HomeMy WebLinkAboutContracts & Agreements_150-2016 INSTALLMENT SALE AGREEMENT
by and between the
CITY OF REDLANDS,
as Purchaser
and the
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK("IBANK"),
as Seller
Dated as of July 1, 2016
Agreement No. ISRF 17-114
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS, CONSTRUCTION & CONDITIONS PRECEDENT...................2
SECTION 1.01. Definitions.............................................................................................2
SECTION 1.02. Rules of Construction............................................................................ 8
SECTION 1.03. Conditions Precedent to Effectiveness.................................................. 8
ARTICLE II TERMS OF SALE................................................................................................... 9
SECTION 2.01. Purchase and Sale.................................................................................. 9
SECTION 2.02. Design, Acquisition, Construction and Sale of the Facility.................. 9
SECTION 2.03. Payment of Purchase Price; Term; Interest Rates............................... 10
SECTION 2.04. Payment on Business Days. ................................................................ 1 I
SECTION 2.05. Disbursement of Facility Funds. ......................................................... 11
SECTION 2.06. Additional Payments........................................................................... 12
SECTION 2.07. Reserved.............................................................................................. 13
SECTION 2.08. No Early Prepayment of APurchase Price; Authorized
Prepayment.......................................................................................... 13
SECTION 2.09. Validity of Pledge and First Lien........................................................ 14
SECTION 2.10. Limited Obligation.............................................................................. 14
SECTION 2.11. Permitted Additional Parity Debt........................................................ 14
SECTION 2.12. Purchaser's Obligation for Other Project Costs.................................. 16
SECTION 2.13. Project and Facility Description.......................................................... 16
SECTION 2.14. Withholding of Facility Funds. ........................................................... 16
SECTION 2.15. Reserve Account................................................................................. 17
SECTION 2.16. Permitted Subordinate Debt..................................................17
ARTICLE III PLEDGE OF REVENUES; APPLICATION OF FUNDS.................................. 18
SECTION 3.01. Pledge of Net System Revenues. ........................................................ 18
SECTION 3.02. Sytem Revenues to be Deposited in the Enterprise Fund. .................. 18
SECTION 3.03. Priority of Payments Made from the Enterprise Fund. ....................... 18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............ 19
SECTION 4.01. Organization; Authority...................................................................... 19
SECTION 4.02. Agreement Valid and Binding. ........................................................... 19
SECTION 4.03. No Conflict in Execution of Agreement. ............................................ 19
SECTION 4.04. No Litigation.......................................................................................20
SECTION 4.05. No Breach or Default. ......................................................................... 20
SECTION 4.06. No Consent, Approval or Permission Necessary................................20
SECTION 4.07. Accuracy and Completeness of Information Submitted to
lBank................................................................................................... 20
SECTION 4.08. Financial Statements of the Purchaser. Error! Bookmark not defined.20
SECTION 4.09. Licenses, Permits and Approvals for Completion of the Facility..... 201
SECTION 4.10. Authority to Operate the System.......................................................201
SECTION 4.11. Valid Title;No Conflict...................................................................... 21
SECTION 4.12. Other Liens;No Lien Senior to lBank Lien........................................21
SECTION 4.13. Purchaser's Compliance with Prop 218 Law......................................21
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SECTION 4.14. No Challenge to Purchaser's Rates, Fees and Charges.....................212
SECTION 4.15. Purchaser's Compliance with Conditions Precedent to Parity
Debt Set Forth in Parity Debt Instruments........................................212
SECTION 4.16. Facility Construction Constitutes Capital Improvemetns. ................ 212
SECTION 4.17. Continuing Validity of Representations and Warranties......... ........22
ARTICLE V AFFIRMATIVE COVENANTS OF THE PURCHASER...................................22
SECTION 5.01. Punctual Payment................................................................................ 22
SECTION 5.02. Payment of Claims.............................................................................. 22
SECTION 5.03. Books and Accounts; Financial Statements........................................ 23
SECTION 5.04. Protection of IBanh's Security and Rights..........................................24
SECTION 5.05. Payments of Taxes and Other Charges. .............................:................24
SECTION 5.06. Maintenance of System Revenues; Rate Covenant.............................25
SECTION 5.07. Tax Covenants.....................................................................................26
SECTION 5.08. Maintenance and Operation of System. .............................................. 30
SECTION 5.09. Assumption of Obligations. ................................................................30
SECTION 5.10. Damage, Destruction, Title Defect and Condemnation; Use of
NetProceeds........................................................................................30
SECTION 5.11. Entry into Replacement Agreement....................................................32
SECTION 5.12. Further Assurances.............................................................................. 32
SECTION 5.13. Agreement to Complete Facility Delivery and the Project................. 32
SECTION 5.14. Collection of Rates, Fees and Charges................................................ 33
SECTION 5.15. The Purchaser's General Responsibility............................................. 34
SECTION 5.16. The Purchaser's Assurances and Commitments. ................................ 34
SECTION 5.17. Facility Access. ...................................................................................34
SECTION 5.18. Operation and Maintenance of the Facility and the Project................ 34
SECTION 5.19. Performance and Payment Bonds. ......................................................35
SECTION 5.20. Continuing Disclosure......................................................................... 35
SECTION 5.21. Notice of Purchaser Event of Default. ................................................ 35
SECTION 5.22. Maintenance of Insurance................................................................... 36
SECTION 5.23. Reserved..............................................................................................36
SECTION 5.24. Compliance with Contracts................................................................. 36
SECTION 5.25. Facility Useful Life Certification... ......................... ...............36
SECTION 5.26. Maintenance of Lien Parity...... ..................... ......................36
SECTION 5.27. Covenant to Comply with Prop 218 Law............ ...................36
ARTICLE VI NEGATIVE COVENANTS OF THE PURCHASER......................................... 37
SECTION 6.01. Limitation on Additional Obligations; No Senior Debt...................... 37
SECTION 6.02. Disposition of Property....................................................................... 37
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES...................................................388
SECTION 7.01. Events of Default and Acceleration. ................................................. 388
SECTION7.02. Remedies............................................................................................. 39
SECTION 7.03. Application of Funds upon Default..................................................... 39
SECTION 7.04. No Waiver...........................................................................................40
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SECTION 7.05. Remedies Not Exclusive..................................................................... 40
ARTICLE V MISCELLANEOUS..............................................................................................41
SECTION 8.01. California Law; Venue........................................................................41
SECTION 8.02. Assignment ofIBank's Rights. ...........................................................41
SECTION 8.03. Third Party Beneficiaries. ................................................................... 41
SECTION 8.04. Successor Entities................................................................................ 41
SECTION 8.05. Discharge of Agreement. .................................................................. 422
SECTION 8.06. Amendment.........................................................................................42
SECTION 8.07. Waiver of Personal Liability...............................................................43
SECTION 8.08. Arm's Length Transaction. .................................................................43
SECTION 8.09. Notices.................................................................................................43
SECTION 8.10. Contact Persons...................................................... ..........44
SECTION 8.11. Partial Invalidity..................................................................................44
SECTION 8.12. Binding Effect.....................................................................................44
SECTION 8.13. Entire Agreement..............................................................44
SECTION 8.14. Indemnification. .................................................................................. 45
SECTION 8.15. Expectations....................................................................46
SECTION 8.16. Section Headings........................... ........................... .........46
SECTION 8.17. Time of the Essence... ......... ...............................................46
SECTION 8.18. Form of Documents............ ........................... ............ .........47
SECTION 8.19. Waiver of Consequential Damages................................. .........47
SECTION 8.20. Nondiscrimination................................. ............ ...... ..........47
SECTION 8.21. Execution in Counterparts...................................................................48
SECTION 8.22. Usury Savings..................................................................48
EXHIBIT A APPROVING RESOLUTION OF THE PURCHASER.............................A-1
EXHIBIT B DESCRIPTION OF THE FACILITY AND PROJECT.............................. B-1
EXHIBIT C CONDITIONS PRECEDENT TO DISBURSEMENT............................... C-1
EXHIBIT D FORM OF OPINION OF LEGAL COUNSEL TO PURCHASER............D-1
EXHIBIT E AMORTIZATION SCHEDULE..................................................................E-2
EXHIBIT F FORM OF CERTIFICATE OF THE MUNICIPAL UTILITIES AND
ENGINEERING DEPARTMENT DIRECTOR...........................................F-I
EXHIBIT G SCHEDULE OF SOURCES AND USES OF FACILITY FUNDS............H-2
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INSTALLMENT SALE AGREEMENT
THIS INSTALLMENT SALE AGREEMENT, is made and entered into as of July 1,
2016 (as defined in Section 1.01, the"Agreement"),by and between City of Redlands, a
municipal corporation duly organized and validly existing under the laws of the State of
California, as purchaser(the"Purchaser"), and the CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK("IBank"), duly organized and validly existing pursuant
to the Bergeson-Peace Infrastructure and Economic Development Bank Act, constituting
Division 1 of Title 6.7 of the California Government Code (commencing at section 63000
thereof) as now in effect and as it may from time to time hereafter be amended(the"Act"), as
Seller. IBank and the Purchaser are hereinafter at times collectively referred to as the "Parries"
and individually as a"Parry."
WITNESSETH:
WHEREAS, on or about March 15, 2016, the Purchaser adopted Resolution No. 7611, in
substantially the same form as set forth in Exhibit A attached hereto, authorizing the purchase
from IBank of a Facility, as defined herein, as evidenced by this Agreement;
WHEREAS, on September 18, 2012, TKE Engineering, Inc. provided a Pavement
Deterioration Analysis Report to the Purchaser which found that solid waste vehicles account for
the highest vehicle loading factor on city streets and, as such, are a major contributor to street
deterioration estimated at an annual, citywide cost of$3.6 million;
WHEREAS,Purchaser's staff issued Proposition 218 notices necessary for the rates and
charges increases required to support the PARIS Project, as defined herein, which notices
attributed more than 38% of damage done to city streets each year to solid waste vehicles;
WHEREAS, not having received written protests against the proposed increases from a
majority of parcels subject to the revised schedule of rates and charges, the Purchaser's City
Council adopted the revised schedule of rates and charges pursuant to the terms of Ordinance
No. 2787 effective February 1,2013;
WHEREAS, the Purchaser sought financing for the aforementioned improvements from
Mank and lBank wishes to provide such financing;
WHEREAS, IBank has issued, or intends to issue,tax-exempt bonds ("Proceeds Bonds"
as defined in Section 1.01), the proceeds of which may be used to provide all or a portion of the
Facility Funds (as defined in Section 1.01);
WHEREAS, Mank may pledge its rights, including the rights to receive payments, under
this Agreement to secure bonds that it has issued, or intends to issue, for the benefit of its
programs("Secured Bonds" as defined in Section 1.01), and the Purchaser acknowledges that the
issuance or existence of both the Proceeds Bonds and the Secured Bonds impacts its rights and
obligations as described herein; and
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NOW, THEREFORE, in consideration of the promises and the mutual agreements herein
contained, the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS, CONSTRUCTION & CONDITIONS PRECEDENT
SECTION 1.01. Definitions. Unless the context clearly otherwise requires, the
capitalized terms in this Agreement shall have the respective meanings set forth below.
"2013A Bonds" means the obligations evidenced by that certain 2013 Solid Waste
Installment Sale Agreement by and between the Purchaser and the Redlands Financing Authority
dated October 1, 2013 (the"2013 ISA"), under which the Purchaser is obligated to make
installment sale payments solely from Net Solid Waste Revenues (as that term is defined in the
2013 ISA) and which are secured by a pledge of revenues of the Purchaser's Solid Waste
Enterprise Fund that is on parity with the obligations created under this Agreement.
"2015 Mank ISA' means the Installment Sale Agreement by and between the Purchaser
and IBank dated as of March 2, 2015, Agreement No. 14-105.
"Act" means the Bergeson-Peace Infrastructure and Economic Development Bank Act,
constituting Division 1 of Title 6.7 of the California Government Code (commencing at section
63000 thereof) as now in effect and as it may from time to time hereafter be amended.
"Additional Payments" means the payments made pursuant to Section 2.06.
"Agreement" means this Installment Sale Agreement, between IBank and the Purchaser,
as originally entered into and as amended from time to time pursuant to the provisions hereof.
"Business Day" means any day, Monday through Friday, which is not a legal holiday of
the State or the trustee of the Proceeds Bonds or Secured Bonds.
"Certificate of the Purchaser" means a request or certificate, in writing, signed by a duly
authorized representative of the Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended, or any successor statute
thereto, and any regulations promulgated thereunder.
"Criteria" means the"Criteria, Priorities and Guidelines for the Selection of Projects for
Financing under the ISRF Program" dated February 23, 2016, as may thereafter be amended
from time to time.
"Current Revenues" means revenues which are both received by the Purchaser and
utilized for the payment of Purchase Price under this Agreement within a six month period.
"Debt Service"means, for any Fiscal Year, the sum of interest, and principal due and
payable under this Agreement during such Fiscal Year, the 113ank Annual Fee for such Fiscal
Year and any Parity Debt Service and debt service on any senior debt for such Fiscal Year.
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"Effective Date" means the date on which this Agreement is last executed, as set forth in
the signature page hereto, and is the date this Agreement becomes effective and binding on the
Purchaser and 113ank, subject to the terms and conditions hereof, and is the date on which interest
commences to accrue hereunder.
"Enterprise Fund" means the solid waste enterprise fund established by the Purchaser and
in which all System Revenues are deposited and maintained by the Purchaser pursuant to Section
3.02 and in which IBank has a certain security interest pursuant to the terms of this Agreement.
The Purchaser's Enterprise Fund is composed of the funds received from providing solid waste
services to customers.
"Event of Default"means any of the events described in Section 7.01.
"Facility" means that portion of the Project financed with the Facility Funds provided by
and to be sold by 113ank to the Purchaser pursuant to terms and conditions of this Agreement as
more particularly described in Exhibit B, hereto.
"Facility Delivery"has the meaning set forth in Section 2.02.
"Facility Funds" mean the moneys provided by IBank to the Purchaser, as agent for
IBank, pursuant to this Agreement to purchase and/or construct the Facility as set forth in
Section 2.05.
"Facility Funds Reduction Request" means any written request of the Purchaser to reduce
the amount of Facility Funds not yet disbursed.
"Fiscal Year" means any twelve month period extending from July I in one calendar year
to June 30 of the succeeding calendar year,both dates inclusive, or any other twelve month
period selected and designated by the Purchaser as its official fiscal year period.
"Guidelines"has the meaning set forth in Section 5.07.
"IBank Annual Fee" means the fee payable to Mank pursuant to Section 2.06.
"Independent Accountant" means any certified public accountant or firm of certified
public accountants duly licensed or registered or entitled to practice and practicing as such under
the laws of the State, appointed by the Purchaser who, or each of whom:
(a) Is in fact independent and not under the direct or indirect control of the
Purchaser or IBank;
(b) Does not have any substantial interest, direct or indirect, in the Purchaser,
IBank, the Project or the Facility; and
(c) Is not connected with the Purchaser or IBank as an officer or employee of
the Purchaser or IBank, but who may be regularly retained to make reports to the Purchaser or
m ank.
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"Independent Consultant" means any consultant or firm of such consultants judged by the
Purchaser to have experience in matters relating to the collection of System Revenues or other
experience with respect to the financing of System projects, as appropriate, appointed and paid
by the Purchaser who, or each of whom:
(a) Is in fact independent and not under the direct or indirect control of the
Purchaser, IBank, the Project or the Facility;
(b) Does not have any substantial interest, direct or indirect, in the Purchaser
or IBank; and
(c) Is not connected with the Purchaser or IBank as a member, officer or
employee of the Purchaser, but who may be regularly retained to make reports to the Purchaser
or IBank.
"Installment Payments" means the principal and interest payments to be made by the
Purchaser to IBank in payment of the Purchase Price hereunder.
"Interest Payment Date" means February 1 and August I of every year in which the
Purchase Price remains unpaid.
"Investment Property" means any security or obligation, any annuity contract, or any
other investment-type property, but does not include any Tax Exempt Obligation unless such
obligation is a"specified private activity bond"within the meaning of section 57(a)(5)(C) of the
Code.
"Liquidated Damages Charge"has the meaning set forth in Section 2.06(a)(4).
"Liquidated Damages Period"has the meaning set forth in Section 5.03(f).
"Maximum Annual Debt Service" means as of the date of calculation, the greatest total
Debt Service payable in any Fiscal Year during which this Agreement is in effect.
"Maximum Rate" has the meaning set forth in Section 8.22.
"Net System Revenues" means, for any Fiscal Year, all System Revenues received by the
Purchaser for such Fiscal Year less the Operations and Maintenance Costs for such Fiscal Year.
"Nongovernmental Persons"means any person or entity other than any state, or political
subdivision of a state, but excludes the United States and its agencies or instrumentalities.
"Operations and Maintenance Costs" means the reasonable and necessary costs paid or
incurred by the Purchaser for maintaining and operating the System, determined in accordance
with generally accepted accounting principles, consistently applied, including all reasonable
expenses of management and repair and all other expenses necessary to maintain and preserve
the System in good repair and working order, and including all administrative casts of the
Purchaser that are charged directly or apportioned to the operation of the System, such as salaries
and wages of employees, overhead, taxes (if any), the cost of permits and licenses to operate the
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System and insurance premiums, and including all other reasonable and necessary costs of the
Purchaser or charges required to be paid by it to comply with the terms hereof, but excluding in
all cases depreciation, replacement and obsolescence charges or reserves therefor and
amortization of intangibles.
"Origination Fee" means a payment in the amount of Thirty Thousand Three Hundred
dollars ($30,300) that shall be due and payable by the Purchaser on the Effective Date and shall
be deducted by IBank from the Facility Funds upon execution of this Agreement.
"Parity Debt" means to the extent outstanding, the obligations associated with the 2013A
Bonds and the 2015 IBank ISA, together with any loan, bond, note, advance, installment sale
agreement, capital lease or other evidence of indebtedness payable from and secured by a first
lien on the Net System Revenues on parity with the Installment Payments and Additional
Payments, issued or incurred pursuant to and in accordance with the provisions of Section 2.11.
"Parity Debt Instrument" means, collectively, any instrument evidencing, governing, or
securing Parity Debt, including without limitation the indenture relating to such Parity Debt, as
applicable.
"Parity Debt Service" means, for any Fiscal Year, the sum of. (1) the principal and
interest due and payable during such Fiscal Year for all outstanding Parity Debt, and(2) annual
fees, if any, under Parity Debt.
