the Bonds, provided that the City complies with certain conditions under the Indenture. See
"SECURITY FOR THE BONDS — Additional Bonds."
THE BONDS ARE PAYABLE SOLELY FROM REVENUES AND CERTAIN FUNDS HELD
UNDER THE INDENTURE. THE BONDS DO NOT 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. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY,
CITY, STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS.
The City and the Enterprise
The City encompasses 11.97 square miles and is located on the coast of the northwestern portion
of Orange County. Neighboring communities include Huntington Beach, Westminster, Los Alamitos and
Long Beach. It is approximately 30 miles southeast of downtown Los Angeles. The City was
incorporated in 1917, and became Charter City in 1947. The City operates under a Mayor /City Council -
City Manager form of government. The City is governed by a five- member City Council, elected at large
to serve four -year alternating terms. As of January 1, 2010, the City had a population of approximately
26,010, according to California Department of Finance estimates. See "APPENDIX A — CITY OF SEAL
BEACH GENERAL INFORMATION" for more information about the City.
The City owns and operates the Enterprise. The Enterprise collects wastewater generated by the
residential, commercial, governmental and industrial members of the City and transports the wastewater
for treatment to the Orange County Sanitation District. The Enterprise serves the City's population
through _ residential, _ commercial, _ school and industrial parcels. See "THE ENTERPRISE."
Continuing Disclosure
The City has covenanted in a Continuing Disclosure Agreement to prepare and deliver an annual
report and notices of certain material events to the Municipal Securities Rulemaking Board. See
"CONCLUDING MATTERS — Continuing Disclosure" and "APPENDIX F — FORM OF CONTINUING
DISCLOSURE AGREEMENT."
Summaries of Documents
This Official Statement contains descriptions of the Bonds, the Indenture, the Installment Sale
Agreement and various other agreements and documents. The descriptions and summaries of documents
contained in this Official Statement do not purport to be comprehensive or definitive, and reference is
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made to each such document for the complete details of all terms and conditions. All statements herein
are qualified in their entirety by reference to each such document and, with respect to certain rights and
remedies, to laws and principles of equity relating to or affecting creditors' rights generally. Capitalized
terms not defined herein shall have the meanings set forth in the Indenture. Copies of the Indenture and
the Installment Sale Agreement are available for inspection during business hours at the corporate trust
office of the Trustee in Los Angeles, California.
Other Information
This Official Statement speaks only as of its date as set forth on the cover, and the information
and expressions of opinion are subject to change without notice, and neither the delivery of this Official
Statement nor any sale of Bonds shall under any circumstances create any implication that there has been
no change in the affairs of the City since the date of this Official Statement. Unless otherwise expressly
noted, all references to internet websites in this Official Statement, including without limitation, the City's
website, are shown for reference and convenience only, and none of their content is incorporated by
reference in this Official Statement. The information contained within such websites has not been
reviewed by the City and the City makes no representation regarding such information.
PLAN OF FINANCING
General
The Bonds are being issued in order to: (i) refinance the City's outstanding Certificates of
Participation (2000 Sewer System Project), which were . originally issued in the aggregate principal
amount of $4,230,000, of which $3,460,000 remain outstanding (the "2000 COPs "); (ii) fund a deposit to
the Reserve Account; and (iii) pay cost of issuance of the Bonds.
Plan of Refunding
The Bonds are being issued to current refund all of the remaining outstanding 2000 COPs in the
amount of $3,460,000. Proceeds of the 2000 COPs were used to fmance certain improvements to the
Enterprise. A portion of the proceeds of the Bonds, together with certain other moneys to be released
from funds relating to the 2000 COPs will be deposited in an escrow fund (the "Escrow Fund ") created
pursuant to Irrevocable Refunding Instructions, dated January _, 2011, by and among the City, the
Authority and Bank of New York Mellon Trust Company, N.A., as escrow bank. Moneys in the Escrow
Fund, together with interest earnings thereon, will be sufficient to pay all outstanding 2000 COPs in full
on February _, 2011, at a redemption price equal to 100% of the remaining principal amount to be
redeemed, plus accrued interest thereon to the date of redemption.
Estimated Sources and Uses of Funds
The following table shows the estimated sources and uses of the proceeds from the sale of the
Bonds:
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Sources:
Par amount of the Bonds $
[Less /plus]: Original issue [discount/premium]
Less: Underwriter's Discount
[Transfer from prior Reserve Account]
[Transfer from prior Debt Service Account]
Total Sources $
Uses: $
Escrow Fund
Reserve Account
Costs of Issuance Account
Total Uses $
(1) An amount equal to the initial Reserve Requirement.
(2) Costs of Issuance include fees and expenses for Bond Counsel, Disclosure Counsel, Financial Advisor,
Trustee, printing expenses, rating fee and other costs.
Annual Debt Service
The following table shows the scheduled annual debt service for the Bonds:
Bond Year Ending Total Annual
June 1 Principal* Interest *I Debt Service
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total $[principal
amount].00
* Preliminary, subject to change.
(1) Assumes a true interest cost of %.
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THE BONDS
General
The Bonds will be issued in the aggregate principal amount and will mature on the dates and bear
interest at the rates per annum as set forth on the inside front cover of this Official Statement. The Bonds
will be issued in integral multiples of $5,000 and will be dated their date of delivery. Interest on the
Bonds will be calculated on the basis of a 360 -day year of twelve 30 -day months and will be payable on
June 1 and December 1 of each year, commencing June 1, 2011 (each an "Interest Payment Date "), until
maturity or earlier redemption.
While the Bonds are subject to the book -entry system, the principal, interest and any prepayment
premium with respect to the Bonds will be paid by the Trustee to DTC for subsequent disbursement to
beneficial owners of the Bonds. See "— Book -Entry Only System" below.
Interest is payable on each Interest Payment Date to the persons in whose names the ownership of
the Bonds is registered on the Registration Books at the close of business on the immediately preceding
Record Date, except as provided below. Interest on any Bond which is not punctually paid or duly
provided for on any Interest Payment Date is payable to the person in whose name the ownership of such
Bond is registered on the Registration Books at the close of business on a special record date for the
payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by
first -class mail not less than 10 days prior to such special record date.
The Trustee will pay interest on the Bonds by check of the Trustee mailed by first class mail,
postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses
shown on the Registration Books as of the close of business on the preceding Record Date. At the written
request of the Owner of Bonds in an aggregate principal amount of at least $1,000,000, which written
request is on file with the Trustee as of any Record,Date, the Trustee will pay interest on such Bonds on
each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of
a financial institution within the United States of America as specified in such written request, which
written request will remain in effect until rescinded in writing by the Owner.
The Trustee will pay principal of the Bonds in lawful money of the United States of America by
check of the Trustee upon presentation and surrender thereof at the Office of the Trustee.
Interest on the Bonds is payable from the Interest Payment Date next preceding the date of
authentication thereof unless: (a) a Bond is authenticated on or before an Interest Payment Date and after
the close of business on the preceding Record Date, in which event it will bear interest from such Interest
Payment Date; (b) a Bond is authenticated on or before the first Record Date, in which event interest
thereon will be payable from the Closing Date, or (c) interest on any Bond is in default as of the date of
authentication thereof, in which event interest thereon will be payable from the date to which interest has
been paid in full, payable on each Interest Payment Date.
Redemption*
Optional Redemption from any Source of Available Funds. The Bonds maturing on or before
June 1, 20 , are not subject to optional redemption prior to their respective stated maturity dates. The
Bonds maturing on or after June 1, 20 — , are subject to redemption in whole, or in part at the Written
Request of the Authority, among maturities on such basis as the Authority may designate and by lot
within a maturity, at the option of the Authority, on any date on or after June 1, 20 — , from any available
* Preliminary; subject to change.
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source of funds, at a redemption price equal to 100% of the principal amount of the Bonds to be
redeemed, plus accrued interest to the date of redemption, without premium.
Redemption From Proceeds of Insurance, Sale and Condemnation. The Bonds are subject to
mandatory redemption, on any date, in whole, or in part on a pro rata basis among maturities, from the net
proceeds of insurance, sale or condemnation credited toward the prepayment of the Installment Payments
by the City under the Installment Sale Agreement. The Bonds are subject to redemption under this
provision at a redemption price equal to the principal amount represented thereby to be prepaid, without
premium, together with accrued interest represented thereby to the redemption date.
Mandatory Sinking Fund Redemption. The Bonds maturing on June 1, 20 (the "Term Bonds "),
are subject to mandatory redemption in part by lot, on June 1 in each of the years as set forth in the
following table, from deposits made for such purpose under the Indenture, at a redemption price equal to
the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date,
without premium (or in lieu of redemption may be purchased as described below), in the aggregate
respective principal amounts and on the respective dates as set forth in the following table.
However, if some but not all of the Term Bonds have been redeemed through optional
redemption or mandatory redemption from proceeds of insurance, sale or condemnation, as described
above, the total amount of all future payments with respect to such Term Bonds will be reduced by the
aggregate principal amount of such Tenn Bonds so redeemed, to be allocated among such payments in
integral multiples of $5,000 as determined by the Authority.
Term Bonds maturing on June 1, 20_
Redemption Date
(June 1) Principal Amount
20 (Maturity)
Purchase in Lieu of Redemption. In lieu of redemption of the Term Bonds as described above,
amounts on deposit in the Bond Fund (to the extent not required to be deposited by the Trustee in the
Interest Account or the Principal Account during the current Bond Year) may also be used and withdrawn
by the Authority, upon the Written Request of the Authority delivered to the Trustee, at any time for the
purchase of such Term Bonds at public or private sale as and when and at such prices (including
brokerage and other charges and including accrued interest) as the Authority may in its discretion
determine. The par amount of any of such Term Bonds so purchased by the Authority in any twelve -
month period ending on April 1 in any year will be credited toward and will reduce the par amount of
such Term Bonds required to be redeemed through mandatory sinking fund redemption under the
Indenture on the next succeeding June 1.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the
redemption of less than all of the Bonds of a single maturity, the Trustee will select the Bonds of that
maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate.
For purposes of such selection, the Trustee will treat each Bond as consisting of separate $5,000 portions
and each such portion will be subject to redemption as if such portion were a separate bond.
Notice of Redemption. The Trustee will mail notice of redemption of the Bonds by first class
mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the
respective Owners of any Bonds designated for redemption at their addresses appearing on the
Registration Books and to one or more Securities Depositories and to the Information Services.
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Neither the failure to receive any redemption notice nor any defect therein will affect the
sufficiency of the proceedings for redemption of the Bonds or the cessation of accrual of interest from and
after the redemption date.
Rescission of Redemption Notice. The Authority has the right to rescind any optional redemption
or redemption from proceeds of insurance, sale and condemnation by written notice to the Trustee on or
prior to the date fixed for redemption. Any notice of redemption will be cancelled and annulled if for any
reason funds are not available on the date fixed for redemption for the payment in full of the Bonds then
called for redemption, and such cancellation will not constitute an Event of Default under the Indenture.
The Trustee will mail notice of rescission of redemption in the same manner notice of redemption was
originally provided.
Effect of Redemption. If notice of redemption has been duly given as 'provided in the Indenture,
and moneys for payment of the redemption price of, together with interest accrued to the date fixed for
redemption on, including any applicable premium, the Bonds (or portions thereof) so called for
redemption are held by the Trustee, on the redemption date designated in the redemption notice, then the
Bonds (or portions thereof) so called for redemption will become due and payable, interest on the Bonds
so called for redemption will cease to accrue, those Bonds (or portions thereof) will cease to be entitled to
any benefit or security under the Indenture, and the Owners of those Bonds will have no rights in respect
thereof except to receive payment of the redemption price thereof.
Book -Entry Only System
The Bonds will be issued as one fully registered bond certificate without coupons for each
maturity (unless the Bonds of such maturity bear different interest rates, then one certificate for each
interest rate among such maturity) and, when issued, will be registered in the name of Cede & Co., as
nominee of DTC. DTC will act as securities depository of the Bonds. Individual purchases may be made
in book -entry form only, in integral multiples of $5,000. Purchasers will not receive certificates
representing their interest in the Bonds purchased. Principal and interest will be paid to DTC, which will
in turn remit such principal and interest to its participants for subsequent disbursement to the beneficial
owners of the Bonds. So long as DTC's book -entry system is in effect with respect to the Bonds, notices
to Owners of the Bonds by the City or the Trustee will be sent to DTC. Notices and communication by
DTC to its participants, and then to the beneficial owners of the Bonds, will be governed by arrangements
among them, subject to then effective statutory or regulatory requirements. See "APPENDIX E – DTC'S
BOOK -ENTRY ONLY SYSTEM."
In the event (a) DTC determines not to continue to act as securities depository for the Bonds, or
(b) the City determines that the DTC shall no longer so act, then the City will discontinue the book -entry
system with DTC. If the City fails to identify another qualified securities depository to replace DTC, 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 Cede & Co., but shall be registered in whatever name or names persons
transferring or exchanging Bonds shall designate, in accordance with the provisions of the Indenture of
Trust.
Transfer, Registration and Exchange
See "APPENDIX A — Summary of Principal Legal Documents" for a description of the
provisions of the Indenture relating to the transfer, registration and exchange of the Bonds.
SECURITY FOR THE BONDS
The general fund of the City is not liable and neither the credit nor the taxing power of the City is
pledged for the payment of the principal of and interest on the Bonds. The Owners of the Bonds may not
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compel the exercise of the taxing power by the City or the forfeiture of its property. The principal of and
interest on the Bonds are not a debt of the Authority or the City, nor a legal or equitable pledge, charge,
lien or encumbrance, upon any of their respective property, or upon any of their income, receipts, or
revenues except the Revenues and other amounts pledged under the Indenture.
