HomeMy WebLinkAboutA08 InstallSaleAgtQuint & Thimmig LLP
INSTALLMENT SALE AGREEMENT
Dated as of February 1, 2024
by and between
TUSTIN PUBLIC FINANCING AUTHORITY, as Seller
and the
CITY OF TUSTIN, as Purchaser
$4,125,000
Tustin Public Financing Authority
Water Revenue Bonds, Series 2024 (Subordinate Lien)
12/18/23
O1/03/24
O1/10/24
O1/22/24
O1/26/24
20027.04
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section1.1. Definitions....................................................................................................................................................................2
ARTICLE II
COVENANTS AND REPRESENTATIONS
Section 2.1. Covenants and Representations of the City............................................................................................................3
Section 2.2. Covenants and Representations of the Authority..................................................................................................5
ARTICLE III
ISSUANCE OF BONDS; ACQUISITION AND CONSTRUCTION OF THE 2024 PROJECT
Section3.1. The Bonds.....................................................................................................................................................................6
Section 3.2. Acquisition and Construction of the 2024 Project..................................................................................................6
Section3.3. Grant of Easements.....................................................................................................................................................6
Section 3.4. Appointment of City as Agent of Authority...........................................................................................................6
ARTICLE IV
SALE OF ENTERPRISE; INSTALLMENT PAYMENTS
Section4.1. Sale..............................................................................................................................................................................7
Section 4.2. Term 7
Section4.3. Title..............................................................................................................................................................................7
Section4.4. Installment Payments.................................................................................................................................................7
Section 4.5. Application of Gross Revenues; Pledge and Application of Pledged Net Revenues.......................................7
Section 4.6. Special Obligation of the City; Obligations Absolute............................................................................................8
Section4.7. Rate Covenant..............................................................................................................................................................9
Section 4.8. Limitations on Future Obligations Secured by Net Revenues...........................................................................10
Section4.9. Additional Payments................................................................................................................................................11
Section 4.10. Payment of Rebatable Amounts............................................................................................................................11
Section 4.11. Rate Stabilization Fund..........................................................................................................................................12
ARTICLE V
MAINTENANCE, TAXES, INSURANCE AND OTHER MATTERS
Section 5.1. Maintenance, Utilities, Taxes and Assessments...................................................................................................13
Section5.2.Operation of Enterprise............................................................................................................................................13
Section5.3. Insurance....................................................................................................................................................................13
Section5.6. Eminent Domain.......................................................................................................................................................14
Section5.5. Records and Accounts..............................................................................................................................................14
Section 5.6. Against Encumbrances.............................................................................................................................................14
Section 5.7. Against Competitive Facilities................................................................................................................................14
Section5.8. Tax Covenants...........................................................................................................................................................14
Section5.9.Other Covenants........................................................................................................................................................15
ARTICLE VI
DISCLAIMER OF WARRANTIES; ACCESS
Section 6.1. Disclaimer of Warranties..........................................................................................................................................17
Section6.2. Access to the Enterprise...........................................................................................................................................17
Section 6.3. Release and Indemnification Covenants................................................................................................................17
Section 6.4. Non -Liability of Authority for Enterprise Obligations........................................................................................17
ARTICLE VII
ASSIGNMENT, SALE AND AMENDMENT
Section7.1. Assignment by the City............................................................................................................................................18
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Section 7.2. Sale or Other Disposition of Enterprise.................................................................................................................18
Section 7.3. Amendment of Installment Sale Agreement.........................................................................................................18
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default Defined........................................................................................................................................19
Section8.2. Remedies on Default.................................................................................................................................................19
Section8.3. No Remedy Exclusive...............................................................................................................................................20
Section 8.4. Agreement to Pay Attorneys' Fees and Expenses................................................................................................20
Section 8.5. No Additional Waiver Implied by One Waiver...................................................................................................20
Section 8.6. Trustee and Bond Owners to Exercise Rights.......................................................................................................20
Section 8.7. Rights of the Owners of Parity Obligations..........................................................................................................21
ARTICLE IX
PREPAYMENT OF INSTALLMENT PAYMENTS
Section9.1. Security Deposit........................................................................................................................................................22
Section9.2.Optional Prepayment...............................................................................................................................................22
Section 9.3. Credit for Amounts on Deposit...............................................................................................................................22
ARTICLE X
MISCELLANEOUS
Section10.1. Further Assurances.................................................................................................................................................23
Section10.2. Notices......................................................................................................................................................................23
Section 10.3. Third Party Beneficiaries........................................................................................................................................23
Section10.4. Governing Law........................................................................................................................................................23
Section10.5. Binding Effect...........................................................................................................................................................23
Section 10.6. Severability of Invalid Provisions.........................................................................................................................23
Section 10.7. Article and Section Headings and References....................................................................................................24
Section10.8. Execution of Counterparts.....................................................................................................................................24
Section 10.9. Waiver of Personal Liability..................................................................................................................................24
Section 10.10. Limitation of Rights to Parties and Bond Owners............................................................................................24
Section10.11. Captions..................................................................................................................................................................24
EXHIBIT A SCHEDULE OF INSTALLMENT PAYMENTS
EXHIBIT B DESCRIPTION OF THE 2024 PROJECT
Quint & Thimmig LLP
INSTALLMENT SALE AGREEMENT
12/18/23
01/03/24
01/10/24
01/22/24
01/26/24
THIS INSTALLMENT SALE AGREEMENT, dated as of February 1, 2024, is by and
between the TUSTIN PUBLIC FINANCING AUTHORITY, a joint powers authority duly
organized and existing under the laws of the State of California (the "Authority"), and the CITY
OF TUSTIN, a general law city and municipal corporation duly organized and existing under
the laws of the State of California (the "City"),
WITNESSETH:
WHEREAS, the City has, together with the former Tustin Community Redevelopment
Agency, duly established the Authority and prescribed its purposes and powers;
WHEREAS, the City has determined that, due to prevailing financial market conditions,
it is in the best interests of the City to finance the acquisition and construction of certain
improvements and facilities (the "2024 Project") which constitute part of the City's municipal
water enterprise (the "Enterprise");
WHEREAS, for the purpose of raising funds necessary to provide such financial
assistance to the City, the Authority proposes to authorize the issuance of its revenue bonds
under the provisions of Article 4 (commencing with section 6584) of Chapter 5 of Division 7 of
Title 1 of the California Government Code (the "Act"), designated as the Tustin Public
Financing Authority Water Revenue Bonds, Series 2024 (Subordinate Lien) (the "Bonds"), all
pursuant to and secured by that certain Indenture of Trust, dated as of February 1, 2024, by and
between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee;
WHEREAS, in order to provide for the repayment of the Bonds, the Authority will sell
the 2024 Project to the City pursuant to an installment sale agreement, under which the City will
agree to make installment payments to the Authority (the "Installment Payments") which will
be calculated to be sufficient to enable the Authority to pay the principal of and interest on the
Bonds when due and payable;
WHEREAS, the City's obligation to make Installment Payments will be payable from a
pledge of the net revenues of the Enterprise, in all respects, junior, subordinate and inferior to
the City's obligations with respect to the payment of debt service on its City of Tustin (Orange
County, California) 2016 Water Refunding Revenue Bonds and its City of Tustin (Orange
County, California) Taxable Water Refunding Revenue Bonds, Series 2020;
WHEREAS, the Authority and the City have duly authorized the execution and delivery
of this Installment Sale Agreement;
NOW, THEREFORE, for and in consideration of the premises and the material
covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind
themselves as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Unless the context clearly otherwise requires or unless otherwise
defined herein, the capitalized terms in this Installment Sale Agreement shall have the
respective meanings specified in the Indenture.
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ARTICLE II
COVENANTS AND REPRESENTATIONS
Section 2.1. Covenants and Representations of the City. The City makes the following
covenants and representations to the Authority that as of the Closing Date:
(a) The City is a general law city and municipal corporation duly organized and validly
existing under the laws of the State, has full legal right, power and authority to enter into this
Installment Sale Agreement and to carry out and consummate all transactions contemplated
hereby, and by proper action has duly authorized the execution and delivery of this Installment
Sale Agreement.
(b) The representatives of the City executing this Installment Sale Agreement are fully
authorized to execute the same.