"Payment Account" means the funds or accounts (or any portions of any funds or
accounts), established pursuant to Section 2.03(c) hereof, that will hold monies that the
Purchaser expects to use to pay the Purchase Price under this Agreement.
"Phase I Environmental Site Assessment" means an investigation of the environmental
condition of the Facility, including all improvements and real property as well as surrounding
improvements and real property, to determine the possibility of contamination,based on visual
observation, interviews with knowledgeable persons, and the review of records and databases, in
a manner consistent with the current standards and practices employed typically by State
Registered Environmental Assessors, or other professionals licensed in the State as engineers or
geologists, performing environmental assessments in the same general geographic location as the
Facility.
"Phase H Environmental Site Assessment" means the in situ sampling and laboratory
analysis of any contamination discovered in connection with a Phase I Environmental Site
Assessment, in a manner consistent with the current standards and practices employed typically
by State Registered Environmental Assessors, or other professionals licensed in the State as
engineers or geologists,performing environmental assessments in the same general geographic
location as the Facility.
"Preliminary Costs" means architectural, engineering, survey or soil testing costs, reports
such as environmental impact reports, Phase I Environmental Site Assessments, Phase II
Environmental Site Assessments, feasibility studies, rate studies and CEQA reports, as well as
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other costs incident to the start of construction, but not land acquisition, site preparation or
similar costs.
"Prepayment Request" means any written request of the Purchaser to prepay all or a
portion of the principal component of the Purchase Price.
"Project" means the Purchaser's Pavement Accelerated Repair Implementation Strategy
(the PARIS project) as more fully described in Exhibit B.
"Proceeds Bonds" means bonds issued, or to be issued, by IBank the proceeds of which
may be used, in whole or part, to provide the Facility Funds.
"Prop 218 Law"means, collectively, the California Constitution Article XIII D, the
statutes implementing it, and the published California Appellate Court and Supreme Court
decisions interpreting it in effect on the Effective Date and as such law may be amended or
interpreted from time to time.
"Purchase Price" means the principal amount plus the interest thereon owed by the
Purchaser to IBank under the conditions and terms hereof for the payment of the costs of the
Facility, and the incidental costs and expenses related thereto paid by IBank.
"Purchaser Representative" shall have the meaning set forth in Section S.10 hereto.
"Rate Challenge" shall have the meaning set forth in Section 5.27 hereto.
"Replacement Agreement Covenant" shall have the meaning set forth in Section 5.11.
"Report" means a document in writing signed by an Independent Consultant or an
Independent Accountant, and including:
(a) A statement that the person or firm making or giving such Report has read
the pertinent provisions of this Agreement to which such Report relates;
(b) A brief statement as to the nature and scope of the examination or
investigation upon which the Report is based; and
(c) A statement that, in the opinion of such person or firm, sufficient
examination or investigation was made as is necessary to enable said consultant to express an
informed opinion with respect to the subject matter referred to in the Report.
"Reporting Covenants" shall have the meaning set forth in Section 5.03(f).
"Secured Bonds" means bonds of one or more series issued, or to be issued,by IBank to
which certain rights of IBank under this Agreement, including the right to receive the Installment
Payments, may be from time to time pledged or assigned directly or indirectly as security for
such bonds.
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"Senior Debt"means the obligations evidenced by any Senior Debt Instrument and any
additional loan, bond, note, advance, installment sale agreement, or other indebtedness or capital
lease of the Purchaser payable from and secured by a first lien on the Net System Revenues
which is senior to the lien established by this Agreement.
"Senior Debt Instruments"means, collectively, any instrument evidencing, governing, or
securing Senior Debt, including without limitation any indenture relating to such Senior Debt, as
applicable.
"Senior Debt Service" means, for any Fiscal Year, the amounts required to be paid
pursuant to any Senior Debt Instrument.
"Service Contract"has the meaning set forth in Section 5.07.
"Service Provider"has the meaning set forth in Section 5.07
"State"means the State of California.
"Subordinate Debt"means any Ioan, bond, note, advance, installment sale agreement, or
other indebtedness or capital lease of the Purchaser payable from and secured by a lien on Net
Systems Revenues which is subordinate to the lien established by this Agreement.
"Subordinate Debt Instruments" means, collectively, any instrument evidencing,
governing or securing Subordinate Debt, including without limitation any indenture relating to
such Subordinate Debt, as applicable.
"Subordinate Debt Service" means for any Fiscal Year, the amounts required to be paid
pursuant to any Subordinate Debt Instrument.
"System" means the entire solid waste collection, processing and disposal system owned
or operated by the Purchaser, including but not limited to all facilities, properties, works and
improvements at any time owned, operated or determined to be part of the System by the
Purchaser for the collection, processing, and disposal of solid waste within the service area of the
Purchaser, together with any necessary lands, rights, entitlements, and other property useful in
connection therewith, together with all extensions thereof and improvements or additions thereto
hereafter acquired, constructed, or installed by the Purchaser.
"System Revenues" means, for each Fiscal Year, all gross income and revenue received
or receivable by the Purchaser from the ownership or operation of the System, determined in
accordance with generally accepted accounting principles, consistently applied, including all
rates, fees and charges(including connection fees and charges) received by the Purchaser for the
services of the System, and all other income and revenue howsoever derived by the Purchaser
from the ownership or operation of the System or arising from the System, and also including all
legally available income from the deposit or investment of any money in the Enterprise Fund or
any rate stabilization fund, and the proceeds of any taxes, but excluding in all cases any
refundable deposits made to establish credit, and advances or contributions in aid of
construction.
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"Tax Exempt Obligation"means any obligation the interest on which is excluded from
gross income for federal income tax purposes pursuant to section 103 of the Code or section 103
of the Internal Revenue Code of 1954, as amended, and Title XIII of the Tax Refonn Act of
1986, as amended, as well as stock in a regulated investment company to the extent at least
ninety-five percent (95%) of income to the stockholder is treated as interest that is excludable
from gross income under section 103 of the Code.
SECTION 1.02. Rules of Construction.
Except where the context otherwise requires, words imparting the singular number shall
include the plural number and vice versa, and pronouns inferring the masculine gender shall
include the feminine gender and vice versa. All references herein to particular articles or
sections are references to articles or sections of this Agreement. The headings, subheadings and
Table of Contents herein are solely for convenience of reference and shall not constitute a part of
this Agreement, nor shall they affect its meanings, construction or effect. Any rule of
construction to the effect that ambiguities are to be resolved against the drafting party shall not
apply in interpreting this Agreement.
SECTION 1.03. Conditions Precedent to Effectiveness.
This Agreement shall be of not force and effect, and IBank shall have no obligations
hereunder,until the following conditions precedent to effectiveness of this Agreement have, in
IBank's reasonable discretion,been satisfied fully.
(a) IBank shall have received three (3) copies of this Agreement bearing
the Purchaser's original signature and Mank shall have counter-signed this Agreement.
(b) IBank shall have received a copy of a resolution duly adopted by the
Purchaser's governing body approving entry into this Agreement in form and content acceptable
to IBank, a copy of which shall be attached hereto as Exhibit A.
(c) IBank shall have received an originally executed copy of an opinion
of the Purchaser's legal counsel in form and content substantially similar to the Form of Opinion
of Legal Counsel to the Purchaser attached hereto as Exhibit D.
(d) IBank shall have received an originally executed copy of a Certificate
of the Purchaser from the Purchaser's Municipal Utilities and Engineering Department Director
in form and content substantially similar to the Form of Certificate of Municipal Utilities and
Engineering Department Director attached hereto as Exhibit F.
(e) The Purchaser shall have paid to ]Bank the Origination Fee.
(fl The Purchaser shall have provided satisfactory evidence that it has
expended fully its funds, or has immediately available committed funds to expend, for each of
the items in Exhibit H, Schedule of Sources and Uses of Facility Funds, denoted to be the
responsibility of the Purchaser.
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ARTICLE II
TERMS OF SALE
SECTION 2.01. Purchase and Sale.
lBank hereby agrees to sell to the Purchaser and the Purchaser hereby agrees to purchase
from IBank the Facility under and subject to the terms of this Agreement. This Agreement
constitutes a continuing agreement between the Purchaser and Mank to secure the full and final
payment of the Purchase Price, subject to the covenants, agreements, provisions and conditions
herein contained.
SECTION 2.02. Design. Acquisition. Construction and Sale of the Facility.
(a) IBank hereby agrees to perform all necessary acts, including but not limited to
acquisition,entitlement,permitting, installation, design, remediation and improvement,to
construct and deliver an operational Facility ("Facility Delivery") for the benefit of, and to sell
the Facility to, the Purchaser. In order to implement this provision, 1Bank hereby appoints the
Purchaser as its agent for the purpose of performing all of the foregoing acts in connection with
the acquisition, entitlement,permitting, installation, design, remediation, improvement,
construction, and delivery of an operational Facility; and the Purchaser hereby accepts such
appointment and agrees to perform all acts necessary to achieve Facility Delivery, including,but
not limited to, entry into such engineering, design and construction contracts and purchase orders
as may be necessary, as agent for IBank, to achieve Facility Delivery. The Purchaser hereby
agrees that as such agent it will cause the Facility Delivery to be diligently pursued and
completed as soon as reasonably possible given the nature of, and inherent challenges in
connection with, the construction of the Facility and prevailing market conditions. IBank hereby
agrees to sell, and hereby sells, the Facility to the Purchaser. The Purchaser hereby agrees to
purchase, and hereby purchases, the Facility from 113ank. Notwithstanding the foregoing, it is
hereby expressly understood and agreed that IBank shall have no obligations whatsoever for
Facility Delivery and shall be, except for providing the Facility Funds,under no liability of any
kind or character whatsoever for the payment of any costs or expenses incurred by the Purchaser
(whether as agent for IBank or otherwise) for any of the actions associated with the Facility
Delivery and that all such costs and expenses shall be paid by the Purchaser, regardless of
whether Facility Funds are sufficient to cover all such costs.
(b) In the event IBank is served with a stop payment notice in connection with the
Facility, the Purchaser shall within thirty(30) days cause such stop payment notice to be
discharged or released, whether by payment of the sum requested in such stop payment notice,
by procurement of a stop payment notice release bond, or by any other legally available means.
Mank shall withhold from the Purchaser amounts sufficient to pay the claim stated in the stop
payment notice, and to otherwise comply with applicable law, until such stop payment notice is
released and/or discharged to IBank's satisfaction, in its sole and absolute discretion.
9
SECTION 2.03. Payment of Purchase Price; Teen, Interest Rates.
(a) The Purchase Price to be paid by the Purchaser to IBank hereunder is the sum of
the principal amount of the Purchaser's obligation hereunder plus interest, subject to prepayment
as provided in Section 2.08. Interest shall accrue on the entire principal balance, whether or not
disbursed, as set forth in the amortization schedule of Exhibit E hereto.
(b) For purposes of this Agreement:
(1) The principal amount of the Purchase Price to be paid by the
Purchaser to IBank hereunder is Three Million Thirty Thousand Three Hundred dollars
($3,030,300).
(2) The term of this Agreement is twenty(20) years from the Effective
Date.
(3) The interest rate is Three and Twenty-Four Hundredths percent
(3.24%)per annum.
(c) For purposes of compliance with Federal Tax laws applicable to lBank's Proceeds
Bonds and/or Secured Bonds, the Purchaser hereby establishes a"Payment Account"within the
Enterprise Fund and agrees to deposit monies intended for paying such Installment Payments in
the Payment Account until the time that such Installment Payments become due and payable
whereupon the Purchaser would take steps to pay Installment Payments as provided herein.
(d) Installment Payments of principal and interest shall be as set forth in the
amortization schedule of Exhibit E hereto.
(1) The first principal payment shall be due August 1, 2017.
(2) Interest only payments will be based upon the total principal
component of the Purchase Price, including the amounts not disbursed,using an interest rate of
Three and Twenty-Four Hundredths percent(3.24%) per annum.
(3) The Purchaser shall receive a credit against interest owed based
upon the actual interest earned by IBank on the undisbursed Facility Funds or the interest rate on
the Agreement, whichever is lower.
(e) Commencing on the day following the end of the interest only period, the
principal component of the Purchase Price shall be fully amortized over the remaining term of
this Agreement. If any portion of the principal of the Purchase Price is prepaid in part pursuant
to Section 2.05 hereof, the schedule of the principal payments shall be modified to reflect such
partial prepayment.
(f) The obligation of the Purchaser to pay the Purchase Price by paying the
Installment Payments and Additional Payments is, subject to Section 5.10, absolute and
unconditional; and until such time as the Purchase Price shall have been paid in full (or provision
for the payment thereof shall have been made as provided in Section 8.05), the Purchaser shall
10
not discontinue or suspend any Installment Payments or Additional Payments required to be paid
by it under this Agreement when due, whether or not the Facility or any part thereof is operating
or operable, or its use is suspended, interfered with, reduced, curtailed or terminated in whole or
in part; and such payments shall not be subject to reduction whether by offset or otherwise and
shall not be conditional upon the performance or nonperformance by any party to any agreement
for any cause whatsoever.
SECTION 2.04. Payment on Business Days.
Whenever in this Agreement any amount is required to be paid on a day that is not a
Business Day, such payment shall be required to be made on the Business Day immediately
following such day and no further interest shall accrue.
SECTION 2.05. Disbursement of Facility Funds.
(a) IBank shall disburse Facility Funds solely for the purposes set forth in
Exhibit H hereto. The aggregate sum of disbursements for each category set forth in Exhibit H
shall not exceed the corresponding amounts set forth in Exhibit H. Upon compliance with
disbursement conditions set for herein and receipt of a written request for disbursement, IBank
will disburse Facility Funds to the Purchaser in amounts of at least five thousand dollars
($5,000). All requests for payment shall be accompanied by information and documentation as
may be requested by IBank to determine the amount of Facility Funds to be disbursed.
(b) Each disbursement request shall specify one or more of the following for
costs included in the disbursement request:
(1) The Purchaser previously paid the costs and is requesting
reimbursement;
(2) The Purchaser will pay the costs directly upon receipt of funds from
lB ank, or
(3) IBank is requested to pay the disbursement directly to the party
owed the funds instead of the Purchaser.
(c) By submitting to IBank a disbursement request of the type set forth in
subparagraph(b)(1), above, the Purchaser represents and warrants that it has previously paid the
costs indicated in such disbursement request. By submitting to IBank a disbursement request of
the type set forth in subparagraph (b)(2), above, the Purchaser represents and warrants that it will
pay the costs indicated in such request directly upon receipt of funds from IBank.
(d) No Facility Funds shall be disbursed unless and until IBank receives
documentation, satisfactory to IBank, demonstrating that the Purchaser has incurred costs that
constitute both reasonable and necessary components of the Facility and which are consistent
with the cost categories, amounts and requirements described in this Agreement.
(e) Unless otherwise consented to in writing by IBank,the Purchaser must
both: (1)begin Project and Facility construction no later than six months after the Effective
11
Date; and(2) submit invoices to IBank for the entire amount of the Facility Funds no later than
Thirty-Five(35) months after the Effective Date. If the Purchaser fails to meet either of these
conditions, IBank may elect to withhold any and all undisbursed Facility Funds pursuant to
Section 2.14 herein.
(f) Notwithstanding any contrary provisions of this Agreement or any related
documents,under no circumstances will IBank be obligated to make disbursements in excess of
the lesser of(i) actual Facility costs incurred in connection with the completion of the Facility or
(ii) the amount of the Facility Funds.
(g) Not more than ninety-five percent(95%) of each invoice payable from
Facility Funds designated for construction shall be disbursed until IBank receives a recorded notice
of completion for the Facility or other evidence of completion satisfactory to IBank and the
Purchaser has met all conditions precedent to final disbursement set forth herein.
SECTION 2.06. Additional Pam.
(a) The Purchaser shall pay Additional Payments to IBank as follows:
(1) A payment of the IBank Annual Fee on August 1st of each year
during the term of this Agreement in an amount equal to three tenths of one percent(0.30%) of
the outstanding principal component of the remaining Installment Payments as set forth in
Exhibit E; and
(2) Amounts in each year as shall be required by IBank for the
payment of extraordinary expenses of IBank in connection with an Event of Default, the
enforcement of this Agreement or any amendments hereto requested by the Purchaser, including
all expenses, fees and costs of accountants, trustees, and attorneys, litigation costs, insurance
premiums and all other extraordinary costs of IBank. Extraordinary expenses and extraordinary
costs are those expenses and costs related to this Agreement in excess of ordinary and customary
expenses and costs incurred as part of the 113ank Annual Fee pursuant to this Section 2.06. Such
Additional Payments shall be billed by Malik from time to time, together with any appropriate
supporting documents for such extraordinary costs or expenses; and
(3) The Purchaser shall deposit the 113ank Annual Fee with IBank not
later than August 1 st of each year and the Purchaser shall pay to IBank the amount billed
pursuant to subsection(2) within thirty(30)days from the date of the invoice. Any amounts not
promptly paid shall accrue interest at the lesser of twelve percent(12%) per annum or the
maximum rate permitted by law.
(4) Unless expressly waived by IBank in writing, in the event the
Purchaser fails to cure any Reporting Covenants noncompliance as set forth in Section 5.03(f) or
fails to cure any Replacement Agreement Covenant noncompliance within 30 days after receipt
by the Purchaser of the replacement agreement from IBank as set forth in Section 5.11 of this
Agreement, an amount equal to one quarter of one percent(0.25%) of the outstanding component
of the Purchase Price, shall automatically be imposed monthly as liquidated damages charged to
the Purchaser and not as a penalty(the"Liquidated Damages Charge"), and shall continue to be
imposed throughout the Liquidated Damages Period. The Purchaser shall be obligated to pay the
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Liquidated Damages Charge as Additional Payments. Such Additional Payment shall be
reflected in an IBank invoice to the Purchaser. The Purchaser agrees that, under the
circumstances existing as of the date of this Agreement, such Liquidated Damages Charge
represents a reasonable estimate of the costs and expenses IBank will incur as a result of the
Purchaser's noncompliance with the Reporting Covenants and/or the Replacement Agreement
Covenant. Nothing herein shall be construed as an express or implied agreement by IBank to
forbear on its exercise of any other rights or remedies provided by this Agreement, as a waiver of
such rights or remedies, or as a waiver of any default or Event of Default under this Agreement.
SECTION 2.07 Reserved.