This section provides summaries of the security for the Bonds and certain provisions of the
Installment Sale Agreement and the Indenture. See "APPENDIX A — Summary of Principal Legal
Documents" for a more complete summary of the Installment Sale Agreement and the Indenture.
Capitalized terms used but not defined in this section have the meanings given in APPENDIX A.
Revenues; Pledge of Revenues
Pledge of Revenues and Other Amounts. Subject only to the provisions of the Indenture
permitting the application thereof for the purposes and on the terms and conditions set forth therein, all of
the Revenues and all amounts held in any fund or account established under the Indenture are pledged to
secure the payment of the principal of and interest and premium (if any) on the Bonds and any
Outstanding Additional Bonds (collectively, the `Bonds ") in accordance with their terms and the
provisions of the Indenture.
This pledge constitutes a lien on and security interest in the Revenues and such amounts and will
attach, be perfected and be valid and binding from and after the Closing Date, without the need for any
physical delivery thereof or further act.
Definition of Revenues. "Revenues" are defined in the Indenture as follows:
(a) all amounts received by the Authority or the Trustee pursuant or with respect to the
Installment Sale Agreement, including, without limiting the generality of the foregoing, all of the
Installment Payments (including both timely and delinquent payments, any late charges, and whether paid
from any source, but excluding any Additional Payments), prepayments, insurance proceeds,
condemnation proceeds, and
(b) all interest, profits or other income derived from the investment of amounts in any fund
or account established pursuant to the Indenture.
Assignment to Trustee. Under the Indenture the Authority will irrevocably transfer, assign and
set over to the Trustee, without recourse to the Authority, all of its rights in the Installment Sale
Agreement (excepting only the Authority's rights to Additional Payments, release and indemnification by
the City, and the payment of attorneys' fees and expenses under the Installment Sale Agreement),
including but not limited to all of the Authority's rights to receive and collect all of the Installment
Payments.
The Trustee is entitled to collect and receive all of the Installment Payments, and any Installment
Payments collected or received by the Authority will be deemed to be held, and to have been collected or
received, by the Authority as the agent of the Trustee and will immediately be paid by the Authority to the
Trustee.
The Trustee is also entitled to and must, subject to the provisions of the Indenture, take all steps,
actions and proceedings which the Trustee determines to be 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 City under the Installment Sale Agreement.
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Installment Payments; Application of System Revenues
Installment Payments. Under the Installment Sale Agreement, the City will irrevocably pledge,
charge and assign all of the Net Revenues and all moneys on deposit in any of the funds and accounts
established and held by the Trustee under the Indenture to the punctual payment of the Installment
Payments. This pledge, charge and assignment constitute a lien on the Net Revenues and such other
moneys for the payment of the Installment Payments in accordance with the terms of the Installment Sale
Agreement, on a parity with the pledge and lien which secures any Parity Obligations.
Net Revenues, Gross Revenues and Operation and Maintenance Costs.
"Net Revenues" means, for any period, an amount equal to all of the Gross Revenues received
during such period minus the amount required to pay all Operation and Maintenance Costs becoming
payable during such period.
"Gross Revenues" means all gross charges received for, and all other gross income and receipts
derived by the City from, the ownership and operation of the Enterprise or otherwise arising from the
Enterprise, including but not limited to investment earnings.
The term "Gross Revenues" does not include (a) developer impact fees, (b) the proceeds of any
ad valorem property taxes levied for the purpose of paying general obligation bonds of the City relating to
the Enterprise, and (c) the proceeds of any special assessments or special taxes levied upon real property
within any improvement district served by the City levied for the purpose of paying special assessment
bonds or special tax obligations of the City relating to the Enterprise.
"Operation and Maintenance Costs means the reasonable and necessary costs and expenses paid
by the City for maintaining and operating the Enterprise, including but not limited to:
(a) costs of utilities, including the costs of electricity and other forms of energy supplied to
the Enterprise,
(b) the reasonable expenses of management and repair and other costs and expenses
necessary to maintain and preserve the Enterprise in good repair and working order, and
(c) the reasonable administrative costs of the City attributable to the operation and
maintenance of the Enterprise, including insurance and other costs described in the Installment Sale
Agreement.
"Operation and Maintenance Costs" do not include (i) debt service payable on obligations
incurred by the City with respect to the Enterprise, including but not limited to the Installment Payments
and any Parity Obligations, (ii) depreciation, replacement and obsolescence charges or reserves therefor,
and (iii) amortization of intangibles or other bookkeeping entries of a similar nature.
Installment Payment Date. Under the Installment Sale Agreement the City is required to make
each Installment Payment with the Trustee by the 3rd Business Day immediately preceding each Interest
Payment Date on the Bonds.
Application of Enterprise Revenues. Under the Installment Sale Agreement the City is
required to deposit all of the Gross Revenues of the Enterprise in the Enterprise Fund (which has been
established and is held and maintained by the City with respect to the Enterprise) immediately upon
receipt.
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The City will apply amounts in the Enterprise Fund as set forth in the Installment Sale Agreement
and any Parity Obligation Documents, and will apply amounts on deposit in the Enterprise Fund to pay
when due the following amounts in the following order of priority:
(i) all Operation and Maintenance Costs;
(ii) the Installment Payments and all payments of principal of and interest on any Parity
Obligations;
(iii) to the Trustee the amount of any deficiency in the Reserve Account established for the
Bonds and in any reserve fund established for Parity Obligations, the notice of which deficiency has been
given to the City in accordance with the Indenture and the related Parity Obligations Documents,
respectively;
(iv) any other payments required to comply with the provisions of the Installment Sale
Agreement and any Parity Obligations Documents; and
(v) any other purposes authorized under the Installment Sale Agreement.
No Preference or Priority. Under the Installment Sale Agreement, payment of the Installment
Payments and the principal of and interest on any Parity Obligations will be made without `preference or
priority among the Installment Payments and such Parity Obligations. If the amount of Net Revenues on
deposit in the Enterprise Fund is any time insufficient to enable the City to pay when due the Installment
Payments and the principal of and interest on any Parity Obligations, such payments will be made on a
pro rata basis.
Other Uses of Net Revenues Permitted. Under the Installment Sale Agreement the City will
manage, conserve and apply the Gross Revenues on deposit in the Enterprise Fund in such a manner that
all deposits required to be made as described above will be made at the times and in the amounts so
required. Subject to the foregoing sentence, so long as no Event of Default has occurred and is continuing,
the City may use and apply moneys in the Enterprise Fund for (i) the payment of any subordinate
obligations or any unsecured obligations, (ii) the acquisition and construction of improvements to the
Enterprise, (Hi) the prepayment of any other obligations of the City relating to the Enterprise, or (iv) any
other lawful purposes of the City.
Covenant to Budget and Appropriate
During the Term of the Installment Sale Agreement, the City is required to adopt all necessary
budgets and make all necessary appropriations of the Installment Payments from the Net Revenues of the
Enterprise. If any Installment Payment requires the adoption by. the City of any supplemental budget or
appropriation, the City will promptly adopt the same.
The covenants on the part of the City contained in this provision of the Installment Sale
Agreement constitute duties imposed by law and it is the duty of each and every public official of the City
to take such actions and do such things as are required by law in the performance of the official duty of
such officials to enable the City to carry out and perform these covenants and agreements.
Allocation of Revenues by Trustee
Transfers from the Bond Fund. Under the Indenture, on or before each Interest Payment Date,
the Trustee will transfer from the Bond Fund and deposit into the following respective accounts the
following amounts in the following order of priority:
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- (a) Deposit to Interest Account. The Trustee will deposit in the Interest Account an amount
required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the
amount of interest becoming due and payable on such Interest Payment Date on all Bonds then
Outstanding.
(b) Deposit to Principal Account. The Trustee will deposit in the Principal Account
an amount required to cause the aggregate amount on deposit in the Principal Account to equal
the principal amount of the Bonds coming due and payable on each June 1, including the aggregate
principal amount of Term Bonds that are subject to mandatory sinking fund redemption on that June 1.
(c) Deposit to Reserve Account. The Trustee will deposit in the Reserve Account an amount,
if any, required to cause the amount on deposit in the Reserve Account to be equal to the Reserve
Requirement.
Application of Interest Account. All amounts in the Interest Account will be used and withdrawn
by the Trustee solely for the purpose of paying interest on the Bonds as it comes due and payable
(including accrued interest on any Bonds purchased or redeemed prior to maturity).
Application of Principal Account. All amounts in the Principal Account will be used and
withdrawn by the Trustee solely to pay the principal amount of the Bonds on their respective maturity
dates, and the principal amount of Term Bonds that are subject to mandatory sinking fund redemption on
their respective redemption dates.
Reserve Account
General' Under the Indenture, a Reserve Account of the Bond Fund has been established for the
Bonds (the "Reserve Account "), and is held in trust by the Trustee. The Authority currently intends to
satisfy the Reserve Require ment for the Bonds through the deposit of a portion of the proceeds of the
Bonds equal to the Reserve Requirement concurrently with issuance of the Bonds.
Reserve Requirement. The "Reserve Requirement" is defined in the Indenture, as of the date of
calculation by the Authority or the City, as the lesser of the following:
(i) Maximum Annual Debt Service (as defined in the Indenture) on the Bonds (excluding
from the calculation thereof Governmental Loans and Parity Obligations other than Bonds),
(ii) 10% of the total of the proceeds of the Bonds (excluding from the calculation thereof
Governmental Loans and Parity Obligations other than Bonds), and
(iii) 125% of average Annual Debt Service on the Bonds (excluding from the calculation
thereof Governmental Loans and Parity Obligations other than Bonds).
However, in no event may the Authority or the City, in connection with the issuance of Parity
Obligations in the form of Additional Bonds, be obligated to deposit an amount in the Reserve Account
which is in excess of the amount permitted by the applicable provisions of the Code to be so deposited
from the proceeds of tax- exempt bonds without having to restrict the yield of any investment purchased
with any portion of such deposit. If such amount of any deposit into the Reserve Account is so limited, the
Reserve Requirement will, in connection with the issuance of such Additional Bonds, be increased only
by the amount of such deposit.
• Application of Reserve Account Generally. All amounts in the Reserve Account will be used and
withdrawn by the Trustee solely for the purpose of
11
(i) paying principal of or interest on the Bonds, including the principal amount of any Term
Bonds subject to mandatory sinking fund redemption, when due and payable to the extent that moneys
deposited in the Interest Account or Principal Account are not sufficient for such purpose, and
(ii) making the final payments of principal of and interest on the Bonds.
If the amounts on deposit in the Reserve Account are insufficient at any time to pay the full
amount of principal of and interest on the Bonds then required to be paid from the Reserve Account, the
Trustee will apply such amounts first, to the payment of interest and second, to the payment of principal.
On the date on which all. Bonds are retired under the Indenture or provision is made therefor under the
Indenture, after payment of any amounts then owed to the Trustee, all moneys then on deposit in the
Reserve Account will be withdrawn by the Trustee and paid to the City as a refund of overpaid
Installment Payments.
Transfer of Excess Amounts. If, on any date, moneys on deposit in the Reserve Account,
together with amounts then on deposit in the Bond Fund, are sufficient to pay all Outstanding Bonds,
including all principal thereof, and interest thereon, the Trustee will, at the Written Request of the
Authority, transfer all amounts then on deposit in the Reserve Account, together with such amounts in the
Bond Fund, to the Redemption Fund to be applied to the optional redemption of the Bonds in accordance
with the Indenture.
The Trustee will transfer any amounts on deposit in the Reserve Account in excess of the Reserve
Requirement, including amounts derived from the investment of moneys in the Reserve Account, to the
Bond Fund.
Substitution of Qualified Reserve Account Credit Instrument. Under the Indenture, the
Authority •will have the right at any time to cause the Trustee to release any cash (including Permitted
Investments) on deposit from the Reserve Account, in whole or in part, by tendering to the Trustee the
following: (1) a "Qualified Reserve Account Credit Instrument" (as defined in the Indenture), and (2) an
opinion of Bond Counsel stating that such release will not, of itself, cause the interest on the Bonds to
become includable in gross income for purposes of federal income taxation.
Upon tender of these items to the Trustee, the Trustee will transfer such funds from the Reserve
Account to or upon the direction of the Authority. Prior to the expiration of any Qualified Reserve
Account Credit Instrument, or to the reduction of the rating of the provider thereof below the rating on the
Bonds, the Authority will be obligated either (a) to replace such Qualified Reserve Account Credit
Instrument with a new Qualified Reserve Account Credit Instrument, or (b) to deposit or cause to be
deposited with the Trustee an amount of funds such that the funds on deposit in the Reserve Account,
together with all Qualified Reserve Account Credit Instruments held by the Trustee, at least equal the
Reserve Requirement.
If a Qualified Reserve Account Credit Instrument is available to be drawn upon for only one or
more particular issues of Bonds, a separate subaccount in the Reserve Account may be established for
such issue or issues. In such case, the calculation of the Reserve Requirement for such issue of Bonds
shall be made only with respect to such issue, and the calculation of the Reserve Requirement with
respect to all other Bonds will exclude the debt service on such issue of Bonds.
Additionally, the Reserve Account may be maintained in the form of one combined Reserve
Account or in the form of one or more separate sub - accounts established for the purpose of holding the
proceeds of separate issues of Bonds in conformity with applicable provisions of the Code to the extent
directed by the Authority or the City in writing to the Trustee.