(c) This Installment Sale Agreement has been duly authorized, executed and delivered
by the City, and constitutes the legal, valid and binding agreement of the City, enforceable
against the City in accordance with its terms.
(d) The execution and delivery of this Installment Sale Agreement, the consummation of
the transactions herein contemplated and the fulfillment of or compliance with the terms and
conditions hereof, will not conflict with or constitute a violation or breach of or default (with
due notice or the passage of time or both) under any applicable law or administrative rule or
regulation, or any applicable court or administrative decree or order, or any indenture,
mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a
party or by which the Enterprise or the 2024 Project are otherwise subject or bound, or result in
the creation or imposition of any prohibited lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the City, which conflict, violation, breach,
default, lien, charge or encumbrance would have consequences that would materially and
adversely affect the consummation of the transactions contemplated by this Installment Sale
Agreement, or the financial condition, assets, improvements or operations of the Enterprise.
(e) No consent or approval of any trustee or holder of any indebtedness of the City or of
the voters of the City, and no consent, permission, authorization, order or license of, or filing or
registration with, any governmental authority, is necessary in connection with the execution
and delivery of this Installment Sale Agreement or the consummation of any transaction herein
contemplated, except as have been obtained or made and as are in full force and effect.
(f) There is no action, suit, proceeding, inquiry or investigation before or by any court or
federal, state, municipal or other governmental authority pending or threatened against or
affecting the City or the Enterprise which, if determined adversely to the City or its interests,
would have a material and adverse effect upon the consummation of the transactions
contemplated by or the validity of this Installment Sale Agreement or upon the financial
condition or operation of the Enterprise, and the City is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state, municipal or
other governmental authority, which default might have consequences that would materially
and adversely affect the consummation of the transactions contemplated by this Installment
Sale Agreement, or the financial conditions or operations of the Enterprise.
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(g) The City has heretofore established the Water Fund into which the City deposits and
will continue to deposit all Gross Revenues, and which the City will maintain throughout the
Term of this Installment Sale Agreement.
(h) The City reasonably believes that sufficient funds can be obtained to make all
Installment Payments and all other amounts required to be paid pursuant to this Installment
Sale Agreement, provided that to the extent Pledged Net Revenues is insufficient to make each
Installment Payment when due, the City agrees to make such payment from any available
moneys.
(i) The City has never non -appropriated or defaulted under any of its payment or
performance obligations or covenants, either under any of its bonds, notes, or other debt
obligations.
(j) During the term of this Installment Sale Agreement, the 2024 Project will be used by
the City only for the purpose of performing one or more governmental or proprietary functions
of the City consistent with the permissible scope of the City's authority.
(k) The City has experienced no material change in its financial condition since June 30,
2023.
(1) Except to the extent disclosed to the Original Purchaser, the Enterprise is free of all
Hazardous Substances, and the City is in full compliance with all Applicable Environmental
Laws.
(m) As of the Closing Date, there are no outstanding bonds, notes, loans, leases, water
installment sale agreements or other obligations which have any security interest in or claim
upon the Pledged Net Revenues, which security interest or claim is superior to or on a parity
with the Installment Payments.
(n) The City's audited financial statements for the period ended June 30, 2023, present
fairly the financial condition of the City as of the date thereof and the results of operation for the
period covered thereby. Except as has been disclosed to the Original Purchaser, there has been
no change in the financial condition of the City since June 30, 2023, that will in the reasonable
opinion of the City materially impair its ability to perform its obligations under this Installment
Purchase Agreement.
(o) All information, reports and other papers and data furnished by the City to the
Original Purchaser were, at the time the same were so furnished, complete and accurate in all
material respects and insofar as necessary to give the Original Purchaser a true and accurate
knowledge of the subject matter and were provided in expectation of the Original Purchaser's
reliance thereon in entering into the transactions contemplated by this Installment Purchase
Agreement. No fact is known to the City which has had or, so far as the City can now
reasonably foresee, may in the future have a Material Adverse Effect, which has not been set
forth in the financial statements previously furnished to the Original Purchaser or in other such
information, reports, papers and data or otherwise disclosed in writing to the Original
Purchaser prior to the Closing Date. Any financial, budget and other projections furnished to
the Original Purchaser by the City or its or their agents were prepared in good faith on the basis
of the assumptions stated therein, which assumptions were fair and reasonable in light of the
conditions existing at the time of delivery of such financial, budget or other projections, and
represented, and as of the date of this representation, represent the City's best estimate of its
future financial performance. No document furnished nor any representation, warranty or other
written statement made to the Original Purchaser in connection with the negotiation,
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preparation or execution of this Installment Purchase Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state (as of the date made or
furnished) any material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were or will be made, not misleading.
(p) In connection with the City's compliance with any continuing disclosure
undertakings (each, a "Continuing Disclosure Agreement") entered into by the City pursuant to
SEC Rule 15c2-12 promulgated pursuant to the Securities and Exchange Act of 1934, as
amended (the "Rule"), the City believes it may be required to file with the Municipal Securities
Rulemaking Board's Electronic Municipal Market Access system or its successor ("EMMA")
notice of its incurrence of its obligations with respect to this Installment Sale Agreement and
related documents and notice of any accommodation, waiver, amendment, modification of
terms or other similar events reflecting financial difficulties in connection with this Installment
Sale Agreement and related documents, in each case including a full copy thereof or a
description of the material terms thereof (each such posting, an "EMMA Posting"). The City
agrees that it shall not file or submit or permit the filing or submission of any EMMA Posting
that includes information relating to Capital One Public Funding, LLC ("COPF"), including the
following: unredacted sensitive or confidential information about COPF or its affiliates in any
portion of an EMMA Posting, address and account information of COPF or any affiliates, e-mail
addresses, telephone numbers, fax numbers, names and signatures of officers, employees and
signatories of COPF or its affiliates. The City acknowledges and agrees that COPF and its
affiliates are not responsible for the City's or any other entity's (including, but not limited to,
any broker -dealer's) compliance or noncompliance (or any claims, losses or liabilities arising
therefrom) with the Rule, any Continuing Disclosure Agreement or any applicable securities or
other laws, including but not limited to those relating to the Rule.
Section 2.2. Covenants and Representations of the Authority. The Authority makes the
following covenants and representations to the City that as of the Closing Date:
(a) The Authority is a joint powers entity, duly organized and existing under the laws of
the State. The Authority has the power to enter into the transactions contemplated by this
Installment Sale Agreement and to carry out its obligations hereunder. By proper action of its
governing body, the Authority has been duly authorized to execute, deliver and duly perform
this Installment Sale Agreement and the Indenture.
(b) To finance the 2024 Project and to pay the Costs of Issuance, the Authority will issue
the Bonds, which will mature, bear interest and be subject to redemption as set forth in the
Indenture.
(c) The Bonds will be issued under and secured by the Indenture, and pursuant thereto,
certain of the Authority's interests in this Installment Sale Agreement have been assigned to the
Trustee as security for payment of the principal of and interest on the Bonds.
(d) The Authority is not in default under any of the provisions of the laws of the State,
which default would affect its existence or its powers referred to in subsection (a) of this Section
2.2.
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ARTICLE III
ISSUANCE OF BONDS; ACQUISITION AND CONSTRUCTION OF THE 2024
PROJECT
Section 3.1. The Bonds. The Authority has authorized the issuance of the Bonds pursuant
to the Indenture in the aggregate principal amount of four million one hundred twenty-five
thousand dollars ($4,125,000). The Authority agrees that the proceeds of sale of the Bonds shall
be paid to the Trustee on the Closing Date for deposit pursuant to the terms and conditions of
the Indenture. The City hereby approves the Indenture, the assignment to the Trustee of the
rights of the Authority assigned under and pursuant to the Indenture, and the issuance of the
Bonds by the Authority under and pursuant to the Indenture.
Section 3.2. Acquisition and Construction of the 2024 Project. The City hereby agrees
with due diligence to supervise and provide for, or cause to be supervised and provided, for the
Acquisition and Construction of the 2024 Project in accordance with Plans and Specifications,
purchase orders, construction contracts and other documents relating thereto pursuant to all
applicable requirements of law. Direct payment of the costs of the 2024 Project shall be made
from amounts on deposit in the 2024 Project Fund, pursuant to Section 3.04 of the Indenture. All
contracts for, and all work relating to, the Acquisition and Construction of the 2024 Project shall
be subject to all applicable provisions of law relating to the acquisition and construction of
public works by the City.