SECTION 2.08. Limitations on Prepayment and Facility Funds Reductions.
(a) Authorized Prepayment Period. At any time, after ten (10) years from the
Effective Date (the "Authorized Prepayment Period), the Purchaser is permitted to prepay all or a
portion of the outstanding principal amount of the Purchase Price as follows: (i) if the
prepayment date is on or after ten(10) years after the Effective Date but prior to eleven (11)
years after the Effective Date, the prepayment amount shall be one hundred two percent (102%)
of the principal amount being prepaid; (ii) if the prepayment date is on or after eleven(11) years
after the Effective Date but prior to twelve (12) years after the Effective Date, the prepayment
amount shall be one hundred one percent(101%) of the principal amount being prepaid; and (iii)
if the prepayment date is on or after twelve (12) years after the Effective Date, the prepayment
amount shall be one hundred percent(100%) of the principal amount being prepaid. Further, the
Purchaser shall pay to IBank all accrued interest through the date of prepayment,plus any
interest due and owing,plus any Additional Payments,plus the pro rata portion of the IBank
Annual Fee.
(b) No Right to Prepayment during Early Prepayment Period. Unless
otherwise consented to in writing by IBank pursuant to this Section 2.08, the Purchaser is not
permitted to prepay all or a portion of the principal component of the Purchase Price during the
period commencing with the Effective Date and ending with the date that is ten(10) years after
the Effective Date (the"Early Prepayment Period).
(c) Facility Funds Reduction Treated as a Prepayment. The Purchaser may
request that the amount of Facility Funds not yet disbursed be reduced ("Facility Funds
Reduction Request")thereby reducing the amount of financing; provided, however that any such
request shall be treated in the same manner as a full or partial Prepayment Request and must
satisfy the requirements set forth in this Section 2.08 including, but not limited to the
requirement for IBank consent.
(d) Written Request Required. Regardless of whether the prepayment period
then in effect is the Early Prepayment Period or the Authorized Prepayment Period, the
Purchaser must provide IBank with its written Prepayment Request or Facility Funds Reduction
Request, as the case may be, at Ieast ninety(90) days prior to the requested prepayment or
reduction date. 113ank will not accept any prepayment funds from the Purchaser unless and until
the requirements of this Section 2.08 have been met.
I3
(e) Consent to Early Prepayment or Facility Funds Reduction. If, during the
Early Prepayment Period, IBank elects to approve a Prepayment Request or Facility Funds
Reduction Request, it will provide a written consent("Early Prepayment Consent") setting forth
the conditions of its consent, including, but not limited to the amount of prepayment premium
applicable to the Prepayment Request or Facility Funds Reduction Request, as determined by
IBank at its discretion ("Prepayment Premium").
(f) Amendment for Partial Prepayment or Facility Funds Reduction. If IBank
provides the Purchaser with an Early Prepayment Consent for(i) a prepayment of a portion of
the outstanding principal component of the Purchase Price; or(ii) a reduction of the Facility
Funds amount, IBank and the Purchaser shall enter into an amendment to this Agreement
reflecting the terms of the Early Prepayment Consent and the Purchaser shall pay to IBank all
accrued interest through the date of prepayment; plus any interest due and owing; plus the
portion of the outstanding principal component of the Purchase Price approved for prepayment;
plus the Prepayment Premium,plus any Additional Payments,plus the pro rata portion of the
IBank Annual Fee.
SECTION 2.09. Validity of Pledge and First Lien.
The pledge of the Net System Revenues and all legally available amounts in the
Enterprise Fund constitute a valid pledge of and lien on all of the Net System Revenues and all
legally available amounts in the Enterprise Fund on parity with the lien(s) securing the Parity
Debt.
SECTION 2.10. Limited Obligation.
The Purchaser's obligation to make Installment Payments is a special obligation of the
Purchaser payable solely from Net System Revenues as provided herein and does not constitute a
debt of the Purchaser or the State of California or of any political subdivision thereof within the
meaning of any constitutional or statutory debt limit or restriction.
SECTION 2.11. Permitted Additional Parity Debt.
(a) The Purchaser may, after the Effective Date, issue or incur Parity Debt in
such principal amount as shall be determined by the Purchaser subject to the requirements for
additional obligations as set forth in all existing Parity Debt Instruments and the following
specific conditions, which are hereby made conditions precedent to the Purchaser's issuance and
delivery of such Parity Debt,provided that to the extent that an existing Parity Debt Instrument
conflicts with any of the requirements set forth in this Section 2.11, the more restrictive
provision shall prevail:
(1) No Event of Default hereunder or under any other instrument
secured by System Revenues shall have occurred and be continuing, and the Purchaser shall
otherwise be in compliance with all covenants set forth in this Agreement; and
(2) Net System Revenues calculated on generally accepted accounting
principles, consistently applied, and excluding the proceeds of any taxes and also excluding any
14
balances in any fund at the beginning of the period of the computation, as shown by the books of
the Purchaser for the latest Fiscal Year, or any more recent twelve month period selected by the
Purchaser ending not more than sixty(60) days prior to the adoption of the resolution pursuant to
which instrument such Parity Debt is issued or incurred, as shown by the books of the Purchaser,
plus, at the option of the Purchaser, either or both of the items below designated in subsections
(b)(1) and (b)(2), shall have amounted to at least 1.25 times the Maximum Annual Debt Service
taking into consideration the maximum annual debt service payable in any Fiscal Year on the
proposed Parity Debt, as set forth in the Report of an Independent Accountant or Independent
Consultant delivered to IBank; provided, however, that where the proposed Parity Debt is with
IBank, no Report of an Independent Accountant or Independent Consultant shall be required.
(b) Either or both of the following allowances may be added to Net System
Revenues for the purpose of meeting the condition contained in subsection(a)(2) above:
(1) An allowance for increased System Revenues from any additions
to or improvements or extensions of the System to be made with the proceeds of such proposed
Parity Debt, and also for System Revenues from any such additions, improvements, or
extensions which have been made from moneys from any source but which, during all or any
part of such Fiscal Year or any more recent twelve month period, were not in service, all in an
amount equal to ninety percent (90%) of the estimated additional average annual System
Revenues to be derived from such additions, improvements, and extensions for the first thirty six
(36) month period following closing of the proposed Parity Debt, all as shown in the Report of
an Independent Accountant or Independent Consultant delivered to IBank; provided however,
that in those instances where the proposed Parity Debt is with IBank,no Report of an
Independent Accountant or Independent Consultant shall be required; provided, however, that
where the proposed Parity Debt is with IBank, no Report of an Independent Accountant or
Independent Consultant shall be required and/or
(2) An allowance for increased System Revenues arising from any
increase in the charges made for service from the System which has become effective prior to the
incurring of such proposed Parity Debt but which, during all or any part of such Fiscal Year or
any more recent twelve (12) month period, was not in effect in an amount equal to one hundred
percent(100%) of the amount by which System Revenues would have been increased if such
increase to charges had been in effect during the whole of such time period and any period prior
to the incurring of such proposed Parity Debt, as shown in the Report of an Independent
Accountant or Independent Consultant delivered to 1Bank; provided however, that where the
proposed Parity Debt is with IBank, no Report of an Independent Accountant or Independent
Consultant shall be required.
(c) For purposes of making the calculations set forth in subsection(a)(2):
(1) If any Parity Debt includes capital appreciation bonds, then the
accreted value payment thereof shall be deemed a principal payment and interest that is
compounded and paid as accreted value shall be deemed due on the scheduled redemption or
payment date of such capital appreciation bond;
15
(2) If any Parity Debt includes interest payable pursuant to a variable
interest rate formula, the variable interest rate portion of such Parity Debt for periods when the
actual interest rate cannot yet be determined, shall be assumed to be the maximum interest rate
under the Parity Debt.
(d) The Purchaser shall deliver to IBank,prior to incurring or issuing such
proposed Parity Debt, a copy of the proposed Parity Debt Instrument and Certificate of the
Purchaser certifying that the conditions precedent to the issuance of such Parity Debt set forth in
subsections (a) and (b) above have been satisfied and, as applicable, the Report required by
subsections (a) and (b) above has been delivered; provided however,that where the proposed
Parity Debt is with IBank, no copy of the proposed Debt Instrument nor Report shall be required
and the certification required by this Section 2.11(d)may be made as part of the Parity Debt
Instrument for the new IBank Parity Debt.
(e) Notwithstanding subsections (a)(2), (b), (c), and (d) above, proposed
Parity Debt to be issued for the purpose of refunding outstanding Parity Debt may be issued
without compliance with subsections (a)(2), (b), (c) and (d) above, so long as such refunding
results in lower Parity Debt Service in each Fiscal Year after such refunding and the final
maturity date of the refunding Parity Debt is no later than the final maturity date of the refunded
Parity Debt. The Purchaser shall deliver to IBank the Parity Debt Instrument for such refunding
within 30 days of such Parity Debt issuance.
(f) For purposes of this Agreement only, and only as relates to these Facility
Funds, IBank hereby waives (i) the requirement under Section 2.11(a)(2) of the 2015 ISA for
delivery of a Report of an Independent Accountant or Independent Consultant, and (ii) the
requirements under Section 2.11(d) for delivery of a certificate. This waiver is effective prior to
the issuance of the Parity Debt evidenced by this Agreement.
SECTION 2.12. The Purchaser's Obligation for Other Project Costs.
The Purchaser acknowledges and agrees that the amount of IBank's obligations under
this Agreement is limited to the amount of the Facility Funds. As such, it is the Purchaser's
obligation to pay all other costs associated with or needed for completion of the Project in excess
the Facility Funds amount.
SECTION 2.13. Project and Facility Descriptions.
For the purposes of this Agreement, the description of each of the Project and the Facility
shall be as set forth in Exhibit B hereto.
SECTION 2.14. Withholding of Facility Funds.
(a) IBank may withhold all or any portion of the Facility Funds in the event
that:
(1) The Purchaser has violated any of the material terms, provisions,
conditions, commitments, representations, warranties, or covenants of this Agreement, as
determined by IBank in its reasonable discretion, or if an Event of Default has occurred; or
16
(2) The Purchaser is unable to demonstrate, to the satisfaction of
IBank in its reasonable discretion, the ability to complete the Facility or to maintain adequate
progress toward completion thereof.
(b) In the event that Facility Funds are withheld from the Purchaser, Mank
shall notify the Purchaser of the reasons, identify any additional conditions to be met in order to
resume disbursements and advise the Purchaser of the time in which to remedy the failure or
violation or satisfy the applicable conditions.
(c) If Facility Funds are withheld pursuant to this section, the Purchaser
remains obligated to repay the entire amount of the Purchase Price but to the extent applicable,
the Purchaser may request that the withheld amount be applied as a prepayment pursuant to
Section 2.08.
SECTION 2.15. Reserve Account.
In the event that (i)the Purchaser incurs Parity Debt in accordance with the requirements
of Section 2.11; and (ii) such Parity Debt requires the Purchaser to establish a reserve fund or
account, the Purchaser shall establish, fund, and maintain a reserve account in favor of IBank in
an amount equal to the reserve requirement of such Parity Debt, so long as any obligations under
this Agreement remain outstanding. Said reserve account shall be established and funded
immediately upon the closing of the Parity Debt transaction.
SECTION 2.16. Permitted Subordinate Debt.
The Purchaser may issue or incur Subordinate Debt following the Effective Date in such
principal amount as shall be determined by the Purchaser subject to the following specific
conditions precedent to the issuance or incurrence of such Subordinate Debt.
(a) No Event of Default hereunder, and no default under any other obligation or
instrument secured by Net System Revenues, shall have occurred and be continuing, and the
Purchaser shall be in compliance with all covenants of this Agreement and any other instrument
securing, evidencing, governing, or relating to other obligations secured by,Net System
Revenues.
(b) Net System Revenues calculated pursuant to generally accepted accounting
principles, consistently applied, and excluding the proceeds of any taxes and also excluding any
balances in any fund at the beginning of the period of the computation, as shown by the books of
the Purchaser for the latest Fiscal Year, or any more recent twelve (12) month period selected by
the Purchaser ending not more than sixty(60) days prior to the adoption of the resolution
pursuant to which instrument such Subordinate Debt is issued or incurred, as shown by the books
of the Purchaser, shall have amounted to at least 1.0 times the aggregate sum of the Maximum
Annual Debt Service of all debt secured by Net System Revenues and the maximum annual debt
service payable in any Fiscal Year on all Subordinate Debt, including the proposed Subordinate
Debt, as set forth in the Report of an Independent Accountant or Independent Consultant
delivered to IBank.
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ARTICLE III
PLEDGE OF REVENUES; APPLICATION OF FUNDS
SECTION 3.01. Pledge of Net System Revenues.
The Installment Payments and Additional Payments and all Parity Debt shall be equally
secured by a pledge of and first lien on all of the Net System Revenues and all legally available
amounts in the Enterprise bund, without preference or priority for series, issue, number, dated
date, sale date, date of execution or date of delivery. The Net System Revenues and all legally
available amounts in the Enterprise Fund are hereby pledged in their entirety to the payment of
Installment Payments and Additional Payments. The Net System Revenues and all legally
available amounts in the Enterprise Fund shall be subject to the Iien of such pledge without any
physical delivery thereof or further act, and the lien of such pledge shall be valid and binding as
against all parties having claims of any kind in tort, contract or otherwise against the Purchaser.
Neither the Installment Payments, the Additional Payments nor this Agreement is a debt of
IBank, the State or any of its political subdivisions (other than the Purchaser) and neither Mank,
the State nor any of its political subdivisions (other than the Purchaser) is liable thereon.
SECTION 3.02. System Revenues to be Deposited in the Enterprise Fund.
In order to carry out its obligation to pay the Installment Payments and Additional
Payments, the Purchaser agrees and covenants that it shall maintain the Enterprise Fund as a
distinct fund separate and apart from the Purchaser's other funds. All System Revenues received
by it shall be deposited when and as received in trust in the Enterprise Fund and shall be applied
and used only as and in the order provided herein: The Purchaser shall pay all Operations and
Maintenance Costs (including amounts reasonably required to be set aside in contingency
reserves for Operations and Maintenance Costs the payment of which is not then immediately
required) from the Enterprise Fund as they become due and payable, and all remaining money on
deposit in the Enterprise Fund shall then be used to pay Section 3.03 amounts. After making all
the set asides and payments hereinabove required to be made in each Fiscal Year, the Purchaser
may expend in such Fiscal Year any remaining money in the Enterprise Fund for any lawful
purpose of the Purchaser. The Purchaser agrees and covenants to maintain the Enterprise Fund
so long as any portion of the Purchase Price remains unpaid.
SECTION 3.03. Priority of Payments Made from the Enterprise Fund.
The Purchaser shall promptly pay the following amounts in the following order and at the
following times:
(a) Installment Payments and Additional Payments under this Agreement and
the 2015 IBank ISA.
(1) The Purchaser shall promptly pay to IBank the principal portion of
the Installment Payments hereunder and under the 2015 IBank ISA,which is due at IBank by
August I"of each year, as set forth on the Exhibit E amortization schedule attached hereto and to
the 2015 113ank ISA. The Purchaser shall promptly pay to IBank the interest portions of
18
Installment Payments hereunder and under the 2015 IBank ISA,which are due to IBank by each
Interest Payment Date.
(2) The Purchaser shall promptly pay to IBank Additional Payments
due pursuant to Section 2.06 of this Agreement and Section 2.06 of the 2015 IBank ISA.
(b) Approved Parity Debt Payments.
Payment of Parity Debt Service as it becomes due and payable on Parity
Debt acknowledged by lBank as of the date hereof or pursuant to Parity Debt issued or incurred
in accordance with Section 2.11 hereof and any amounts needed to replenish reserve accounts
established for the Parity Debt to the extent not encompassed by the IBank Reserve
Requirement.
(c) Approved Subordinate Debt Payments.
Payment of Subordinate Debt Service as it becomes due and payable on
Subordinate Debt pursuant to Subordinate Debt issued or incurred in accordance with Section
2.16 hereof.
ARTICLE N
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.01. Organization; Authority.
The Purchaser is duly organized and existing as a municipal corporation under the laws
of the State and has all necessary power and authority to enter into and perform its duties
(including,but not limited to, the authority to set rents, fees, rates and charges without the
approval of any other governing body and to pledge the Net System Revenues or those certain
amounts on deposit in the Enterprise Fund) under this Agreement.
SECTION 4.02. Agreement Valid and Binding.
This Agreement has been duly authorized, executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or limiting creditors' rights
generally.
SECTION 4.03. No Conflict in Execution of Agreement.
The execution and delivery by the Purchaser of this Agreement and compliance with the
provisions hereof will not conflict with or constitute a breach of or default by the Purchaser
under any law, administrative regulation, court decree, resolution, charter, by-law, or any
agreement to which the Purchaser is subject or by which it is bound or by which its properties
may be affected.
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SECTION 4.04. No Litigation.
There is no action, suit, proceeding or investigation at law or in equity before or by any
court or governmental agency or body pending or threatened against the Purchaser to restrain or
enjoin the execution or delivery of this Agreement, or in any way contesting or affecting the
validity of this Agreement, or contesting the powers of the Purchaser to enter into or perform its
obligations under this Agreement, or that would affect the Purchaser's ability to perform its
obligations under this Agreement, including, but not limited to, the pledge of Net System
Revenues and legally available amounts on deposit in the Enterprise Fund.
SECTION 4.05. No Breach or Default.
The Purchaser is not in breach of or in default under any applicable law or administrative
regulation of the State or the United States, the Constitution of the State (including article XVI,
section 18 thereof), any applicable judgment or decree, any agreement, indenture, bond, note,
resolution, agreement or other instrument to which the Purchaser is a party or is otherwise
subject which, if not resolved in favor of the Purchaser, would have a material adverse impact on
the Purchaser's ability to perform its obligations under this Agreement and no event has occurred
and is continuing which, with the passage of time or the giving of notice, or both, would
constitute a default or an event of default under any such instrument.
SECTION 4.06. No Consent. Approval or Permission Necessary.
No consent or approval of any trustee or holder of any indebtedness of the Purchaser, and
no consent,permission, authorization, order or licenses of, or filing or registration with, any
Cr authority is necessary in connection with the execution and delivery of this
Agreement or the consummation of any transaction contemplated herein, except as have been
obtained or made and as are in full force and effect.
