Attachment C
Trust Agreement
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TRUST AGREEMENT
by and among
UI\ION BANK OF CALIFORNIA, N.A.
as Trustee
and
BALDY MESA WATER DISTRICT PUBLIC FACIUTIES CORPORATION
as Corporation
And
BALDY MESA WATER DISTRICT
as Purchaser
Dated as of March 1, 2006
Relating to
S 13,070,000
PARITY CERTlFICATES OF PARTICIPATION
(WATER SYSTEM IMPROVEMENT PROJECT)
SERIES 2006
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TABLE OF CONTENTS
Section
ARTICLE I.
Page
DEFINITIONS; RULES OF CONSTRUCTION; CONTENTS OF
CERTIFICATES AND OPINIONS; RECITALS .. ......................................... I Section 1.0 I.
Section l.02.
Section l .03.
Section 1.04.
Definitions .................................................................................... ........ l Rules of Construction .......................................................................... 8 Content of Statements and Opinions .................................................... 8 Recitals ................................................................................................. 9 ARTICLE II. CERTIFICATES; TERMS AND PROVISIONS ............................................ 9 Section 2.01.
Section 2.02.
Section 2.03.
Section 2.04.
Section 2.05.
Section 2.06.
Section 2.07.
Section 2.08.
Section 2.09.
Section 2. I 0.
Section 2.11.
Section 2.12 .
Section 2.13.
Section 2.14.
Section 1.15.
Preparation of Certificates .... ............................................................... 9 Denominations; Medium and Place of Payment; Dating ..................... 9 Payment of Principal and Interest with Respect to Certificates ......... 10 Fom1 of Certificates ........................................................................... 11 Execution ............................... .......................................................... , . 11 Transfer of Certificates ...................................................................... 11 Exchange of Certificates .................................................................. .. 11 Certificate Registration Books ..................................................... ...... l 1 Temporary Certificates ...................................................................... 12 Certificates Mutilated, Lost, Destroyed or Stolen ............................. 12 Book-Entry System; Limited Obligation ........................................... 13 Representation Letter ........... ..... ........................................................ 14 Transfers Outside Book-Entry System .................... .. .......... .............. 14 Payments and Notices to the Nominee ............... ............. .................. 15 Initial Depository and Nominee .............. ........................................... 15 ARTICLE Ill. DELIVERY OF CERTIFICATES; COST OF ISSUANCE FUND; CONSTRCCTION FUND ............................................................................. 15 Section 3.0 I.
Section 3.02.
Section 3.03.
Section 3.04.
Section 3.05.
Delivery of Certificates .................................................... .................. 15 Application of Proceeds of Certificates and Other Moneys .......... .... 15 Validity of Ce11ificates ....................................................................... 15 Cost of Issuance Fund ............................................................. ........... 15 Construction Fund ... ............................................................... ......... ... 16 ARTICLE l\1. PREPAYMENT OF CERTlFlC A TES ... ..................... ................. ................. l 6 Section 4.01 .
Section 4.02.
Section 4.03.
Section 4.04.
Section 4.05.
Tenns of Prepayments ....................................................................... 16 Selection of Certificates for Prepayment ........................................... 18 Notice of Prepayment ........................ .... ............... ............................. 18 Partial Prepayment of Certificate ....... .... ............................................ 18 Effect of Prepayment .......... .................... ................................ .......... . 19 ARTICLE V. INSTALLMENT PAYMENTS ............. ............ .. ..... ....... .............................. 19 Section 5.01.
Section 5.02 .
Section 5.03.
Pledge and Deposit of Installment Payments .......................... .... ....... 19 Installment Payment Fund .. .............................................................. 19 Investment of Moneys ........................................................................ 20 •
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Section 5. 04.
Section 5.05 .
Reserve Fund ..................................................................................... 21 Pledge of Moneys in Funds ................................................................ 22 ARTICLE Vf. COVENANTS ............................................................................................... 22 Section 6. 0 I.
Section 6.02.
Section 6.03.
Section 6.04.
Section 6.05.
Section 6.06.
Section 6.07.
Section 6.08.
Section 6.09.
Section 6.10.
Section 6.11.
Corporation and Purchaser to Comply with Installment
Purchase Agreement .......................................................................... 22 Purchaser Budgets .............................................................................. 22 Tax Covenants ................................................................................... 23 Accounting Records and Repo1ts ....................................................... 23 Compliance with Trust Agreement.. .................................................. 23 Observance of Laws and Regulations .. .............................................. 2 3 Compliance with Contracts ............................................................ .... 23 Prosecution and Defense of Suits ...................................................... 23 Recordation and Filing .................................................................... ... 24 Eminent Domain .. ............................................................ .................. 24 Further Assurances ............................................................................. 24 ARTICLE VII. DEFAULT Al\TI LIMlT ATlON OF LIABILITY ........................................ 25 Section 7.01.
Section 7.02.
Section 7.03.
Section 7.04.
Section 7.05.
Section 7 .06.
Section 7.07.
Section 7.08.
Section 7.09.
Section 7.10.
Section 7.11 .
Section 7. l 2.
Section 7 .13.
Notice of Non-Payment ..................................................................... 25 Action on Default or Termination ...................................................... 25 Other Remedies of the Trustee ........................ .......................... .. ...... 25 Non-Waiver .............................. .......................................................... 26 Remedies Not Exclusive .................................................................... 26 No Obligation by the Purchaser to Owners ....................................... 26 Trustee Appointed Agent for Certificate-owners; Direction of Proceedings ..................................................................................... ... 26 Power of Trustee to Control Proceedings .......................................... 26 Limitation on Certificate Owners' Right to Sue ................................ 27 No Obligation with Respect to Performance by Trustee ................... 27 No Liability to Owners for Payment ................................. ................. 27 No Responsibility for Sufficiency ..................................................... 27 Indemnification of Trustee ................................................................. 27 ARTICLE VIII. THE TRUSTEE .................. ................................ ...................... ..................... 28 Section 8.01.
Section 8.02.
Section 8.03 .
Section 8.04.
Section 8.05.
Section 8.06.
Employment of Trustee ........... .. ......................................................... 28 Acceptance of Employment .. ............................ .................. ........ ....... 28 Trustee, Duties, Removal and Resignation ......... ............................ ... 28 Merger or Consolidation of Trustee ...... ............................................. 29 Compensation of the Trustee ............................................................. 29 Protection of the Trustee ................ .................................................... 30 ARTICLE IX. AMENDMENT OF TRUST AGREEMENT ............................... ................. 32 Section 9.01.
Section 9.02.
Section 9.03 .
Section 9.04.
Amendments Permitted ...................................................................... 32 Endorsement or Replacement of Certificates After Amendment or Supplement ..................... ............................................................... 33 Amendment of Particular Ce11ificates .. .......................................... ... 33 Notice to Rating Agencies ......... ... .................................. ...... .......... ... 33 II
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ARTICLE X. DEFEASANCE .............................................................................................. 33 Section 10.01 .
Section 10.02.
Section 10.03.
Discharge of Trust Agreement.. ......................................................... 33 Deposit of Money or Securities with Trustee .................................... 34 Unclaimed Moneys ............................................................................ 34 ARTICLE XI. BOND INSURANCE .................................................................................... 35 Section 11.01.
Section l 1.02.
Section 11.03.
Section 11 .04.
Section 11.05.
Section 11.06.
Section 11.07.
Section 11 .08.
Section 11.09.
Amendments Requiring Consent of Bond Insurer ............................. 35 Approval of Any Reorganization ....................................................... 35 Provisions Relating to Remedies Upon an Event of Default.. ........... 35 Notice to Bond Insurer ....................................................................... 35 Defeasance Provisions ....................................................................... 36 Payment Procedure ............................................................................ 37 Trustee-Related Provisions .. ............................................................. . 38 Bond Insurer as Third Party Beneficiary ........................................... 38 Parties Interested Herein .................................................................... 38 ARTICLE XII. MISCELLANEOUS ........................................................................ ............. . 39 Section 12.01.
Section 12.02.
Section 12.03.
Section 12.04.
Section 12.05.
Section 12.06.
Section 12.07 .
Section 12.08.
Section 12.09.
Section 12. l 0.
Section 12. 1 l.
Section 12.12.
Section 12.13.
Section 12.14.
Benefits of Trust Agreement Limited to Parties ................................ 39 Successor Deemed Included in all References to Predecessor .......... 39 Execution of Documents by Owners ................................. ................ 39 Disqualified Certificates ............................................................. ....... 39 Waiver of Personal Liability .......... ............................ ........................ 40 Acquisition of Certificates by Purchaser; Destruction of Certificates ..... ............................... .. ................... ................................ 40 Headings ............................... ..................... ... ....................... .............. 40 Funds and Accounts .............. ........................ ... .................................. 40 Partial Invalidity ............................ ................................... .................. 40 California Law ..................................................... .............................. 41 Effect of Bond fnsurance Policy on Owners ..................... ................. 41 Notices to Bond Insurer .......................... ..... ...................................... 41 Notices ................................................................................. .............. 41 Execution in Counterparts ..................... ..................................... ... ..... 41 EXHIBIT A -- FORM OF CERTIFICATE OF PARTICIPATION ...... .................................... A-l EXHIBIT B -- FORM OF CONSTRUCTION FUND REQUISITION .................................... B- 1 111
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TRUST AGREEMENT
THIS TRUST AGREEMENT, made and entered into as of March 1, 2006 (the ··Agrccmcnf"l. by and among UNION BANK OF CALIFORNIA, N.A., as trustee (the ··Trustee··). a national banking association authorized to exercise trust powers, duly organized and existing under the laws of the United States of America, the BALDY MESA WATER DISTRICT PUBLIC FACILITIES CORPORATION, a California nonprofit public benefit corporation duly organized and existing under the laws of the State of California (the ··Corporation") and the BALDY MESA WATER DISTRICT, a county water district duly organized and existing under and pursuant to the laws of the State of California (the "Purchaser" and the '•District"):
WITNESS ETH:
In consideration of the mutual covenants herein contained and for other valuable consideration, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFl~ITIONS; RULES OF CONSTRUCTION; CONTENTS
OF CERTIFICATES AND OPINIONS; RECITALS
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined herein. the following definitions to be equally applicable to both the singular and plural forms of any of the tem1s defined herein. All capitalized tenns used herein and not defined herein shall have the meanings ascribed thereto in the Installment Purchase Agreement.
Agreement. The term ·'Agreemenf" means this Trust Agreement, as originally executed or as it may from time to time be amended as provided for herein.
Assignment Agreement. The term ''Assignment Agreement" means that certain Assignment Agreement, dated as of March I, 2006 by and between the Corporation and the Trustee, as originally executed or as it may from time to time be amended or supplemented in accordance \vith its tcm1s.
,Bond Insurance Policy. The term "Bond Insurance Policy" means the municipal bond new issue insurance policy issued by the Bond Insurer that guarantees payment of principal of and interest with respect to the Certificates.
Bond Insurer. The tem1 "Bond Insurer'" means Ambac Assurance Corporation.
Business Day. The term "Business Day" means a day other than: a Saturday or Sunday or a day on which (i) banks located in the State of California, or in any state in which the •
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principal corporate trust office of the Trustee is located are required or authorized to remain closed, and (ii) on which The New York Stock Exchange is closed . fertificatc Year. The term ·•certificate Year" means the period beginning on the date of initial execution and delivery of the Certificates and ending on August l, 2006 and each successive one-year or shorter period thereafter, beginning August 2 until there are no Outstanding Ccrti ficates.
Certificates. The term "Certificates" means the certificates of participation executed and delivered by the Trustee pursuant to this Agreement.
Code. The term "Code" means the Internal Revenue Code of 1986. as amended. and the regulations issued thereunder.
Corporate Trust Office. The term "Corporate Trust Office'' means the corporate trust office of the Trustee at 120 South San Pedro Street, Fourth Floor, Los Angeles, Cali fomia 90012.
Cost of Issuance Fund. The term ''Cost of Issuance Fund" means the fund by that name established in Section 3.04 hereof.
Delivery Date. The term "Delivery Date" means, with respect to the Certificates, the date on which such Certificates were executed and delivered to the original purchaser thereof.
Depository or OTC. The term "Depository'' or "OTC' means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York in its capacity as securities depository for the Certificates.
Fair Market Value means the price at which a willing buyer would purchase the investment from a willing sel ]er in a bona fide, arm's length transaction ( determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section l 273 of the Tax Code) and, otherwise, the tem1 •'fair market value'' means the acquisition price in a bona fide arm· s length transaction (as referenced above) if (i) the investment is a certificate of deposit the value of which is detem1ined in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) the value of which is detem1ined in accordance with applicable regulations under the Tax Code, (iii) the investment is a United Slates Treasury Security-State and Local Government Series that is acquired in accordance with applicahle regulations of the United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment Fund of the State of California, but only if at all times during which the investment is held its yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable direct obligation of the United States.
Hazardous Substances. The term "Hazardous Substances" means any substance. waste pollutant or contaminant now or hereafter included in such (or any similar) term under any 45(,84X98 I 2
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federal, state or local law, statutes, code or ordinance or regulation now existing or hereafter enacted or amended .
lnfom1ation Services. The term '·Information Services" means Financial Information, Inc. ·s '"Daily Called Bond Service,'' 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Fitch ''Called Bond Department,'' 5250 Center Drive. Suite 150, Charlotte. NC 28217; S&P ··Called Bond Record," 65 Broadway, 16th Floor, New York, New York 10004; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds as the Purchaser may designate in a Written Request of the purchaser delivered to the Trnstec.
Installment Payment Date. The term ··rnstallment Payment Date" means the fifteenth day of each January and July or if such day is not a Business Day, the preceding Business Day.
Installment Payment Fund. The term "lnstalJment Payment Fund'' means the fund by that name established in Section 5.02 hereof.
Installment Payments. The term '·Installment Payments" means the Installment Payments payable by the Purchaser pursuant to the Installment Purchase Agreement and in the amounts and at the times set forth in the Installment Purchase Agreement.
Installment Purchase Agreement. The tem1 "Installment Purchase Agreement" means the Installment Purchase Agreement, dated as of March 1, 2006 by and between the Purchaser and the Corporation, as originally executed or as it may from time to time be amended in accordance with its lenns.