The City shall have the right from time to time in its sole discretion to amend the
description of the 2024 Project to be financed and sold by the Authority hereunder. In order to
exercise such right, the City shall file with the Authority and the Trustee an amended Exhibit B
hereto.
Section 3.3. Grant of Easements. The City hereby grants to the Authority all necessary
easements, rights of way and rights of access in and to all real property or interests therein now
or hereafter acquired and owned by the City, as may be necessary or convenient to enable the
Authority to acquire, construct and install the 2024 Project thereon or thereabouts. The City
covenants that it will execute, deliver and record any and all additional documents as may be
required to be executed, delivered and recorded to establish such easements, rights of way and
rights of access.
Section 3.4. Appointment of City as Agent of Authority. The Authority hereby appoints
the City as its agent to carry out all phases of the Acquisition and Construction of the 2024
Project pursuant to and in accordance with the provisions hereof. The City hereby accepts such
appointment and assumes all rights, liabilities, duties and responsibilities of the Authority
regarding the Acquisition and Construction of the 2024 Project. The Authority, or the City as
agent of the Authority hereunder, shall enter into, administer and enforce all purchase orders or
other contracts relating to the Acquisition and Construction of the 2024 Project. The City shall
submit Written Requisitions of the City to the Trustee from time to time pursuant to and in
accordance with the provisions of Section 3.04 of the Indenture for payment, or for
reimbursement to the City for payment, of all 2024 Project Costs. All contracts for, and all work
relating to, the Acquisition and Construction of the 2024 Project shall be subject to all applicable
provisions of law relating to the acquisition, construction, improvement, and equipping of like
projects and property by joint powers authorities and by municipal corporations.
ARTICLE IV
SALE OF ENTERPRISE; INSTALLMENT PAYMENTS
Section 4.1. Sale. The Authority hereby agrees to sell the 2024 Project to the City, and the
City hereby agrees to purchase the 2024 Project from the Authority, upon the terms and
conditions set forth in this Installment Sale Agreement.
Section 4.2. Term. The Term of this Installment Sale Agreement shall commence on the
Closing Date, and shall end on the date on which the City shall have paid all of the Installment
Payments and all other amounts due and payable hereunder. The provisions of this Section 4.2
are subject in all respects to any other provisions of this Installment Sale Agreement relating to
the termination hereof with respect to the 2024 Project or any portion thereof.
Section 4.3. Title. Upon the Completion Date of each component of the 2024 Project, title
to such component shall be deemed conveyed to and vested in the City. The Authority and the
City shall execute, deliver and cause to be recorded any and all documents necessary to convey
such title to the City.
Section 4.4. Installment Payments.
(a) Obligation to Pay. The City agrees to pay to the Authority, its successors and assigns,
but solely from the Pledged Net Revenues, as the purchase price of the 2024 Project the
aggregate principal amount of four million one hundred twenty-five thousand dollars
($4,125,000), together with interest on the unpaid principal balance, payable in Installment
Payments coming due and payable in the respective amounts and on each Installment Payment
Date specified in Exhibit A. The Installment Payments shall be paid by the City to the Trustee,
as assignee of the Authority pursuant to the Indenture, in the amounts and at the times as set
forth in Section 4.5(b).
(b) Rate on Overdue Payments. In the event the City should fail to make any of the
payments required in this Section 4.4 and Section 4.10, the payment in default shall continue as
an obligation of the City until the amount in default shall have been fully paid, and the City
agrees to pay the same with interest thereon, from the date of default to the date of payment, at
the Default Rate.
(c) Assignment. The City understands and agrees that all Installment Payments have
been assigned by the Authority to the Trustee in trust, pursuant to the Indenture, for the benefit
of the Owners of the Bonds, and the City hereby assents to such assignment. The Authority
hereby directs the City, and the City hereby agrees, to pay to the Trustee at its Trust Office, all
amounts payable by the City pursuant to this Section 4.4 and all amounts payable by the City
pursuant to Article IX.
Section 4.5. Application of Gross Revenues; Pledge and Application of Pledged Net
Revenues.
(a) Deposits Into Water Fund, Transfers to Make Installment Payments. All of the Gross
Revenues shall be deposited by the City immediately upon receipt in the Water Fund.
Upon receipt of Gross Revenues, the City shall segregate such amounts as shall be
estimated to be required (a) to pay all Maintenance and Operation Costs and (b) to make
payments due and payable on the Senior Obligations for the period beginning on such date and
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ending on the next anticipated date of receipt of Gross Revenues. Amounts remaining on
deposit in the Water Fund after payment of such Maintenance and Operation Costs and Senior
Obligations and shall be the Pledged Net Revenues.
The City covenants and agrees that all Pledged Net Revenues will be held by the City in
the Water Fund in trust for the benefit of the Trustee (as assignee of the rights of the Authority
hereunder) and the Bond Owners, and for the benefit of the owners of any Parity Obligations.
(b) Pledge of Pledged Net Revenues, Transfers. All of the Pledged Net Revenues are hereby
irrevocably pledged, charged and assigned to the punctual payment of the Installment
Payments and all Parity Obligations and, except as otherwise provided herein, the Pledged Net
Revenues shall not be used for any other purpose so long as any of the Installment Payments or
payments with respect to any Parity Obligations remain unpaid. Such pledge, charge and
assignment shall constitute a first lien on the Pledged Net Revenues for the payment of the
Installment Payments and all Parity Obligations in accordance with the terms hereof.
On or before the fifth Business Day preceding each Interest Payment Date, commencing
September 25, 2024, the City shall withdraw from the Water Fund (together with similar
withdrawals from the Water Fund with respect to all Parity Obligations):
(i) and transfer to the Trustee for deposit in the Bond Fund, an amount (other
than amounts required for payment of principal of or interest on any Bonds which have
matured but which have not been presented for payment), equal to the interest
component of the Installment Payment and the interest component of any outstanding
Parity Obligations coming due and payable on the next succeeding Interest Payment
Date, and the principal component of the Installment Payment and the principal
component of any outstanding Parity Obligations coming due and payable on the next
succeeding principal payment date, if any, provided that any amounts on deposit in the
Bond Fund shall be credited against the City's obligation to make such deposits or
transfers therein,
(ii) and transfer to funds or accounts established as reserve funds with respect to
Parity Obligations such amounts as are required for the replenishment thereof, the
amount, if any, required to increase the amount on deposit in reserve funds with respect
to Parity Obligations, the amount, if any, required to increase the amount on deposit
therein to the reserve requirement of such funds or account,
(iii) and pay all other amounts, including Additional Payments, when and as due
and payable under this Installment Sale Agreement and under any agreements relating
to Parity Obligations, and
(iv) and pay all amounts when and as due and payable with respect to any
Subordinate Debt.
(c) Release from Lien. Following the transfers described in paragraph (b) of this Section
4.5, excess Pledged Net Revenues shall be released from the lien of this Installment Sale
Agreement and shall be available for any lawful purpose of the City.
Section 4.6. Special Obligation of the City; Obligations Absolute. The City's obligation to
pay the Installment Payments, the Additional Payments, any other amounts coming due and
payable hereunder and payments with respect to Parity Obligations shall be a special obligation
of the City limited solely to the Pledged Net Revenues. Under no circumstances shall the City
be required to advance moneys derived from any source of income other than the Pledged Net
so
Revenues and other sources specifically identified herein for the payment of the Installment
Payments, the Additional Payments or payments with respect to Parity Obligations, nor shall
any other funds or property of the City be liable for the payment of the Installment Payments,
the Additional Payments or payments with respect to Parity Obligations and any other amounts
coming due and payable hereunder.
