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Section 2.3 Equality of Bonds and Parity Bonds; Pledge of Net Taxes. Pursuant to the Act and this Indenture, the Bonds and any Parity Bonds shall be equally payable from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account and any Subaccounts of the Reserve Account not designated herein for the benefit of such Bonds or Parity Bonds), without priority for number, date of the Bonds or Parity Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any Parity Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account and any Subaccounts of the Reserve Account not designated herein for the benefit of such Bonds or Parity Bonds), which are hereby pledged and set aside for the payment of the Bonds and any Parity Bonds. Amounts in the Special Tax Fund (other than the Administrative Expenses Account therein and any Subaccounts of the Reserve Account not designated herein for the benefit of such Bonds or Parity Bonds) shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and any Parity Bonds and so long as any of the Bonds and any Parity Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture. Notwithstanding any provision contained in this Indenture to the contrary, Net Taxes deposited in the Rebate Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds or any Parity Bonds, and none of the Rebate Fund, the Surplus Fund, the Improvement Fund, the Costs of Issuance Fund, or the Administrative Expenses Account of the Special Tax Fund shall be construed as a trust fund held for the benefit of the Owners.
Section 2.4 Description of Bonds; Interest Rates. The Bonds and any Parity Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof.
The Bonds and any Parity Bonds of each issue shall be numbered as desired by the Trustee.
The Series 2022A Bonds shall be designated “COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, SPECIAL TAX BONDS, SERIES 2022A (IMPROVEMENT AREA NO. 2).” The Series 2022A Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on September 1, 2022 and each Interest Payment Date thereafter:
Maturity Date
(September 1) Principal Amount Interest Rate
$ %
The Series 2022B Bonds shall be designated “COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE CITY OF UPLAND, COUNTY OF SAN
BERNARDINO, STATE OF CALIFORNIA, SPECIAL TAX BONDS, TAXABLE SERIES 2022B (IMPROVEMENT AREA NO. 2).” The Series 2022B Bonds shall be dated as of their
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Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on September 1, 2022 and each Interest Payment Date thereafter:
Maturity Date
(September 1) Principal Amount Interest Rate
$ %
Interest shall be payable on each Bond and Parity Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of that Bond or Parity Bond has been paid; provided, however, that if at the maturity date of any Bond or Parity Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds and Parity Bonds shall then cease to bear interest. Interest due on the Bonds and Parity Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months.
Section 2.5 Place and Form of Payment. The Bonds and Parity Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and Parity Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal Office of the Trustee, or at the designated office of any successor Trustee.
Interest on any Bond or Parity Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond or Parity Bond, unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond or Parity Bond, in which event interest shall be payable from the dated date of such Bond or Parity Bond, as applicable; provided, however, that if at the time of authentication of such Bond or Parity Bond, interest is in default, interest on that Bond or Parity Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that Bond or Parity Bond, interest on that Bond or Parity Bond shall be payable from its dated date. Interest on any Bond or Parity Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond or Parity Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed on the Interest Payment Date by first class mail, postage prepaid, to such Bondowner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the Bonds or of any issue of Parity Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account designated by such Owner.
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Section 2.6 Form of Bonds and Parity Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the forms attached hereto as Exhibit A and Exhibit B, which form is hereby approved and adopted as the form of such Bonds and of the certificate of authentication. Each issue of Parity Bonds and the certificate of authentication therefor shall be in the form provided in the Supplemental Indenture for such issue of Parity Bonds.
Until definitive Bonds or Parity Bonds, as applicable, shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds or Parity Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds or Parity Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds or Parity Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds or Parity Bonds. If the District issues temporary Bonds or Parity Bonds, it shall execute and furnish definitive Bonds or Parity Bonds, as applicable, without unnecessary delay and thereupon any temporary Bond or Parity Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond or Parity Bond of the same issue, maturity, interest rate and principal amount in any authorized denomination. All temporary Bonds or Parity Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued.
Section 2.7 Execution and Authentication. The Bonds and Parity Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Clerk of the City, or any duly appointed deputy City Clerk, in their capacity as officers of the District, and the seal of the District (or a facsimile thereof) may be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the City Clerk of the City Council. In case any one or more of the officers who shall have signed or sealed any of the Bonds or Parity Bonds shall cease to be such officer before the Bonds or Parity Bonds so signed and sealed have been authenticated and delivered by the Trustee (including new Bonds or Parity Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or Parity Bonds or to lost, stolen, destroyed or mutilated Bonds or Parity Bonds), such Bonds or Parity Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds or Parity Bonds had not ceased to hold such office.
Only the Bonds as shall bear thereon such certificate of authentication in the forms set forth in Exhibit A and Exhibit B attached hereto shall be entitled to any right or benefit under this Indenture, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee.
Section 2.8 Bond Register. The Trustee will keep or cause to be kept, at the Principal Office of the Trustee, sufficient books for the registration and transfer of the Bonds and any Parity Bonds which shall upon reasonable prior notice be open to inspection by the District during all regular business hours, and, subject to the limitations set forth in Section 2.9 below, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may
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prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as herein provided.
The District and the Trustee may treat the Owner of any Bond or Parity Bond whose name appears on the Bond Register as the absolute Owner of that Bond or Parity Bond for any and all purposes, and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner’s address so that the Bond Register may be revised accordingly.
Section 2.9 Registration of Exchange or Transfer. Subject to the limitations set forth in the following paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the Principal Office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Bondowner or his or her duly authorized attorney.
Bonds or Parity Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount of Bonds or Parity Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond or Parity Bond issued upon any exchange or transfer but, shall require the Bond owner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds or Parity Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of (i) Bonds or Parity Bonds for a period of fifteen (15) days next preceding any selection of the Bonds or Parity Bonds to be redeemed; or (ii) any Bonds or Parity Bonds chosen for redemption.
Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond or Parity Bond shall become mutilated, the District shall execute, and the Trustee shall authenticate and deliver, a new Bond or Parity Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond or Parity Bond so mutilated, but only upon surrender to the Trustee of the Bond or Parity Bond so mutilated. Every mutilated Bond or Parity Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond or Parity Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District shall execute and the Trustee shall authenticate and deliver, a new Bond or Parity Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond or Parity Bond so lost, destroyed or stolen. Any Bond or Parity Bond issued in lieu of any Bond or Parity Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds and Parity Bonds issued hereunder. The Trustee shall not treat both the original Bond or Parity Bond and any replacement Bond or Parity Bond as being Outstanding for the
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purpose of determining the principal amount of Bonds or Parity Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds or Parity Bonds Outstanding hereunder, but both the original and replacement Bond or Parity Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond or Parity Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds or Parity Bonds.
Section 2.11 Validity of Bonds and Parity Bonds. The validity of the authorization and issuance of the Bonds and any Parity Bonds shall not be affected in any way by any defect in any proceedings taken by the District for the financing of the Project, or by the invalidity, in whole or in part, of any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the financing of the Project or upon the performance by any Person of his obligation with respect to the Project, and the recital contained in the Bonds or any Parity Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance.
Section 2.12 Book-Entry System. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each of the maturities of the Bonds. Upon initial delivery, the ownership of each such Bond shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository.
Except as provided in Section 2.14 hereof, all of the Outstanding Bonds shall be registered in the registration books kept by the Trustee in the name of the Nominee. At the election of the District, any Parity Bonds may also be issued as book-entry bonds registered in the name of the Nominee as provided herein, in which case the references in Sections 2.12 through 2.15 to “Bonds” shall be applicable to such Parity Bonds.
With respect to Bonds registered in the registration books kept by the Trustee in the name of the Nominee, the District and the Trustee shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds.
Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds are redeemed in part, or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest due with respect to the Bonds.
The District and the Trustee may treat and consider the Person in whose name each Bond is registered in the registration books kept by the Trustee as the holder and absolute owner of such Bond for the purpose of payment of the principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest due on the Bonds only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the District’s obligations with respect to payment
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of the principal, premium, if any, and interest due on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Trustee, shall receive a Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant to this Indenture. Upon delivery by the Depository to the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Indenture shall refer to such new nominee of the Depository.
Section 2.13 Representation Letter. In order to qualify the Bonds and any Parity Bonds which the District elects to register in the name of the Nominee for the Depository’s book-entry system, an authorized representative of the District is hereby authorized to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way limit the provisions of Section 5.1 or in any other way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners, as shown on the registration books kept by the Trustee. The District agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Authorized Representatives of the District are hereby authorized to take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository’s book-entry program.
Section 2.14 Transfers Outside Book-Entry System. In the event (i) the Depository determines not to continue to act as securities depository for the Bonds, or (ii) the District determines that the Depository shall no longer so act, then the District will discontinue the book-entry system with the Depository. If the District fails to identify another qualified securities depository to replace the Depository then the Bonds so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 hereof.
Section 2.15 Payments to the Nominee. Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, premium, if any, and interest due with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository.
Section 2.16 Initial Depository and Nominee. The initial Depository under this Article shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York.
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ARTICLE III
CREATION OF FUNDS AND APPLICATION OF PROCEEDS
Section 3.1 Creation of Funds; Application of Proceeds. (a) There is hereby created and established and shall be maintained by the Trustee the following funds and accounts:
(1) The Community Facilities District No. 2015-1 (Sycamore Hills) IA No. 2 Special Tax Fund (the “Special Tax Fund”) (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account (in which there shall be established and created (A) a Series 2022A Reserve Subaccount for the benefit of the Series 2022A Bonds and (B) a Taxable Series 2022B Reserve Subaccount for the benefit of the Series 2022B Bonds), and an Administrative Expenses Account). (2) The Community Facilities District No. 2015-1 (Sycamore Hills) IA No. 2 Improvement Fund (the “Improvement Fund”) (in which there shall be established and created a Series 2022A Account and a Taxable Series 2022B Account). (3) The Community Facilities District No. 2015-1 (Sycamore Hills) IA No. 2 Costs of Issuance Fund (the “Costs of Issuance Fund”) (in which there shall be established and created a Series 2022A Account and a Taxable Series 2022B Account). (4) The Community Facilities District No. 2015-1 (Sycamore Hills) IA No. 2 Rebate Fund (the “Rebate Fund”).
(5) The Community Facilities District No. 2015-1 (Sycamore Hills) IA No. 2 Surplus Fund (the “Surplus Fund”).
The amounts on deposit in the foregoing funds, accounts, and subaccounts shall be held by the Trustee, and the Trustee shall invest and disburse the amounts in such funds, accounts, and subaccounts in accordance with the provisions of this Article III and shall deposit investment earnings thereon in accordance with the provisions of Section 3.11 hereof.
In connection with the issuance of any Parity Bonds, the Trustee, at the written direction of an Authorized Representative of the District, may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds. (b) A portion of the proceeds of the sale of the Series 2022A Bonds in the amount of $__________ (such amount being equal to the principal amount of the Series 2022A Bonds, [plus/less] net original issue [premium/discount] of $__________, less an Underwriter’s discount of $__________) shall be received by the Trustee on behalf of the District and deposited as follows:
(1) $__________ shall be deposited in the Series 2022A Account of the Improvement Fund;
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(2) $__________ shall be deposited in the Series 2022A Account of the Costs of Issuance Fund to pay a pro rata share of the Costs of Issuance of the Series 2022 Bonds; and
(3) $__________ shall be deposited in the Series 2022A Reserve Subaccount of the Reserve Account of the Special Tax Fund, which is equal to the initial Reserve Requirement for the Series 2022A Bonds.
The Trustee may, in its discretion, establish a temporary fund or account in its books and records to facilitate such deposits.
(c) A portion of the proceeds of the sale of the Series 2022B Bonds in the amount of $__________ (such amount being equal to the principal amount of the Series 2022B Bonds, [plus/less] net original issue [premium/discount] of $__________, less an Underwriter’s discount of $__________) shall be received by the Trustee on behalf of the District and deposited as follows:
(1) $__________ shall be deposited in the Taxable Series 2022B Account of the Improvement Fund;
(2) $__________ shall be deposited in the Taxable Series 2022B Account of the Costs of Issuance Fund to pay a pro rata share of the Costs of Issuance of the Series 2022 Bonds; and
(3) $__________ shall be deposited in the Taxable Series 2022B Reserve Subaccount of the Reserve Account of the Special Tax Fund, which is equal to the initial Reserve Requirement for the Series 2022B Bonds.
The Trustee may, in its discretion, establish a temporary fund or account in its books and records to facilitate such deposits.
Section 3.2 Deposits to and Disbursements from Special Tax Fund. (a) To the extent the District receives any Prepayments, the District shall deposit such Prepayments with the Trustee, together with a Certificate of an Authorized Representative designating such Special Taxes as Prepayments and specifying the respective amounts to be deposited in the various funds and accounts hereunder, and the Trustee shall make such deposits as specified in such certificate promptly after its receipt thereof. Except for any Prep ayments to be deposited pursuant to the foregoing, the Trustee shall, on or promptly after each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee shall transfer the Special Taxes on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections 3.3 through
3.8, in the following order of priority, to:
(1) the Administrative Expenses Account of the Special Tax Fund; (2) the Interest Account of the Special Tax Fund;
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(3) the Principal Account of the Special Tax Fund;
(4) the Redemption Account of the Special Tax Fund;
(5) the Reserve Account of the Special Tax Fund;
(6) the Rebate Fund; and
(7) the Surplus Fund.
Notwithstanding the foregoing and any other provision of this Indenture to the contrary, in the event of a shortfall of amounts on deposit in the Special Tax Fund (such shortfall being determined excluding amounts on deposit in, and prior to drawing upon, the Reserve Account) to make the transfers, pursuant to Sections 3.4 and 3.5 herein, to the Principal Account of the Special Tax Fund and to the Redemption Account of the Special Tax Fund necessary to pay in full both (x) the principal payment due on the Bonds and any Parity Bonds maturing on the applicable September 1 and (y) the Sinking Fund Payment due on any Outstanding Bonds and any Parity Bonds on such September 1, the Trustee shall transfer the available amount from the Special Tax Fund to the Principal Account and the Redemption Account on a pro rata basis (calculated with reference to the respective principal payment and Sinking Fund Payment coming due and payable on such September 1) at least three (3) Business Days prior to such September 1. (b) At maturity of all of the Bonds and any Parity Bonds and, after all principal and interest then due on the Bonds and any Parity Bonds then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose.
Section 3.3 Administrative Expenses Account of the Special Tax Fund. From time to time, the District may provide the Trustee with a Certificate of an Authorized Representative of the District in substantially the form provided as Exhibit C hereto, requesting the payment of Administrative Expenses as set forth therein. Upon its receipt of any such certificate, the Trustee shall transfer from the Special Tax Fund and deposit in the Administrative Expenses Account of the Special Tax Fund amounts necessary to make timely payment of any such Administrative Expenses as set forth in the Certificate of an Authorized Representative of the District; provided, however, that, except as set forth in the following sentence, the total amount transferred in a Bond Year shall not exceed the Administrative Expenses Priority Amount until such time as there has been deposited (a) to the Interest Account and the Principal Account an amount, together with any amounts already on deposit therein, that is sufficient to pay the interest and principal on all Bonds and any Parity Bonds due in such Bond Year, (b) to the Redemption Account an amount, together with any amounts already on deposit therein, that is sufficient to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedule in the Supplemental Indenture for such Parity Bonds, and (c) to the Subaccounts of the Reserve Account such amounts, together with any amounts already on deposit therein, that is sufficient to restore each Subaccount of the Reserve Account to the applicable Reserve Requirement. Notwithstanding the foregoing, amounts in excess of the Administrative Expenses Priority Amount may be transferred to the Administrative Expenses Account to the extent necessary to collect delinquent Special Taxes.
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Moneys in the Administrative Expenses Account of the Special Tax Fund may be invested in any Authorized Investments as directed in writing by an Authorized Representative of the District and shall be disbursed as directed in a Certificate of an Authorized Representative. The Trustee shall have no obligation to transfer any amount from the Special Tax Fund for deposit in the Administrative Expenses Account of the Special Tax Fund except upon its receipt of a Certificate of an Authorized Representative of the District pursuant to this section.
Section 3.4 Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon redemption, shall be paid by the Trustee from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds and any Parity Bonds will be made when due and after making the transfer required by Section 3.3, if any, at least three (3) Business Days prior to each March 1 and September 1, the Trustee shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds or any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund (exclusive of the Reserve Account) are inadequate to make the foregoing transfers, then any deficiency shall be made up by transfers from the applicable Subaccounts of the Reserve Account:
(a) To the Interest Account, an amount such that the balance in the Interest Account three (3) Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds and any Parity Bonds as the same become due.
(b) To the Principal Account, an amount such that the balance in the Principal Account three (3) Business Days prior to September 1 of each year, commencing September 1, 2022, shall equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity.
Section 3.5 Redemption Account of the Special Tax Fund. (a) With respect to each September 1 on which a Sinking Fund Payment is due and after the deposits have been made to the Administrative Expenses Account, the Interest Account, and the Principal Account of the Special Tax Fund as required by Sections 3.3 and 3.4 hereof, the Trustee shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account three (3) Business Days prior to each September 1 equal to the Sinking Fund Payment due on any Outstanding Bonds and any Parity Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the applicable Subaccounts of the Reserve Account, if funded, pursuant to Section 3.6 below. Moneys so deposited in the Redemption Account shall be used and applied
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by the Trustee to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof, and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedules in the Supplemental Indenture for such Parity Bonds. (b) After making the deposits to the Administrative Expenses Account, the Interest Account and the Principal Account of the Special Tax Fund pursuant to Sections 3.3 and 3.4 above and to the Redemption Account for Sinking Fund Payments then due pursuant to subparagraph (a) of this Section, and in accordance with the District’s election to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, or to call Parity Bonds for optional redemption as set forth in any Supplemental Indenture for Parity Bonds, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) may be applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the Subaccounts of the Reserve Account will equal the applicable Reserve Requirements. (c) Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to Section 4.1(c) hereof for the use of such Prepayments to the payment of the principal of, premium, and interest on the Bonds and Parity Bonds to be redeemed with such Prepayments.