I 998 Installment Purchase A§,rrcement. The term "1998 Installment Purchase Agreement" means the Installment Purchase Agreement. dated as of May L 1998, by and between the Baldy Mesa Water District, as Purchaser and the Baldy Mesa Water District Public Facilities Corporation, as Seller, as originally executed or as it may from time to time be amended in accordance with its terms.
2003 Installment Purchase Agreement. The term "'2003 Installment Purchase Agreement" means the Installment Sale Agreement. dated as of November 26, 2003, by and between the Baldy Mesa Water District, as Purchaser and LaSalle Bank National Association, as Seller, as originally executed or as it may from time to time be amended in accordance with its terms.
Interest Payment Date. The term ''Interest Payment Date" means February 1 and August I of each year, commencing August I, 2006.
J_,etter of Representations. The tem1 "Letter of Representations'' means the letter of the Purchaser and the Trustee, if required, delivered to and accepted by the Depository on or prior to delivery of the Certificates as book-entry certificates setting forth the basis on which the Depository serves as depository for such book-entry certificates, as originally executed or as it may be supplemented or revised or replaced by a letter from the Purchaser and the Trustee d~livered to and accepted by the Depository.
3 Nominee. The tenn "Nominee'' means the nominee of the Depository, which may be the • Depository, as dctennined from time to t1me pursuant to Section 2.11 hereof.
Outstanding. The term "Outstanding," when used as of any particular time with reference to Certificates, means (subject to the provisions of Section 12.04) all Certificates theretofore or thereupon executed and delivered by the Trustee except:
(a)
(b)
10.01; and
Certificates canceled by the Trustee or delivered to the Trustee for cancellation; Certificates paid or deemed to have been paid within the meaning of Section (c) Certificates in lieu of or in substitution for which other Cert1ficates shall have been executed and delivered by the Trustee pursuant to Section 2.10.
Owner. Unless the context clearly indicates otherwise. the term ''Owner" or ''Certificate Ov.-ner'' or ··owner of Certificates" or any similar term, when used with respect to the Certificates, means any person who shall be the registered owner of any Outstanding Certificate as shown on the registration books maintained by the Trustee pursuant to Section 2.08.
Participants. The term ''Participants" means those broker-dealers, banks and other financial 1nstitutions from time to time for which the Depository holds book-entry certificates as securities depository.
Permitted Investments means any of the following that at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:
A. The Insurer will allow the following obligations to be used as Permitted Investments for all purposes, including defcasance mvestments in refunding escrow accounts. (I) Cash (insured at all times by the Federal Deposit Insurance Corporation), (2) Obligations of, or obligations guaranteed as to principal and interest by, the U.S. or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the l.J .S. including:
• U.S. treasury obligations
• All direct or fully guaranteed obligat10ns
• Farmers Home Administration
• General Services Administration
• Guaranteed Title XI financing
• Government National Mortgage Association (GNMA)
• State and Local Government Series
Any security used for dcfcasance must provide for the timely payment of principal and interest and cannot be callable or prcpayable prior to maturity or earlier redemption of the rated debt (excluding securities tha1 do not have a fixed par value and/or whose tenns do not promise a fixed dollar amount at maturity or call date).
4 B.
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The Insurer will allow the following Obligations to be used as Permitted Investments for all purposes other than dcfeasancc investments in refunding escrow accounts . ( 1) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including:
-Export-Import Bank
-Rural Economic Community Development Administration
-U.S. Maritime Administration
-Small Business Administration
-U.S. Department of Housing & Urban Development (PIIAs) -Federal Housing Administration
-Federal Financing Bank
(2) Direct obligations of any of the following federal agencies which obligations arc not fully (l)
guaranteed by the full faith and credit of the United States of America:
-Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC). -Obligations of the Resolution Funding Corporation (REFCORP) -Senior debt obligations of the Federal Home Loan Bank System -Semor debt obligations of other Government Sponsored Agencies approved by the Insurer
U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purcha~e of "P-1 '' by Moody's and "A-I'' or ''A-I+" by S&P and maturing not more than 360 calendar days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); (--l) Commercial paper which is rated at the time of purchase in the single highest classification, "'P- I,. by Moody's and "A-1 +'' by S&P and which matures not more than 270 calendar days after the date of purchase;
(5) Investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P including such funds for which the Trustee or an affiliate provides investment advice or other services;
(6) Pre-refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and
(A) which are rated, based on an irrevocable escrmv account or fund (the "escrow"), in the highest rating category of Moody's or S&P or any successors thereto; or (B) (1) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph A(2) above, which cscrmv may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to 5 •
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(7)
( I 0)
such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; Pre-refunded Municipal Obligations meeting the requirements of subsection (B) hereof may be used as Permitted Investments for annual appropriation lease transactions.
Municipal Obligations rated ·'Aaa/AAA" or general obligations of States with a rating of "A2/A" or higher by both Moody's and S&P.
Investment Agreements approved in writing by the insurer (supported by appropriate opinions of counsel):
The Local Agency Investment Fund ("LAIF') of the State of California, created pursuant to Section 16429. I of the California Government Code; and other fonns of investments (including repurchase agreements) approved in writing by the insurer.
C. The value of the above investments shall be determined as follows:
a)
h)
c)
For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued at fair market value. The Trustee shall determine the fair market value based on accepted industry standards and from accepted industry providers. Accepted industry providers shall include but are not limited to pricing services provided by Financial Times Interactive Data Corporation, Merrill Lynch, Citigroup Global Markets Inc., Bear Steams, or Lehman Brothers.
As to certificates of deposit and bankers' acceptances: the face amount thereof, plus. accrued interest thereon; and
As to any investment not specified above: the value thereof established by prior a6>Teement among the Issuer_ the Trustee. and the Insurer.
Prepayment Price. The term ·'Prepayment Price" means, with respect to any Certificate (or portion thereof), the principal amount with respect to such Certificate (or portion thereof) plus the applicable premium, if any, payable upon prepayment thereof pursuant to the provisions of such C'erti ficate and this Agreement.
j>rojc~!- The term "Project" means the Water System.
()uali lied Surety Bond means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to Section 5.04 pro\·ided that all of the following requirements are met: (i) the longterm credit rating of such bank or insurance company at the time of delivery of such letter of credit or surety bond is rated in one of the two highest rating categories by Moody's and S&P; (ii) such letter of credit or surety bond has a tem1 of at least twelve (12) months; (iii) such letter o C credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds arc proposed to be released pursuant to Section 5.04; and (iv) the Trustee is authorized pursuant to the tenns of such letter of credit or surety bond to 6 •
draw thereunder an amount equal to any deficiencies that may exist from time to time in the amounts available to repay the principal of and interest on the Certificates .
Record Date. The tenn ''Record Date" means. with respect to any Interest Payment Date for the Certi !icatcs, the first ( t st) day of the calendar month preceding such Interest Payment Date, whether or not such day is a Business Day.
Reserve Fund. The term ''Reserve Fund" means the fund by that name established in Section 5.04 hereof.
Reserve Requirement. The tenn "Reserve Requirement'' or ''Series 2006 Reserve Fund Requirement'" means, as of any date of calculation, the least of (i) ten percent ( 10%) of the proceeds (within the meaning of Section 148 of the Code) of the Certificates; (ii) 125% of average Installment Payments for that and all subsequent Certificate Years; or (iii) maximum aggregate installment Payments for that or any subsequent Certificate Year.
S&P. The tem1 '"S&P'' means Standard & Poor's, a division of McGraw-Hill, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perfonn the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Purchaser.
Securities Depositories The term ''Securities Depositories" means The Depository Trust Company, 55 Water Street, 50th Floor, New York, New York 10041-0099, Attention: Call Notification Department, Fax (212) 855-7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Purchaser may designate in a Written Request of the Purchaser delivered to the Trustee.
Special Counsel. The term ''Special Counsel'' means (a) Fulbright & Jaworski L.L.P., or (b) any other attorney or firm of attorneys appointed by or acceptable to the Purchaser of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia.
Stat~. The term ''State'' means the State of California.
Statement of the Coa,oration or Purchaser. The term "Statement of the Corporation or Purchaser" means a statement signed by or on behalf of (a) the Corporation by its President or a Vice President or (b) the Purchaser by the General Manager, President or Vice President of the Board of Directors or by any person who is specifically authorized by resolution of the Purchaser (a certified copy of which has been delivered to the Trustee) to sign or execute such a document on its behalf. ff and to the extent required by the provisions of Section 1.03, each Statement of the Corporation or Purchaser shall include the statements provided for in Section 1.03.
Trustee. The term ''Trustee'" means Union Bank of California, N.A., a national banking association, duly organized and existing under and by virtue of the laws of the United States of 7 •
America having a corporate tmst office in Los Angeles, California, or its successor as Trustee hereunder .
Water Fund. The tenn ;.Water Fund'' means the existing fund by that name established and held by the District with respect to the Water System.
Water System. The term ''Water System'' shall have the meaning given such term in the Im.tallment Purchase Agreement.
Written Consent of the Corporation or Purchaser, Written Order of the Corporation or Purchaser, Written Request of the Corporation or Purchaser, Written Requisition of the Corporation or Purchaser. The terms ';Written Consent of the Corporation or Purchaser," "Written Order of the Corporation or Purchaser,'' "Written Request of the Corporation or Purchaser." and "Written Requisition of the Corporation or Purchaser" mean, respectively. a written consent, order, request or requisition signed by or on behalf of (a) the Corporation by its President or a Vice President or (b) the Purchaser by the General Manager, President or Vice President of the Board of Directors or by any person who is specifically authorized by resolution of the Purchaser (a certified copy of which has been delivered to the Trustee) to sign or execute such a document on its behalf.
Section 1.02. Rules of Construction. Words of any gender shall be deemed and construed to include all genders, and words importing persons shall include corporations and associations, including public bodies, as well as natural persons. Unless the context otherwise indicates, words importing the singular number shall include the plural number and vice versa.
Section 1.03. Content of Statements and Opinions. Every statement or opinion with respect to compliance with a condition or covenant provided for in this Agreement, including each Statement of the Corporation, shall include (a) a statement that the person or persons making or giving such statement or opinion have read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such statement or opinion arc based; ( c) a statement that, in the opinion of the signers. they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such covenant or condition has been complied with; and ( d) a statement as to whether, in the opinion of the signers, such condition or covenant has been complied with.
Any such statement or opinion made or given by an officer of the Corporation may be based, insofar as it relates to legal or accounting matters, upon a statement or opinion of or representations by counsel or accountants, unless such officer knows, or in the exercise of reasonable care should have known, that the statement or opinion or representations with respect to the matters upon which his statement or opinion may be based, as aforesaid, are erroneous.
Any such statement or opinion made or given by counsel or accountants may be based, insofar as it relates to factual matters, upon infomiation with respect to which is in the possession of the Corporation, or upon the statement or opinion of or representations by an officer or officers of the Corporation, unless such counsel, accountant or consultant knows, or in the exercise of 8 •
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reasonable care should have known, that the statement or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous .
Section 1.04. Recitalt
(a) Installment Purchase Agreement. The Corporation and the District have entered into the Installment Purchase Agreement whereby the Corporation has ab>reed to sell to the Purchaser the Project, and the Purchaser has agreed to purchase the Project from the Corporation. (b) Installment Payments. Under the Installment Purchase Agreement, the Purchaser is obligated to pay to the Corporation or its assigns Installment Payments for the purchase of the Project.
( c) Assignment Agreement. The Corporation has assigned and transferred all of its rights, title and interest in the Installment Purchase Agreement ( other than its rights to indemni ft cation pursuant to Section 10.14 thereof) to the Trustee, pursuant to the Assignment Agreement; in consequence, the Trustee shall pursuant to this Trust Agreement execute and deliver the Certificates, each evidencing an undivided ownership interest in the Installment Purchase Agreement, including in the Installment Payments to be made thereunder, in the aggregate face amount equal to the aggregate of Principal Components of Series 2006 Installment Payments, and to apply the proceeds of sale of such interests to the payment by the Trustee, as assignee of the Corporation, of the purchase price of the Water System. ( d) Conditions Precedent Satisfied. The Purchaser and the Corporation hereby certify that all acts, conditions and things required by law to exist, happen and be performed precedent to and in connection with the execution and entering into of this Ab>reement have happened and have been perfonned in regular and due time, fom1 and manner as required by law, and the parties hereto are now duly empowered to execute and enter into this Agreement.
ARTICLE II.
CERTIFICATES; TER1\1S AND PROVISIONS
Section 2.01. Preparation of Certificates. The Trustee is hereby authorized, upon Written Order of the Corporation, to execute certificates of participation, to be designated --Parity Certificates of Participation (Water System Improvement Project) Series 2006'' in an aggregate principal amount of Thirteen Million Seventy Thousand Dollars ($13,070,000) evidencing undivided ownership interests in the Installment Purchase Agreement, including in the Installment Payments to be paid by the Purchaser thereunder.
Section 2.02. Denominations; Medium and Place of Payment; Dating. The Certificates shall he delivered in the fonn of fully registered Certificates in the denomination of $5,000 each or any integral multiple thereof; provided that no Certificate shall have principal represented thereby maturing in more than one year. The Certificates sha\1 be payable in lawful money of the United States of America.
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The payments of principal and Prepayment Price with respect to all Certificates shall be made upon presentation and surrender thereof at the Corporate Trust Office of the Trustee .
Payments of interest with respect to Certificates shall be payable by check of the Trustee mailed by first class mail on the Interest Payment Date of such Certificates to the respective Certificate Owners of record thereof as of the close of business on the Record Date at the addresses shown on the books required to be kept pursuant to Section 2.08, or, upon the request of an Owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by such Owner in writing to the Trnstcc prior to the Record Date, except in each case, that, if and to the extent that there shall be a default in the payment of the interest due on such Interest Payment Date, and such defaulted interest is subsequently received by the Trustee, such defaulted interest shall be paid to the Owners in whose names any such Certificates are registered at the close of business on a special record date as determined by the Tmstce.
The Certificates shall be dated the Delivery Date. Interest with respect to Certificates shall be accrued from the Interest Payment Date preceding their date of execution, unless such date shall be after a Record Date and on or before the succeeding lnterest Payment Date, in which case interest shall be accrued from such Interest Payment Date, or unless such date shall be on or before the first Record Date, in which case interest shall be accrued from the Delivery Date, provided, however, that if, as shown by the records of the Trustee, interest represented by the Certificates shall be in default, Certificates executed in exchange for Certificates surrendered for transfer or exchange shall represent interest from the last date to which interest has been paid in full or duly provided for with respect to the Certificates, or, if no interest has been paid or duly provided for with respect to the Certificates, from the Delivery Date.