SECTION 4.07. Accuracy and Completeness of Information Submitted to IBank.The
information relating to the Purchaser and its System submitted by the Purchaser to IBank,
including, but not limited to, all information in the application for Facility Funds was time at the
time submitted to IBank and, as of the Effective Date,remains true and correct in all material
respects; and such information did not and does not contain any untrue or misleading statement
of a material fact or omit to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
SECTION 4.08. Financial Statements of the Purchaser.
The Purchaser's financial statements that have been furnished to Mank were prepared in
conformity with generally accepted accounting principles, consistently applied, and fairly present
in all material respects the financial condition of the Purchaser as of the date thereof and the
results of its operations for the period covered thereby. There has been no material adverse
change in the business, condition(financial or otherwise), or operations of the Purchaser since
the date of such financial statements.
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SECTION 4.09. Licenses, Permits and Approvals for Completion of Facilitv.
The Purchaser has obtained or will obtain all licenses,permits and approvals from any
governmental agency or authority having jurisdiction over the Purchaser now required for
Facility Delivery and will obtain all licenses, permits, and approvals as required in the future.
SECTION 4.10. Authority to Operate the System.
The Purchaser has obtained or will obtain all licenses, permits, and approvals from any
governxnental agency or authority having jurisdiction over the Purchaser now required for the
operation of the System and will obtain all licenses, permits, and approvals as required in the
future.
SECTION 4.11. Valid Title,No Conflict.
(a) The Purchaser, upon completion of the Facility, will have good and valid
title to the Facility sufficient to carry out the purposes of this Agreement.
(b) To the best of the Purchaser's knowledge no officer or official of IBank
has any material interest whatsoever in the Facility or in the transactions contemplated by this
Agreement.
(c) All applicable local governmental agency, State and federal government
certificates, approvals, permits and authorizations required in order to complete construction and
commence operations of the Facility have been obtained or will be obtained as soon as
practicable.
SECTION 4.12. Other Liens; No Lien Senior to IBank Lien.
Except as may otherwise be described herein, as of the Effective Date, there is no other
debt or obligation that places a lien on or in any way encumbers the Purchaser's Net System
Revenues other than the first lien established by Section 3.01 of this Agreement, and,to the
extent outstanding, the lien established by the 2013A Bonds and the 2015 lBank ISA, Further,
the Purchaser warrants and represents that the lien on Net System Revenues and certain amounts
on deposit in the Enterprise Fund established by Section 3.01 of this Agreement is not junior to
any lien and is on parity with, to the extent outstanding, the lien on Net System Revenues and
certain amounts on deposit in the Enterprise Fund established by the Parity Debt Instruments.
SECTION 4.13: Purchaser's Compliance with Prop 218 Law.
The Purchaser hereby represents and warrants that, as of the Effective Date, the rates,
fees and charges it imposes on its System customers are legal, valid, and comply with the Prop
218 Law The Purchaser further specifically warrants and represents that(i) the rates, fees and
charges it imposes on its System customers do not exceed, in the aggregate, the funds required to
operate the System, and (ii) its method of allocating rates, fees and charges among users of the
System complies with the proportionality requirements of the Prop 218 Law.
21
SECTION 4.14: No Challenge to Purchaser's Rates, Fees and Charges.
The Purchaser hereby represents and warrants that, as of the Effective Date, there is no
action, suit,proceeding or investigation at law or in equity before or by any court or
governmental agency or body pending or threatened against the Purchaser challenging
Purchaser's compliance with the Prop 218 Law as it applies to Purchaser's rates, fees and
charges.
SECTION 4.15: Purchaser's Compliance with Conditions Precedent to Parity Debt
Set Forth in Parity Debt Instruments.
The Purchaser represents, warrants, and by the execution of this Agreement certifies as of
the Effective Date the Purchaser has satisfied all conditions, or such conditions have been
waived,under the Parity Debt Instruments precedent to the lien on Net System Revenues
imposed by this Agreement being on parity with the lien on Net System Revenues imposed by
the 2013A Bonds and the 2015 IBank ISA.
SECTION 4.16: Facility Construction Constitutes Cappital Im rovements.
The construction of the Facility constitutes"capital improvements" as defined under the
Code and, except as otherwise provided herein, Facility Funds will be used solely to finance or
reimburse costs directly related to capital improvements in connection with the Facility.
SECTION 4.17. Continuing Validi y of Representations and Warranties.
Unless the representations and warranties set forth in this Article IV are limited by their
express terns to a specific time period or a point in time, the foregoing representations and
warranties are true, accurate, and correct as of the Effective Date and shall continue to be true,
accurate, and correct throughout the term of this Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE PURCHASER
SECTION 5.01. Punctual Payment.
The Purchaser hereby covenants to punctually pay, or cause to be paid, all payments
required hereunder when due and in all other respects in strict conformity with the terms of this
Agreement, and to faithfully observe and perform all of the conditions, covenants, and
requirements of this Agreement.
SECTION 5.02. Payment of Claims.
The Purchaser hereby covenants that, from time to time, it will pay and discharge, or
cause to be paid and discharged, any and all lawful claims for labor, materials or supplies, which,
if unpaid, might become liens or charges upon the properties owned by the Purchaser, including
the System, or upon the System Revenues or any part thereof, or upon any funds in the hands of
Mank, or which might impair the security for the payment of the Installment Payments or
22
Additional Payments. Provided, however,nothing herein contained shall require the Purchaser
to make any such payment so long as the Purchaser in good faith shall contest the validity of said
claims and shall act promptly to remove any liens or charges arising from said claims, by, among
other things, obtaining surety bonds to cause the release of such liens or charges.
SECTION 5.03. Books and Accounts. Financial Statements.
(a) The Purchaser hereby covenants that it will keep proper books of record
and accounts in which complete and correct entries shall be made of all transactions relating to
the System Revenues. Such books of record and accounts shall at all times during business
hours be subject to the inspection of IBank or its designee.
To the extent that any continuing disclosure certificates entered into by the Purchaser in
connection with other debt or obligations require the information required in subsections (b)
through(e), the Purchaser may submit a copy of the information and materials required by such
continuing disclosure certificate instead of providing separate statements setting forth the
required information.
(b) The Purchaser shall prepare and file with IBank annually as soon as
practicable, but in any event not later than two hundred forty(240) days after the close of each
Fiscal Year, so long as this Agreement has not been discharged by IBank, an audited financial
statement of the Purchaser relating to the System Revenues and the Enterprise Fund for the
preceding Fiscal Year,prepared by an Independent Accountant; provided,however, that in the
event that such audited financial statement is not available by the above-referenced filing date,
an unaudited financial statement may be substituted therefore. In the event an unaudited
financial statement is submitted, the Purchaser shall file the audited financial statement with
IBank as soon as it becomes available. The Purchaser will furnish to 113ank such reasonable
number of copies of such audited financial statements as may be required by IBank for
distribution(at the expense of the Purchaser).
(c) Simultaneously with the delivery of the annual financial statements, the
Purchaser shall deliver to IBank a Certificate of the Purchaser stating the following:
(1) The number of System users as of the end of the Fiscal Year;
(2) Calculation of the coverage ratios described in Section 5.06 and a
certification that adopted rates and charges comply with the requirements of that section;
(3) Notification of the withdrawal of any System user generating four
percent(4%) or more of System Revenues since the last reporting date;
(4) Any significant System facility retirements or expansions planned
or undertaken since the last reporting date;
(5) Notification of any Parity Debt or Subordinate Debt incurred since
the last reporting date and certification that there has been no default or noncompliance under
any obligation secured by System Revenues;
23
(6) Certification that no Event of Default has occurred or is continuing
and no other event has occurred or is continuing, which, with the passing of time or the giving of
notice or of both, would constitute an Event of Default;
(7) Certification that the Purchaser is in compliance with the terms of
this Agreement, including without limitation the Tax Covenants set forth in Section 5.07 hereof;
(S) Notification of any other event or circumstance that would
materially affect completion of the Facility or the Project, or the payment of the Purchase Price;
(9) To the extent the 2013A Bonds and 2015 IBank ISA continue to
impose a lien on Net System Revenues and legally available amounts on deposit in the
Enterprise Fund, certification that the Purchaser has complied with,kept, observed, and
performed, and continues to comply with, keep, observe, and perform, all requirements,
conditions, covenants, duties, and terms under the applicable Parity Debt Instruments for the lien
on Net System Revenues and legally available amounts on deposit in the Enterprise Fund created
by this Agreement to be on parity with the lien on Net System Revenues created under the
2013A Bonds and the 2015 IBank ISA, including, but not limited to, satisfying any debt service
coverage requirements;
(10) Such other information as may be reasonably requested by IBank.
(d) The Purchaser shall,upon request, furnish to IBank, in a format provided
by IBank, information concerning employment and other public benefits connected to the
Facility.
(e) The Purchaser shall notify IBank forthwith upon the service of a stop
payment notice, or the filing of any stop payment notice litigation, or any other legal proceeding
which may impact the completion of the Facility.
(f) The Purchaser's covenants set forth in paragraphs 5.03(b)through (d)
hereof are hereinafter referred to as the "Reporting Covenants." In the event the Purchaser fails
to comply timely with the Reporting Covenants, starting on the date that is the thirty-first day
(31St day) after the applicable due date of any ReportintD
g Covenant and continuing until the date
the Purchaser actually cures its noncompliance (the"Liquidated Damages Period"), the
Purchaser shall be obligated to pay the Liquidated Damages Charge in accordance with Section
2.06(x)(4) hereof.
SECTION 5.04. Protection of IBank's Security and Rights.
The Purchaser will preserve and protect the security for payment of the Installment
Payments,Additional Payments, and the rights of IBank. From and after the Effective Date, the
Agreement shall be incontestable by the Purchaser.
SECTION 5.05. Payments of Taxes and Other Charges.
The Purchaser will pay and discharge, or cause to be paid and discharged, all taxes,
service charges, assessments and other governmental charges, or charges in lieu thereof, which
24
may hereafter be lawfully imposed upon the Purchaser, the System, or the System Revenue when
the same shall become due. Nothing herein contained shall require the Purchaser to make any
such payment so long as the Purchaser in good faith shall contest the validity of said taxes,
assessments, or charges and shall have established adequate reserves for the payment thereof.
The Purchaser will duly observe and conform to all valid requirements of any governmental
authority relative to the System or any part thereof.
SECTION 5.06. Maintenance of System Revenues. Rate Covenant.
(a) The Purchaser hereby covenants that, to the fullest extent pennitted by
law, it will fix,prescribe, charge, and collect, or cause to be fixed, prescribed, charged, and
collected, in each Fiscal Year, such rates, fees, and charges for the use of and for the service
furnished by the System so that Net System Revenues realized are in an amount which will be
sufficient to be at least equal to One Hundred Twenty-Five percent (125%) of annual Debt
Service, and at least equal to One Hundred percent(100%) of the sum of annual Debt Service
and annual Subordinate Debt Service for such Fiscal Year.
(b) The Purchaser further covenants that, to the fullest extent permitted by
law, it will fix, prescribe, charge, and collect, or cause to be fixed, prescribed, charged, and
collected, in each Fiscal Year, such rates, fees, and charges for the use of and for the service
furnished by the System so that System Revenues realized are in an amount which will be
sufficient to pay the following amounts in the following order or priority:
(1) All Operations and Maintenance Costs estimated by the Purchaser to
become due and payable in such Fiscal Year;
(2) The Installment Payments due hereunder and under the 2015 IBank
ISA and the principal and interest on any outstanding Parity Debt as they become due and
payable during such Fiscal Year, without preference or priority;
(3) All amounts, if any, required to restore the balance of any reserve fund
required under this Agreement or any reserve fund or accounts required under any Parity Debt
Instrument, for any outstanding Parity Debt, to the full amount of any such reserve requirement;
and
(4) All payments required to meet any other obligations of the Purchaser
which are charges, liens, or encumbrances upon, or with are otherwise payable from, the System
Revenues or the Net System Revenues during such Fiscal Year, including any Additional
Payments.
(c) If for any reason Net System Revenues, or System Revenues, as
applicable, prove insufficient to comply with the requirements of subsections (a) and (b), the
Purchaser first will engage an Independent Consultant to recominend revised rents,rates, fees,
charges, or assessments, or any combination thereof, and the Purchaser will, subject to any
applicable requirements and restrictions imposed by law, including, but not limited to, the Prop
218 Law, and subject to the good faith determination of the Purchaser that such
recommendations, in whole or in part, are in the best interests of the Purchaser, take all actions
necessary to increase System Revenues through any combination of increased rents,rates, fees,
25
charges, or assessments and that it will do so not later than one hundred eighty(18 0) days
following the date on which Net System Revenues first fail to meet the requirements of this
Section 5.06. The Purchaser may make adjustments from time to time in such rents, rates, fees,
and charges and may make such classification thereof as it deems necessary, but shall not reduce
the rents,rates, fees, and charges then in effect unless the Net System Revenues from such
reduced rents, rates, fees, and charges will at all times be sufficient to meet the requirements of
ZD
this section.
SECTION 5.07. Tax Covenants,
The Purchaser recognizes that the Facility Funds may be derived from the proceeds of, or
payments made hereunder may be pledged to secure, bonds issued or to be issued by IBank, the
interest on which is excluded from gross income for federal income tax purposes under Section
103 of the Code. In order to maintain the tax-exempt status of, and perform its obligations with
respect to, the Proceeds Bonds and Secured Bonds, the Purchaser will not take any action, or fail
to take any action, if such action or failure to take such action would adversely affect the
exclusion from gross income of the interest on the Proceeds Bonds or Secured Bonds under the
Code, and the Purchaser specifically agrees to comply with all terms and conditions contained
herein and to provide annual certification of its compliance with the tax covenants set forth in
this Section 5.07, The Purchaser will not directly or indirectly use or make any use of the
Facility Funds or any other funds of the Purchaser, or take or omit to take any action, if such use
or action would cause the Proceeds Bonds or Secured Bonds to be"arbitrage bonds" subject to
federal income taxation by reason of section 148 of the Code. The provisions of this Section
5.07 shall survive the discharge of the Purchaser's obligations hereunder and shall apply to any
trustee or other successor or assignee described in Section 8.02.
(a) Eligible Uses of Facility Funds. Unless otherwise agreed to by IBank, Facility
Funds shall be used exclusively for the following purposes: (i) to pay or reimburse the Purchaser
for capital expenditures paid with respect to the Facility that meet the requirements of subsection
(b) of this Section 5.07, (ii)the Origination Fee; and(iii) initial operating expenses directly
associated with the Facility(in aggregate amount not exceeding five percent(5%) of the amount
of the Facility Funds).
(b) Allocation of Facility Funds to Expenditures. On March 15, 2016 the
Purchaser adopted a resolution stating its official intent to be reimbursed from the proceeds of a
borrowing to finance costs of the Facility(the "Reimbursement Resolution"). Absent written
agreement by IBank, all expenditures of Facility Funds will be to pay or reimburse the Purchaser
for capital expenditures with respect to the Facility that are either:
(1) costs that are Preliminary Costs incurred with respect to the Facility prior to
the start of construction and in an aggregate amount not exceeding twenty percent(20%) of the
Facility Funds;
(2) costs paid by the Purchaser no earlier than the date which is sixty(60) days
prior to the date of the adoption of the Reimbursement Resolution; or
(3) costs paid by the Purchaser on or after the Effective Date.
26
In addition, Facility Funds shall be allocated to paying or reimbursing the Purchaser for
capital expenditures no later than eighteen months after the later of the date the expenditure was
paid or the date the Facility is placed in service, but in the case of costs described in clause (ii),
above, such allocations must be made in all events no later than three years after the cost was
paid.
(c) Prohibited Uses of Facility Funds. The Purchaser will not loan any of the
Facility Funds to any other person or entity. The Purchaser will not use Facility Funds directly
or indirectly to make principal, interest, or premium payments with respect to any bond, note,
certificate of participation or other obligation of the Purchaser or any person or entity that is a
related party to the Purchaser within the meaning of Treasury Regulation Section 1.150-1(b).
(d) Expectations Regarding Facility Funds and Facility; No Change in Use. The
Purchaser reasonably expects and consistent with this Section 5.07 hereof to use all Facility
Funds and all of the Facility for the entire stated term to maturity of this Agreement. The
Purchaser does not expect that the Facility or any part thereof will be sold or otherwise disposed
of so long as the Purchaser's obligations under this Agreement are not discharged. Absent
written agreement by Mank, the Purchaser hereby agrees that it will use all Facility Funds and
all of the Facility as set forth in this Section 5.07.
(e) Funds for Making Installment Payments. All amounts used to fund the
Payment Account will be deemed to have been made from the Payment Account by using a first-
in, first-out accounting method. The Purchaser agrees that the amounts used to pay Purchase
Price shall be both received by the Purchaser and utilized for the payment of Purchase Price
within a thirty(30) day period. The Payment Account will be used primarily to achieve a proper
matching of revenues and Purchase Price payments within each year; a matching of revenues
means that revenue and Purchase Price payments come in and go out at approximately the same
level and the Payment Account is cleared out to a very low balance at least one time during the
year. Current Revenues in the Payment Account shall be invested without regard to yield so
long as the Purchaser complies with this section.
(f)Nongovernmental Use of Facility Funds and Facility. The Purchaser
understands that the Facility Funds and the Facility are subject to certain restrictions on the use
of the Facility Funds or the Facility by any Nongovernmental Person, other than use as a member
of the general public. For this purposea Nongovernmental Person will be treated as"using"
Facility Funds to the extent the Nongovernmental Person:
(1) borrows Facility Funds, or
(2) acquires an ownership or lease interest with respect to any portion of the
Facility;
(3) uses any portion of the Facility ., as a service provider, operator, or
manager), except pursuant to a contract that meets the requirements of
subsection(g) of this Section 5.07;
27
(4) in the case of a Facility that provides water, electricity, or natural gas,
acquires such output from the Facility(except pursuant to generally
applicable and uniformly applied rates that are available to the general
public).
The Purchaser hereby represents and covenants that it will not allow more than
five percent(5%) of the Facility Funds or more than five percent(5%) of the Facility to be used
directly or indirectly by any Nongovernmental Person, other than, as a member of the general
public.
(g) Management Contracts. The Purchaser understands that an arrangement with
any person or organization(other than a state or local governmental unit)which provides for
such person or organization to manage, operate, or provide services with respect to the Facility(a
"Service Contract") can give rise to Nongovernmental Use. The guidelines set forth in Revenue
Procedure 97-13, as amended or amplified, including by Notice 2014-67(the"Guidelines") set
forth situations where a service contract will be treated as not giving rise to a Nongovernmental
Use. Service Contracts that relate to the use or operation of the Facility by a"service provider,"
as that term is used in the Guidelines (the"Service Providers"), will satisfy the Guidelines if,
among other ways of satisfying the Guidelines, the requirements of each of the following
requirements is satisfied:
(1) The compensation of the Service Provider under the contract must be
reasonable for the services rendered.