(d) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and Parity Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds or Parity Bonds to be redeemed upon presentation and surrender of such Bonds or Parity Bonds and, in the case of an optional redemption or an extraordinary redemption from Prepayments, to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account, other than Prepayments, may be used to purchase Outstanding Bonds or Parity Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds or Parity Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or an extraordinary redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.1(a) or 4.1(c) hereof, as applicable, or in the case of Parity Bonds the premium established in any Supplemental Indenture.
Any accrued interest payable upon the purchase of Bonds or Parity Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date.
Section 3.6 Reserve Account of the Special Tax Fund. There shall be maintained in each Subaccount of the Reserve Account of the Special Tax Fund an amount equal to the applicable Reserve Requirement.
The Reserve Requirement may be satisfied by crediting to the applicable Subaccount of the Reserve Account moneys or one or more Reserve Policies or any combination thereof, which in the aggregate make funds available in the applicable Subaccount of the Reserve Account in an
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amount equal to the corresponding Reserve Requirement. Upon the deposit with the Trustee of any such Reserve Policy, the Trustee shall release moneys from the applicable Subaccount of the Reserve Account to the Interest Account of the Special Tax Fund, in an amount equal to the face amount of such Reserve Policy.
If funded and subject to subsection (f) below, the amounts in the Subaccounts of the Reserve Account shall be applied as follows:
(a) Transfers from Reserve Subaccounts in the Event of Insufficiency for Interest, Principal, and Sinking Fund Payments. Except as otherwise provided in this Section 3.6, moneys in each Subaccount of the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds corresponding to such Subaccount when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.7 hereof upon written direction from the District. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds and Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the corresponding Subaccounts of the Reserve Account for deposit (in order of priority) in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund (subject to the pro rata allocation between the Principal Account and the Redemption Account described in the following sentence), or the Rebate Fund, as applicable, moneys necessary for such purposes. Any such withdrawal from a Subaccount of the Reserve Account for the principal of, including Sinking Fund Payments, then due on the Bonds and Parity Bonds corresponding to such Subaccount shall be deposited on a pro rata basis (calculated with reference to the respective principal payment and Sinking Fund Payment coming due and payable on such September 1 with respect to such Bonds and Parity Bonds) into the Principal Account and the Redemption Account, respectively. (b) Replenishment of Reserve Subaccounts to Applicable Reserve Requirements. On or after March 2 and September 2 of each year, after making the required transfers referred to in Sections 3.3, 3.4 and 3.5 above, the Trustee shall transfer to each Subaccount of the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the respective amount needed to restore the amount of such Subaccount of the Reserve Account to the applicable Reserve Requirement.
Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account and the Subaccounts therein only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Administrative Expenses Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund on or before the next September 1. If amounts available in the Special Tax Fund together with any other amounts transferred to replenish the Subaccounts of the Reserve Account are inadequate to restore each Subaccount of the Reserve Account to the applicable Reserve Requirement, then the District shall include the amount necessary fully to restore the Subaccounts of the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates.
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(c) Application of Moneys in Reserve Subaccounts to Optional or Extraordinary Redemption or Defeasance. In connection with an optional redemption or extraordinary redemption of Bonds pursuant to Section 4.1(a) or (c), respectively, or Parity Bonds in accordance with any Supplemental Indenture, or a partial defeasance of Bonds or Parity Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account Subaccount corresponding to such Bonds or Parity Bonds may be applied to such redemption or partial defeasance so long as the amount on deposit in the subject Subaccount of the Reserve Account following such redemption or partial defeasance equals the applicable Reserve Requirement (taking into account Outstanding Bonds and Parity Bonds corresponding to the subject Subaccount after such redemption or partial defeasance). The District shall set forth in a Certificate of an Authorized Representative the amount in the applicable Subaccount of the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to Section 9.1(b) or (c), as applicable, to partially defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. (d) Application of Moneys in Reserve Subaccounts to Debt Service Payments in Final Bond Year. To the extent that a Subaccount of the Reserve Account is at the applicable Reserve Requirement as of the first day of the final Bond Year for the Bonds corresponding to such Subaccount in accordance herewith or, if applicable, with any Supplemental Indenture for a Series of Parity Bonds corresponding to such Subaccount, amounts in such Subaccount of the Reserve Account may be applied to pay the principal of and interest due on the corresponding Bonds and Parity Bonds, as applicable, in the final Bond Year for such Series. (e) Moneys in Reserve Subaccounts in Excess of Applicable Reserve Requirement.
Moneys in a Subaccount of the Reserve Account in excess of the applicable Reserve Requirement not transferred in accordance with the preceding provisions of this section shall be withdrawn from such Subaccount of the Reserve Account on the fifth (5th) Business Day before each March 1 and September 1, and such moneys shall be transferred and deposited into the Interest Account of the Special Tax Fund; provided, however, to the extent that, as of a date ninety (90) days prior to the next occurring Interest Payment Date, the amount on deposit in a Subaccount of the Reserve Account is equal to or greater than the aggregate remaining principal payments to be paid on the Bonds and any Parity Bonds corresponding to such Subaccount, any and all amounts in such Subaccount of the Reserve Account may be applied to effect a redemption of all such corresponding Outstanding Bonds pursuant to Section 4.1(a) and any such Outstanding Parity Bonds in accordance with any Supplemental Indenture. The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account Subaccount to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to Section 9.1(b) or (c), as applicable, to defease Bonds corresponding to such Subaccount, and the Trustee shall make such transfer on the applicable redemption or defeasance date. (f) Provisions Relating to Reserve Policy in a Reserve Subaccount. If and to the extent that a Subaccount of the Reserve Account has been funded with a combination of cash (or Authorized Investments) and a Reserve Policy, then all such cash (or Authorized Investments) shall be completely used before any demand is made on such Reserve Policy, and replenishment of the Reserve Policy shall be made prior to any replenishment of any such cash (or Authorized Investments). If a Subaccount of the Reserve Account is funded, in whole or in part, with more than one Reserve Policy, then any draws made against each such Reserve Policy shall be made
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pro-rata among those Reserve Policies (calculated by reference to the coverage then available thereunder).
Section 3.7 Rebate Fund.
(a) To the extent and at such time necessary to accommodate rebate amounts pursuant to the Tax Certificate, the Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund. Upon establishing the Rebate Fund, the Trustee shall establish a separate Account within the Rebate Fund with respect to each Series of Tax-exempt Bonds or Parity Bonds. All amounts on deposit in the Rebate Fund with respect to the Series 2022A Bonds or a Series of Tax-exempt Parity Bonds shall be governed by this Section 3.7 and the Tax Certificate for such Series, unless the District obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest payments on the Bonds and Parity Bonds, as applicable, will not be adversely affected if such requirements are not satisfied. The District shall calculate and make, or cause to be calculated and made, the rebate amount in accordance with the Tax Certificate. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund (including the Accounts therein) with respect to the Series 2022A Bonds or a Series of Tax-exempt Parity Bonds after redemption and payment of such Series and after making the payments required under the Tax Certificate, shall be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District for any lawful purpose. (c) Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Series 2022A Bonds and any Tax- exempt Parity Bonds with respect to which an Account has been created in the Rebate Fund. (d) Amendment Without Consent of Owners. This Section 3.7 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2022A Bonds and any Series of Parity Bonds issued on a Tax- exempt basis.
The Trustee shall not be responsible for calculating rebatable arbitrage or for the adequacy or correctness or any rebate report or rebate calculations. The Trustee shall be deemed conclusively to have complied with the provisions of this Indenture regarding calculation and payment of rebatable arbitrage if it follows the directions of the District, and it shall have no independent duty to review such calculations or enforce the compliance by the District with such rebate requirements.
Section 3.8 Surplus Fund. After making the transfers required by Sections 3.3, 3.4,
3.5, 3.6 and 3.7 hereof, as soon as practicable after each September 1, and in any event prior to each October 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received a Certificate of an Authorized Representative directing that certain amounts be retained in the Special Tax Fund because the
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District has included such amounts as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(b) hereof.
Moneys deposited in the Surplus Fund will be transferred by the Trustee at the direction of an Authorized Representative of the District (i) to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, premium, if any, and interest on the Bonds and any Parity Bonds when due in the event that moneys in the Special Tax Fund and the applicable Subaccounts of the Reserve Account of the Special Tax Fund are insufficient therefor, (ii) to the Subaccounts of the Reserve Account in order to replenish the Subaccounts to the applicable Reserve Requirements, (iii) to the Administrative Expenses Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expenses Account of the Special Tax Fund are insufficient to pay Administrative Expenses, or (iv) for any other lawful purpose of the District.
The amounts in the Surplus Fund are not pledged to the repayment of the Bonds or any Parity Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds or Parity Bonds, the District will notify the Trustee in a Certificate of an Authorized Representative, and the Trustee will segregate such amount into a separate account of the Surplus Fund. The moneys on deposit in such account of the Surplus Fund shall be invested at the written direction of the District in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the Series of Bonds or Parity Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a Tax-exempt basis for federal income tax purposes.
Section 3.9 Costs of Issuance Fund. The moneys in the Accounts of the Costs of Issuance Fund shall be disbursed by the Trustee pursuant to a Certificate of an Authorized Representative of the District. Any balance therein shall be transferred by the Trustee to the corresponding Account of the Improvement Fund 180 days after the Delivery Date of the Bonds or Parity Bonds, as applicable, and the Trustee shall thereafter close the Co sts of Issuance Fund and the Accounts therein.
Section 3.10 Improvement Fund.
(a) Requisition for Disbursement of Project Costs. Subject to the limitations and provisions set forth in this Section 3.10, the moneys in the Series 2022A Account and the Taxable Series 2022B Account of the Improvement Fund shall be applied exclusively to pay the Project Costs. Amounts for Project Costs shall be disbursed by the Trustee from such accounts of the Improvement Fund as specified in a Requisition for Disbursement of Project Costs, substantially in the form of Exhibit D attached hereto, which must be submitted in connection with each requested disbursement.
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(b) Taxable Series 2022B Account - Development Impact Fee Requisitions.
Requisitions for all Project Costs identified on Exhibit B (Eligible DIFs) of the Acquisition Agreement with respect to Improvement Area No. 2 shall be submitted and approved by the District solely for disbursement from the Taxable Series 2022B Account of the Improvement Fund.
For clarity, such Project Costs to be paid solely from the Taxable Series 2022B Account consist of all development impact fees, described more particularly as follows (and subject to the terms and provisions of the Acquisition Agreement): General Fee, Fire Fee, Police Fee, Parks (Quimby) Fee, Traffic Fee, Water Fee, Sewer Fee, Storm Drain Fee, and Water Meter Fee (3/4 inch).
(c) Facilities Nos. 12 and 15 - Project Costs Requisitions. In furtherance of the federal tax covenants set forth in Section 5.2(e) of this Indenture, any Requisition for Disbursement of Project Costs of those certain facilities identified on Exhibit A of the Acquisition Agreement as Facility No. 12 (i.e., Gas Main Extension within Baseline Road) or Facility No. 15 (i.e., Relocation of Edison Power Poles along Project Frontage) shall be submitted and approved by the District for disbursement solely from amounts on deposit in the Taxable Series 2022B Account of the Improvement Fund.
(d) Unconstructed Facility No. 4 - No Improvement Fund Requisition Therefor. As provided in the Acquisition Agreement, as heretofore amended, the parties thereto determined that the certain facility identified on Exhibit A of the original Acquisition Agreement as Facility No. 4 (i.e., 10” VCP Sewer Line within Benson Avenue from 13th Street to Arrow Highway), was not necessary to meet the increased demands placed upon the public infrastructure in the City as a result of the development of property within the District, and accordingly, such Facility No. 4 has neither been required by the City nor constructed by the developers of such property. As a result, no Requisition for Disbursement of Project Costs shall be approved for the aforementioned, Facility No. 4.
(e) Improvement Fund Surplus. Upon receipt of a Certificate of an Authorized Representative of the District stating that all or a specified portion of the amount remaining in an Account of the Improvement Fund is no longer needed to pay Project Costs, the Trustee shall transfer all or such specified portion, as applicable, of the moneys remaining on deposit in such Account of the Improvement Fund to the Principal Account or Redemption Account of the Special Tax Fund for application to the next principal payment coming due on the corresponding Series of Bonds (or if no Series 2022B Bonds are then Outstanding, to the next principal payment coming due on the Series 2022A Bonds) or to the Surplus Fund, as directed in the Certificate, provided that in connection with any direction to transfer amounts to the Surplus Fund there shall have been delivered to the Trustee with such Certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a Tax- exempt basis for federal income tax purposes.
Section 3.11 Investments. Moneys held in any of the Funds, Accounts, and Subaccounts under this Indenture shall be invested at the written direction of the District in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds, Accounts and Subaccounts. Any loss resulting from such Authorized
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Investments shall be credited or charged to the Fund, Account or Subaccount from which such investment was made, and any investment earnings on a Fund, Account or Subaccount shall be applied as follows: (i) investment earnings on all amounts deposited in the Costs of Issuance Fund, the Improvement Fund, the Special Tax Fund, the Surplus Fund and the Rebate Fund and each Account and Subaccount therein shall be deposited in those respective Funds, Accounts, and Subaccounts, and (ii) investment earnings on all amounts deposited in the Reserve Account shall be deposited therein to be applied as set forth in Section 3.6. Moneys in the Funds, Accounts, and Subaccounts held under this Indenture may be invested by the Trustee as directed in writing by the District, from time to time, in Authorized Investments subject to the following restrictions:
(a) Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Costs of Issuance Fund. (b) Moneys in the Improvement Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Improvement Fund. Notwithstanding anything herein to the contrary, amounts in the Improvement Fund, if any, three (3) years after the Delivery Date for the Bonds and the proceeds of each issue of Parity Bonds issued on a Tax - exempt basis which are remaining on deposit in the Improvement Fund on the date which is three (3) years following the date of issuance of such issue of Parity Bonds shall be invested only in Authorized Investments the interest on which is excluded from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds from which such proceeds were derived, unless in the opinion of Bond Counsel such restriction is not necessary to prevent interest on the Bonds or any Parity Bonds which were issued on a Tax-exempt basis for federal income tax purposes from being included in gross income for federal income tax purposes. (c) Moneys in the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same become due.
(d) Moneys in the Reserve Account (and Subaccounts therein) of the Special Tax Fund may be invested only in Authorized Investments which, taken together, have a weighted average maturity not in excess of five (5) years; provided that such amounts may be invested in an Investment Agreement to the later of the final maturity of the Bonds or any Parity Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.6 hereof; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds or an issue of Parity Bonds shall mature later than the respective final maturity date of the Bonds or the issue of Parity Bonds, as applicable.
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(e) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (1) of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.7 hereof or in Authorized Investments of the type described in clause (7) of the definition thereof.
(f) In the absence of written investment directions from the District, the Trustee shall hold all monies uninvested.
The Trustee shall sell, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the market value thereof at least semiannually on or before each Interest Payment Date. In making any valuations hereunder, the Trustee may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything herein to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Indenture.
The Trustee or an affiliate may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for such investment. The Trustee or its affiliate, as applicable, may sell at the best market price reasonably obtainable at the time by the Trustee or its affiliate, as applicable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Authorized Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder but, shall account for each separately.
The Trustee shall furnish the District periodic cash transaction statements which shall include detail for all investment transactions effected by the Trustee or brokers selected by the District. The District waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The District further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost, and other trade confirmations may be obtained from the applicable broker.
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ARTICLE IV
REDEMPTION OF BONDS
Section 4.1 Redemption of Bonds.
(a) Optional Redemption.
The Bonds maturing on or before [September 1, 2031] are not subject to optional redemption prior to maturity. The Bonds maturing on or after [September 1, 2032] shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District , from any source of funds on any date on or after [September 1, 2031] in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, [at a redemption price equal to 100% of the principal amount to be redeemed, without premium, together with accrued interest to the date of redemption.]
In the event the District elects to redeem Bonds as provided above, the District shall give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee shall be given at least forty-five (45) but no more than ninety (90) days prior to the redemption date, or by such later date as is acceptable to the Trustee, in its sole discretion. (b) Mandatory Sinking Fund Redemption.
(i) The Series 2022A Bonds maturing on September 1, 20__ and September 1, 20__ (collectively, the “Series 2022A Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter prior to maturity, in accordance with the respective schedules of Sinking Fund Payments set forth below. The Series 2022A Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Series 2022A Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
SERIES 2022A TERM BONDS MATURING SEPTEMBER 1, 20__
Redemption Date
(September 1) Principal Amount
$
(maturity)
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SERIES 2022A TERM BONDS MATURING SEPTEMBER 1, 20__
Redemption Date
(September 1) Principal Amount
$
(maturity)
In the event of a partial optional redemption or extraordinary redemption of the Series 2022A Term Bonds, each of the remaining Sinking Fund Payments for such Series 2022A Term Bonds, as applicable, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000.
(ii) The Series 2022B Bonds maturing on September 1, 20__ and September 1, 20__ (collectively, the “Series 2022B Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter prior to maturity, in accordance with the respective schedules of Sinking Fund Payments set forth below. The Series 2022B Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Series 2022B Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
SERIES 2022B TERM BONDS MATURING SEPTEMBER 1, 20__
Redemption Date
(September 1) Principal Amount
$
(maturity)
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SERIES 2022B TERM BONDS MATURING SEPTEMBER 1, 20__
Redemption Date
(September 1) Principal Amount
$
(maturity)
In the event of a partial optional redemption or extraordinary redemption of the Series 2022B Term Bonds, each of the remaining Sinking Fund Payments for such Series 2022B Term Bonds, as applicable, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000.