Section 2 .03. Payment of Principal and Interest with Respect to Certificates. (a) Payments of principal and interest with respect to the Certificates shall be made on August in the years and in the amounts and with an interest component as provided in subsection (b) below at the rates (based on a 360-day year of twelve (12) thirty-day months), as follows:
Maturity Date
(August I) Principal Amount Interest Rate
2007 $230,000 3.20%
2008 240,000 3.30
2009 245,000 3.40
2010 255,000 3.45
2011 265,000 3.50
2012 270,000 3.55
2016 1,205,000 4.50
201 7 335,000 3.90
2018 350,000 4.00
2019 365,000 4.00
2020 380,000 4.05
2021 395,000 4. 10
2026 2,230,000 4.35
2029 1,590,000 4.50
2036 4,715,000 5.00
456H.J~l))< .1 10
• Principal or Prepayment Price due with respect to the Certificates at maturity or •
prepayment thereof shall, to the extent of the aggregate principal amount stated upon the Certificates, represent the sum of those portions of the Installment Payments designated as principal coming due on the Installment Payment Dates immediately preceding August I in each year.
(h) Interest with respect to the Certi fie ates shall be payable on each Interest Payment Date to and including the date of maturity or prior prepayment. Said interest shall represent the sum of those portions of the Installment Payments designated as interest coming due on the Installment Payment Dates, at the rates set forth in subsection (a) above.
Section 2.04. Form of Certificates. The Certificates and the fonn of assignment to appear thereon shall be in substantially the fonn set forth in Exhibit A hereto with necessary or appropriate variations, omissions and insertions as pennitted or required by this Agreement.
Section 2.05. Execution. The Certificates shall be executed by and in the name of the Trustee, as Trustee under this Agreement, by the manual signature of an authorized officer or signatory of the Trustee.
Section 2.06. Transfer of Certificates. Any Certificate may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions of Section
2.08, by the person in whose name it is registered, in person or by such person's duly authorized attorney, upon surrender of such Certificate for cancellation at the Corporate Trust Office of the Trustee, accompanied by delivery of a duly executed written instrument of transfer in a fonn acceptable to the Trustee.
Whenever any Certificate or Certificates shall be surrendered for transfer, the Trustee shall execute and deliver a new Certificate or Certificates of the same maturity for a like aggregate principal amount and interest rate. The Trustee may require the payment by any Certificate Owner requesting any such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Certificates the Trustee shall cancel and destroy the Certificates it has received.
Section 2.07. Exchange of Certificates. Certificates may be exchanged upon surrender thereof at the Corporate Trust Office of the Trustee, for a like aggregate principal amount of Certificates of other authorized denominations of the same maturity and interest rate. The Trustee may require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of Certificates the Trustee shall cancel and destroy the Certificates it has received.
The Trustee shall not be required to register the exchange or transfer pursuant to Section
2.06 hereof. of any Certificate (a) within 15 days preceding selection of Certificates for prepayment or (b) selected for prepayment.
Section 2.08. Certificate Registration Books. The Trustee shall keep or cause to be kept, at its Corporate Trust Office, sufficient books for the registration and transfer of the Certificates, 11 •
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which shall upon reasonable prior notice and at all reasonable times be open to inspection by the Corporation or the Purchaser; and. upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Certificates as hcrcinbefore provided.
The person in whose name any Ce1tificate shall be registered shall be deemed the Owner thereof for all purposes hereof, and all payments with respect to such Certificate shall be made only to or upon the order in writing of such registered Owner, which payments shall be valid and effectual to satisfy and discharge liability upon such Certificate to the extent of the sum or sums so paid.
Section 2.09. Temporary Certificates. The Certificates may be initially delivered in temporary form exchangeable for definitive Certificates when ready for delivery. The temporary Certificates may be printed, lithographed or typewritten, shall be of such denominations as may be detem1incd by the Trustee, shall be in registered form and may contain such reference to any of the provisions of this Agreement as may be appropriate. Every temporary Certificate shall be executed by the Trustee upon the same conditions and in substantially the same manner as the definitive Certificates. If temporary Certificates are initially delivered, the Purchaser shall furnish definitive Certificates without delay, and thereupon the temporary Certificates may be sunendcred, for cancellation, in exchange therefor at the Corporate Trust Office of the Trustee, and the Trustee shall deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same maturity or maturities. Until so cxchang<.:d, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates executed and delivered hereunder.
Section 2.10. Certificates Mutilated, Lost, Destroyed or Stolen. If any Certificate shall become mutilated, the Trustee shall execute and deliver a new Certificate of like tenor, maturity and principal amount in exchange and substitution for the Certificate so mutilated, but only upon surrender to the Trustee at its Corporate Trust Office, of the Certificate so mutilated. Every mutilated Certificate so surrendered to the Trustee shall be canceled by it and destroyed.
If any Certificate 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 indemnity satisfactory to the Trustee shall be given indemnifying the Trustee, the Corporation and the Purchaser, the Trustee, at the expense of the Certificate Owner, shall execute and deliver a nev,· Certificate of like tenor, maturity and principal amount, and numbered as the Trustee shall dctem1ine, in lieu of and in substitution for the Certificate so lost, destroyed or stolen. The Trustee may require reasonable payment for preparing each nev,,: Cenificate executed under this Section and of the expenses that may be incurred by the Trustee under this Section. Any Certificate executed under the provisions of this Section in lieu of any Certificate alleged to be lost, destroyed or stolen shall be equally and propo1tionately entitled to the benefits of this Agreement with all other Certificates secured by this Agreement. The Trustee shall not be required to treat both the original Certificate and any replacement Certificate as being Outstanding for the purpose of determining the principal amount of Certificates that may be executed hereunder or for the purpose of determining any percentage of Certificates Outstanding hereunder, but both the original and replacement Certificate shall be treated as one and the same .
Notwithstanding any other provision of this Section, in lieu of delivering a new Certificate for a 12 •
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Certificate that has been mutilated, lost, destroyed or stolen and that has matured or been selected for prepayment, the Trustee may make payment of such Certificate upon receipt of indemnity satisfactory to the Trustee.
Section 2.11. Book-Entry System; Limited Obligation. The Certificates shall be initially executed and delivered in the fonn of a separate single folly registered Certificate (which may be typewritten) for each of the maturities of the Certificates. Upon initial execution and delivery, th<: ownership of each such global Certificate shall be registered in the Certificate register in the name of the Nominee as nominee of the Depository. Except as provided in Section 2.13 hereof, all of the Outstanding Certificates shall be registered in the Certificate Register kept by the Trustee in the name of the Nominee and the Certificates may be transferred, in whole but not in part, only to the Depository, to a successor Depository or to another nominee of the Depository or of a successor Depository. Each global Certificate shall bear a legend substantially to the following effect: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE TRUST AGREEMENT)
TO THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE EXECUTED AND DELIVERED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), 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.''
With respect to Certificates registered in the Certificate register in the name of the Nominee. the Purchaser and the Trustee shall have no responsibility or obligation to any Depository Participant or to any person on behalf of which such a Depository Participant holds a beneficial interest in the Certificates. Without limiting the immediately preceding sentence, the Purchaser and the Trustee shall have no responsibility or obligation with respect to (a) the accuracy of the records of the Depository, the Nominee or any Depository Participant with respect to any beneficial ownership interest in the Certificates, (b) the delivery to any Depository Participant, beneficial owner or any other person, other than the Depository, of any notice with respect to the Certificates, including any prepayment notice, (c) the selection by the Depository and the Depository Participants of the beneficial interests in the Certificates to be prepaid in part, or ( d) the payment to any Depository Participant, beneficial owner or any other person, other than the Depository, of any amount with respect to the Certificates. The Purchaser and the Trustee may treat and consider the person in whose name each Certificate is registered in the Certificate register as the holder and absolute Owner of such Certificate for the purpose of pi.!ymcnts with respect to the Certificate, for the purpose of giving prepayment notices with respect to the Certificate and other notices with respect to the Certificate, and for all other purposes whatsoever, including. without limitation, registering transfers with respect to the Certificate.
The Trustee shall make payments in respect of the Certificates only to or upon the order of the respective Certificate Owners, as shown in the Certificate register kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid 13 •
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hereunder with respect to the payment of principal, premium, if any, and interest with respect to the Certificates to the extent of the sum or sums so paid. No person other than a Certificate Owner, as shown in the Certificate register, shall receive a Certificate evidencing the obligation to make payments of principal, premium, if any, and interest with respect to such Certificate pursuant to this Agreement. Upon delivery by the Depository to the Trustee and the Purchaser of written notice to the effect that the Depository has determined to substitute a new nominee in place of the l\'ominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Agreement shall refer to such new nominee of the Depository.
Section 2.12. Representation Letter. In order to qualify the Certificates for the Depository's book-entry system, the Authorized Representative is hereby authorized to execute, countersign and deliver on behalf of the Purchaser to such Depository a letter from the Purchaser representing such matters as shall be necessary to so qualify the Certificates (the "Representation Letter"). Thi: execution and delivery of the Representation Letter shall not in any way limit the provisions of Section 2.11 hereof or in any other way impose upon the Purchaser or the District any obligation whatsoever with respect to persons having beneficial interests in the Certificates other than the Owners, as shown in the Certificate Register kept by the Trustee. ln the written acceptance by the Trustee of the Representation Letter, the Trustee shall agree, and hereby agrees, to take all actions necessary for all representations of the Trustee in the Representation Letter with respect to the Trustee to at all times be complied with. In addition to the execution and delivery of the Representation Letter, the Purchaser Representative and all other officers of the Purchaser, and their respective deputies and designees, each is hereby authorized to take any other actions, not inconsistent with this Agreement, to qualify the Certificates for the Depository's book-entry program .
Section 2.13. Transfers Outside Book-Entry System. If at any time the Depository notifies the Purchaser that it is unwilling or unable to continue as Depository with respect to the Ccrti ficatcs or if at any time the Depository shall no longer be registered or in good standing under the Securities Exchange Act of 1934 or other applicable statute or regulation and a successor Depository is not appointed by the Purchaser within 90 days after the Purchaser receives notice or becomes aware of such condition, as the case may be, Section 2.11 hereof shall no longer be applicable and the Trustee shall execute and deliver certificates representing the Certificates as provided below. In addition, the Purchaser may determine at any time that the Ccrti ficates shall no longer be represented by global certificates and that the provisions of Section 2.11 hereof shall no longer apply to the Certificates. In any such event the Trustee shall execute and deliver certificates representing the Certificates as provided below. Certificates executed and delivered in exchange for global certificates pursuant to this Section 2.13 shall be registered in such names and delivered in such Authorized Denominations as the Depository, pursuant to instructions from the Depository Participants or otherwise, shall instruct the Purchaser and the Trustee. The Trustee shall deliver such certificates representing the C crti ficates to the persons in whose names such Certi fie ates are so registered.
If the Purchaser determines to replace the Depository with another qualified securities depository, the Purchaser shall prepare or cause to be prepared a new fully-registered global certificate for each of the maturities of the Certificates, registered in the name of such successor or substitute securities depository or its nominee, or make such other arrangements as are 14 acceptable to the Purchaser, the Trustee and such securities depository and not inconsistent with • the terms of this Agreement.
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Section 2.14. Payments and Notices to the Nominee. Notwithstanding any other provision of this Agreement to the contrary, so long as any Certificate is registered in the name of the Nominee, all payments with respect to such Certificate and all notices with respect to such Certificate shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository.
Section 2.15. Initial Depository and Nominee. The initial Depository under this Agreement shall be DTC. The initial Nominee shall be Cede & Co., as nominee of OTC.
ARTICLE Ill.
DELIVERY OF CERTIFICATES; COST OF ISSUANCE FUND;
CONSTRUCTION FUND
Section 3.01. Delivery of Certificates. The Trustee is hereby authorized to execute and deliver Certificates in an aggregate principal amount of $13,070,000, upon the Written Order of the Corporation.
Section 3.02. Application of Proceeds of Certificates and Other Moneys. The proceeds received from the sale of the Certificates shall be applied by the Trustee to the purchase of the Project from the Purchaser. The Purchaser hereby directs that such payment be applied in the following manner: (a) deposit in the Cost of Issuance Fund $143,979.72; (b) deposit in the Construction Fund $ I 2,000,000; and (c) deposit in the Reserve Fund $816,500.00 (the initial Reserve Requirement).
Section 3.03. Validity of Certificates. The validity of the authorization and delivery of the Certificates is not dependent on and shall not be affected in any way by any proceedings taken by the Purchaser or the Trustee with respect to or in connection with the Installment Purchase Agreement. The recital contained in the Certificates that all acts, conditions and things required by the Constitution and statutes of the State of California and this Agreement to exist, to have happened and to have been performed precedent to and in the delivery thereof do exist, have happened and have been performed in due time, fonn and manner as required by law shall be deemed to be a statement to the Corporation and not of the Trustee and shall be conclusive evidence of their validity and of compliance with the provisions of law in their delivery.
Section 3.04. Cost of Issuance Fund. There is hereby established with the Trustee the Cost of Issuance Fund, which the Trustee shall establish and maintain and hold in trust separate and apart from other funds held by it. The moneys ,n the Cost of Issuance Fund shall be used and withdrawn by the Trustee to pay any Cost of Issuance upon submission of Written Requisitions of the Purchaser stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred, that such payment is a proper charge against said fund and that payment for such charge has not previously been made. Upon ninety days afler the delivery of the Certificates, or upon the earlier Written Request of the Purchaser, all amounts remaining in the Cost of Issuance Fund shall be transferred by the Trustee to the 15 •
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Installment Payment Fund for application in accordance with Section 5.02. Upon such transfer, the Cost of Issuance Fund shall be closed.