The obligations of the City to make the Installment Payments, the Additional Payments
and payments with respect to Parity Obligations from the Pledged Net Revenues and to
perform and observe the other agreements contained herein and under agreements with respect
to Parity Obligations shall be absolute and unconditional and shall not be subject to any defense
or any right of setoff, counterclaim or recoupment arising out of any breach of the City, the
Authority or the Trustee of any obligation to the City or otherwise with respect to the
Enterprise, whether hereunder or otherwise, or out of indebtedness or liability at any time
owing to the City by the Authority or the Trustee. Until such time as all of the Installment
Payments, all of the Additional Payments and all other amounts coming due and payable
hereunder shall have been fully paid or prepaid, the City (a) will not suspend or discontinue
payment of any Installment Payments, Additional Payments, payments with respect to Parity
Obligations or such other amounts, (b) will perform and observe all other agreements contained
in this Installment Sale Agreement, and (c) will not terminate the Term of this Installment Sale
Agreement for any cause, including, without limiting the generality of the foregoing, the
occurrence of any acts or circumstances that may constitute failure of consideration, eviction or
constructive eviction, destruction of or damage to the Enterprise, sale of the Enterprise, the
taking by eminent domain of title to or temporary use of any component of the Enterprise,
commercial frustration of purpose, any change in the tax law or other laws of the United States
of America or the State or any political subdivision of either thereof or any failure of the
Authority or the Trustee to perform and observe any agreement, whether express or implied, or
any duty, liability or obligation arising out of or connected with the Indenture or this
Installment Sale Agreement.
Nothing contained in this Section 4.6 shall be construed to release the Authority or the
Trustee from the performance of any of the agreements on its part contained herein or in the
Indenture, and in the event the Authority or the Trustee shall fail to perform any such
agreements, the City may institute such action against the Authority or the Trustee as the City
may deem necessary to compel performance so long as such action does not abrogate the
obligations of the City contained in the preceding paragraph. The City may, however, at the
City's own cost and expense and in the City's own name or in the name of the Authority
prosecute or defend any action or proceeding or take any other action involving third persons
which the City deems reasonably necessary in order to secure or protect the City's rights
hereunder, and in such event the Authority hereby agrees to cooperate fully with the City and
to take such action necessary to effect the substitution of the City for the Authority in such
action or proceeding if the City shall so request.
Section 4.7. Rate Covenant. The City covenants to fix, prescribe, revise and collect rates,
fees and charges for the Enterprise as a whole for the services and improvements furnished by
the Enterprise during each Fiscal Year which are at least sufficient, after making allowances for
contingencies and error in the estimates, to yield Gross Revenues that are sufficient to pay the
following amounts in the following order of priority:
(a) all Maintenance and Operation Costs estimated by the City to become due and
payable in such Fiscal Year;
(b) all payments required with respect to Senior Obligations;
(c) the Installment Payments and all payments required with respect to Parity
Obligations;
(d) all other payments required for compliance with this Installment Sale Agreement
and the instruments pursuant to which any Parity Obligations shall have been issued; and
(e) all payments required to meet any other obligations of the City which are charges,
liens, encumbrances upon or payable from the Gross Revenues,, including transfers to the Rate
Stabilization Fund pursuant to Section 4.11, the Net Revenues or the Pledged Net Revenues.
In addition, the City shall fix, prescribe, revise and collect rates, fees and charges for the
services and facilities furnished by the Enterprise during each Fiscal Year which are sufficient to
yield Net Revenues, including other funds accumulated in the City's Water Fund and which are
lawfully available to the City for payment, of at least one hundred twenty percent (120%) of the
amounts payable under the preceding paragraphs (b) and (c) in such Fiscal Year. When
calculated for purposes of this Section 4.7, Net Revenues do not include amounts which are
transferred from the Rate Stabilization Fund pursuant to Section 4.11 that are in excess of
twenty percent (20%) of the amounts payable under the preceding paragraphs (b) and (c) in
such Fiscal Year.
Section 4.8. Limitations on Future Obligations Secured by Net Revenues.
(a) No Obligations Superior to Installment Payments. In order to protect further the
availability of the Pledged Net Revenues and the security for the Installment Payments and any
Parity Obligations, the City hereby agrees that the City shall not, so long as the Installment
Payments are not fully paid or any Parity Obligations are outstanding, issue or incur any
obligations superior to the Installment Payments or such Parity Obligations.
(b) Parity Obligations. The City further covenants that it will not issue or incur any Parity
Obligations unless Net Revenues, calculated on sound accounting principles, as shown by the
books of the City for the latest Fiscal Year or any more recent twelve (12) month period selected
by the City ending not more than sixty (60) days prior to the adoption of the resolution
pursuant to which instrument such Parity Obligations are issued or incurred, as shown by the
books of the City, plus, at the option of the City, the additional allowance described below, shall
have amounted to at least 1.20 times Maximum Aggregate Annual Debt Service immediately
subsequent to the incurring of such Parity Obligations; provided, however, that the City may at
any time incur Parity Obligations without compliance with the foregoing conditions if the
Maximum Aggregate Annual Debt Service for each Fiscal Year during which such Parity
Obligations are Outstanding will not be increased by reason of the incurrence of such Parity
Obligations. When calculated for purposes of this Section 4.8(b), Net Revenues do not include
amounts which are transferred from the Rate Stabilization Fund pursuant to Section 4.11 that
are in excess of twenty percent (20%) of the amounts payable under paragraphs (b) and (c) of
Section 4.7 in such Fiscal Year.
Either or both of the following items may be added to such Net Revenues for the
purpose of applying the restriction contained herein:
(i) An allowance for revenues from any additions to or improvements or
extensions of the Enterprise to be constructed with the proceeds of such Parity
Obligations, and also for Net Revenues from any such additions, improvements or
extensions which have been constructed from any source of funds but which, during all
or any part of such Fiscal Year, were not in service, all in an amount equal to 70% of the
estimated additional average annual Net Revenues to be derived from such additions,
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improvements and extensions to be constructed during the first 36-month period
following issuance of the proposed Parity Obligations, all as shown by the certificate or
opinion of a qualified independent consultant employed by the City, may be added to
such Net Revenues for the purpose of applying the restriction contained in this
subsection (b)(i) and/or
(ii) An allowance for earnings arising from any increase in the charges made for
service from the Enterprise which has become effective prior to the incurring of such
Parity Obligations but which, during all or any part of such Fiscal Year or any more
recent twelve (12) month period selected by the City ending not more than sixty (60)
days prior to the adoption of the resolution pursuant to which instrument such Parity
Obligations are issued or incurred, as shown by the books of the City, plus, at the option
of the City, the additional allowance, was not in effect, in an amount equal to 100% of
the amount by which the Net Revenues would have been increased if such increase in
charges had been in effect during the whole of such Fiscal Year and any period prior to
the incurring of such additional obligations, as shown by the certificate or opinion of a
qualified independent consultant employed by the City.
(c) Subordinate Debt. The City further covenants that the City shall not issue or incur any
Subordinate Obligations unless Pledged Net Revenues, calculated on sound accounting
principles, as shown by the books of the City for the latest Fiscal Year or any more recent twelve
(12) month period selected by the City ending not more than sixty (60) days prior to the
adoption of the resolution pursuant to which instrument such Subordinate Obligations are
issued or incurred, as shown by the books of the City shall, after deducting all amounts
required for the payment of the Bonds and any Parity Obligations, have amounted to at least 1.0
times the sum of the maximum annual debt service on all Subordinate Obligations outstanding
immediately subsequent to the incurring of such additional obligations. An allowance for
earnings arising from any increase in the charges made for service from the Enterprise which
has become effective prior to the incurring of such additional obligations but which, during all
or any part of such Fiscal Year, was not in effect, may be added in an amount equal to 100% of
the amount by which the Pledged Net Revenues would have been increased if such increase in
charges had been in effect during the whole of such Fiscal Year and any period prior to the
incurring of such additional obligations, as shown by the certificate or opinion of a qualified
independent consultant employed by the City.
Section 4.9. Additional Payments. In addition to the Installment Payments, the City shall
pay when due all costs and expenses incurred by the Authority to comply with the provisions
of the Indenture, including without limitation all Costs of Issuance (to the extent not paid from
amounts on deposit in the Costs of Issuance Fund), and shall pay to the Trustee upon request
therefor all compensation for fees due to the Trustee and all of its costs and expenses payable as
a result of the performance of and compliance with its duties hereunder or under the Indenture
or any related documents, together with all amounts required to indemnify the Trustee
pursuant to Section 6.3 hereof or Section 8.12 of the Indenture, and all costs and expenses of
attorneys, auditors, engineers and accountants. The rights of the Trustee and the obligations of
the City under this Section 4.9 shall survive the termination of this Installment Sale Agreement
and the resignation or removal of the Trustee.