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Installment Payments as Special Obligation of the City; Obligations Absolute
Special Limited Obligation. The City's obligation to pay the Installment Payments and any other
amounts coming due and payable under the Installment Sale Agreement is a special obligation of the City
limited solely to the Net Revenues. Under no circumstances is the City required to advance moneys
derived from any source of income other than the Net Revenues and other sources specifically identified
in the Installment Sale Agreement for the payment of the Installment Payments and such other amounts.
No other funds or property of the City are liable for the payment of the Installment Payments and any
other amounts coming due and payable under the Installment Sale Agreement.
Absolute and Unconditional Obligations. The obligations of the City to pay the Installment
Payments from the Net Revenues and to perform and observe the other agreements contained in the
Installment Sale Agreement are absolute and unconditional and are not subject to any defense or any right
of set -off, counterclaim or recoupment arising out of any breach by the Authority or the Trustee of any
obligation to the City or otherwise with respect to the Enterprise, whether under the Installment Sale
Agreement or otherwise, or out of indebtedness or liability at any time owing to the City by the Authority
or the Trustee.
No Suspension of Payments or Termination of Installment Sale Agreement. Until all of the
Installment Payments, all of the Additional Payments and all other amounts coming due and payable
under the Installment Sale Agreement are fully paid or prepaid, the City (a) will not suspend or
discontinue payment of any Installment Payments, Additional Payments or such other amounts, (b) will
perform and observe all other agreements contained in the Installment Sale Agreement, and (c) will not
terminate the Installment Sale Agreement for any cause, including, without limiting the generality of the
foregoing, the occurrence of any acts or circumstances that may constitute failure of consideration,
eviction or constructive eviction, destruction of or damage to the Enterprise, sale of the Enterprise, the
taking by eminent domain of title to or temporary use of any component of the Enterprise, commercial
frustration of purpose, any change in the tax law or other laws of the United States of America or the State
of California or any political subdivision of either thereof, or any failure of the Authority or the Trustee to
perform and observe any agreement, whether express or implied, or any duty; liability or obligation
arising out of or connected with the Indenture or the Installment Sale Agreement.
No Release of Authority. The foregoing provisions do not release the Authority from the
performance of any of the agreements on its part contained in the Installment Sale Agreement or in the
Indenture, and if the Authority fails to perform any such agreements, the City may institute such action
against the Authority as the City deems necessary to compel performance, so long as such action does not
abrogate the obligations of the City contained in the preceding paragraph. The City may, however, at its
cost and expense and in its name or in the name of the Authority, prosecute or defend any action or
proceeding or take any other action involving third persons which the City deems reasonably necessary in
order to secure or protect the City's rights under the Installment Sale Agreement, and in such event the
Authority will cooperate fully with the City and take such action necessary to effect the substitution of the
City for the Authority in such action or proceeding if the City may request.
Additional Payments
Under the Installment Sale Agreement, in addition to the Installment Payments, the City is
required to pay when due the following amounts to the following parties:
(i) to the Authority, all costs and expenses incurred by the Authority to comply with the
provisions of the Installment Sale Agreement and the Indenture;
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(ii) to the Trustee upon request therefor, all of its fees, costs and expenses payable as a result
of the performance of and compliance with its duties under the Installment Sale Agreement or under the
Indenture or any related documents;
(iii) to the Authority and the Trustee, all amounts required . to indemnify the Authority and the
Trustee under the Installment Sale Agreement and the Indenture;
(iv) all costs and expenses of auditors, engineers and accountants for professional services
relating to the Enterprise or the Bonds.
The Additional Payments are payable from, but are not secured by a pledge or lien upon, the Net
Revenues.
Rate Covenants
Sum Sufficient Under the Installment Sale Agreement the City is required to fix, prescribe,
revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during
each Fiscal Year, which are at least sufficient, after making allowances for contingencies and error in the
estimates, to yield Gross Revenues sufficient to pay the following amounts in the following order of
priority:
(i) All Operation and Maintenance Costs estimated by the City to become due and payable
in such Fiscal Year;
(ii) All Installment Payments and all payments of principal of and interest on any Parity
Obligations as they become due and payable during such Fiscal Year, without preference or priority,
except to the extent such Installment Payments or the principal of and interest on such Parity Obligations
are payable from the proceeds of the Bonds or such Parity Obligations, as applicable, or from any other
source of legally available funds of the City (other than the Gross Revenues) that have been deposited
with the Trustee for such purpose before the beginning of that Fiscal Year;
(iii) All amounts, if any, required to restore the balance in the Reserve Account to the full
amount of the Reserve Requirement; and
(iv) All payments required to meet any other obligations of the City which are charges, liens,
encumbrances upon, or which are otherwise payable from, the Gross Revenues or the Net Revenues
during such Fiscal Year, except to the extent other sources of funds are reserved or encumbered therefore.
Coverage from Net Revenues. In addition, the City will fix, prescribe, revise and collect rates,
fees and charges for the services and facilities furnished by the Enterprise during each Fiscal Year that are
sufficient, after making allowances for contingencies and error in the estimates, to yield Net Revenues
that are at least equal to 120% of the amounts described in the preceding clause (ii) and clause (iii) for
such Fiscal Year. For purposes of this paragraph, the amount of Net Revenues for a Fiscal Year will be
computed on the basis that (1) any transfers into the Wastewater Enterprise Fund in that Fiscal Year from
the Rate Stabilization Fund are included in the calculation of Net Revenues, as provided in the Installment
Sale Agreement, and (2) any deposits into the Rate Stabilization Fund in that Fiscal Year are deducted
from the amount of Net Revenues, but only to the extent such deposits are made from Gross Revenues
received by the City during that Fiscal Year.
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Additional Debt
Superior and Subordinate Obligations. Under the Installment Sale Agreement, the City may not
issue or incur any additional bonds or other obligations during the Term of the Installment Sale
Agreement having any priority in payment of principal or interest out of the Gross Revenues or the Net
Revenues over the Installment Payments.
Nothing in the Installment Sale Agreement is intended or may be construed to limit or affect the
ability of the City to issue, enter into or incur (a) Governmental Loans payable on a priority basis to
payments due under the Installment Sale Agreement or in connection with any Parity Obligations, (b)
Parity Obligations, or (c) obligations which are either unsecured or which are secured by an interest in the
Net Revenues which is junior and subordinate to the pledge of and lien upon the Net Revenues
established under the Installment Sale Agreement.
Conditions for Issuance of Parity Obligations. Under the Installment Sale Agreement, except for
obligations incurred to prepay or discharge the Installment Payments or any Parity Obligations, the City
may not issue or incur any Parity Obligations during the Term of the Installment Sale Agreement unless
all of the following conditions are satisfied:
(a) No Event of Default has occurred and is continuing.
(b) The Net Revenues, calculated in accordance with sound accounting principles, as shown
by the books of the City for the most recent completed Fiscal Year for which audited financial statements
of the City are available, or for any more recent consecutive 12 -month period selected by the City, in
either case verified by a certificate or opinion of an Independent Accountant or a Fiscal Consultant, plus
(at the option of the City) any Additional Revenues, at least equal 120% of Maximum Annual Debt
Service (including the Parity Obligations then proposed to be issued).
(c) There must be deposited in a reserve fund for the security of such Parity Obligations an
amount equal to the least of (i) the maximum amount of debt service required to be paid by the City with
respect to such Parity Obligations during any Fiscal Year, (ii) 125% of average annual debt service
required to be paid by the City with respect to such Parity Obligations during each fiscal year, and (iii)
10% of the net proceeds of such Parity Obligations.
If the Parity Obligations are being issued solely to refund outstanding Parity Obligations, and the
resulting Annual Debt Service for each Bond Year is less than the Annual Debt Service for each Bond
Year prior to the issuance of the refunding Parity Obligations, the City need not comply with the
provisions described in paragraphs (a) and (b) above.
The Parity Obligations may be, but are not required to be, in the form of Supplemental
Agreements, and may, but are not required to, secure the payment of debt service on Bonds.
"Parity Obligations." The term "Parity Obligations" is defined in the Indenture as (i) any bonds,
notes, leases, installment sale agreements or other obligations of the City payable from and secured by a
pledge of and lien upon any of the Net Revenues on a parity with the Installment Payments, entered into
or issued under and in accordance with the Installment Sale Agreement and (ii) any Governmental Loan
that is treated as a Parity Obligation under the Installment Sale Agreement.
"Additional Revenues." The term "Additional Revenues" is defined in the Indenture as any or all
of the following amounts:
(i) An allowance for Net Revenues from any additions or improvements to or extensions of
the Enterprise to be made with the proceeds of such Parity Obligations and also for Net Revenues from
15
any such additions, improvements or extensions which have been made from moneys from any source but
in any case which, during all or any part of the latest Fiscal Year or for any more recent consecutive 12-
month period selected by the City, were not in service, all in an amount equal to 90% of the estimated
additional average annual Net Revenues to be derived from such additions, improvements and extensions
for the first 36 -month period in which each addition improvement or extension is respectively to be in
operation, all as shown by the certificate or opinion of a qualified independent engineer employed by the
City.
(ii) An allowance for Net Revenues arising from any increase in the charges made for service
from the Enterprise which has been adopted prior to the incurring of such Parity Obligations but which,
during all or any part of the latest Fiscal Year or for any more recent consecutive 12 -month period
selected by the City, was not in effect, in an amount equal to the total amount by which the Net Revenues
would have been increased if such increase in charges had been in effect during the whole of such Fiscal
Year or 12 -month period, all as shown by the certificate or opinion of an Independent Accountant or
Fiscal Consultant employed by the City.
Conditions for Entering Into Governmental Loans.
(a) The City may borrow money from a Governmental Agency and incur a Governmental
Loan to finance improvements to the Enterprise. A Governmental Loan may be treated as a Parity
Obligation for purposes of the Installment Sale Agreement, so long as the City complies with subsections
(a), (b) and (d) under the conditions for issuance of Parity Obligations described above before incurring
the Governmental Loan; the City need not comply with the provisions of subsection (c) under the
conditions for issuance of Parity Obligations described above in order for such Governmental Loan to be
treated as a Parity Obligation under the Installment Sale Agreement.
(b) (i) A Governmental Agency will not be entitled to be paid from monies then on hand in
the Reserve Account in the event the Net Revenues are ever insufficient to make a timely payment on any
Governmental Loan, and (ii) the City may not make a payment on any Governmental Loan (except as
expressly described in subsection (c) below) to the extent it would have the effect of causing the City to
fail to make a timely payment on the Bonds.
(c) If Net Revenues are ever insufficient to pay the full amount of Installment Payments and
other Parity Obligations then Outstanding and such Governmental Loan, the City will make payments on
the Installment Payments and other Parity Obligations and such Governmental Loan on a pro rata basis.
The term "Governmental Loan" is defined in the Indenture as any loan made by a "Governmental
Agency" (defined as the State, and the United States of America, acting through any of its agencies, to the
extent that the State or such agency has loaned money to the City for the Enterprise) to the City which is
secured by a pledge of Net Revenues and incurred by the City to finance improvements to the Enterprise.
Proceeds of Insurance, Sale or Condemnation Awards
Insurance.
(a) Under the Installment Sale Agreement the City must at all times maintain with
responsible insurers all such insurance on the Enterprise as is customarily maintained with respect to
works and properties of like character against accident to, loss of or damage to the Enterprise. The City
will apply any amounts collected from insurance against accident to or destruction of any portion of the
Enterprise, at its option, either (i) to repair or rebuild such damaged or destroyed portion of the Enterprise,
or (ii) to prepay on a pro rata basis (A) the Installment Payments on the next available prepayment date,
and (B) any Parity Obligations in accordance with the related Parity Obligations Documents.
16
(b) The City must also maintain, with responsible insurers, worker's compensation insurance
and insurance against public liability and property damage to the extent reasonably necessary to protect
the City, the Authority, the Trustee and the Owners of the Bonds.
(c) Any policy of insurance required under this provision may be maintained as part of or in
conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in
part in the form of self - insurance by the City or in the form of the participation by the City in a joint
powers agency or other program providing pooled insurance.
Sale of the Enterprise. Except as described below, the City will covenant in the Installment Sale
Agreement that the Enterprise will not be encumbered, sold, leased, pledged, have any charge placed
thereon, or otherwise be disposed of, as a whole or substantially as a whole, if such encumbrance, sale,
lease, pledge, charge or other disposition would materially impair the ability of the City to pay the
Installment Payments or the principal of or interest on any Parity Obligations, or would materially
adversely affect its ability to comply with the terms of the Installment Sale Agreement or any Parity
Obligations Documents.
The City may not enter into any agreement which impairs the operation of the Enterprise or any
part of it necessary to secure adequate Net Revenues to pay the Installment Payments or any Parity
Obligations, or which otherwise would impair the rights of the Bond Owners or the Trustee with respect
to the Net Revenues.
If any substantial part of the Enterprise is sold, the payment therefor must either (a) be used for
the acquisition or construction of improvements to the Enterprise, or (b) be applied on a pro rata basis to
(i) prepay the Installment Payments on the next available prepayment date, and (ii) redeem any Parity
Obligations in accordance with the related Parity Obligations Documents.
Condemnation Awards. Any amounts received as awards as a result of the taking of all or any
part of the Enterprise by the lawful exercise of eminent domain, if and to the extent that such right can be
exercised against such property of the City, will either (i) be used for the acquisition or construction of
improvements to the Enterprise, or (ii) be applied on a pro rata basis to (A) prepay the Installment
Payments on the next available prepayment date, and (B) redeem any Parity Obligations in accordance
with the related Parity Obligations Documents.
Establishment of Rate Stabilization Fund.