Section 3.05. Construction Fund. There is hereby established with the Trustee the Construction Fund, which the Trustee shall establish and maintain and hold in trust separate and apart from other funds held by it. The moneys in the Construction Fund shall be used and withdrawn by the Trustee to pay capital improvements to the Water System upon receipt by the Trustee of a Written Request of the Purchaser in the form of Exhibit B hereto certifying with respect to each disbursement: ( i) the requisition number; (ii) the name and address of the person, lim1 or corporation to whom payment will be made; (iii) the amount to be disbursed; (iv) that each obligation mentioned in the requisition is a proper charge against the Construction Fund and has not previously been disbursed by the Trustee from amounts in the Construction Fund; and (v) in reasonable detail the nature of the obligation; and shall be accompanied by a bill or statement of account (if any) for each obligation. Upon completion of the Project, as indicated by a Written Request of the Purchaser, all amounts remaining in the Construction Fund shall be transferred by the Trustee to the Installment Payment Fund for application in accordance with Section 5.02. Upon such transfer, or after all proceeds in the Construction Fund have been depleted, the Construction Fund shall be closed.
ARTICLE IV.
PREPAYMENT OF CERTIFICATES
Section 4.01. Terms of Prepayments.
(a) The Certificates maturing on or after August 1, 2017 are subject to optional prepayment prior to maturity upon notice to the Trustee on August 1, 2016, or any date thereafter, from any source of available funds, as a whole or in part, at a price of par together with interest accrued thereon to the date of prepayment, without premium. (b) The Certificates shall be subject to prepayment prior to their respective stated maturities, as a \\'hole on any date or in part on any Interest Payment Date, in the order of stated maturity as directed by the Purchaser in a Written Request of the Purchaser provided to the Trustee at least 60 days prior to the prepayment date, or (in the event the Purchaser has not directed the order of stated maturity, in inverse order of stated maturity), and by lot within each stated maturity in integral multiples of $5,000, from prepaid Installment Payments made by the Purchaser from Net Proceeds, upon the terms and conditions of, and as provided for in, Section
6.10 of this Agreement, and Sec lions 6.8 and 6.14 of the Installment Purchase Agreement (provided that such prepayment shall occur on the next Interest Payment Date subsequent to such transfer with respect to which timely notice of prepayment can be provided as required hereunder) at a Prepayment Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for prepayment, without premium. ( c) The Certificates maturing on August 1, 2016, are to be called for mandatory sinking fund prepayment prior to such maturity dates in part, by lot, at 100% of the principal • amount thereof plus accrued interest to the prepayment date, as follows:
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Mandatory Prepayment Dates
(August 1)
2013
2014
2015
20 l 6 (maturity)
Principal Amount
$280,000
295,000
310,000
320,000
( d) The Certificates maturing on August 1, 2026 are to be called for mandatory sinking fund prepayment prior to such maturity dates in part, by lot, at 100% of the principal amount thereof plus accrued interest to the prepayment date, as follows:
Mandatory Prepayment Dates
(August I)
2022
2023
2024
2025
2026 (maturity)
Principal Amount
$410.000
425.000
445,000
465.000
485,000
(c) The Certificates maturing on August 1, 2029 are to be called for mandatory sinking fund prepayment prior to such maturity dates in part, by lot, at 100% of the principal amount thereof plus accrued interest to the prepayment date, as follows:
Mandatory Prepayment Dates
(August 1)
2027
2028
2029 (maturity)
Principal Amount
$505,000
530,000
555,000
( f) The Certificates maturing on August l, 2036 arc to be called for mandatory sinking fund prepayment prior to such maturity dates in part, by lot, at I 00% of the principal amount thereof plus accrued interest to the prepayment date, as follows:
4568489~ ·'
Mandatory Prepayment Dates
(August l)
2030
2031
2032
2033
2034
2035
2036 (maturity)
17 Principal Amount
$580,000
605,000
640,000
670,000
705,000
740,000
775,000
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In the event of a partial prepayment of Certificates pursuant to Section 4.01(a) or 4.0l(b) above, the foregoing annual mandatory prepayments shall be reduced in equal percentages, as nearly as practicable, provided that the reductions shall be made in multiples of $5,000. The Purchaser shall provide the Trustee with the amended mandatory prepayment schedule calculated as set forth above.
Section 4.02. Selection of Certificates for Prepayment. Whenever less than all of the Certificates arc called for prepayment, the Trustee shall select the Certificates or portions thereof to be prepaid from the Outstanding Certificates in accordance with Section 4.01 hereof. The Trustee shall promptly notify the Purchaser in writing of the numbers of the Certificates or portions thereof so selected for prepayment.
Section 4.03. Notice of Prepayment. Notice of prepayment shall be mailed, first class postage prepaid, to the respective Owners of any Certificates designated for prepayment at their addresses appearing on the Certificate registration books and to the Information Services and by registered or certified or overnight mail to the Securities Depositories at least thirty days but not more than sixty days prior to the prepayment date.
Each notice of prepayment shall state the date of notice, the prepayment date, the place or places of prepayment and the prepayment price, shall designate the maturities, CUSIP numbers, if any, and, if less than all of any such maturity is to be prepaid, the serial numbers of the Certificates of such maturity to be prepaid by giving the individual number of each Certificate or by stating that all Certificates between two stated numbers, both inclusive, have been called for prepayment and, in the case of Certificates to be prepaid in part only, the respective portions of the principal amount thereof to be prepaid. Each such notice shall also state that on said date there will become due and payable on each of said Certificates the Prepayment Price thereof or of said specified portion of the principal represented thereby in the case of a Certificate to be prepaid in part only, together with interest accrued with respect thereto to the prepayment date, and that (provided that moneys for prcpa)ment have been deposited with the Trustee) from and after such prepayment date interest with respect thereto shall cease to accrue, and shall require that such Certificate be then surrendered to the Trustee. Any failure to receive such notice or any defect in the notice or the mailing shall not affect the validity of the prepayment of any Certi ficatc.
Notice of prepayment of Certificates shall be given by the Trustee.
Notice of the prepayment of Certificates, other than mandatory sinking fund prepayment and excepting any notice that refers to Certificates that are the subject of a refunding, shall be circulated only if sufficient funds have been deposited with the Trustee to pay the Prepayment Price of the Certificates to be prepaid.
Section 4.04. Partial Prepayment of Certificate. Upon sun-ender of any Certificate prepaid in part only, the Trnstec shall execute and deliver to the Owner thereof, at the expense of the Purchaser, a new Certificate or Certificates of authorized denominations equal in aggregate principal amount to the unprepaid portion of the Certificate surrendered and of the same interest rate and maturity .
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Section 4.05. Effect or Prepayment. When notice of prepayment has been duly given as aforesaid. and moneys for payment of the Prepayment Price of, together with interest accrued to the prepayment date with respect to, the Certificates (or portions thereof) so called for prepayment are held by the Trustee, the Certificates (or portions thereof) so called for prepayment shall, on the prepayment date designated in such notice, become cancelable upon payment of the Prepayment Price specified in such notice and interest accrued thereon to the prepayment date; and from and after the date so designated the right of the Certificates so called for prepayment to payments of interest shall cease to accrue, said Certificates ( or portions thereof) shall cease to be entitled to any benefit or security under this Agreement, and the Owners of said Certificates shall have no rights in respect thereof except to receive payment of said Prepayment Price and accrued interest.
Each Certificate with respect to which a prepayment has been made pursuant to the provisions of this Article shall he canceled upon surrender thereof and destroyed by the Trustee.
ARTICLE V.
INSTALLMENT PAYMENTS
Section 5.01. Pledge and Deposit of Installment Payments. The Installment Payments are hereby irrevocably pledged to, and shall be used for, the timely payments with respect to the Certificates, and the Installment Payments shall not be used for any other purpose while any of the Certificates remains Outstanding. This pledge shall constitute a first and exclusive lien on the Installment Payments in accordance with the te1ms hereof.
Pursuant to the tem1s of the Assignment Agreement, all Installment Payments to which the Corporation may at any time have been entitled (including income or profit from investments pursuant to Section 5.03) are to be made directly to the Trustee; if any such Installment Payment is received by the Corporation at any time, it shall be deposited by the Corporation with the Trustee within one Business Day after the receipt thereof. The Trustee shall deposit all Installment Payments as and when received in the Installment Payment Fund. All moneys at any time deposited in the Installment Payment Fund shall be held by the Trustee in trust for the benefit of the Owners from time to time of the Certificates, but shall nevertheless be disbursed, allocated and applied solely for the uses and purposes herein set forth. The Assignment Agreement creates an absolute assignment and transfer of the rights of the Corporation as set forth therein and does not merely create a security interest in such rights.
Section 5.02. Installment Payment Fund. There is hereby established with the Trustee the Installment Payment Fund, which the Trustee shall establish and maintain and hold in trust separate and apart from other funds held by it. The Trustee shall pay from the Installment Payment Fund, the interest and principal payments with respect to Installments that become payable on each Interest Payment Date, and the Prepayment Price of Installments that become payable as provided in Section 4.01 hereof.
All earnings derived from the investment of funds on deposit in the Installment Payment • Fund shall be retained therein. At least 10 days before each Interest Payment Date or, if such 19 •
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day is not a Business Day, on the next preceding Business Day, the Trustee shall transfer all earnings from the Reserve Fund not used to meet the Reserve Requirement and for which the Trustee has not received an instruction pursuant to Section 5 .06(b) hereof to the Installment Payment Fund.
Amounts deposited into the Installment Payment Fund shall be held as a credit against the obligation of the Purchaser with respect to its payment of the immediately succeeding installment Payment; at least 10 days before an Interest Payment Date or, if such day is not a Business Day, on the next preceding Business Day, the Trustee shall notify the Purchaser in writing of the amount necessary to be deposited in the Installment Payment Fund to pay the Installment Payment coming due on the next Interest Payment Date.
Section 5.03. Investment of Moneys. Any moneys in the Installment Payment Fund, the Cost of Issuance Fund, the Construction Fund and the Reserve Fund shall be invested by the Trustee, upon the Written Request of the Purchaser at least two (2) Business Days before the inYestment date, in Permitted Investments that will mature on or before the dates when such moneys are scheduled to be needed for payment from such fund; provided, however, that any Pennitted Investments purchased with moneys in the Reserve Fund will mature in five years or less frorn the date of purchase. Securities acquired as an investment of moneys in a fund shall be credited to such fund.
In the absence of written investment direction from the Purchaser, the Trustee shall invest moneys held by it solely in Permitted Investments specified in clause B(5) of the definition thereof.
Subject to the further provisions of Section 6.03 hereof, the Trustee may sell or present for prepayment any obligations so purchased at the \vritten direction of the Purchaser whenever it shall be necessary in order to provide moneys to meet any payments and the Trustee shall not be liable or responsible for any loss resulting from such investment. The Trustee or any of its affiliates may act as principal or agent in the acquisition or disposition of any investment. The Trustee may commingle moneys held in any of the funds or accounts established pursuant to this Agreement into a separate fund or funds for investment purposes only; provided, however, that all funds or accounts held by the Trustee hereunder shall be accounted for separately notwithstanding such commingling. Permitted lnvestm<!nts that are registrable securities shall be registered in the name of the Trustee.
The Purchaser acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Purchaser the right to receive brokerage confim1ations of security transactions as they occur, the Purchaser specifically waives receipt of such confinnations to the extent permitted by law. The Trustee will furnish the Purchaser periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder.
The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee hereunder. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its 20 individual capacity) or with any one or more of its affiliates, whether it or such affiliate is acting • as an agent of the Trustee or for any third person or dealing as principal for its own account. •
Such investments (except investment agreements) shall be valued by the Trustee on or before each February I and August 1, at the Fair Market Value thereof, exclusive of accrued interest. Deficiencies in the amount on deposit in the Reserve Fund resulting from a decline in market value shall be restored no later than the succeeding valuation date.
In making any valuations of securities hereunder, the Trustee may utilize and rely upon computerized securities pricing services that may be available to it, including those available through its regular accounting system.
Section 5.04. Reserve Fund. There is hereby established with the Trustee the Reserve Fund, which the Trustee shall establish and maintain and hold in trust separate and apart from other funds held by it. The Trustee shall deposit in the Reserve Fund, the amounts required to be deposited therein pursuant to the Installment Purchase Agreement and this Agreement and shall apply moneys in the RcserYe Fund in accordance with this Section 5.04.
If one day prior to any Interest Payment Date, or if such date is not a Business Day, then the preceding Business Day, the money in the Installment Payment Fund is insufficient to make the payments required by this Trust Agreement with respect to Certificates on such Interest Payment Date, the Trustee shall give the Purchaser notice of such shortfall and shall transfer from the Reserve Fund to the lnstalJment Payment Fund the amount of such insufficiency.
In the event that the Trustee has transferred money from the Reserve Fund to the Installment Payment Fund in accordance with this Section 5.04, upon receipt of the moneys from the Purchaser to increase the balance in the Reserve Fund to the Reserve Fund Requirement, the Trustee shall deposit such money in the Reserve Fund. Any deficiency in the Reserve Fund due to a draw thereon shall be replenished by the Purchaser within one year of such deficiency in tv. elve equal monthly installments.
All moneys in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of paying principal and interest with respect to the Certificates or, to the extent that the value of the Reserve Fund exceeds the Reserve Fund Requirement, monies in an amount equal to such excess shall be transferred from the Reserve Fund to the Installment Payment Fund. All amounts on deposit in the Reserve Fund on the date no Certificates remain outstanding shall be transferred to the Purchaser.
The Purchaser may fund all or a portion of the Reserve Requirement with one or more Qualified Surety Bonds. Upon deposit of any Qualified Surety Bond with the Trustee, the Trustee, upon the Written Order of the Purchaser, shall pay to the Purchaser from amounts in the Reserve Fund an amount equal to the principal of the Qualified Surety Bond. The Purchaser undertakes to apply all such amounts to capital expenditures and, pending such application, to hold such amounts in a segregated account and if invested into Investment Property (within the meaning of section 148( a} of the Code) then invested to produce a yield not in excess of the yield 011 the Installment Purchase Agreement.
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In any case where the Reserve Fund is funded with a combination of cash and a Qualified Surety Bond, the Trustee shall deplete all cash balances before drawing on the Qualified Surety Bond. With regard to replenishment, any available moneys provided by the Purchaser shall be used first to reinstate the Qualified Surety Bond and second, to replenish the cash in the Reserve Fund. In the event the Qualified Surety Bond is drawn upon, the Purchaser shall make payment of interest on amounts advanced under the Qualified Surety Bond after making any Installment Payments to the Installment Purchase Agreement.
In the event the Qualified Surety Bond will lapse or expire, the Trustee shall draw upon such Qualified Surety Bond prior lo its lapsing or expiring, make deposits from available moneys provided by the Purchaser to the Reserve Fund to increase the amount on deposit therein to the Reserve Rcqllirement or substitute such Qualified Surety Bond with a Qualified Surety Bond furnished to it by the Purchaser that satisfies the requirements of this section.
