Norton Rose Fulbright US LLP Draft 7/2/24
139198877.5 1001271367
Anaheim 2024 Water Bonds
INSTALLMENT PURCHASE AGREEMENT
by and between the
ANAHEIM HOUSING AND PUBLIC IMPROVEMENTS AUTHORITY,
as Seller
and the
CITY OF ANAHEIM,
as Purchaser
Dated as of [______ 1], 2024
Relating to the
$__________
Anaheim Housing and Public
Improvements Authority
Revenue Bonds, Series 2024-A
(Water System Project)
(Variable Rate Demand Bonds)
(Second Lien Qualified Obligations)
TABLE OF CONTENTS
Page
139198877.5 i
ARTICLE I DEFINITIONS AND EXHIBITS ............................................................................................1 SECTION 1.1 Definitions ......................................................................................................1 SECTION 1.2 Content of Statements and Opinions ............................................................14 SECTION 1.3 Exhibits .........................................................................................................15 ARTICLE II REPRESENTATIONS AND WARRANTIES.....................................................................15 SECTION 2.1 Representations and Warranties of the City .................................................15 SECTION 2.2 Representations and Warranties of the Authority.........................................17 ARTICLE III PURCHASE AND SALE OF THE WATER SYSTEM; FUNDS AND ACCOUNTS; FLOW OF REVENUES; SECURITY...............................................18 SECTION 3.1 Purchase and Sale of the Water System........................................................18 SECTION 3.2 Purchase Payment Fund................................................................................18 SECTION 3.3 Qualified Obligations Account .....................................................................18 SECTION 3.4 Second Lien Qualified Obligations Account ................................................18 SECTION 3.5 WRAN Account............................................................................................18 SECTION 3.6 Remaining Surplus Account .........................................................................18 SECTION 3.7 Water System Surplus Revenue Fund ..........................................................18 SECTION 3.8 Funds and Accounts......................................................................................19 SECTION 3.9 Flow of Revenues .........................................................................................19 SECTION 3.10 Flow of Surplus Revenues ............................................................................20 SECTION 3.11 Security for the 2024-A Purchase Payments ................................................21 ARTICLE IV EFFECTIVE DATE OF THIS AGREEMENT; DURATION; PAYMENT PROVISIONS; LIABILITY ......................................................................................21 SECTION 4.1 Effective Date of this Installment Purchase Agreement; Duration...............21 SECTION 4.2 Purchase Price; 2024-A Purchase Payments ................................................21 SECTION 4.3 Additional Purchase Payments .....................................................................22 SECTION 4.4 Source for City Payments .............................................................................23 SECTION 4.5 Obligations of the City Unconditional; Net Contract; Obligations of Authority Unconditional ...............................................................................23 SECTION 4.6 Prepayment of 2024-A Purchase Payments..................................................24 SECTION 4.7 Termination of Installment Purchase Agreement .........................................25 ARTICLE V PARTICULAR COVENANTS ............................................................................................25 SECTION 5.1 Limitation on Encumbrances; Against Sale..................................................25 SECTION 5.2 Accounting Records......................................................................................25 SECTION 5.3 Rates and Charges.........................................................................................26 SECTION 5.4 Tax Covenants ..............................................................................................26 SECTION 5.5 Limits on Bonds and Obligations Secured by Net Surplus Revenues..........30 SECTION 5.6 Continuing Disclosure ..................................................................................30 ARTICLE VI MAINTENANCE AND INSURANCE ..............................................................................31 SECTION 6.1 Maintenance and Operation of the Water System ........................................31 SECTION 6.2 Insurance.......................................................................................................31 ARTICLE VII NON-LIABILITY OF AUTHORITY; EXPENSES, INDEMNIFICATION....................31 SECTION 7.1 Non-Liability of Authority............................................................................31
TABLE OF CONTENTS
(continued)
Page
139198877.5 ii
SECTION 7.2 Expenses .......................................................................................................32 SECTION 7.3 Indemnification.............................................................................................32 SECTION 7.4 Survive Termination .....................................................................................33 ARTICLE VIII DEFAULTS AND REMEDIES .......................................................................................33 SECTION 8.1 Events of Default ..........................................................................................33 SECTION 8.2 Remedies on Default.....................................................................................34 SECTION 8.3 Remedies Not Exclusive; No Waiver of Rights ...........................................34 SECTION 8.4 Expenses on Default .....................................................................................35 SECTION 8.5 Notice of Default ..........................................................................................35 ARTICLE IX MISCELLANEOUS............................................................................................................35 SECTION 9.1 Further Assurances .......................................................................................35 SECTION 9.2 Notices ..........................................................................................................35 SECTION 9.3 Governing Law .............................................................................................35 SECTION 9.4 Binding Effect...............................................................................................35 SECTION 9.5 Severability of Invalid Provisions.................................................................36 SECTION 9.6 Article and Section Headings and References..............................................36 SECTION 9.7 Amendments .................................................................................................36 SECTION 9.8 Disclaimer of Warranties ..............................................................................36 SECTION 9.9 Claims; Warranties, etc.................................................................................36 SECTION 9.10 Waiver of Personal Liability.........................................................................37 SECTION 9.11 Execution of Counterparts ............................................................................37 SECTION 9.12 Assignment ...................................................................................................37 SECTION 9.13 Indenture .......................................................................................................37 EXHIBIT A – DESCRIPTION OF WATER SYSTEM COMPONENTS ............................................A-1 139198877.5
INSTALLMENT PURCHASE AGREEMENT
THIS INSTALLMENT PURCHASE AGREEMENT, dated as of [______ 1], 2024 (the “Installment Purchase Agreement”), between the ANAHEIM HOUSING AND PUBLIC IMPROVEMENTS AUTHORITY, a joint powers authority organized and existing under the laws of the State of California (hereinafter referred to as the “Authority”), as seller, and the CITY OF ANAHEIM (hereinafter referred to as the “City”), as purchaser.
W I T N E S S E T H:
WHEREAS, the Authority is authorized to assist the City in the financing and refinancing of costs related to capital improvements; and WHEREAS, the City has the power to purchase real and personal property; and WHEREAS, the City owns and operates a water system (the “Water System”); and WHEREAS, the Authority has approved the issuance of its Revenue Bonds, Series 2024- A (Water System Project) (Variable Rate Demand Bonds) (Second Lien Qualified Obligations) (the “2024-A Bonds”) to assist the City in providing funds (i) to finance the acquisition and construction of additional capital assets of the City’s Water System, and (ii) to pay related costs of issuance; and WHEREAS, the Authority will purchase certain components of the Water System described in Exhibit A hereto (the “Components”) in consideration for providing proceeds of the 2024-A Bonds, and the City will purchase the Components back from the Authority in consideration for 2024-A Purchase Payments equal in time and amount to the debt service on the 2024-A Bonds; and WHEREAS, the Authority will transfer in trust and assign to the Trustee all of the right, title and interest of the Authority in and to the 2024-A Purchase Payments (as hereinafter defined) and all rights to enforce the payment of the 2024-A Purchase Payments under this Installment Purchase Agreement; and
WHEREAS, the City and the Authority have duly authorized the execution and delivery of this Installment Purchase Agreement;
NOW, THEREFORE, for and in consideration of the premises and the material covenants hereinafter contained, the parties hereto mutually agree as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
SECTION 1.1 Definitions. The following terms shall, for all purposes of this Installment Purchase Agreement, have the respective meanings ascribed to them. Words in the singular shall include the plural and words in the plural shall include the singular where the context so requires.
All capitalized terms used herein which are defined in the Indenture and not defined herein shall have the meanings specified in the Indenture.
“Accountant” shall mean any independent certified public accountant or firm of such accountants selected by the City.
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“Additional Purchase Payments” shall mean the payments so designated and required to be made by the City pursuant to Section 4.3 hereof.
“Assumed Second Lien Qualified Obligation Service” shall mean for any Fiscal Year the aggregate amount of principal and interest or other payments which would be payable with respect to Second Lien Qualified Obligations assuming that each payment of principal subject to optional tender is amortized on a substantially level debt service basis for a period ending on the earlier of (i) 30 years from the date of calculation or (ii) if a binding commitment has been provided for the refinancing of the applicable indebtedness, the term specified in the lender’s commitment for such refinancing indebtedness, in either case calculated based on an assumed interest rate equal to the actual rate of interest payable on the applicable indebtedness if the interest rate is a fixed rate, or equal to the maximum interest rate specified in any credit or liquidity facility or other arrangement for the tender of such Second Lien Qualified Obligations if the rate of interest is a variable rate. “Authority” shall mean the Anaheim Housing and Public Improvements Authority, or its successors and assigns, a joint exercise of powers authority formed by a Joint Exercise of Powers Agreement, dated as of July 1, 2014, by and between the City and the Anaheim Housing Authority, pursuant to the provisions of the Joint Exercise of Powers Act, comprising Articles 1, 2, 3 and 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the Government Code of the State of California.
“Balloon Indebtedness” shall mean, with respect to any Series of Qualified Obligations twenty-five percent (25%) or more of the principal of which matures on the same date or within a 12- month period (with sinking fund payments deemed to be payments of matured principal), that portion of such Series of Qualified Obligations which matures on such date or within such 12-month period; provided, however, that to constitute Balloon Indebtedness the amount of indebtedness maturing on a single date or over a 12-month period must equal or exceed 150% of the amount of such Series of Qualified Obligations which matures during any preceding 12-month period. For purposes of this definition, the principal amount maturing on any date shall be reduced by the amount of such indebtedness which is required, by the documents governing such indebtedness, to be amortized by prepayment or redemption prior to its stated maturity date. “Bond” shall mean any revenue bond, revenue note, warrant or other evidence of indebtedness issued, incurred or delivered for the financing or refinancing of extensions of, additions to, repairs and replacements to, renewals of, and improvements of, the Water System, designated by the City at the initial delivery thereof as payable from Net Surplus Revenues in the Second Lien Qualified Obligations Account, to the extent so payable. “Bond” shall not include any Obligation. “Charter” shall mean the charter of the City adopted by the electors of the City on June 2, 1964 and as amended from time to time.
“City Council” shall mean the City Council of the City. “Components” shall mean the components of the Water System purchased under this Installment Purchase Agreement as described in Exhibit A hereto, as it may be amended from time to time by the City in accordance herewith.
“Continuing Disclosure Agreement” shall mean the Continuing Disclosure Agreement between the City and the Trustee dated the date of issuance of the 2024-A Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. 139198877.5 3
“Delivery Date” shall mean the date on which the 2024-A Bonds are delivered pursuant to the Indenture to the original purchasers thereof.
“Environmental Regulations” shall mean any federal, state or local law, statute, code, ordinance, regulation, requirement or rule relating to dangerous, toxic or hazardous pollutants, Hazardous Substances or chemical waste, materials or substances.
“Fiscal Year” shall mean the twelve-month fiscal period of the City which commences on July 1 in every year and ends on June 30 of the succeeding year, or any other twelve-month, or fifty- two week, period hereafter selected and designated as the official fiscal year period of the City. “Fitch” shall mean Fitch Ratings, Inc., its successors and assigns, or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a statistical rating organization, any other nationally recognized securities rating agency designated by the City, with the approval of the Authority, by notice to the Trustee.
“Hazardous Substances” shall mean (a) any oil, flammable substance, explosives, radioactive materials, hazardous wastes or substances, toxic wastes or substances or any other wastes, materials or pollutants which (i) pose a hazard to the Water System or to persons on or about the Water System or (ii) cause the Water System to be in violation of any Environmental Regulation; (b) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls, or radon gas; (c) any chemical, material or substance defined as or included in the definition of “waste,” “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous waste,” “restricted hazardous waste,” or “toxic substances” or words of similar import under any Environmental Regulation including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 USC §§ 9601 et seq.; the Resource Conservation and Recovery Act (“RCRA”), 42 USC §§ 6901 et seq.; the Hazardous Materials Transportation Act, 49 USC §§ 1801 et seq.; the Federal Water Pollution Control Act, 33 USC §§ 1251 et seq.; the California Environmental Quality Act (“CEQA”), Cal. Public Resources Code § 21000 et seq.; the California Hazardous Waste Control Law (“HWCL”), Cal. Health & Safety §§ 25100 et seq.; the Hazardous Substance Account Act (“HSAA”), Cal. Health & Safety Code §§ 25300 et seq.; the Underground Storage of Hazardous Substances Act, Cal.
Health & Safety §§ 25280 et seq.; the Porter-Cologne Water Quality Control Act (the “Porter-Cologne Act”), Cal. Water Code §§ 13000 et seq., the Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65); and Title 22 of the California Code of Regulations, Division 4, Chapter 30; (d) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or agency or may or could pose a hazard to the health and safety of the occupants of the Water System or the owners and/or occupants of property adjacent to or surrounding the Water System, or any other person coming upon the Water System or adjacent property; or (e) any other chemical, materials or substance which may or could pose a hazard to the environment. “Indenture” shall mean the Indenture of Trust dated as of [______ 1], 2024, by and among the Authority, the City and the Trustee, authorizing the issuance of the 2024-A Bonds, as originally executed or as it may from time to time be supplemented, modified or amended. “Interest Components” shall mean the 2024-A Purchase Payments other than the Principal Components.