(iii) Purchase of Series 2022 Term Bonds in Lieu of Redemption. If during the Fiscal Year immediately preceding one of the redemption dates specified above the District purchases Series 2022A Term Bonds or Series 2022B Term Bonds pursuant to Section 4.1(d), at least forty-five (45) days prior to the redemption date, the District shall notify the Trustee as to the principal amount purchased and the amount of Series 2022A Term Bonds or Series 2022B Term Bonds so purchased, as applicable, shall be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce such upcoming Sinking Fund Payment for the applicable maturity of the Series 2022A Term Bonds or Series 2022B Term Bonds, as applicable, so purchased. All Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof. (c) Extraordinary Redemption.
The Bonds are subject to extraordinary redemption as a whole, or in part proportionately between the Series 2022A Bonds and the Series 2022B Bonds as described further below, and on a pro rata basis among maturities of each such Series in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account pursuant to Section 3.2, plus any amounts authorized to be transferred from the Reserve Account pursuant to Section 3.6(c), at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Redemption Dates Redemption Price
On or before [March 1, 2029] [103%]
[September 1, 2029 and March 1, 2030] [102]
[September 1, 2030 and March 1, 2031] [101]
[September 1, 2031 and thereafter] [100]
For purposes of the proportionate allocation of any such extraordinary redemption from Prepayments between the Series 2022A Bonds and the Series 2022B Bonds, described in the first
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paragraph above under this subsection (c), “proportionately” shall mean calculated with respect to the then Outstanding principal amount of each such Series, as nearly as possible in view of the $5,000 minimum denomination of the Bonds per Section 2.4 of this Indenture; provided, if the implementation of such a proportionate allocation requires more Bonds of one Series to be redeemed than Bonds of the other Series to accommodate the $5,000 minimum denominations or otherwise, the District shall give priority to redeem more Series 2022A Bonds than Series 2022B Bonds.
The District shall give written notice to the Trustee of its intention to redeem Bonds pursuant to this subsection, the redemption date, and the principal amount of the Bonds of each Series and of each maturity to be redeemed within each Series at least forty-five (45) but no more than ninety (90) days prior to the redemption date, or by such later date as is acceptable to the Trustee, in its sole discretion.
(d) Purchase In Lieu of Redemption.
As provided in Section 3.5(d) and Section 4.1(b)(iii), as applicable, in lieu or partially in lieu of any optional redemption, extraordinary redemption or mandatory sinking fund redemption as described above, moneys deposited in the Redemption Account, other than Prepayments, may be used to purchase Outstanding Bonds. Such purchases of Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or an extraordinary redemption, the premium applicable at the next following call date. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. All Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof. (e) The redemption provisions for Parity Bonds shall be set forth in a Supplemental Indenture.
Section 4.2 Selection of Bonds and Parity Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of any Series of Bonds or Parity Bonds Outstanding, the Trustee shall select the Bonds or Parity Bonds to be redeemed from all Outstanding Bonds or Parity Bonds of such Series or such given portion thereof not previously called for redemption, on a pro rata basis among the maturities (unless the maturity or maturities are otherwise specified in this Indenture or in writing by the District) and by lot within a maturity in any manner which the Trustee in its discretion shall deem appropriate. For purposes of such selection, all Bonds or Parity Bonds of a denomination of more than $5,000 shall be deemed to be comprised of separate $5,000 portions, and such portions shall be treated as separate Bonds or Parity Bonds, as applicable, which may be separately redeemed. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption.
Section 4.3 Notice of Redemption. When Bonds or Parity Bonds are due for redemption under Section 4.1 above or under another redemption provision set forth in a
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Supplemental Indenture relating to any Parity Bonds, the Trustee shall give notice, in the name of the District, of the redemption of such Bonds or Parity Bonds. Such notice of redemption shall (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redemption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemption, or all the Bonds or Parity Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the Bonds or Parity Bonds to be redeemed; (c) state the red emption price; (d) state the place or places where the Bonds or Parity Bonds are to be redeemed; (e) in the case of Bonds or Parity Bonds to be redeemed only in part, state the portion of such Bond or Parity Bond which is to be redeemed; (f) state the date of issue of the Bonds or Parity Bonds as originally issued; (g) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (h) state any other descriptive information needed to identify accurately the Bonds or Parity Bonds being redeemed as shall be specified by the Trustee. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond or Parity Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least thirty (30) days but no more than forty-five (45) days prior to the redemption date, the Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond or Parity Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds or Parity Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption.
In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
Each further notice of redemption shall be sent (i) not later than two (2) Business Days before the date that notice of redemption is mailed to the Bond owners pursuant to the first paragraph of this Section, to the Depository in such electronic format and manner as specified by the Depository and to any other registered securities depositories (in such electronic format and manner as specified thereby) then in the business of holding substantial amounts of obligations of types comprising the Bonds and Parity Bonds as determined by Trustee, and (ii) not later than the date that notice of redemption is mailed to the Bond owners pursuant to the first paragraph of this Section, to the Information Services in such electronic format and manner as specified by the Information Services.
The District shall have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under this Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or arising from
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such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent.
Upon the payment of the redemption price of any Bonds and Parity Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds and Parity Bonds being redeemed with the proceeds of such check or other transfer.
Section 4.4 Partial Redemption of Bonds or Parity Bonds. Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Bond owner at the expense of the District, a new Bond or Bonds or a new Parity Bond or Parity Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity or, in the case of surrender of a Parity Bond, a new Parity Bond or Parity Bonds subject to the foregoing limitations.
Section 4.5 Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3 hereof, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption:
(a) the Bonds and Parity Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture or in any Supplemental Indenture with respect to any Parity Bonds, anything in this Indenture or in the Bonds or the Parity Bonds to the contrary notwithstanding; (b) upon presentation and surrender thereof at the Principal Office of the Trustee, the redemption price of such Bonds and Parity Bonds shall be paid to the Owners thereof; (c) as of the redemption date the Bonds or the Parity Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or Parity Bonds, or portions thereof, shall cease to bear further interest; and (d) as of the date fixed for redemption no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture or any Supplemental Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.
ARTICLE V
COVENANTS AND WARRANTY
Section 5.1 Warranty. The District shall preserve and protect the security pledged hereunder to the Bonds and any Parity Bonds against all claims and demands of all persons.
Section 5.2 Covenants. So long as any of the Bonds or Parity Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Bondowners
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under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund:
(a) Punctual Payment; Against Encumbrances. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond and Parity Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds and in accordance with this Indenture to the extent that Net Taxes and other amounts pledged hereunder are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, and this Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Supplemental Indentures and of the Bonds and any Parity Bonds issued hereunder.
The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in this Indenture, and will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, other than Parity Bonds issued in accordance with Section 9.2 hereof. Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds and the Parity Bonds. (b) Levy of Special Tax. The legislative body of the District represents it has levied the Special Tax for Fiscal Year 2021-22 pursuant to the Rate and Method, and so long as any Bonds or Parity Bonds issued under this Indenture are Outstanding, but subject to the Rate and Method, the legislative body of the District covenants to levy the Special Tax in an amount equal to the Special Tax Requirement (as defined in the Rate and Method) for Improvement Area No. 2, which includes, but is not limited to, amounts sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay (1) the principal of and interest on the Bonds and any Parity Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement.
The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. (c) Commence Foreclosure Proceedings. The District covenants for the benefit of the Owners of the Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings against any parcel with either (A) at least four (4) consecutive installments of delinquent Special Taxes or (B) delinquent Special Taxes in excess of $10,000 on any one parcel, in each instance by the December 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the December 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount on deposit in the Reserve Account is at least equal
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to the Reserve Requirement, and such delinquencies will not cause moneys in the Reserve Account to be withdrawn on the next succeeding Interest Payment Date. In no event shall such foreclosure actions exceed the time periods specified in Section 53356.1 of the Act.
The District covenants that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds.
Notwithstanding the foregoing, the District may elect (but is not obligated) to advance the amount of any particular delinquency (excluding penalties and interest) and deposit such amount to the Special Tax Fund. Upon a deposit of such money in the Special Tax Fund, the District will not need to initiate a foreclosure action as provided above; provided, however, the District may reimburse itself for such advance when the Special Tax on such property is paid in the amount of such advance plus interest on such amount at a rate equal to the yield on the Outstanding Bonds .
Interest and penalties paid in excess of the amount advanced by the District shall be deposited in the Special Tax Fund.
Notwithstanding the foregoing, if at any time, the County’s Teeter Plan (adopted pursuant to Sections 4701 through 4717 of the California Revenue and Taxation Code) is in effect and is made applicable to the District and the Special Taxes being levied in connection with the Bonds, the District may, in its discretion, elect not to commence any judicial foreclosure proceeding pursuant to this Section 5.2(c) or defer the commencement of such proceedings until such time as the District deems appropriate.
(d) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Trustee (who shall have no duty or obligation to inspect) or of the Owners of not less than 10% of the principal amount of the Bonds or the Owners of not less than 10% of any issue of Parity Bonds then Outstanding or their representatives authorized in writing.
(e) Federal Tax Covenants. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and any Parity Bonds issued on a Tax-exempt basis for federal income tax purposes will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows:
(1) The District shall not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the Tax -exempt status of interest on the Bonds or any Parity Bonds under Section 103(a) of the Code or cause interest on the Bonds or any Parity Bonds to be an item of tax preference for purposes of the alternative minimum tax under the Code.
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(2) In furtherance of the foregoing tax covenant, the District shall comply with the provisions of the Tax Certificate, which is incorporated herein as if fully set forth herein. These covenants shall survive payment in full or defeasance of the Bonds and any Parity Bonds.
(f) Against Reduction of Maximum Special Taxes. The District hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the District hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the District below the levels provided in this Section
5.2(f) would interfere with the timely retirement of the Bonds and Parity Bonds. The District determines it to be necessary in order to preserve the security for the Bonds and Parity Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District hereby does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the District.
(g) Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(f) above or to limit the power of the District to levy the Special Taxes for the purposes set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (h) Limitation on Right to Tender Bonds. The District hereby covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District shall have first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds and Parity Bonds when due. (i) Continuing Disclosure. The District covenants to comply with the terms of the Continuing Disclosure Agreement and with the terms of any certificate or agreement executed by the District with respect to any Parity Bonds, which assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934.
The Trustee hereby agrees to inform the District within three (3) Business Days after obtaining knowledge that any of the events listed in Section 5(a) of the Continuing Disclosure Agreement has occurred, or as soon as reasonably practicable thereafter. (j) Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in this Indenture.
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ARTICLE VI
AMENDMENTS TO INDENTURE
Section 6.1 Supplemental Indentures or Orders Not Requiring Bond owner Consent. The District may from time to time, without notice to or consent of any of the Bond owners, adopt Supplemental Indentures for any of the following purposes (provided that no such Supplemental Indenture shall modify any of the rights or obligations of the Trustee without its written consent thereto):
(a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Indenture or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bond owners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond or Parity Bond payments; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this In denture, including without limitation Section 9.2 hereof; (d) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity Bonds then Outstanding;
(e) to modify, alter or amend the Rate and Method in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is below the levels provided in Section 5.2(f) of this Indenture, and in any event not less than the sum of the estimated Administrative Expenses and 110% of the principal and interest due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment; or (f) to the extent necessary to obtain a municipal bond insurance policy or to obtain a rating on the Bonds, or in connection with satisfying all or a portion of the Reserve Requirement by crediting a Reserve Policy to the Reserve Account; provided that such amendments which shall not materially adversely affect the interests of the Owners of the then Outstanding Bonds; or (g) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Bond owners.
Section 6.2 Supplemental Indentures or Orders Requiring Bond owner Consent.
Exclusive of the Supplemental Indentures described in Section 6.1, the Owners of not less than a
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majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, m odifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however, that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity Bond, (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond or the rate of interest thereon, (c) a preference or priority of any Bond or Parity Bond over any other Bond or Parity Bond, or (d) a reduction in the aggregate principal amount of the Bonds and Parity Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds and Parity Bonds then Outstanding; provided, further, that no such Supplemental Indenture shall modify any of the rights or obligations of the Trustee without its written consent thereto.
If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Bond owners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage prepaid, to all Bond owners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the Principal Office of the Trustee for inspection by all Bond owners. The failure of any Bond owners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds and any Parity Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental Indenture, Bonds or Parity Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination.
Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds in instances where such consent is required pursuant to the provisions of this section, this Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds and Parity Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments.
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Section 6.3 Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date and presentation of his Bond or Parity Bond for the purpose at the Principal Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity Bonds. If the District shall so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity Bonds shall be exchanged at the Principal Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds or Parity Bonds, upon surrender of such Outstanding Bonds or Parity Bonds.
ARTICLE VII
TRUSTEE
Section 7.1 Trustee. U.S. Bank Trust Company, National Association, a national banking association, shall be the Trustee for the Bonds and any Parity Bonds unless and until another Trustee is appointed by the District hereunder. The District may, at any time, appoint a successor Trustee satisfying the requirements of Section 7.2 below for the purpose of receiving all money which the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture.
The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5 above, interest payments to the Bond owners, to select Bonds and Parity Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation of Bonds and Parity Bonds all as provided in this Indenture, and to provide for the authentication of Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds and Parity Bonds paid, discharged and cancelled by it.
The Trustee is hereby authorized to pay the Bonds and Parity Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds and Parity Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof.
The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees
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and agents, harmless from and against costs, claims, expenses and liabilities, including, without limitation, fees and expenses of its attorneys, not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder.
The foregoing obligation of the District to indemnify the Trustee shall survive the removal or resignation of the Trustee or the discharge of the Bonds.
Section 7.2 Removal of Trustee. The District may at any time in its sole discretion remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a bank, national banking association, or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least $100,000,000, and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank, national banking association, or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this section the combined capital and surplus of such bank, national banking association, or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee and notice being sent by the successor Trustee to the Bond owners of the successor Trustee’s identity and address.
Section 7.3 Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the Principal Office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying the criteria in Section 7.2 above by an instrument in writing.
Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee.
If no successor Trustee shall have been appointed and have accepted appointment within forty-five (45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bondholder (on behalf of itself and all other Owners of the Bonds) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee.
Section 7.4 Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any Parity Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Indenture, the Bonds or any Parity Bonds, and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein, in the Bonds and any Parity Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds or any Parity Bonds for value. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct.
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The Trustee shall be responsible for the performance of the duties of the Trustee expressly set forth in this Indenture, and no implied duties or obligations shall be read into this Indenture against the Trustee.
The Trustee shall have no responsibility for, and makes no representations with respect to, any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds.
Before taking any action under Article VIII hereof or this Article the Trustee may require indemnity satisfactory to the Trustee be furnished from any expenses and to protect it against any liability it may incur hereunder.
The Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of the Owners of at least twenty-five percent (25%) (or other percentage provided for herein) in aggregate principal amount of Outstanding Bonds relating to the exercise of any right, power or remedy available to the Trustee.
The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty.
The Trustee may become the owner or pledgee of Bonds with the same rights it would have if it were not Trustee.
The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond, Parity Bond, facsimile transmission, electronic mail or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in ac cordance therewith.
The Trustee shall not be bound to recognize any person as the Owner of a Bond or Parity Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed.
Whenever in the administration of its duties under this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.
The Trustee shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it shall actually receive. No provision in this Indenture shall require the Trustee to expend or risk its own funds or
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otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers.
The Trustee shall not be deemed to have knowledge of any default or Event of Default until an officer at the Trustee’s corporate trust office responsible for the administration of its duties hereunder shall have actual knowledge thereof or the Trustee shall have received written notice thereof at its corporate trust office.
Section 7.5 Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.1 Events of Default. Any one or more of the following events shall constitute an “event of default” (each, an “Event of Default”):
(a) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond or Parity Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) default in the due and punctual payment of the interest on any Bond or Parity Bond when and as the same shall become due and payable; or
(c) except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds or any Parity Bonds, and such default shall have continued for a period of sixty (60) days after the District shall have been given notice in writing of such default by the Trustee or the Owners of twenty-five percent (25%), in aggregate principal amount of the Outstanding Bonds and Parity Bonds; provided, that if such default (other than a default arising from nonpayment of the Trustee’s fees and expenses) be such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if corrective action is instituted by the District within the applicable period and diligently pursued until the default is corrected.
The Trustee agrees to give notice to the Owners as soon as practicable upon the occurrence of an Event of Default under (a) or (b) above and within sixty (60) days of the Trustee’s knowledge of an Event of Default under (c) above.
Section 8.2 Remedies of Owners. Upon the occurrence of an Event of Default, the Trustee may pursue any available remed y at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds and Parity Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture, including:
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(a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or
(c) By a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust.
If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and Parity Bonds and if indemnified to its satisfaction, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners of the Bonds and Parity Bonds.
No remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law; provided, under no circumstance shall the Bonds, or the obligation of the District to pay installments of principal thereof and interest thereon, be accelerated.
Section 8.3 Application of Revenues and Other Funds After Default. Following the declaration by the Trustee of an Event of Default, all amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of this Indenture relating to the Bonds and Parity Bonds shall be applied by the Trustee in the following order upon presentation of the several Bonds and Parity Bonds:
First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, advisors, attorneys and counsel, and to the payment of all other outstanding fees and expenses of the Trustee; and Second, to the payment of the whole amount of interest on and principal of the Bonds and Parity Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds and Parity Bonds; provided, however, that in the event such amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts shall be applied in the following order of priority:
(a) first to the payment of all installments of interest on the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing,
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(b) second, to the payment of all installments of principal, including Sinking Fund Payments, of the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing, and
(c) third, to the payment of interest on overdue installments of principal and interest on the Bonds and Parity Bonds on a pro rata basis based on the total amount then due and owing.