Section 5.05. Pledge of Moneys in Funds. All amounts on deposit in the Installment Payment Fund and the Reserve Fund arc hereby irrevocably pledged by the Purchaser to the Owners of the Certificates as provided herein. This pledge shall constitute a first and exclusive lien on the Installment Payment Fund and the Reserve Fund for the benefit of the Owners of the Certificates in accordance with the tem1s hereof and of the Installment Purchase Agreement.
ARTICLE VI.
COVENANTS
Section 6.01 . Corporation and Purchaser to Comply with Installment Purchase Agreement. Each of the Corporation and Purchaser covenants and agrees with the Owners of the Certificates to perfonn all obligations and duties imposed on it under the Installment Purchase Agreement and, together with any assignee thereof, to enforce such Installment Purchase Agreement against the other party thereto in accordance with its terms.
The Corporation and the Purchaser each will in all respects promptly and faithfully keep, perform and comply with all the terms, provisions, covenants, conditions and agreements of the Installment Purchase Agreement to be kept, performed and complied with by it.
The Corporation and the Purchaser each agrees not to do or permit anything to be done, or omit or refrain from doing an11hing, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would or might be a ground for cancellation or termination of the Jnstallmcnt Purchase Agreement.
Section 6.02. Purchaser Budgets. On or prior to the ninetieth day of each Fiscal Year, the Purchaser shall certify to the Trustee that the amounts budgeted for payment of Installment Payments are fully adequate for the payment of all Installment Payments due under the Installment Purchase Agreement for such Fiscal Year as well as payments to the Reserve Fund pursuant to Section 5 .04 hereof. If the amounts so budgeted are not adequate for the payment of Installment Payments due under the Installment Purchase Agreement, the Purchaser will take such action as may be necessary to cause such annual budget to be amended, corrected or augmented so as to include therein the amounts required to be raised by the Purchaser in the then 22 •
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ensuing Fiscal Year for the payment of Installment Payments due under the Installment Purchase Agreement and will notify the Trustee of the proceedings then taken or proposed to be taken by the: Purchaser.
Section 6.03. Tax Covenants. Under Section 6.5 of the lnstallment Purchase Agreement, the Corporation has undertaken certain covenants with respect to the exclusion of the Interest Component of Series 2006 Installment Payments from the gross income of the owner thereof for federal income tax purposes. Said provision also restricts assignment of the Installment Purchase Agreement by the Corporation unless the assignee, other than the Trustee, shall have assumed and undertaken the obligations of the Corporation under said Section 6.5.
Section 6.04. Accounting Records and Reports. The Trustee shall keep or cause to be kept proper books of record and account in which complete and correct entries shall be made of all transactions made by it relating to the receipts, disbursements, allocation and application of the Installment Payments, and such books shall be available for inspection by the Purchaser and by any Owner of Certificates, or his agent or representative, at reasonable hours and under reasonable conditions. Each month, so long as the Certificates are Outstanding, the Trustee shall furnish to the Purchaser a statement covering receipts, disbursements, allocation and application of amounts on deposit in the funds and accounts created hereunder held by it.
Section 6.05. Compliance with Trust Agreement. The Trustee will execute the Certificates upon Written Order of the Corporation as provided in Section 3.01 hereof. The Purchaser will not suffer or permit any default by it to occur under this Agreement, but will faithfully observe and perform all the covenants, conditions and requirements hereof.
Section 6.06. Observance of Laws and Regulations. To the extent necessary to assure its performance hereunder, the Corporation and the Purchaser wil1 each well and truly keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on it by contract, or prescribed by any law of the United States of America, or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or franchise now owned or hereafter acquired by the Corporation or the Purchaser respectively, including its right to exist and carry on its business, to the end that such contracts, rights and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired.
Section 6.07. Compliance with Contracts. The Purchaser shall comply with the terms, covenants and provisions, express or implied, of all contracts for the use of the Project by the Purchaser, and all other contracts and agreements affecting or involving the Project to the extent that the Purchaser is a party thereto.
Section 6.08. Prosecution and Defense of Suits. The Purchaser shall promptly, upon request of the Trustee or any Certificate Owner, from time to time take such action as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the Water System or any part thereof, whether no,v existing or hereafter developing, shall prosecute all such suits, actions and other proceedings as may be appropriate for such purpose and, to the extenl permitted by law. shall indemnify and save the Trustee, the Corporation and every Certificate 23 Owner hannless from all loss, cost, damage and expense, including attorneys fees, that they or • any of them may incur by reason of any such defect, cloud, suit, action or proceeding. •
The Purchaser shall defend against every suit, action or proceeding at any time brought against the Trustee, the Corporation or any Certificate Owner upon any claim arising out of the receipt, application or disbursement of any of the Installment Payments or involving the rights of the Trustee, the Corporation or any Certificate Owner under this Agreement; provided that the Trustee. the Corporation or any Certificate Owner at such party's election may appear in and defend any such suit, action or proceeding. To the extent permitted by law, the Purchaser shall indemnify and hold harmless the Trustee, the Corporation and the Certificate Owners against any and all liability claimed or asserted by any person, arising out of such receipt, application or disbursement, and shall indemnify and hold harmless the Certificate Owners against any attorneys fees or other expenses that any of them may incur in connection with any litigation to which any of them may become a party by reason of ownership of Certificates. The Purchaser shall promptly reimburse the Corporation or any Certificate Owner in the full amount of any attorneys fees or other expenses that it or such Owner may incur in litigation or otherwise in order to enforce such party's rights under this Agreement or the Certificates, provided that such litigation shall be concluded favorably to such party's contentions therein.
Section 6.09. Recordation and Filing. The Purchaser, or the Trustee, at the written direction of the Purchaser, shall record, register, file, renew, refile and re-record all such documents, including financing statements, as may be required by law in order to maintain a security interest in this Agreement and the Assignment Agreement, all in such manner, at such times and in such places as may be required by, and to the extent permitted by, law in order fully to preserve, protect and perfect the security of the Certi ficatc Owners and the rights and security interests of the Trustee. The Purchaser shall do whatever else may be necessary or be reasonably required in order to perfect and continue the lien of this Agreement and the Assignment Agreement.
Section 6.10. Eminent Domain. If all or any part of the Project shall be taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain), the proceeds therefrom shall be applied in the manner specified in Section 6.14 Clfthe Installment Purchase Agreement.
Section 6.11 . Further Assurances. Whenever and so often as may be necessary, the Corporation and the Purchaser will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things, as may be necessary or reasonably required in order to further and more fully vest in the Trustee and the Certificate Owners all rights, interest, powers, benefits, privileges and advantages conferred or intended to be conferred upon them by this Agreement.
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ARTICLE VII .
DEFAULT AND LIMITATION OF LIABILITY
Section 7.01. Notice of Non-Payment. In the event of delinquency in the payment of any Installment Payments due by the Purchaser pursuant to the InstaJlment Purchase Agreement, the Trustee shall give written notice, to the Purchaser, the Bond Insurer and the Corporation, of the delinquency and the amount of the delinquency no later than one {l) Business Day following the date upon which such delinquent lnstallment Payment was due.
Section 7.02. Action on Default or Tem1ination. Upon the occurrence of an Event of Default (as that tem1 is defined in the Installment Purchase Agreement), which event shall constitute a default hereunder, and in each and every such case during the continuance of such Event of Default, the Trustee, but only with the prior written consent of the Bond Insurer so long as the Bond Insurance Policy is in full force and effect and the Bond Insurer has not failed to comply with its payment obligations under the Bond Insurance Policy, at the written direction of the Owners of not less than a majority in aggregate principal amount of Certificates at the time Outstanding shall be entitled, upon notice in writing to the Purchaser, to accelerate the unpaid Installment Payments under the Installment Purchase Agreement and to exercise the remedies provided to the Corporation in the Installment Purchase Agreement.
Upon declaration of the entire principal amount of the unpaid Installment Payments and the accmcd interest thereon to be due and payable immediately and provided such declaration is not rcsctnded or annulled, all in accordance with Section 8.1 of the Installment Purchase Agreement, the Trustee may apply all moneys received as Installment Payments and all moneys held in any fund or account hereunder to the payment of the entire principal amount of the Ccrti ficates and the accrued interest with respect thereto, with interest on the overdue Certificates at the rate or rates of interest applicab1e to the Certificates if paid in accordance with their terms.
In detem1ining whether a defau It in the payment of the Installment Payments has occurred or whether a payment of principal of or interest with respect to the Certificates has been made under the Trust Agreement, no effect shall be given to payments made under the Bond Insurance Policy.
Section 7.03. Other Remedies of the Trustee. The Trustee shall have the right -- (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Purchaser or any director, officer or employee thereof, and to compel the Purchaser or any such director, officer or employee to pcrfom1 or carry out its or his duties under law and the agreements and covenants required to be performed by it or him contained herein; (b) by suit in equity to enjoin any acts or things that are unlawful or violate the rights of the Trustee; or
(c) by smt 111 equity upon the happening of any default hereunder to require the Purchaser and its directors, officers and employees to account as the trustee of an express trust. 25 •
Section 7 .04. Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee shall not affect any subsequent default or breach of duty or contract or impair any duty or contract. No delay or omission by the Trustee to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee by law or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee.
If any action, proceeding or suit to enforce any right or to exercise any remedy is discontinued, abandoned or determined adversely to the Trustee, the Trustee, the Purchaser and the- Certi ficatc Owners shall be restored to their fom1er positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.
Section 7.05. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or the Certificate Owners is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law.
Section 7.06. No Obligation by the Purchaser to Owners. Except for the payment of Installment Payments when due in accordance with the Installment Purchase Agreement and the pcrfonnancc of the other covenants and agreements of the Purchaser contained in said Installment Purchase Agreement and herein, the Purchaser shall have no obligation or liability to the Owners of the Certificates with respect to this Agreement or the execution, delivery or transfer of the Certificates, or the disbursement of Installment Payments to the Owners by the Trustee; provided however that nothing contained in this Section shall affect the rights, duties or obligations of the Trustee expressly set forth herein.
Section 7.07. Trustee Appointed Agent for Certificate-owners; Direction of Proceedings. The Trustee is hereby appointed the agent and attorney of the Owners of all Certificates outstanding hereunder for the purpose of filing any claims relating to the Certificates. For such purposes, the Bond Insurer shall be deemed to be the sole holder of the Certificates so long as it has not failed to comply with its payment obligations under the Bond lnsuranci.: Policy. The Owners of a majority in aggregate principal amount of the Certificates Outstanding hereunder shall, upon tender to the Trustee of reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such direction, have the right to direct the method and place of conducting all remedial proceedings by the Trustee, provided such direction shall be in accordance with law and the provisions of this Trust Agreement and that the Trustee shall have the right to decline to follow any such direction that in the opinion of the Trustee would be unjustly prejudicial to Certificate owners not parties to such a direction.
Section 7.08. 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 othenvisc, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of a majority in aggregate principal amount of the Certificates then outstanding pursuant to Section 7.07 hereof, it shall have full power, in the exercise of its 26 •
discretion for the best interests of the Owners of the Certificates, 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 hereunder, 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 at least a majority in principal amount of the Certificates Outstanding hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation.
Section 7.09. Limitation on Certificate Owners' Right to Sue. No Owner of any Certificate executed and delivered hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Agreement, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default hereunder; (b) the Owners of at least a majority in aggregate principal amount of all the Certificates then Outstanding shall have made written request upon the Trustee to exercise the powers hereinhefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee reasonable indemnity 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 request shall have been received by, and said tender of indemnity shall have been made to, the Trustee.
Section 7.10. No Obligation with Respect to Performance by Trustee. Neither the Purchaser nor the Corporation shall have any obligation or liability to any of the other parties hereto or to the Owners of the Certificates with respect to the performance by the Trustee of any duty imposed upon it under this Agreement.
Section 7 .11. No Liability to Owners for Payment. The Corporation shall not have any obligation or liability to the Owners of the Certificates with respect to the payment of the Installment Payments by the Purchaser when due, or with respect to the performance by the Purchaser of any other covenant made by it in the Installment Purchase Agreement or herein.
Except as proYided in this Agreement, the Trustee shall not have any obligation or liability to the Owners of the Certificates with respect to the payment of the Installment Payments by the Purchaser when due, or with respect to the perfonnance by the Purchaser of any other covenant made by it in the Installment Purchase Agreement or herein.
Section 7.12. No Responsibility for Sufficiency. The Trustee shall not be responsible for the sufficiency of this Trust Agreement, the Installment Purchase Agreement, or of the assignment made to it by the Assignment Agreement of rights to receive Installment Payments pursuant to the Installment Purchase Agreement, or the value of or title to the Project. The Trustee shal I not be responsible or liable for any loss suffered in connection with any investment of funds made by it under the tem1s of and in accordance with this Agreement.
Section 7.13. Indemnification of Trustee. To the extent permitted by law, the Purchaser shall indemnify the Trustee and hold it harmless against any loss, liability, expenses or advances, including but not limited to fees and expenses of counsel and other experts, incurred or made without negligence or willful misconduct on the part of the Trustee, (i) arising out of or in 27 •
connection with the acceptance or administration of this trust or in the exercise and perfonnance of any of the powers and duties hereunder or under the Installment Purchase Agreement by the Trustee, (ii) relating to or arising out of the Project, or the conditions, occupancy, use, possession, conduct or management of, or work done in or about, or from the planning, design, acquisition, installation or construction of the Project or any part thereof, (iii) arising out of or relating to any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading in any official statement or other offering circular utilized in connection with the sale of the Certificates, or (iv) the use, presence, storage, disposal or release of any Hazardous Substances on or about the Project, including the costs and expenses of defending itself against any claim of liability arising under this Agreement.
Such indemnity shall survive payment of the Certificates or resignation or removal of the Trustee.
ARTICLE VIJI.
THE TRUSTEE
Section 8.01. Employment of Trustee. ln consideration of the recitals hereinabove set forth and for other valuable consideration, the Purchaser hereby agrees to employ the Trustee to receive, hold, invest and disburse the moneys received pursuant to the Installment Purchase Agreement for credit to the various funds and accounts established by this Agreement; to execute, deliver and transfer the Certificates; and to apply and disburse the Installment Payments received from the Purchaser to the Owners of Certificates; and to perform certain other functions: all as herein provided and subject to the terms and conditions of this Agreement.