“Maximum Annual Debt Service” shall mean Maximum Annual Debt Service as defined in Resolution No. 93R-71 of the City Council.
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“Maximum Annual Qualified Obligation Service” shall mean, as of any date, the maximum amount of Qualified Obligation Service payable in the then current or any subsequent Fiscal Year. For purposes of calculating Maximum Annual Qualified Obligation Service, the following assumptions shall be used to calculate the principal and interest becoming due in any fiscal year:
(i) in determining the principal amount due in each year, payments shall (except to the extent a different paragraph of this definition applies for purposes of determining principal maturities or amortization) be assumed to be made in accordance with any amortization schedule established for such debt, including the amount of any Qualified Obligations which are or have the characteristics of commercial paper and which are not intended at the time of issuance to be retired from the sale of a corresponding amount of Qualified Obligations, and including any scheduled mandatory redemption or prepayment of Qualified Obligations, and for such purpose, the redemption payment shall be deemed a principal payment; in determining the interest due in each year, interest payable at a fixed rate (except to the extent paragraph (ii) or (iii) of this definition applies) shall be assumed to be made at such fixed rate and on the required payment dates;
(ii) if all or any portion or portions of an Outstanding Series of Qualified Obligations constitutes Balloon Indebtedness or if all or any portion or portions of a Series of Qualified Obligations then proposed to be issued would constitute Balloon Indebtedness, then, for purposes of determining Maximum Annual Qualified Obligation Service, each maturity which constitutes Balloon Indebtedness shall be treated as if it were to be amortized in substantially equal annual installments of principal and interest over a term of 25 years commencing in the year the stated maturity of such Balloon Indebtedness occurs, and the interest rate used for such computations shall be determined as provided in paragraph (iv) or (v) below, as appropriate, and all payments of principal and interest becoming due prior to the year of the stated maturity of the Balloon Indebtedness shall be treated as described in paragraph (i) above; (iii) if any of the Outstanding Series of Qualified Obligations constitutes Tender Indebtedness or if Qualified Obligations proposed to be issued would constitute Tender Indebtedness, then, for purposes of determining Maximum Annual Qualified Obligation Service, Tender Indebtedness shall be treated as if the principal amount of such Qualified Obligations were to be amortized in accordance with the amortization schedule set forth in such Tender Indebtedness or in the standby purchase or liquidity facility established with respect to such Tender Indebtedness, or if no such amortization schedule is set forth, then such Tender Indebtedness shall be deemed to be amortized in substantially equal annual installments of principal and interest over a term of 25 years commencing in the year in which such Series is first subject to tender, and the interest rate used for such computation shall be determined as provided in paragraph (iv) or (v) below, as appropriate;
(iv) if any Outstanding Qualified Obligations constitutes Variable Rate Indebtedness (except to the extent paragraph (ii) relating to Balloon Indebtedness or paragraph (iii) relating to Tender Indebtedness applies), the interest rate on such obligations shall be assumed to be 110% of the daily average interest rate on such Qualified Obligations during the 12 months ending with the month preceding the date of calculation, or such shorter period that such Qualified Obligations shall have been Outstanding; provided that in the event that such Variable Rate Indebtedness has been issued in connection with a Qualified Swap Agreement, the interest rate for purposes of computing Maximum Annual Qualified Obligation Service shall be determined by (x) calculating the annualized net amount paid by the City under such Variable Rate Indebtedness and Qualified Swap Agreement (after giving effect to payments made under the Variable Rate Indebtedness and made and received by the City under the Qualified Swap 139198877.5 5
Agreement) during the 12 months ending with the month preceding the date of calculation, or such shorter period that such Qualified Swap Agreement has been in effect, and (y) dividing the amount calculated in clause (x) by the average daily balance of the related Qualified Obligations Outstanding during the 12-month period contemplated by clause (x); (v) if Qualified Obligations proposed to be issued will be Variable Rate Indebtedness (except to the extent paragraph (ii) relating to Balloon Indebtedness or paragraph (iii) relating to Tender Indebtedness applies), then such Qualified Obligations shall be assumed to bear interest at the rate quoted in The Bond Buyer 25 Revenue Bond Index for the last week of the month preceding the date of sale of such additional Qualified Obligations, as published in The Bond Buyer, or if that index is no longer published, another similar index selected by the City, or if the City fails to select a replacement index, an interest rate equal to 80% of the yield for outstanding United States Treasury bonds having an equivalent maturity, or if there are no such Treasury bonds having such maturities, 80% of the lowest prevailing prime rate of any of the five largest commercial banks in the United States ranked by assets; provided that in the event that such Variable Rate Indebtedness will be issued in connection with a Qualified Swap Agreement, the interest rate for purposes of computing Maximum Annual Qualified Obligation Service shall be determined by (a) calculating the net amount to be paid by the City under such Variable Rate Indebtedness and Qualified Swap Agreement (after giving effect to payments to be made under the Variable Rate Indebtedness and to be made and received by the City under the Qualified Swap Agreement) for the first year during which the Qualified Swap Agreement is to be in effect, and (b) dividing the amount calculated in clause (a) by the average principal amount of the related Qualified Obligations to be Outstanding during the first year after the issuance of such Qualified Obligations;
(vi) if moneys or Permitted Investments have been deposited by the City into a separate fund or account or are otherwise held by the City or by a fiduciary to be used to pay principal and/or interest on specified Qualified Obligations, then the principal and/or interest to be paid from such moneys, Permitted Investments or from the earnings thereon shall be disregarded and not included in calculating Maximum Annual Qualified Obligation Service; (vii) if Qualified Obligations are Paired Obligations, the interest thereon shall be the resulting linked rate or effective fixed rate to be paid with respect to such Paired Obligations; and (viii) in the event that an agreement or commitment which, at the time of calculation is a Qualified Swap Agreement, is or is to be in effect with respect to Qualified Obligations which are not Variable Rate Indebtedness, the interest rate of such Qualified Obligations for purposes of calculating Maximum Annual Qualified Obligation Service shall be calculated as follows:
(a) for such a Qualified Swap Agreement which is in effect on the date of calculation, the interest rate shall be calculated in the same manner as is specified in paragraph (iv) for a Qualified Swap Agreement issued in connection with Variable Rate Indebtedness which is Outstanding on the date of calculation; and (b) for such a Qualified Swap Agreement which is not in effect on the date of calculation, the interest rate shall be calculated in the same manner as is specified in paragraph (v) for a Qualified Swap Agreement to be issued in connection with Variable Rate Indebtedness to be Outstanding after the date of calculation, and for this purpose any variable rate of interest agreed to be paid thereunder shall be assumed to be the rate assumed for Variable Rate Indebtedness described in paragraph (v).
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“Maximum Annual Second Lien Qualified Obligation Service” shall mean, at any point in time, with respect to Second Lien Qualified Obligations then Outstanding, the maximum amount of principal and interest becoming due on the Second Lien Qualified Obligations in the then current or any future Fiscal Year, calculated by the City as provided in this definition and provided to the Trustee.
For purposes of calculating Maximum Annual Second Lien Qualified Obligation Service, the following assumptions shall be used to calculate the principal and interest becoming due in any fiscal year:
(i) in determining the principal amount due in each year, payments shall (except to the extent a different paragraph of this definition applies for purposes of determining principal maturities or amortization) be assumed to be made in accordance with any amortization schedule established for such debt, including the amount of any Second Lien Qualified Obligations which are or have the characteristics of commercial paper and which are not intended at the time of issuance to be retired from the sale of a corresponding amount of Second Lien Qualified Obligations, and including any scheduled mandatory redemption or prepayment of Second Lien Qualified Obligations, and for such purpose, the redemption payment or prepayment shall be deemed a principal payment; in determining the interest due in each year, interest payable at a fixed rate (except to the extent paragraph (ii) or (iii) of this definition applies) shall be assumed to be made at such fixed rate and on the required payment dates; (ii) if all or any portion or portions of an Outstanding Series of Second Lien Qualified Obligations constitutes Second Lien Balloon Indebtedness or if all or any portion or portions of a Series of Second Lien Qualified Obligations then proposed to be issued would constitute Second Lien Balloon Indebtedness, then, for purposes of determining Maximum Annual Second Lien Qualified Obligation Service, each maturity which constitutes Second Lien Balloon Indebtedness shall be treated as if it were to be amortized in substantially equal annual installments of principal and interest over a term of 30 years commencing in the year the stated maturity of such Second Lien Balloon Indebtedness occurs, and the interest rate used for such computations shall be determined as provided in paragraph (iv) or (v) below, as appropriate, and all payments of principal and interest becoming due prior to the year of the stated maturity of the Second Lien Balloon Indebtedness shall be treated as described in paragraph (i) above;
(iii) if any of the Outstanding Series of Second Lien Qualified Obligations constitutes Second Lien Tender Indebtedness or if Second Lien Qualified Obligations proposed to be issued would constitute Second Lien Tender Indebtedness, then, for purposes of determining Maximum Annual Second Lien Qualified Obligation Service, Second Lien Tender Indebtedness shall be treated as if the principal amount of such Second Lien Qualified Obligations were to be amortized in accordance with the amortization schedule set forth in such Second Lien Tender Indebtedness or in the standby purchase or liquidity facility established with respect to such Second Lien Tender Indebtedness, or if no such amortization schedule is set forth, then such Second Lien Tender Indebtedness shall be deemed to be amortized in substantially equal annual installments of principal and interest over a term of 30 years commencing in the year in which such Series is first subject to tender, and the interest rate used for such computation shall be determined as provided in paragraph (iv) or (v) below, as appropriate; (iv) if any Outstanding Second Lien Qualified Obligations constitutes Variable Rate Indebtedness (except to the extent paragraph (ii) relating to Second Lien Balloon Indebtedness or paragraph (iii) relating to Second Lien Tender Indebtedness applies), the interest rate on such obligations shall be assumed to be 110% of the daily average interest rate on such Second Lien Qualified Obligations during the 12 months ending with the month preceding the date of calculation, or such shorter period that such Second Lien Qualified Obligations shall have been Outstanding; provided that in the event that such Variable Rate Indebtedness has been issued in connection with a Second Lien Qualified Swap Agreement, the interest rate for purposes of computing Maximum Annual Second Lien Qualified Obligation Service shall be determined by (x) calculating the annualized net amount paid by the City 139198877.5 7
under such Variable Rate Indebtedness and Second Lien Qualified Swap Agreement (after giving effect to payments made under the Variable Rate Indebtedness and made and received by the City under the Second Lien Qualified Swap Agreement) during the 12 months ending with the month preceding the date of calculation, or such shorter period that such Second Lien Qualified Swap Agreement has been in effect, and (y) dividing the amount calculated in clause (x) by the average daily balance of the related Second Lien Qualified Obligations Outstanding during the twelve-month period contemplated by clause (x); (v) if Second Lien Qualified Obligations proposed to be issued will be Variable Rate Indebtedness (except to the extent paragraph (ii) relating to Second Lien Balloon Indebtedness or paragraph (iii) relating to Second Lien Tender Indebtedness applies), then such Second Lien Qualified Obligations shall be assumed to bear interest at the weekly average of The Bond Market Association Municipal Swap Index during the ten-year period ending immediately prior to the date of issuance, or if that index is no longer published, another similar index selected by the City, or if the City fails to select a replacement index, an interest rate equal to 80% of the yield for outstanding United States Treasury bonds having an equivalent maturity, or if there are no such Treasury bonds having such maturities, 80% of the lowest prevailing prime rate of any of the five largest commercial banks in the United States ranked by assets; provided that in the event that such Variable Rate Indebtedness will be issued in connection with a Second Lien Qualified Swap Agreement, the interest rate for purposes of computing Maximum Annual Second Lien Qualified Obligation Service shall be determined by (a) calculating the net amount to be paid by the City under such Variable Rate Indebtedness and Second Lien Qualified Swap Agreement (after giving effect to payments to be made under the Variable Rate Indebtedness and to be made and received by the City under the Second Lien Qualified Swap Agreement) for the first year during which the Second Lien Qualified Swap Agreement is to be in effect, and (b) dividing the amount calculated in clause (a) by the average principal amount of the related Second Lien Qualified Obligations to be Outstanding during the first year after the issuance of such Second Lien Qualified Obligations; (vi) if moneys or Permitted Investments have been deposited by the City into a separate fund or account or are otherwise held by the City or by a fiduciary to be used to pay principal and/or interest on specified Second Lien Qualified Obligations, then the principal and/or interest to be paid from such moneys, Permitted Investments or from the earnings thereon shall be disregarded and not included in calculating Maximum Annual Second Lien Qualified Obligation Service; (vii) if Second Lien Qualified Obligations are Second Lien Paired Obligations, the interest thereon shall be the resulting linked rate or effective fixed rate to be paid with respect to such Second Lien Paired Obligations; and
(viii) in the event that an agreement or commitment which, at the time of calculation is a Second Lien Qualified Swap Agreement, is or is to be in effect with respect to Second Lien Qualified Obligations which are not Variable Rate Indebtedness, the interest rate of such Second Lien Qualified Obligations for purposes of calculating Maximum Annual Second Lien Qualified Obligation Service shall be calculated as follows:
(a) for such a Second Lien Qualified Swap Agreement which is in effect on the date of calculation, the interest rate shall be calculated in the same manner as is specified in paragraph (iv) for a Second Lien Qualified Swap Agreement issued in connection with Variable Rate Indebtedness which is Outstanding on the date of calculation; and (b) for such a Second Lien Qualified Swap Agreement which is not in effect on the date of calculation, the interest rate shall be calculated in the same manner as is specified in paragraph (v) for a Second Lien Qualified Swap Agreement to be issued in connection with Variable Rate Indebtedness to be Outstanding after the date of calculation, and for this purpose 139198877.5 8
any variable rate of interest agreed to be paid thereunder shall be assumed to be the rate assumed for Variable Rate Indebtedness described in paragraph (v). “Moody’s” shall mean Moody’s Investors Service, Inc., its successors and assigns, or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a statistical rating organization, any other nationally recognized securities rating agency designated by the City, with the approval of the Authority, by notice to the Trustee.