(2) The contract must not provide for any compensation for services based, in
whole or in part, on a share of net profits from the operation of the Facility.
Generally, compensation is not based on a share of net profits if such
compensation is based on a"capitation fee" or a"per-unit fee." Under the
Guidelines, "capitation fee" means a fixed periodic amount for each person for
whom the Service Provider assumes the responsibility to provide all needed
services for a specified period (so long as the quantity and type of services
actually provided to covered persons varies substantially). Under the Guidelines,
a"per-unit fee" means a fee based on a unit of service provided(e.g., a stated
dollar amount for each specified medical procedure performed). Further,
compensation based on a percentage of gross revenues or a percentage of
expenses (but not both) will generally not be considered as based on a share of net
profits.
(3)A productivity reward for services in any annual period during the term of the
contract generally also does not cause the compensation to be based on a share of
net profits of the financed facility if(a) the eligibility for the productivity award is
based on the quality of the services provided under the management contract,
rather than increases in revenues or decreases in expenses of the facility; and(b)
the amount of the productivity award is a stated dollar amount, a periodic fixed
fee, or a tiered system of stated dollar amounts or periodic fixed fees based solely
on the level of performance achieved with respect to the applicable measure.
28
(4) A Service Contract providing for a compensation arrangement that satisfies
any one of the following paragraphs will meet the Guidelines:
(A)All of the compensation for services is based on a stated amount;
periodic fixed fee; a capitation fee; a per-unit fee; or a combination of the
preceding. The compensation for services also may include a percentage of gross
revenues, adjusted gross revenues, or expenses of the facility(but not both
revenues and expenses). The term of the contract, including all renewal options,
does not exceed five years. Such contract need not be terminable by the
Purchaser prior to the end of the term.. For purposes of this subsection
5.07(g)(iv)(a), a tiered productivity award as described in subsection 5.07(g)(iii)
will be treated as a stated amount or a periodic fixed fee, as appropriate.
(B) For a contract with a term, including renewal options, that is not
longer than(i)the lesser of 10 years or 80 percent of the reasonably expected
useful life of the financed property, or(ii)the lesser of 15 years or 80 percent of
the reasonably expected useful life of the financed property, at least 80 percent(in
the case of a contract with a term described in(i) hereof) or at Ieast 95 percent(in
the case of a contract with a term described in (ii) hereof) is based on a periodic
fixed fee. For purposes of this paragraph, a fee does not fail to qualify as a
periodic fixed fee as a result of a one-time incentive award during the terns of the
contract under which compensation automatically increases when a gross revenue
or expense (but not both) is reached if that award is equal to a single, stated dollar
amount.
(5) The Service Provider may not have a role or relationship with the qualified
user(or the Purchaser)that, in effect, substantially limits the ability of the
qualified user to exercise its rights, including cancellation rights, under the
Service Contract. Accordingly, not more than 20 percent of the voting power of
the governing body of the qualified user(or the Purchaser) in the aggregate may
be vested in the Service Provider and its directors, officers, shareholders and
employees. Furthermore,the group of persons belonging to both the governing
board of the qualified user(or the Purchaser) and the Service Provider may not
include the chief executive officers of the qualified user(or the Purchaser) and the
Service Provider, or their respective governing bodies. Finally, neither the
qualified user nor the Purchaser may be members of the same"controlled group"
(within the meaning of Treasury Regulations § 1.150-1(f)) or Related Person as
the Service Provider.
The Purchaser shall coordinate with IBank to ensure any extension,renewal or new operations
and maintenance agreement relating to the Facility and commencing after the Effective Date
meets the requirements for qualified management contracts under the Code.
(h)No Other Replacement Proceeds. The Purchaser is not using any Facility
Funds and hereby agrees that it will not use any Facility Funds to replace funds of the Purchaser
which are or will be used to acquire Investment Property reasonably expected to produce a yield
that is materially higher than the yield on the Installment Payments under this Agreement.
29
(i) Federal Guarantee. The Purchaser will not directly or indirectly use or permit
the use of any Facility Funds or take or omit to take any action that would cause the Proceeds
Bonds or Secured Bonds to be obligations that are "federally guaranteed" within the meaning of
section 149(b) of the Code. In furtherance of this covenant, the Purchaser will not allow the
payment of principal or interest under this Agreement to be guaranteed (directly or indirectly) in
whole or in part by the United States or any agency or instrumentality thereof.
6)No Hedge Bonds. The Purchaser reasonably expects that more than eighty-
five percent (85%) of the Facility Funds will be expended for the purposes of this Agreement
within three years of the Effective Date.
SECTION 5.08. Maintenance and Operation of System.
The Purchaser hereby covenants that, so long as any portion of the Purchase Price is
unpaid, it will at its own cost and expense maintain,preserve, keep, and operate the System, and
every portion thereof, in good condition, repair and working order as necessary to operate the
System for its intended purpose in compliance with all laws, rules,regulations, codes, and
ordinances, subject only to normal wear and tear and that it will from time to time make or cause
to be made all necessary and proper repairs, replacements, and renewals necessary to maintain
the System in such a condition. Mank will have no responsibility or obligation for any of these
matters. The Purchaser further covenants that it will operate the System in an efficient and
economical manner, and will pay all Operations and Maintenance Costs as they become due and
payable.
SECTION 5.09. Assumption of Obligations.
The obligations of the Purchaser under this Agreement may not be assumed by another
entity except in connection with a transfer of the entire System by the Purchaser and only upon
prior written approval of Mank and receipt by IBank of-
(a)
f(a) an opinion of counsel experienced in matters relating to the tax-exempt status
of interest on any obligations secured by this Agreement, and approved by
IBank, to the effect that such transfer would not cause interest on the
obligations to be included in gross income for federal income tax purposes;
(b) a Report signed by an Independent Consultant or Independent Accountant
in
concluding that such transfer would not materially adversely affect the
security for the Installment Payments, Additional Payments, or the rights of
IB ank; and
(c) evidence satisfactory to IBank that the entity assuming the Purchaser's
obligation hereunder is eligible pursuant to the Act.
SECTION 5.10. Damage. Destruction, Title Defect and Condemnation; Use of Net
Proceeds.
(a) If prior to the termination of the term hereof(i) the Facility or any other
improvements in or on the Facility are damaged or destroyed(each of which is hereinafter called
30
"Damaged Improvements")by a peril covered by a policy of insurance described in Section 5.22
hereof(an"Insured Peril"); or(ii)title to, or the right to possession, use, or occupancy, whether
permanent or temporary, of, the Facility or any portion thereof or the estate of the Purchaser or
IBank in the Facility or any portion thereof is defective or shall be taken under the exercise of the
power of eminent domain by any governmental body or by any person or firm or corporation
acting under governmental authority, then the Purchaser and IBank will cause the net proceeds of
any loss or claim paid by an insurer under an insurance policy, or condemnation award, resulting
from any damage or destruction to any portion of the Facility, or taking of the Facility, (the "Net
Proceeds") to be transferred to 113ank and applied as follows:
(1)Net Proceeds Exceeding Costs. Within one hundred twenty(120) days of the
date of said Insured Peril, the Purchaser shall obtain written estimate(s) of the(i) cost of
the repair, replacement, and reconstruction of the Damaged Improvements (collectively
referred to herein as the"Reconstruction"), and (ii) Net Proceeds available to pay such
costs. Copies of such estimate(s) shall be provided to 113ank. If the one hundred twenty
(120) day period is insufficient to obtain said estimates, the period may be reasonably
extended by the Purchaser upon the approval of IBank, in its reasonable discretion. If the
Net Proceeds (not including proceeds of any policy of title insurance or condemnation
award received by IBank in respect of the Facility) exceed the estimated costs of
Reconstruction,the Damaged Improvements shall be repaired, replaced, and
reconstructed to the same or better quality as existed before the damage occurred. The
Purchaser shall commence and manage the Reconstruction and shall complete the
Reconstruction as soon as reasonably possible after the occurrence of such damage. Any
balance of Net Proceeds remaining after the Reconstruction has been completed shall be
transferred to IBank for the payment of unpaid Purchase Price and Additional Payments.
Net Proceeds remaining after payment of the amounts specified in the previous sentence
shall be transferred to the Purchaser.
(2) Costs Exceeding Net Proceeds. If the estimated costs of Reconstruction
exceed the Net Proceeds (not including proceeds of any policy of title insurance or
condemnation award received by IBank in respect of the Facility), the Purchaser, in its
sole discretion, may elect to budget and appropriate to the Reconstruction the amount of
such excess, and to manage the Reconstruction as set forth in Section 5.10(a)(5). The
Purchaser shall exercise this election by written notice thereof delivered to IBank within
thirty(30) days after the Purchaser obtains the written estimate(s).
(3)Net Proceeds Sufficient to Prepay All Unpaid Installment Payments. If the
Purchaser does not exercise the election to reconstruct pursuant to the above subsection
and Net Proceeds are at least sufficient to prepay all unpaid amounts of the Purchase
Price and any due and owing Additional Payments, such Net Proceeds shall be
transferred to Mank to prepay such Purchase Price and any due and owing Additional
Payments. If the Net Proceeds (not including proceeds of any policy of title insurance or
condemnation award received by IBank in respect of the Facility) exceed the amount
necessary to prepay the unpaid Purchase Price and any due and owing Additional
Payments, the Purchaser shall be entitled to the amount of proceeds remaining after such
prepayment.
31
(4)Net Proceeds Insufficient to Prepay All Unpaid Installment Payments. If the
Purchaser does not exercise the election to reconstruct pursuant to Section 5.10(a)(2) and
Net Proceeds are insufficient to prepay the unpaid Purchase Price hereunder, the
Purchaser, in its sole discretion, may elect to budget and appropriate funds to cause the
prepayment of the Purchase Price and due and owing Additional Payments and the Net
Proceeds, together with such funds, shall be transferred to Mank with directions to apply
the proceeds to the prepayment of the Purchase Price and due and owing Additional
Payments; provided, that if the Purchaser elects not to appropriate funds for such
prepayment, the Purchaser shall apply Net Proceeds (not including proceeds of any
policy of title insurance or condenrnation award received by Mank in respect of the
Facility) to the Reconstruction. If the Purchaser, in its sole discretion, elects to budget or
appropriate funds for the prepayment of the unpaid Purchase Price and due and owing
Additional Payments, the Purchaser shall transfer such funds to IBank for the prepayment
of Purchase Price and due and owing Additional Payments.
(5) Management of Reconstruction. If the Facility or any part thereof becomes
Damaged Improvements, the Purchaser shall promptly cause, manage, and supervise the
Reconstruction.
(b) The proceeds of any policy of title insurance or condemnation award received
by IBank in respect of the Facility shall be applied to prepay the Purchase Price.
SECTION 5.11. Entry into Replacement Agreement.
The Purchaser acknowledges that IBank intends to issue, has issued, or may issue,
Secured Bonds or Proceeds Bonds subsequent to the Effective Date of this Agreement, and that
one requirement of the Secured Bonds and/or Proceeds Bonds will be the re-entry by the
Purchaser into an agreement to replace this Agreement. So long as the terms of the replacement
agreement are substantially identical to the tern of this Agreement, the Purchaser hereby
covenants and agrees to execute the replacement agreement and any related documents and to
provide required certifications in a timely manner. The Purchaser understands and
acknowledges that time is of the essence with respect to entry into such replacement agreement
as such timing is mandated by Federal tax laws applicable to IBank's Proceeds Bonds and/or
Secured Bonds. The Purchaser's covenant set forth in this Section 5.11 is hereinafter referred to
as the "Replacement Agreement Covenant."
SECTION 5.12. Further Assurances.
The Purchaser will adopt, make, execute, and deliver any and all such further resolutions,
instruments, and assurances as may be reasonably required by IBank as necessary or proper to
cant'out the intention or to facilitate the performance of this Agreement and for the better
assuring and confinning unto IBank of the rights, remedies, and benefits provided in this
Agreement.
SECTION 5.13. Agreement to Complete Facility Delivery and the Project.
(a) The Purchaser agrees that it will perform all acts necessary to complete
Facility Delivery, and construct, acquire, improve or install other facilities and real and personal
32
property deemed by the Purchaser necessary for the operation of Facility and the Project. The
Purchaser may supplement or amend the Facility description with written approval from IBank
from time to time, provided that no such supplement or amendment shall cause the Facility or
any portion thereof to fail to constitute an eligible project under the Act.
(b) At any time,upon request of IBank, the Purchaser agrees to make
available to IBank for review and copying all then current plans and specifications for the
Facility. The Purchaser may identify any proprietary information in such plans and
specifications and, to the extent legally permissible, IBank agrees to keep such information
confidential. Provided, however, for the avoidance of doubt, and not by limitation of the
foregoing, lBank may disclose any such confidential information in connection with any
Proceeds Bonds or Secured Bonds or in the event 1Bank is served with a subpoena, a valid
discovery request, a notice to appear and produce documents, or a valid public records act
request, seeking, or that could be construed reasonably as seeking, such confidential information.
(c) As soon as the Facility is completed, the Purchaser shall evidence such
completion by providing a certificate to IBank stating that (i) construction of the Facility has
been completed substantially in accordance with the final plans and specifications therefor and
all labor, services, materials, and supplies used in construction have been paid for, and(ii) all
other facilities necessary in connection with the Facility have been constructed, acquired, and
installed in accordance with the final plans and specifications therefor, and all costs and expenses
incurred in connection therewith have been paid. Notwithstanding the foregoing, such certificate
may state that it is given without prejudice to any rights of the Purchaser against third parties for
the payment of any amount not then due and payable which exist at the date of such certificate or
which may subsequently exist.
(d) The Purchaser shall notify IBank forthwith upon the filing of a stop
payment notice in connection with the Facility or the Project, the tender of a claim against any
payment or performance bond related to the Facility or the Project, the recordation of a
mechanics lien against Facility or the Project, the filing of litigation in connection with the
Facility or the Project, the issuance of a mandatory or prohibitory injunction related to the
Facility or the Project, or any other legal proceeding which may impact the completion of the
Facility or the Project.
SECTION 5.14. Collection of Rates. Fees and Charges.
The Purchaser will have in effect at all times rules and regulations requiring each user of
the System to pay the rates, fees, and charges applicable to the services provided by the System
to each user. The Purchaser will not permit any part of the System or any facility thereof to be
used or taken advantage of free of charge by any corporation, fern, or person, or by any public
agency(including the United States of America, the State, and any city, county, district,political
subdivision, public corporation, or agency of any thereof); provided, that the Purchaser may
without charge use the services provided by the System.
33
SECTION 5.15. The Purchaser's General Responsibility.
The Purchaser is solely responsible for the Facility Delivery and the operation and
maintenance of the Facility. Any review or approval of plans, specifications,bid documents, or
other construction documents by IBank is solely for the purpose of proper administration of
Facility Funds by Mank and shall not be deemed to relieve or restrict the Purchaser's
responsibility or result in any duty, obligation, or responsibility on the part of IBank or the
officers and agents thereof.
SECTION 5.16. The Purchaser's Assurances and Commitments.
(a) Compliance with Laws, Regulations and IBank Policy.
The Purchaser shall at all times comply, and require its direct contractors, and
their subcontractors,to comply with all requirements, federal and State laws, rules and
regulations, and all local ordinances applicable to the Facility or the Project. This specifically
includes,but is not limited to any applicable prevailing wage, environmental,procurement and
safety requirements set forth in the Criteria. The Purchaser agrees that its failure to act in
accordance with the provisions of this subsection(a) will not result in any duty, obligation or
responsibility on the part of Mank or the officers and agents thereof.
(b) Facility Construction Activities.
The Purchaser shall ensure that adequate supervision and inspection of Facility
and Project construction activities are maintained. IBank, either by itself or through its designee,
reserves the right to conduct an audit of the Purchaser's construction expenditures during
construction and for up to three years following receipt by 113ank of notice of completion or other
evidence of completion satisfactory to Mank. IBank, at its discretion,may require the Purchaser
to conduct an interim and/or a final audit at the Purchaser's expense, such audit to be conducted
by and a Report prepared by an Independent Accountant.
SECTION 5.17. Facility Access.
The Purchaser shall ensure that 113ank or its designee have suitable access to the Facility
site at all reasonable times so long as the Purchase Price remains unpaid and shall include
provisions ensuring such access in all contracts and subcontracts relating to the Facility.
SECTION 5.1$. Operation and Maintenance of the Facility and the Project.
The Purchaser agrees to commence operation of the Facility and the Project upon the
completion thereof. The Purchaser covenants and agrees that it will, at its own cost and expense,
operate and maintain the Facility, the Project, and every portion thereof, in accordance with all
governmental laws, ordinances, approvals, rules, codes, regulations, and requirements including,
without limitation, such zoning, sanitary,pollution and safety ordinances and Iaws, and such
rules and regulations thereunder as may be binding upon the Purchaser. The Purchaser further
covenants and agrees that it will, at its own cost and expense, maintain, preserve, keep, and
operate the Facility and the Project and will maintain, keep,preserve, and operate the same,now
or hereafter at any time constituting part of the Facility and the Project, in good repair, working
34
order and condition as necessary to operate the Facility and the Project for their intended
purposes, subject only to normal wear and tear, and that it will from time to time make or cause
to be made all needful and proper replacements, repairs, renewals, and improvements, in each
case to the extent necessary so that the efficiency and value of the Facility and the Project shall
not be impaired. IBank shall have no responsibility or obligation for any of these matters or for
the making of additions or improvements to the Facility.
SECTION 5.19. Performance and Payment Bonds.
(a) The Purchaser shall require its direct contractor(s) for the Facility to
certify under penalty of perjury, and provide the Purchaser with a copy of such certification,
which shall be available for IBank's inspection, if requested,that, in connection with the
construction of the Facility, it has obtained a bond or bonds by one or more authorized surety
companies satisfactory to the Purchaser; such surety companies roust be authorized to do
business in California, be an admitted surety insurer, and have an agent for service of process in
California.