Section 8.02. Acceptance of Employment. In consideration of the compensation herein provided for, the Trustee accepts the employment above referred to subject to the terms and conditions of this Agreement.
Section 8.03. Trustee, Duties, Removal and Resignation. By executing and delivering this Agreement, the Trustee accepts the duties and obligations of the Trustee provided in this Agreement, but only upon the tem1s and conditions set forth in this Agreement. (a) In case an Event of Default has occmTed and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer of the Trnstec, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.
( c) The Trustee shat I not be liable with respe.ct to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of a majority in principal amount of the Certificates relating to the time, method and place of conducting any proceeding 28 for any remedy available to the Trustee, or exercising any trust or power conferred upon the • Trustee under this Agreement.
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( d) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement, unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.
The Purchaser, or, if the Purchaser is in default under the Installment Purchase Agreement, the Owners of a majority in aggregate principal amount of all Certificates Outstanding, may by written request to the Trustee, remove the Trustee and any successor thereto, and may appoint a successor Trustee, but any such successor shall be a bank or trust company doing business and having a corporate trust office in California, that has ( or the parent holding company of which has) a combined capital (exclusive of borrowed capital) and surplus of at least seventy-five million dollars ($75,000,000) and subject to supervision or examination by federal or state authorities. If such bank or trust company 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 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.
The Trustee may at any time resign by giving written notice to the Purchaser and by giving to the Certificate Owners notice of such resignation by mail at the addresses shown on the registration books maintained by the Trnstee. Upon receiving such notice of resignation, the Purchaser shall promptly appoint a successor Trustee by an instrument in writing; provided, however, that in the event that the Purchaser does not appoint a successor Trustee within thirty (30) days following receipt of such notice of resignation, the resigning Trustee may at the expense of the Purchaser petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee.
Section 8.04. Merger or Consolidation of Trustee. Any corporation into which the Trustee may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding, provided that such successor trnstee shall be eligible under the provisions of Section 8.03.
Section 8.05. Compensation of the Trustee. The Purchaser shall from time to time, subject to any agreement in effect with the Trustee, pay to the Trustee reasonable compensation for its services and shall reimburse the Trustee for all its advances and expenditures, including but not limited to, advances to and fees and expenses of independent appraisers, accountants, consultants, counsel, agents and attorneys-at-law or other experts employed by it in the exercise and perfom1ance of its powers and duties hereunder. Such compensation and reimbursement shall be paid by the Purchaser; provided, however, that the Trustee shall not otherwise have any 29 •
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claims, except in accordance with Section 7.13 hereof, or lien for payment of compensation for its services against any other moneys held by it in the funds or accounts established hereunder hut may take whatever legal actions are lawfully available to it directly against the Purchaser.
The agreement contained in this Section shall survive the payment of the Certificates, the discharge of this Agreement and the appointment of a successor trustee.
Section 8.06. Protection of the Trustee. The Trustee shall be protected and shall incur no liability in acting. refraining from acting or proceeding in good faith upon any resolution, notice, telegram, request, consent, waiver, certificate, statement, affidavit, voucher, bond, requisition or other paper or document that it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions of this Agreement, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee may consult with counsel, who may be counsel to the Corporation or the Purchaser, 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, suffered or omitted by it hereunder in good faith in accordance therewith.
Whenever in the administration of this Agreement, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking, omitting or suffering any action hereunder, the Trustee may (unless other evidence in respect thereof be herein specifically prescribed) rely on a certificate of the Corporation or the Purchaser and such certificate shall be full warranty to the Trustee for any action taken or suffered under the provisions of this Agreement upon the faith thereof. but in its discretion the Trustee may (but shall have no duty), in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.
The Trustee may buy, sell, own, hold and deal in any of the Certificates provided pursuant to this Agreement, and may join in any action that any Owner may be entitled to take with like effect as if the Trustee were not a party to this Agreement. The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Purchaser or the Corporation, and may act as depositary, trustee, or agent for any committee or body of Owners of Certificates or of obligations of the Corporation or the Purchaser as freely as if it were not Trustee hereunder.
The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder either directly or by or through attorneys, agents, or receivers, and the Trustee shall not be responsible for the negligence or misconduct of any such attorney, agent or receiver selected by it with reasonable care. The Trustee shall not be answerable for the exercise of any discretion or power under this Agreement or for anything whatever in connection with the funds and accounts established hereunder, except only for its own willful misconduct or negligence.
The recitals, statements and representations by the Purchaser or the Corporation contained in this Abrreement or in the Certificates shall be taken and construed as made by and 456X4898 .1 30
on the part of the Purchaser or Corporation and not by the Trustee and the Trustee does not • assume, and shall not have, any responsibility or obligations for the correctness of any thereof.
Except during the continuance of an Event of Default the Trustee undertakes to pcrfom1 such duties, and only such duties as are specifically set forth in this Agreement and no implied duties or obligations shall be read into this Agreement against the Trustee. ~o provision in this Agreement shall require the Trustee to risk or expend its own funds or othenvisc incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights or powers.
In accepting the trust hereby created, the Trustee acts solely as Trustee for the Owners and not in its individual capacity and all persons, including without limitation the Owners and the Purchaser or the Corporation having any claim against the Trustee arising from this Agreement shall look only to the funds and accounts held by the Trustee hereunder for payment except as otherwise provided herein. Under no circumstances shall the Trustee be liable in its individual capacity for the obligations evidenced by the Certificates.
The Trustee makes no representation or warranty express or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated hy the Purchaser or the Corporation of the Project. In no event shall the Trustee be liable for incidental, indirect, special or consequential dan1ages in connection with or arising from the Installment Purchase Agreement or this Agreement for the existence, furnishing or use of the Project.
The Trustee shall not be deemed to have knowledge of any Event of Default hereunder or under the Installment Purchase Agreement unless and until it shall have actual knowledge thereof or have received notice thereof at its corporate trust office at the address set forth in Section 12.13 hereof.
The Trustee shall not be accountable for the use or application by the Purchaser, or the Corporation or any other party of any funds that the Trustee has released in accordance with the terms of this Agreement.
The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Certificates.
The Trustee is authorized and directed to execute m its capacity as Trustee the Assignment Agreement.
The immunities extended to the Trustee also extend to its directors, officers, employees and agents.
The Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of the Owners of a majority (or other percentage provided for herein) in aggregate 31 principal amount of Certificates outstanding relating to the exercise of any right, power or • remedy available to the Trustee.
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ARTICLE IX.
AMENDMENT OF TRUST AGREEMENT
Section 9.01. Amendments Pennittcd. (a) This Agreement and the rights and ob ligations of the Corporation, the Purchaser, the Owners of the Certificates and of the Trustee may be modified or amended at any time with the prior written consent of the Bond Insurer so long as the Bond Insurance Policy is in full force and effect by an amendment hereto, which shall become binding when the written consents of the Owners of a majority in aggregate principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as provided in Section 12.04 hereof, shall have been filed with the Trustee, provided, however, that no such modification or amendment shall ( 1) extend the stated maturities of the Certificates, or reduce the rate of interest represented thereby, or extend the time of payment of interest, or reduce the amount of principal represented thereby, or reduce any premium payable on the prepayment thereof, without the consent of the Owner of each Certificate so affected, or (2) reduce the aforesaid percentage of Owners of Certificates whose consent is required for the execution of any amendment or modification of this Agreement, or (3) modify any of the rights or obligations of the Trustee or the Corporation without its respective written consent thereto. (b) This Agreement and the rights and obligations of the Corporation, the Purchaser and of the Owners of the Certificates may also be modified or amended at any time by an amendment hereto, which shall become binding upon adoption, without the consent of the Ow·ners of any Certificates. but only to the extent permitted by law and only for any one or more of the following purposes:
( l) to add to the covenants and agreements of the Corporation or the Purchaser contained in this Agreement other covenants and agreements thereafter to be observed or to surrender any right or power herein reserved to or conferred upon the Corporation or the Purchaser, but only if such addition or surrender does not adversely affect the interests of the Owners of the Certificates; (2) to cure, correct or supplement any ambiguous or defective provision contained in this Agreement or in regard to questions arising under this Agreement, as the Corporation or the Purchaser may deem necessary or desirable, but only if such cure, correction or supplementation does not adversely affect the interests of the Owners of the Ccrti ficates; and
(3) to make such other amendments or modifications as may be in the best interests of the Owners of the Certificates.
No amendment without consent of the Owners may modify any of the rights or oh ligations of the Trustee without its written consent thereto. 32 •
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Section 9.02. Endorsement or Replacement of Certificates After Amendment or Supplement. After the effecti\'e date of any action taken as hereinabove provided, the Trustee may determine that the Certificates may bear a notation by endorsement in form approved by the Trustee as to such action, and in that case upon demand of the Trustee to the Owner of any Outstanding Certificate and presentation of such Owner's Certificate for such purpose at the principal corporate trust office of the Trustee a suitable notation as to such action shall be made on such Certificate. If the Trustee shall so detem1ine, new Certificates so modified as in the opinion of the Trustee shall be necessary to confonn to such action shall be prepared, and in that case upon demand of the Trustee to the Owner of any Outstanding Certificates such new Certificates shall be exchanged at the principal corporate trust office of the Trustee without cost to each Owner for Certificates then Outstanding upon surrender of such Outstanding Certificates.
Section 9.03. Amendment of Particular Certificates. The provisions of this article shall not prevent any Owner from accepting any amendments to the particular Certificates held by him, provided that due notation thereof is made on such Certificates.
In connection with any amendment of this Agreement, the Trustee may conclusively rely on an opinion of counsel that the requirements of this Article IX have been met.
Section 9.04. Notice to Rating Agencies. Any rating agency rating the Certificates shall receive notice of each amendment to the Trust Agreement and a copy thereof at least 15 days in advance of its execution. The Bond lnsurer shall be provided with a full transcript of all proceedings relating to any amendment or supplement hereto .
ARTICLE X.
DEFEASANCE
Section 10.01. Dischar~e of Trust Agreement. When the obligations of the Purchaser under the Installment Purchase Agreement shall cease pursuant to Article IX of the Installment Purchase Agreement (except for the right of the Trustee and the obligation of the Purchaser to have the money and Permitted Investments mentioned therein applied to the payment of Installment Payments as therein set forth and the obligation to apply moneys on deposit in the Rebate Fund as provided in Section 5.06), then and in that case the obligations created by this Agreement shall thereupon cease, tem1inate and become void, and after provision for payment of amounts due the Trustee hereunder, the Trustee shall turn over to the Purchaser, as an O\'crpayment of Installment Payments, any surplus in the Installment Payment Fund and all balances remaining in any other funds or accounts (other than moneys and Permitted Investments held for the payment of the Certificates at maturity or on prepayment, which moneys and Permitted Investments shall continue to be held by the Trustee in trust for the benefit of the Owners and shall be applied by the Trustee to the payment, when due, of the principal and interest and premium, if any, represented by the Certificates), and (unless otherwise provided herein) alter such payment this Agreement shall become void. lf moneys or securities issued by the United States of America described in clause (2) and (3) of the definition of Pennitted Investments or securities described in clause (8) of the 33 •
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definition of Pem1itted Investments are deposited with and held by the Trustee as hercinabove provided. the Trustee shall within thirty (30) days after such moneys or Permitted Investments shall have been deposited with it, mail a notice, first class postage prepaid, to the Owners at the addresses listed on the registration books kept by the Trustee pursuant to Section 2.08, setting forth (a) the date fixed for prepayment of the Certificates, (b) a description of the moneys or securities described in clause (a) of the definition of Pennittcd Investments so held by it, and (c) that this Agreement has been released in accordance with the provisions of this Section.
J\ot\vithstanding anything herein to the contrary, in the event that the principal and/or interest due on the Certificates shall be paid by the Bond Insurer pursuant to the Bond Insurance Policy, the Certificates shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Corporation, and the assignment and pledge of the Trust Estate and all covenants, agreements and other obligations of the Corporation to the registered owners shall continue to exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be subrogatcd to the rights of such registered owners.
Section 10.02. Deposit of Money or Securities with Trustee. Whenever in this Agreement or the Installment Purchase Agreement it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or prepay any Certificates, the money or securities to be so deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to this Agreement and shall be only cash. direct non-callable obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the llnited States of America, to which direct obligation or guarantee the full faith and credit of the ljnited States of America has been pledged or securities described in clause (8) of the definition of Permitted Investments. In the event of an advance refunding, the Purchaser shall cause to be delivered a verification report or a report of an independent nationally recognized certified public accountant.
Section 10.03. Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of the interest or principal or Prepayment Price represented by any of the Certificates that remain unclaimed for two (2) years after the later of (a) the date when such interest or principal or Prepayment Price shall have become payable, or (b) the date of deposit of such moneys if deposited with the Trustee after the date when the interest or principal or Prepayment Price represented by such Certificates shall have become payable, shall be repaid by the Trustee to the Purchaser as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the Purchaser for the payment of the interest and principal or Prepayment Price represented by such Certificates; provided, however. that before being required to make any such payment to the Purchaser, the Trustee shall, at the expense of the Purchaser, first mail a notice to the Owners of the Certificates so payable that such moneys remain unclaimed and that after a date named in such notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such moneys then unclaimed will be returned to the Purchaser. 34 •
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ARTICLE XI.
BONDINSURAI\CE
Section 11.01. Amendments Requiring Consent of Bond Insurer. Any provision of this Tmst Agreement expressly recognizing or granting rights in or to the Bond Insurer may not be amended in any manner which adversely affects the rights of the Bond Insurer hereunder without the prior written consent of the Bond Insurer. The Bond Insurer reserves the right to charge the Purchaser a fee for any consent or amendment to this Trust Agreement while the Bond Insurance Policy is outstanding.
Unless otherwise provided in this Article XL the Bond Insurer's consent shall be required in addition to consent of the registered owners of the Certificates, when required, for the following purposes: (i) execution and delivery of any Supplemental Trust Agreement that would adversely affect the rights of the Bond Insurer; (ii) removal of the Trustee and selection and appointment of any successor trustee; and (iii) initiation or approval of any action not described in (i) or (ii) above which requires consent of the registered owners of the Certificates.
Notwithstanding any other provision of this Trust Agreement, the Bond Insurer shall have the right, in lieu of registered owners of the Certificates, to consent on behalf of such owners to any Supplemental Trust Agreement that requires the consent of registered owners of Certificates.