Third, to deposit such amounts in the Reserve Account to restore the balance therein to the Reserve Requirement.
After payment or deposit of such amounts, the Trustee may apply any remaining amounts received toward the payment of any rebate amounts pursuant to Section 3.7 or to the payment of the fees, costs and expenses of the District in connection with such Event of Default.
Section 8.4 Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of twenty-five percent (25%) in aggregate principal amount of the Bonds and Parity Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds and Parity Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other such litigation. Any suit, action or proceeding which any Owner of Bonds or Parity Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds and Parity Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds and Parity Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney in fact of the respective Owners of the Bonds and Parity Bonds for the purposes of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds and Parity Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact.
Section 8.5 Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Owners of the Bonds and Parity Bonds under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or rec eivers of the Net Taxes and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment(s) shall confer.
Section 8.6 Non-Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the Bonds or the Parity Bonds, shall affect or impair the obligation of the District,
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which is absolute and unconditional, to pay the interest on and principal of the Bonds and Parity Bonds to the respective Owners of the Bonds and Parity Bonds at the respective dates of maturity, as herein provided, out of the Net Taxes and other moneys herein pledged for such payment.
A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not affect any subsequent default or breach of duty, or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds or Parity Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or the Owners by the Act or by this Article VIII may be enforced and exercised from time to time and as oft en as shall be deemed expedient by the Trustee or the Owners, as the case may be.
Section 8.7 Limitation on Rights and Remedies of Owners. No Owner of any Bond or Parity Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds and Parity Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written req uest shall have been received by, and said tender of indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds and Parity Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds and Parity Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds and Parity Bonds.
The right of any Owner of any Bond and Parity Bond to receive payment of the principal of and interest and premium (if any) on such Bond and Parity Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture.
Section 8.8 Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the District, the Trustee and the Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken.
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ARTICLE IX
DEFEASANCE AND PARITY REFUNDING BONDS
Section 9.1 Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond or Parity Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond or Parity Bond under this Indenture and any Supplemental Indenture relating to such Parity Bond shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds and Parity Bonds pursuant to this Section, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds and Parity Bonds.
Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond or Parity Bond is paid in any one or more of the following ways:
(a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable; or
(c) by depositing with the Trustee or an escrow agent appointed by the District, in trust, Federal Securities, in which the District may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable.
If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligations of the District under this Indenture and any Supplemental Indenture with respect to such Bond or Parity Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond or Parity Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in Section 5.2(e) or any covenants in a Supplemental Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than ten (10) days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Trustee in the sole discretion of the Trustee. In
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connection with a defeasance under (c) above, there shall be provided to the District and the Trustee a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow agent to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds and Parity Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable. In connection with a defeasance under (b) or (c) above, there also shall be provided to the District and the Trustee an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds or Parity Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture.
Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds and Parity Bonds which have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds and Parity Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds and Parity Bonds when due. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bond owners whose Bonds or Parity Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred.
Section 9.2 Conditions for the Issuance of Parity Refunding Bonds. For the sole purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding, t he District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein and any Subaccounts of the Reserve Account not designated herein for the benefit of such Bonds or Parity Bonds) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued hereunder or under any Supplemental Indenture. Parity Bonds issued are subject to the following additional specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds:
(a) The District shall be in compliance with all covenants set forth in this Indenture and any Supplemental Indenture then in effect and a certificate of the District to that effect shall have been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants.
(b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Indenture duly adopted by the District which shall specify the following:
(1) that such Parity Bonds are to be issued for the sole purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding, as applicable, and the fund or funds into which the proceeds thereof are to be deposited, including a provision requiring
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the proceeds of such Parity Bonds to be applied solely for the purpose of refunding any Outstanding Bonds or Parity Bonds, including payment of all costs and the funding of all reserves incidental to or connected with such refunding; (2) the authorized principal amount of such Parity Bonds; (3) the date and the maturity date or dates of such Parity Bonds; provided that (i) each maturity date shall fall on a September 1, (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number, and (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; (4) the description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication;
(5) the denominations and method of numbering of such Parity Bonds; (6) the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds;
(7) the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement;
(8) the form of such Parity Bonds; and
(9) such other provisions as are necessary or appropriate and not inconsistent with this Indenture.
(c) The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Trustee (unless the Trustee shall accept any of such documents bearing a prior date):
(1) a certified copy of the Supplemental Indenture authorizing the issuance of such Parity Bonds;
(2) a written request of the District as to the delivery of such Parity Bonds; (3) an opinion of Bond Counsel and/or general counsel to the District to the effect that (a) the District has the right and power under the Act to adopt this Indenture and the Supplemental Indentures relating to such Parity Bonds, and this Indenture and all such Supplemental Indentures have been duly and lawfully adopted by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (b) this Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in this Indenture, subject to the application thereof to the
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purposes and on the conditions permitted by this Indenture; and (c) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of this Indenture and all Supplemental Indentures thereto and entitled to the benefits of this Indenture and all such Supplemental Indentures, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and this Indenture and all such Supplemental Indentures; and a further opinion of Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a Tax-exempt basis, or the exemption from State of California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued; (4) a certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of this Indenture; (5) a certificate of an Independent Financial Consultant certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; and
(6) such further documents, money and securities as are required by the provisions of this Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds.
ARTICLE X
MISCELLANEOUS
Section 10.1 Cancellation of Bonds and Parity Bonds. All Bonds and Parity Bonds surrendered to the Trustee for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or Parity Bond purchased by the District as authorized herein and delivered to the Trustee for such purpose shall be, cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds and Parity Bonds, as provided by law, and furnish to the District a certificate of such destruction.
Section 10.2 Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Bond owners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds or Parity Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner:
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(a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority. (b) As to any Bond or Parity Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary.
Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or Parity Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent.
Section 10.3 Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds and Parity Bonds which remain unclaimed for two (2) years after the date when such Outstanding Bonds or Parity Bonds have become due and payable, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such payment to the District, the Trustee, at the expense of the District, shall cause to be mailed by first class mail, postage prepaid, to the registered Owners of such Outstanding Bonds or Parity Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District.
Section 10.4 Provisions Constitute Contract. The provisions of this Indenture shall constitute a contract between the District and the Bond owners, and the provisions hereof shall be construed in accordance with the laws of the State of California.
In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bond owners or the Trustee, then the District, the Trustee and the Bond owners
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shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken.
After the issuance and delivery of the Bonds this Indenture shall be irrepealable but, shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner.
Section 10.5 Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which is subordinate to the pledge hereunder, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes and other amounts pledged hereunder.
Section 10.6 Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds or any Parity Bonds the rights and benefits provided in this Indenture.
Section 10.7 Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds and any Parity Bonds issued pursuant hereto shall remain valid and the Bond owners shall retain all valid rights and benefits accorded to them under the laws of the State of California.
Section 10.8 Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, by overnight mail, as a .pdf attachment to electronic mail, or by facsimile or other form of telecommunication, confirmed by telephone at its number set forth below. Notice shall be effective either (i) upon transmission by facsimile or other form of telecommunication (provided receipt is confirmed), (ii) 48 hours after deposit in the United States first class mail, postage prepaid, (iii) in the case of overnight mail, upon delivery to the addressed destination, or (iv) in the case of personal delivery to any person, upon actual receipt. The District or the Trustee may, by written notice to the other party, from time to time modify the address or number to which communications are to be given hereunder.
If to the District: City of Upland
460 N. Euclid Avenue
Upland, California 91786
Attention: City Manager
Facsimile: (909) 931-4123
Telephone: (909) 931-4106
Email: [email protected]
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If to the Trustee: U.S. Bank Trust Company, National Association 633 West Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Global Corporate Trust
Facsimile: (213) 615-6199
Telephone: (213) 615-6024
Email: [email protected]
The District and the Trustee may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, has caused this Bond Indenture to be signed by the Mayor of the City of Upland, as authorized by the City Council of the City of Upland acting as the legislative body of the District, and attested thereto by the City Clerk of the City of Upland, and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, in token of its acceptance of the trust created hereunder, has caused this Bond Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written.
COMMUNITY FACILITIES DISTRICT NO. 2015-
1 (SYCAMORE HILLS) OF THE CITY OF
UPLAND, COUNTY OF SAN BERNARDINO,
STATE OF CALIFORNIA
By:
Mayor of the City of Upland, California
ATTEST:
City Clerk of the City of Upland, California
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By:
Its: Authorized Officer
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EXHIBIT A
FORM OF SPECIAL TAX BOND, SERIES 2022A (IMPROVEMENT AREA NO. 2) Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the District or the Trustee for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
R-__ $___________
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF SAN BERNARDINO
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE
CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA
SPECIAL TAX BOND
SERIES 2022A (IMPROVEMENT AREA NO. 2)
INTEREST RATE MATURITY DATE DATED DATE CUSIP
____% September 1, 20__ __________, 2022 91535____
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: ________________________________ DOLLARS COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA (the “District”), which was formed by the City of Upland (the “City”) and is situated in the County of San Bernardino, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next precedin g the date of authentication hereof, unless (i) the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated
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Date set forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 (each, an “Interest Payment Date”), commencing September 1, 2022, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment.
The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such term is defined in the Indenture (as defined below)), initially U.S. Bank Trust Company, National Association (the “Trustee”). Interest on this Bond shall be paid by check of the Trustee mailed on the Interest Payment Date by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Registered Owner hereof as of the close of business on the fifteenth day of the month preceding the Interest Payment Date (the “Record Date”) at such Registered Owner’s address as it appears on the registration books maintained by the Trustee.
This Bond is one of a duly authorized issue of “Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California, Special Tax Bonds, Series 2022A (Improvement Area No. 2)” (the “Bonds”) issued in the aggregate principal amount of $____________ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the “Act”) for the purpose of financing certain public facilities, funding a reserve subaccount, and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City acting in its capacity as the legislative body of the District (the “Legislative Body”) on [March ___, 2022] and a Bond Indenture dated as of [March 1, 2022], by and between the District and the Trustee executed in connection therewith (the “Indenture”), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California.
Pursuant to the Act and the Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District (the “Special Taxes”) and certain other amounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund (other than the Administrative Expenses Account therein and any Subaccounts of the Reserve Account not designated in the Indenture for the benefit of this Bond) established under the Indenture, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Indenture it will commence and diligently pursue to completion judicial foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds.
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The Bonds are limited obligations of the District and are payable from, and are secured by, a first pledge of and lien on the Net Taxes (as that term is defined in the Indenture) on a parity with the District’s $____________ original aggregate principal amount Special Tax Bonds, Taxable Series 2022B (Improvement Area No. 2) (the “Series 2022B Bonds”), issued concurrently with the Bonds.
The Bonds maturing on or before [September 1, 2031] are not subject to optional redemption prior to maturity. The Bonds maturing on or after [September 1, 2032] shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District, from any source of funds on any date on or after [September 1, 2031] in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, [at a redemption price equal to 100% of the principal amount to be redeemed, without premium, together with accrued interest to the date of redemption].
The Bonds maturing on September 1, 20__ and September 1, 20__ (collectively, the “Series A Term Bonds”) are subject to mandatory sinking fund redemption, in whole or in part by lot, on September 1 each year commencing September 1, 20__ and September 1, 20__, respectively, as provided in the Indenture.
The Bonds are subject to extraordinary redemption as a whole, or in part proportionately between the Bonds and the Series 2022B Bonds as described further in the Indenture, and on a pro rata basis among maturities of each such Series in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments of Special Taxes deposited to the Redemption Account, plus any amounts authorized to be transferred from the Reserve Account pursuant to the Indenture in connection with such transfers, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Redemption Dates Redemption Price
On or before [March 1, 2029] [103%]
[September 1, 2029 and March 1, 2030] [102]
[September 1, 2030 and March 1, 2031] [101]
[September 1, 2031 and thereafter] [100]
Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than thirty (30) nor more than forty-five (45) days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date, provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds.
The District shall have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available
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on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent.
This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary.
The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor.
The Trustee shall not be required to register transfers or make exchanges of (i) any Bonds for a period of fifteen (15) days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption.
The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture.
THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF UPLAND
OR OF THE DISTRICT FOR WHICH THE CITY OF UPLAND OR THE DISTRICT IS
OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE
BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE
PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE
INDENTURE BUT ARE NOT A DEBT OF THE CITY OF UPLAND, THE STATE OF
CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION.
This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California.
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IN WITNESS WHEREOF, Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California, has caused this Bond to be dated as of _____________, 2022, to be signed on behalf of the District by the Mayor of the City by his [manual/facsimile] signature and attested by the [manual/facsimile] signature of the City Clerk of the City.
COMMUNITY FACILITIES DISTRICT NO.
2015-1 (SYCAMORE HILLS) OF THE CITY OF
UPLAND, COUNTY OF SAN BERNARDINO,
STATE OF CALIFORNIA
Mayor of the City of Upland, California
ATTEST:
City Clerk of
the City of Upland, California
===================================================================== [FORM OF TRUSTEE’S CERTIFICATE
OF AUTHENTICATION AND REGISTRATION]
This is one of the Bonds described in the within-mentioned Indenture which has been registered on the Bond registration books.
Dated: _____________, 2022 U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee
By:
Its: Authorized Signatory
=====================================================================
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[FORM OF ASSIGNMENT]
For value received the undersigned hereby sell(s), assign(s) and transfer(s) unto
(Name, Address, and Tax Identification or Social Security Number of Assignee) the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) _____________________________________________________________________ attorney, to transfer the same on the Registration Books of the Trustee with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature must be guaranteed by a
member of an institution which is a
participant in the Securities Transfer Agent
Medallion Program (STAMP) or other
similar program.
Note: The signature(s) on this Assignment
must correspond with the name(s) as written on
the face of the within Bond in every particular
without alteration or enlargement or any
change whatsoever.
=====================================================================
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EXHIBIT B
FORM OF SPECIAL TAX BOND, TAXABLE SERIES 2022B (IMPROVEMENT AREA NO. 2)
Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the District or the Trustee for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
R-__ $___________
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF SAN BERNARDINO
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE
CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA
SPECIAL TAX BOND
TAXABLE SERIES 2022B (IMPROVEMENT AREA NO. 2)
INTEREST RATE MATURITY DATE DATED DATE CUSIP
____% September 1, 20__ __________, 2022 91535____
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: ________________________________ DOLLARS COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA (the “District”), which was formed by the City of Upland (the “City”) and is situated in the County of San Bernardino, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof, unless (i) the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the
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close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 (each, an “Interest Payment Date”), commencing September 1, 2022, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment.
The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such term is defined in the Indenture (as defined below)), initially U.S. Bank Trust Company, National Association (the “Trustee”). Interest on this Bond shall be paid by check of the Trustee mailed on the Interest Payment Date by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Registered Owner hereof as of the close of business on the fifteenth day of the month preceding the Interest Payment Date (the “Record Date”) at such Registered Owner’s address as it appears on the registration books maintained by the Trustee.
This Bond is one of a duly authorized issue of “Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California, Special Tax Bonds, Taxable Series 2022B (Improvement Area No. 2)” (the “Bonds”) issued in the aggregate principal amount of $____________ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the “Act”) for the purpose of financing certain public facilities, funding a reserve subaccount, and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City acting in its capacity as the legislative body of the District (the “Legislative Body”) on [March ___, 2022] and a Bond Indenture dated as of [March 1, 2022], by and between the District and the Trustee executed in connection therewith (the “Indenture”), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California.
Pursuant to the Act and the Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District (the “Special Taxes”) and certain other amounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund (other than the Administrative Expenses Account therein and any Subaccounts of the Reserve Account not designated in the Indenture for the benefit of this Bond) established under the Indenture, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenan ted for the benefit of the owners of the Bonds that under certain circumstances described in the Indenture it will commence
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and diligently pursue to completion judicial foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds.
The Bonds are limited obligations of the District and are payable from, and are secured by, a first pledge of and lien on the Net Taxes (as that term is defined in the Indenture) on a parity with the District’s $____________ original aggregate principal amount Special Tax Bonds, Series 2022A (Improvement Area No. 2) (the “Series 2022A Bonds”), issued concurrently with the Bonds.
The Bonds maturing on or before [September 1, 2031] are not subject to optional redemption prior to maturity. The Bonds maturing on or after [September 1, 2032] shall be subject to call and redemption prior to maturity and may be redeemed, at the option of the District, from any source of funds on any date on or after [September 1, 2031] in whole, or in part, from such maturities as are selected by the District and by lot within a maturity, [at a redemption price equal to 100% of the principal amount to be redeemed, without premium, together with accrued interest to the date of redemption].
The Bonds maturing on September 1, 20__ and September 1, 20__ are subject to mandatory sinking fund redemption, in whole or in part by lot, on September 1 each year commencing September 1, 20__ and September 1, 20__, respectively, as provided in the Indenture.
The Bonds are subject to extraordinary redemption as a whole, or in part proportionately between the Bonds and the Series 2022A Bonds as described further in the Indenture, and on a pro rata basis among maturities of each such Series in integral multiples of $5,000, as nearly as possible, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments of Special Taxes deposited to the Redemption Account, plus any amounts authorized to be transferred from the Reserve Account pursuant to the Indenture in connection with such transfers, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Redemption Dates Redemption Price
On or before [March 1, 2029] [103%]
[September 1, 2029 and March 1, 2030] [102]
[September 1, 2030 and March 1, 2031] [101]
[September 1, 2031 and thereafter] [100]
Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than thirty (30) nor more than forty-five (45) days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date, provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds.
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The District shall have the right to rescind any optional redemption by written notice to the Trustee one (1) Business Day prior to the date fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The District and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent.
This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary.
The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor.