“Net Revenues” of the Water System shall mean the amount of the Revenues less the Operating Expenses.
“Net Surplus Revenues” shall mean the moneys in the Second Lien Qualified Obligations Account of the Surplus Revenue Fund.
“Notes” shall mean the City of Anaheim Water Revenue Anticipation Notes, authorized by Ordinance No. 5376 of the City Council.
“Obligation” shall mean any contract, instrument or other agreement for the purchase, acquisition or lease of facilities, properties, structures or equipment for the Water System, designated by the City at the initial delivery thereof as payable from Net Surplus Revenues in the Second Lien Qualified Obligations Account, to the extent so payable, the final payments under which are due more than one year following the incurrence thereof. “Obligation” shall not include any Bond. “Operating Expenses” of the Water System shall mean the reasonable and necessary current expenses of maintaining, repairing and operating the Water System, including City administrative expenses directly attributable to Water System functions, but excluding depreciation and amortization, transfers to the City’s general fund, and debt service requirements of the City’s general obligation water bonds, all computed in accordance with sound accounting principles and consistent with existing accounting practices of the City.
“Opinion of Counsel” shall mean a written opinion of counsel selected by the City. If and to the extent required by the provisions of Section 1.2 hereof, each Opinion of Counsel shall include the statements provided for in Section 1.2 hereof.
“Outstanding,” when used as of any particular time with respect to Qualified Obligations or Second Lien Qualified Obligations, shall mean all such obligations theretofore or thereupon executed, authenticated and delivered by the City, a conduit issuer for the City or any trustee or other fiduciary, except (i) such obligations theretofore canceled or surrendered for cancellation; (ii) such obligations paid or deemed to be paid within the meaning of any defeasance provisions thereof; (iii) such obligations owned by the City or the conduit issuer; and (iv) such obligations in lieu of or in substitution for which other obligations have been executed and delivered. “Paired Obligations” shall mean any Series (or portion thereof) of Qualified Obligations or related conduit obligations designated as such in the document authorizing the issuance or incurrence thereof, which are simultaneously issued or incurred, (i) the principal of which is of equal amount maturing and to be redeemed (or canceled after acquisition thereof) on the same dates and in the same amounts, and (ii) the interest rates of which, taken together, result in an irrevocably fixed interest rate obligation of the City for the terms thereof.
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“Person” shall mean an individual, corporation, firm, association, partnership, trust, limited liability company or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.
“Prepayment Date” shall mean the date selected by the City for the optional prepayment of 2024-A Purchase Payments in accordance with Section 4.6 hereof. “Prepayment Price” shall mean the price payable by the City to prepay 2024-A Purchase Payments, equal to the amount of the Outstanding Principal Components to be prepaid, plus a premium with respect thereto in the amount of the premium payable upon the Authority’s optional redemption of the corresponding 2024-A Bonds, plus the amount of related Interest Components to the Prepayment Date.
“Principal Components” shall mean that portion of the 2024-A Purchase Payments designated as principal components corresponding to the principal amounts due at each maturity and mandatory sinking fund redemption of the 2024-A Bonds.
“Purchase Payment Dates” shall mean the dates on which the 2024-A Purchase Payments are required to be made as provided in this Installment Purchase Agreement, such dates being each date that amounts are due and payable on the 2024-A Bonds, commencing [____________], 2024. “Purchase Price” shall mean the amount to be paid by the City to the Authority for the Water System as specified in Section 4.2 hereof.
“Qualified Obligation Service” shall mean, with respect to any period, the amount of principal and interest or other payments accrued or to accrue in such period with respect to all outstanding Qualified Obligations (excluding the amount of proceeds of Qualified Obligations held in any fund or account for the payment of Qualified Obligation Service accrued or to accrue during such period). For purposes of accrual under this definition, all payments with respect to Qualified Obligations due in a calendar month shall be deemed due on the first day of such calendar month. “Qualified Obligations” shall mean, without duplication, (i) 2024-A Purchase Payments; (ii) 2022 Purchase Payments; (iii) 2020 Purchase Payments; (iv) 2015-A Purchase Payments; and (v) Bonds and Obligations which at the time of initial delivery thereof satisfy the covenant set forth in Section 5.5 hereof.
“Qualified Obligations Account” shall mean the account by that name described in Section 3.3 hereof.
“Qualified Swap Agreement” shall mean a contract or agreement, payable from Surplus Revenues on a basis subordinate to Qualified Obligations, intended to place payment obligations on the interest rate, currency, cash flow or other basis desired by the City, including, without limitation, any interest rate swap agreement, currency swap agreement, forward payment conversion agreement or futures contract, any contract providing for payments based on levels of, or changes in, interest rates, currency exchange rates, stock or other indices, any contract to exchange cash flows or a series of payments, or any contract, including, without limitation, an interest rate floor or cap, or an option, put or call, to hedge payment, currency, rate, spread or similar exposure, between the City and a counterparty; provided that not less than 30 days prior to the City’s execution of such contract or agreement, each Rating Agency which maintains a rating with respect to any Qualified Obligations receives notice in writing of the City’s pending execution thereof; and provided further that at the time of origination each Rating Agency which maintains a rating with respect to any Qualified Obligations confirms in writing to 139198877.5 10
the City that the City’s execution and delivery of such contract will not result in a downgrading, withdrawal or suspension of such rating.
“Rating Agency” means each of Moody’s, Standard & Poor’s and Fitch and/or such other nationally recognized securities rating agency selected by the City. “Revenues” shall mean all rates, fees and charges for providing water service to persons and real property (including connection fees) and all other fees, rents and charges and other income derived by the City from the ownership, operation, use or services of the Water System. “Second Lien Balloon Indebtedness” shall mean, with respect to any Series of Second Lien Qualified Obligations twenty-five percent (25%) or more of the principal of which matures on the same date or within a twelve-month period (with sinking fund payments deemed to be payments of matured principal), that portion of such Series of Second Lien Qualified Obligations which matures on such date or within such twelve-month period; provided, however, that to constitute Second Lien Balloon Indebtedness the amount of indebtedness maturing on a single date or over a twelve-month period must equal or exceed 150% of the amount of such Series of Second Lien Qualified Obligations which matures during any preceding twelve-month period. For purposes of this definition, the principal amount maturing on any date shall be reduced by the amount of such indebtedness which is required, by the documents governing such indebtedness, to be amortized by prepayment or redemption prior to its stated maturity date.
“Second Lien Other Bank Obligations” shall mean any and all obligations of the City under a Second Lien Reimbursement Agreement to pay all fees and expenses specified therein and all indemnification and other obligations to the bank or other financial institution party thereto arising under or in relation to the Second Lien Reimbursement Agreement, including in each instance all interest accrued thereon. Second Lien Other Bank Obligation do not include Second Lien Reimbursement Obligations.
“Second Lien Paired Obligations” shall mean any Series (or portion thereof) of Second Lien Qualified Obligations or related conduit obligations designated as such in the document authorizing the issuance or incurrence thereof, which are simultaneously issued or incurred, (i) the principal of which is of equal amount maturing and to be redeemed (or canceled after acquisition thereof) on the same dates and in the same amounts and (ii) the interest rates of which, taken together, result in an irrevocably fixed interest rate obligation of the City for the terms thereof. “Second Lien Qualified Obligation Service” shall mean, with respect to any period, the amount of principal and interest or other payments accrued or to accrue in such period with respect to all Outstanding Second Lien Qualified Obligations (excluding the amount of proceeds of Second Lien Qualified Obligations held in any fund or account for the payment of Second Lien Qualified Obligation Service accrued or to accrue during such period), calculated in accordance with the provisions contained in the definition of Maximum Annual Second Lien Qualified Obligation Service herein. For purposes of accrual under this definition, all payments with respect to Second Lien Qualified Obligations due in a calendar month are to be deemed due on the first day of such calendar month. “Second Lien Qualified Obligations” shall mean, without duplication, (i) the 2024-A Purchase Payments, (ii) additional obligations payable from Net Surplus Revenues on a parity with such payments which at the time of initial delivery thereof satisfy the requirements set forth in this Installment Purchase Agreement for the issuance of additional Second Lien Qualified Obligations, and (iii) unpaid Second Lien Reimbursement Obligations, excluding Second Lien Paired Obligations. 139198877.5 11
“Second Lien Qualified Obligations Account” shall mean the account by that name within the Water System Surplus Revenue Fund maintained pursuant to Section 3.7 hereof. “Second Lien Qualified Swap Agreement” shall mean a contract or agreement, payable from Net Surplus Revenues on a parity with (but with respect to termination payments, on a basis subordinate to) Second Lien Qualified Obligations, intended to place payment obligations on the interest rate, currency, cash flow or other basis desired by the City, including, without limitation, any interest rate swap agreement, currency swap agreement, forward payment conversion agreement or futures contract, any contract providing for payments based on levels of, or changes in, interest rates, currency exchange rates, stock or other indices, any contract to exchange cash flows or a series of payments, or any contract, including, without limitation, an interest rate floor or cap, or an option, put or call, to hedge payment, currency, rate, spread or similar exposure, between the City and a counterparty; provided that not less than 30 days prior to the City’s execution of such contract or agreement, each Rating Agency which maintains a rating with respect to any Second Lien Qualified Obligations receives notice in writing of the City’s pending execution thereof; and provided further that at the time of origination each Rating Agency which maintains a rating with respect to any Second Lien Qualified Obligations confirms in writing to the City that the City’s execution and delivery of such contract will not result in a downgrading, withdrawal or suspension of such rating.
“Second Lien Reimbursement Agreement” shall mean an agreement with a bank or other financial institution relating to an irrevocable letter of credit, guarantee or other enhancement device providing liquidity or irrevocable credit or security for the payment of Second Lien Qualified Obligations or the purchase price thereof upon tender for purchase. The 2024-A Reimbursement Agreement is a Second Lien Reimbursement Agreement.
“Second Lien Reimbursement Obligations” shall mean any and all obligations of the City under a Second Lien Reimbursement Agreement to reimburse a Credit Facility Provider for any drawings under the related Credit Facility or to repay a Liquidity Facility Provider for any Liquidity Provider Bonds and the related liquidity advance, including in each instance all interest accrued thereon.
The 2024-A Reimbursement Obligations are Second Lien Reimbursement Obligations. Second Lien Reimbursement Obligations do not include Second Lien Other Bank Obligations. “Second Lien Tender Indebtedness” means any Second Lien Qualified Obligations or portions thereof, a feature of which is an option, on the part of the holders thereof, or an obligation, under the terms of such Second Lien Qualified Obligations, to tender all or a portion of such Second Lien Qualified Obligations to the City, a conduit issuer for the City, a paying agent or other fiduciary or agent for payment or purchase and requiring that such obligation or that such rights to payments or portions of payments thereof be purchased if properly presented.
“Senior Bond Resolution” shall mean any resolution authorizing the issuance of Senior Bonds.
“Senior Bonds” shall mean the outstanding revenue bonds, revenue notes or other similar evidences of indebtedness hereafter issued for the acquisition, construction or financing of additions to, and improvements of the Water System, payable out of and secured by Net Revenues. “Series” shall mean Qualified Obligations or Second Lien Qualified Obligations issued at the same time or sharing some other common term or characteristic and designated as a separate Series. “S&P” shall mean S&P Global Ratings, its successors and assigns, or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a statistical rating organization, any 139198877.5 12
other nationally recognized securities rating agency designated by the City, with the approval of the Authority, by notice to the Trustee.