Section 11.02. Approval of Any Reorganization. Any reorganization or liquidation plan with respect to the Purchaser must be acceptable to the Bond Insurer. In the event of any reorganization or liquidation, the Bond Insurer shall have the right to vote on behalf of all registered owners who hold the Certificates absent a default by the Bond Insurer under the Bond Insurance Policy.
Section 11.03. Provisions Relating to Remedies Upon an Event of Default.
Notwithstanding any other provisions of this Trust Agreement, upon the occurrence and continuance of an Event of Default, the Bond Insurer shall have the right, so long as it is not in default under the Bond Insurance Policy, to control and direct the enforcement of all rights and remedies granted to the registered owners of Certificates or the Trustee for the benefit of the registered owners under this Trust Agreement.
Section 11.04. Notice to Bond Jnsurer.
(a) While the Bond Insurance Policy is in effect, the Purchaser or the Trustee (as to (B) and (C)), as appropriate, shall furnish to the Bond Insurer (to the attention of the Surveillance Department, unless otherwise indicated):
(A) as soon as they are available, a copy of any financial statement, audit and/or annual report of the Purchaser;
(B) such additional information as the Bond Insurer may reasonably request; (C) a copy of any notice to be given to the registered owners of the Certificates, including, without limitation, notice of any redemption or defeasance of the Certificates, 35 •
and any certificate rendered pursuant to this Trust Agreement relating to the security for the Certificates; and
(D) to the extent that the Purchaser has entered into a continuing disclosure agreement with respect to the Certificates, the Bond Insurer shall be included as party to be notified of a material signi ti cant event required to be given thereunder. (b) The Purchaser or the Trnstee, as appropriate, shall notify the Bond Insurer (to the attention of the General Counsel Office) of any failure of the Purchaser to provide relevant notices, ccrti ficates, etc.
(c) Notwithstanding any other provision of this Trust Agreement, the Trustee or the Purchaser, as appropriate, shall immediately notify the Bond Insurer (to the attention of the General Counsel Office) if at any time there are insufficient moneys to make any payments of principal and/or interest on the Certificates as required and immediately upon the occurrence of any Event of Default hereunder.
(d) The Purchaser will pem1it the Bernd Insurer to discuss the affairs, finances and accounts of the Purchaser or any infom1ation the Bond Insurer may reasonably request regarding the security for the Certificates with appropriate officers of the Purchaser. The Trustee or the Purchaser, as appropriate, will pennit the Bond Insurer to have access to and to make copies of all books and records relating to the Certificates at any reasonable time. (c) The Bond [nsurer shall have the right to direct an accounting with respect to the Certificates at the Purchaser's expense. and the Purchaser·s failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from the Bond Insurer shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension \vould not materially adversely affect the interests of any registered owner of the Certificates.
Section 11.05. Defeasance Provisions. Notwithstanding any other provision of this Trust Agreement, in the event that the principal and/or interest due with respect to the Certificates is paid by the Bond insurer pursuant to the Bond [nsurance Policy, the Certificates shall remain Outstanding for all purposes, not be dcfeased or otherwise satisfied and not be considered paid by the Purchaser, and all covenants, agreements and other obligations of the Purchaser under the Trust Agreement to the registered owners of the Certificates shall continue to exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be subrogated to the rights of such registered owners of the Certificates. To evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee shall note the Bond Insurer's rights as subrogee on the registration books of the Purchaser maintained by the Trustee upon receipt from the Bond Insurer of proof of the payment of interest thereon to the registered owners of the Certificates, and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note the Bond Insurer's rights as subrogee on the registration books of the Purchaser maintained by the Trustee upon surrender of the Certificates by the registered owners thereof together with proof of the payment of principal thereof.
36 Section 11.06. Payment Procedure. As long as the Bond Insurance Policy shall be in full • force and effec:t, the Purchaser and the Trustee agree to comply with the following provisions:
(a) At least one ( ! ) day prior to all interest payment dates the Trustee will detennine whether there will be sufficient funds in the applicable funds and accounts to pay the principal of or interest on the Certificates on such interest payment date. [f the Trustee detennines that there wi 11 be insufficient funds in such funds or accounts, the Trustee shall so notify the Bond Insurer.
Such notice shall specify the amount of the anticipated deficiency. the Certificates to which such deficiency is applicable and whether such Certificates will be deficient as to principal or interest, or both. If the Trustee has not so noti lied the Bond Insurer at least one ( 1) day prior to an interest payment date, the Bond Insurer will make payments of principal or interest due with respect to the Certificates on or before the first day next following the date on which the Bond Insurer shall have received notice of nonpayment from the Trustee. (h) The Trustee shall, after giving notice to the Bond Insurer provided in (a) above, make available to the Bond Insurer and. at the Bond insurer's direction, to The Bank of New York, in New York, New York, as insurance trustee for the Bond Insurer or any successor insurance trustee (the ''Insurance Trustee .. ), the registration books of the Purchaser maintained by the Trustee and all records relating to the funds and accounts maintained under the Trust Agreement.
(c) The Trustee shall provide the Bond Insurer and the Insurance Trustee with a list of registered <)wners of Certificates entitled to receive principal or interest payments from the Bond Insurer under the terms of the Bond Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of the Certificates entitled to receive full or partial interest payments from the Bond Insurer and (ii) to pay principal with respect tc) the Certificates surrendered to the Insurance Trustee by the registered owners of the Certificates entitled to receive full or partial principal payments from the Bond Insurer. (d) The Trustee shall, at the time it provides notice to the Bond Insurer pursuant to (a) above, notify tegistered owners of the Certificates entitled to receive the payment of principal or interest thereon from the Bond Insurer (i} as to the fact of such entitlement, (ii) that the Bond Insurer will remit to them all or a part of the interest payments next coming due upon proof of the entitlement of the registered owners of the Certificates to interest payments and delivery to the Insurance Trustee, in fonn satisfactory to the Insurance Trustee, of an appropriate assignment of the right to payment of the registered owners of the Certificates, (iii) that should they be entitled to receive full payment of principal from the Bond Insurer, they must surrender their Certificates (along with an appropriate instrument of assignment in fom1 satisfactory to the Insurance Trustee to permit ownership of such Certificates to be registered in the name of the Bond Insurer) for payment to the Insurance Trustee, and not the Trustee, and (iv) that should they be entitled to receive partial payment of principal from the Bond Insurer, they must surrender their Certificates for payment thereon first to the Trustee who shall note on such Certificates the portion of the principal paid by the Trustee, and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which \vill then pay the unpaid portion of principal.
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(e) In the event that the Trustee has notice that any payment of principal of or interest with respect to a Certificate which has become due for payment and which is made to a registered owner of Certificates by or on behalf of the Purchaser has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee shall, at the time the Bond Insurer is notified pursuant to (a) above, notify all registered owners of the Certificates that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from the Bond Insurer to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee shall furnish to the Bond Insurer its records evidencing the payments of principal of and interest on Certificates which have been made by the Trustee and subsequently recovered from registered owners of Certificates and the dates on which such payments were made.
Section 11.07. Trustee-Related Provisions. The Trustee may be removed at any time, at the request of the Bond Insurer, for any breach of the trust set forth in the Trust Agreement. The Trustee shall provide to the Bond Insurer prior written notice of any Trustee resignation. l\otv,1ithstanding any other provision of this Trust Agreement, in determining whether the rights of the registered owners of the Certificates \vill be adversely affected by any action taken pursuant to the terms and provisions of the Trust Agreement, the Trustee shall consider the effect on the registered owners of the Certificates as if there were no Bond Insurance Policy.
Notwithstanding any other provision of this Trust Agreement, no removal, resignation or termination of the Tmstee shall take effect until a successor, acceptable to the Bond Insurer, shall be appointed.
Section 11.08. Bond Insurer as Third Party Beneficiary. To the extent that the Trust Agreement confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or by reason of the Trust Abrrecment, the Bond Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted under the Trust Agreement. Notwithstanding any other provision of the Trust Agreement, the Bond Insurer shall be entitled to the rights, remedies and claims set forth in the Trust Agreement so long as it is not in default under the Bond Insurance Policy.
Section l 1.09. Parties Interested Herein. Nothing in this Trust Agreement expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the Purchaser, the Trustee, the Corporation, the Bond Insurer, and the registered owners of the Certificates, any right, remedy or claim under or by reason of the Trust Agreement or any covenant, condition or stipulation in the Trust Agreement, and any covenant, condition or stipulation hereoC all covenants, stipulations, promises and agreements in this Trust Agreement contained by and on behalf of the Purchaser shall be for the sole and exclusive benefit of the Purchaser, the Trustee, the Corporation, the Bond Insurer, and the registered owners of the Certificates, as applicable.
451,84K98 J 38
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ARTICLE XII .
MISCELLANEOUS
Section 12.01. Benefits of Trust Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the Purchaser, the Tmstee, the Corporation, the Bond Insurer and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition, covenant or tem1 required herein to be observed or perfonncd by or on behalf of the Purchaser shall be for the sole and exclusive benefit of the Trnstee, the Corporation, the Bond Insurer and the Owners.
Section 12.02. Successor Deemed Included in all References to Predecessor. Whenever the Purchaser, the Corporation or the Trustee or any officer thereof is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Purchaser, the Corporation or the Trustee or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or performed by or on behalf of the Purchaser, the Corporation or the Trustee or any officer thereof shall bind and inure to the benefit of the respective successors thereof whether so expressed or not.
Section 12.03. Execution of Documents by Owners. Any declaration, request or other instrument that is pennitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner or such person's attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer, or by such other proof as the Trnstee may accept that it deems sufficient.
The ownership of any Certificates and the amount, payment date, number and date of owning the same may be proved by the books required to be kept by the Trustee pursuant to the provisions of Section 2.08.
Any declaration, request or other instrument in writing of the Owner of any Certificate shall bind all future Owners of such Certificate with respect to anything done or suffered to be done by the Purchaser or the Trustee in good faith and in accordance therewith.
Section 12.04. Disgualitie<l Certificates. Unless all Certificates are then so owned or held, Certificates known to the Trustee to be owned or held by or for the account of the Corporation or the Purchaser shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Certificates provided for in this Agreement, and shall not be entitled to consent to or take any other action provided for in this Agreement. For the purpose hereof no bank organized under the laws of the State and no national banking 39 association doing business in said State, or elsewhere, shall be deemed to be an agency of the • Corporation or of the Purchaser.
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The Trustee may adopt appropriate regulations to require each Owner of Certificates, before his consent provided for in this Agreement shall be deemed effective, to reveal if the Certificates as to which such consent is given arc disqualified as provided in this Section.
Section 12.05. Waiver of Personal Liability. No director, officer or employee of the Purchaser or the Corporation shall be individually or personally liable for the payment of the interest or principal or the prepayment premiums, if any, represented by the Certificates, but nothing contained herein shall relieve any director, officer or employee of the Purchaser or Corporation from the performance of any official duty provided by any applicable provisions of law or by the Installment Purchase Agreement or hereby.
Section 12.06. Acquisition of Certificates by Purchaser; Destruction of Certificates. All Certificates acquired by the Purchaser, whether by purchase or gift or otherwise shall be surrendered to the Trustee for cancellation. Whenever in this Agreement provision is made for the cancellation by the Trustee of any Certificates, the Trustee shall destroy such Certificates and deliver a certificate of such destruction to the Purchaser.
Section 12.07. Headings. Headings preceding the text of the several Articles and Sections hereof, and the table of contents, are solely for convenience of reference and shall not constitute a part of this Agreement or affect its meaning, construction or effect.
All references herein to "Articles." "Sections"' and other subdivisions arc to the corresponding Articles. Sections or subdivisions of this Agreement: and the words "herein,'' ''hereof." "hereunder"' and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof Section 12.08. Funds and Accounts. Any fund required by this Agreement to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds shall at all times be maintained in accordance with sound industry practices and with due regard for the protection of the security of the Certificates and the rights of every Owner thereof Section 12.09. Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms required herein to be observed or performed by or on the part of the Purchaser, the Corporation or the Trustee shall be contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or tem1s shall he null and Yoid and shall be deemed separable from the remaining agreements, conditions, covenants and tem1s hereof and shall in no way affect the validity hereof or of the Certificates, and the Owners shall retain all the benefit, protection and security afforded to them under any applicable provisions of law. The Purchaser, the Corporation and the Trustee hereby declare that they would have executed the Trust Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the 40 •
execution and delivery of the Certificates pursuant hereto irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstances may be held to be unconstitutional, unenforceable or invalid.
Section 12.10. California Law. THIS AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE ST A TE.
Section 12.11. Effect of Bond Insurance Policy on Owners. Notwithstanding any other provision hereof, in detennining whether the rights of the Certificate Owners will be adversely affected by any action taken pursuant to the tem1s and provisions hereof, the Trustee shall consider the effect on the Certificate Owners as if there were no Bond Insurance Policy.
Section 12.12. Notices to Bond Insurer. The Trustee shall provide the Bond Insurer with notice of the prepayment, other than mandatory sinking fund prepayment, of any of the Certificates, including the principal amount, maturities and CUSIP numbers thereof; and such additional information as the Bond Insurer may reasonably request from time to time.
Section 12.13. Notices. All written notices to be given under this Agreement shall be given by mail to the party entitled thereto at its address set forth below, or at such address as the party tnay provide to the other parties in writing from time to time.
If to the Purchaser:
If to the Corporation:
If to the Trustee:
If to the Bond Insurer:
Baldy Mesa Water District
I 03 t 3 Duncan Road
Victorville, CA 92392
Attention: General Manager
Baldy Mesa Water District Public Facilities Corporation 103 13 Duncan Road
Victorville, CA 92392
Attention: President
Union Bank of California, N.A.
120 S. San Pedro Street, 4th Floor
Los Angeles, CA 90012
Attention: Corporate Trust Department
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Surveillance Department
Section 12.14. Execution in Counterparts. This Agreement may be executed in several counterparts. each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
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IN WITNESS WHEREOF. the parties hereto have executed this Trust Agreement by their officers thereunto duly authorized as of the day and year first written above.