Error! Bookmark not defined.The City has the right at any time to establish a fund to be held by it
for the purpose of stabilizing the rates and charges imposed by the City with respect to the Enterprise.
From time to time the City may deposit amounts in the Rate Stabilization Fund, from any source of
legally available funds, including but not limited to Net Revenues which are released from the pledge and
lien which secures the Installment Payments and any Parity Debt, as the City may determine. The Rate
Stabilization Fund will be accounted for as a separate fund, although amounts credited to it may be
commingled with other funds of the City. The City may, but is not be required to, withdraw amounts on
deposit in the Rate Stabilization Fund and deposit such amounts in the Wastewater Enterprise Fund in any
Fiscal Year for the purpose of paying the Installment Payments or the principal of and interest on any
Parity Debt coming due and payable in such Fiscal Year. Amounts so transferred from the Rate
Stabilization Fund to the Wastewater Enterprise Fund in any Fiscal Year constitute Gross Revenues for
that Fiscal Year (except as otherwise provided in the Installment Sale Agreement), and will be applied for
the purposes of the Wastewater Enterprise Fund. Amounts on deposit in the Rate Stabilization Fund are
not pledged to and do not otherwise secure the Installment Payments or any Parity Debt. All interest or
other earnings on deposits in the Rate Stabilization Fund will be retained therein or, at the option of the
City, be applied for any other lawful purposes. The City has the right at any time to withdraw any or all
17
amounts on deposit in the Rate Stabilization Fund and apply such amounts for any other lawful purposes
of the City.
THE ENTERPRISE 1
General
[Update - The City provides sewer collection service to most areas within its corporate
boundaries, as well as to a few smaller areas outside its City limits. The collection system consists of
approximately 155,000 feet of pipe ranging in size from 6 -inch to 24 -inch diameter, and 633 manholes.
The system includes nine pump stations and their associated force mains. All sewage generated within
the City's service area is treated at Orange County Sanitation District ( "OCSD ") facilities. OCSD's
operations are funded by a combination of property taxes and user charges which are included in the
annual County tax bill sent to property owners.
The sewage generated in Old Town, Bridgeport, Marina Hill, Aquatic Park, and the Naval
Weapons Station drains to Pump Station 35 located at Seal Beach Boulevard and Electric Avenue. From
there, it is pumped through a force main in Seal Beach Boulevard to the OCSD's Seal Beach Pump
Station located just northeast of Westminster Boulevard. The wastewater from areas along Adolfo Lopez,
the Boeing property, and the commercial areas at Seal Beach Boulevard and Westminster Boulevard is
pumped into this force main as well.
College Park East drains into an OCSD sewer in Seal Beach Boulevard at Lampson Avenue.
Rossmoor Center, College Park West, Leisure World and Surfside are not provided wastewater collection
service by the City.]
Existing Facilities
The existing facilities were constructed between the 1920's and mid- 1960's and, to a large extent,
construction materials and facility designs do not meet current standards. In 1998, for example, the Pump
Station 35 force main failed after only26 years of service and required emergency repairs. Such repairs
usually cost several times more than a planned replacement project, due to the nature of the urgency and
the lack of time for obtaining competitive bids.
The system includes nine pump stations, which have useful service lives of 15 to 20 years for
mechanical and electrical equipment. Many of these pump stations lack standby facilities, are not in
compliance with current safety standards, and need to be upgraded. Failure of the wastewater collection
system facilities would have serious consequences, including beach closures and fines by the Regional
Water Quality Control Board.
Capital Improvement Program
A Sewer Master Plan (the "Master Plan ") was prepared for the City in 1999. The Master Plan
identified the facility improvements and replacements needed for proper wastewater service. The total
cost of the recommended improvements is estimated to be $9,272,000.
The City may be able to obtain grants of up to $1,961,000 through Orange County Sanitation
District's Cooperative Projects Program (the "CPP "), initiated in 1999 to reduce inflow and infiltration
into the OCSD's collection system and minimize future treatment plant and ocean outfall construction
costs. Under the CPP, projects of member agencies that reduce infiltration and inflow are eligible for
funding up to 50 percent of total cost. The Enterprise experiences inflow and infiltration, and facility
improvements that reduce them are therefore eligible for funding under the CPP.
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The phased capital improvement projects recommended by the Master Plan, their estimated costs,
anticipated Cooperative Projects Program participation, and estimated net costs to the City are shown in
Table 1.
Management and Employee Relations
The City has four employees assigned directly to the Enterprise for Fiscal Year 2010 -11. The
Public Works Director has overall responsibility for the Enterprise. The following are certain key
personnel responsible for the operation and maintenance of the Enterprise.
Sean Crumby, Public Work Director. [bio to come].
Michael Ho, City Engineer. [bio to come]
The City's employees in general are represented by four bargaining units; the employees of the
Enterprise are represented by two of those units, whose contracts expire as follows:
Bargaining Unit Contract Expiration Date
General Service Workers June 2012
Management Employees June 2012
Outstanding Indebtedness
As of the date of the Official Statement, there is no outstanding bonded indebtedness of the
Enterprise, other than the 2000 COPs (which will be defeased with proceeds of the Bonds).
Historical Number of Customers
The City's customer base has remained relatively stable over the past five years. The following
table sets forth the average number of Enterprise customers during the last five fiscal years.
TABLE 1
City of Seal Beach
Enterprise
Historical Average Number of Customers
Fiscal Year Number of Customers
2005 -06 4,670
2006 -07 4,678
2007 -08 4,700
2008 -09 4,713
2009 -10 4,790
Source: City of Seal Beach
(1) The City's customer base is very stable because the City is already built -out, other than the
occasional small scale multi -unit development project.
Top Ten Customers
The top ten customers, listed in the following table, accounted for approximately 22.65 percent of
the total Enterprise revenues for the fiscal year ending June 30, 2010.
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TABLE 2
City of Seal Beach
Enterprise
Top Ten Customers
(Fiscal Year 2009- 10)
Annual Flow Hundred Percent of Total
Customer Type of Use Cubic Feet Revenues Wastewater Revenues
Naval Weapons Station Residential/Commercial 16,476.68 $ 74,894.00 9.08%
Military Housing Residential 6,745.20 30,660.00 3.72
Oakwood Apartments Residential 4,038.10 18,355.00 2.22
Golden State Water Commercial 3,964.84 18,022.00 2.18
Boeing Commercial 3,037.76 13,808.00 1.67
Sunrise Senior Living Residential 1,272.70 5;785.00 0.70
Riverbeach Condos Residential 1,790.14 8,137.00 0.99
DCOR Commercial 1,235.08 5,614.00 0.68
Seal Beach Trailer Park Residential 1,263.24 '5,742.00 0.70
Sunset Aquatic Park Commercial 1,304.38 • 5,929.00 0.72
Total 41,128.12 $186,946.00 22.65%
Source: City of Seal Beach
(1) Based on the sewer user charge structure adopted by the City for the _ Fiscal Year.
(2) [confirm - Annual flow data is the actual annual flow from the calendar year prior to the beginning of the fiscal year.
Therefore, sewer user charges for fiscal year 2009 -10, which began on July 1, 2009, are based on the actual flow from
calendar year 2008.]
Budget Process and Billing Procedures
As an annual operating practice, the Engineering Division of the Public Works Department
provides estimates of revenues and expenditures for operations of the Enterprise (including expected
contract billings from Los Angeles for the treatment of effluent at the OCSD Plant, which have fluctuated
over the past ten years) for the upcoming fiscal year by May of each year to an outside firm (the
"Consultant "). The Consultant prepares an analysis of the rates and charges necessary to provide adequate
revenues to the Enterprise. The recommendations of the Consultant are included in a report by the City
Engineer to the City Council by June of each year. The City Council conducts a review of the proposed
budget and makes such revisions as it deems desirable and adopts a budget by July 1. The City reports the
adopted sewer user charges to the County Tax Collector's Office by August 10 of each fiscal year for
inclusion in the tax bills mailed to owners of property in the City. See " —Rates and Charges."
Each Enterprise user pays sewer charges as a direct assessment billed on his or her property tax
bill. Property taxes are due on November 1 but are not delinquent if paid by December 10 (for the first
installment) and April 10 (for the second installment). The County remits sewer charge revenues to the
City in seven installments. Current payment practices by the County provide for payment to the City of
approximately 60% of the sewer charge revenues by February. By April, the County allocates
approximately 89% of sewer charge revenues to the City with the balance delivered by June. If a property
owner fails to pay the sewer charge portion of his or her property tax bill, the entire amount is considered
delinquent and remains subject to penalties and tax foreclosure procedures. If the property tax bill remains
unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by
the County Tax Collector for the delinquent amount. The current year property tax delinquency rate
within the City has averaged less than 2 percent over the past 10 years.
The following table summarizes payments made to OCSD from Fiscal Year 2000 -2001 through
2009 -10.
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TABLE 3
City of Seal Beach
Enterprise
OCSD Payments
Fiscal Year 2000 -01 through 2009 -10
Percent Change in
Fiscal Year Charges from OCSD Annual Charges
2000 -01 4,878.25 --
2001 -02 392,592.50 7947.81%
2002 -03 104,357.50 -73.42
2003 -04 172,320.50 65.13
2004 -05 33,310.84 -80.67
2005 -06 527,924.50 1484.84
2006 -07 44,822.11 -91.51
2007 -08 225,324.91 402.71
2008 -09 13,846.35 -93.85
2009 -10 7,257.05 -47.59
Source: City of Seal Beach
(1) Revenues fluctuate based on construction activity in the City. For FY 2001 -02 through 2003 -04, Centex
Homes were built. In FY 2005 -06, Heron Pointe Tract was developed. 'In 2007 -2008, Pacific Gateway
(new commercial building) was completed. These fees were collected due to these new developments.
Rates and Charges
The City increased its sewer user charges in 2005 in compliance with Proposition 218, after
providing mailed notice at least 45 days prior to a public hearing. See "CONSTITUTIONAL
PROVISIONS AFFECTING ENTERPRISE REVENUES AND EXPENDITURES."
The City Council approved the current Enterprise charges on _, 2010. For single family
residences, the billing rate formula includes a minimum, or base charge (by distributing the customer
service cost equally among all single family users), a flow credit (based upon a prorated average flow for
a single family residence), a unit excess wastewater flow surcharge, and an adjustment factor to
compensate for exterior water use. The following table provides a summary of the City's Enterprise
charges.
TABLE 4
City of Seal Beach
Enterprise
History of Single Family Sewer Rates
Fiscal Percent Change Average Annual Percent. Change in
Year Sewer User Charge Rate in Rates Charge Annual Charges
2000 -01 22% 0% $372,993.35 1.86%
2001 -02 22 0 438,015.50 17.43
2002 -03 22 0 401,579.08 -8.32
2003 -04 22 0 531,678.46 32.40
2004 -05 22 0 606,574.62 14.09
2005 -06 22 0 763,608.03 25.89
2006 -07 22 0 83 5,214.93 9.38
2007 -08 22 0 869,294.84 4.08
2008 -09 22 0 873,470.54 0.48
2009 -10 22 0 825,235.69 -5.52
21
(1) 22% of Water Usage fees plus Water Capital Fund charges.
The table below provides a comparison of the average annual single - family residential customer's
usage charge for the City and neighboring communities for fiscal year 2009 -10:
TABLE 5
City of Seal Beach
Enterprise
Comparison of Average Annual Single - Family Residential Customers Charges
(Fiscal Year 2009 -10)
Average Annual Charges
City per Single Family Unit
Huntington Beach
Seal Beach
Long Beach
Westminster
Source: Wastewater User Charge Survey Report FY 2009 -2010, dated _ 2010, California Environmental
Protection Agency, State Water Resources Control Board, Division of Financial Assistance
The following table sets forth sewer charge collection history for the Enterprise for the last five
fiscal years.
TABLE 6
City of Seal Beach
Enterprise
Historical Collection of Sewer Charges
Current Current Amount Prior Years' Total Collections
Fiscal Amount Amount Collected as a Delinquent as Percentage of
Year Billed Collected Percentage of Billings Collections Amount Billed
2005 -06 $763,608.03 $812,870.73 106%
2006 -07 835,214.93 899,529.70 107
2007 -08 869,294.84 905,789.57 104
2008 -09 873,470.54 964,753.09 110
2009 -10 825,235.69 849,789.43 103
Source: City of Seal Beach
(1) Each year uncollected revenue from prior years are collected making it appear as if we collected more than we billed.
Current delinquencies are less for recent fiscal periods.
Enterprise User Composition
As summarized in the tables below, as of fiscal year 2009 -10, the Enterprise served
approximately 4,651 residential units in the City, including 4,072 single - family residences and 579 multi-
family units. Residential dwellings represent approximately 92.91% of sewer user charge revenues, with
commercial and industrial users representing 7.09 %.
22
TABLE 7 !
City of Seal Beach
Enterprise!
Wastewater Revenue Allocation jby User Classification
Fiscal Year 2009 -10
No. of Percent of Total
User Classification Units ' (1)
Total RevenuesRevenues
Group I
Single Family 4,072 $671,269 81.34%
Multi Family 579 95,4405 11.57
Total Group I 4,651 766,717.35 92.91
Group II Users (Commercial) 341 56,2131.85 6.81
Group III Users (Comm. /Indus.) 3 494 0.06
Group IV Users (Institutions) 0 0.00
Group V Users (Schools) 1 164.85 0.02
Group VI Users (Large Volume) 10 1,648.50 0.20
Total 5,006 825,239.10 100.00%
Source: City of Seal Beach
(1) Revenue is collected in total and not by specific user classification. Revenue was calculated at a unit cost from total revenue
for2009 -2010.