Section 4.10. Payment of Rebatable Amounts. The City agrees to furnish all information
to, and cooperate fully with, the Authority and its officers, employees, agents and attorneys, in
order to assure compliance with the provisions of Section 6.07(b) of the Indenture. In the event
that the Authority shall determine, pursuant to Section 6.07(b) of the Indenture, that any
amounts are due and payable to the United States of America thereunder and that neither the
Authority nor the Trustee has on deposit an amount of available moneys (excluding moneys on
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deposit in the funds and accounts established for the payment of the principal of or interest on
the Bonds) to make such payment, the Authority shall promptly notify the City of such fact.
Upon receipt of any such notice, the City shall promptly pay to the Trustee from any source of
legally available funds, the amounts determined by the Authority to be due and payable to the
United States of America under such Section 6.07(b).
Section 4.11. Rate Stabilization Fund.
(a) There is hereby created a separate fund to be known as the "Rate Stabilization Fund,"
to be held and maintained by the City.
(b) From time to time, the City may deposit in the Rate Stabilization Fund from Gross
Revenues such amounts as the City may determine, as set forth in Section 4.7.
(c) The City may withdraw amounts from the Rate Stabilization Fund (i) for transfer to
the Bond Fund for inclusion in Gross Revenues for any Fiscal Year, for calculating the rate
covenant in Section 4.7, or (ii) for any other lawful purpose of the City.
(d) All interest or other earnings on deposits in the Rate Stabilization Fund shall be
withdrawn therefrom and accounted for as Gross Revenues.
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ARTICLE V
MAINTENANCE, TAXES, INSURANCE AND OTHER MATTERS
Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this
Installment Sale Agreement, all improvement, repair and maintenance of the Enterprise shall be
the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of
all utility services supplied to the Enterprise, which may include, without limitation, janitor
service, security, power, gas, telephone, light, heating, water and all other utility services, and
shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of
the Enterprise resulting from ordinary wear and tear.
The City shall also pay or cause to be paid all taxes and assessments of any type or
nature, if any, charged to the Authority or the City affecting any Enterprise or the respective
interests or estates therein; provided, however, that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of years, the City
shall be obligated to pay only such installments as are required to be paid during the Term of
this Installment Sale Agreement as and when the same become due.
The City may, at the City's expense and in its name, in good faith contest any such taxes,
assessments, utility and other charges and, in the event of any such contest, may permit the
taxes, assessments or other charges so contested to remain unpaid during the period of such
contest and any appeal therefrom unless the Authority shall notify the City that, in its opinion,
by nonpayment of any such items, the interest of the Authority hereunder or under the
Indenture will be materially adversely affected, in which event the City shall promptly pay such
taxes, assessments or charges or provide the Authority with full security against any loss which
may result from nonpayment, in form satisfactory to the Authority.
Section 5.2. Operation of Enterprise. The City covenants and agrees to operate or cause
to be operated the Enterprise in an efficient and economical manner and to operate, maintain
and preserve or caused to be operated, maintained and preserved the Enterprise in good repair
and working order. The City covenants that, in order to fully preserve and protect the priority
and security of the Bonds, the City shall pay from the Gross Revenues and discharge all lawful
claims for labor, materials and supplies furnished for or in connection with the Enterprise
which, if unpaid, may become a lien or charge upon the Pledged Net Revenues prior or
superior to the lien granted hereunder, or which may otherwise impair the ability of the City to
pay the Installment Payments in accordance herewith.
Section 5.3. Insurance. The City shall maintain or cause to be maintained, throughout the
Term of this Installment Sale Agreement, but only if and to the extent available at reasonable
cost from reputable insurers, liability and casualty insurance in such amounts and against such
risks as shall be appropriate for water systems of like size and with similar facilities as the
Enterprise. Such insurance may be maintained as part of or in conjunction with any other
insurance carried by the City and may be maintained in whole or in part in the form of self-
insurance by the City or in the form of the participation by the City in a joint powers agency or
other program providing pooled insurance. All amounts collected from insurance against
accident to or destruction of any portion of the Enterprise shall be used to repair, rebuild or
replace such damaged or destroyed portion of the Enterprise. The proceeds of liability
insurance shall be applied toward the extinguishment or satisfaction of the liability with respect
to which such proceeds shall have been paid.
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Section 5.4. Eminent Domain. Any amounts received as awards as a result of the taking
of all or any part of the Enterprise by the lawful exercise of eminent domain, at the election of
the City (evidenced by a Written Certificate of the City filed with the Trustee and the Authority)
shall either (a) be used for the acquisition or construction of improvements and extension of the
Enterprise in replacement of the condemned portions thereof, or (b) with the prior written
consent of the Owner, applied as a credit against the City's obligation to make the Installment
Payments and payments with respect to any Parity Obligations in accordance with written
instructions of the City filed with the Trustee.
Section 5.5. Records and Accounts. The City shall keep proper books of record and
accounts of the Enterprise, separate from all other records and accounts, in which complete and
correct entries shall be made of all transactions relating to the Enterprise. Said books shall, upon
prior request, be subject to the reasonable inspection by the Owners of not less than ten percent
(10%) in aggregate principal amount of the Outstanding Bonds, or their representatives
authorized in writing. The City shall cause the books and accounts of the Enterprise to be
audited annually by an Independent Accountant, not more than one hundred eighty (180) days
after the close of each Fiscal Year, and shall make a copy of such report available for inspection
by the Bond Owners at the office of the City.
Section 5.6. Against Encumbrances. The City will not make any pledge of or place any
lien on moneys in the Water Fund except as provided herein. The City may at any time, or from
time to time, execute Parity Obligations or Subordinate Obligations as permitted herein or incur
evidences of indebtedness or incur other obligations for any lawful purpose which are payable
from and secured by a pledge of lien on Pledged Net Revenues as may from time to time be
deposited therein, provided that such pledge and lien shall be subordinate in all respects to the
pledge of and lien thereon provided herein.
Section 5.7. Against Competitive Facilities. To the extent permitted by law, the City
covenants that it will not acquire, construct, maintain or operate and will not, to the extent
permitted by law and within the scope of its powers, permit any other public or private agency,
corporation, city or political subdivision or any person whomsoever to acquire, construct,
maintain or operate within the City any water system competitive with the Enterprise.
Notwithstanding the foregoing, the City may permit competitive systems where it determines
that provision of water service is either geographically, technically or economically prohibitive
or where provision of such services is more readily obtained from another provider of such
services.
Section 5.8. Tax Covenants.
(a) Private Activity Bond Limitation. The City shall assure that proceeds of the Bonds are
not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the
Code or the private loan financing test of section 141(c) of the Code.
(b) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer
any action to be taken if the result of the same would be to cause any of the Bonds to be
"federally guaranteed" within the meaning of section 149(b) of the Code.
(c) Rebate Requirement. The City shall take any and all actions necessary to assure
compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings,
if any, to the federal government, to the extent that such section is applicable to the Bonds.
(d) No Arbitrage. The City shall not take, or permit or suffer to be taken by the Trustee or
otherwise, any action with respect to the proceeds of the Bonds which, if such action had been
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reasonably expected to have been taken, or had been deliberately and intentionally taken, on
the Closing Date would have caused the Bonds to be "arbitrage bonds" within the meaning of
section 148 of the Code.
(e) Maintenance of Tax -Exemption. The City shall take all actions necessary to assure the
exclusion of interest with respect to the Bonds from the gross income of the Owners of the
Bonds to the same extent as such interest is permitted to be excluded from gross income under
the Code as in effect on the Closing Date.
Section 5.9.Other Covenants.