“Statement,” “Request,” “Requisition” or “Order” of the Authority or the City shall mean, respectively, a written statement, request, requisition or order signed in the name of the Authority or the City by an Authorized Authority Representative or Authorized City Representative, as the case may be. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section
1.2 hereof, each such instrument shall include the statements provided for in Section 1.2 hereof. “Surplus Revenues” shall mean moneys in the Water System Surplus Revenue Fund. “Tax Certificate” shall mean the Tax Certificate as to Arbitrage and the Provisions of Sections 103 and 141-150 of the Internal Revenue Code of 1986, relating to the 2024-A Bonds, executed and delivered by the Authority and the City on the Delivery Date, as amended or supplemented from time to time.
“Tender Indebtedness” means any Qualified Obligations or portions thereof, a feature of which is an option, on the part of the holders thereof, or an obligation, under the terms of such Qualified Obligations, to tender all or a portion of such Qualified Obligations to the City, a conduit issuer for the City, a paying agent or other fiduciary or agent for payment or purchase and requiring that such obligation or that such rights to payments or portions of payments thereof be purchased if properly presented.
“Treasurer” shall mean the Treasurer of the City.
“Trustee” shall mean U.S. Bank Trust Company, National Association, a national banking association organized and existing under the laws of the United States, having a principal corporate trust office in Los Angeles, California, or its successor, as trustee under the Indenture, and any Co-Trustee appointed under the Indenture.
“Unassigned Rights” shall mean the rights of the Authority under Sections 4.3, 7.2, 7.3,
7.4, 9.3, 9.7, 9.8, 9.9 and 9.10 of this Installment Purchase Agreement. “Variable Rate Indebtedness” shall mean any portion of indebtedness or other payment obligations, the interest rate on which is not established at the time of incurrence and has not at some subsequent date been established at a single numerical rate for the entire term thereof, excluding Paired Obligations.
“Water System” shall mean the entire water system of the City and all additions to, and improvements and extensions of, said system later constructed or acquired. “Water System Surplus Revenue Fund” shall mean the Water System Surplus Revenue Fund of the City held by the Treasurer and created by Ordinance No. 5376 of the City Council. “WRAN Account” shall mean the account described in Section 3.5 hereof, heretofore created under Ordinance No. 5376 of the City Council.
“1984 Bond Resolution” shall mean Resolution No. 84R-396 of the City Council, adopted October 9, 1984, authorizing the issuance of the 1984 Bonds. 139198877.5 13
“1984 Bonds” shall mean the $6,650,000 water revenue bonds designated “Water Revenue Bonds, 1984 Series.”
“1986 Bond Resolution” shall mean Resolution No. 86R-91 of the City Council, adopted March 4, 1986, authorizing the issuance of the 1986 Bonds. “1986 Bonds” shall mean the $7,160,000 refunding water revenue bonds designated “Water Revenue Bonds, 1986 Series.”
“1988 Bond Resolution” shall mean Resolution No. 88R-11 of the City Council, adopted January 12, 1988, authorizing the issuance of the 1988 Bonds. “1988 Bonds” shall mean the $5,000,000 water revenue bonds designated “Water Revenue Bonds, 1988 Series.”
“1990 Bond Resolution” shall mean Resolution No. 90R-293 of the City Council adopted August 14, 1990, authorizing the issuance of the 1990 Bonds. “1990 Bonds” shall mean the $9,000,000 water revenue bonds designated “Water Revenue Bonds, 1990 Series.”
“1993 Bond Resolution” shall mean Resolution No. 93R-71 of the City Council adopted May 4, 1993, authorizing the issuance of the 1993 Bonds. “1993 Bonds” shall mean the $13,545,000 water revenue bonds designated “Water Revenue Bonds, 1993 Series.”
“2004 Bond Resolution” shall mean Resolution No. 2004-59 of the City Council adopted April 20, 2004, authorizing the issuance of the 2004 Bonds. “2004 Bonds” shall mean the $12,105,000 water revenue bonds designated “Anaheim Public Financing Authority Water Revenue Refunding Bonds, 2004 Series (Water System Refunding).” “2015-A Bonds” shall mean the $95,885,000 aggregate principal amount of California Municipal Finance Authority Revenue Bonds, Series 2015-A (City of Anaheim Water System Project). “2015-A Purchase Payments” shall mean the payments so designated and required to be made by the City pursuant to the Installment Purchase Agreement relating to the 2015-A Bonds. “2020 Bonds” shall mean, collectively, the 2020-A Bonds and the 2020-B Bonds. “2020-A Bonds” shall mean the Anaheim Housing and Public Improvements Authority Revenue Bonds, Series 2020-A (Water System Project), authorized by the 2020 Resolution. “2020-B Bonds” shall mean the Anaheim Housing and Public Improvements Authority Revenue Bonds, Series 2020-B (Water System Refunding) (Taxable), authorized by the 2020 Resolution. “2020 Installment Purchase Agreement” shall mean the Installment Purchase Agreement, dated as of March 1, 2020, between the City and the Authority, as amended and supplemented from time to time, relating to the 2020 Bonds. 139198877.5 14
“2020 Purchase Payments” shall mean the payments required to be made by the City pursuant to 2020 Installment Purchase Agreement.
“2020 Resolution” shall mean Resolution No. 2020-001 of the City Council, adopted on January 14, 2020, approving the Authority’s issuance of the 2020 Bonds. “2022 Bonds” shall mean, collectively, the 2022-A Bonds, the 2022-B Bonds and the 2022-C Bonds.
“2022 Installment Purchase Agreement” shall mean the Installment Purchase Agreement, dated as of April 1, 2022, between the City and the Authority, as amended and supplemented from time to time, relating to the 2022 Bonds.
“2022 Purchase Payments” shall mean the payments so designated and required to be made by the City pursuant to the 2022 Installment Purchase Agreement. “2022-A Bonds” shall mean the $44,955,000 aggregate principal amount of Anaheim Housing and Public Improvements Authority Revenue Bonds, Series 2022-A (Water System Project). “2022-B Bonds” shall mean the $79,260,000 aggregate principal amount of Anaheim Housing and Public Improvements Authority Revenue Refunding Bonds, Series 2022-B (Water System Refunding) (Taxable).
“2022-C Bonds” shall mean the $31,600,000 aggregate principal amount of Anaheim Housing and Public Improvements Authority Revenue Refunding Bonds, Series 2022-C (Water System Refunding).
“2024-A Reimbursement Agreement” shall mean the Reimbursement Agreement, dated as of [____] 1, 2024, by and among the City, the Authority and Bank of America, N.A., , as the amended, modified, supplemented or restated in accordance with the terms thereof. “2024-A Reimbursement Obligations” shall mean any and all obligations of the City under the 2024-A Reimbursement Agreement to reimburse Bank of America, N.A. for any credit or liquidity drawings under the letter of credit issued under the 2024-A Reimbursement Agreement, including all interest accrued thereon.
“2024-A Bonds” shall mean the $__________ aggregate principal amount of Anaheim Housing and Public Improvements Authority Revenue Bonds, Series 2024-A (Water System Project) (Variable Rate Demand Bonds) (Second Lien Qualified Obligations). “2024-A Purchase Payments” shall mean the payments so designated and required to be made by the City pursuant to Section 4.2 hereof.
SECTION 1.2 Content of Statements and Opinions. Every statement or opinion provided for in this Installment Purchase Agreement with respect to compliance with any provision hereof shall include (1) a statement that the person making or giving such statement or opinion has read such provision and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion is based, (3) a statement (a) that, in the opinion of such person, he or she has made or caused to be made such examination or investigation as is necessary to enable him or her to express an informed opinion with respect to the subject matter or (b) that he or she has made or caused to be made his or her examination or investigation with respect to 139198877.5 15
the subject matter in accordance with specified professional standards; and (4) a statement as to whether, in the opinion of such person, such provision has been complied with.
Any such statement or opinion made or given by an officer of the Authority or the City may be based, insofar as it relates to legal, accounting or City matters, upon a statement or opinion of or representation by counsel or an Accountant, unless such officer knows, or in the exercise of reasonable care should have known, that the statement, opinion or representation with respect to the matters upon which such statement or statements may be based, as aforesaid, is erroneous. Any such statement or opinion made or given by counsel or an Accountant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Authority or the City, as the case may be) upon a statement or opinion of or representation by an officer of the Authority or the City, unless such counsel or Accountant knows, or in the exercise of reasonable care should have known, that the statement or opinion or representation with respect to the matters upon which such person’s statement or opinion or representation may be based, as aforesaid, is erroneous. The same officer of the Authority or the City, or the same counsel or Accountant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Installment Purchase Agreement, but different officers, counsel or Accountants may certify to different matters, respectively.
SECTION 1.3 Exhibits. The following Exhibits are attached to and by this reference made a part of this Installment Purchase Agreement:
Exhibit A: Description of Water System Components.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations and Warranties of the City. The City makes the following representations and warranties to the Authority as of the date of the execution and delivery of this Installment Purchase Agreement and as of the Delivery Date (such representations and warranties to remain operative and in full force and effect regardless of delivery of the 2024-A Bonds or any investigations by or on behalf of the Authority or the results thereof):
(i) The City is a municipal corporation organized and existing under a charter duly and regularly adopted pursuant to the provisions of the Constitution of the State, has full legal right, power and authority to enter into this Installment Purchase Agreement and to carry out and consummate all transactions contemplated by this Installment Purchase Agreement and by proper action has duly authorized the execution and delivery of this Installment Purchase Agreement.
(ii) The officers of the City executing this Installment Purchase Agreement are duly and properly in office and fully authorized to execute the same. (iii) This Installment Purchase Agreement has been duly authorized, executed and delivered by the City, and constitutes a legal, valid and binding agreement of the City enforceable against the City in accordance with its terms. (iv) The execution and delivery of this Installment Purchase Agreement, the consummation of the transactions herein contemplated and the fulfillment of or compliance with the terms and conditions hereof, will not in any material respect conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under, the 139198877.5 16
Charter or any indenture, mortgage, deed of trust, agreement, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any trust agreement, mortgage, deed of trust, loan agreement, lease, contract or other agreement to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Installment Purchase Agreement, or the financial condition, assets, properties or operations of the City.
(v) No consent or approval of any trustee or holder of any indebtedness of the City or any other Person, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Installment Purchase Agreement, or the consummation of any transaction herein contemplated, or the fulfillment of or compliance with the terms and conditions hereof, except as have been obtained or made and as are in full force and effect and except such other permits as the City contemplates obtaining in due course. (vi) There are no easements, encumbrances or interests with respect to the Components which prohibit or materially impair the execution, delivery and performance of this Installment Purchase Agreement or the Indenture or the acquisition or use of the Components. (vii) The City has found and determined that this Installment Purchase Agreement, the Indenture and the transactions contemplated hereby and thereby will provide significant public benefits to the citizens of the City, in accordance with Section 6586 of the Bond Law.
(viii) There is no action, suit, proceeding, inquiry or investigation, before or by any court or federal, state, municipal or other governmental authority, pending, or to the knowledge of the City, after reasonable investigation, threatened, against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material adverse effect upon the consummation of the transactions contemplated by or the validity of this Installment Purchase Agreement, or upon the financial condition, assets, properties or operations of the Water System. (ix) No written information, exhibit or report furnished to the Authority by the City in connection with the negotiation of this Installment Purchase Agreement, and no official statement or other offering document in connection with the issuance of the 2024-A Bonds, if any, as of its date or as of the date hereof, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (x) All financial statements and information heretofore delivered to the Authority by City, including without limitation, information relating to the financial condition of the Water System, fairly and accurately present the financial position thereof and have been prepared (except where specifically noted therein) in accordance with generally accepted accounting principles consistently applied. Since the date of such statements, there has been no material adverse change in the financial condition or results of operations of the Water System. 139198877.5 17
(xi) The City has good and marketable title to the Components free and clear from all material encumbrances.
(xii) The City is not in default (and no event has occurred and is continuing which with the giving of notice or the passage of time or both could constitute a default) (1) under this Installment Purchase Agreement, or (2) with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default could reasonably be expected to have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Installment Purchase Agreement or the Indenture, or the financial condition, assets, properties or operations of the Water System.
(xiii) The City acknowledges, represents and warrants that it understands the nature and structure of the transactions relating to the refinancing of the Components; that it is familiar with the provisions of all of the documents and instruments relating to such financing to which the City is a party or of which it is a beneficiary, including the Indenture; that it understands the risks inherent in such transactions; and that it has not relied on the Authority for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Installment Purchase Agreement and the Indenture or otherwise relied on the Authority for any advice.