Connection Charges
Connection charges are paid to the City directly by developers or property owners for any change
of business use at the time of the issuance of a building permit by the Building and Safety Division of the
City's Community Development Department to connect to the Enterprise. The charge is determined by
the Engineering Division of the City's Public Works Department. The City passes on approximately half
of the connection charges it receives to the City of Los Angeles to pay for the expansion of the OCSD
Plant. Income from connection charges is not included in the pledge for the Bonds.
I
The table below set forth a schedule of one -time sewer facilities charges for fiscal years 2000 -01
through 2009 -10.
23
TABLE 8
City of Seal Beach
Enterprise
History of Connection Charges
Total Connection Fees
Fiscal Year Collected
2000 -01 $ 15,753.75
2001 -02 260,043.87
2002 -03 42,607.85
2003 -04 9,916.00
2004 -05 , --
2005 -06 --
2006 -07 -
2007 -08 --
2008 -09 --
2009 -10 --
Source: City of Seal Beach
(1)
[Remainder of Page Intentionally Left Blank]
24
Financial Statements
Set forth in the following tables are the statements of net assets and statements of revenues,
expenditures and changes in fund net assets with respect to the Sewer Enterprise Fund derived from
City's audited financial statements for the Fiscal Years 2005 -06 through 2009 -10. The City's audited
financial statements for the Fiscal Year ended June 30, 2010 are included as APPENDIX B to this
Official Statement. The following table should be read in conjunction with the information and related
footnotes contained in APPENDIX B.
Table 9
CITY OF SEAL BEACH
Sewer Enterprise Fund
Statements of Net Assets
(Fiscal Years Ending June 30)
(Dollars in Thousands)
2005 -06 2006 -07 2007 -08 2008 -09 2009 -10
Assets
Current:
Cash and investments $2,907,224 $3,655,904
Restricted assets: Cash with fiscal agent 396,321 294,407
Accounts receivable 296,479 314,266
Total Current Assets $3,600,024 $4,264,577
Noncurrent:
Deferred charges 161,051 153,382
Capital assets -net of accumulated depreciation 17,793,914 17,546,483
Total Noncurrent Assets $17,954,965 $17,699,865
Total Assets $21,554,989 $21,964,442
Liabilities
Current:
Accounts payable 325,365 94,637
Accrued liabilities 13,067 14,896
Deposits 1,444 1,444
Long -term liabilities, portion due within 1 year 97,773 117,078
Total Current Liabilities $437,649 $228,055
Noncurrent:
Long -term liabilities, portion due within more 3,492,773 3,374,199
than 1 year
Total Noncurrent Liabilities 3,492,773 3,374,199
Total Liabilities $3,930,422 $3,602,254
Net assets
Invested in capital assets, net of related debt 14,635,235 14,380,890
Restricted for debt service 396,321 294,407
Unrestricted 2,593,011 3,686,894
Total Net Assets $17,624,567 $18,362,188
Source: City of Seal Beach audited fmancial statements for fiscal years 2005 -06 through 2009 -10.
25
Table 10
City of Seal Beach
Enterprise
Historical Operating Results
(Fiscal Years Ending June 30)
(Dollars in Thousands) -
Audited Audited Audited Audited Audited
• 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10
Operating Revenues:
Charges for services $2,075,431 $2,184,287
Total Operating Revenues $2,075,431 $2,184,287
Operating Expenses:
Pumping 3,535 --
Administration and general 597,911 719,976
Amortization 7,669 7,669
_Depreciation 521,594 528,702
Total Operating Expenses $1,130,709 $1,256,347
Operating Income (Loss) $944,722 $927,940
Nonoperating Revenues (Expenses):
Investment income 65,577 18,757
Interest expense (200,901) (196,401)
Total Nonoperating Revenues (Expenses) $(135,324) $(177,644)
Income (Loss) Before transfers $809,398 $750,296
Transfers:
Transfers in -- --
Transfers out -- (12,675)
Changes in Net Assets $809,398 $737,621
Net Assets:
Net assets (deficit): beginning of fiscal year 16,815,169 17,624,567
Net assets (deficit): end of fiscal year $17,624,567 $18,362,188
Source: City of Seal Beach Comprehensive Annual Financial Reports for fiscal years 2005 -06 through 2009 -10.
(1) Numbers may not add due to rounding.
(
The table below sets forth the historical Net Revenues and debt service coverage of the Enterprise
for fiscal year 2005 -06 through 2009 -10.
TABLE 11
City of Seal Beach _ —
Enterprise
Historical Net Revenues and Debt Service Coverage
(Fiscal Years Ending June 30)
2005 -06 2006 -07 2007 -08 2008 -09 2009 -10
Operating Revenues:
Charges for Services
Interest Income
Total Operating Revenues
Operating Expenses:
Total Operating Expenses
Net Revenues
26
2000 COPs Debt Service
Coverage
Net Revenues after Debt Service
Source: M F Whipple & Associates based on information provided by the City and the City's audited financial statements
(1) Sales and Service Charges and Miscellaneous Revenues.
(2) Includes investment income.
(3) Includes salaries and benefits, supplies, repair and maintenance, insurance, claims and settlements, administrative services,
rent and lease expenses, consulting and contract services. Does not include depreciation.
(4) Coverage equals Net Revenues divided by 2000 COPs Debt Service.
[Remainder of Page Intentionally Left Blank]
The table below sets forth the projected revenues, expenditures and debt service coverage of the
Enterprise for fiscal years 2010 -11 through 2014 -15.
TABLE 12
City of Seal Beach
Enterprise
Projected Revenues, Expenses and Coverage*
(Fiscal Years Ending June 30)
Audited Projected Projected Projected Projected Projected
2009 -10 2010 -11 2011 -12 2012 -13 2013 -14 2014 -15
Operating Revenues:
Charges for servicesW 2,184,287
Interest Income 18,757
Total Operating Revenues 2,203,044
Operating Expenses:
Administration and General 719,976
Amortization 7,669
Depreciation 528,702
Interest Expense 196,401
Transfer Out 12,675
Total Operating Expenses 1,465,423
Net Revenues 737,621
2000 COPs Debt Service
Bonds Debt Service*
Coverage*
Remaining revenues*
Source: City of Seal Beach Comprehensive Annual Financial Reports and M F Whipple & Associates.
* Preliminary, subject to change.
SEAL BEACH PUBLIC FINANCING AUTHORITY
The Seal Beach Public Financing Authority is a joint exercise of powers authority duly organized
and existing under and pursuant to the provisions of Articles 1 through 4 (commencing with section 6500)
of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Act "). The Authority was
established pursuant to a Joint Exercise of Powers Agreement, dated May 8, 2000, between the City and
the Redevelopment Agency of the City of Seal Beach. Pursuant to the Act, the Authority is authorized to
assist local agencies in financing public capital improvements. The Authority is governed by a five-
member board whose members are the same as the City Council.
27
BONDOWNERS' RISKS
INVESTMENT IN THE BONDS INVOLVES ELEMENTS OF RISK. THE FOLLOWING
SECTION DESCRIBES CERTAIN SPECIFIC RISK FACTORS AFFECTING THE PAYMENT AND
SECURITY OF THE BONDS. THE FOLLOWING DISCUSSION OF RISKS IS NOT MEANT TO BE
AN EXHAUSTIVE LIST OF THE RISKS ASSOCIATED WITH THE PURCHASE OF THE BONDS
AND THE ORDER OF DISCUSSION OF SUCH RISKS DOES NOT NECESSARILY REFLECT THE
RELATIVE IMPORTANCE OF THE VARIOUS RISKS. POTENTIAL INVESTORS ARE ADVISED
TO CONSIDER THE FOLLOWING FACTORS ALONG WITH ALL OTHER INFORMATION IN
THIS OFFICIAL STATEMENT IN EVALUATING THE BONDS. THERE CAN BE NO
ASSURANCE THAT OTHER RISK FACTORS NOT DISCUSSED UNDER THIS CAPTION WILL
NOT BECOME MATERIAL IN THE FUTURE.
Limited Obligations with Respect to the Bonds
The Bonds are payable solely from, and secured by, a pledge of Revenues and any funds and
accounts held under the Indenture. See "SECURITY FOR THE BONDS." If, for any reason, the
Revenues are not sufficient to pay debt service on the Bonds, the Authority will not be obligated to utilize
any other of its funds, other than moneys on deposit in the Reserve Account and the other funds and
accounts established under the Indenture. The Bonds do not 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.
Forecasts
Although the City believes that the projections of future operating results of the Enterprise
contained in this Official Statement are reasonable, there can be no assurance that actual operating results
will match the projections due to changes in general economic conditions and similar factors, including
defaults in the payment of property taxes. In addition, the Enterprise and economic development within
the service area of the City are subject to federal, State and local regulations. There can be no assurance
that the Enterprise will not be adversely affected by future economic conditions, governmental policies or
other factors beyond the control of the City.
Wastewater System Expenses And Collections
There can be no assurance that the Operating Expenses for the Enterprise will remain at the levels
described in this Official Statement. Changes in OCSD charges to the City, technology, energy or other
expenses could reduce the Net Revenues and could require substantial increases in rates or charges.
Given the requirements of Proposition 218, the City can give no assurance that any such increase in sewer
charges would not be precluded by a majority protest. See "CONSTITUTIONAL PROVISIONS
AFFECTING ENTERPRISE REVENUES AND EXPENDITURES" below. Additionally, any such rate
increases could increase the likelihood of nonpayment by customers of the Enterprise, which may have an
adverse impact on the Authority's ability to pay debt service on the Bonds.
Casualty Risk; Earthquakes
Any natural disaster or other physical calamity, including earthquake, may have the effect of
reducing sewer revenues through damage to the Enterprise and/or adversely affecting the economy of the
surrounding area. The City currently maintains insurance or self - insurance, but only if and to the extent
available at reasonable cost from reputable insurers. No assurance can be given that property insurance
will continue to be maintained at such levels in the future, depending upon factors such as cost and
availability.
28
[UPDATE - The State of California is a seismically active region. There are several geological
faults in the area, which have the potential to cause serious earthquakes and damage to the Enterprise.
According to the City's General Plan, the two most probable major earthquake sources for the City are the
San Andreas Fault Zone, which is located 45 miles from the City at its closest point, and the Newport-
Inglewood Fault Zone, a portion of which is located within the City. The City is also in proximity to the
Overland and Charnock faults, but movement along those fault's is not anticipated because evidence
suggest those faults are no longer active. The City does not carry earthquake insurance. Loss of
components of the Enterprise may have an adverse impact on the City's ability to pay debt service on the
Bonds.]
Additional Bonds and Future Rate Increases
The Installment Sale Agreement permits the incurrence of additional obligations secured by Net
Revenues on a parity with the Installment Payment, upon the City's compliance with certain conditions.
Such additional Parity Obligations would increase Installment Payments payable from Net Revenues and
could adversely affect debt service coverage with respect to the Bonds. Although the rate covenant of the
City under the Installment Sale Agreement will remain in effect, the City can give no assurance that any
required increase in sewer rates pursuant to the rate covenant would not be precluded by a majority
protest. See "SECURITY FOR THE BONDS," "THE ENTERPRISE — Rates and Charges" and
"CONSTITUTIONAL PROVISIONS AFFECTING ENTERPRISE REVENUES AND
EXPENDITURES."
Limitations on Remedies
Remedies available to the Owners may be limited by a variety of factors and may be inadequate
to assure the timely payment of principal of and interest and premium, if any, on the Bonds or to preserve
the tax - exempt status of interest on the Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds, the [Indenture and the
Installment Sale Agreement] to the extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally
the enforcement of creditor's rights, by equitable principles and by the exercise of judicial discretion. The
lack of availability of certain remedies or the limitation of remedies may entail risks of delay in the
exercise of, or limitations on or modifications to, the rights of the Owners.
Enforceability of the rights and remedies of the Owners of the Bonds, and the obligations
incurred by the City, may become subject to the federal bankruptcy code and applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of
creditor's rights generally, now or hereafter in effect, equity principles which may limit the specific
enforcement under State law of certain remedies, the exercise by the United States of America of the
powers delegated to it by the Constitution, the reasonable and necessary exercise, in certain exceptional
situations, of the police powers inherent in the sovereignty of the State and its govermnental bodies in the
interest of serving a significant and legitimate public purpose and the limitations on remedies against
governmental entities in the State.
Investment of Funds
The Reserve Account and all other funds held under the Indenture are required to be invested in
Permitted Investments as provided under the Indenture. See "APPENDIX D - SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS." All investments, including Permitted Investments, authorized by
law from time to time for investments by the City contain a certain degree of risk. Such risks include, but
are not limited to, a lower rate of return than expected, decline in market value and loss or delayed receipt
of principal. The occurrence of these events with respect to amounts held under the Indenture could have
a material adverse effect on the security for the Bonds.
29
Voter Initiatives -- State Constitutional Amendment
California's voter initiative process allows measures which qualify for the ballot to be approved
or disapproved by voters in a State of California statewide election. From time to time initiative measures
could be adopted which adversely affect the ability of the City to pay Installment Payments. In recent
years, several initiative measures have been proposed or adopted which affect the ability of local
governments to increase taxes and rates. There is no assurance that the electorate or the State legislature
will not at some future time approve additional limitations that would affect the ability of the City to
implement rate increases, which could reduce Net Revenues and adversely affect the security for the
Bonds.