(b) Said bonds shall be in the following amounts and for the following
purposes: (i) a performance bond(s) in an amount not less than one hundred percent (100%) of
the total amount of the construction agreement(s) for the Facility, guaranteeing the faithful
performance of the terms of the Facility construction agreement(s), including the maintenance of
the work required under the Facility construction agreement(s) for a period of one year from the
date of the Purchaser's final acceptance, and the prompt correction of any defective work or
labor done, or defective materials furnished, pursuant to the Facility construction agreement(s)
and(ii) a payment bond(s) in an amount not less than one hundred percent (100%) of the total
amount of the Facility construction agreement(s), securing payment to the subcontractors and to
persons renting equipment or furnishing labor or materials to such subcontractors or to the
Purchaser's direct contractors, or to any other claimant as defined in Civil Code Section 8004,
under the Facility construction agreement(s). In the event Lessee does not enter into a
construction agreement for the Facility separate from the Project, said bonds shall be in an
amount equal to one hundred percent(100%) of the construction agreement for the Project.
SECTION 5.20. Continuing Disclosure.
If requested by IBank, the Purchaser hereby covenants and agrees to furnish certain
financial and operating data pertaining to the Purchaser that may be required to either: (i) enable
IBank to issue any, or perform its obligations under existing, Proceeds Bonds or Secured Bonds;
or(ii) enable any underwriter of any Proceeds Bonds or Secured Bonds to comply with Rule
15c2-12(b)(5) of the Securities and Exchange Commission.
SECTION 5.21. Notice of Purchaser Event of Default.
The Purchaser covenants that it will deliver-to IBank, immediately after the Purchaser
shall have obtained knowledge of the occurrence of an Event of Default or a failure as described
in Section 7.01, the written statement of an authorized officer of the Purchaser setting forth the
details of such Event of Default or failure, and the action which the Purchaser proposes to take
with respect thereto.
35
SECTION 5.22. Maintenance of Insurance.
The Purchaser will procure and maintain or cause to be procured and
maintained insurance on the System with responsible insurers, or as part of a reasonable system of
self-insurance, in such amounts and against such risks(including damage to or destruction of the
System) as are usually covered in connection with systems similar to the System. The Purchaser
shall on the Effective Date, and annually on each anniversary of the Effective Date thereafter,
provide a Certificate of the Purchaser to lBank certifying that such insurance is in effect. Further,
the Purchaser will cause to be procured and maintained a standard, commercially reasonable,
commercial general liability policy of the direct contractor(s) for the Facility with a minimum
combined single limit of one million dollars($1,000,000) for personal injury or death of one or
more persons, and for property damage, in each accident or event(subject to a deductible clause of
not to exceed one hundred thousand dollars($100,000). The Purchaser and IBank shall be named
as an additional insured under such insurance policy. The Purchaser shall also cause to be procured
and maintained a standard, commercially reasonable, worker's compensation insurance policy of
the direct contractor(s)for the Facility in an amount equal to at least the required statutory
minimum. The Purchaser and Mank shall be named as an additional insured under such insurance
policy.
SECTION 5.23. Reserved.
SECTION 5.24. Compliance with Contracts.
The Purchaser will comply with, keep, observe, and perform all agreements, conditions,
covenants, and terms, express or implied, required to be performed by it contained in all
contracts for the use of the System, and all other contracts affecting or involving the System to
the extent that the Purchaser is a party thereto.
SECTION 5.25. Facility Useful Life Certification.
As soon as practical,but in any event prior to the initial disbursement of Facility Funds,
the Purchaser shall provide IBank with a signed Certificate of the Purchaser from the Municipal
Utilities and Engineering Department Director certifying that the useful life of the Facility
exceeds twenty(20) years. Said certificate shall be substantially in the form set forth in Exhibit
F attached hereto and incorporated herein by this reference.
SECTION 5.26 Maintenance of Lien Parit .
To the extent the 2013A Bonds and 2015 IBank ISA continue to impose a lien on Net
System Revenues, the Purchaser will at all times comply with, keep, observe, and perform all
requirements, conditions, covenants, duties, and terms set forth in the Parity Debt Instrument for
the lien on Net System Revenues created by this Agreement to be on parity with the lien on Net
Systern Revenues created by the Identify Parity Debt Instruments, including,but not limited to,
satisfying any debt service coverage and reserve requirements.
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SECTION 5.27 Covenant to Comply with Prop 218 Law.
The Purchaser shall at all times ensure that the rates, fees and charges imposed on its
System customers comply with the Prop 218 Law. In the event any party(or parties) institutes
litigation or an administrative proceeding challenging the Purchaser's rates and charges or any
other aspect of its compliance with Prop 218 Law (collectively, a"Rate Challenge"), the
Purchaser shall as soon as practicable, but no later than 30 days after the Purchaser becomes
aware of the Rate Challenge, provide IBank with written notice of such Rate Challenge. Further,
the Purchaser will expeditiously take steps to (i) diligently defend against the Rate Challenge; or
(ii) conform its rates or other practices in a manner that fully addresses the deficiencies
underlying the Rate Challenge. Purchaser shall provide IBank with a second written notice
indicating its chosen course of action as soon as practicable.
ARTICLE VI
NEGATIVE COVENANTS OF THE PURCHASER
SECTION 6.01. Limitation on Additional Obligations; No Senior Debt.
The Purchaser hereby covenants that, until the Purchase Price has been paid in full and
this Agreement has been discharged pursuant to Section 8.05, the Purchaser shall not after the
date of this Agreement issue any bonds, notes, or other obligations, enter into any agreement or
otherwise incur any loans, advances, or obligations, which are in any case secured by a lien on
all or any part of Net System Revenues or on those legally available amounts on deposit in the
Enterprise Fund that is senior to or on a parity with the lien established hereunder for the security
for the payment of the Installment Payments and Additional Payments, excepting only Parity
Debt meeting the requirements of Section 2.11 herein. The Purchaser may issue or incur
Subordinate Debt upon compliance with the requirements of Section 2.16 herein.
SECTION 6.02. Disposition of_Property.
The Purchaser hereby covenants that it will not authorize or effect the disposition of real
or personal property constituting more than ten percent(10%) of the value of the System unless
the Purchaser first obtains a Report, and provides a copy to IBank, of. (i) an Independent
Consultant concluding that such disposition will not substantially adversely affect the security
for the payment of the Installment Payments and Additional Payments; and(ii) a nationally-
recognized bond counsel concluding that such disposition will not cause the interest on any
Secured Bonds or Proceeds Bonds to no longer be excluded from federal gross income. The
Purchaser hereby covenants that it will not dispose of any portion of the Facility while the
Purchase Price is unpaid except for property that is not operating or is worn out, and for the
dedication of public streets and public and private utility casements.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. Events of Default and Acceleration.
(a) Each of the following events shall constitute an Event of Default
hereunder:
(1) Failure by the Purchaser to pay any Installment Payment or interest
or prepayment premium (if any) or any Additional Payment pursuant to Section 3.03(a)when
and as the same shall become due and payable;
(2) Failure by the Purchaser to observe and perform any of the
covenants, agreements or conditions on its part contained in this Agreement, other than as
referred to in the preceding subsection(1), or if any representation or warranty fails to be true
and correct in all material respects, for a period of sixty(60)days after written notice has been
given to the Purchaser by IBank, or to the Purchaser and IBank, specifying such failure and
requesting that such failure be remedied; provided, however, that if the failure stated in such
notice can be corrected,but not within such sixty(60) day period, 113ank may consent to an
extension of such time if corrective action is instituted by the Purchaser within such sixty(60)
day period and diligently pursued until such failure is corrected;
(3) The filing by the Purchaser of a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws or any other applicable law of
the United States of America, or if a court of competent jurisdiction shall approve a petition,
filed with or without the consent of the Purchaser, seeking reorganization under the federal
bankruptcy laws or any other applicable law of the United States of America, or if,under the
provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction
shall assume custody or control of the Purchaser or of the whole or any substantial part of its
property;
(4) Any representation or other written statement made by the
Purchaser contained in this Agreement, the application for financing or in any instrument
furnished in compliance with or in reference thereto shall prove to have been incorrect in any
material respect;
(5) An unexcused failure by the Purchaser to pay amounts due under
any bond, note, installment sale agreement, capital lease, or other agreement or instrument to
which it is a party relating to the borrowing of money, if such unpaid amount shall exceed fifty
thousand dollars ($50,000); or
(6) The occurrence of an event of default with respect to any Parity
Debt or any Subordinate Debt which causes all principal of such Parity Debt or Subordinate Debt
to become due and payable immediately.
(b) If an Event of Default has occurred and is continuing, IBank may
(i) declare the principal of the Purchase Price, together with the accrued interest on all unpaid
38
installments thereof, to be due and payable immediately, and upon any such declaration the same
shall become immediately due and payable, anything in this Agreement to the contrary
notwithstanding, and (ii) exercise any other remedies available to IBank in law or at equity.
Immediately upon becoming aware of the occurrence of an Event of Default, [Bank shall give
notice of such Event of Default to the Purchaser by telephone, telecopier, facsimile or other
telecommunication device,promptly confirmed in waiting. This provision, however, is subject to
the condition that if, at any time after the principal of the Purchase Price shall have been so
declared due and payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered, the Purchaser shall deposit with IBank a sum sufficient to
pay all installments of principal of the Purchase Price due prior to such declaration and all
accrued interest thereon, with interest on such overdue Installment Payments at the rate of the
lesser of twelve percent(12%) per annum or the maximum rate permitted by law, and the
reasonable expenses of IBank (including but not limited to attorney's fees and costs), and any
and all other defaults known to IBank (other than in the payment of principal of and interest on
the Purchase Price due and payable solely by reason of such declaration), including the payment
of Additional Payments due and owing, shall have been made good or cured to the satisfaction of
IBank or provision deemed by IBank to be adequate shall have been made therefor, then, and in
every such case, IBank may, by written notice to the Purchaser, rescind and annul such
declaration and its consequences. However, no such rescission and annulment shall extend to or
shall affect any subsequent default, or shall impair or exhaust any right or power consequent
thereon.
SECTION 7.02. Remedies.
Upon the occurrence of an Event of Default IBank shall have the following rights, in
addition to its rights under Section 7.01:
(a) By mandamus or other action or proceeding or suit at law or in equity to
enforce its rights against the Purchaser or any member, officer, or employee thereof, and to
compel the Purchaser or any such member, officer, or employee to perform and carry out its or
his duties under law and the agreements and covenants required to be performed by it or him
contained herein;
(b) By suit in equity to enjoin any acts or things which are unlawful or violate
the rights of IBank; or
(c) By suit in equity to require the Purchasers and its members, officers, and
employees to account as the trustee of an express trust.
SECTION 7.03. Application of Funds upon Default.
All amounts received by IBank pursuant to any right given or action taken by [Bank
under provisions of this Agreement, or otherwise held by IBank upon the occurrence of an Event
of Default, shall be applied by IBank in the following order:
(a) First, to the payment of the costs and expenses of IBank, including
reasonable compensation to their agents and attorneys, including IBank employees, as set forth
in Section 2.06; and
39
(b) Second, to the payment of the whole amount of Installment Payments then
due and unpaid, with interest on overdue Installment Payments at the rate of the lesser of twelve
percent(12%)per annum or the maximum rate permitted by law; provided, however, that in the
event such amounts shall be insufficient to pay in full the amount of such Installment Payments,
then such amounts shall be applied in the following order of priority:
(1) First, to the payment of all installments of interest on the Purchase
Price then due and unpaid, on a pro rata basis in the event that the available amounts are
insufficient to pay all such interest in full;
(2) Second, to the payment of principal of all installments of the
Purchase Price then due and unpaid, other than principal having come due and payable solely by
reason of acceleration pursuant to Section 7.01, on a pro rata basis in the event that the available
amounts are insufficient to pay all such principal in full;
(3) Third, to the payment of principal of the Purchase Price then due
and unpaid and having come due and payable solely by reason of acceleration pursuant to
Section 7.01, on a pro rata basis in the event that the available amounts are insufficient to pay all
such principal in full; and
(c) Third,to the payment to IBank of other Additional Payments as described
in Section 2.06.
SECTION 7.04. No Waiver.
Nothing in this Article VII or in any other provision of this Agreement shall affect or
impair the obligation of the Purchaser, which is absolute and unconditional, to pay from the Net
System Revenues and other amounts pledged hereunder, all payments due hereunder, or affect or
impair the right of action, which is also absolute and unconditional, of IBank to institute suit to
enforce such payment by virtue of the contract embodied in this Agreement.
A waiver of any default by IBank shall not affect any subsequent default or impair any
rights or remedies on the subsequent default. No delay or omission of IBank to exercise any
right or power accruing upon any default shall impair any such right or power, or shall be
construed to be a waiver of any such default, or an acquiescence therein, and every power and
remedy conferred upon IBank by this Article VII may be enforced and exercised from time to
time and as often as shall be deemed expedient by IBank.
If a suit, action, or proceeding to enforce any right or exercise any remedy shall be
abandoned or determined adversely to IBank,the Purchaser and IBank shall be restored to their
former positions, rights, and remedies as if such suit, action, or proceeding had not been brought
or taken.
SECTION 7.05. Remedies Not Exclusive.
No remedy herein conferred upon or reserved to IBank is intended to be exclusive of any
other remedy. Every such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder, or now or hereafter existing at law or in equity or by statute or
40
otherwise, and may be exercised without exhausting and without regard to any other remedy
conferred by law.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. California Law: Venue.
This Agreement shall be governed by and construed and interpreted in accordance with
the laws of the State. Any action or proceeding arising out of this Agreement shall be filed and
maintained in the Superior Court in and for the County of Sacramento, California, or in the
United States District Court in and for the Eastern District of California,unless otherwise
expressly agreed to by IBank in its sole and absolute discretion.
SECTION 8.02. Assigrunent of IBank's Rights.
The Purchaser hereby agrees and acknowledges that Mank's rights, including but not
limited to the right to receive Installment Payments and Additional Payments under this
Agreement may, in 113ank's sole and absolute discretion, be assigned by IBank to a trustee or
another party for the purpose of securing the payment of any bonds, notes, or other obligations
issued by IBank and secured by this Agreement and the Installment Payments and Additional
Payments, without the need for consent by the Purchaser. The Purchaser agrees to execute all
documents, including notices of assignment and chattel mortgages or financing statements,
which Mank or the trustee may request, in their sole and absolute discretion, in connection with
any such assignment by IBank.
SECTION 8.03, Third Party Beneficiaries.
The trustee for any Proceeds Bonds or Secured Bonds is hereby expressly designated as a
third party beneficiary hereunder for the purpose of enforcing any of the rights hereunder
assigned to said trustee and for the purpose of said trustee enforcing its own rights. Nothing in
this Agreement, expressed or implied, is intended to give to any person other than IBank, the
Purchaser, and any trustee under any Proceeds Bonds or Secured Bonds, any right, remedy, or
claim under or by reason of this Agreement. All covenants, stipulations, promises, or
agreements contained in this Agreement by and on behalf of the Purchaser shall be for the sole
and exclusive benefit of IBank, any trustee under any Proceeds Bonds or Secured Bonds, and
their permitted assigns.
SECTION 8.04. Successor Entities.
Whenever in this Agreement either the Purchaser or IBank is named or referred to, such
reference shall be deemed to include the permitted successors or assigns thereof, and all the
covenants and agreements in this Agreement contained by or on behalf of the Purchaser or IBank
shall bind and inure to the benefit of the respective permitted successors and assigns thereof,
whether so expressed or not. The trustee for the Proceeds Bonds will be Mank's initial assignee.
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SECTION 8.05. Discharge of Agreement.
(a) If the Purchaser shall pay and discharge the entire amount of its obligation
hereunder by paying or causing to be paid the principal of, interest, and prepayment premium(if
any) on the Purchase Price and Additional Payments, as and when the same become due and
payable, then, at the election of the Purchaser,but only if all other amounts then due and payable
hereunder shall have been paid or provision for their payment made, the pledge of and lien upon
the Net System Revenues and all legally available amounts in the Enterprise Fund provided for
in this Agreement and all other obligations of 1Bank and the Purchaser under this Agreement
with respect to the Purchase Price shall cease and terminate, except only (i) the obligation of the
Purchaser to pay or cause to be paid to IBank, frorn the amounts so deposited with IBank or such
other fiduciary, all sums due with respect to this Agreement and all expenses and costs of lBank,
and (ii)the obligations of the Purchaser under Sections 5.07 and 8.12. Notice of such election
shall be filed with IBank.
(b) All or any portion of unpaid principal installments of the Purchase Price
shall, prior to their payment dates or dates of prepayment, be deemed to have been paid within
the meaning of and with the effect expressed in this section(except that the Purchaser shall
remain liable for such Purchase Price payment, but only out of such money or securities
deposited with the trustee or other fiscal agent approved by IBank for such payment), if(i)there
shall have been deposited with the trustee or other fiscal agent approved by IBank either money
in an amount which shall be sufficient, or federal securities (as defined below) which are not
subject to redemption prior to maturity except by the holder thereof(including any such federal
securities issued or held in book entry form), or tax-exempt obligations of a state or a political
subdivision thereof which have been defeased under irrevocable escrow instructions with federal
securities, the interest on and principal of which when paid will provide money which, together
with money, if any, deposited with IBank, shall be sufficient to pay when due the Installment
Payments of such portions thereof on and prior to their payment dates or their dates of
prepayment, as the case may be, and the Prepayment Premiums, if any, applicable thereto, and
(ii) an opinion of nationally recognized bond counsel acceptable to IBank is filed with IBank to
the effect that the action taken pursuant to this section will not cause the interest on the Proceeds
Bonds or Secured Bonds to be includable in gross income under the Code for federal income tax
purposes. As used in this section, "federal securities" means United States of America Treasury
bills,notes, bonds, or certificates of indebtedness, or obligations of, or obligations guaranteed
directly or indirectly by,the United States of America, or securities evidencing ownership
interests in such obligations or in specified portions of the interest on or principal of such
obligations.
SECTION 8.06, Amendment.
No term or provision of this Agreement may be waived or otherwise modified except by
a written agreement signed by the Parties. The Parties acknowledge and agree that the previous
sentence shall be interpreted, enforced, and adhered to strictly, notwithstanding any legal
doctrine, rule, statute, or case law that may permit oral modification of this Agreement, or that
may find under certain circumstances the portion of this Section 8.06 requiring all modifications
to this Agreement be in writing is waived orally or by the Parties' conduct. To the greatest
extent permissible under the law, the Parties hereby agree to waive any legal doctrine, rule,
42
statute, or case law that permits, or could be construed to permit, modification of this Agreement
by means other than a writing signed by both Parties.