SECTION 2.2 Representations and Warranties of the Authority. (a) The Authority makes the following representations and warranties to the City. (i) The Authority is a joint exercise of powers agency duly organized and existing under the laws of the State and is duly authorized to issue the 2024-A Bonds and to perform its obligations under this Installment Purchase Agreement. (ii) All requirements have been met and procedures have occurred in order to authorize the execution and delivery of this Installment Purchase Agreement. The Authority has taken all necessary action and has complied with all provisions of the law required to make this Installment Purchase Agreement a valid and binding limited obligation of the Authority, except to the extent limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally, by the application of equitable principles regardless of whether enforcement is sought in a proceeding at law or in equity, or by public policy. (iii) The 2024-A Bonds have been duly authorized, executed and delivered by the Authority. Nothing in this Agreement shall be construed as requiring the Authority to provide any financing other than the proceeds of the 2024-A Bonds or to provide sufficient moneys for all of the cost of accomplishing the purposes of the 2024-A Bonds. (iv) To the best knowledge of the Authority, there is no action, suit, proceeding, inquiry or investigation by or before any court, governmental agency or public board or body pending or threatened against the Authority that (i) affects or seeks to prohibit, restrain or enjoin the issuance, execution or delivery of the 2024-A Bonds, or the execution and delivery of the Indenture or this Installment Purchase Agreement, (ii) affects or questions the validity or enforceability of the 2024-A Bonds, the Indenture or this Installment Purchase Agreement, or (iii) questions the tax-exempt status of interest on the 2024-A Bonds. 139198877.5 18
ARTICLE III
PURCHASE AND SALE OF THE WATER SYSTEM; FUNDS AND ACCOUNTS; FLOW OF REVENUES; SECURITY
SECTION 3.1 Purchase and Sale of the Water System. (a) The City hereby sells, transfers and conveys to the Authority all of the City’s right, title and interest in and to the Components of the Water System. The Authority agrees to simultaneously sell to the City, and the City agrees to purchase from the Authority, the Components of the Water System at the Purchase Price (payable in installments) specified in Section 4.2 hereof and otherwise in the manner and in accordance with the provisions of this Installment Purchase Agreement and the Bond Law.
The Authority hereby transfers and assigns to the City all of the Authority’s right, title and interest to all or any portion of the Components of the Water System. (b) From time to time, at the request of the City, the Authority shall promptly deliver to the City any instruments necessary to confirm the rights of the City to the Components of the Water System.
SECTION 3.2 Purchase Payment Fund. The Authority shall create, or cause to be created, under the Indenture the 2024-A Purchase Payment Fund, into which it shall deposit or cause to be deposited on the Delivery Date the amount, if any, specified in Section 3.02 of the Indenture with respect to the 2024-A Purchase Payment Fund. The Authority shall cause the Trustee to make deposits to and payments from the 2024-A Purchase Payment Fund in accordance with the terms of this Installment Purchase Agreement and the Indenture.
SECTION 3.3 Qualified Obligations Account. The Treasurer shall continue to maintain the Qualified Obligations Account, heretofore created under Ordinance No. 5376 of the City Council, so long as any Qualified Obligations remain Outstanding. The City shall make deposits to and payments from the Qualified Obligations Account in accordance with the terms of this Installment Purchase Agreement.
SECTION 3.4 Second Lien Qualified Obligations Account. The City shall cause the Treasurer to establish and maintain a new account within the Water System Surplus Revenue Fund, which shall be designated as the “Second Lien Qualified Obligations Account.” The City shall make deposits to and payments from the Second Lien Qualified Obligations Account in accordance with the terms of this Installment Purchase Agreement.
SECTION 3.5 WRAN Account. The Treasurer shall continue to maintain the WRAN Account, heretofore created under Ordinance No. 5376 of the City Council, so long as any of the Qualified Obligations or Second Lien Qualified Obligations remain Outstanding.
SECTION 3.6 Remaining Surplus Account. The Treasurer shall continue to maintain the Remaining Surplus Account, heretofore created under Ordinance No. 5376 of the City Council, so long as any of the Qualified Obligations or Second Lien Qualified Obligations remain Outstanding.
SECTION 3.7 Water System Surplus Revenue Fund. The Treasurer shall continue to maintain the Water System Surplus Revenue Fund, so long as any of the 2024-A Bonds remain Outstanding.
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SECTION 3.8 Funds and Accounts. (a) The Treasurer shall continue to maintain or cause to be maintained the following funds and accounts, heretofore created pursuant to Section 1210 of the City Charter, as provided for in the 1984 Bond Resolution, the 1986 Bond Resolution, the 1988 Bond Resolution, the 1990 Bond Resolution, the 1992 Bond Resolution, the 1993 Bond Resolution and the 2004 Bond Resolution so long as any Senior Bonds, Qualified Obligations or Second Lien Qualified Obligations remain Outstanding.
(1) Water Enterprise Fund (the “Water Enterprise Fund”), and the following accounts therein:
(A) Water System Revenue Account (the “Revenue Account”); and (B) Water System Maintenance and Operating Account (the “M&O Account”); and
(C) Water System Renewal and Replacement Account (the “R&R Account”); and
(D) Water System Extension and Improvement Account (the “E&I Account”); and
(E) Water System Revenue Bond Reserve Fund (the “Reserve Fund”); (b) The Treasurer shall continue to maintain or cause to be maintained the following accounts, heretofore created under the 1984 Bond Resolution, so long as any Senior Bonds or Qualified Obligations remain outstanding:
(1) Water System Revenue Bond and Interest Account (the “Bond Service Account”); and
(2) Water System Revenue Bond Sinking Account (the “Sinking Account”).
SECTION 3.9 Flow of Revenues. The Treasurer shall deposit the Revenues of the Water System as received in the Revenue Account. On or before the twentieth day of each calendar month, there shall be withdrawn from the Revenue Account the entire amount on deposit in the Revenue Account and there shall be allocated and deposited such amount in the indicated priority to the following accounts and funds:
(i) First, so long as any of the Senior Bonds, Qualified Obligations or Second Lien Qualified Obligations are Outstanding, to the M&O Account, an amount sufficient for the payment of Operating Expenses of the Water System as said expenses become due and payable; and
(ii) Second, so long as any of the Senior Bonds are outstanding, to the Bond Service Account, (i) one-sixth of the interest becoming due and payable (less any interest which has already been provided for) on the outstanding Senior Bonds within the next six month period; and (ii) one-twelfth of the principal amount which will mature and be payable on the outstanding Senior Bonds within the next twelve month period; and to the Bond Sinking Account, the amount required with respect to any term Senior Bond to provide for mandatory sinking fund installments; and
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(iii) Third, so long as any of the Senior Bonds are Outstanding, to the Reserve Fund, the amount required (when added to amounts on deposit therein) to provide a balance equal to Maximum Annual Debt Service; and
(iv) Fourth, so long as any of the Senior Bonds, Qualified Obligations or Second Lien Qualified Obligations are Outstanding, to the R&R Account, an amount equal to two percent (2%) of the Revenues received in the preceding calendar month until a balance is established, or reestablished, therein equal to one percent (1%) of the depreciated book value of the land, general plant and equipment which constitute the net utility plant of the Water System or such other balance as the consulting engineer may recommend; and (v) Fifth, so long as any of the Senior Bonds are Outstanding, to the E&I Account such amounts as shall be deemed desirable by the City Council or appropriate City staff by appointment of the City Council.
(vi) Sixth, to the Water System Surplus Revenue Fund, all moneys in the Revenue Account remaining after the above transfers have been made and all covenants required by the resolutions relating to the Senior Bonds have been performed, which moneys shall constitute Surplus Revenues.
SECTION 3.10 Flow of Surplus Revenues. So long as any Qualified Obligations or Second Lien Qualified Obligations are Outstanding, promptly after any deposit is made to the Water System Surplus Revenue Fund in any month, the entire amount of Surplus Revenues in the Water System Surplus Revenue Fund shall be transferred in the indicated priorities to the following accounts:
First, there shall be transferred to the Qualified Obligations Account the amount of Qualified Obligation Service with respect to such calendar month (to the extent not already transferred to such Account in such month), or the entire amount of surplus Revenues then available for transfer to the Qualified Obligations Account, whichever is less.
Second, there shall be transferred to the Second Lien Qualified Obligations Account the amount required to be transferred thereto in such month for the payment of the principal of and interest on the Second Lien Qualified Obligations and Second Lien Other Bank Obligations to the extent required by the instruments pursuant to which such Second Lien Qualified Obligations are issued (to the extent not already transferred to such Account in such month), or the entire amount of Net Surplus Revenues then available for transfer to the Second Lien Qualified Obligations Account, whichever is less.
Third, there shall be transferred to the WRAN Account the amount required to be transferred thereto in such month for the payment of the principal of and interest on the Notes to the extent required by the ordinances and resolutions pursuant to which such Notes are issued (to the extent not already transferred to such Account in such month), or the entire amount of Net Surplus Revenues then available for transfer to the WRAN Account, whichever is less.
Fourth, all remaining Net Surplus Revenues shall be transferred to the Remaining Surplus Account. Moneys in the Remaining Surplus Account at any time may be used for any lawful purpose of the City, provided, that, moneys remaining on deposit in the Remaining Surplus Account at any time shall be transferred as needed, in the following order of priority:
(i) to the Qualified Obligations Account, the amount necessary (or all available moneys in the Remaining Surplus Account if less than the amount necessary) to make up any deficiency therein;
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(ii) to the Second Lien Qualified Obligations Account, the amount necessary (or all available moneys in the Remaining Surplus Account if less than the amount necessary) to make up any deficiency therein; and
(iii) to the WRAN Account, the amount necessary (or all available moneys in the Remaining Surplus Account if less than the amount necessary) to make up any deficiency therein.
SECTION 3.11 Security for the 2024-A Purchase Payments and Second Lien Other Bank Obligations. The City is obligated to make 2024-A Purchase Payments and Second Lien Other Bank Obligations solely from the Net Surplus Revenues and any moneys deposited in the Second Lien Qualified Obligations Account. The 2024-A Purchase Payments shall be payable as Second Lien Qualified Obligation Service hereunder. Notwithstanding the foregoing, the 2024-A Purchase Payments shall be made from the proceeds of the sale of the 2024-A Bonds deposited in the 2024-A Purchase Payment Fund, in the amounts and at the times set forth in the Indenture, and other moneys transferred to or deposited in the 2024-A Purchase Payment Fund pursuant to the Indenture. The Net Surplus Revenues are hereby pledged to secure the 2024-A Purchase Payments and the Second Lien Other Bank Obligations. The 2024-A Purchase Payments and all other payments with respect to Second Lien Qualified Obligations and Second Lien Other Bank Obligations shall be equally secured by the Net Surplus Revenues in the Second Lien Qualified Obligations Account without priority for number or date of incurrence of such Second Lien Qualified Obligations and Second Lien Other Bank Obligations. The Net Surplus Revenues in the Second Lien Qualified Obligations Account shall be held in trust by the Treasurer of the City for the benefit of the holders of the 2024-A Bonds and any other Second Lien Qualified Obligations and the bank or financial institution to which Second Lien Other Bank Obligations are payable.
ARTICLE IV
EFFECTIVE DATE OF THIS AGREEMENT; DURATION;
PAYMENT PROVISIONS; LIABILITY
SECTION 4.1 Effective Date of this Installment Purchase Agreement; Duration.
This Agreement shall become effective upon its execution and delivery, and shall expire on such date as shall be determined in accordance with Section 4.7 hereof.
SECTION 4.2 Purchase Price; 2024-A Purchase Payments. (a) The City agrees to pay the Purchase Price for Components of the Water System by making purchase payments, referred to herein as “2024-A Purchase Payments,” which the City agrees to pay to the Trustee, as assignee of the Authority, for deposit in the 2024-A Purchase Payment Fund held by the Trustee, in such amounts and at such times which, in the aggregate, shall be sufficient for the payment in full of all obligations to the Owners of the 2024-A Bonds from time to time Outstanding under the Indenture, including (i) the total Interest Components due and payable with respect to the 2024-A Purchase Payments (provided that the Interest Component shall be the product of the interest rate then borne by the 2024-A Bonds, times the total outstanding Principal Component) and (ii) the total Principal Components of such 2024-A Purchase Payments; less the amount of other funds available for such payment as provided in the Indenture. (b) On or before the third Business Day preceding each Purchase Payment Date, the City shall pay from Net Surplus Revenues on deposit in the Second Lien Qualified Obligations Account to the Trustee for deposit in the 2024-A Purchase Payment Fund the amount of the 2024-A Purchase Payments due on the following Purchase Payment Date.
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(c) Each 2024-A Purchase Payment hereunder shall be paid by the City in immediately available funds on the due date in lawful money of the United States of America to the Trustee at its Corporate Trust Office, and held, invested, disbursed and applied as provided in the Indenture. In the event the City fails to make any of the payments required by paragraph (a) of this Section 4.2, the installment so in default shall continue as an obligation of the City until the amount in default shall have been fully paid with interest thereon at a rate of interest equal to the highest rate of interest applicable to any then unpaid 2024-A Bond. In the event that seven (7) days prior to an Purchase Payment Date there are insufficient moneys in the Second Lien Qualified Obligations Account to pay the amounts required by paragraph (a) of this Section 4.2 on the due date thereof, the City will notify the Trustee not later than five (5) days prior to the Purchase Payment Date thereof that the amount available in the Second Lien Qualified Obligations Account is less than the amount required on the following Purchase Payment Date.