1 _
Loss of Tax Exemption
In order to maintain the exclusion from gross income for federal income tax purposes of the
interest on the Bonds, the City and the Authority have covenanted to comply with the applicable
requirements of Section 148 and certain other sections of the Internal Revenue Code of 1986, as amended,
relative to arbitrage and avoidance of characterization as private activity bonds, among other things. The
interest on the Bonds could become includable in gross income for purposes of federal income taxation
retroactive to the date of issuance of the Bonds as a result of acts or omissions of the City or the Authority
in violation of their covenants. Should such an event of taxability occur, the Bonds are not subject to
redemption or any increase in interest rates and may remain Outstanding until maturity or until redeemed
under one of the redemption provisions contained in the Indenture. See "CONCLUDING MATTERS —
Tax Matters."
Secondary Market
There can be no assurance that there will be a secondary market for the Bonds, or if a secondary
market exists, that such Bonds can be sold for any particular price. Occasionally, because of general
market conditions or because of adverse history or economic prospects connected with a particular issue,
secondary marketing practices in connection with a particular issue are suspended or terminated.
Additionally, pricing of issues for which a market is being made will depend upon then prevailing
circumstances. Such prices could substantially differ from the original purchase price.
CONSTITUTIONAL PROVISIONS AFFECTING
ENTERPRISE REVENUES AND EXPENDITURES
Article XIIIA and Article XIIIB
Pursuant to California law, any fee that exceeds the reasonable cost of providing the service for
which the fee is charged is a "special tax," which under Article XIIIA of the California Constitution must
be authorized by a two- thirds vote of the electorate. This requirement may be applicable to rates for water
and sewer service and capacity charges, to the extent that such rates and charges exceed the reasonable
costs of providing service. In addition, the California courts have determined that fees imposed as a
condition of approval of a development project, such as impact fees for water or sewer service, will not be
special taxes if the fees approximate the reasonable cost of constructing the related improvements
contemplated by the local agency imposing the fee. Such court determinations have been codified in
California Government Code Section 66005.
On November 6, 1979, California voters approved Proposition 4, the "Gann Initiative," which
added Article XIIIB to the California Constitution. Under Article XIIIB, state and local governmental
entities have an annual "appropriations limit" and are not permitted to spend certain moneys that are
called "appropriations subject to limitation" (consisting of tax revenues, state subventions, and certain
other funds) in an amount higher than the "appropriations limit." Article XIIIB does not affect the
appropriations of moneys that are excluded from the definition of "appropriations subject to limitation,"
30
including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded
indebtedness subsequently approved by the voters. In general terms, the "appropriations limit" is to be
based on certain 1978 -79 expenditures and is to be adjusted annually to reflect changes in consumer
prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if
these entities' revenues in any tax year exceed the amounts permitted to be spent, the excess would have
to be returned by revising tax rates or fee schedules over the subsequent two years. Certain expenditures
are excluded from the appropriation limit, including payments of indebtedness existing or legally
authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by voters and payments
required to comply with court or federal mandates which without discretion required an expenditure for
additional services or which unavoidably make the providing of existing services more costly.
The City believes that its rates and charges for water and sewer service do not exceed the costs
the City reasonably bears in providing existing such services, and are presently in compliance with Article
XIIIA and Article XIIIB.
Proposition 218: Article XIIIC and Article XIIID
General. On November 5, 1996, California voters approved Proposition 218, "the Right to Vote
on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the California Constitution, providing
certain voter approval requirements and other limitations on the imposition of new or increased taxes,
assessments, and property- related fees and charges.
Article XIIIC. Article XIIIC provides that a local government may not impose, extend, or
increase local taxes until such taxes are submitted to the electorate for approval. General taxes, imposed,
extended, or increased for general governmental purposes of the city, require a majority vote and special
taxes, imposed, extended, or increased for specific purposes, require a two- thirds vote. In addition,
Article XIIIC provides that the constitutional initiative power shall not be prohibited or otherwise limited
in matters of reducing or repealing any local taxes, assessments, fees, and charges. This provision with
respect to the initiative power is not limited to taxes, assessments, fees, and charges imposed on or after
November 6, 1996, the effective date of Proposition 218. No assurance can be given that the voters of the
City will not, in the future, approve an initiative which reduces or repeals local taxes, assessments, fees or
charges, including a reduction of all or any portion of the customer charges for wastewater services
securing the Bonds. The use of the initiative power is arguably limited in the case of levies directly
pledged to bonded indebtedness, such as the City's charges for wastewater services. Although the City
expects that the impairment of contracts clause of the federal Constitution would likely invalidate a rate -
reduction initiative that violated a rate covenant in existing revenue bond agreements, it is possible that
courts deciding the issue could determine otherwise. If an initiative to reduce the City's charges for
wastewater service is the subject of a challenge, no guarantee can be made that the courts will agree with
such interpretation.
Article XIIID. Article XIIID imposes various procedural and substantive requirements on local
governments that levy an "assessment," "fee," or "charge." Article XIIID defines "fees" or "charges" as
"any levy other than an ad valorem tax, a special tax, or an assessment imposed by a [local government]
upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a
property related service." "Property related service" means a public service having a direct relationship to
property ownership (property ownership includes tenancies where tenants are directly liable to pay the fee
or charge). In particular, a fee or charge (i) may not exceed the funds required to provide the "property
related service," (ii) may not be used for any purpose other than that for which the fee or charge was
imposed, (iii) may not exceed the proportional cost of the service attributable to the parcel, (iv) may not
be imposed for a service unless that service is actually used by, or is immediately available to, the owner
of the property in question, and (v) may not be imposed for general governmental services.
In addition, before any property related fee or charge may be imposed or increased, the local
government agency must provide mailed notice 45 days in advance of a hearing regarding the proposed
31
imposition or increase, and if written protests against the proposal are presented by a majority of the
owners of the identified parcels, the local government agency may not impose or increase the fee or
charge. Moreover, except for fees or charges for water, wastewater, and refuse collection services (or fees
for electrical and gas service, which are expressly exempted from Proposition 218), no property related
fee or charge may be imposed or increased without a majority approval by the property owners subject to
the fee or charge or, at the option of the local agency, two- thirds approval by those residing in the affected
area and voting at the election. Article XIIID states that, beginning July 1, 1997, all fees or charges must
comply with its provisions.
The ability of the City to comply with the covenants in the Installment Sale Agreement in
connection with the levy and collection of wastewater service charges, including the rate covenant
described under "SECURITY FOR THE BONDS — Rate Covenant," could be adversely affected by
actions taken or not taken by voters, property owners or other persons obligated to pay wastewater service
charges.
In July 2006, the California Supreme Court decided Bighorn-Desert View Water Agency v. Verjil
( "Bighorn") and held that fees and charges for ongoing water service through an existing connection were
fees and charges for a property related service and were therefore imposed on a person as an incident of
property ownership for purposes of Article XIIID. As the California Courts continue to interpret
Proposition 218, charges for wastewater services could also be found to be fees or charges as defined by
Proposition 218. The City believes that it has complied with the requirements of Proposition 218 in all
material respects with respect to the adoption of the City's current charges for the Enterprise.
The general financial condition of the City may be affected by provisions of Article XIIIC and
Article XIIID, including (A) provisions of Article XIIIC (i) requiring taxes for general governmental
purposes to be approved by a majority vote and taxes for specific purposes, even if deposited into the
General Fund, to be approved by two- thirds vote, (ii) requiring any general purpose tax which the City
imposed, extended or increased, without voter approval, after December 31, 1994, to be approved by
majority vote on November 5, 1998, (iii) subjecting all taxes, assessments, fees and charges to reduction
or repeal at any time through the initiative process; and (B) provisions of Article XIIID that could reduce
the ability of the City to fund certain services or programs that it may be required or choose to fund, such
as provisions (1) adding requirements making it generally more difficult to levy and maintain
assessments, (2) requiring the City to hold a noticed public hearing at which a majority of the owners of
property subject to any new or increased fee or charge may protest and prevent the City from imposing
the new or increased fee or charge, and (3) requiring any imposition or increase of fees or charges other
than for sewer, water and refuse collection services or fees for electrical or gas service (which are not
treated as property related for purposes of Article XIIID). to be approved by "majority of the property
owners" subject to the fee or charge or, at the option of the local government, two- thirds vote of the
electorate residing in the affected area.
The foregoing discussion of Article XIIIC and Article XIIID should not be considered an
exhaustive or authoritative treatment of the issues. The City does not expect to be in a position to control
the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or
legislative activity in this regard. Interim rulings, final decisions, legislative proposals and legislative
enactments may all affect the impact of Article XIIIC and Article XIIID on the Bonds as well as the
market for the Bonds. Legislative and court calendar delays and other factors may prolong any
uncertainty regarding the effects of Article XIIIC and Article XIIID.
32
CONCLUDING MATTERS
Absence of Litigation
•
To the best of the City's knowledge, there is no litigation pending or threatened to restrain or
enjoin the issuance, execution or delivery of the Bonds, to contest the validity of the Bonds, the Indenture,
the Installment Sale Agreement, or any proceedings of the City with respect thereto. In the opinion of the
City and its counsel, there is no lawsuit or claim pending against the City which will materially impair the
City's ability to enter into the Installment Sale Agreement or restrain or enjoin the collection of Net
Revenues or the payment of the Bonds as contemplated therein.
Continuing Disclosure
The City has undertaken for the benefit of holders and beneficial owners of the Bonds to provide
certain financial information relating to the Enterprise and other data by not later than March 31 of each
year, commencing March 31, 2012 with the report for the 2010 -2011 fiscal year (the "Annual Report"),
and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report
and notices of material events will be filed by the City or Bank of New York Mellon Trust Company,
N.A., as the Dissemination Agent on behalf of the City, 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 set forth in "APPENDIX F — FORM OF CONTINUING DISCLOSURE AGREEMENT." This
undertaking has been made in order to assist the Underwriter in complying with Rule 15c2- 12(b)(5) (the
"Rule ") promulgated by the Securities and Exchange Commission under the Securities and Exchange Act
of 1934, as amended.
A failure by the City to comply with the provisions of the Continuing Disclosure Agreement is
not an event of default under the Indenture (although the holders and beneficial owners of the Bonds do
have remedies at law and in equity). However, a failure to comply with the provisions of the Continuing
Disclosure Agreement must be reported in accordance with the Rule and must be considered by any
broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds.
Therefore, a failure by the City to comply with the provisions of the Continuing Disclosure Agreement
may adversely affect the marketability of the Bonds on the secondary market.
Certain Legal Matters
The legality of the issuance of the Bonds is subject to the approval of Richards Watson &
Gershon, A Professional Corporation, Los Angeles, Bond Counsel. Bond Counsel's opinions with respect
to the Bonds will be substantially in the forms set forth in APPENDIX C of this Official Statement. In
addition, certain other legal matters will be passed on by Richards, Watson & Gershon, A Professional
Corporation, Los Angeles, California, as Disclosure Counsel. Fees payable to Bond Counsel and
Disclosure Counsel are contingent upon successful sale and delivery of the Bonds.
Tax Matters
The Internal Revenue Code of 1986, as amended (the "Code ") establishes certain requirements
which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and
remain excluded from gross income for Federal income tax purposes. Noncompliance with such
requirements could cause interest on the Bonds to be included in gross income for Federal income tax
purposes retroactive to their date of issue. These requirements include, but are not limited to, provisions
which limit how the proceeds of the Bonds may be spent and invested, and generally require that certain
investment earnings be rebated on a periodic basis to the United States of America. The City has made
certifications and representations and has covenanted to maintain the exclusion of the interest on the
Bonds from gross income for Federal income tax purposes pursuant to Section 103(a) of the Code.
33
In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under
existing law and, assuming the accuracy of such certifications and representations by the City and
compliance with such covenants, (i) interest on the Bonds is excluded from gross income for Federal
income tax purposes under Section 103 of the Code, and (ii) the Bonds are not "specified private activity
bonds" within the meaning of Section 57(a)(5) of the Code and, therefore, interest on the Bonds is not a
preference item for purposes of computing the alternative minimum tax imposed by Section 55 of the
Code. Bond Counsel is also of the opinion that interest on the Bonds is exempt from State of California
personal income taxes.
A portion of the interest on the Bonds earned by certain corporations may be subject to a federal
corporate alternative minimum tax. In addition, interest on the Bonds may be subject to a federal branch
profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax
imposed on excess net passive income of certain S corporations. The exclusion of interest from gross
income for federal income tax purposes may have certain adverse federal income tax consequences on
items of income, deduction or credit for certain taxpayers, including financial institutions, certain
insurance companies, recipients of Social Security and Railroad Retirement benefits, those deemed to
incur indebtedness to acquire tax- exempt obligations, and individuals eligible for the earned income tax
credit. Bond Counsel will express no opinion regarding these and other such consequences.
Bond Counsel has not undertaken to advise in the future whether any circumstances or events
occurring after the date of issuance of the Bonds may affect the tax status of interest on the Bonds. No
assurance can be given that future legislation, or amendments to the Code, if enacted into law, will not
contain provisions which could eliminate, or directly or indirectly reduce the benefit of the exclusion of
interest on the Bonds from gross income for Federal income tax purposes. Certain requirements and
procedures contained or referred to in relevant documents may be changed and certain actions may be
taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon
the advice or with the approving opinion of nationally recognized bond counsel. Bond Counsel expresses
no opinion as to any Bond, or the interest thereon, if any such change occurs or action is taken upon the
advice or approval of bond counsel other than Richards, Watson & Gershon, A Professional Corporation.