UNION BA>l"K OF CALIFORNIA, N.A., as
Trustee
By:_____._.1_:>-'- . ,. _ _...__,:-·/~---------
Authorized Signatory
BALDY MESA WATER DISTRICT PUBLIC
FACILITIES CORPORATfON, as Corporation
/
By: __ --"'- :}~.....:c:.......::•---· _ _ ...,._.1/_· _ _ _____ _ President
BALDY MESA WATER DJSTRICT, as Purchaser
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Exhibit A
[FORM OF CERTIFICATE OF PARTICIPATION]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE TRUST
AGREEMENT) TO THE TRUSTEE FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE EXECUTED AND
DELIVERED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTIIER\VISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
INTEREST
RATE
PARITY CERTIFICATE OF PARTICIPATION
(Water System Improvement Project)
Series 2006
Evidencing the Direct, Undivided Fractional
Interest of the Owner Hereof in
Installment Payments to be Made by
BALDY MESA WATER DlSTRICT, CALIFORNIA
As the Purchase Price for Certain Property
Pursuant to an Installment Purchase Agreement With the
Baldy Mesa Water District Public Facilities Corporation
CERTIFJCATE
PAYMENT
DATE
August 1, _ _
DATED
DATE
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
CUSIP
DOLLARS
THIS IS TO CERTIFY that the Registered Owner (specified above) of this Parity Catificate of Participation (herein called the '·Certificate") is the owner of an undivided interest in the right to receive certain Installment Payments (as that term is defined in the Trust Agreement hereinafter mentioned) (the ''Installment Payments'') under that certain Installment A-1
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Purchase Agreement dated as of March I, 2006 (the "Installment Purchase Agreement'') by and between Baldy Mesa Water District Public Facilities Corporation (the "Corporation'') and the Baldy Mesa Water District (the "Purchaser"), the Installment Payments to be made thereunder having been assigned to Union Bank of California, N.A., as trustee (the ''Trustee"), having a corporate trnst office in Los Angeles, California. The Trustee has executed and delivered $13,070,000 aggregate principal amount of Certificates.
The Registered Owner of this Certificate is entitled to receive, subject to the tenns of the Installment Purchase Agreement and the Trust Agreement, on the Certificate Payment Date (specified above) the Principal Amount (specified above) representing a portion of the Installment Payments designated as principal coming due on the Certificate Payment Date, and to receive an interest component on such principal component at the interest rate per annum spcci fied above, from the Interest Pa1mcnt Date ( as hereinafter defined) preceding the date of execution hereof by the Trustee, unless such date of execution is after a Record Date (as hereinafter defined) and on or before the succeeding Interest Payment Date, in which case interest shall be payable from such Interest Payment Date, or unless such date of execution is on or before the first Record Date, in which case interest shall be payable from the Delivery Date, provided. however, that if, as shown by the records of the Trustee, interest represented by this Certificate shall be in default, Certificates executed in exchange for this Certificate surrendered for transfer or exchange shall represent interest from the last date to whjch interest has been paid in full or duly provided for with respect to this Certificate, or, if no interest has been paid or duly provided for with respect to this Certificate, from the Delivery Date. Interest with respect to this Certificate shall be paid on February I and August 1 of each year, commencing August I, 2006 (each, an "'Interest Payment Date''), to and including the Certificate Payment Date set forth above or the date of prior prepayment hereof. The principal and prepayment price with respect hereto arc payable in lawful money or the United States of America upon presentation and surrender at the Corporate Trust Office (as defined in the Trust Agreement) of the Trustee. Interest with respect hereto is payable by check of the Trustee mailed by first class mail on each Interest Payment Date to the Registered Owner hereof as of the close of business on the fifteenth day of the calendar month preceding such 1nterest Payment Date, whether or not such day is a business day (the "Record Date") at the address shown on the registration books maintained by the Trustee or, upon the request of an owner of at least $1,000,000 in aggregate principal amount of Cc:rtificates, by wire transfer in immediately available funds to an account in the United States designated by such owner in writing to the Trustee prior to the Record Date except in each case, that, if and to the extent that there shall be a default in the payment of the interest due on such Interest Payment Date, such defaulted interest shall be paid to the owner in whose name this Certificate is registered at the close of business on a special record date as determined by the Trustee.
REFERENCE IS MADE TO THE FURTHER PROVJSIONS OF THIS CERTIFICATE
SET FORTH ON THE REVERSE SIDE, WHICH SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH HERE.
The Purchaser has certified that all acts, conditions and things required by the Constitution and statutes of the State of California and the Trust Agreement to exist, to have happened and to have been performed precedent to and in the delivery of this Certificate, do exist have happened and have been performed in due time, form and manner as required by law. •
This Certificate has been executed by the Trustee pursuant to the tenns of a Trust Agreement, dated as of March 1, 2006, by and among the Trustee, the Corporation and the Purchaser (the "Trust Agreement"). Copies of the Trust Agreement and the Installment Purchase Agreement are on file at the Corporate Trust Office of the Trustee, and reference is made to the Tmst Agreement and the Installment Purchase Agreement and any and all amendments thereto for a description of the pledges and covenants securing the Certificates, the nature, extent and manner of enforcement of such pledges, the rights and remedies of the registered owners of the Certificates with respect thereto and the other terms and conditions upon which the Certificates are delivered thereunder.
The certificates arc payable from Installment Payments and other moneys on deposit in the funds and accounts created under the Trust Agreement. All Net Revenues and all amounts on deposit in the Water Fund (as such terms are defined in the Installment Purchase Agreement) arc irrevocably pledged to the payment of the Installment Payments and the Net Revenues shall not be used for any other purpose while any of the Installment Payments remain unpaid; provided that out of Net Revenues there may be apportioned such sums for such purposes as arc expressly pcm1itted in the Installment Purchase Agreement. Such pledge constitutes a lien on Net Revenues and, subject to application of Net Revenues and all amounts on deposit in the Water Fund as permitted in the Installment Purchase Agreement, the Water Fund and other funds and amounts created under the Installment Purchase Agreement for the payment of the Installment Payments and all Parity Obligations (as such term is defined in the Installment Purchase Agreement) in accordance with the terms of the Installment Purchase Agreement and the Trust Agreement. The obligation of the Purchaser to make Installment Payments is a special obligation of the Purchaser payable solely from such Net Revenues (as such term is defined in the Installment Purchase Agreement), the Water Fund and other funds described in the Installment Purchase Agreement and in the Trust Agreement and docs not constitute a debt of the Purchaser or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction.
The Purchaser has covenanted not to issue evidences of indebtedness or incur other obligations that are payable from and secured by a pledge of and lien on Net Revenues senior to the pledge of and lien on Net Revenues of the Installment Payments. The Purchaser may at any time execute or issue any Parity Obligations, the payments of which, as the case may be, are on a parity v,ith the Installment Payments and which are secured by a pledge of or lien on the Net Revenues in accordance with the Installment Purchase Agreement.
The Certificates are authorized to be executed and delivered in the form of full y registered Ce,tificates in the denomination of $5,000 each or any integral multiple thereof; provided that no Certificate shall have principal represented thereby becoming payable in more than om: year. Subject to the limitations and conditions and upon payment of the taxes or charges. if any, as provided in the Trust Agreement, Certificates may be exchanged for a like aggregate principal amount of Certificates of the same Certificate Payment Date and interest rate of other authorized denominations at the Corporate Trust Office of the Trustee.
This Certificate is transferable by the Registered Owner hereof, in person or by such person's duly authorized attorney, at said office of the Trustee, but only in the manner, subject to the limitations and upon payment of the taxes or charges provided in the Trust Agreement, and A-3
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upon surrender of this Certificate for cancellation, accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. Upon such transfer a new Certificate or Certificates, of the same Certificate Payment Date, and of authorized denomination or denominations, for a like aggregate principal amount and interest rate will be delivered to the transferee in exchange therefor. The Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Trustee shall not be affected by any notice to the contrary.
The Trustee shall not be required to register the transfer or exchange of any Certificate (i) within 15 days preceding selection of Certificates for prepayment or (ii) selected for prepayment.
The Certificates maturing on or after August 1, 2017 are subject to optional prepayment prior to maturity upon notice to the Trustee on August 1, 2016, or any date thereafter, from any source of available funds, as a whole or in part, at a price of par together with interest accrued thereon to the date of Prepayment, without premium.
The Certificates shall be subject to prepayment prior to their respective stated maturities, as a whole on any date or in part on any Interest Payment Date, in the order of maturity as directed by the Purchaser in a written request provided to the Trustee at least 60 days prior to the prepayment date, or in the event the Purchaser has not directed the order of maturity, in inverse order of maturity, and by lot within each maturity in integral multiples of $5,000, from prepaid Installment Payments made by the Purchaser from net proceeds of insurance or condemnation awards upon the terms and conditions of, and as provided for, in the Trust Agreement and the Installment Purchase Agreement (provided that such prepayment shall occur on the next Interest Payment Date subsequent to such transfer with respect to which timely notice of prepayment can be provided) at a prepayment price equal to the principal amount thereof plus accrued interest thereon to the date fixed for prepa1ment, ,vithout premium.
The Certificates maturing on August 1, 2016, August 1, 2026, August I, 2029 and August 1, 203<1, respectively, are to be called for mandatory sinking fund prepayment prior to such maturity dates in part, by lot, at 100% of the principal amount thereof plus accrued interest to the prepayment date, as set forth in the Trust Agreement.
As provided in the Trust Agreement, notice of prepayment hereof shall be mailed, first class postage prepaid, at least thirty days but not more than sixty days prior to the prepayment date, to the Registered Owner of this Certificate. If this Certificate is called for prepayment and payment is duly provided therefor as specified in the Trust Agreement, interest represented hereby shall cease to accrue from and after the date fixed for prepayment. Any failure to receive such notice or defect in the notice or the mailing will not affect the validity of the prepayment of this Certificate.
To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust Agreement and the rights and obligations of the Corporation, the Purchaser, the registered owners of the Certificates and of the Trustee may be modified or amended at any time with the pri~H \,\Titten consent of Financial Guaranty Insurance Corporation (the ''Bond Insurer") so long as the Bond Insurance Policy (as defined in the Trust Agreement) is in full force and effect with A-4
the written consents of the registered owners of a rnajotity in aggregate principal amount of the • Certi ficatcs then outstanding, provided, however, that no such modification or amendment shall (I) extend the stated maturities of the Certificates, or reduce the rate of interest represented thereby, or extend the time of payment of interest, or reduce the amount of principal represented thereby, or reduce any premium payable on the prepayment therco[ without the consent of the registered owner of each Certificate so affected,
(2) reduce the percentage of registered owners of Certificates whose consent is required for the execution of any amendment or modification of the Trust Agreement, or
(3) modify any of the rights or obligations of the Trustee or the Corporation v,.-ithout its respective written consent thereto.
To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust Agreement and the rights and obligations of the Corporation, the Purchaser and of the registered o\vners of the Certificates may also be modified or amended at any time without the consent or the registered owners of any Certificates, but only to the extent permitted by law and only for any one or more of the following purposes---
( I) to add to the covenants and agreements of the Corporation or the Purchaser contained in this Agreement other covenants and agreements thereafter to be observed or to surrender any right or power herein reserved to or conferred upon the Corporation or the Purchaser, but only if such addition or surrender does not adversely affect the interests of the Owners of the Certificates; (2) to cure, correct or supplement any ambiguous or defective prov1s1on contained in this Agreement or in regard to questions arising under this Agreement, as the Corporation or the Purchaser may deem necessary or desirable, but only if such cure, correction or supplementation does not adversely affect the interests of the Owners of the Certificates; and
(3) to make such other amendments or modifications as may be in the best interests of the Owners of the Certificates.
No amendment without registered owner consent may modify any of the rights or obligations of the Trustee without its written consent thereto.
The Installment Purchase Agreement may be amended in accordance with the provisions thereof.
The Trust Agreement contains provisions permitting the Purchaser to make provision for the payment of the interest, principal and premium, if any, evidenced and represented by the Certificates so that such Certificates shall no longer be deemed to be outstanding under the terms of the Trnst Agreement.
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The Trustee has no obligation or liability to the Certificate owners for the payment of interest, principal or prepayment premium, if any, with respect to the Certificates out of the Trustee's own funds; the Trustee's sole obligations are those described in the Trust Agreement.
The recitals of facts in the Trust Agreement shall be taken as statements of the Purchaser and the Corporation and the Trustee docs not have any responsibility for the accuracy thereof.
The Trustee has executed this Certificate solely in its capacity as Trustee under the Trust Agreement.
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STATEMENT OF INSURANCE
Financial Guaranty Insurance Policy No. 25079BE (the "Policy") with respect to payments due for principal of and interest on this Certificate has been issued by Ambac Assurance Corporation (''Ambac Assurance''). The Policy has been delivered to The Bank of New York. New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from Ambac Assurance or the Insurance Trustee. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this Certificate acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set forth in the Policy.
lN WlTNESS WHEREOF, this Certificate has been executed by the manual signature of an authorized officer oft he Trustee, all as of the date set forth below.
Execution date: March , 2006
uNJON BANK OF CALIFORNIA, N.A., as Trustee
Authorized Officer
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[FORM OF ASSIGNMENT]
For \'alue received the undersigned do(es) hereby sell, assign and transfer unto ____ _________ the within-mentioned Certificate and hereby irrevocably constitutc(s) and appoint(s) _________ attorney, to transfer the same on the Certificate register of the Trustee with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an
eligible guarantor institution .
Note: The signature(s) to this Assignment must
correspond with the name(s) as written on the
face of the within Certificate in every
particular, without alteration or enlargement or
any change whatsoever
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Exhibit B
FORM OF CONSTRUCTION FUND REQUISITION
Date: Requisition No. ______ _
Payment shall be made to:
Name:
Fim1/Corporation/Company:
Address:
Listed below in reasonable detail is a description of [ materials purchased and/or services rendered] in connection with certain capital improvements to the Baldy Mesa Water District (the "District") water system. The undersigned hereby certifies that (i) he/she is an authorized representative of the District, (ii) that each obligation mentioned herein is a proper charge against the Construction Fund under that certain Trust Agreement dated as of March 1, 2006 by and between Union Bank of California, N.A., as trustee and the District, as Purchaser, and (iii) this has not previously been disbursed by the Trustee from amounts in the Construction Fund.
Detail:
-------------------------
Charee:
$
$
$
s
S ______ _
S ______ _
Total $
Attached hereto is a bill or statement of account (if any) for each obligation.
By:
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Baldy Mesa Water District
Authorized Representative