SECTION 4.3 Additional Purchase Payments. (a) In addition to 2024-A Purchase Payments, the City shall also pay to the Authority, the Trustee or to the United States Treasury Department, as the case may be, “Additional Purchase Payments,” as follows:
(i) All taxes and assessments of any type or character charged to the Authority or to the Trustee affecting the amount available to the Authority or the Trustee from payments to be received hereunder or in any way arising due to the transactions contemplated hereby (including taxes, service charges, and assessments and other governmental charges lawfully assessed or levied by any public agency or governmental authority of whatsoever character having power to levy taxes or assessments) but excluding franchise taxes based upon the capital and/or income of the Trustee and taxes based upon or measured by the net income of the Trustee; provided, however, that the City shall have the right to protest in good faith any such taxes or assessments and to require the Authority or the Trustee, at the City’s expense, to protest and contest any such taxes or assessments levied upon them and the City shall have the right to withhold payment of any such taxes or assessments pending disposition of any such protest or contest unless such withholding, protest or contest could, in the reasonable opinion of the Authority, adversely affect the rights or interests of the Authority or the Trustee; (ii) Any taxes which may be imposed on the sale, resale, use, possession or ownership of the Water System pursuant to this Installment Purchase Agreement; (iii) All reasonable fees, charges and expenses of the Trustee, as and when the same become due and payable;
(iv) The reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Authority or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under this Installment Purchase Agreement or the Indenture;
(v) The reasonable costs and expenses of the Authority as provided herein in connection with this Installment Purchase Agreement, the 2024-A Bonds or the Indenture, including any and all expenses incurred in connection with the issuance, sale and delivery of any such 2024-A Bonds or in connection with any litigation which may at any time be instituted involving this Installment Purchase Agreement, the 2024-A Bonds or the Indenture or any of the other documents contemplated thereby; and
(vi) Any amount required to be paid to the United States Treasury Department pursuant to Section 5.4 hereof.
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(b) Such Additional Purchase Payments to the Authority or the Trustee shall be billed to the City by the Authority or the Trustee, as the case may be, from time to time, together with a statement certifying that the amount billed has been incurred or paid by the Authority or the Trustee, for one or more of the above items. After such a demand, amounts so billed shall be paid by the City within 30 days after receipt of the bill by the City.
SECTION 4.4 Source for City Payments. (a) The City shall be obligated to make 2024-A Purchase Payments and payments on Second Lien Other Bank Obligations hereunder solely from the Net Surplus Revenues in the Second Lien Qualified Obligations Account. (b) Notwithstanding Section 4.4(a) hereof, 2024-A Purchase Payments shall not be made from Net Surplus Revenues in the Second Lien Qualified Obligations Account to the extent of other moneys transferred to or deposited in the 2024-A Purchase Payment Fund pursuant to Section 4.03 of the Indenture.
(c) The City shall be obligated to make Additional Purchase Payments hereunder solely from the Net Surplus Revenues in the Remaining Surplus Account.
Subject to the foregoing provisions of this Section 4.4, nothing herein shall preclude the City from making 2024-A Purchase Payments, Additional Purchase Payments and payments on Second Lien Other Bank Obligations from other lawfully available moneys of the City.
SECTION 4.5 Obligations of the City Unconditional; Net Contract; Obligations of Authority Unconditional. (a) Subject to Section 4.4 hereof, the obligations of the City to make the 2024-A Purchase Payments and Additional Purchase Payments required hereunder and to perform and observe the other agreements on its part contained herein shall be absolute and unconditional, and shall not be abated, rebated, set-off, reduced, abrogated, terminated, waived, diminished, postponed or otherwise modified in any manner or to any extent whatsoever, while any 2024-A Purchase Payments or Additional Purchase Payments remain unpaid, regardless of any contingency, act of God, event or cause whatsoever, including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, the taking by eminent domain or destruction of or damage to the Water System, commercial frustration of purpose, any change in the laws of the United States of America or of the State or any political subdivision of either or in the rules or regulations of any governmental authority, or any failure of the Authority or the Trustee to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Installment Purchase Agreement or the Indenture.
This Installment Purchase Agreement shall be deemed and construed to be a “net contract,” and the City shall pay absolutely net the 2024-A Purchase Payments, Additional Purchase Payments and all other payments required hereunder, from the sources of revenue described herein, regardless of any rights of set-off, recoupment, abatement or counterclaim that the City might otherwise have against the Authority or the Trustee or any other party or parties.
The Authority and the City understand, agree and intend that the obligation of the City to make 2024-A Purchase Payments and to pay Additional Purchase Payments hereunder shall not in any way be construed to be a debt of the City, the Authority, or the State of California, or any political subdivision thereof, in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the City, the Authority, the State of California, or any political subdivision thereof, nor shall anything contained herein constitute a pledge of general revenues, funds or moneys of the City or the Authority or an obligation of the City or the Authority for 139198877.5 24
which the City or the Authority is obligated to levy or pledge any form of taxation or for which the City or the Authority has levied or pledged any form of taxation. (b) The City covenants to take such action as may be necessary to include and maintain the 2024-A Purchase Payments and Additional Purchase Payments due hereunder in its budget for the appropriate Fiscal Year or pursuant to separate resolution of the City Council and further shall make the necessary appropriations for all such 2024-A Purchase Payments and Additional Purchase Payments required herein. The covenants on the part of the City contained in this subsection (b) shall be deemed to be and shall be construed to be ministerial duties and it shall be the ministerial duty of each and every public official of the City to take such action and do such things as are required by law in the performance of such official duty of such officials to enable the City to carry out and perform such covenants.
(c) The obligation of the Authority to perform and observe the agreements on its part contained herein shall be absolute and unconditional and, until such time as all of the 2024-A Purchase Payments and Additional Purchase Payments shall have been fully paid (or provision for the payment of Outstanding 2024-A Bonds shall have been made in accordance with Section 10.03 of the Indenture), the Authority (i) will perform and observe all of its agreements contained in this Installment Purchase Agreement and (ii) will not terminate this Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Water System, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the City to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Installment Purchase Agreement.
Nothing contained in this Section 4.5(c) shall be construed to release the City from the performance of any of the agreements on its part herein contained, and in the event the City should fail to perform any such agreement, the Authority may institute such action against the City as the Authority may deem necessary to compel performance or recover its damages for nonperformance so long as such action shall not violate the agreements of the Authority contained in the first paragraph of this Section 4.5.
SECTION 4.6 Prepayment of 2024-A Purchase Payments. 2024-A Purchase Payments are subject to prepayment as provided in this Section 4.6. All prepayments of 2024-A Purchase Payments shall be made in funds immediately available on the Prepayment Date. (a) Optional Prepayment at Par. Prior to October 1, 20__, the City shall not have the option to prepay remaining Principal Components of 2024-A Purchase Payments. From and after October 1, 20__, the City shall have the option to prepay remaining Principal Components of 2024-A Purchase Payments in whole or in part (in an amount equal to Authorized Denominations), in any order of maturity, to the extent the Authority has the ability to effect an optional redemption of the 2024-A Bonds.
Such prepayment shall be effected by depositing with the Trustee the Prepayment Price with respect thereto on or before the Prepayment Date. The City shall give the Trustee written notice of its intention to exercise its option to prepay not more than 90 and not less than 45 days in advance of the date of such prepayment.
(b) Effect of Prepayment. In the event that the City prepays the 2024-A Purchase Payments in whole, the amount paid shall be applied to the redemption in full of the principal and interest with respect to the 2024-A Bonds in accordance with the Indenture. In the event that the City prepays the 2024-A Purchase Payments in part, such prepayment shall be applied to the prepayment of the 2024-A Purchase Payments as follows: (i) the City shall designate which Principal Components are being prepaid, 139198877.5 25
and to what extent, and the Principal Component of each remaining 2024-A Purchase Payment shall be reduced accordingly, in each case in the amount equal to Authorized Denominations in excess thereof corresponding to the principal amount of 2024-A Bonds redeemed pursuant to Section 2.08 of the Indenture; and (ii) the Interest Component of each remaining 2024-A Purchase Payment shall be reduced by the aggregate corresponding amount of interest which would otherwise be payable on the 2024-A Bonds thereby redeemed pursuant to the Indenture.
SECTION 4.7 Termination of Installment Purchase Agreement. Except as otherwise specifically provided herein, this Installment Purchase Agreement shall terminate upon the earlier of the following events:
(i) the payment or prepayment by the City of all remaining 2024-A Purchase Payments as provided in Section 4.6 hereof and all other amounts to be paid by the City hereunder (including any Additional Purchase Payments and payments on Second Lien Other Bank Obligations which are then due or will become due) and the payment or defeasance of all 2024-A Bonds; or
(ii) the payment, or deemed payment, of all 2024-A Bonds in accordance with Section 10.03 of the Indenture and the payment of all amounts due and payable to the Trustee.
ARTICLE V
PARTICULAR COVENANTS
SECTION 5.1 Limitation on Encumbrances; Against Sale. The City covenants and agrees that it will not create, assume or suffer to exist any mortgage, deed of trust, pledge, security interest, encumbrance, lien or charge of any kind (including the charge upon property purchased under conditional sales or other title retention agreements) upon the Water System which impairs the ability of the City to comply with its covenant set forth in Section 5.3 hereof. The City covenants that the Water System shall not be sold, leased or disposed of as a whole or substantially as a whole if such sale, lease or disposal would impair the ability of the City to comply with its covenant set forth in Section 5.3 hereof.
Notwithstanding any other provisions contained herein, the City may: (i) sell or dispose of customer connections (and related distribution lines) located outside the City limits; (ii) take all action necessary to comply with its existing agreements with Yorba Linda Water District, and any subsequent implemental agreements; and (iii) enter into, and take all actions necessary to fulfill its commitments under, contractual agreements concerning water service to all or part of any areas which are annexed to the City after the sale and delivery of the 2024-A Bonds, with parties organized to provide water service to all or part of any such area. Any proceeds from the sale or disposition of any part of the Water System or the granting of any service rights or privileges pursuant to the preceding sentence shall be used to defray the cost of renewals, replacements, additions and extensions to the Water System or shall be held for the redemption of callable bonds prior to maturity or open market purchase of 2024-A Bonds or Senior Bonds then outstanding. Any proceeds from the sale or disposition of any part of the Water System shall be placed in the Revenue Account.
SECTION 5.2 Accounting Records. The City covenants and agrees at all times to keep, or cause to be kept, proper books of record and account prepared in accordance with generally accepted accounting principles, in which complete and accurate entries shall be made of all transactions of or in relation to the business, properties and operations of the Water System. Such books of record and 139198877.5 26
account shall be available for inspection by the Trustee at reasonable hours and under reasonable circumstances.
SECTION 5.3 Rates and Charges. The City shall prescribe, revise and collect such charges for the services and facilities of the Water System so that, in each Fiscal Year, the Net Surplus Revenues shall at least equal the sum of:
(i) 1.10 times the amount of Second Lien Qualified Obligation Service with respect to such Fiscal Year;
(ii) 1.00 times the principal of and interest on the Notes due and payable and to be paid from Net Surplus Revenues in such Fiscal Year; and (iii) 1.00 times all other payments required to be made from Net Surplus Revenues in such Fiscal Year.
SECTION 5.4 Tax Covenants.
(a) Special Definitions. When used in this Section, the following terms have the following meanings:
“Code” means the Internal Revenue Code of 1986.
“Computation Date” has the meaning set forth in section 1.148-1(b) of the Tax Regulations.
“Gross Proceeds” means any proceeds as defined in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds), and any replacement proceeds as defined in section 1.148-1(c) of the Tax Regulations, of the 2024-A Bonds. “Investment” means (i) any security (within the meaning of section 165(g)(2)(A) or (B) of the Code), (ii) any obligation (notwithstanding that such obligation may be a tax-exempt bond), (iii) any annuity contract, (iv) when allocated to a bond other than a private activity bond, any residential rental property for family units that is not located within the jurisdiction of the issuer and that is not acquired to implement a court ordered or approved housing desegregation plan, or (v) any investment- type property (as defined in section 1.148-1(e) of the Treasury Regulations). “Nonpurpose Investment” means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the 2024-A Bonds are invested and that is not acquired to carry out the governmental purposes of the 2024-A Bonds.
“Proceeds,” with respect to an issue of governmental obligations, has the meaning set forth in section 1.148-1(b) of the Treasury Regulations (referring to sales, investment and transferred proceeds, but not replacement proceeds, of that issue). “Rebate Amount” has the meaning set forth in section 1.148-1(b) of the Tax Regulations. “Treasury Regulations” means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code. 139198877.5 27
“Yield” of (i) any Investment has the meaning set forth in section 1.148-5 of the Tax Regulations; and (ii) the 2024-A Bonds has the meaning set forth in section 1.148-4 of the Tax Regulations.
(b) Not to Cause Interest to Become Taxable. The Authority and the City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, would cause the interest on any of the 2024- A Bonds to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Authority or the City receives a written opinion of Bond Counsel to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any 2024-A Bond, the Authority or the City, as the case may be, shall comply with each of the specific covenants in this Section.