If the issue price of a Bond (the first price at which a substantial amount of the bonds of a
maturity are to be sold to the public) is less than the stated redemption price at maturity of such Bond, the
difference constitutes original issue discount, the accrual of which is excluded from gross income for
Federal income tax purposes to the same extent as interest on the Bonds. Further, such original issue
discount accrues actuarially on a constant yield method over the term of each such Bond and the basis of
each Bond acquired at such initial offering price by an initial purchaser thereof will be increased by the
amount of such accrued original issue discount. The accrual of original issue discount may be taken into
account as an increase in the amount of tax- exempt income for purposes of determining various other tax
consequences of owning such Bonds. Purchasers who acquire Bonds with original issue discount are
advised that they should consult with their own independent tax advisors with respect to the state and
local tax consequences of owning such Bonds.
If the issue price of a Bond is greater than the state redemption price at maturity of such Bond, the
difference constitutes original issue premium, the amortization of which is not deductible from gross
income for Federal income tax purposes. The amount of amortizable Bond premium for a taxable year is
determined actuarially on a constant interest rate basis over the term of each such Bond, or in the case of a
callable bond, possibly on a more accelerated basis. For purposes of determining gain or loss on the sale
or other disposition of such Bond, the purchaser is required to decrease such purchaser's adjusted basis in
such Bond annually by the amount of amortizable Bond premium for the taxable year.
Prospective purchasers of the Bonds should consult their own independent tax advisers regarding
pending or proposed federal and state tax legislation and court proceedings, and prospective purchasers of
the Bonds at other than their original issuance at the respective prices indicated on the cover of this
34
Official Statement should also consult their own tax advisers regarding other tax considerations such as
the consequences of market discount, as to all of which Bond Counsel expresses no opinion.
The Internal Revenue Service has established a program to audit issues of tax- exempt bonds in
order to determine whether, in its view, interest should instead be included in gross income of the
Bondholders for purposes of federal income taxation. It cannot be predicted whether or not the Bonds
will be subjected to such an audit. If such an audit is undertaken, it could adversely affect the market
value of the Bonds until the audit is concluded, regardless of the ultimate outcome of the audit.
Financial Advisor
M F Whipple & Associates has acted as financial advisor to the City concerning the Bonds. As
financial advisor, M F Whipple & Associates will receive compensation contingent upon the sale and
delivery of the Bonds.
Underwriting
The Underwriter has agreed, subject to certain conditions, to purchase the Bonds at a purchase
price of $ (equal to the principal amount of the Bonds, less a net original issue discount of $
and less an underwriter's discount of $ ). The Underwriter intends to offer the Bonds to the public
initially at the prices set forth on the inside cover page of this Official Statement, which prices may
subsequently change without any requirement of prior notice.
Rating
Standard & Poors ( "S &P "), is expected to assign an underlying rating of " " to the Bonds.
Such rating reflects only the views of such organization and any desired explanation of the significance of
such rating may be obtained from S &P. Generally, a rating agency bases its rating on the information and
materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance
such rating will continue for any given period of time or that such rating will not be revised downward or
withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so
warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the
market price of the Bonds.
Financial Statements
Excerpts of the City's Comprehensive Annual Financial Report for fiscal year ended June 30,
2010, which include the City's 2009 -10 financial statements and the Independent Auditor's Report issued
by Mayor Hoffman McCann P.C., Certified Public Accountants, Irvine, California, (the "Auditor ")
regarding such financial statements, are set forth in Appendix B. The Auditor was not requested to
consent to the inclusion of its report in Appendix B and it has not undertaken to update financial
statements included in Appendix B. No opinion is expressed by the Auditor with respect to any event
subsequent to its report.
Miscellaneous
All of the preceding description and summaries of the Bonds, the Indenture and the Installment
Sale Agreement, other applicable agreements, legislation 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 City 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 of estimates, whether or not so
35
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 City and the Authority have duly authorized the execution and delivery of this Official
Statement by their duly authorized officers.
SEAL BEACH PUBLIC
FINANCING AUTHORITY
By:
Executive Director
CITY OF SEAL BEACH
By:
City Manager
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APPENDIX A
CITY OF SEAL BEACH GENERAL INFORMATION
This Appendix is included solely to provide background and demographic information regarding
the City. The City's obligation to Installment payment is a special obligation limited solely to the Net
Revenues of the Enterprise. No other funds or property of the City shall be liable for the payment of the
Bonds or any other amounts payable under the Installment Sale Agreement.
General
The City, incorporated on October 27, 1915, is a municipal corporation duly organized and
existing under California law and, since 1964, under its City Charter. The City is located on'the coast of
the northwestern portion Orange County, approximately 30 miles southeast of downtown Los Angeles.
Neighboring communities include Huntington Beach, Westminster, Los Alamitos and Long Beach. As of
January 1, 2010, it has a population of approximately 26,010 and currently provides sewer service to
approximately _ residential and _ commercial customers.
Municipal Government
The City operates under a Mayor /City Council -City Manager form of government. The City is
governed by a five- member City Council, elected at large to serve four -year alternating terns. The City
Clerk is also an elected position. The City Council appoints the City Manager and the City Attorney.
The City has its own Police Department, but contracts for fire and paramedic services through the Orange
County Fire Authority. As of June 30, 2010, the City had _ full -time employees.]
The current members of the City Council are as follows:
Name and Office Current Term Expires
David W. Sloan, Mayor
Michael P. Levitt, Vice Mayor
Charles J. Antos, Councilmember
Gordon A. Shanks, Councilmember
Gary A. Miller, Councilmember
Population
The following table shows a summary of population data for the City, Orange County (the
"County ") and the State of California (the "State ") for the years shown.
CITY OF SEAL BEACH
City, County and State Population
Calendar Years 1980, 1990, 2000, 2010
Calendar Year City County State
1980 25,972 1,932,708 23,782,000
1990 25,150 2,398,400 29,558,000
2000 23,705 2,831,799 33,721,583
2010 26,010 3,166,461 38,648,090
Source: State of California Department of Finance estimates as of January 1 of each year.
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_ City's Taxable Valuation
A summary of the City's taxable valuation for fiscal years 2005 -06 through 2009 -10 is set forth
below. These figures are presented for historical comparison, with reference only to the time frame of the
years shown.
CITY OF SEAL BEACH
Assessed Valuations
Fiscal Years 2005 -06 through 2009 -10
Unsecured Total Taxable
Fiscal Year Secured Property Property Assessed Value
2005 -06 $3,018,869,834 $171,000,511 $3,189,870,345
2006 -07 3,373,750,311 211,551,053 3,585,301,364
2007 -08 3,691,176,766 184,725,523 3,875,902,289
2008 -09 4,031,469,067 225,415,156 4,256,884,223
2009 -10 4,067,713,475 173,507,894 4,241,221,369
Source: City of Seal Beach Comprehensive Annual Financial Report for fiscal year ended June 30, 2010.
Tax Levies and Delinquencies
Taxes are levied by the County for each fiscal year on taxable real and personal property which is
situated in the County as of the preceding January 1. Secured property tax bills are mailed in October, the
first installment of the secured tax levy is due November 1 and the second installment is due February 1,
but the entire bill may be paid when paying the first installment. If the first installment of the property tax
bill is not paid by December 10, then the taxes becomes delinquent and a ten percent delinquent penalty is
added to the amount due. If the second installment of the property tax bill is not paid by April 10, then it
becomes delinquent and a ten percent delinquent penalty is added to the amount due and an administrative
charge of $10 is added. Unsecured taxes become delinquent if unpaid on August 31.
Property owners who fail to pay either or both installments by June 30, will have their properties
tax defaulted. Properties may be redeemed under an installment plan of redemption that allows property
owners to make payments on defaulted taxes over a five -year period. To open an installment plan, the
property owner must pay a $75 non - refundable application fee, make a minimum payment of 20 percent
of the total tax amount including penalty and interest charges, and pay any current year's taxes and
penalties on or before April 10. Interest accrues at 1.5 percent per month on the unpaid balance once the
account has been opened. If no payments have been made on delinquent taxes at the end of five fiscal
years for residential property and three years for non - residential property, the properties then become
subject to the County Treasurer and Tax Collector's power of sale as provided by law.
[Confirm and update J Each Enterprise user pays sewer charges as a direct assessment billed on
his or her property tax bill. The County remits sewer charge revenues to the City in seven installments.
Current payment practices by the County provide for payment to the City of approximately 60% of the
sewer charge revenues by February. By April, the County allocates approximately 89% of sewer charge
revenues to the City with the balance delivered by June. If a property owner fails to pay the sewer charge
portion of his or her property tax bill, the entire amount is considered delinquent and remains subject to
the penalties and tax foreclosure procedures described in the preceding paragraph. If the property tax bill -
remains unpaid for a period of five years or more, the property is subject to sale by the County Tax
Collector for the delinquent amount. The current year property tax delinquency rate within the City has
averaged less than 2 percent over the past 10 years.]
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Construction Activity
The following is a summary of the construction permits issued by the City from fiscal years 2005-
06 through 2009 -10.
City of Seal Beach
Building Permits Issued and Values for Permits Issued
Fiscal Years 2005 -06 through 2009 -10
Valuation of Permits Issued
Fiscal Total Commercial Residential
Year Permits and Office Single All Other Total
2005 -06 1,390 16,934,941 38,182,256 3,834,703 58,951,900
2006 -07 1,556 40,161,995 19,118,791 9,842,242 69,123,028
2007 -08 1,505 20,232,550 15,112,562 10,936,173 46,281,285
2008 -09 1,135 14,336,139 12,723,325 3,607,461 30,666,925
2009 -10 1,208 20,349,996 10,014,306 10,646,523 41,010,825
Source: City of Seal Beach.
Employment
According to the State of California Employment Development Department, for calendar year
2010, estimated unemployment rate for the City was 6.7 percent, and that for the County was 9.1 percent.
The following table shows certain employment statistics for the City and the County for calendar years
2006 through 2010.
CITY OF SEAL BEACH
City and County Employment Statistics
Calendar Years 2005 through 2009 (1)
City County State
Unemployment Unemployment Unemployment
Year Labor Force Employed Rate Rate Rate
2006 11,500 11,200 2.5% 3.4% 4.9%
2007 11,500 11,200 2.8 3.9 5.3
2008 11,500 11,100 3.8 5.3 7.2
2009 11,200 10,400 6.6 9.0 11.4
2010 11,300 10,500 6.7 9.1 12.0
(1) Not seasonally adjusted. Figures represent the 12 -month average for each such year.
(2) Preliminary data, as of October 2010.
Source: State of California, Employment Development Department.
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The following table lists the principal employers in the City.
City of Seal Beach
Principal Employers
as of June 30, 2010
% of Total City
Name of Company Product/Service Employees Employment
Boeing Co. Government Contractor 2,505 24.92%
US Healthcare Services Medical Services 500 4.97
Accurate Metal Fabricators Manufacturer of sheet metal & plastic 300 2.98 t
MAG TEK Merchant Services 250 2.49
Target Retail 200 1.99
Country Villa Nursing Home 185 1.84
First Team Real Estate Real Estate Agent 175 1.74
KOHL's Department Store Retail/Department Store 135 1.34
Old Ranch Country Club Banquet Facility 130 1.29
Olson Company Home builders 120 1.19
Custom Building Products Provide and install tile and stone 101 1.00
McGaugh Elementary School Public School - 100 0.99
Romano's Macaroni Grill Restaurant/Food Services 100 0.99
Marie Calender's Restaurant/Food Services 90 0.90
Walt's Wharf Restaurant Restaurant/Food Services 90 0.90
Total 4,981 49.55%
Source: City of Seal Beach Comprehensive Annual Financial Report for fiscal year ended June 30, 2010 and City of Seal Beach.
Commercial Activity
The following table summarizes the annual volume of taxable transactions within the City for
calendar years 2004 through 2008.
CITY OF SEAL BEACH
Taxable Transactions
Calendar Years 2004 through 2008
(in Thousands of Dollars)
2004 2005 2006 2007 2008
Retail Outlets
Apparel store 21,607 -- -- 27,572 23,262
General merchandise stores -- -- -- -- --
Food stores 15,611 15,180 15,272 13,249 14,556
Eating & drinking places 61,024 63,033 65,177 70,008 74,032
Home furn. & appliances 16,310 17,501 18,197 20,462 24,001
Bldg. material and farm impl. 3,012 3,328 3,085 3,058 2,455
Auto dealers & supplies -- -- -- 1,346 --
Service stations 41,198 44,582 48,077 47,618 53,772
Other retail stores 74,367 100,359 105,266 80,449 92,601
Subtotal 233,129 243,983 255,074 263,762 284,677
All Other Outlets 73,130 61,717 62,230 130,728 128,388
All Outlets 306,259 305,700 317,304 394,490 413,065
Source: Compiled from data published by State of California Board of Equalization.
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The following table summarizes the civilian labor force in the County for the calendar years 2005
through 2009. These figures are county -wide statistics and may not necessarily accurately reflect
employment trends in the City.
ORANGE COUNTY
Annual Average Industrial Employment (t)
Calendar Years 2005 -2009
Industry 2005 2006 2007 2008 2009
Private, non -farm
Goods producing:
Natural resources and mining 700 600 600 600 500
Construction 99,900 106,600 103,100 91,200 73,600
Manufacturing - durable goods 128,300 128,000 126,200 122,500 108,900
Manufacturing - non - durable goods 54,600 54,700 54,200 51,500 45,600
Service Providing:
Wholesale trade 83,000 83,700 86,900 86,700 80,100
Retail trade 158,100 160,800 161,200 155,600 141,900
Transport., warehousing and utilities 28,700 28,200 28,900 29,300 27,900
Information 32,800 31,900 31,200 30,100 27,400
Financial activities 138,400 138,200 127,700 113,100 105,600
Professional and business services 264,300 274,500 273,300 266,600 239,000
Educational and health services 133,500 137,700 142,600 150,700 151,100
Leisure and hospitality 165,000 169,600 172,900 176,400 169,700
Other services 48,400 47,700 47,400 46,500 42,800
Government 155,300 156,700 159,400 160,800 157,300
Subtotal 1,490,900 1,518,900 1,515,500 1,481,600 1,371,400
Farm 5,600 5,300 5,000 4,600 3,900
Total 1,496,500 1,524,300 1,520,500 1,486,200 1,375,400
(1) Employment reported by place of work; does not include persons involved in labor - management disputes. Figures are rounded
to the nearest hundred. Columns may not add due to rounding. Figures represent the 12 -month average for each such year.