The Trustee shall not be required to register transfers or make exchanges of (i) any Bonds for a period of fifteen (15) days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption.
The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture.
THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF UPLAND
OR OF THE DISTRICT FOR WHICH THE CITY OF UPLAND OR THE DISTRICT IS
OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL O R SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE
BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE
PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE
INDENTURE BUT ARE NOT A DEBT OF THE CITY OF UPLAND, THE STATE OF
CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION.
This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required
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by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California.
IN WITNESS WHEREOF, Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California, has caused this Bond to be dated as of _____________, 2022, to be signed on behalf of the District by the Mayor of the City by his [manual/facsimile] signature and attested by the [manual/facsimile] signature of the City Clerk of the City.
COMMUNITY FACILITIES DISTRICT NO.
2015-1 (SYCAMORE HILLS) OF THE CITY OF
UPLAND, COUNTY OF SAN BERNARDINO,
STATE OF CALIFORNIA
Mayor of the City of Upland, California
ATTEST:
City Clerk of
the City of Upland, California
==================================================================== [FORM OF TRUSTEE’S CERTIFICATE
OF AUTHENTICATION AND REGISTRATION]
This is one of the Bonds described in the within-mentioned Indenture which has been registered on the Bond registration books.
Dated: _____________, 2022 U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee
By:
Its: Authorized Signatory
=====================================================================
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[FORM OF ASSIGNMENT]
For value received the undersigned hereby sell(s), assign(s) and transfer(s) unto
(Name, Address, and Tax Identification or Social Security Number of Assignee) the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) _____________________________________________________________________ attorney, to transfer the same on the Registration Books of the Trustee with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature must be guaranteed by a
member of an institution which is a
participant in the Securities Transfer Agent
Medallion Program (STAMP) or other
similar program.
Note: The signature(s) on this Assignment
must correspond with the name(s) as written on
the face of the within Bond in every particular
without alteration or enlargement or any
change whatsoever.
=====================================================================
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EXHIBIT C
ADMINISTRATIVE EXPENSE PAYMENT REQUEST FORM
U.S. Bank Trust Company, National Association
Global Corporate Trust
633 West Fifth Street, 24th Floor
Los Angeles, California 90071
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE CITY
OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA SPECIAL TAX BONDS, SERIES 2022 (IMPROVEMENT AREA NO. 2) PAYMENT REQUEST NO. ____
The Trustee is hereby requested to pay from the Administrative Expenses Account of the Special Tax Fund established pursuant to the Bond Indenture, dated as of [March 1, 2022], by and between Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California (the “District”), with respect to its Improvement Area No. 2 and you, as Trustee, to the person, corporation, or other entity designated below as Payee, the sum set forth below such designation, in payment of the Administrative Expense(s) described below. The amount shown below is due and payable under a purchase order, contract, or other authorization with respect to the Administrative Expense described below and has not formed the basis of any prior request for payment.
Payee:
Address:
Amount: $
Description:
The Administrative Expense(s) described above are accepted by the District for its Improvement Area No. 2 and authorized to be paid to the Payee. For the current Bond Year (September 2 through September 1), the total amount of Administrative Expenses requested by the District for payment from the Administrative Expenses Account (including this Payment Request) is $______________, and includes Payment Requests Nos. _____________.
All payments shall be made by check or wire transfer in accordance with the payment instructions set forth herein, and the Trustee shall rely on such payment instructions with no duty to investigate or inquire as to the authenticity of the payment instructions or the authority under which they were given.
Executed by the Authorized Representative of
Community Facilities District No. 2015-1
(Sycamore Hills) of the City of Upland, County of
San Bernardino, State of California
Signature:
Name:
Title:
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EXHIBIT D
FORM OF REQUISITION FOR DISBURSEMENT OF PROJECT COSTS
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS) OF THE
CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)
Requisition No. _____
Account: ____ SERIES 2022A (Tax-Exempt) ____ TAXABLE SERIES 2022B U.S. Bank Trust Company, National Association, as Trustee, is hereby requested to pay from the Community Facilities District No. 2015-1 (Sycamore Hills) IA No. 2 Improvement Fund (the “Improvement Fund”), established by the Bond Indenture, dated as of [March 1, 2022] (the “Indenture”), by and between the Trustee and Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California (the “District”), the amount specified and to the payee named below for payment of the Project Costs set forth in Attachment No. 1 hereto:
Payee:
Address:
Purpose:
Amount: $
The amount is due and payable under purchase order, contract or other authorization and has not formed the basis of any prior request for payment. The conditions for the release of this amount from the Improvement Fund, including those conditions in Sections 3.10(b), (c) and (d) of the Indenture to the extent applicable, have been satisfied. Sections 3.10(b), (c) and (d) of the Indenture are summarized as follows:
Section 3.10(b) - Development Impact Fees: Requisitions for all Project Costs identified on Exhibit B (Eligible DIFs) of the Acquisition Agreement with respect to Improvement Area No. 2 shall be submitted and approved by the District solely for disbursement from the Taxable Series 2022B Account of the Improvement Fund.
____ Please mark here if this Requisition is for development impact fees. Section 3.10(c) - Facilities Nos. 12 and 15: In furtherance of federal tax covenants set forth in the Indenture, any Requisition for Disbursement of Project Costs of those certain facilities identified on Exhibit A of the Acquisition Agreement as Facility No. 12 (i.e., Gas Main Extension within Baseline Road) or Facility No. 15 (i.e., Relocation of Edison Power Poles along Project Frontage) shall be submitted and approved by the
D-2
12979-0034\2596666v3.doc
District for disbursement solely from amounts on deposit in the Taxable Series 2022B Account of the Improvement Fund.
____ Please mark here if this Requisition is for either Facility No. 12 (i.e., Gas Main Extension within Baseline Road) or Facility No. 15 (i.e., Relocation of Edison Power Poles along Project Frontage).
Section 3.10(d) - Unconstructed Facility No. 4: No Requisition for Disbursement of Project Costs shall be approved for unconstructed Facility No. 4 (i.e., 10” VCP Sewer Line within Benson Avenue from 13th Street to Arrow Highway), which facility was determined by the parties to the Acquisition Agreement to no longer be necessary and therefore was not constructed.
There has not been filed with nor served upon the District notice of any lien, right to lien or attachment upon, or stop notice or claim affecting the right to receive payment of the amount specified above which has not been released or will not be released simultaneously with the payment of such amount, other than materialmen’s or mechanic’s liens accruing by mere operation of law.
Dated: COMMUNITY FACILITIES DISTRICT NO. 2015-
1 (SYCAMORE HILLS) OF THE CITY OF
UPLAND, COUNTY OF SAN BERNARDINO,
STATE OF CALIFORNIA
By:
Authorized Representative
D-A-1
12979-0034\2596666v3.doc
ATTACHMENT NO. 1
(IMPROVEMENT FUND)
ACCOUNT: ____ SERIES 2022A (Tax-Exempt) ____ TAXABLE SERIES 2022B
[Insert Description of Project Costs &
Attach Completed Acquisition Agreement Payment/Disbursement Request with supporting documentation, if payment is requested by Developer]
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$_________
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS)
OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA SPECIAL TAX BONDS, SERIES 2022A (IMPROVEMENT AREA NO. 2)
and
$_________
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS)
OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA SPECIAL TAX BONDS, TAXABLE SERIES 2022B (IMPROVEMENT AREA NO. 2)
BOND PURCHASE AGREEMENT
_________, 2022
Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California Upland, California
Ladies and Gentlemen:
Hilltop Securities Inc. (the “Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (the “Purchase Agreement”) with Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California (the “CFD”) which, upon acceptance, will be binding upon the CFD and upon the Underwriter. This offer is made subject to acceptance of it by the CFD on the date hereof, and if not accepted will be subject to withdrawal by the Underwriter upon notice delivered to the CFD at any time prior to the acceptance hereof by the CFD.
The CFD acknowledges and agrees that: (i) the primary role of the Underwriter as underwriter is to purchase the Bonds (as defined below) for resale to investors in an arm’s-length commercial transaction between the CFD and the Underwriter; (ii) in connection with such transaction, the Underwriter is acting solely as a principal and not as an agent or a fiduciary of the CFD; (iii) the Underwriter has financial and other interests that differ from those of the CFD; (iii) the Underwriter has not assumed a fiduciary responsibility in favor of the CFD with respect to: (A) the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the CFD on other matters), or (B) any other obligation to the CFD except the obligations expressly set forth in this Purchase Agreement; and (iv) the CFD has consulted with its respective legal and municipal advisors to the extent it deemed appropriate in connection with the offering of the Bonds. The Underwriter has provided to the CFD prior disclosures under Rule G-17 of the Municipal Securities Rulemaking Board (the “MSRB”), which have been received by the CFD.
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2 1. Purchase, Sale and Delivery of the Bonds; Establishment of Issue Price. (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter agrees to purchase from the CFD, and the CFD agrees to sell to the Underwriter, all (but not less than all) of the Community Facilities Dis trict No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California, Special Tax Bonds, Series 2022A (Improvement Area No. 2) (the “2022A Bonds”) and the Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California, Special Tax Bonds, Taxable Series 2022B (Improvement Area No. 2) (the “2022B Bonds,” and together with the 2022A Bonds, the “Bonds”) in the aggregate principal amounts specified in Exhibit A hereto. The Bonds shall be dated the Closing Date (as defined herein), and bear interest from said date (payable semiannually on March 1 and September 1 in each year, commencing [September 1, 2022]) at the rates per annum and maturing on the dates and in the amounts set forth in Exhibit A hereto. The purchase price for the Bonds shall be the amount specified as such in Exhibit A hereto.
The Underwriter agrees to assist the CFD in establishing the issue price of the 2022A Bonds and shall execute and deliver to the CFD at Closing (as defined herein) an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit D, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the CFD and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All actions to be taken by the CFD under this section to establish the issue price of the Bonds may be taken on behalf of the CFD by the CFD’s municipal advisor identified herein and any notice or report to be provided to the CFD may be provided to the CFD’s municipal advisor.
Except as otherwise set forth in Exhibit A attached hereto, t he CFD will treat the first price at which 10% of each maturity of the 2022A Bonds (the “10% test”) is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the CFD the price or prices at which it has sold to the public each maturity of 2022A Bonds. If at that time the 10% test has not been satisfied as to any maturity of the 2022A Bonds, the Underwriter agrees to promptly report to the CFD the prices at which it sells the unsold 2022A Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the 2022A Bonds of that maturity or until all 2022A Bonds of that maturity have been sold to the public.
The Underwriter confirms that it has offered the 2022A Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the 2022A Bonds for which the 10% test has not been satisfied and for which the CFD and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the CFD to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the 2022A Bonds, the Underwriter will neither offer nor sell
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3 unsold 2022A Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
(1) the close of the fifth (5th) business day after the sale date; or (2) the date on which the Underwriter has sold at least 10% of that matu rity of the 2022A Bonds to the public at a price that is no higher than the initial offering price to the public.
The Underwriter shall promptly advise the CFD when it has sold 10% of that maturity of the 2022A Bonds to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date.
The Underwriter confirms that any selling group agreement and any retail distribution agreement relating to the initial sale of the 2022A Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such retail distribution agreement, as applicable, to (1) report the prices at which it sells to the public the unsold 2022A Bonds of each maturity allotted to it until it is notified by the Underwriter that either the 10% test has been satisfied as to the 2022A Bonds of that maturity or all 2022A Bonds of that maturity have been sold to the public and (2) comply with the hold-the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriter.
The CFD acknowledges that, in making the representation set forth in this subsection, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the 2022A Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the hold-the-offering-price rule, if applicable, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a retail distribution agreement was employed in connection with the initial sale of the 2022A Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the hold -the-offering-price rule, if applicable, as set forth in the retail distribution agreement and the related pricing wires. The CFD further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution agreement, to comply with its corresponding agreement regarding the hold-the-offering-price rule as applicable to the 2022A Bonds.
The Underwriter acknowledges that sales of any 2022A Bonds to any person that is a related party to the Underwriter shall not constitute sales to the public fo r purposes of this section. Further, for purposes of this section:
(1) “public” means any person other than an underwriter or a related party, (2) “underwriter” means (A) any person that agrees pursuant to a written contract with the CFD (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the 2022A Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate i n the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the 2022A Bonds to the public), (3) a purchaser of any of the 2022A Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of
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4 their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (4) “sale date” means the date of execution of this Purchase Agreement by all parties.
(b) The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable and subject to redemption as provided in, the Bond Indenture, dated as of ________ 1, 2022, (the “Indenture”), by and between the CFD and U.S. Bank National Association, as trustee (the “Trustee”), approved by Resolution No. _______ adopted by the City Council of the City of Upland (the “City”), acting as the legislative body of the CFD (the “City Council”), on ________, 2022 (the “Resolution of Issuance”). The Bonds and interest thereon will be payable from a special tax (the “Special Tax”) levied and collected on the taxable land within the CFD in accordance with Resolution No. 6437 adopted by the City Council on March 26, 2018 (the “Resolution of Change”), which declared the results of a special election within Improvement Area No 2 and changed and replaced the original rate and method of apportionment of special tax approved by Resolution No. 6308 adopted by the City Council on November 23, 2015 (the “Resolution of Formation”) with an amended and restated rate and method of apportionment of special tax (the “Amended and Restated Rate and Method of Apportionment of Special Tax”), less amounts not to exceed the Administrative Expenses Priority Amount (as defined in the Indenture) set aside to pay administrative expenses of the CFD (the “Net Taxes”). Proceeds of the sale of the Bonds will be used in accordance with the Indenture and the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the “Law”), to acquire certain public improvements described in the Resolution of Formation. The Resolution of Issuance, the Resolution of Formation, the Resolution of Change, and Ordinance No. 1899, as amended by Ordinance No. 1930 (all as amended from time to time), are collectively referred to herein as the “CFD Resolutions.”
(c) At or prior to the acceptance hereof by the CFD, the CFD shall cause to be delivered to the Underwriter a Rule 15c2-12 Certificate, dated as of the date of the Preliminary Official Statement (the “CFD Certificate”), in substantially the form attached hereto as Exhibit B, with only such changes therein as shall have been accepted by the Underwriter. (d) Subsequent to its receipt of the CFD Certificate deeming the Preliminary Official Statement for the Bonds, dated _______, 2022, which Preliminary Official Statement, together with the cover page, inside cover page and all appendices thereto, is herein collectively referred to as the “Preliminary Official Statement,” final for purposes of Rule 15c2-12 of the Securities and Exchange Commission (“Rule 15c2-12”), the Underwriter has distributed copies of the Preliminary Official Statement, and the Preliminary Official Statement has been made available to investors electronically.
The CFD hereby ratifies the use by the Underwriter of the Preliminary Official Statement and authorizes the Underwriter to use and distribute (i) the final Official Statement in the form of the Preliminary Official Statement as amended to conform to the terms of this Purchase Agreement, and with such changes and amendments as are mutually agreed to by the CFD and the Underwriter, including the cover page, inside cover page and all appendices thereto, and including all information previously permitted to have been omitted by Rule 15c2-12, and any supplements and amendments thereto as have been approved by the CFD as evidenced by the execution and delivery of such
4893-9813-5560.2
5 document by an officer of the CFD, herein referred to as the “Official Statement,” (ii) the Indenture, (iii) the Continuing Disclosure Agreement of the CFD (the “CFD Disclosure Agreement”), (iv) this Purchase Agreement, (v) any other documents or contracts to which the CFD is a party, and (vi) all information contained therein, and all other documents, certificates and statements fur nished by the CFD to the Underwriter in connection with the transactions contemplated by this Purchase Agreement, in connection with the offer and sale of the Bonds by the Underwriter. The Underwriter hereby agrees to deliver a copy of the Official Statement to the Munici pal Securities Rulemaking Board (the “MSRB”) through the Electronic Municipal Marketplace Access website of the MSRB on or before the Closing Date and otherwise to comply with all applicable statutes and regulations in connection with the offering and sale of the Bonds, including, without limitation, MSRB Rule G-32 and Rule 15c2-12.
(e) At 8:00 A.M., Pacific Daylight Time, on _______, 2022, or at such earlier time or date as shall be agreed upon by the Underwriter and the CFD (such time and date being herein referred to as the “Closing Date”), the CFD will deliver (i) through the facilities of the Depository Trust Company, the Bonds in definitive form (all Bonds being in book-entry form registered in the name of Cede & Co. and having the CUSIP numbers assigned to them printed thereon), duly executed by the officers of the CFD, as provided in the Indenture, and (ii) to the Underwriter, at the offices of Bond Counsel, or at such other place as shall be mutually agreed upon by the CFD and the Underwriter, the other documents herein mentioned; and the Underwriter shall accept such delivery and pay the purchase price of the Bonds in immediately available funds (such delivery and payment being herein referred to as the “Closing”). Notwithstanding the foregoing, the Underwriter may, in its discretion, accept delivery of the Bonds in temporary form upon making arrangements with the CFD which are satisfactory to the Underwriter relating to the delivery of the Bonds in definitive form. (f) Except as otherwise disclosed and agreed to by the CFD, the Underwriter agrees to make a bona fide public offering of the Bonds at their initial public offering price or prices set forth on the inside cover page of the Official Statement and in Exhibit A h ereto; provided, however, the Underwriter reserves the right to change such initial public offering prices as the Underwriter deems necessary or desirable, in its sole discretion, in connection with the marketing of the Bonds, and to sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the initial offering prices for the Bonds set forth in the Official Statement. A “bona fide public offering” shall include an offering to instituti onal investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. The Underwriter shall provide to the CFD on the Closing Date a certificate stating that the Underwriter made a bona fide public offering of the Bonds at their initial public offering price or prices set forth on the inside cover page of the Official Statement and in Exhibit A.