(c) No Private Use or Private Payments. Except as would not cause any 2024-A Bond to become a “private activity bond” within the meaning of section 141 of the Code and the Tax Regulations and rulings thereunder, the Authority and the City shall at all times prior to the payment and cancellation of the last 2024-A Bond to be paid and canceled:
(i) use their best efforts to ensure that the City exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the 2024-A Bonds, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (ii) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the 2024-A Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the jurisdiction of the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes; and
(iii) where the 2024-A Bonds are refunded, the City will apply the foregoing restrictions taking cognizance of the provisions of sections 1.141-3(g) and 1.141-4(c)(2)(ii) of the Treasury Regulations and of any subsequently adopted rules or regulations applicable to such a refunding.
(d) No Private Loan. Except as would not cause any 2024-A Bond to become a “private activity bond” within the meaning of section 141 of the Code and the Treasury Regulations and rulings thereunder, the Authority and the City shall not use Gross Proceeds of any 2024-A Bond to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be “loaned” to a person or entity if:
(a) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction that creates a debt for federal income tax purposes; (b) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (c) indirect benefits of such Gross Proceeds, or burdens and benefits of ownership of any 139198877.5 28
property acquired, constructed or improved with such Gross Proceeds, are otherwise transferred in a transaction that is the economic equivalent of a loan.
(e) Not to Invest at Higher Yield. Except as would not cause any 2024-A Bond to become an “arbitrage bond” within the meaning of section 148 of the Code and the Treasury Regulations and rulings thereunder, the Authority and the City shall not at any time prior to the final maturity of the 2024-A Bonds directly or indirectly invest Gross Proceeds in any Investment, if as a result of such investment the Yield of any Investment or class of Investments acquired with Gross Proceeds, whether then held or previously disposed of, would materially exceed the Yield of such 2024-A Bond within the meaning of said section 148 and related Treasury Regulations and rulings. (f) Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Treasury Regulations and rulings thereunder, the Authority and the City shall not take or omit to take any action that would cause any 2024-A Bond to be “federally guaranteed” within the meaning of section 149(b) of the Code and the Treasury Regulations and rulings thereunder. Without limitation of the foregoing, the Authority and the City will not permit any portion of the debt service on the 2024-A Bonds to be guaranteed (in whole or in part) by the United States, or more than 5% of the proceeds of the 2024-A Bonds to be loaned to any person under which the obligation of that person to repay such loan is guaranteed (in whole or in part) by the United States, or more than 5% of the proceeds of the 2024-A Bonds to be invested (directly or indirectly) in federally insured deposits or accounts. For this purpose, a guarantee or insurance by an agency or instrumentality of the United States will be treated as though made or provided by the United States.
(g) Information Report. The Authority shall timely file any information required by section 149(e) of the Code with respect to the 2024-A Bonds with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. (h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Treasury Regulations and rulings thereunder in order to assure that no 2024-A Bond is treated as an arbitrage bond:
(i) The Authority and the City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last 2024-A Bond is discharged. However, to the extent permitted by law, the Authority or the City may commingle Gross Proceeds of the 2024-A Bonds with its other money, provided that the Authority or the City, as the case may be, separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith.
(ii) Not less frequently than each Computation Date, the Authority and the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Treasury Regulations and rulings thereunder. The Trustee may rely conclusively upon the Authority’s and the City’s determinations, calculations and certifications with regard to the calculation of rebate. The Trustee shall have no responsibility to independently make any calculation or determination or to review the Authority’s and the City’s calculations hereunder.
The Authority and the City shall maintain a copy of the calculation with its official transcript of proceedings relating to the issuance of the 2024-A Bonds until six years after the final Computation Date.
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(iii) In order to assure the excludability of the interest on the 2024-A Bonds from the gross income of the owners thereof for federal income tax purposes, the Authority and the City, jointly and severally but without duplication, shall pay to the United States the amount that when added to the future value of previous rebate payments made for the 2024-A Bonds equals (A) in the case of a Final Computation Date as defined in section 1.148-3(e)(2) of the Treasury Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (B) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, such rebate payments shall be made by the Authority or the City at the times and in the amounts as are or may be required by section 148(f) of the Code and the Treasury Regulations and rulings thereunder, and shall be accompanied by Form 8038-T prepared by the Authority or the City or such other forms and information as is or may be required by section 148(f) of the Code and the Treasury Regulations and rulings thereunder for execution and filing by the Authority or the City.
(iv) The Authority and the City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (i) and (ii) above, and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under section 1.148-3(h) or other provision of the Treasury Regulations.
(i) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Treasury Regulations and rulings thereunder, the Authority shall not, at any time prior to the final maturity of the 2024-A Bonds, enter into any transaction that reduces the amount required to be paid to the United States pursuant to paragraph (h) of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm’s length and had the Yield on the 2024-A Bonds not been relevant to either party. (j) 2024-A Bonds Not Hedge Bonds.
(i) The Authority and the City each represents that none of the 2024-A Bonds are or will become “hedge bonds” within the meaning of section 149(g) of the Code. (ii) Without limitation of paragraph (i) above, (A) on the date of issuance of the 2024-A Bonds, the City reasonably expected that at least 85% of the spendable proceeds of the 2024-A Bonds would be expended within the three-year period commencing on such date of issuance, and (B) no more than 50% of the proceeds of the 2024-A Bonds will be invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more.
(k) Use of Proceeds; Weighted Average Maturity. Each of the Authority and the City hereby represents and covenants that it will apply the proceeds of the 2024-A Bonds in a manner so that the weighted average maturity of the 2024-A Bonds does not exceed 120% of the average reasonably expected remaining economic life of the facilities financed or refinanced therewith (all determined in accordance with the provisions of section 147(b) of the Code). (l) Elections. The Authority hereby directs and authorizes any Authorized Authority Representative and the City hereby directs and authorizes any Authorized City Representative to make elections permitted or required pursuant to the provisions of the Code or the Tax Regulations, as such Authorized Authority Representative or Authorized City Representative (after consultation with Bond 139198877.5 30
Counsel) deems necessary or appropriate in connection with the 2024-A Bonds, in the Tax Certificate relating to the 2024-A Bonds or similar or other appropriate certificate, form or document.
SECTION 5.5 Limits on Bonds and Obligations Secured by Net Surplus Revenues. (a) After the Delivery Date, no Bond or Obligation shall be issued, incurred or delivered unless, at the initial delivery thereof, the Net Surplus Revenues calculated on sound accounting principles, as shown by the books of the City for any consecutive twelve-month period selected by the City during the 18 months prior to the adoption of the resolution approving the delivery of such Bonds or Obligations (as certified by the City), plus, at the option of the City, the allowance for earnings hereinafter set forth in subparagraph (c) of this Section 5.5, shall have amounted to at least 1.10 times the average annual Second Lien Qualified Obligation Service on all Second Lien Qualified Obligations to be outstanding immediately subsequent to the initial delivery of such Bond or Obligation.
For purposes of this Section 5.5, the conversion of any Bonds or Obligations to a different interest rate mode shall be deemed a delivery of Bonds or Obligations. (b) Subparagraph (a) of this Section 5.5 notwithstanding, Bonds or Obligations may be issued to refund outstanding Second Lien Qualified Obligations if, after giving effect to the application of the proceeds thereof, either (i) total Second Lien Qualified Obligation Service will not be increased in any Fiscal Year in which Second Lien Qualified Obligations (outstanding on the date of issuance or incurrence of such refunding Bonds or Obligations, but excluding such refunding Bonds or Obligations) not being refunded are outstanding, or (ii) the Net Surplus Revenues, calculated on sound accounting principles, as shown by the books of the City for each of the last two completed Fiscal Years prior to the adoption of the resolution approving the delivery of such Bonds or Obligations (as shown by an audit certificate or opinion of an independent certified public accountant or firm of certified public accountants employed by the City), plus, at the option of the City, the allowance for earnings hereinafter set forth in subparagraph (c) of this Section 5.5, shall have amounted to at least 1.10 times total Second Lien Qualified Obligation Service in the Fiscal Year next succeeding the Fiscal Year in which such Bond or Obligation is initially delivered.
(c) The following may be added to the Net Surplus Revenues of the Water System for the purpose of applying the restrictions contained in this Section 5.5:
An allowance for earnings arising from any increase in the charges made for service from the Water System which has become effective prior to the initial delivery of such Bond or Obligation but which, during all or any part of said twelve-month period, was not in effect, in an amount equal to the amount by which the Surplus Revenues would have been increased if such increase in charges had been in effect during the whole of said twelve-month period, as certified by the City.
(d) The City further covenants that the Net Surplus Revenues shall not be mortgaged, encumbered, sold, leased, pledged, any charge placed thereon, or disposed of or used except as authorized by the terms of this Installment Purchase Agreement. The City further covenants that it will not incur obligations payable from Surplus Revenues except in accordance with the Installment Purchase Agreements that are Qualified Obligations.
SECTION 5.6 Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Agreement.
Notwithstanding any other provision of this Agreement, failure of the City to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, any Owner or Beneficial 139198877.5 31
Owner or any Participating Underwriter (as defined in the Continuing Disclosure Agreement) may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Section. For purposes of this Section, “Beneficial Owner” means any person which has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any 2024-A Bonds (including persons holding 2024-A Bonds through nominees, depositories or other intermediaries).
ARTICLE VI
MAINTENANCE AND INSURANCE
SECTION 6.1 Maintenance and Operation of the Water System. The City covenants and agrees that it will operate and maintain the Water System in accordance with all governmental laws, ordinances, approvals, rules, regulations and requirements including, without limitation, such zoning, sanitary, pollution and safety ordinances and laws and such rules and regulations thereunder as may be binding upon the City. The City further covenants and agrees that it will maintain and operate the Water System and all pumps, machinery, apparatus, fixtures, fittings and equipment of any kind in or that shall be placed in any building or structure now or hereafter at any time constituting part of the Water System in good repair, working order and condition, and that it will from time to time make or cause to be made all necessary and proper replacements, repairs, renewals and improvements thereto.
SECTION 6.2 Insurance. The City covenants that it shall at all times maintain with responsible insurers all such insurance on the Water System as is customarily maintained by similar utilities systems with respect to works and properties of like character against accident to, loss of or damage to such works or properties. If any useful part of the Water System shall be damaged or destroyed such part shall be restored to use. The money collected from insurance against accident, loss or damage shall be used for repairing or rebuilding the lost, damaged or destroyed works and properties, and to the extent not so applied, shall be applied to the retirement of outstanding Senior Bonds, Qualified Obligations and Second Lien Qualified Obligations and for such purposes paid into the appropriate funds or accounts.
The City shall also maintain with responsible insurers worker’s compensation insurance and insurance against public liability and property damage to the extent reasonably necessary.
Notwithstanding the foregoing, the City may provide any insurance required by this covenant through a self-insurance program or as part of any blanket coverages maintained by the City.
ARTICLE VII
NON-LIABILITY OF AUTHORITY; EXPENSES, INDEMNIFICATION
SECTION 7.1 Non-Liability of Authority. Other than set forth herein or in the Indenture, the Authority shall not be obligated to pay 2024-A Purchase Payments. Neither the faith and credit nor the taxing power of the State or any political subdivision thereof is pledged to the payment of the principal of, premium, if any, or interest on the 2024-A Bonds.
The City hereby agrees that if the payments to be made hereunder shall ever prove insufficient to pay all principal of, premium, if any, and interest on the 2024-A Bonds as the same shall become due (whether by maturity, redemption or otherwise), then upon notice from the Trustee, the City shall, subject to Section 4.4 hereof and to the extent permitted by law, pay such amounts as are required 139198877.5 32
from time to time to prevent any deficiency or default in the payment of such principal, premium or interest, including, but not limited to, any deficiency caused by acts, omissions, nonfeasance or malfeasance on the part of the Trustee, the City, the Authority or any third party.
The City, the Trustee and/or the Owners shall have no right to compel the Authority to pay Principal Components or Interest Components of 2024-A Purchase Payments.
SECTION 7.2 Expenses. The City covenants and agrees to pay and to indemnify, defend and hold harmless the Authority and the Trustee against all costs and charges, including reasonable fees of attorneys, accountants, consultants and other experts, incurred in good faith or arising out of or in connection with this Installment Purchase Agreement, the 2024-A Bonds or the Indenture.
SECTION 7.3 Indemnification.