Not seasonally adjusted.
Source: State of California, Employment Development Department.
Land and Land Use
[Update - The City encompasses an area of approximately 11.97 square miles. The U.S. Naval
Weapons Station accounts for 5,000 acres of this total. Excluding the U.S. Naval Weapons Station, the
City is 98% developed. The City's sewer service area is approximately 6,373 acres including the U.S.
Naval Weapons Station. Excluding the U.S. Naval Weapons Station, land use is 94% residential and 6%
commercial.]
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City Powers
[Update - The City has broad general powers over the use of sewers within its boundaries,
including the right of eminent domain and the authority to acquire, control, distribute, store, spread, sink,
treat, purify, reclaim, recapture and salvage any sewer for beneficial use, to acquire, construct and operate
facilities for the collection, treatment, and disposal of sewage, waste and storm water, to sell potable and
non - potable water, to contract with the United States of America, other public agencies, private
corporations, or other persons and subject to constitutional limitations, to levy assessments, taxes and
standby charges on lands. For a discussion of current and potential limitations on the City's ability to
maintain or increase taxes, fees and other charges, including such fees and other charges as may be
limited by the terms of Proposition 218, see "BONDOWNER'S RISKS— CONSTITUTIONAL
PROVISIONS AFFECTING ENTERPRISE REVENUES AND EXPENDITURES – Proposition 218:
Article XIIC and Article XIID" herein.]
Employees and Employee Benefits
[Update - The City currently employs four persons in Public Works Administration, five in the
Finance Department, and four in Sewer Field Operations. Employees are represented by the Orange
County Employees Association (OCEA) and management employees belong to the Management and Key
Employees group.
The City is a member of the California Public Employees Retirement System ( "PERS ") and the
California Public Agency Retirement System ( "PARS "), each of which is an agent multiple- employer
public employee retirement system which provides a contributory defined - benefit pension plan for City
employees. Required employer and employee contributions are determined from rates established by
PERS or PARS, as the case may be, based upon various actuarial assumptions. See "APPENDIX B --
CITY OF SEAL BEACH COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR
ENDED JUNE 30, 2010 (EXCERPTS) -- Note 19." The City provides group medical, dental and life
insurance for its employees.]
Budget Process
[Update - Prior to June 1 of each year, the City Manager submits to the City Council a proposed
budget for the fiscal year commencing the following July 1. The City Council conducts open public
meetings to obtain comments from residents and rate payers. Subsequent to these public meetings, the
City Council approves the budget prior to July 1. The City approved the City's operating budget for the
2010 -2011 fiscal year on June 2010.
The City's budget is prepared on the accrual basis and includes the City's sewer system. For
budgeting purposes, the City determines user charges and how rates and charges are fixed.
The City has a five year Capital Improvement Program budget, which sets forth the planned
capital improvements for streets, storm drains, building maintenance, beach and pier maintenance, and
water and sewer utilities. The City's Sewer Master Plan has a ten year capital improvement program
which includes various sewer line and manhole replacements, sewage pump station upgrades and
replacements, and sewer force main replacements. The ten year program will be funded with Certificate
proceeds, sewer revenues, future development fees, and grants from the Orange County Sanitation
District and other agencies as available. See "THE SEWER SYSTEM – Capital Improvement Program. "]
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Insurance
The City is a member of the California Joint Powers Insurance Authority ( "CJPIA "). The CJPIA
is composed of 119 California public entities and is organized under a joint powers agreement pursuant to
the California Government Code. The purpose of CJPIA is to arrange and administer programs for the
pooling of self - insured losses, to purchase excess insurance or reinsurance, and to arrange for group
purchased insurance for property and other coverage. CJPIA's pool began covering claims of its
members in 1978. Each member government has an elected official as its representative on the Board of
Directors. The Board operates through a 9- member Executive Committee. See "APPENDIX B — CITY
OF SEAL BEACH COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR
ENDED JUNE 30, 2010 (EXCERPTS) — Note 21."
Self- insurance programs of CJPIA are as follows: [update]
General Liability Insurance. Annual deposits are paid by member cities and are adjusted
retrospectively to cover costs. Specific coverage includes municipal liability including bodily injury,
property damage, personal injury and errors and omissions and auto liability including owned, hired and
nonowned vehicles. The limits of liability are $2,000,000 per occurrence and $20,000,000 annual
aggregate after the City's $300,000 self - insurance retention.
Worker's Compensation. The City carries workers' compensation insurance in the amount of
$2,000,000 excess of a self- insured retention of $275,000.
Property Protection. The City carries blanket coverage on all real and personal property and
rental income in the amount of $105,000,000. The coverage is subject to the standard exclusions and
there is no self-insured retention.]
Investment Policy
[Update - The City invests its funds, including moneys attributable to the Enterprise, in
accordance with the City's investment policy. In accordance with the City Charter and a City ordinance,
cash management and investment transactions are the responsibility of the Director of Administrative
Services acting as Finance Director and City Treasurer, who establishes written procedures for the
operation of the City's investment program consistent with the investment policy. The Treasurer is
required to submit an investment report to the City Council no less frequently than quarterly. For
additional information relating to investment of City funds, including a summary of the City's adopted
investment policy and the composition of its investment portfolio as of June 30, 2010, see "APPENDIX B
- CITY OF SEAL BEACH COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR
ENDED JUNE 30, 2010 (EXCERPTS) — Note 2." ]
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APPENDIX B
CITY OF SEAL BEACH COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR FISCAL YEAR ENDED JUNE 30, 2010 (EXCERPTS)
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APPENDIX C
FORM OF OPINION OF BOND COUNSEL
Upon issuance and delivery of the Bonds, Richards Watson & Gershon, A Professional Corporation,
Bond Counsel, proposes to render its final approving opinion in substantially the following form:
[closing date], 2011
City of Seal Beach
211 Eighth Street
Seal Beach, California 90740
Opinion of Bond Counsel
with reference to
$[principal amount]
Seal Beach Public Financing Authority
2011 Wastewater Revenue Refunding Bonds, Series A
Ladies and Gentlemen:
We have examined (i) a record of proceedings relating to the issuance by the Seal Beach Public
Financing Authority (the "Authority") of the above - captioned bonds (the "Bonds "); (ii) the Indenture of
Trust, dated as of January 1, 2011 (the "Indenture), between the Authority and Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee "); (iii) the Installment sale Agreement, dated as of January
1, 2011 (the "Installment Sale Agreement "), between the Authority and the City of Seal Beach (the
"City"); and (iv) supplemental documents furnished to us, certificates and documents from public
officials and others, and such other matters of law as we have deemed necessary for the purpose of this
opinion. As to questions of fact material to this opinion, we have relied upon such certificates and
documents without undertaking to verify the same by independent investigation. All capitalized terms
used but not defined herein have the meanings ascribed to them in the Indenture, and if not in the
Indenture, in the Installment Sale Agreement.
The Bonds are issued under and pursuant to the Indenture and the provisions of Title 1, Division
7, Chapter 5, Article 4 of the Government Code of California, as amended (the "Act "), and other laws
amendatory thereof and supplemental thereto.
From such examination, we are of the opinion that under existing law:
1. The Indenture has been duly and lawfully authorized, executed and delivered by the
Authority and, assuming due authorization, execution and delivery by the Trustee, is in full force and
effect in accordance with its terms and is valid and binding upon the Authority and enforceable in
accordance with its terms, and no other authorization for the Indenture is required. The Indenture creates
the valid pledge which it purports to create of (i) the Revenues and (ii) certain funds established by the
Indenture, including the investments, if any, thereof; subject to the provisions of the Indenture permitting
the application thereof for the purposes and on the terms and conditions set forth in the Indenture.
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2. The Authority is duly authorized and entitled to issue. the Bonds, and the Bonds have
been duly and validly authorized and issued by the Authority in accordance with the Constitution and
statutes of the State of California, including the Act, and in accordance with the Indenture. The Bonds
constitute the valid and binding obligations of the Authority as provided in the Indenture, are enforceable
in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Act
and the Indenture. The Bonds are not an obligation of the State of California, any public agency thereof
(other than the Authority), or any member of the Authority and neither the faith and credit nor the taxing
power of the State of California or any public agency thereof or any member of the Authority is pledged
for the payment of the Bonds. The Authority has no taxing power.
3. The Authority and the City have duly authorized, executed and delivered the Installment
Sale Agreement, which constitute the valid and binding agreement of the Authority and the City
enforceable according to its terms. The obligation of the City to make Installment Payments constitutes a
valid and binding obligation of the City payable from Net Revenues of the Enterprise.
4. Interest on the Bonds is exempt from personal income taxes of the State of California
and, assuming compliance with the covenant described below, is excluded from gross income for Federal
income tax purposes. The Bonds are not "specified private activity bonds" within the meaning of Section
57(a)(5) of the Internal Revenue Code of 1986, as amended (the "Code ") and, therefore, interest on the
Bonds will not be treated as a preference item for purposes of computing the alternative minimum tax
imposed by Section 55 of the Code. However, we note a portion of the interest on Bonds owned by
corporations may be subject to the Federal alternative minimum tax, which is based in part on adjusted
current earnings.
The Code sets forth certain requirements which must be met subsequent to the issuance and
delivery of the Bonds for interest thereon to be and remain excluded from gross income for Federal
income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be
included in gross income retroactive to the date of issue of the Bonds. The Authority and the City have
covenanted in the Indenture and the Installment Sale Agreement to satisfy, or take such actions as may be
necessary to cause to be satisfied, each provision of the Code necessary to maintain the exclusion of the
interest on the Bonds from gross income for Federal income tax purposes pursuant to Section 103(a) of
the Code.
Certain requirements and procedures contained or referred to in the Indenture, the Installment
Sale Agreement and other relevant documents may be changed and certain actions may be taken, under
the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or
with the approving opinion of nationally recognized bond counsel. We express no opinion as to any
Bond, or the interest thereon, if any change occurs or action is taken upon the advice or approval of other
bond counsel.
Except as stated in the foregoing paragraph numbered 4 and the paragraph immediately following
paragraph 4, we express no opinion as to any Federal or state tax consequences of the ownership or
disposition of the Bonds.
The opinions expressed in the paragraphs numbered 1, 2 and 3 hereof are qualified to the extent
that the enforceability of the Indenture, the Installment Sale Agreement and the Bonds may be limited by
any applicable bankruptcy, insolvency, debt adjustment, fraudulent conveyance or transfer, moratorium,
reorganization or other similar laws affecting creditors' rights, to the application of equitable principles,
to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against
public entities in the State of California. We express no opinion with respect to any indemnification,
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contribution, penalty, choice of law, choice of forum or waiver provisions contained in the foregoing
documents. We do not express any opinion with respect to the quality of title to, or interests in, any of the
real or personal property described in or subject to the lien of the Installment Sale Agreement or with
respect to the accuracy or sufficiency of the description of any such property contained therein and in the
Indenture.
The opinions expressed herein are based on an analysis of existing law and cover certain matters
not directly addressed thereby. Such opinions may be affected by actions taken or omitted or events
occurring after the date hereof, and we have not undertaken to determine, or to inform any person,
whether any such actions or events are taken or do occur. We have assumed the genuineness of all
documents and signatures presented to us. We have not undertaken to verify independently, and have
assumed, the accuracy of the factual matters represented, warranted or certified in such documents.
Respectfully submitted,
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APPENDIX D
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
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APPENDIX E
DTC'S BOOK -ENTRY ONLY SYSTEM
The information in this Appendix concerning DTC and DTC's book -entry system has been
obtained from sources that the City believes to be reliable and the City takes no responsibility for the
accuracy thereof The City give no assurances that (i) DTC, the Direct and Indirect Participants or
others will distribute payments of principal, premium (f any) or interest with respect to the Bonds paid to
DTC or its nominee as, the registered owner, to the Beneficial Owners, (ii) such entities will distribute
redemption notices or other notices, to the Beneficial Owners, or (iii) an error or delay relating thereto
will not occur.
The Depository Trust Company ( "DTC "), New York, New York, 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 certificate will be issued for the each maturity of the Bonds, each 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 2.2 million
issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market
instruments from over 100 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,
Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC and
EMCC, 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. corn and www.dtc.org.
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. Beneficial Owners are, however, 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 Direct and Indirect Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in the Bonds, except in the event that use of the book -entry system for the Bonds is discontinued.
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•
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are
registered in the name of DTCs partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration
in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Bonds: DTC's records reflect only the
identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be
the Beneficial Owners. The Direct and Indirect 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 a maturity 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 any other DTC nominee) will consent or vote with respect to
the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the City 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium (if any) 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 City 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 City or the Trustee, subject to any statutory or regulatory requirements as may be in effect
from time to time. Principal, premium (if any) and interest payments with respect to the Bonds to Cede &
Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time
by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a
successor depository is not obtained, Bond certificates are required to be printed and delivered.
The City 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 in
accordance with the provisions of the Indenture.
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APPENDIX F
FORM OF CONTINUING DISCLOSURE AGREEMENT
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