2. Representations, Warranties and Agreements of the CFD. The CFD represents, warrants and covenants to and agrees with the Underwriter that:
(a) The CFD is duly organized and validly existing as a community facilities district under the laws of the State of California. The City has duly authorized the formation of the CFD pursuant to the Resolution of Formation and the Law. The City Council of the City, as the legislative body of the CFD, has duly adopted the CFD Resolutions, and has caused to be recorded in the real property records of the County of San Bernardino (i) on December 15, 2015, a Notice of Special Tax Lien, as Document No. 2015-0547478 (the “Original Notice of Special Tax Lien”), and (ii) on April 4, 2018, an Amended Notice of Special Tax Lien, as Document No. 2018-0117989 (the “Amended Notice of Special Tax Lien”) that amends and supersedes the Original Notice of Special Tax Lien”) (such CFD Resolutions
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6 and Amended Notice of Special Tax Lien being collectively referred to herein as the “Formation Documents”). Each of the Formation Documents remains in full force and effect as of the date hereof and, except as otherwise described therein, has not been amended. The CFD is duly organized and validly existing as a community facilities district under the laws of the State of California. The CFD has, and at the Closing Date will have, as the case may be, full legal right, power and authority (i) to execute, deliver and perform its obligations under this Purchase Agreement and the CFD Disclosure Agreement, and to carry out all transactions contemplated by each of such agreements, (ii) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Resolution of Issuance and the Indenture as provided herein, and (iii) to carry out, give effect to and consummate the transactions contemplated by the Formation Documents and by the Indenture, this Purchase Agreement, and the CFD Disclosure Agreement (collectively, the “CFD Documents”) and the Official Statement ; (b) The CFD has complied, and will at the Closing Date be in compliance, in all material respects, with the Formation Documents and the CFD Documents, and any immaterial compliance by the CFD, if any, will not impair the ability of the CFD to carry out, give effect to or consummate the transactions contemplated by the foregoing. From and after the date of issuance of the Bonds, the CFD will continue to comply with the covenants of the CFD contained in the CFD Documents; (c) The City Council of the City has duly and validly: (i) adopted the CFD Resolutions, (ii) called, held and conducted in accordance with all requirements of the Law an election within the CFD to approve the levy of the Special Tax within the CFD and the issuance of the Bonds and recorded the Amended Notice of Special Tax Lien which established a continuing lien on the land within the CFD securing the Special Tax, (iii) authorized and approved the execution, delivery and due performance of the Bonds and the CFD Documents, (iv) authorized the preparation, delivery and distribution of the Preliminary Official Statement and the Official Statement, and (v) authorized and approved the performance by the CFD of its obligations contained in, and the taking of any and all action as may be necessary to carry out, give effect to and consummate the transactions contemplated by, each of the CFD Documents (including, without limitation, the collection of the Special Tax), the Bonds and the Official Statement and at the Closing Date, the Formation Documents will be in full force and effect and the CFD Documents and the Bonds will constitute the valid, legal and binding obligations of the CFD and (assuming due authorization, execution and delivery by other parties thereto, where necessary) will be enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in the State of California and to the application of equitable principles if equitable remedies are sought;
(d) To the best of the CFD’s knowledge, the CFD is not in breach of or default under any applicable law or administrative rule or regulation of the State of California (the “State”) or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, fiscal agent a greement, contract, agreement or other instrument to which the CFD is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the performance by the CFD of its obligations under the Bonds, the Formation Documents or the CFD Documents, and compliance with the provisions of each thereof will not conflict with or constitute a breach of or default , in any material respect, under any applicable law or administrative rule or regulation of the State or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order, or a material breach of or default , in any material respect, under any loan agreement, note, resolution, trust agreement, contract, agreement or other instrument to which the CFD, as the case may be, is a party or is otherwise subject or bound;
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7 (e) Except for compliance with the blue sky or other states securities law filings, as to which the CFD makes no representations, warranties, covenants, and agreements, all approvals, consents, authorizations, elections and orders of or filings or registrations with any State governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the CFD of its obligations hereunder, or under the Formation Documents or the CFD Documents, have been obtained and are in full force and effect;
(f) The Special Tax constituting the security for the Bonds has been duly and lawfully authorized and may be levied under the Law, the State Constitution and the applicable laws of the State, and such Special Tax, when levied, will constitute a valid and legally binding continui ng lien on the properties on which it has been levied;
(g) The CFD shall not supplement or amend the Official Statement or cause the Official Statement to be supplemented or amended without the prior written consent of the Underwriter, which consent shall not be unreasonably withheld. Until the date which is twenty-five (25) days after the “end of the underwriting period” (as defined herein), if any event shall occur of which the CFD is aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements in the Official Statement, in light of the circumstances existing at such time, not misleading, the CFD shall forthwith notify the Underwriter of any such event of which it has knowledge and shall cooperate fully in furnishing any information available to it for any supplement to the Official Statement necessary, in the Underwriter’s reasonable opinion, so that the statements therein as so supplemented will not be misleading in light of the circumstances existing a t such time and the CFD shall promptly furnish to the Underwriter a reasonable number of copies of such supplement. As used herein, the term “end of the underwriting period” means the later of such time as (i) the CFD delivers the Bonds to the Underwriter, or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the “end of the underwriting period” shall be deem ed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the CFD at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the “end of the underwriting period”;
(h) The Indenture creates a valid pledge of the Net Taxes and the moneys in the Special Tax Fund (exclusive of the Administrative Expenses Account) and the Reserve Account therein established pursuant to the Indenture, including the investments thereof, subject in all cases to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon to maturity or to the date of redemption if redeemed prior to maturity, and premium, if any, the CFD will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture;
(i) Except as disclosed in the Official Statement, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with proper service of process on the CFD having been accomplished or, to the best knowledge of the CFD, threatened (i) which would materially adversely affect the ability of the CFD to perform its obligations under the Bonds, the Formation Documents or the CFD Documents, or (ii) seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Indenture, or the collection or application of the Special Tax pledged or to be
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8 pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting the validity or enforceability of the Bonds, the Formation Documents, the CFD Documents, or any action contemplated by any of said documents, or (iii) in any way contesting the completeness or accuracy of the Preliminary Official Statement or the powers or authority of the CFD with respect to the Bonds, the Formation Documents, the CFD Documents, or any action of the CFD contemplated by any of said documents; nor is there any action pending with proper service of process on the CFD having been accomplished or, to the best knowledge of the CFD, threatened against the CFD which alleges that interest on the Bonds is not excludable from gross income for federal income tax purposes or is not exempt from California personal income taxation; (j) The CFD will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order for the Underwriter to qualify the Bonds for offer and sale under the “Blue Sky” or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designa te; provided, however, the CFD shall not be required to register as a dealer or a broker of securities or to consent to service of process in connection with any blue sky filing; (k) Any certificate signed by any official of the CFD authorized to do so shall be deemed a representation and warranty to the Underwriter as to the statements made therein; (l) The CFD will apply the proceeds of the Bonds in accordance with the Indenture and as described in the Official Statement;
(m) The information contained in the Preliminary Official Statement was as of the date thereof, and the information contained in the Official Statement as of its date and on the Closing Date, shall be, true and correct in all material respects and such information does not and shall not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (n) The Preliminary Official Statement heretofore delivered to the Underwriter has been deemed final by the CFD as of its date, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of Rule 15c2-12. The CFD hereby covenants and agrees that, within seven (7) business days from the date hereof, the CFD shall cause a final electronic and/or printed form of the Official Statement to be delivered to the Underwriter in a quantity mutually agreed upon by the Underwriter and the CFD so that the Underwriter may comply with paragraph (b)(4) of Rule 15c2-12 and Rules G-12, G-15, G-32 and G-36 of the Municipal Securities Rulemaking Board;
(o) Except as otherwise disclosed in the Preliminary Official Statement, the CFD is, and has always been, in material compliance with respec t to all reporting obligations in the last five years that it has undertaken under Rule 15c2-12 for all indebtedness issued by the CFD; (p) Except as otherwise disclosed in the Preliminary Official Statement, the Formation Documents have not been amended, terminated, rescinded or modified; (q) The CFD shall not voluntarily undertake any course of action inconsistent with satisfaction of the requirements applicable to the CFD as set forth in this Purchase Agreement;
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9 (r) The CFD shall cooperate with the Underwriter in the qualification of the Bonds for offering and sale and the determination of their eligibility for investment under the laws of such jurisdictions as the Underwriter may designate;
(s) The CFD shall not knowingly take or omit to take any action that, under exis ting law, may adversely affect the exemption from state income taxation or the exclusion from gross income for federal income tax purposes of the interest on the Bonds.
3. Representations and Warranties of the Underwriter. The Underwriter hereby agrees with, and makes the following representations and warranties to, the CFD, as of the date hereof and as of the Closing Date, which representations and warranties shall survive the Closing:
(a) The Underwriter is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) This Purchase Agreement has been duly authorized, executed and delivered by the Underwriter and, assuming the due authorization, execution and delivery by the CFD, is the legal, valid and binding obligation of the Underwriter enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, moratorium or other laws affecting enforcement of creditors’ rights or by the application of equitable pri nciples if equitable remedies are sought; and
(c) The Underwriter represents that it is licensed by and registered with the Financial Industry Regulatory Authority as a broker-dealer and the MSRB as a municipal securities dealer.
4. Conditions to the Obligations of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on th e part of the CFD contained herein, as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the CFD made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the CFD of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions:
(a) At the Closing Date, the Formation Documents and the CFD Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as disclosed in the Preliminary Official Statement or may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and with the transactions contemplated thereby and by this Purchase Agreement, all such actions as, in the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel for the CFD, and Nixon Peabody LLP, counsel to the Underwriter, shall be necessary and appropriate; (b) The information contained in the Official Statement will, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, be true, correct and complete in all material respects and will not, as of the Closing Date or as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
4893-9813-5560.2
10 (c) Between the date hereof and the Closing Date, the market price or marketability of the Bonds at their initial offering prices set forth in the Official Statement shall not have been materially adversely affected, in the judgment of the Underwriter (evidenced by a written notice to the CFD terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following:
(1) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department or the Internal Revenue Service of the United States of America, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon the interest that would be received by the holders of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; (2) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America, or an order, decree or injunction issued by an y court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, or of the Bonds, including any or all underwriting arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws, rules or regulations as amended and then in effect;
(3) any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the CFD, its property, income, securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the CFD to construct or acquire the improvements as contemplated by the Formation Documents, the CFD Documents or the Official Statement; (4) any event occurring, or information becoming known, which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or the Official Statement, or results in the Preliminary Official Statement or the Official Statement containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (5) the declaration of war or the escalation of, or engagement in, military hostilities by the United States or the occurrence of any other national or international emergency or calamity relating to the effective operation of the government of, or the financial community in, the United States which, in the judgment of the Underwriter, makes it impracticable or inadvisable to proceed
4893-9813-5560.2
11 with the offering or the delivery of the Bonds on the terms and in the manner contemplated in the Preliminary Official Statement or the Official Statement; (6) the declaration of a general banking moratorium by federal, State of New York or State of California authorities, or the general suspension of trading on any national securities exchange or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange or other national securities exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission (the “SEC”) or any other governmental authority having jurisdiction that, in the Underwriter’s reasonable judgment, makes it impracticable for the Underwriter to market the Bonds or enforce contracts for the sale of the Bonds; (7) the imposition by the New York Stock Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or securities generally, or the materia l increase of any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (8) the entry of an order by a court of competent jurisdiction which enjoins or restrains the City, the County of San Bernardino, California or any other governmental entity, agency, or instrumentality from issuing permits, licenses or entitlements within the CFD or which order, in the reasonable opinion of the Underwriter, otherwise materially and adversely affects proposed development of property within the CFD;
(9) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred;
(10) there shall have been any material adverse change in the affai rs of the CFD that in the Underwriter’s reasonable judgment will materially adversely affect the market for the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; (11) there shall be established any new restriction on transa ctions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a change to the net capital requirements of, underwriters established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order;
(12) a stop order, release, regulation, or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made to the effect that the issuance, offering, or sale of the Bonds, including all the underlying obligations as contemplated hereby or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act, and the Trust Indenture Act of 1939, as amended.
(d) On the Closing Date, the Underwriter shall have received counterpart originals or certified copies of the following documents, in each case satisfactory in form and substance to the Underwriter:
4893-9813-5560.2
12 (1) The Formation Documents and the CFD Documents, together with a certificate dated as of the Closing Date of the City Clerk of the City to the effect that each Formation Document is a true, correct and complete copy of the one duly adopted by the City Council; (2) The Official Statement;
(3) Unqualified approving opinions for the Bonds, dated the Closing Date and addressed to the CFD, of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel for the CFD, in the respective forms attached to the Preliminary Official Statement at Appendix D, and an unqualified letter or letters of such counsel, dated the Closing Date and addressed to the Underwriter and the Trustee, to the effect that such approving opinion s addressed to the CFD may be relied upon by the Underwriter and the Trustee to the same extent as if such opinions were addressed to it; (4) A supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Bond Counsel for the CFD, to the effect that (i) the Purchase Agreement has been duly executed and delivered by, and is a valid and binding agreement of, the CFD; (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; (iii) the CFD has full legal power and authority to issue the Bonds, to enter into the CFD Documents, and to carry out the transactions contemplated under the CFD Documents; (iv) the CFD Documents are legal, valid, and binding obligations of the CFD, enforceable in accordance wi th their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws relating to or limiting creditors’ rights in the State of California and by the principles of equity if equitable remedies are sought; (v) the Official Statement has been duly executed and delivered by the CFD by an authorized officer of the City; and (vi) the statements contained in the Official Statement and under the captions “INTRODUCTION,” “THE BONDS (excluding information with respect to DTC and its Book-Entry Only System),” “SECURITY FOR THE BONDS” and “TAX MATTERS,” and in APPENDIX E – “SUMMARY OF CERTAIN PROVISIONS OF INDENTURE” and APPENDIX D – “FORMS OF OPINIONS OF BOND COUNSEL,” in each case with respect to the Indenture and the Bonds and excluding any material that may be treated as included under such captions by cross-reference or reference to other documents or sources, insofar as such statements expressly summarize certain provisions of the Indenture and the form and content of such counsel’s approving opinion, are accurate in all material respects; (5) An opinion, dated the Closing Date and addressed to the Underwriter, of Nixon Peabody LLP to the effect that, without having undertaken to check the accuracy, completeness or fairness of, or verifying the information contained in the Official Statement, and are therefore unable to make any representation in that regard, such firm has participated in conferences prior to the date of the Official Statement with the City’s and the CFD’s representatives, including Bond Counsel and the Counsel to the City, representatives of the Underwriter, KB HOME Coastal Inc. (“KB”) and Bravepark Property LLC (“Bravepark”), counsel to KB, counsel to Bravepark, and others, during which conferences the contents of the Official Statement and related matters were discussed and based upon the information made available to such firm in the course of its participation as Underwriter’s counsel in such conferences and its review of the documents referred to above, its reliance on the documents, certificates, instructions, and records, and the opinions of counsel described above and its understanding of applicable law, such firm does not believe that the Preliminary Official Statement as of its date and as of the date of the pricing or the Official Statement as of its date or as of the Closing Date contained or contains any untrue statement of a material fact, or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein in light of the
4893-9813-5560.2
13 circumstances under which they were made, not misleading (provided that no view shall be expressed as to any information concerning DTC or the book-entry system, any information contained under the Appendices A through I or with respect to any financial, economic, demographic, statistical or engineering data or forecasts, numbers, charts, tables, estimates, projections, appraisals or assessed valuations contained in the Official Statement, including any of the Appendices thereto); (6) A certificate or certificates, dated the Closing Date and signed by an authorized officer of the CFD, ratifying the use and distribution by the Underwriter of the Preliminary Official Statement and the Official Statement in connection with the offering and sale of the Bonds; and certifying that (i) the representations and warranties of the CFD contained in Section 2 hereof are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best of his or her knowledge, no event has occurred since the date of the Official Statement affecting the matters contained therein which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make the statements and information contained in the Official Statement not misleading in any material respect, and the Bonds, the Formation Documents and the CFD Documents conform as to form and tenor to the descriptions thereof contained in the Official Statement; (iii) the CFD has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Formation Documents, the CFD Documents and the Official Statement at or prior to the Closing Date; and (iv) the representations and warranties of the CFD contained in the CFD Certificate are true and correct in all material respects on and as of the Closing Date, with the same effect as if made on the Closing Date, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the Official Statement;
(7) An opinion, dated the Closing Date and addressed to the Underwriter, of the City Attorney, to the effect that (i) the CFD is a community facilities district duly organized and validly existing pursuant to the Act; (ii) the Resolution of Issuance was duly adopted at a meeting of the City Council of the City, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout; (iii) to counsel’s knowledge, the execution and delivery of the CFD Documents and compliance by the CFD with the provisions thereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the CFD a breach of or default under any agreement or other instrument applicable to or binding upon the CFD, or any existing law, regulation, court order, or consent decree to which the CFD is subject; and (iv) except as stated in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, or body pending with respect to which the City or the CFD has been properly served with process or, to my knowledge, threatened against them: (a) which challenges the creation, organization, existence, or powers of the City or the CFD, or the titles of their respective officers or the City Council members to their respective offices; (b) seeking to enjoin or restrain the issuance, sale, and delivery of the Bonds, the lien, the levy, and the collection of the Special Tax, or the pledge thereof; (c) which questions any of the rights, powers, duties, or obligations of the CFD with respect to the Special Tax or the moneys and assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds; (d) which questions any authority for the issuance of the Bonds, the validity or enforceability of the Bonds, or the CFD Documents; or (e) which questions the transactions contemplated by the CFD Documents or the Official Statement;
(8) A letter, dated the date of the Closing and addressed to the Underwriter and the CFD, of Richards, Watson & Gershon, A Professional Corporation, disclosure counsel (the “Disclosure Counsel”), to the effect that, without having undertaken to determine independently the accuracy or
4893-9813-5560.2
14 completeness of the statements contained in the Preliminary Official Statement or the Official Statement, but on the basis of their participation in conferences with representatives of the CFD, the Special Tax Consultant and others, and their examination of certain documents, nothing has come to their attention which has led them to believe that the Preliminary Official Statement as of its date and as of the date of the pricing or the Official Statement as of its date or as of the date of closing contained or contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial statements or other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archeological or environmental matters, or any information about The Depository Trust Company or the book-entry-only system); (9) One or more certificates dated the Closing Date from Willdan Financial Services (the “Special Tax Consultant”) addressed to the CFD and the Underwriter to the effect that (i) the amount of the Special Taxes that could be levied in each Fiscal Year on all Developed Property (as defined in the Amended and Restated Rate and Method of Apportionment of Special Tax) in the CFD that are not delinquent in the payment of any Special Taxes then due a nd owing is at least one hundred ten percent (110%) of the total Annual Debt Service for each such Fiscal Year on the proposed Bonds, plus reasonably anticipated Administrative Expenses, and (ii) all information supplied by them for use in the Preliminary Official Statement and the Official Statement is true and correct as of the date of the Preliminary Official Statement or the Official Statement and as of the Closing Date; (10) A certificate of the CFD dated the Closing Date, in a form acceptable to Bond Counsel, that the 2022A Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended and an Information Return for Tax-Exempt Bond Issues (Internal Revenue Service Form 8038-G), in a form satisfactory to Bond Counsel for filing, executed by a duly authorized officer of the CFD;
(11) A certificate of the Trustee and an opinion of counsel to the Trustee dated the Closing Date and addressed to the CFD and the Underwriter to the effect that the Trustee has authorized the execution and delivery of the Indenture and that the Indenture is a valid and binding obligation of the Trustee enforceable in accordance with its terms;
(12) A Letter of Representations of KB in connection with the printing of the Preliminary Official Statement dated the date of the Preliminary Official Statement, substantially in the form attached as part of Exhibit C hereto or as such Letter of Representations may be modified with the approval of the Underwriter, Underwriter’s Counsel, Disclosure Counsel, and Bond Counsel, and a Closing Certificate of KB dated the Closing Date, substantially in the form attached as part of Exhibit C hereto;
(13) An opinion letter from counsel to KB addressed to the Underwriter and the CFD in form and substance acceptable to the Underwriter; (14) A Developer Tax Certificate from Bravepark in form and substance acceptable to Bond Counsel;
(15) An opinion letter from counsel to Bravepark addressed to the Underwriter and the CFD in from and substance acceptable to the Underwriter and Bond Counsel;
4893-9813-5560.2
15 (16) A letter dated the Closing Date from Kitty Siino & Associates, Inc. (the “Appraiser”) addressed to the Underwriter and the CFD to the effect that it has prepared the appraisal report (the “Appraisal”) with respect to the property located within Improvement Area No. 2 of the CFD, and that (a) the Appraisal, set forth in Appendix C to the Official Statement, may be included in the Preliminary Official Statement and the Official Statement, (b) the Appraisal in Appendix C and the information in the Official Statement referring to the Appraisal do not contain any untrue statement of a material fact or omit to state a material fact nece ssary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and (c) nothing has come to the attention of the Appraiser that would lead the Appraiser to believe that the value of the property in Improvement Area No. 2 of the CFD is less than the minimum value of such property reported in the Appraisal;
(17) Continuing Disclosure Certificate (Major Property Owner) substantially in the form attached as Appendix H of the Official Statement; and (18) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the statements and information contained in the Preliminar y Official Statement and the Official Statement, of the CFD’s representations and warranties contained herein and the due performance or satisfaction by the CFD at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the CFD and the CFD in connection with the transactions contemplated hereby and by the Official Statement.