(a) To the fullest extent permitted by law, the City agrees to indemnify, hold harmless and defend the Authority, the Trustee, and each of its respective past, present and future officers, members, directors, officials, employees, attorneys and agents (collectively, the “Indemnified Parties”), against any and all losses, damages, claims, actions, liabilities, costs and expenses of any conceivable nature, kind or character (including, without limitation, reasonable attorneys’ fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) to which the Indemnified Parties, or any of them, may become subject under or any statutory law (including federal or state securities laws) or at common law or otherwise, arising out of or based upon or in any way relating to:
(i) the 2024-A Bonds, the Indenture, the Installment Purchase Agreement or the Tax Certificate or the execution or amendment hereof or thereof or in connection with transactions contemplated hereby or thereby, including the issuance, sale or resale of the 2024-A Bonds;
(ii) any act or omission of the City or any of its agents, contractors, servants, employees, tenants or licensees in connection with the Water System, the operation of the Water System, or the condition, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or construction of, the Water System or any part thereof;
(iii) any lien or charge upon payments by the City to the Authority and the Trustee hereunder, or any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges imposed on the Authority or the Trustee in respect of any portion of the Water System;
(iv) any violation of any Environmental Regulations with respect to, or the release of any Hazardous Substances from, the Water System or any part thereof; (v) the defeasance and/or redemption, in whole or in part, of the 2024-A Bonds;
(vi) any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in any offering statement or disclosure or continuing disclosure document for the 2024-A Bonds or any of the documents relating to the 2024-A Bonds, or any omission or alleged omission from any offering statement or disclosure or continuing disclosure document for the 2024-A Bonds of any material fact 139198877.5 33
necessary to be stated therein in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; (vii) any declaration of taxability of interest on the 2024-A Bonds, or allegations that interest on the 2024-A Bonds is taxable or any regulatory audit or inquiry regarding whether interest on the 2024-A Bonds is taxable; or (viii) the Trustee’s acceptance or administration of the trust of the Indenture, or the exercise or performance of any of its powers or duties thereunder or under any of the documents relating to the 2024-A Bonds to which it is a party; (ix) except (a) in the case of the foregoing indemnification of the Trustee or any of its respective officers, members, directors, officials, employees, attorneys and agents, to the extent such damages are caused by the negligence or willful misconduct of such Indemnified Party; or (b) in the case of the foregoing indemnification of the Authority or any of its officers, members, directors, officials, employees, attorneys and agents, to the extent such damages are caused by the willful misconduct of such Indemnified Party. In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought hereunder, the City, upon written notice from the Indemnified Party, shall assume the investigation and defense thereof, including the employment of counsel selected by the Indemnified Party, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the City shall pay the reasonable fees and expenses of such separate counsel; provided, however, that such Indemnified Party may only employ separate counsel at the expense of the City if in the judgment of such Indemnified Party a conflict of interest exists by reason of common representation or if all parties commonly represented do not agree as to the action (or inaction) of counsel. (b) The rights of any persons to indemnity hereunder and rights to payment of fees and reimbursement of expenses pursuant to this Installment Purchase Agreement shall survive the final payment or defeasance of the 2024-A Bonds and in the case of the Trustee any resignation or removal.
The provisions of this Section shall survive the termination of this Installment Purchase Agreement.
SECTION 7.4 Survive Termination. Notwithstanding Section 4.7 hereof, the provisions of this Article and Section 4.3(a)(iii) shall survive payment in full of the 2024-A Purchase Payments and the 2024-A Bonds, the termination of the Indenture, the termination of this Installment Purchase Agreement and the resignation or removal of the Trustee.
ARTICLE VIII
DEFAULTS AND REMEDIES
SECTION 8.1 Events of Default. Each of the following events shall be an “Event of Default”:
(a) If the City shall fail to pay in full any 2024-A Purchase Payment pursuant to Section 4.2 hereof, Additional Purchase Payment or other payment required to be paid hereunder at the time and in the manner specified herein;
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(b) If the City shall fail to observe or perform any covenant, condition, agreement or provision in this Installment Purchase Agreement on its part to be observed or performed, other than as referred to in subsection (a) of this Section 8.1, or shall breach any warranty by the City herein contained, for a period of sixty (60) days after written notice, specifying such failure or breach and requesting that it be remedied, has been given to the City by the Authority or the Trustee; except that, if in the reasonable opinion of the City such failure or breach can be remedied but not within such sixty (60) day period and if the City has taken all action reasonably possible to remedy such failure or breach within such sixty (60) day period, such failure or breach shall not become an Event of Default for so long as the City shall diligently proceed to remedy it in accordance with and subject to any directions or limitations of time established by the Authority or the Trustee, as the case may be; (c) If the City files a petition in voluntary bankruptcy, for the composition of its affairs or for its corporate reorganization under any state or federal bankruptcy or insolvency law, or makes an assignment for the benefit of creditors, or admits in writing to its insolvency or inability to pay debts as they mature, or consents in writing to the appointment of a trustee or receiver for itself or for the whole or any substantial part of the Water System;
(d) If a court of competent jurisdiction shall enter an order, judgment or decree declaring the City an insolvent, or adjudging it bankrupt, or appointing a trustee or receiver of the City or of the whole or any substantial part of the Water System, or approving a petition filed against the City seeking reorganization of the City under any applicable law or statute of the United States of America or any state thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of the entry thereof; or
(e) 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 City, and such custody or control shall not be terminated within sixty (60) days from the date of assumption of such custody or control.
SECTION 8.2 Remedies on Default. If an Event of Default specified in Section 8.1 hereof shall occur, then, and in each and every case during the continuance of such Event of Default:
(i) The Trustee may take whatever action, at law or in equity, as may appear necessary or desirable to collect the 2024-A Purchase Payments, Additional Purchase Payments and any other payments then due and thereafter to become due under this Installment Purchase Agreement or to enforce the performance and observance of any obligation, covenant, agreement or provision contained in this Installment Purchase Agreement; and (ii) The Trustee may take whatever other legal action may appear necessary or desirable to enforce its rights and the rights of the Owners of the 2024-A Bonds.
SECTION 8.3 Remedies Not Exclusive; No Waiver of Rights. No remedy herein conferred upon or reserved to the Authority or the Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy, to the extent permitted by law, shall be cumulative and shall be in addition to every other remedy given under this Installment Purchase Agreement or now or hereafter existing at law or in equity or otherwise. In order to entitle the Authority or the Trustee to exercise any remedy, to the extent permitted by law, reserved to it or contained in this Installment Purchase Agreement, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Such rights and remedies as are given to the Authority hereunder shall also extend to the Trustee, and the Trustee may exercise any rights under this Installment Purchase Agreement, and the Trustee and the owners of the 2024-A Bonds issued under the Indenture shall be deemed third party beneficiaries of all covenants and conditions herein contained. 139198877.5 35
No delay in exercising or omitting 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 such right and power may be exercised from time to time and as often as may be deemed expedient.
Notwithstanding any other provision of this Installment Purchase Agreement, the Trustee is not empowered to sell the Water System or any portion thereon and use the proceeds of such sale to make 2024-A Purchase Payments.
SECTION 8.4 Expenses on Default. In the event the City should default under any of the provisions of this Installment Purchase Agreement and the Trustee should employ attorneys or incur other expenses for the collection of the payments due hereunder or the enforcement of performance or observance of any obligation on the part of the defaulting party herein contained, the City agrees that it will on demand therefor pay to the Trustee the reasonable fee of such attorneys and such other expenses so incurred by the Trustee.
SECTION 8.5 Notice of Default. The City agrees that, as soon as is practicable, and in any event within ten (10) days, the City will furnish the Trustee notice of any event which is an Event of Default pursuant to Section 8.1 hereof which has occurred and is continuing on the date of such notice, which notice shall set forth the nature of such event and the action which the City proposes to take with respect thereto.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Further Assurances. The City agrees that it will execute and deliver any and all such further agreements, instruments, financing statements or other assurances as may be reasonably necessary or requested by the Authority or the Trustee to carry out the intention or to facilitate the performance of this Installment Purchase Agreement, including, without limitation, to perfect and continue the security interests herein intended to be created.
SECTION 9.2 Notices. All notices or communications herein required or permitted to be given shall be in writing and, if to the City, mailed or delivered to it as follows: City Clerk, City of Anaheim, 200 South Anaheim Boulevard, Anaheim, California 92805 and concurrently therewith, City of Anaheim, Public Utilities Department, 201 South Anaheim Boulevard, Anaheim, California 92805, Attention: Public Utilities General Manager; and, if to the Authority, mailed or delivered to it as follows:
Anaheim Housing and Public Improvements Authority, 200 South Anaheim Boulevard, Anaheim, California 92805; and if to the Trustee, mailed or delivered to it as provided in the Indenture. A duplicate copy of each notice or communication given hereunder by either the Authority or the City to the other shall also be given to the Trustee. The Authority, the City and the Trustee may, by notice given hereunder, designate any further or different address to which subsequent notices, certificates and other communications shall be sent.
SECTION 9.3 Governing Law. This Agreement shall be construed in accordance with and governed by the Constitution and laws of the State of California.
SECTION 9.4 Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the Authority, the City and their respective successors and assigns, subject, however, to the limitations contained herein.
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SECTION 9.5 Severability of Invalid Provisions. If any one or more of the provisions contained in this Installment Purchase Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Installment Purchase Agreement and such invalidity, illegality or unenforceability shall not affect any other provision of this Installment Purchase Agreement, and this Installment Purchase Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority and the City each hereby declares that it would have entered into this Installment Purchase Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that any one or more sections, paragraphs, sentences, clauses or phrases of this Installment Purchase Agreement may be held illegal, invalid or unenforceable.
SECTION 9.6 Article and Section Headings and References. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Installment Purchase Agreement. All references herein to “Articles,” “Sections” and other subsections are to the corresponding Articles, Sections or subsections of this Installment Purchase Agreement; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this Installment Purchase Agreement as a whole and not to any particular Article, Section or subsection hereof; and words of the masculine gender shall mean and include words of the feminine and neuter genders.
SECTION 9.7 Amendments. This Agreement may not be effectively amended, changed, modified, altered or terminated except by the written agreement of the City and the Authority and the concurring written consent of the Trustee, given in accordance with the provisions of the Indenture; provided, however, that the City may amend the description of the Components in Exhibit A hereto in any manner consistent with the Tax Certificate without the agreement or consent of the Authority or the Trustee.
SECTION 9.8 Disclaimer of Warranties. The Authority makes no warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by the City of the Water System or any portion thereof, or any other representation or warranty with respect to the Water System, or any portion thereof.
In no event shall the Authority or assigns be liable for incidental, indirect, special or consequential damages in connection with this Installment Purchase Agreement or the existence, furnishing or functioning of the Water System, or the City’s or the Authority’s or any other person’s use of the Water System, except such damages as may arise by reason of the Authority’s breach of this Installment Purchase Agreement.
SECTION 9.9 Claims; Warranties, etc. The Authority irrevocably appoints the City as its agent and attorney-in-fact, so long as the City shall not be in default hereunder, to assert from time to time whatever claims and rights, including warranties with respect to any portion of the Water System, which the Authority may have against the manufacturer, supplier or contractor of such portion of the Water System. As between the Authority and the City, the City’s sole remedy for the breach of any warranty, indemnification or representation shall be against the manufacturer, supplier or contractor of any portion of the Water System, and not against the Authority, nor shall such matter have any effect whatsoever on the rights of the Authority with respect to this Installment Purchase Agreement, including the rights to receive full and timely payments hereunder. The City expressly acknowledges that neither the Authority nor the Trustee makes, or has made, any representation or warranty whatsoever as to the existence or availability of such warranties of the manufacturer, supplier or contractor with respect to any item of the Water System.
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SECTION 9.10 Waiver of Personal Liability. No director, officer, agent or employee of the Authority or member, director, officer, agent or employee of the City shall be individually or personally liable for the payment of 2024-A Purchase Payments or any other sum hereunder or be subject to any personal liability or accountability by reason of the execution and delivery of this Installment Purchase Agreement; but nothing herein contained shall relieve any such director, member, officer, agent or employee from the performance of any official duty provided by law or by this Installment Purchase Agreement.
SECTION 9.11 Execution of Counterparts. This Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be original and all of which shall together constitute but one and the same instrument.
SECTION 9.12 Assignment.
(a) Pursuant to Section 4.01 of the Indenture, the Authority has assigned its right, title and interest in and to this Installment Purchase Agreement (other than its Unassigned Rights) to the Trustee, for the benefit of the owners from time to time of the 2024-A Bonds. The City hereby consents to such assignment.
(b) The City shall not assign its interests in this Installment Purchase Agreement without the prior written consent of the Authority and the Trustee.
SECTION 9.13 Indenture. The City acknowledges having read the Indenture, approves the Indenture and agrees to perform all duties imposed on it by the Indenture. The City further agrees that 2024-A Bond proceeds shall be applied as set forth in the Indenture. Insofar as any section of the Indenture imposes duties and responsibilities on the City it is specifically incorporated herein by reference.
[Signatures following on next page.]
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IN WITNESS WHEREOF, the Authority and the City have caused this Installment Purchase Agreement to be executed in their respective names by their duly authorized representatives, all as of the date first above written.
CITY OF ANAHEIM
By ______________________________________
Public Utilities Assistant General Manager—
Finance and Energy Resources
ANAHEIM HOUSING AND PUBLIC
IMPROVEMENTS AUTHORITY
By ______________________________________
Treasurer and Auditor
[City of Anaheim Water System Project Series 2024-A]
139198877.5 A-1
EXHIBIT A
DESCRIPTION OF WATER SYSTEM COMPONENTS
At the Delivery Date, the Water System Components consist of the components listed below:
[TO COME]