SECTION 8.07. Waiver of Personal Liability.
No member, officer, agent, or employee of the Purchaser shall be individually or
personally liable for the payment of the principal of, premium, if any, or the interest under this
Agreement; but nothing herein.contained shall relieve any such member, officer, agent, or
employee from the perfonnance of any official duty provided by law.
SECTION 8.08. Arm's Length Transaction.
The Purchaser acknowledges and agrees that (i) the transaction contemplated by this
Agreement is an arm's-length commercial transaction, (ii) in connection therewith and with the
financing discussions, undertakings and procedures leading up to the consummation of such
transaction, IBank is and has been acting solely as a principal and is not acting as the agent or
fiduciary of or in any way advising the Purchaser, (iii) IBank has not assumed an advisory or
fiduciary responsibility in favor of the Purchaser with respect to the financing contemplated
hereby or the discussions,undertakings and procedures leading thereto (irrespective of whether
IBank has provided other services or is currently providing other services to the Purchaser on
other matters) and IBank has no obligation to the Purchaser with respect to the financing
contemplated hereby except the obligations expressly set forth in this Agreement and(iv) the
Purchaser has consulted its own legal, financial and other advisors to the extent it has deemed
appropriate.
SECTION 8.09. Notices.
All written notices to be given under this Agreement 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, except that notices from the
Purchaser to IBank shall be given by registered mail, or by telecommunication confirmed in
writing. Notice shall be effective forty-eight(48) hours after deposit in the United States mail,
postage prepaid or, in the case of any notice to IBank, or in the case of personal delivery to any
person,upon actual receipt at the address set forth below:
If to IB ank:
California Infrastructure and Economic Development Bank
Attn: Loan Unit Manager,Agreement Number ISRF 17-114
P.O. Box 2830
Sacramento, CA 95812-2830
For overnight mail or personal delivery only:
California Infrastructure and Economic Development Bank
Attn: Loan Unit Manager,Agreement Number ISRF 17-114
1325 J Street, Suite 1823
Sacramento, CA 95814
43
With a copy to the General Counsel of 113ank at the same address.
If to the Purchaser: City of Redlands
35 Cajon Street, Suite 15A
Redlands, CA 92373
Attn: Chris Diggs
Or to such other address as may be designated in writing by the Purchaser.
SECTION 8.10. Contact Persons.
(a) The Executive Director of IBank or such other person as designated in
writing by 113ank shall manage this Agreement for IBank and shall have authority to make
determinations and fmdings with respect to each controversy arising under or in connection with
the interpretation, performance, or payment for work performed under this Agreement.
(b) The Purchaser's contact person shall be its Municipal Utilities and
Engineering Department Director, or such other person as may be designated in writing by the
Purchaser(the"Purchaser Representative"). The Purchaser's Municipal Utilities and
Engineering Department Director shall be the Purchaser Representative for the administration of
this Agreement and shall have full authority to act on behalf of the Purchaser and may designate
in writing another person or persons authorized to request disbursement of Facility Funds. All
communications given to the Purchaser Representative shall be as binding as if given to the
Purchaser.
SECTION 8.11. Partial Invalidity.
The illegality, unenforceability, or invalidity of any provision of this Agreement with
regard to any Party or circumstance shall not render that provision illegal,unenforceable, or
invalid with regard to any other Party or circumstance. All provisions of this Agreement, in all
other respects, shall remain legal, enforceable, and valid to the fullest extent permitted by law. If
any provision of this Agreement is held to be illegal, unenforceable, or invalid by a court of
competent jurisdiction, then such provision shall be deemed severed from this Agreement and
this Agreement shall be construed and enforced as if such illegal, unenforceable, or invalid
provision had never been part hereof.
SECTION 8.12. Binding Effect.
This Agreement shall inure to the benefit of and shall be binding upon IBank and the
Purchaser and their respective successors and assigns.
SECTION 8.13. Entire Agreement.
Except as expressly stated herein, this Agreement, together with the exhibits and
attachments hereto, constitutes the entire agreement among the Parties. Except as expressly
stated herein,there are no understandings, agreements,representations or warranties, express or
implied, not specified herein or therein regarding this Agreement or the Facility financed
44
hereunder. Any terms and conditions of any purchase order or other document submitted by the
Purchaser in connection with this Agreement which are in addition to or inconsistent with the
terms and conditions of this Agreement will not be binding on IBank and will not apply to this
Agreement.
SECTION 8.14. Indemnification.
The Purchaser shall, to the fullest extent permitted by law, indemnify, protect, hold
harmless, save and keep harmless IBank and its members, directors, officers, attorneys, advisors,
employees, and agents (collectively,the"Indemnified Parties") from and against any and all
liability, obligations, losses, claims, demands, damages, actions, causes of action, liens, stop
payment notices, or costs whatsoever,regardless of the cause thereof, and expenses in
connection therewith, including, without limitation, counsel fees and expenses as incurred,
penalties and interest (collectively, a"Claim"), arising out of, related to or as the result of
entering into this Agreement, and the acquisition, construction, operation, use, condition, or
possession of the Facility or the Project and any portion thereof, including without limitation:
(a) any accident in connection with the operation, use, condition, or possession of the
Facility or the Project resulting in damage to property or injury to or death to any
person including, without limitation, any claim alleging latent and other defects,
whether or not discoverable by the Purchaser or IBank;
(b) patent, trademark or copyright infringement, or similar claims as a consequence of the
operation, use, occupancy, or maintenance of the Facility or the Project;
(c) strict liability in tort as a consequence of the operation, use, occupancy, or
maintenance of the Facility or the Project;
(d) any Claim based upon any environmental law or regulation relating to the Facility or
the Project;
(e) any Claim of any nature directly arising from or related to the Facility or the Project,
which Claim is based upon the operation of the Facility or the Project from and after
the Effective Date;
(f) the existence, placement, delivery, storage, or release of hazardous materials on or
from the Facility or the Project or contamination of property, arising therefrom;
(g) either(i) the application of the Facility Funds, or other amounts treated as"gross
proceeds" of the Proceeds Bonds or Secured Bonds in such manner that any portion
of the Proceeds Bonds or Secured Bonds becomes an "arbitrage bond" within the
meaning of Code sections 103(b)(2) and 148, with the result that interest on the
Proceeds Bonds or Secured Bonds is or becomes subject to federal income taxation of
the holder of the Proceeds Bonds or Secured Bonds; or (ii) if as a result of any act,
failure to act, or use of the proceeds of any portion of the Facility Funds or the
Facility, or any misrepresentation or inaccuracy in any of the representations,
warranties, or covenants contained in this Agreement or the enactment of any federal
45
legislation or the promulgation of any federal rule or regulation after the date of this
Agreement, all or any portion of the interest on any portion of the Proceeds Bonds or
Secured Bonds becomes subject to federal income taxation;
(h) the consummation or carrying out of any of the transactions contemplated by this
Agreement or any related document; and
(i) information provided by the Purchaser which is used in connection with the Proceeds
Bonds or the Secured Bonds.
The indemnification arising under this Section 8.14 shall continue in full force and effect
notwithstanding the full payment of all obligations hereunder and shall survive the termination of
this Agreement for any reason. Any party seeking indemnity hereunder shall promptly give
notice to the Purchaser of any Claim or liability hereby indemnified against upon learning of any
circumstances giving rise to any such Claim or liability. The Purchaser's obligation to
indemnify, defend, protect, hold harmless, save, and keep harmless the Indemnified Parties as
provided in this Section 8.14 shall arise immediately upon any Claim covered under this Section
8.14 being asserted against an Indemnified Parry, whether orally, in writing, or in any court or
administrative action or proceeding.
SECTION 8.15. Expectations.
The undersigned is an authorized representative of the Purchaser acting for and on behalf
of the Purchaser in executing this Agreement. To the best of the knowledge and belief of the
undersigned, there are no other facts, estimates or circumstances that would materially change
the expectations as set forth herein, and said expectations are reasonable.
SECTION 8.16. Section Headings.
All section headings contained herein are for convenience of reference only and are not
intended to define or limit the scope of any provision hereof.
SECTION 8.17. Time of the Essence.
Subject to the remainder of this Section 8.17, time is of the essence with respect to this
Agreement and the performance of each obligation contained in this Agreement. Whenever the
time for performance of any obligation under this Agreement, or if under this Agreement a Party
must act by a particular time or date, or if an act is effective only if done by a particular time or
date, and the last date for performance of such obligation or the doing or effectiveness of such
act falls on a Saturday, Sunday, or legal holiday in the State, the time for performance of such
obligation or the doing or effectiveness of such act shall be extended to the next day that is not a
Saturday, Sunday, or a legal holiday in the State. The first day shall be excluded and the last day
shall be included when computing the time in which an obligation is to be performed or an act is
to be done under this Agreement. Unless otherwise provided herein all time periods shall end at
5:00 p.m. California time.
46
SECTION 8.18. Form of Documents.
The form and substance of all documents and instruments to be delivered to IBank under
the terms of this Agreement, if any, shall be at all times subject to IBank's approval, in its
reasonable discretion. No document or instrument delivered to IBank, or to be delivered to
IBank, or which is subject to the approval of IBank, shall be amended, modified, superseded, or
terminated in any respect whatsoever without IBank's prior written approval.
SECTION 5.19. Waiver of Consequential Damages.
To the fullest extent permitted by law, the Purchaser shall not assert, and hereby waives,
any claim against IBank on any theory of liability for special, indirect, consequential, or punitive
damages (as opposed to direct actual damages) arising from, or in connection with, this
Agreement.
SECTION 8.20. Nondiscrimination.
(a) During the performance of this Agreement, the Purchaser shall ensure that
any direct contractor and its subcontractors constructing the Facility shall not deny the contracts'
benefits to any person on the basis of race, color,religion, ancestry, national origin, ethnic group
identification, marital status, gender, sex, sexual orientation, age,medical condition,physical
handicap or disability, mental disability, political affiliation, or position in a labor dispute,nor
shall they discriminate unlawfully against any employee or applicant for employment because of
race, color, religion, national origin, ethnic group identification, ancestry, physical handicap or
disability, mental disability, medical condition, marital status, age, gender, sex, sexual
orientation, political affiliation, or position in a labor dispute. The Purchaser shall ensure that
any direct contractor and its subcontractor shall ensure that the evaluation and treatment of
employees and applicants for employment are free of such discrimination.
(b) The Purchaser shall ensure that any direct contractor and its subcontractors
constructing the Facility shall comply with the applicable provisions of the Fair Employment and
Housing Act(Government Code section 12900 et seq.), the regulations promulgated thereunder
(Title 2, California Code of Regulations, section 7285.0 et seq.) the provisions of Article 9.5,
Chapter 1, Part 1, Division 3, Title 2 of the Government Code (sections 11135-11139.5) and any
regulations promulgated thereunder.
(c) The Purchaser shall ensure that any direct contractor and its subcontractors
constructing the Facility shall not knowingly give preferential treatment of any kind whatsoever
in connection with any business transaction related to the construction or operation of the
Facility to any of its affiliates or to any business enterprise in which the Purchaser has any
financial interest, but in such business transactions shall deal at all times with such affiliates and
enterprises on the same basis as though dealing with any other parties.
(d) The Purchaser shall ensure that any direct contractor and its subcontractors
constructing the Facility shall, with respect to the Facility, give written notice of their obligations
under this section to labor organizations representing employees of the Purchaser and any
47
contractor or subcontractor performing work on the Facility which have a collective bargaining
or other contract with the Purchaser, such contractor or subcontractor.
(e) The Purchaser shall ensure that any direct contractor and its subcontractors
constructing the Facility shall include the provisions of this section in all subcontracts to perform
work with respect to the Facility.
SECTION 8.21. Execution in Counterparts.
This Agreement shall become enforceable upon its execution and delivery. This
Agreement may be executed and entered into in several counterparts, each of which shall be
deemed an original, and all of which shall constitute but one and the same instrument.
SECTION 8.22. Usury Savings.
Nothing herein shall be construed as entitling IBank to charge, receive, or collect interest
in a sum greater than the maximum interest rate perzxaitted to be charged by Mank to the
Purchaser under applicable law(the"Maximum Rate"). The Parties intend that this Agreement
shall comply with applicable law and that the rate or rates of interest charged hereunder shall not
exceed the Maximum Rate. If the occurrence of any circumstance, event or contingency should
cause such interest to exceed interest at the Maximum Rate, any such excess amount shall be
applied to the reduction of the unpaid principal component of the Installment Payments. As used
herein, the term"applicable law" shall mean the law in effect as of the date hereof; provided,
however,that in the event there is a change in the law which results in a different permissible
rate of interest, then this Agreement shall be governed by such new law as of its effective date.
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers on the dates set forth below.
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK, as Seller
Teveia R. Barnes
Executive Director
Date Is"--- 1__1)I-)/l",P
CITY OF REDLANDS, as Purchaser
By_
Paul W. Foster
Mayor
Date 7-19-16
ATTEST:
ro
Sam Irwin, '
City Clerk
49
EXHIBIT A
APPROVING RESOLUTION OF THE PURCHASER
[See Attached]
A-1
RESOLUTION NO. 7611
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDLANDS AUTHORIZING
THE INCURRING OF AN OBLIGATION, PAYABLE TO THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK, FOR THE FINANCING
OF A CAPITAL IMPROVEMENT PROJECT AND APPROVING CERTAIN OTHER
MATTERS IN CONNECTION THEREWITH
WHEREAS, the California Infrastructure and Econornic Development Bank ("IBank")
administers a financing program to assist local governments with the financing eligible projects
in accordance with Section 63000 et seq. of the California Government Code (the "Act"); and
WHEREAS, Mank created the Infrastructure State Revolving Fund Program ("ISRF
Program") pursuant to the provisions of the Act; and,
WHEREAS, IBank's Criteria, Priorities and Guidelines for the Selection of Projects for
Financing under the ISRF Program, dated February 23, 2016, and as may thereafter be amended
from time to time (the "Criteria"), establishes requirements for the financing of projects under
the ISRF Program; and
WHEREAS, the City of Redlands ("Borrower"), has applied to Mank for the financing of
the costs of improvements and construction of certain parts of the Pavement Accelerated Repair
Implementation Strategy (PARIS) ("Project") in an aggregate amount not to exceed $33000,000;
and
WHEREAS, the Act requires the Borrower to make, by resolution of its governing body,
certain findings prior to a project being selected for financing by IBank; and
WHEREAS, the Borrower reasonably expects that a financing arrangement
("Obligation") in an amount not expected to exceed $3,000,000 will be entered into under and
memorialized by one or more financing agreements and related documents (collectively, the
"Financing Agreements") and that certain proceeds of such Obligation will be used to reimburse
the Borrower for Project expenditures incurred or paid prior to incurring the Obligation; and
WHEREAS, the Borrower acknowledges that lBank fiends the ISRF Program, in part,
with the proceeds of tax exempt bonds and, as such, has certain compliance obligations that may
require it to have the Borrower enter into new financing agreements to replace the Financing
Agreements (the "Replacement Agreements") on terms and conditions substantially identical to
the original Financing Agreements.
NOW, THEREFORE, be it resolved by the City Council of the City of Redlands (the
"Council") as follows:
Section 1. The Council hereby approves, confirms, ratifies and affirms all actions of the
Borrower's representatives, employees and officers heretofore taken in connection with, or with
respect to, submitting an application for financing for the Project and the consideration and
I
1:1cc1erklResolu1ionslRes 7600-769917611 Redlands 11 ISRF Borrower PARIS 3 15 16.doc
approval of the Obligation and the Financing Agreements; and in connection therewith finds and
certifies:
a. The Project facilitates effective and efficient use of existing and future public
resources so as to promote both economic development and conservation of
natural resources;
b. The Project develops and enhances public infrastructure in a manner that will
attract, create, and sustain long-term employment opportunities;
C. That the Project is consistent with the General Plan of the City of Redlands,
and any elements of the General Plan of the San Bernardino that are
applicable to the Borrower and the Project;
d. The proposed financing is appropriate for the Project;
e. The Project is consistent with IBank's Criteria for the ISRF Prograni; and
E It has considered (i) the impact of the Project on California's land resources
and the need to preserve such resources; (ii) whether the Project is
econoYnically or socially desirable; and (iii) whether the project is consistent
with, and in furtherance of the State Enviromnental Goals and Policy Report
(as defined in the Criteria)_
Section 2. The Borrower hereby declares its official intent to use certain proceeds of the
Obligation to reimburse itself for expenditures reimbursable with the proceeds of tax exempt
bonds or other tax exempt securities under the provisions of the Internal Revenue Code of 1986,
as amended, and those U.S. Treasury Regulations implementing such provisions (collectively,
"Federal Tax Law"). This declaration is made solely for purposes of establishing compliance
with applicable requirements of Federal Tax Law. This declaration does not bifid the Borrower
to make any expenditure, incur any indebtedness, or proceed with the Project.
Section 3. The City Manager of the City of Redlands, and his or her designee, is hereby
authorized and directed to act on behalf of the City of Redlands in all matters pertaining to the
financing from IBank, and the execution of related financial documents, Including but not
limited to, the authority to: (1) pledge the revenues of the Solid Waste Fund, for the repayment
of an obligation whose proceeds are used to finance a City street project, on a parity basis with
the City of Redland's obligations in connection with the Installment Sale Agreement, by and
between the Borrower and IBank, dated as of March 2, 2415, to the repayment of the Obligation;
(2) provide covenants relating to, among other things, maintaining the debt service coverage
ratio required by IBank, the rates and charges to be pledged, and as to any other security or
collateral securing the Obligation; and (3) take any other action necessary or desirable to enable
the Borrower to enter into the Financing Agreements and incur the Obligation.
Section 4. If the Obligation is approved by IBank, the City Manager of the City of
Redlands, and his or her designee, is authorized to negotiate, enter into and sign financing
documents and any amendments thereto, including, but not limited to the Financing Agreements
and the Replacement Agreements, with IBank for the purpose of financing the Obligation.
Section 5. This resolution shall become effective immediately upon adoption.
2
1:1cc1erk\Resolusions1Res 7600-7699\761 1 Redlands 11 ISRF Borrower PARIS 3 15 16.dae
ADOPTED, SIGNED AND APPROVED this 15th day of March, 2016.