If the CFD shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Underwriter nor the CFD shall be under any further obligation hereunder, except that the respective obligations of the CFD and the Underwriter set forth in Section 6, Section 7 and Section 9 hereof shall continue in full force and effect.
5. Conditions of the CFD’s Obligations. The CFD’s obligations hereunder are subject to the Underwriter’s performance of its obligations hereunder, and are also subject to the following conditions:
(a) As of the Closing Date, no litigation shall be pending with proper service of process on the CFD having been accomplished or, to the knowledge of the duly authorized officer of the CFD executing the certificate referred to in Section 4(d)(6) hereof, threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting any authority for or the validity of the Bonds, the Formation Documents, the CFD Documents or the existence or powers of the CFD; and (b) As of the Closing Date, the CFD shall receive the approving opinions of Bond Counsel referred to in Section 4(d)(3) and (4) hereof, dated as of the Closing Date.
6. Expenses.
4893-9813-5560.2
16 (a) The Underwriter shall be under no obligation to pay, and the CFD shall pay or cause to be paid (solely from proceeds of the Bonds) all expenses incident to the performance of the CFD’s obligations hereunder, including, but not limited to, the cost of printing, engraving and delivering the Bonds to the Underwriter, the cost of preparation, printing, distribution and delivery of the Indenture, the Preliminary Official Statement and the Official Statement, and all other agreements and documents contemplated hereby (and drafts of any thereof) in such reasonable quantities as requested by the Underwriter; and the fees and disbursements of the Trustee for the Bonds, Bond Counsel, Municipal Advisor, Special Tax Consultant, and any accountants, engineers or any other experts or consultants the CFD has retained in connection with the Bonds; and
(b) The CFD shall be under no obligation to pay, and the Underwriter shall pay, any fees of the California Debt and Investment Advisory Commission, the cost of preparation of any “blue sky” or legal investment memoranda and this Purchase Agreement; expenses to qualify the Bonds for sale under any “blue sky” or other state securities laws; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds (except those specifically enumerated in paragraph (a) of this section), including underwriter’s counsel, CUSIP® and MSRB fees, and any advertising expenses.
The CFD acknowledges that the Underwriter will pay from the underwriter’s expense allocation of the underwriting discount certain fees, including the applicable per bond assessment charged by the California Debt and Investment Advisory Commission.
7. Notices. Any notice or other communication to be given to the CFD under this Purchase Agreement may be given by delivering the same in writing to the CFD at 460 North Euclid Avenue, Upland, California 91786, Attention: City Manager; and any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Hilltop Securities Inc., 2533 South Coast Highway 101, Suite 250, Cardiff by the Sea, California 92007 Attention: Robin Thomas.
8. Parties in Interest. This Purchase Agreement is made solely for the benefit of the CFD and the Underwriter (including their successors or assigns), and no other person shall acquire or have any right hereunder or by virtue hereof.
9. Survival of Representations and Warranties. The representations and warranties of the CFD set forth in or made pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the CFD and regardless of delivery of and payment for the Bonds.
10. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the CFD and shall be valid and enforceable as of the time of such acceptance.
11. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds for the CFD.
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17 12. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California.
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4893-9813-5560.2
Signature Page of Bond Purchase Agreement relating to
Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California Special Tax Bonds, Series 2022A (Improvement Area No. 2) and Taxable Series 2022B (Improvement Area No. 2)
13. Counterparts. This Purchase Agreement may be executed simultaneously in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument.
Very truly yours,
HILLTOP SECURITIES INC.
By:
Authorized Signatory
ACCEPTED:
COMMUNITY FACILITIES DISTRICT NO. 2015-1
(SYCAMORE HILLS) OF THE CITY OF UPLAND,
COUNTY OF SAN BERNARDINO, STATE OF
CALIFORNIA
By:
Authorized Signatory
Time of Execution: __________________
4893-9813-5560.2
A-1
EXHIBIT A
MATURITY SCHEDULE
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS)
OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA SPECIAL TAX BONDS, SERIES 2022A (IMPROVEMENT AREA NO. 2)
Maturity Date
(September 1)
Principal
Amount Interest Rate Yield Price
______________
* Term Bond.
** Yield to call date of __________ at par.
The purchase price of the 2022A Bonds shall be $________, which is the principal amount thereof ($_________) plus net original issue premium of $__________ and less Underwriter’s discount of $__________.
4893-9813-5560.2
A-2
Maturity Date
(September 1)
10% Test
Satisfied
10% Test
Not
Satisfied
Subject to
Hold-The-
Offering-Price
Rule
4893-9813-5560.2
A-3
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS)
OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA SPECIAL TAX BONDS, TAXABLE SERIES 2022B (IMPROVEMENT AREA NO. 2)
Maturity Date
(September 1)
Principal
Amount Interest Rate Yield Price
______________
* Term Bond.
The purchase price of the 2022B Bonds shall be $_________, which is the principal amount thereof ($________) less Underwriter’s discount of $_________.
4893-9813-5560.2
B-1
EXHIBIT B
COMMUNITY FACILITIES DISTRICT NO. 2015-1
(SYCAMORE HILLS) OF THE CITY OF UPLAND,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA
SPECIAL TAX BONDS, SERIES 2022A (IMPROVEMENT AREA NO. 2) And
COMMUNITY FACILITIES DISTRICT NO. 2015-1
(SYCAMORE HILLS) OF THE CITY OF UPLAND,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA
SPECIAL TAX BONDS, TAXABLE SERIES 2022B (IMPROVEMENT AREA NO. 2)
RULE 15c2-12 CERTIFICATE
The undersigned hereby certifies and represents that he is the City Manager of the City of Upland and a duly authorized representative of the Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California (the “CFD”), and, as such, is duly authorized to execute and deliver this certificate and further hereby certifies that:
(1) this certificate is being delivered in connection with the sale and issuance of the above- captioned bonds (the “Bonds”) in order to enable the underwriter of the Bonds to comply with Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934, as amended (the “Rule”); (2) in connection with the sale and issuance of the Bonds, there has been prepared a Preliminary Official Statement dated _________, 2022 setting forth information concerning the Bonds and the CFD (the “Preliminary Official Statement”); and (3) except for the Permitted Omissions, the Preliminary Official Statement is deemed final within the meaning of the Rule. As used herein, the term “Permitted Omissions” refers to the offering price(s), interest rates(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all as set forth in the Rule.
IN WITNESS WHEREOF, I have hereunto set my hand as of ________, 2022.
COMMUNITY FACILITIES DISTRICT NO. 2015-1
(SYCAMORE HILLS) OF THE CITY OF UPLAND,
COUNTY OF SAN BERNARDINO, STATE OF
CALIFORNIA
By:
Michael Blay, City Manager of the City of Upland
4893-9813-5560.2
C-1
EXHIBIT C
COMMUNITY FACILITIES DISTRICT NO. 2015-1
(SYCAMORE HILLS) OF THE CITY OF UPLAND,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA
SPECIAL TAX BONDS, SERIES 2022A (IMPROVEMENT AREA NO. 2) And
COMMUNITY FACILITIES DISTRICT NO. 2015-1
(SYCAMORE HILLS) OF THE CITY OF UPLAND,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA
SPECIAL TAX BONDS, TAXABLE SERIES 2022B (IMPROVEMENT AREA NO. 2)
LETTER OF REPRESENTATIONS OF
KB HOME COASTAL INC.
________, 2022
City of Upland
460 North Euclid Avenue
Upland, California 91785-0460
Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California 460 North Euclid Avenue
Upland, California 91785-0460
Hilltop Securities Inc.
2533 South Coast Hwy 101, Suite 250
Cardiff by the Sea, California 92007
Ladies and Gentlemen:
This Letter of Representations of KB HOME Coastal Inc. (the “Letter of Representations”) is delivered pursuant to Section 4(d)(13) of the Bond Purchase Agreement (the “Purchase Agreement”) to be entered into in connection with the issuance, sale, and delivery by Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California (the “CFD”) of its Special Tax Bonds, Series 2022A (Improvement Area No. 2) and its Special Tax Bonds, Taxable Series 2022B (Improvement Area No. 2) (collectively, the “Bonds”).
Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Agreement.
The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of KB HOME Coastal Inc., a California corporation (the “Property Owner”), and the undersigned, on behalf of the Property Owner, further certifies as follows:
4893-9813-5560.2
C-2
1. The Property Owner is duly organized, validly existing, and in good standing under the laws of the State of California and has all requisite limited liability company right, power, and authority (i) to execute and deliver this Letter of Representations and the Continuing Disclosure Certificate (Major Property Owner) substantially in the form attached as Appendix H to the Preliminary Official Statement (“Continuing Disclosure Certificate”), (ii) to complete the development (i.e., construction of homes) on its property in the CFD as described in the Preliminary Official Statement, and (iii) to perform its obligations under the Continuing Disclosure Certificate.
2. As set forth in the Preliminary Official Statement, title to a cert ain portion of the property within Improvement Area No. 2 of the CFD is held in the name of the Property Owner (such portion of the property hereinafter referred to as the “Property”). The undersigned, on behalf of the Property Owner, makes the representations herein with respect to all such Property.
3. Except as set forth in the Preliminary Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against the Property Owner (with proper service of process to the Property Owner having been accomplished) or, to the Actual Knowledge of the Undersigned,1 is pending against any current Affiliate2 (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of the Undersigned is threatened in writing against the Property Owner or any such Affiliate (a) to restrain or enjoin the collection of the Special Tax or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Fund established under the Indenture), (b) to restrain or enjoin the development of the Property as described in the Preliminary Official Statement, (c) in any way contesting or affecting the validity of the Special Tax, or (d) which is reasonably likely to materially and adversely affect the Property Owner’s ability to complete the development and sale of the Property as described in the Preliminary Official Statement, to
1“Actual Knowledge of the Undersigned” means the knowledge that the individual signing on behalf of the Property Owner currently has as of the date of this Letter of Representations or has obtained through (i) interviews with such current offic ers and responsible employees of the Property Owner and its Affiliates as the undersigned has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this Letter of Representations, and /or (ii) review of documents that were reasonably available to the undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge of the matters set forth in this Letter of Representations. The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary i n connection with the ordinary course of the Property Owner’s current business and operations. The individual signing this Letter of Representations has not contacted any individuals who are no longer employed by or associated with the Property Owner or it s Affiliates
2“Affiliate” means, with respect to the Property Owner, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Property Owner, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the CFD and investment decision regarding the Bonds (i.e., information relevant to (a) the Property Owner’s development plans with respect to the Property and ability to pay its Special Tax on the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency, or (b) such Person’s assets or funds that wo uld materially affect the Property Owner’s ability to develop the Property as described in the Preliminary Official Statement or to pay its Special Tax on the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner ) prior to delinquency). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
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pay the Special Tax due at any time with respect to the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Continuing Disclosure Certificate.
4. The Property Owner agrees to execute at the closing of the Bonds the Continuing Disclosure Certificate substantially in the form attached as Appendix H to the Preliminary Official Statement, with such additional changes as may be agreed upon by the Property Owner. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Property Owner is not aware of any material failures by it to comply in all material respects with previous continuing disclosure undert akings in a written certificate or agreement executed by it to provide periodic continuing disclosure reports or notices of material events respecting bond offerings in California within the past five years.
5. As of the date of the Preliminary Official Statement, the information contained therein solely with respect to the Property Owner, its Affiliates, the proposed development of the Property, ownership of the Property, the Property Owner’s development plan, the Property Owner’s financing plan, the Property Owner’s lenders, if any, and contractual arrangements of the Property Owner or any Affiliates (including, if material to the Property Owner’s development plan or the Property Owner’s financing plan, other loans of such Affiliates) as set forth under the captions “INTRODUCTION – Property Ownership,” “PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT” and “CONTINUING DISCLOSURE – The Landowner,” is true and correct in all material respects and did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
6. Except as described in the Preliminary Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of the Property Owner or its Affiliates, that are secured by an interest in the Property. To the Actual Knowledge of the Undersigned, neither the Property Owner nor any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect the Property Owner’s ability to develop the Property as described in the Prel iminary Official Statement, to pay the Special Tax due with respect to the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Continuing Disclosure Certificate.
7. To the Actual Knowledge of the Undersigned, the Property Owner is not aware that any of the Property has a current liability with respect to the presence of a substance presently classified as hazardous under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 or applicable California law or is adversely affected by the presence of endangered or threatened species or habitat for endangered or threatened species.
8. The Property Owner covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Property Owner and its Affiliates which it controls will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way seeks to challenge
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or overturn the formation of the CFD, to challenge the adoption of the CFD Resolutions of the CFD, to invalidate the CFD or any of the Bonds or any refunding bonds related thereto, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Property Owner in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body including, without limitation, (a) an action or suit contending that the Special Tax has not been levied in accordance with the methodologies contained in the Amended and Restated Rate and Method of Apportionment of Special Tax, pursuant to which the Special Tax is levied, (b) an action or suit with respect to the application or use of the Special Tax levied and collected or (c) an action or suit to enforce the obligations of the City and/or the CFD under the CFD Resolutions, the Indenture, or any other agreements among the Property Owner, the City and/or the CFD or to which the Property Owner is a party or beneficiary.
9. The Property Owner consents to the issuance of the Bonds. The Property Owner acknowledges and agrees that the proceeds of the Bonds will be used as described in the Preliminary Official Statement.
10. The Property Owner intends to comply with the provision of the Mello-Roos Community Facilities District Act of 1982, as amended relating to the Notice of Special Tax described in Government Code Section 53341.5 in connection with the sale of the Property, or portions thereof.
11. To the Actual Knowledge of the Undersigned, the Property Owner is able to pay its bills as they become due and no legal proceedings are pending against the Property Owner (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Property Owner may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation.
12. To the Actual Knowledge of the Undersigned, Affiliates of the Property Owner are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Property Owner (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Property Owner may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation, in any case which is reasonably likely to materially and adversely affect the development of the Property as described in the Preliminary Official Statement, the payment of the Special Tax due at any time with respect to the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Continuing Disclosure Certificate.