(a) Reporting Requirements. The City hereby covenants and agrees that it will provide to
the Owner:
(i) the audited financial statements of the City within nine months after the end
of each fiscal year, which shall include audited financial statements of the City, with a
standard opinion provided by the auditor in accordance with Generally Accepted
Accounting Principles including required supplemental information;
(ii) will cause to be prepared annually, not more than two hundred ten (210) days
after the close of each Fiscal Year an internally prepared balance sheet, and income
statement showing: the assets, liabilities, reserves, revenues and expenditures of the
Enterprise, together with the following additional reports: (A) Gross Revenues and the
amount of all other funds collected which are required to be pledged or otherwise made
available as security for payment of principal and interest with respect to this
Installment Sale Agreement, the disbursements from the Gross Revenues and other
funds in reasonable detail, (B) customer utilization and collection metrics, (C)
independent rate analysis reports (when and if prepared and 30 days after City review),
(D) capital projects underway and proposed, and (E) general narrative of the physical
condition of the Enterprise;
(iii) annually, within 30 days of City approval, an annual financial plan for the
Enterprise with a narrative (when available) for the following year;
(iv) a certification of the City (A) demonstrating the ratio of Net Revenues to
scheduled debt service with respect to the Senior Obligations, this Installment Sale
Agreement, any outstanding Parity Obligations and any subordinate obligations for the
prior fiscal year; and (B) such additional information with respect to the City or Net
Revenues as the Owner may from time to time reasonably request. Said Report to be
provided by October 31 of each year;
(v) immediately upon the City's knowledge thereof, notices of (A) any default on
any debt obligation, (B) Material Litigation, (C) material governmental proceedings, or
(D) Material Adverse Effect; and
(vi) such other information regarding the operations of the Enterprise and the
City's financial condition as the Owner may reasonably request, including without
limitation, information regarding water rates and charges, copies of any rate studies
commissioned by the City, and reports regarding the compliance of Enterprise with
Applicable Environmental Laws.
(b) Event of Default. The City shall immediately notify the Trustee and the Owner by
telephone, promptly confirmed in writing, of any event, action or failure to take any action
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which constitutes an event of default under any obligation or this Installment Sale Agreement,
together with a detailed statement by a City Representative of the steps being taken by the City
to cure the effect of such event of default.
(c) Action, Suit or Proceeding. The City shall promptly notify the Owner in writing (i) of
any action, suit or proceeding or any investigation, inquiry or similar proceeding by or before
any court or other governmental authority, domestic or foreign, against the City which involve
claims equal to or in excess of $1,000,000 or that seeks injunctive relief, any Material Litigation
and the occurrence of any Material Adverse Change.
(d) Costs and Expenses. The City agrees to pay the reasonable out-of-pocket expenses and
disbursements of the Original Purchaser and the necessary and reasonable fees, expenses and
disbursements of counsel to the Original Purchaser in connection with (A) obtaining any waiver
or consent under this Installment Sale Agreement (whether or not the transactions
contemplated thereby shall be consummated) or any Event of Default hereunder, (B) the
preparation, execution, delivery, administration, defense and enforcement or preservation of
rights in connection with a workout, restructuring or waiver with respect to this Installment
Sale Agreement, and (C) the occurrence of an Event of Default and collection and other
enforcement proceedings resulting therefrom.
(e) Indemnification. The City covenants and agrees to indemnify and hold harmless, to the
extent permitted by law, the Owner and its incorporators, members, commissioners, directors,
officers, agents and employees (collectively, the "Owner Indemnified Persons') against all
liability, losses, damages, all reasonable costs and charges (including reasonable fees and
disbursements of attorneys, accountants, consultants and other experts), taxes, causes of action,
suits, claims, demands and judgments of every conceivable kind, character and nature
whatsoever, by or on behalf of any person arising in any manner from the transaction of which
this Installment Sale Agreement is a part, including, but not limited to, losses, claims, damages,
liabilities or reasonable expenses arising out of, resulting from or in any way connected with (i)
the operation of the Enterprise; (ii) any violation of contract, agreement (including this
Installment Sale Agreement) or restriction relating to the Enterprise; or (iii) the carrying out of
any of the transactions contemplated by this Installment Sale Agreement
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ARTICLE VI
DISCLAIMER OF WARRANTIES; ACCESS
Section 6.1. Disclaimer of Warranties. The Authority and the Trustee make no warranty
or representation, either express or implied, as to the value, design, condition, merchantability
or fitness for any particular purpose or fitness for the use contemplated by the City of the 2024
Project, or any other representation or warranty with respect to the 2024 Project. In no event
shall the Authority or the Trustee be liable for incidental, indirect, special or consequential
damages in connection with or arising out of this Installment Sale Agreement or the Indenture
for the existence, furnishing, functioning or City's use of the 2024 Project.
Section 6.2. Access to the Enterprise. The City agrees that the Authority and the Trustee,
and any duly authorized representative thereof, shall have the right at all reasonable times to
enter upon and to examine and inspect the Enterprise. The City further agrees that the
Authority and the Trustee, and any duly authorized representative thereof, shall have such
rights of access to the Enterprise as may be reasonably necessary to cause the proper
maintenance of the Enterprise in the event of failure by the City to perform its obligations
hereunder.
Section 6.3. Release and Indemnification Covenants. The City shall and hereby agrees to
indemnify and save the Authority and the Trustee and their respective officers, agents,
successors and assigns harmless from and against all claims, losses and damages, including
legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or
from any work or thing done on the Enterprise by the City, (b) any breach or default on the part
of the City in the performance of any of its obligations under this Installment Sale Agreement,
(c) any negligence or willful misconduct of the City or of any of its agents, contractors, servants,
employees or licensees with respect to the Enterprise, (d) any act or negligence of any sublessee
of the City with respect to the Enterprise , (e) the Acquisition and Construction of the 2024
Project or the authorization of payment of the 2024 Project Costs, (f) the performance by the
Trustee of its duties and obligations under the Indenture, including any duties referred to in
Section 8.12 of the Indenture, (g) the presence on, under or about, or release from, the Enterprise
of any substance, material or waste which is, or which becomes, regulated or classified as
hazardous or toxic under State, federal or local law, or (h) the offer, sale and issuance of the
Bonds. No indemnification is made under this Section 6.3 or elsewhere in this Installment Sale
Agreement for adjudicated willful misconduct or negligence by the Authority or the Trustee, or
their respective officers, employees, successors or assigns. The rights of the Trustee and the
obligations of the City under this Section 6.3 shall survive the termination of this Installment
Sale Agreement and the resignation or removal of the Trustee.
Section 6.4. Non -Liability of Authority for Enterprise Obligations. The Authority and its
successor and assigns shall have no obligation and shall incur no liabilities or debts whatsoever
for the obligations, liabilities and debts of the City incurred in connection with the Enterprise.
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ARTICLE VII
ASSIGNMENT, SALE AND AMENDMENT
Section 7.1. Assignment by the City. The obligations of the City under this Installment
Sale Agreement may not be assigned by the City.
Section 7.2. Sale or Other Disposition of Enterprise. The City covenants that the
Enterprise shall not be encumbered, sold, leased, pledged, any charge placed thereon, or
otherwise disposed of, as a whole or substantially as a whole, without the prior consent of the
Owner. Neither the Pledged Net Revenues nor any other funds pledged or otherwise made
available to secure payment of the Installment Payments shall be mortgaged, encumbered, sold,
leased, pledged, any charge placed thereon, or disposed or used except as authorized by the
terms of this Installment Sale Agreement. The City shall not enter into any agreement which
impairs the operation of the Enterprise or any part of it necessary to secure adequate Pledged
Net Revenues to pay the Installment Payments, or which otherwise would impair the rights of
the Bond Owners and the owners of any Parity Obligations with respect to the Pledged Net
Revenues. If any substantial part of the Enterprise shall be sold, the payment therefor shall
either (a) be used for the acquisition or construction of improvements, extensions or
replacements to the Enterprise, or (b) to the extent not so used, with the prior written consent of
the Owner, be applied to prepay Installment Payments or payments with respect to any Parity
Obligations, in accordance with written instructions of the City filed with the Trustee.
Section 7.3. Amendment of Installment Sale Agreement. The City and the Authority
shall have the right to modify or amend this Installment Sale Agreement without the consent of
any of the Bond Owners or any of the owners of Parity Obligations, but only if such amendment
or modification does not cause interest represented by the Bonds to be includable in gross
income for federal income tax purposes in the opinion of Bond Counsel, and only if such
amendment or modification does not materially adversely affect the interests of the Owners of
the Bonds in the opinion of Bond Counsel, and only if such amendment or modification is for
any one or more of the following purposes:
(a) to provide for the issuance of Parity Obligations pursuant to Section 4.8(b);
(b) to add to the covenants and agreements of the City contained in this Installment Sale
Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender
any rights or power herein reserved to or conferred upon the City; or
(c) to amend any provision thereof for the purpose of complying with the applicable
requirements of the Code.
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ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default Defined. The following events shall be Events of Default
hereunder:
(a) Failure by the City to pay any installments of principal or interest with respect to the
Senior Obligations when and as the same become due and payable.
(b) Failure by the City to pay any Installment Payment when and as the same become
due and payable hereunder.
(c) Failure by the City to pay any Additional Payment when due and payable hereunder,
and the continuation of such failure for a period of ten (10) days.
(d) Failure by the City to observe and perform any covenant, condition or agreement on
its part to be observed or performed, other than as referred to in the preceding clauses (a) or (b),
for a period of thirty (30) days after written notice specifying such failure and requesting that it
be remedied has been given to the City by the Authority or the Trustee; provided, however, that if
the City shall notify the Authority and the Trustee that in its reasonable opinion the failure
stated in the notice can be corrected, but not within such thirty (30) day period, such failure
shall not constitute an Event of Default hereunder if the City shall commence to cure such
failure within such thirty (30) day period and thereafter diligently and in good faith cure such
failure in a reasonable period of time; provided that such additional cure period may not exceed
30 days without the written consent of the Owner.
(e) The filing by the City of a voluntary petition in bankruptcy, or failure by the City
promptly to lift any execution, garnishment or attachment, or adjudication of the City as a
bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an
agreement of composition with creditors, or the approval by a court of competent jurisdiction of
a petition applicable to the City in any proceedings instituted under the provisions of the
Federal Bankruptcy Code, as amended, or under any similar acts which may hereafter be
enacted.
(f) The occurrence and continuation of any payment event of default under and as
defined in the instruments authorizing the issuance of any Parity Obligations or any event that
allows the acceleration of Parity Obligations.
Section 8.2. Remedies on Default. Whenever any Event of Default shall have happened
and be continuing, the Trustee as assignee of the Authority shall have the right, at its option and
without any further demand or notice, but subject in all respects to the provisions of Article VII
of the Indenture, to:
(a) declare all principal components of the unpaid Installment Payments, together with
accrued interest thereon at the net effective rate of interest per annum then borne by the
Outstanding Bonds from the immediately preceding Interest Payment Date on which payment
was made, to be immediately due and payable, whereupon the same shall immediately become
due and payable;
(b) take whatever action at law or in equity may appear necessary or desirable to collect
the Installment Payments then due or thereafter to become due during the Term of this
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Installment Sale Agreement, or enforce performance and observance of any obligation,
agreement or covenant of the City under this Installment Sale Agreement; and
(c) as a matter of right, in connection with the filing of a suit or other commencement of
judicial proceedings to enforce the rights of the Trustee and the Bond Owners hereunder, cause
the appointment of a receiver or receivers of the Gross Revenues and all amounts pledged
hereunder, with such powers as the court making such appointment shall confer.
The provisions of the preceding clause (a), however, are subject to the condition that if,
at any time after the principal components of the unpaid Installment Payments shall have been
so declared due and payable pursuant to the preceding clause (a), and before any judgment or
decree for the payment of the moneys due shall have been obtained or entered, the City shall
deposit with the Trustee a sum sufficient to pay all principal components of the Installment
Payments coming due prior to such declaration and all matured interest components (if any) of
the Installment Payments, with interest on such overdue principal and interest components
calculated at the net effective rate of interest per annum then borne by the Outstanding Bonds,
and the reasonable expenses of the Trustee (including any fees and expenses of its attorneys),
and any and all other defaults known to the Trustee (other than in the payment of the principal
and interest components of the Installment Payments due and payable solely by reason of such
declaration) shall have been made good, then, and in every such case, with the written consent
of the Trustee, shall rescind and annul such declaration and its consequences. However, no such
rescission and annulment shall extend to or shall affect any subsequent default, or shall impair
or exhaust any right or power consequent thereon. As provided in Section 8.6, the Trustee shall
be required to exercise the remedies provided herein in accordance with the Indenture.
Section 8.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the
Authority is intended to be exclusive and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Installment Sale Agreement or now or
hereafter existing at law or in equity. No delay or omission to exercise any right or power
accruing upon any default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time and as often
as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved
to it in this Article VIII it shall not be necessary to give any notice, other than such notice as may
be required in this Article VIII or by law.
Section 8.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either party to
this Installment Sale Agreement shall default under any of the provisions hereof and the
nondefaulting party, the Trustee or the Owner of any Bonds should employ attorneys or incur
other expenses for the collection of moneys or the enforcement or performance or observance of
any obligation or agreement on the part of the defaulting party herein contained, the defaulting
party agrees that it will on demand therefor pay to the nondefaulting party, the Trustee or such
Owner, as the case may be, the reasonable fees of such attorneys and such other expenses so
incurred.
Section 8.5. No Additional Waiver Implied by One Waiver. In the event any agreement
contained in this Installment Sale Agreement shall be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder.
Section 8.6. Trustee and Bond Owners to Exercise Rights. Such rights and remedies as
are given to the Authority under this Article VIII have been assigned by the Authority to the
Trustee under the Indenture, to which assignment the City hereby consents. Such rights and
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remedies shall be exercised by Trustee and the Owners of the Bonds as provided in the
Indenture.
Section 8.7. Rights of the Owners of Parity Obligations. Notwithstanding anything in
this Article VIII to the contrary, it is hereby acknowledged and agreed that the rights of the
Trustee and the Bond Owners hereunder in and to the Pledged Net Revenues and the
Enterprise shall be exercised on a parity and proportionate basis with the rights of the owners of
any Parity Obligations and any fiduciary acting for the benefit of such owners. The provisions
of this Article VIII, and the provisions of any instruments authorizing the issuance of any Parity
Obligations, shall be construed in accordance with the foregoing sentence.
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ARTICLE IX
PREPAYMENT OF INSTALLMENT PAYMENTS
Section 9.1. Security Deposit. Notwithstanding any other provision of this Installment
Sale Agreement, the City may on any date secure the payment of Installment Payments in
whole or in part by irrevocably depositing with the Trustee or any other fiduciary an amount of
cash which, together with amounts on deposit in the Bond Fund and the accounts therein, is
either (a) sufficient to pay all such Installment Payments, including the principal and interest
components thereof, in accordance with the Installment Payment schedule set forth in Exhibit
A, or (b) invested in whole or in part in Federal Securities in such amount as will, in the written
opinion of an Independent Accountant, together with interest to accrue thereon and together
with any cash which is so deposited, be fully sufficient to pay all such Installment Payments
when due pursuant to Section 4.4(a) , as the City shall instruct at the time of said deposit. In the
event of a security deposit pursuant to this Section 9.1 with respect to all of the Installment
Payments, all obligations of the City under this Installment Sale Agreement, and all security
provided by this Installment Sale Agreement for said obligations, shall cease and terminate,
excepting only the obligation of the City to make, or cause to be made, all of such Installment
Payments from such security deposit, and the obligation of the City to compensate and
indemnify the Trustee pursuant to Sections 4.9 and 6.3. Said security deposit shall be deemed to
be and shall constitute a special fund for the payment of Installment Payments in accordance
with the provisions of this Installment Sale Agreement.
Section 9.2. Optional Prepay. The City may exercise its option to prepay the
principal components of the Installment Payments on or after March 15, 2034, in whole on any
date, or in part on any Installment Payment Date, in integral multiples of $5,000, by paying a
prepayment price equal to the aggregate principal components of the Installment Payments to
be prepaid, together with the interest component of the Installment Payment required to be
paid on or accrued to such date. Such prepayment price shall be deposited by the Trustee in the
Redemption Fund or in another trustee -held fund to be applied to the redemption of Bonds
pursuant to Section 4.01(b) of the Indenture. The City shall give the Trustee written notice of its
intention to exercise its option not less than forty-five (45) days in advance of the date of
exercise. Prepayments of Installment Payments in part shall be applied to the principal
component of remaining Installment Payments in inverse order of maturity.
Section 9.3. Credit for Amounts on Deposit. Upon payment in full of all Additional
Payments and other amounts then due and payable hereunder, all available amounts then on
deposit in the funds and accounts established under the Indenture shall be credited towards the
amounts then required to be so prepaid.
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ARTICLE X
MISCELLANEOUS
Section 10.1. Further Assurances. The City agrees that it will execute and deliver any and
all such further agreements, instruments, financing statements or other assurances as may be
reasonably necessary or requested by the Authority or the Trustee to carry out the intention or
to facilitate the performance of this Installment Sale Agreement, including, without limitation,
to perfect and continue the security interests herein intended to be created.
Section 10.2. Notices. Any notice, request, complaint, demand or other communication
under this Installment Sale Agreement shall be given by first class mail or personal delivery to
the party entitled thereto at its address set forth below, or by telecopy, telex or other form of
telecommunication, at its number set forth below. Notice shall be effective either (a) upon
transmission by telecopy, telex or other form of telecommunication, (b) 48 hours after deposit in
the United States mail, postage prepaid, or (c) in the case of personal delivery to any person,
upon actual receipt.
If to the Authority: Tustin Public Financing Authority
c / o City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: City Manager
Phone: (714) 573-3000
If to the City: City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: City Manager
Phone: (714) 573-3000
If to the Trustee: The Bank of New York Mellon Trust Company, N.A.
333 South Hope Street, Suite 2525
Los Angeles, CA 90071
Attention: Corporate Trust Department
Phone: (213) 630-6260
The Authority, the City or the Trustee may, by written notice to the other parties, from
time to time modify the address or number to which communications are to be given
hereunder.
Section 10.3. Third Party Beneficiaries. The Trustee and the Owner shall each be and is
hereby made a third party beneficiary hereunder.
Section 10.4. Governing Law. This Installment Sale Agreement shall be construed in
accordance with and governed by the laws of the State.
Section 10.5. BindingEffect. ffect. This Installment Sale Agreement shall inure to the benefit of
and shall be binding upon the Authority and the City, and their respective successors and
assigns, subject, however, to the limitations contained herein.
Section 10.6. Severability of Invalid Provisions. If any one or more of the provisions
contained in this Installment Sale Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, then such provision or provisions shall be deemed severable from
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the remaining provisions contained in this Installment Sale Agreement and such invalidity,
illegality or unenforceability shall not affect any other provision of this Installment Sale
Agreement, and this Installment Sale Agreement shall be construed as if such invalid or illegal
or unenforceable provision had never been contained herein. The Authority and the City each
hereby declares that it would have entered into this Installment Sale Agreement and each and
every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that
any one or more Sections, paragraphs, sentences, clauses or phrases of this Installment Sale
Agreement may be held illegal, invalid or unenforceable.
Section 10.7. Article and Section Headings and References. The headings or titles of the
several Articles and Sections hereof, and any table of contents appended to copies hereof, shall
be solely for convenience of reference and shall not affect the meaning, construction or effect of
this Installment Sale Agreement. All references herein to "Articles," "Sections' and other
subdivisions are to the corresponding Articles, Sections or subdivisions of this Installment Sale
Agreement; the words "herein," "hereof," "hereby," "hereunder" and other words of similar
import refer to this Installment Sale Agreement as a whole and not to any particular Article,
Section or subdivision hereof; and words of the masculine gender shall mean and include
words of the feminine and neuter genders.
Section 10.8. Execution of Counterparts. This Installment Sale Agreement may be
executed in any number of counterparts, each of which shall for all purposes be deemed to be
an original and all of which shall together constitute but one and the same instrument.
Section 10.9. Waiver of Personal Liability. No member of the City Council, officer, agent
or employee of the City shall be individually or personally liable for the payment of Installment
Payments or Additional Payments or be subject to any personal liability or accountability by
reason of this Installment Sale Agreement; but nothing herein contained shall relieve any such
member of the City Council, officer, agent or employee from the performance of any official
duty provided by law or by this Installment Sale Agreement.
Section 10.10. Limitation of Rights to Parties and Bond Owners. Nothing in this
Installment Sale Agreement expressed or implied is intended or shall be construed to give to
any person other than the Authority, the Trustee, the City and the Owners of the Bonds, any
legal or equitable right, remedy or claim under or in respect of this Installment Sale Agreement
or any covenant, condition or provision therein or herein contained; and all such covenants,
conditions and provisions are and shall be held to be for the sole and exclusive benefit of the
Authority, the Trustee, the City and the Owners of the Bonds.
Section 10.11. Captions. The captions or headings in this Installment Sale Agreement are
for convenience only and in no way define, limit or describe the scope or intent of any
provisions or Section of this Installment Sale Agreement.
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IN WITNESS WHEREOF, the Authority and the City have caused this Installment Sale
Agreement to be executed in their respective names by their duly authorized officers, all as of
the date first above written.
TUSTIN PUBLIC FINANCING
AUTHORITY, as seller
By
Executive Director
CITY OF TUSTIN, as Purchaser
By Vb
cs?�
City Manager
[Signature page to Installment Sale Agreement, dated as of February 1, 2024, by
and between the Tustin Public Financing Authority and City of Tustin}
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EXHIBIT A
SCHEDULE OF INSTALLMENT PAYMENTS
Installment
Payment Date
9/25/24
3/25/25
9/25/25
3/25/26
9/25/26
3/25/27
9/25/27
3/25/28
9/25/28
3/25/29
9/25/29
3/25/30
9/25/30
3/25/31
9/25/31
3/25/32
9/25/32
3/25/33
9/25/33
3/25/34
9/25/34
3/25/35
9/25/35
3/25/36
9/25/36
3/25/37
9/25/37
3/25/38
9/25/38
3/25/39
9/25/39
3/25/40
9/25/40
3/25/41
9/25/41
3/25/42
9/25/42
3/25/43
9/25/43
3/25/44
TOTALS
Principal
Component
$105,000.00
135,000.00
140,000.00
145,000.00
155,000.00
160,000.00
170,000.00
180,000.00
185,000.00
195,000.00
205,000.00
215,000.00
225,000.00
235,000.00
245,000.00
260,000.00
270,000.00
285,000.00
300,000.00
315,000.00
$4,125,000.00
Interest
Component(1)
$ 125,370.21
99,412.50
96,882.00
96,882.00
93,628.50
93,628.50
90,254.50
90,254.50
86,760.00
86,760.00
83,024.50
83,024.50
79,168.50
79,168.50
75,071.50
75,071.50
70,733.50
70,733.50
66,275.00
66,275.00
61,575.50
61,575.50
56,635.00
56,635.00
51,453.50
51,453.50
46,031.00
46,031.00
40,367.50
40,367.50
34,463.00
34,463.00
28,197.00
28,197.00
21,690.00
21,690.00
14,821.50
14,821.50
7,591.50
7,591.50
$2,434,029.71
Total
Installment
Payment
$ 125,370.21
204,412.50
96,882.00
231,882.00
93,628.50
233,628.50
90,254.50
235,254.50
86,760.00
241,760.00
83,024.50
243,024.50
79,168.50
249,168.50
75,071.50
255,071.50
70,733.50
255,733.50
66,275.00
261,275.00
61,575.50
266,575.50
56,635.00
271,635.00
51,453.50
276,453.50
46,031.00
281,031.00
40,367.50
285,367.50
34,463.00
294,463.00
28,197.00
298,197.00
21,690.00
306,690.00
14,821.50
314,821.50
7,591.50
322,591.50
$6,559,029.71
(1) The applicable interest rate is the Tax -Exempt Rate (4.820%). If the Default Rate (7.820%) or the
Taxable Rate (6.350%) is in effect, interest will be computed by applying such alternate rate.
Exhibit A
Page 1
EXHIBIT B
DESCRIPTION OF THE 2024 PROJECT
Beneta Well: The Beneta Well project involves the design and construction of an additional well
at the existing Beneta Well site, with a groundwater production capacity of 1,000 gallons per minute..
Well Rehab Program: Routine rehabilitation of well facilities. The following wells have been
identified for rehabilitation over the next three fiscal years: FY 23-24 Vandenberg Well, FY 24-25 Main
Street #3, and FY 25-26 Pasadena Well.
Lyttle Reservoir: The Lyttle Reservoir project includes the evaluation of the tank's condition,
implementation of safety improvements, as well as interior and exterior recoating. Tank to be inspected
by a qualified contractor to determine appropriate repairs, maintenance, or improvements.
Exhibit B
Page 1