Paul W. Foster, Mayor
ATTEST:
Sam IrvX ' , •City Clerk
3
I-.cclerklResolutions\Res 7600-76991761 1 Redlands II ISRr Bosower PARIS 3 15 16.doc
I, Sam Irwin, City Clerk of the City of Redlands, hereby certify that the foregoing resolution was
duly adopted by the City Council at a regular meeting thereof held on the 15th day of March,
2016, by the folloNving vote:
AYES: Councilmembers Harrison, Gilbreath, Barich, .Tames; Mayor Foster
NOES: None
ABSENT: None
ABSTAIN: None
Sarre.Iry,,in, City Clerk
4
L\cclerI Recalutions,Rcs 7600-7699\7611 Redlands 11 ISRF Borrower PARIS 3 15 Mdoc
EXHIBIT B
DESCRIPTION OF FACILITY AND PROJECT
Description of the Project
The Purchaser's Pavement Accelerated Repair Implementation Strategy(the PARIS Project)
seeks to upgrade, reconstruct, and rehabilitate approximately 420 lane miles, or approximately
213 of all of Purchaser's streets, as prioritized by the Purchaser's Pavement Management
Program(PMP). Priority is based on the age of the streets, street condition, use of streets
determined by vehicle miles traveled, and proximity to school or health facilities. The
Purchaser's street network includes over 292 street miles, or approximately 640 lane miles of
paved streets. Funding for the Project was established by the Redlands City Council under
Ordinance No. 2787, adopted on December 4, 2012, which increased the Purchaser's solid waste
rates and charges, and authorized the use of certain revenues resulting from such increases for
payment of PARIS Project costs.
Description of the Facility
Also known as the"City of Redlands Streets Project', the Facility will finance approximately
6.4% of the PARIS Project. The Facility will address needed improvements for approximately 27
lane miles as identified in the PARIS Project(See Exhibit I hereto). The Facility further
includes:
i. Pavement upgrading.
ii. Reconstruction and rehabilitation of city streets.
iii. Street improvements that are identified in the city's Pavement
Management Program (PMP).
iv. Street improvements that are identified in the city's Pavement Accelerated
Repair Implementation Strategy (PARIS).
v. Other components necessary or desirable in connection with an
infrastructure project of this type consistent with the applicable
requirements of the IBank Act and the Criteria, Priorities and Guidelines
for the ISRF Program(ISRF Criteria).
B-1
o � • e • e e • o
NO STREET NAME FromStreet ToStreet
1 Alta Vista Dr Sunset Dr Outer Hwy 10 S
2 Arroyo Crest Smiley Heights Dr Dead End
3 Banyan Dr Palm Ave Dead End
4 Brentwood PI Clifton Ave Silverwood PI
5 Country Club Dr Country Club Dr Puesta Del Sol
6 Dolores Ct Highland Ave Dead End
7 Elizabeth Crest Elizabeth St Dead End
8 Elizabeth St Crescent Ave Henrietta St
9 Fl wood CA Rainier Ct Dpad End
11 Felisa Ct Dead End Sunset Dr
12 Florida St Alta Vista Dr 18th St
13 Ford St Sunset Dr Redlands Blvd
14 Gideon Wy Palm Ave Dead End
15 Helen Dr Sunset Dr Dead End
16 Hibiscus Dr Plam Ave Dead End
17 Highview Ln Alta Vista Dr Dead End
18 Hilary Wy Dead End Country Club Dr
19 Hilltop Dr Dead End Alta Vista Dr
20 Hilltop Dr Outer Hwy 10 Knoll Dr
21 Kimball Ln Sunset Dr Sunset Dr
22 Knoll Dr Dead End Alta Vista Dr
23 Knoll Dr Outer Hwy 10 Hilltop Dr
24 Kristin Ct Helen Dr Dead End
25 La Paloma St Palm Ave Dead End
26 1-@ sa I le St Hiahland Ave CitrUs Ave
27 --IQ5-Aho3—DL— Palo Alto Dr --Wahas.LAye--
28 Lotus Ave Dead End Hibiscus Dr
29 Lotus Ct La Paloma St Dead End
30 Maria Ct Somerset Ln Dead End
32 Marjorie Crest Dead End Sunset Dr
33 Mesa Dr Highview Ln Dead End
34 Mirasol Dr Country Club Dr Palo Alto Dr
35 Orchard Dr Cypress Ave Dead End
36 Palm Ave Silverwood PI Redlands Blvd
37 Pamela Crest Sunset Dr Dead End
18 Wax Ave. ppad Fnd Hihivritq Dr
39 Phlox Ct La Paloma St Dead End
40 Rainier Ct Somerset Ln Dead End
Roseh*ll Crest Dead End Arroyo Crest
42 Serpentine Dr Clifton Ave Palm Ave
43 Silverwood PI Brentwood PI Brentwood PI
44 Somerset Ln La Salle St Wabash Ave
45 Sunset Cj Dud End 5un�et Df
45 Sunset Dr Helen Dr Alta Vista Dr
47 Sunset Dr Alta Vista Dr Sunset Dr
48 Valley View Ln Valley Knuckle Sunset Dr
49 Wabash Ave Sunset Dr Fwy 1-10
B-2
50 Wabash Ave 5th Ave Citrus Ave
51 Walnut Ave Alvarado St Banyan Dr
52 Walnut Ct Walnut Ave Dead End
B-3
EXHIBIT C
CONDITIONS PRECEDENT TO DISBURSEMENT
A. Conditions Precedent to Initial Disbursement
No Facility Funds shall be disbursed pursuant to this Agreement until and unless
the Purchaser has submitted the following to IBank:
(1) Insurance Certificate of the Purchaser required by Section 5.22; and
(2) Evidence satisfactory to IBank, in its reasonable discretion, that all
conditions to the obligations of this Agreement being on parity with the 2013A Bonds and the
2015 IBank ISA and the obligations under the 2013A Bonds and the 2015 IBank ISA have been
satisfied, including the conditions that (a) no default shall have occurred and be continuing under
the 2013A Bonds and the 2015 IBank ISA, and (b) Net System Revenues, as calculated by an
independent certified public accountant,for the most recent Fiscal Year for which audited financial
statements are available, or for any more recent twelve (12) month period, equal at least One
Hundred Twenty-Five percent (125%) of Maximum Annual Debt Service (including the
Installment Payments and Additional Payments).
B. Conditions Precedent to Disbursement for Construction Costs
No Facility Funds shall be disbursed for construction costs for the Facility until and
unless the Purchaser has submitted the following to 1Bank:
(1) A copy of the Purchaser's direct contractor's builder's risk and
liability insurance policies that name the Purchaser as loss payee and additional insured, unless
specifically waived by IBank;
(2) A copy of the Purchaser's direct contractor's payment and
performance bonds satisfying the requirements set forth in Section 5.19 of this Agreement; and
(3) A copy of the executed direct contract(s) for the Facility between
the Purchase and its direct contractor(s), including any exhibits, attachments, or change orders, if
and when applicable. Provided, however, if there is no direct contract(s) for the Facility separate
from the Project, a copy of the executed direct contract(s) for the Project between the Purchaser
and its direct contractor(s), including any exhibits, attachments, or change orders, if and when
applicable.
C. Conditions Precedent to Final Disbursement
The final disbursement of Facility Funds shall not be made until the Purchaser has
provided the following to IBank:
(1) Recorded notice of completion for the Facility or other evidence of
completion satisfactory to IBank;
C-1
(2) Lien waivers for the Facility, or evidence of the passage of the
applicable statutory time periods for filing mechanics and other similar liens; and
(3) Certification by the Purchaser that the Facility has been completed
according to its approved final plans and specifications, that the completed Facility is consistent
with the definition of Facility in this Agreement and is acceptable to IBank.
C-2
Exhibit D
%f
°raDaniel J.McHugh
Officeof the
1 Attorney ,,_ pity old"onr�r
'
City of Redlands
July 1, 20116
California Infrastructure and Economic Development bank
1325 J St. Suite 1.823
Sacramento, CA 95814
RE: Installment Sale Agreement, By and Among the City of Redlands and the California
Infrastructure and Economic Development Dank("I7 "), dated as of July 19, 2016.
Ladies and Gentlemen:
In my capacity as legal counsel to the City orf Redlands(the "City") and in connection with
the above described financing agreement(the "Financing Agreement"), I have examined the laws
pertaining to the City; copies of the Financing Agreement; City Resolution No. 761.1 (the
"Resolution"); that certain 2013 Solid Waste Installment Sale Agreement by and between the
Purchaser and the Redlands Financing Authority dated October 1, 20113 (the"20113 ISA"), that
certain Installment Sale Agreement by and between the Purchaser and I13ank dated as of March 2,
2015,Agreement No. LIED -1.4-1015 (the "2015 ISA");the rate and fee structure for the City's solid
waste system and such other information and documents as I considered necessary to redder this
opinion.
Based upon the foregoing, it is my opinion that:
(i)the City is a municipal corporation and a public instrumentality of the State of California duly
organized and validly existing pursuant to the laws of the State of California;
(ii) the Resolution and other actions of the City approving,and authorizing the execution and
delivery of the Financing Agreement were duly adopted at a meeting of the governing body of the City
which was called and held pursuant to law, in.accordance with all pubic notice required by law and at
which a quorum was present and acting throughout and such approval and authority is continuing; and in
fall farce and effect as of the date hereof,
(iii) the City has the fall right and lawful authority to execute and deliver the Financing
Agreement and the Financing Agreement has been duly authorized and executed on behalf of the City
and the Financing Agreement is the legal, valid and binding obligations of the City enforceable in
accordance with its terns, except as enforcement may be limited by bankruptcy, insolvency,
moratorium, or similar laws, or by legal or equitable principles relating to or limiting creditors'rights
C:ILlsers\jdonaldson\App Data\Lorca\Micrasaftl indowsVi'ernporauy Internet Filcs\C ontent 0utIook\TPGH40JG\7 1.9 lG DJM Letterhead to
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D-1
generally;
(iv)to the best of my knowledge, after due inquiry,the execution and delivery of the Financing
Agreement and compliance with the provisions thereof, under the circumstances contemplated thereby,
does not and will not, in any material respect, conflict with or constitute on the part of the City a breach
of or default under any agreement or other instrument to which the City is a parry, including without
limitation the 2013 ISA and the 2015 ISA, or by which it is bound or any existing law, regulation, court
order or consent decree to which the City is subject;
(v)the obligations of the City under the Financing Agreement constitutes permitted parity
obligations under the 2013 ISA and the 2015 ISA and are on parity with the obligations of the City
under the 2013 ISA and the 2015 ISA;
(vi)the rates, fees and charges the City imposes on its solid waste system customers are legal,
valid and comply with California Constitution article XIIID,the statues implementing it, and the
published California Appellate Court and Supreme Court decisions interpreting it;
(vii)to the best of my knowledge, after due inquiry, there is no action, suit,proceeding, inquiry
or investigation before or by any court or public body pending or threatened against or affecting the
City: (1) challenging or questioning the transactions contemplated by the Financing Agreement or any
other agreement,document or certificate related to such transactions; (2) challenging or questioning the
creation, organization, existence or powers of the City; (3) seeking to enjoin or restrain the execution of
the Financing Agreement or the construction of the Facility(as defined in the Financing Agreement) or
the collection of any of the revenues used for making payments under the Financing Agreement; (4) in
any way questioning or affecting any authority for the execution of the Financing Agreement or the
validity or enforceability of the Financing Agreement; or(6) in any way questioning or affecting any
other agreement or instrument relating to the Financing Agreement to which the City is a party.
Sincerely,
Daniel 7. cHugh
City Attorney, City of Redlands
D-2
EXHIBIT E
AMORTIZATION SCHEDULE
finding Tatar Total Payrt�ent
Payrrrer�t Pr1ncPal Interest At�nUal Total
Pncipal Prtnctpal Fiscal Yeah
Date Payment Payment Fee Payment
Balance Earl ng 30lU.W
19-Jul-2016 $3,030,300.00
1-Feb-2017 $52,363.58 $52,363.58 $52,363.58 $52,363.58
1-Aug-20171 $2,912,404.60 $117,895.40 $49,090.86 $166,986.26 $9,090.90 $176,077.16
1-Feb-2018 $47,180.95 $47,180.95 $47,180.95 $223,258.12
1-Aug-2018 $2,790,689.39 $121,715.21 $47,180.95 $168,896.17 $8,737.21 $177,633.38
1-Feb-2019 $45,209.17 $45,209.17 $45,209.17 $222,842.55
1-Aug-2019 $2,665,030.60 $125,658.78 $45,209.17 $170,867.95 $8,372.07 $179,240.02
i-Feb-2020 $43,173.50 $43,173.50 $43,173.50 $222,413.52
1-Aug-2020 $2,535,300.47 $129,730.13 $43,173.50 $172,903.62 $7,995.09 $180,898.72
1-Feb-2021 $41,071.87 $41,071.87 $41,071M $221,970M
1-Aug-2021 $2,401,367.09 $133,933.39 $41,071.87 $175,005.25 $7,605.90 $182,611.15
1-Feb-2022 $38,902.15 $38,902.15 $38,902.15 $221,513.30
1-Aug-2022 $2,263,094.26 $138,272.83 $38,902.15 $177,174.97 $7,204.10 $184,379.07
1-Feb-2023 $36,662.13 $36,662.13 $36,662.13 $221,041.20
1-Aug-2023 $2,120,341.40 $142,752.87 $36,662.13 $179,414.99 $6,789.28 $186,204.28
1-Feb-2024 $34,349.53 $34,349.53 $34,349.53 $220,553.81
1-Aug-2024 $1,972,963.34 $147,378.06 $34,349.53 $181,727.59 $6,361.02 $188,088.61
1-Feb-2025 $31,962.01. $31,962.01 $31,962.01 $220,050.62
1-Aug-2025 $1,820,81D.23 $152,153.11 $31,962.01 $184,115.11 $5,918.89 $190,034.00
1-Feb-2026 $29,497.13 $29,497.13 $29,497.13 $219,531.13
1-Aug-2026 $1,663,727.36 $157,082.87 $29,497.13 $186,579.99 $5,462.43 $192,042.43
1-Feb-2027 $26,952.38 $26,952.38 $26,952.38 $218,994.81
1-Aug-2027 $1,501,555.D1 $162,172.35 $26,952.38 $189,124.74 $4,991.18 $194,115.92
1-Feb-2028 $24,325.19 $24,325.19 $24,325.19 $218,441.11
1-Aug-2028 $1,334,128.27 $167,426.74 $24,325.19 $191,751.93 $4,504.67 $196,256.59
1-Feb-2029 $21,612.88 $21,612.88 $21,612.88 $217,869.47
1-Aug-2029 $1,161,276.90 $172,851.36 $21,612.88 $194,464.24 $4,002.38 $198,466.63
1-Feb-2030 $18,812.69 $18,812.69 $18,812.69 $217,279.31
1-Aug-2030 $982,825.15 $178,451.75 $18,812.69 $197,264.43 $3,483.83 $200,748.27
1-Feb-2031 $15,921.77 $15,921.77 $15,921.77 $216,670.03
1-Aug-2031 $798,591.57 $184,233.59 $15,921.77 $200,155.35 $2,948.48 $203,103.83
1-Feb-2032 $12,937.18 $12,937.18 $12,937.18 $216,041.01
1-Aug-2032 $608,388.81 $190,202.75 $12,937.18 $203,139.94 $2,395.77 $205,535.71
1-Feb-2033 $9,855.90 $9,855.90 $9,855.90 $215,391.61
1-Aug-2033 $412,023.49 $196,365.32 $9,855.90 $206,221.22 $1,825.17 $208,046.39
1-Feb-2034 $6,674.78 $6,674.78 $6,674.78 $214,721.17
i-Aug-2034 $209,295.93 $202,727.56 $5,674,78 $209,402.34 $1,236.07 $210,638.41 $0.00
I-Feb-20351 $3,390.59 $3,390.59 $3,390.59 $214,029.00
I-Aug-20351 $0.00 $209,295.93 $3,390.59 $212,686.53 $627.89 $213,314.41 $213,314.41
Total Payments: $3,030,300.00 $1,078,438.01 $4,108,738.01 1 $99,552.34 $4,208,290.36 $4,208,290.36
E-1
Exhibit F
RED1,AN '[111)s (JIMS [ACKJS"
� � � VrctrckW�adrauucR 1 � �b
& Dqxaalrnenl
909-798-7698
FORM OF CERTIFICATE OF MUNICIPAL UTILITIES AND ENGINEERING
DEPARTMENT DIRECTOR
To be signed and dated as of the Effective .Tate
California Infrastructure and Economic Development Bank
1325 J St. Suite 1823
Sacramento, CA 95814
RE: Installment Sale Agreement, By and Among the City of Redlands and the California
Infrastructure and Economic Development Bank("113ank"), dated as of July 1, 2016; Facility
Useful Life.
Ladies and Gentlemen
In my capacity as the Municipal Utilities and Engineering Department Director(the"MUED
Director") of the City of Redlands (the"City"), I, Chris Diggs, do hereby certify as follows:
1. My responsibilities as the MUED Director include overseeing and managing the
operations and maintenance of the City's road and transportation system.
2. 1 have detailed knowledge of the materials utilized for the construction of roads in the
City,their strengths and weaknesses, and their characteristics from an operations and
maintenance standpoint.
3. The City is in the process of undertaking its Pavement Accelerated Repair
Implementation Strategy ("PARIS")Project,which seeks to upgrade, reconstruct, and
rehabilitate approximately 424 lane miles, or approximately 2/3 of all of the City's streets, as
prioritized by the City's Pavement Management Program (the"PMP"). The construction
methods and materials that will be used in connection with the PARIS Project are commonly
used throughout California for road upgrade, reconstruction, and rehabilitation projects and are
designed to have a useful life of at least 24 years. Therefore, in my opinion as the MUED
Director of the City,the useful lift;of the roads repaired in connection with the PARIS Project
will be at least 20 years.
Exhibit F
1, Chris Diggs, hereby certify that each of the foregoing is true and correct.
Dated: July 19, 2016
Sincerely,
Chris Diggs _ ...__...._.__._....__......_._.....m..._..
Municipal Utilities and.Engineering Department Director, City of
Redlands
EXHIBIT G
SCHEDULE OF SOURCES AND USES OF FACILITY FUNDS
i
i
o 1 E
Construction & Construction Contingency $3,000,000 $0 $3,000,000
IBank Origination Fee $30,300 $0 $30,300
Total $3,030,300 $0 $3,030,300
G-1