13. The Property Owner has been developing or has been involved in the development of property over an extended period of time. It is likely that the Property Owner has been delinquent at one time or another in the payment of ad valorem property taxes, special
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assessments, or special taxes. However, to the Actual Knowledge of the Undersigned, during the last five years, neither the Property Owner nor any Affiliate (during their period of ownership) has been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property in California owned by the Property Owner or by any such Affiliate (during the period of their ownership) included within the boundaries of a community facilities district or an assessment district that (a) would have caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being filed in a court of law against the delinquent Property Owner or its Affiliate.
14. The Property Owner has not filed for the reassessment of the assessed value of portions of the Property, other than in connection with the sale of homes to individual homebuyers.
15. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there are no claims, disputes, suits, actions or contingent liabilities by and among the Property Owner, its Affiliates or any contractors working on the development of the Property which is reasonably l ikely to materially and adversely affect the development of the Property as described in the Preliminary Official Statement, the payment of the Special Tax due at any time with respect to the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Continuing Disclosure Certificate.
16. Based upon the current development plans, including, without limitation, the current budget and subject to economic conditions and risks generally inherent in the development of real property, including, but not limited to, the risks described in the Preliminary Official Statement under the section entitled “RISK FACTORS,” to the Actual Knowledge of the Undersigned, the Property Owner presently anticipates that it will have sufficient funds to complete the development of the Property as described in the Preliminary Official Statement and to pay the Special Tax levied against the Property the n owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency and does not anticipate that the CFD will be required to resort to a draw on the Reserve Fund for payment of principal of or interest on the Bonds due to the Property Owner’s nonpayment of the Special Tax. However, neither the Property Owner nor any of its Affiliates are obligated to pay the Special Tax or to make any additional capital contribution or loan to the Property Owner at any time, and the Property Owner reserves the right to change its respective development plan and financing plan for the Property at any time without notice, and there is no recourse against the Property Owner for the failure to pay the Special Tax other than the filing of a foreclosure action.
17. Solely as to the limited information described in the sections of the Preliminary Official Statement indicated in Paragraph 5 herein, the Property Owner agrees to indemnify and hold harmless, to the extent permitted by law, the City, the CFD, the Underwriter and their officials and employees, and each Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended (each, an “Indemnified Party” and, collectively, the “Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any
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statute or at law or in equity and shall reimburse any such Indemnified Party for any reasonable legal or other expense incurred by it in connection with investigating any such claim against it and defending any such action, insofar as and solely to the extent such losses, claims, da mages, liabilities or actions, or legal or other expenses, arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact by the Property Owner in the above -referenced information in the Preliminary Official Statement, as of its date, necessary to make the statements made by the Property Owner contained therein, in light of the circumstances under which they were made not misleading.
This indemnity provision shall not be construed as a limitation on any other liability which the Property Owner may otherwise have to any Indemnified Party, provided that in no event shall the Property Owner be obligated for double indemnification, or for the negligence or willful misconduct of an Indemnified Party.
If any suit, action, proceeding (including any governmental or regulatory investigation), claim, or demand shall be brought or asserted against any Indemnified Party in respect of which indemnification may be sought pursuant to the above paragraph, such Indemnified Party shall promptly notify the Property Owner in writing; provided that the failure to notify the Property Owner shall not relieve it from any liability that it may have hereunder except to the extent that it has bee n materially prejudiced by such failure; and provided, further, that the failure to notify the Property Owner shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under the above paragraph unless such liability was also conditioned upon such notice. If any such proceeding shall be brought or asserted against an Indemnified Party and it shall have notified the Property Owner thereof, the Property Owner shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Property Owner and the Indemnified Party shall have mutually agreed to the contrary; (ii) the Property Owner has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Property Owner such that a material conflict of interest exists for such counsel; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Property Owner and the Indemnified Party and representation of both parties by the same counsel wou ld be inappropriate due to actual differing interest between them. It is understood and agreed that the Property Owner shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for any given Indemnified Party, and that all such fees and expenses, to the extent reasonable, shall be paid or reimbursed as they are incurred. Any such separate firm shall be designated in writing by the Indemnified Party or Indemnified Parties which it represents. The Property Owner shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Property Owner agrees to indemnify each Indemnified Party from and against any loss or liability by reason of such settlement or judgment. The Property Owner shall not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is a party and indemnification could have been sought hereunder by such Indemnified Party, unless such settlement (x) includes an unconditional release of such Indemnified Party, in form and
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substance reasonably satisfactory to such Indemnified Party, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party.
18. If between the date hereof and the Closing Date any event relating to or affecting the Property Owner, its Affiliates, the proposed development of the Property, ownership of the Property, the Property Owner’s development plan, the Property Owner’s financing plan, the Property Owner’s lenders, if any, and contractual arrangements of the Property Owner or any Affiliates (including, if material to the Property Owner’s development plan or the Property Owner’s financing plan, other loans of such Affiliates) shall occur of which the Property Owner has actual knowledge which would cause the information under the sections of the Preliminary Official Statement indicated in Paragraph 5 hereof, to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Property Owner shall notify the City, the CFD and the Underwriter and if in the opinion of counsel to the City or the Underwriter such event requires the preparation and publication of a supplement or amendment to the Preliminary Official Statement, the Property Owner shall reasonably cooperate with the City and the CFD in the preparation of an amendment or supplement to the Preliminary Official Statement in form and substance satisfactory to counsel to the City, the CFD and to the Underwriter.
19. The Property Owner agrees to deliver the Closing Certificate of KB HOME Costal Inc. (the “Closing Certificate”) dated the date of issuance of the Bonds at the time of issuance of the Bonds in substantially the form attached as Exhibit A. If any event related to or affecting the Property Owner, its Affiliates, or the ownership, development or sale of the Property occurs, as a result of which it is necessary to modify the Closing Certificate, the Property Owner agrees to deliver a new Closing Certificate revised to reflect such event.
20. On behalf of the Property Owner, I have reviewed the contents of this Letter of Representations and have met with counsel to the Property Owner for the purpose of discussing the meaning of the contents of this Letter of Representations. The Property Owner acknowledges and understands that a variety of state and federal securities laws, including, but not limited to the Securities Act of 1933, as amended, and Rule 10b -5 promulgated under the Securities Exchange Act of 1934, as amended, may apply to the Property Owner and that under some circumstances, certification as to the matters set forth in this Letter of Representations, without additional disclosures or other action, may not fully discharge all duties and obligations of the Property Owner under such securities laws.
[Remainder of Page Intentionally Left Blank]
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The undersigned has executed this Letter of Representations solely in his capacity as an authorized officer or representative of the Property Owner and he will have no personal liability arising from or relating to this Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Property Owner.
KB HOME COSTAL INC.,
a California corporation
By: _________________________
Name: __________________________
Title: ___________________________
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EXHIBIT A
$_________
COMMUNITY FACILITIES DISTRICT NO. 2015-1
(SYCAMORE HILLS) OF THE CITY OF UPLAND,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA
SPECIAL TAX BONDS, SERIES 2022A (IMPROVEMENT AREA NO. 2) And
$________
COMMUNITY FACILITIES DISTRICT NO. 2015-1
(SYCAMORE HILLS) OF THE CITY OF UPLAND,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA
SPECIAL TAX BONDS, TAXABLE SERIES 2022B (IMPROVEMENT AREA NO. 2)
CLOSING CERTIFICATE OF KB HOME COASTAL INC.
[Closing Date]
City of Upland
460 North Euclid Avenue
Upland, California 91785-0460
Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California 460 North Euclid Avenue
Upland, California 91785-0460
Hilltop Securities Inc.
2533 South Coast Hwy 101, Suite 250
Cardiff by the Sea, California 92007
Ladies and Gentlemen:
Reference is made to above-captioned bonds (collectively, the “Bonds”), and to the Bond Purchase Agreement, dated _________, 2022 (the “Purchase Agreement”), entered into in connection therewith. This Closing Certificate of KB HOME Coastal Inc. (the “Closing Certificate”) is delivered pursuant to Section 4(d)(13) of the Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations of KB HOME Coastal Inc. (the “Letter of Representations”), dated ________, 2022, delivered by KB HOME Coastal Inc., a California corporation (the “Property Owner”).
The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Property Owner, and the undersigned, on behalf of the Property Owner, further certifies as follows:
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1. The Property Owner has received the final Official Statement dated ________, 2022 relating to the Bonds (the “Official Statement”). To the Actual Knowledge of the Undersigned, each statement, representation and warranty made in the Letter of Representations is true and correct in al l material respects on and as of the date hereof with the same effect as if made on the date hereof, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the final Official Statement.
2. The Property Owner has executed the Continuing Disclosure Certificate.
3. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in the sections of the Official Statement referenced in Paragraph 5 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 5 of the Letter of Representations) relating to the Property Owner, its Affiliates, the proposed development of the Property, ownership of the Property, the Property Owner’s development plan, the Property Owner’s financing plan, the Property Owner’s lenders, if any, and contractual arrangements of the Property Owner or any Affiliates (including, if material to the Property Owner’s development plan or the Property Owner’s financing plan, other loans of such Affiliates), which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make such statements and information contained in the Official Statement not misleading in any material respect.
4. For the period through 25 days after the “end of the underwriting period” as defined in the Purchase Agreement to mean the date hereof, if any event relating to or affecting the Pr operty Owner, its Affiliates, the proposed development of the Property, ownership of the Property, the Property Owner’s development plan, the Property Owner’s financing plan, the Property Owner’s lenders, if any, and contractual arrangements of the Propert y Owner or any Affiliates (including, if material to the Property Owner’s development plan or the Property Owner’s financing plan, other loans of such Affiliates) shall occur as a result of which it is necessary, in the opinion of the Underwriter or counsel to the City or the CFD, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it was delivered to a purchaser, the Property Owner shall reasonably cooperate with the City and the Underwriter in the preparation and publication of a supplement or amendment to the information described in the sections of the Official Statement referenced in Paragraph 5 of the Letter of Representations, in form and substance satisfactory to the Underwriter and counsel to the City and the CFD which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the st atements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading.
[Remainder of Page Intentionally Left Blank]
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The undersigned has executed this Closing Certificate solely in his capacity as an authorized officer or representative of the Property Owner and he will have no personal liability arising from or relating to this Closing Certificate. Any liability arising from or relating to this Closing Certificate may only be asserted against the Property Owner.
KB HOME COASTAL INC.,
a California corporation
By:_____________________________
Name: __________________________
Title: ___________________________
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EXHIBIT D
FORM OF ISSUE PRICE CERTIFICATE
$_________
COMMUNITY FACILITIES DISTRICT NO. 2015-1 (SYCAMORE HILLS)
OF THE CITY OF UPLAND, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA SPECIAL TAX BONDS, SERIES 2022A (IMPROVEMENT AREA NO. 2)
The undersigned, on behalf of Hilltop Securities Inc. (the “Underwriter”) hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”).
1. Sale of the Bonds. As of the date of this certificate, for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A.
2. Initial Offering Price of the Hold-the-Offering-Price Maturities. (a) Underwriter offered the Hold-the-Offering-Price Maturity to the Public for purchase at the respective initial offering price listed in Schedule A (the “Initial Offering Price”) on or before the Sale Date.
(b) As set forth in the Bond Purchase Agreement, dated _________, 2022, by and between the Issuer and Underwriter, Underwriter has agreed in writing that, (i) for the Hold-the- Offering-Price Maturity, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the-offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) will offer or sell any Hold-the-Offering-Price Maturity at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.
3. The aggregate of the sale prices of the Bonds is $___________ (the “Issue Price”).
4. Based upon our experience in marketing and maintaining a market for obli gations having terms and credit arrangements similar to those underlying the Bonds, the Reserve Requirement contemplated under the Bond Indenture, dated as of _______ 1, 2022, by and between the Issuer and U.S. Bank National Association, pursuant to which the Bonds are being issued, was a vital and necessary factor in marketing the Bonds to the public and is both reasonably required and necessary to the maintenance of an orderly market for the Bonds.
5. The weighted average maturity of the Bonds is _____ years.
6. The Yield on the Bonds is _____________%, being the discount rate which, when used in computing the present worth of all payments of principal and interest to be paid on the Bonds,
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computed on the basis of a 360-day year and semi-annual compounding produces an amount equal to the Issue Price of the Bonds [, computed with the following adjustment. The Bonds maturing (i) on September 1, 20__, and (ii) on September 1, 20__ are the only Bonds that are subject to optional redemption before maturity and have an Initial Offering Price that exceeds their stated redemption price at maturity by more than one-fourth of one percent multiplied by the product of their stated redemption price at maturity and the number of complete years to their first optional redemption date.
Accordingly, in computing the Yield on the Bonds, such Bonds were treated as retired on their optional redemption date or at maturity to result in the lowest Yield on the Bonds. To the extent that we provided the Issuer and bond counsel with certain computations that show a bond yield, issue price, weighted average maturity and certain other information with respect to the Bonds, these computations are provided for informational purposes and are based on our understanding of directions that we have received from bond counsel regarding interpretation of the applicable law. We express no view regarding the legal sufficiency of any such computations or the correctness of any legal interpretation made by bond counsel].
7. [None of the Bonds subject to mandatory early redemption has a stated redemption price that exceeds the initial offering price of such bond by more than one -fourth of one percent multiplied by the product of its stated redemption price at maturity and the number of years to its weighted average maturity date.]
8. [None of the Bonds is subject to optional redemption within five years of the Issue Date of the Bonds, and none of the Bonds subject to optional redemption has an Initial Offering Price that exceeds its stated redemption price at maturity by more than one-fourth of one percent multiplied by the product of its stated redemption price at maturity and the number of complete years to its first optional redemption date.]
9. Defined Terms.
(a) Issuer means Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California. (b) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but di fferent stated interest rates, are treated as separate Maturities.
(c) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter.
The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (d) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).
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Other capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Certificate Regarding Compliance with Certain Tax Matters (the “Tax Certificate”) executed by the Issuer and the City of Upland (the “City”) with respect to the Bonds.
4893-9813-5560.2
Signature Page of Issue Price Certificate relating to
Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California Special Tax Bonds, Series 2022A (Improvement Area No. 2)
D-4
The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Underwriter’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, a s amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer and the City with respect to certain of the representations set forth in the Tax Certificate relating to the Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by Richards, Watson & Gershon, A Professional Corporation, in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038 -G, and other federal income tax advice that it may give to the Issuer and the City from time to time relating to the Bonds.
HILLTOP SECURITIES INC.
By:_______________________________________
Name:_____________________________________
Dated: ___________, 2022
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APPENDIX G
FORM OF CONTINUING DISCLOSURE AGREEMENT
(ISSUER)
This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of [March] 1, 2022 is executed and delivered by the Community Facilities District No. 2015-1 (Sycamore Hills) of the City of Upland, County of San Bernardino, State of California (the “District”) and Willdan Financial Services, as dissemination agent (the “Dissemination Agent”) in connection with the issuance by the District of its $___ aggregate principal amount of Special Tax Bonds, Series 2022A (Improvement Area No. 2) (the “Tax-Exempt Bonds”) and $___ aggregate principal amount of Special Tax Bonds, Taxable Series 2022B (Improvement Area No. 2) (the “Taxable Bonds” and together with the Tax-Exempt Bonds, the “Bonds”). The Bonds are being issued pursuant to a Bond Indenture, dated as of [March] 1, 2022 (the “Indenture”), by and between the District and U.S. Bank National Association, as trustee (the “Trustee”).
The District and the Dissemination Agent covenant and agree as follows:
Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (as defined below).
Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement, unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Dissemination Agent” shall mean Willdan Financial Services, or any successor Dissemination Agent designated in writing by the District and which has filed with the District and the Trustee a written acceptance of such designation.
“EMMA” shall mean the Electronic Municipal Market Access system located at http://www.emma.msrb.org , which is the centralized on-line repository for municipal disclosure documents to be filed with the MSRB pursuant to the Rule, or such other successor repository site as prescribed by the MSRB.
“Financial Obligation” shall mean a: (A) Debt obligation; (B) Derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) Guarantee of any financial obligation outlined in the foregoing (A) or (B). The term Financial Obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
“MSRB” shall mean the Municipal Securities Rulemaking Board. “Obligated Person” shall mean any person, including an issuer of municipal securities, who is either generally or through an enterprise, fund, or account of such person committed by contract or
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other arrangement to support payment of all, or part of the obligations on the Bonds (other than providers of municipal bond insurance, letters of credit, or other liquidity facilities). “Official Statement” shall mean the final Official Statement, dated ___, 2022, relating to the Bonds.
“Participating Underwriter” shall mean Hilltop Securities, Inc., the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 3. Provisions of Annual Reports.
(a) The District shall, or shall cause the Dissemination Agent to, not later than March 31 of each year, commencing March 31, 2023 with the report for the 2021-22 fiscal year, provide to the MSRB, via EMMA, in an electronic format accompanied by identifying information as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City for the Fiscal Year may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b). (b) Not later than fifteen (15) business days prior to the applicable date specified in subsection (a) above for providing the Annual Report to the MSRB, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the first sentence of this subsection (b). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall send a notice to the MSRB in such form as prescribed by, or acceptable to, the MSRB. (d) The Dissemination Agent (if other than the District) shall, if and to the extent, the District has provided an Annual Report in final form to the Dissemination Agent for dissemination, file a report with the District certifying that the Annual Report has been provided to the MSRB pursuant to this Disclosure Agreement, and stating the date it was provided.
Section 4. Content of Annual Reports. The District’s Annual Report shall contain or incorporate by reference the following:
(a) Audited financial statements of the City prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Such financial statements shall be accompanied by a statement substantially as follows: