EXHIBIT 10.8
INDENTURE OF TRUST AND AGREEMENT
among
THE REDEVELOPMENT AGENCY OF THE CITY OF SAN MARCOS
and
SAN MARCOS RETIREMENT VILLAGE
and
THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE,
and
SECURITY PACIFIC NATIONAL BANK
________________________________________________________________________________
$13,500,000
The Redevelopment Agency of the City of San Marcos
Adjustable/Fixed Rate Multifamily Housing Bonds
(San Marcos Retirement Village Project)
________________________________________________________________________________
__________________________________
Dated as of December 1, 1985
__________________________________
INDEX
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RECITALS.............................................................. 1
PART I: PLEDGE AND ASSIGNMENT; DEFINITIONS
Article 1: Pledge and Assignment by Issuer
Section 101 Pledge and Assignment of Issuer........................ 2
Section 102 Defeasance of Lien; Termination of Borrower's
Obligations on the Loan................................ 2
Article 2: Definitions
PART II: THE BONDS
Article 3: The Bonds
Section 301 Issuance of Bonds...................................... 19
Section 302 Delivery of Bonds...................................... 20
Section 303 Execution; Authentication.............................. 21
Section 304 Interest on Bonds...................................... 21
Section 305 Lost Bonds; Exchange and Transfer of Bonds;
Additional Interest Only Assignable by Separate
Writing................................................ 22
Section 306 Temporary Bonds........................................ 24
Article 4: Redemption or Purchase of Bonds Before Maturity
Section 401 Redemption or Purchase of Bonds........................ 25
Section 402 [Not Used]
Section 403 Selection of Bonds to be Redeemed...................... 30
Section 404 Procedure for Redemption............................... 31
Section 405 No Partial Redemption After Default.................... 31
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Section 406 Trustee to Notify Bank of Redemption
of Principal........................................... 31
Article 5: Source and Application of Funds
Section 501 Project Fund........................................... 31
Section 502 Bond Fund.............................................. 36
Section 503 Letter of Credit Fund; Draws Under
Letter of Credit....................................... 36
Section 504 Investment of Moneys in Funds.......................... 38
Section 504A Payment of Bonds From Funds............................ 39
Section 505 Avoidance of Arbitrage................................. 39
Section 506 Authorized Application of Funds; Moneys
to be Held in Trust.................................... 40
Section 507 Nonpresentment of Bonds................................ 40
Section 508 Bonds Are Not General Obligations...................... 40
Section 509 Substitute Letter of Credit............................ 41
PART III: THE PROJECT
Article 6: Completion of the Project
Section 601 Borrower's Obligations to Complete
Project, etc........................................... 42
Section 602 Completion Certificate................................. 42
Section 603 Subdivision of Project Site............................ 43
Article 7: Damage and Destruction
Section 701 Damage and Destruction................................. 43
Section 702 Eminent Domain......................................... 43
Section 703 Payment to Borrower.................................... 44
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PART IV: REPRESENTATIONS AND AGREEMENTS OF ISSUER AND BORROWER
Article 8: Representations and Agreements of Issuer
Section 801 Due Organization, etc.................................. 44
Section 802 Payment of Bonds; Trustee's Rights with Respect to the
Loan; Cooperation with Trustee......................... 45
Article 9: Representations and Covenants of the Borrower
Section 901 Legal Proceedings...................................... 46
Section 902 Compliance with Law; Consents, etc..................... 46
Section 903 Adequacy of Disclosure................................. 46
Section 904 Acquisition, Construction and Completion of
Project................................................ 47
Section 905 Residential Rental Property............................ 49
Section 906 Lower Income Tenants................................... 50
Section 907 Tax-Exempt Status of the Bonds......................... 51
Section 908 Modification and Termination of Special Tax
Covenants.............................................. 51
Section 909 Sale of Project........................................ 52
Article 10: Certain Agreements of Borrower
Section 1001 Borrower to Make Loan Payments Sufficient to Meet
Debt Service on Bonds and Additional Payments.......... 53
Section 1002 Borrower to Maintain Its Legal Existence............... 54
Section 1003 [Not Used]
Section 1004 Borrower to Give Notice of Event Adversely Affecting
Tax-Exempt Status of Interest on Bonds................. 54
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Section 1005 Covenants Related to Mortgaged Property................ 55
Section 1006 Instruments of Further Assurance; Recordings and
Filing................................................. 57
Section 1007 Insurance and Worker's Compensation
Coverage............................................... 57
Section 1008 Indemnification of Issuer, Bank and Trustee............ 58
Section 1009 Inconsistencies Between Indenture and Reimbursement
Agreement.............................................. 60
PART V: EVENTS OF DEFAULT
Article 11: Default Provisions and Remedies of
Trustee, Bank, Bondholders and Issuer
Section 1101 Events of Default; Defaults ........................... 60
Section 1102 Acceleration........................................... 62
Section 1103 [Not Used]
Section 1104 Remedies; Rights of Bank and Bondholders............... 63
Section 1105 Right of Bank and Bondholders to Direct
Proceedings............................................ 63
Section 1106 Appointment of Receiver ............................... 64
Section 1107 Application of Moneys ................................. 64
Section 1108 Remedies Vested in Trustee............................. 64
Section 1109 Rights and Remedies of Bank and Bondholders............ 65
Section 1110 Waivers of Events of Default .......................... 65
Section 1111 Intervention by Trustee ............................... 65
Section 1112 Remedies of Issuer on Event of Default................. 66
Section 1113 Non-Recourse........................................... 66
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PART VI: THE TRUSTEE
Article 12: The Trustee
Section 1201 Acceptance of Trusts..................................... 66
Section 1202 Fees and Expenses of Trustee............................. 67
Section 1203 Successor Trustee........................................ 68
Section 1204 Resignation by Trustee; Removal.......................... 68
Section 1205 Appointment of Successor Trustee......................... 68
Section 1206 Dealing in Bonds......................................... 69
Section 1207 Trustee as Bond Registrar; List of
Bondholders.............................................. 69
Section 1208 Successor Trustee as Custodian of Funds,
Bond Registrar and Paying Agent.......................... 69
Section 1209 Adoption of Authentication............................... 69
Section 1210 Designation and Succession of Paying
Agents................................................... 69
Section 1211 Appointment of Co-Trustee................................ 70
PART VII: SUPPLEMENTAL INDENTURE AND WAIVERS;
MISCELLANEOUS
Article 13: Supplemental Indentures and Waivers
Section 1301 Supplemental Indentures Not Requiring
Consent of Bondholders................................... 71
Section 1302 Supplemental Indentures Requiring Consent
of Bondholders........................................... 72
Section 1303 Opinion of Counsel....................................... 73
Section 1304 Consent of Bank; Amendments to Letter of
Credit................................................... 73
Section 1305 Modification by Unanimous Consent........................ 73
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Article 14: Miscellaneous
Section 1401 Consents, etc., of Bondholders......................... 74
Section 1402 Limitation of Rights................................... 74
Section 1403 Severability........................................... 74
Section 1404 Notices................................................ 74
Section 1405 Payments Due on Saturdays, Sundays
and Holidays........................................... 74
Section 1406 Extent of Issuer Covenants; No Personal
Liability.............................................. 74
Section 1407 Bonds Owned by Issuer or Borrower...................... 75
Section 1408 Captions; Index........................................ 75
Section 1409 Counterparts........................................... 75
Section 1410 Governing Law; Sealed Instrument....................... 75
Section 1411 Agreements to Constitute Covenants..................... 75
Signatures
Acknowledgements
EXHIBIT 301 - Form of Bond
EXHIBIT 401 - Form of Bondholder's Election Notice
EXHIBIT 501 - Costs of Issuance
EXHIBIT 601 - Description of Project
EXHIBIT 904A - Form of Borrower's Certificate of Project Costs
EXHIBIT 904B - Form of Monitoring Agreement
EXHIBIT 906A - Form of Income Certification
EXHIBIT 906B - Form of Borrower's Report
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INDENTURE OF TRUST AND AGREEMENT
This Indenture of Trust and Agreement (together with any supplemental
indentures, the "Indenture") is made as of December 1, 1985, among The
Redevelopment Agency of the City of San Marcos (the "Issuer"); San Marcos
Retirement Village, a California general partnership (the "Borrower"); The First
National Bank of Boston, authorized to execute trusts of the character herein
set out, with its principal office in Boston, Massachusetts, as Trustee (the
"Trustee"); and Security Pacific National Bank (the "Bank").
Terms defined in this Indenture are used as defined. Unless otherwise
indicated, references to Articles or Sections refer to those in this Indenture.
RECITALS
The Issuer has duly determined to issue $13,500,000 principal amount of
industrial revenue bonds (the "Bonds", which term includes bonds issued in
replacement or exchange and excludes Bonds for which the Trustee is holding
payment therefor under Section 507 hereof). The proceeds of the Bonds will be
loaned (the "Loan") hereunder by the Issuer to the Borrower. Such proceeds will
be used to finance permitted costs in connection with the construct ion of
residential dwelling units and facilities for the elderly to be owned and used
by the Borrower in San Marcos, California. To secure the Bonds and the Bank
Obligations (as defined in Article 2), and the obligations of the Issuer and the
Borrower hereunder and under the Reimbursement Agreement, the Borrower is
expected to grant a first deed of trust and second deed of trust and/or security
interest in certain of its properties and the Issuer is herein pledging the
Pledged Receipts and assigning certain of its rights hereunder.
All things necessary to make the Bonds, when authenticated, the binding,
limited obligations of the Issuer and to create a valid lien and pledge as
herein provided have been accomplished; and the execution and delivery of this
Indenture and the issuance of the Bonds have been duly authorized.
In consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby
agree, covenant, grant, pledge, assign, represent and warrant as follows (it
being
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understood and agreed that in the performance of the agreements of the Issuer
herein contained, any obligation it may incur for the payment of money shall not
be a general obligation of the Issuer or a debt or pledge of the faith and
credit of the State of California but shall be payable solely from the Pledged
Receipts):
PART I:
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PLEDGE AND ASSIGNMENT; DEFINITIONS
ARTICLE 1 - Pledge and Assignment by Issuer
Section 101. Pledge and Assignment of Issuer. In order to secure the due
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payment of principal, premium, if any, and interest of or on the Bonds and
compliance by the Issuer with its agreements contained in this Indenture and to
secure the due payment and performance of the Bank Obligations, the Issuer
hereby grants, pledges and assigns to the Trustee all of its right, title and
interest in and to the following (the "Trust Estate"):
(a) All of the Issuer's right, title and interest in and to the
Pledged Receipts;
(b) All of the Issuer's right, title and interest in and to the First
Deed of Trust; and
(c) All of the Issuer's right, title and interest in this Indenture,
including enforcement rights and remedies (including the grant herein of a
security interest under the Uniform Commercial Code to the maximum extent
possible);
but excepting from such grant, pledge and assignment the right of the Issuer to
any payment or reimbursement pursuant to Section 1001B, Section 1008 or the
third sentence of Section 1112; to have and to hold the Trust Estate, whether
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now owned or hereafter acquired, unto the Trustee and its respective successors
in trust and assigns forever; in trust nevertheless, upon the terms and trusts
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herein set forth for the benefit, security and protection of (i) all present and
future holders of all Bonds from time to time issued under and secured by this
Indenture and (ii) the Bank.
Section 102. Defeasance of Lien; Termination of Borrower's Obligations on
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the Loan. When (i) the Issuer has paid or has caused to be paid out of Priority
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Funds to the holders of all of the Bonds the principal and interest and premium,
if any, due or
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to become due thereon at the times and in the manner stipulated therein and
herein, (ii) all of the Bank Obligations have been performed or satisfied in
full and (iii) all Additional Payments have been paid or provided for to the
satisfaction of the Issuer and the Trustee, the lien of this Indenture on the
Trust Estate shall terminate and the Borrower's obligations with respect to the
Loan shall terminate, except that the rights given by Section 401(d) of this
Indenture to the registered owners of all Outstanding Bonds shall survive for so
long as such Bonds remain outstanding. Upon the Borrower's request, the Trustee
shall upon the termination of the lien hereof promptly execute and deliver to
the Borrower and the Issuer an appropriate discharge hereof and shall assign and
deliver to the Borrower any property at the time subject to the lien of this
Indenture which may then be in its possession, except amounts held by the
Trustee pursuant to Section 507 for the payment of the principal of, premium, if
any, and interest on the Bonds and Additional Payments and payments pursuant to
Section 1008.
All the outstanding Bonds shall be deemed to have been paid within the
meaning of this Section if:
(a) After 123 days shall have passed and no Bankruptcy shall have
occurred since the Borrower shall have deposited with the Trustee, in trust for
and irrevocably committed thereto:
(i) sufficient moneys, or
(ii) direct obligations of the United States to be of such
maturities and interest payment dates and to bear such interest as will, without
further investment or reinvestment of either the principal amount thereof or the
earnings therefrom (likewise to be held in trust and committed, except as
hereinafter provided), be sufficient together with moneys referred to in (i)
above, for the payment, at their maturities or redemption dates, of all
principal of and interest and premium, if any, on such Bonds to the date of
maturity or redemption, or if default in such payment shall have occurred on
such date then to the date of the tender of such payment; provided, that if any
such Bonds are to be defeased prior to the earlier of the redemption or the
maturity thereof, notice of such redemption shall have been duly given or
irrevocable provision satisfactory to the Trustee shall have been duly made for
the giving of such notice and the Trustee shall have received an unqualified
opinion of Bond Counsel that such payment shall not cause the Bonds to become
"arbitrage bonds" within the meaning of Section 103(c) of the Internal Revenue
Code of 1954, as amended; or
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(b) the Trustee shall have drawn under the Letter of credit and shall
have paid to the holders of the Bonds, or pursuant to Section 503, 507 or 1107
shall be holding in trust for and irrevocably committed to the payment of the
Bonds, sufficient Priority Funds for the payment, at their maturities or
redemption dates or as provided in Section 503, of all principal of and interest
and premium, if any, on such Bonds to the date of maturity or redemption or as
provided in Section 503, as the case may be, or if default in such payment shall
have occurred on such date, then to the date of tender of such payment;
provided, that if any such Bonds are to be redeemed prior to the maturity
thereof, notice of such redemption shall have been duly given as provided in
this Indenture; and provided, further, that no Bond shall be deemed to have been
paid within the meaning of this clause (b) if any payment of principal thereof
or premium or interest thereon shall have been made out of funds or securities
deposited with the Trustee by the Borrower and if with respect to any such
deposit the conditions of clause (a) of this Section 103 shall not have been
satisfied.
The Bank Obligations shall be deemed to have been performed and satisfied
in full within the meaning of this Section 103 if (A) the Letter of Credit is no
longer outstanding, (B) the Borrower shall have paid sufficient moneys to the
Bank for the payment of all of its obligations under the Reimbursement Agreement
and (C) the Bank shall have so notified the Trustee in writing.
Any moneys held by the Trustee in accordance with the provisions of this
Section shall be invested by the Trustee in accordance with Section 504 (but
only to the extent that such investments are available) only in direct
obligations of the United States the maturities or redemption dates, without
premium, of which shall coincide as nearly as practicable with, but not be later
than, the time or times at which said moneys will be required for the aforesaid
purposes; provided, however, that moneys drawn under the Letter of Credit shall
be invested only in direct obligations of the United States with maturities of
30 or fewer days. The making of any such investments or the sale or other
liquidation thereof shall not be subject to the control of the Issuer or the
Borrower and neither the Trustee nor, without limiting it obligations under the
Basic Agreements, the Borrower shall have any responsibility for any losses
resulting from such investment. Any income or interest earned by, or increment
to, the investments held under this Section, to the extent determined from time
to time by the Trustee, with the consent of the Bank, to be in excess of the
amount required to be held by it for the purposes of this Section 102, shall be
paid to or for the account of the Borrower.
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Any amounts remaining in the Project Fund or the Bond Fund, after all of
the outstanding Bonds shall be deemed to have been paid and all other amounts
required to be paid under this Indenture, including without limitation the Bank
Obligations, shall have been paid and after the Trustee shall have been notified
by the Bank that all Bank Obligations have been satisfied, shall be paid to the
Borrower upon the termination of this Indenture.
ARTICLE 2 - Definitions
The following terms as used in this Indenture, the Bonds and any
certificate or document executed in connection therewith shall have the
following meanings (or are defined elsewhere in this Indenture as indicated
below) unless the context otherwise indicates:
"Act of Bank Bankruptcy" means the Bank shall become insolvent or fail to
pay its debts generally as such debts become due or shall admit in writing its
inability to pay any of its indebtedness or shall consent to or petition for or
apply to any authority for the appointment of a receiver, liquidator, trustee or
similar official for itself or for all or any substantial part of its properties
or assets or any such trustee, receiver, liquidator or similar official is
otherwise appointed or insolvency, reorganization, arrangement or liquidation
proceedings (or similar proceedings) shall be instituted by or against the Bank.
"Additional Payments" means the amounts required to be paid by the Borrower
under Section 1001B.
"Adjustable Period Interest Payment Date" means (i) the first Wednesday in
each calendar month during the Adjustable Rate Period, and (ii) the Conversion
Date.
"Adjustable Rate" means the lesser of (i) 12 1/2% per annum and (ii) a
floating rate established as herein provided. Except as provided in the last
sentence hereof, the floating rate shall be equal to ARBI plus a fixed interest
component ("FIC") equal to (x) one-quarter of one percent (1/4th of 1%) or (y),
(y) from and after the first Wednesday of the Adjustable Rate Interest Period
next succeeding the 15th day after the Remarketing Agent gives notice to the
Registered Owners of the Bonds that the Bonds have been rated AA or better (or
the equivalent thereof) by S&P or Moody's or their successors, one-eighth of one
percent (1/8th of 1%), provided that:
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(i) if the Trustee shall have received a notice tendering any of the
Bonds for purchase as described in Section 401(d) and if the Remarketing Agent
shall remarket all or a portion of such Bonds pursuant to the Remarketing
Agreement, the floating rate of interest for all Bonds shall be equal to the sum
of (A) ARBI, plus (B) the FIC, plus (C), if required to enable the Remarketing
Agent to remarket such tendered Bonds at par plus accrued interest, an
additional interest component ("AIC") determined as hereinafter provided. The
AIC shall be equal to that percentage of interest determined by the Remarketing
Agent in connection with any remarketing effort and expressed in increments of
1/8th of 1% per annum, which when added to the sum of ARBI plus the FIC will
produce the interest rate per annum necessary to enable the Remarketing Agent to
remarket such Bonds at par plus accrued interest. The AIC shall become effective
with respect to all Bonds as of the Purchase Date with respect to the Tendered
Bonds under Section 401(d), unless such date occurs after the last Wednesday of
an Adjustable Rate Interest Period, in which case such AIC shall become
effective as of the first Wednesday of the next Adjustable Rate Interest Period;
and
(ii) if an AIC is added to the floating rate pursuant to the preceding
clause (i), such AIC shall remain in effect until the end of the Adjustable Rate
Interest Period following the Adjustable Rate Interest Period in which the Bonds
were remarketed (except as provided in clause (iii) below), until a further
adjustment to the floating rate is made pursuant to the preceding clause (i) or
until the interest rate on the Bonds is otherwise determined as provided in this
Indenture; and
(iii) if the Remarketing Agent shall have advised the Borrower, the
Issuer, the Trustee and each Bondholder not less than seven days prior to the
first Wednesday of any Adjustable Rate Interest Period that the discontinuance
of the AIC would result in the Bonds bearing interest at a rate different from
the interest rate per annum necessary to enable the Remarketing Agent to
remarket the Bonds at par plus accrued interest, the floating rate shall be
equal to the floating rate as last adjusted pursuant to the preceding clause (i)
until such time as the floating rate may again be adjusted pursuant to such
clause (i) or until the interest rate on the Bonds is otherwise determined as
provided for in this Indenture; and
(iv) in the event that the Remarketing Agent shall have determined
(which determination shall be within the judgment and discretion of the
Remarketing Agent) that the Bonds may be remarketed at par plus accrued interest
at an Adjustable Rate equal to ARBI, then from and after the first Wednesday of
the
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adjustable Rate Interest Period next succeeding the 15th day after the
Remarketing Agent gives notice to the Registered Owners of the Bonds that it has
made such determination and so long as such determination shall remain in
effect, the FIC shall equal zero.
In the event that The First National Bank of Boston discontinues the
announcement of ARBI, the floating rate shall be equal to the average coupon
rate of interest expressed as a percentage of the yield evaluations at par of
United States Treasury obligations having a maturity of 91 days, which is
determined by the Remarketing Agent as necessary to remarket the Bonds at par
plus accrued interest, and which shall be announced by the Remarketing Agent to
the Trustee, the Issuer and the Borrower on Wednesday of each week, beginning on
the first such Wednesday following the discontinuance of ARBI, each change in
such floating rate to take effect on the Wednesday next following its
announcement.
"Adjustable Rate Interest Period" means each period during the Adjustable
Rate Period commencing on (and including) the first Wednesday of each calendar
month (or, in the case of the first such period, the date of delivery of the
Bonds to the initial purchaser or purchasers of the Bonds) and ending on (but
excluding) the first Wednesday of the next succeeding calendar month.
"Adjustable Rate Period" means the period from the date of issuance and
delivery of the Bonds to and including the earlier of (i) the Conversion Date
and (ii) the date the principal of and interest on the Bonds shall have been
paid in full or provision shall have been made for the payment thereof in
accordance with this Indenture
"AIC" -- See definition of Adjustable Rate.
"ARBI" means the rate, calculated as a percentage (the "ARBI Percent") of
the FNBB Base Rate, which, in the sole judgment of The First National Bank of
Boston, will result in the minimum yield attainable on tax-exempt adjustable-
rate bonds priced at par supported by the letter of credit of The First National
Bank of Boston. ARBI shall change as and when the FNBB Base Rate changes,
provided that (a) ARBI shall not be lower on any day during any Adjustable Rate
Interest Period than on the first Wednesday of such Interest Period, and (b)
changes in the FNBB Base Rate of which the Trustee is given notice after the
last Wednesday in any Adjustable Rate Interest Period shall become effective on
the first Wednesday of the next succeeding Adjustable Rate Interest Period.
Changes in ARBI which result
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from a change in the ARBI Percent shall become effective with respect to a
Adjustable Rate Interest period only if the Trustee is given notice of such
change in the ARBI Percent at least seven days prior to the first Wednesday of
such Adjustable Rate Interest Period. Changes in ARBI shall be communicated by
The First National Bank of Boston to the Trustee and the Remarketing Agent
promptly after they are announced.
"Bank" means Security Pacific National Bank so long as its Letter of Credit
is outstanding or, where the context requires, any bank or other financial
institution issuing a Substitute Letter of Credit. If no Letter of Credit or
Substitute Letter of Credit is outstanding, then any reference in this Indenture
to the Bank shall be disregarded.
"Bank Obligations" means any and all obligations of the Borrower to the
Bank under the Reimbursement Agreement (including without limitation the
obligation to reimburse the Bank for amounts drawn under the Letter of Credit
and to pay interest on such amounts until paid).
"Bankruptcy" means the filing of a petition in bankruptcy (or the
commencement of a bankruptcy or similar proceeding) by or against the Borrower
or the Issuer under any applicable bankruptcy, insolvency, reorganization or
similar law now or hereafter in effect.
"Basic Agreements" means this Indenture, the Land Use Restriction
Agreement, the Bonds, the Bond Purchase Agreement, the Depositary Agreement, the
Reimbursement Agreement, the Bond Pledge Agreement, the Intercreditor Agreement,
the Remarketing Agreement and the First Deed of Trust and the Second Deed of
Trust.
"Bond Counsel" means Kutak, Rock & Campbell or any other attorney at law or
a firm of attorneys mutually acceptable to the Trustee and the Borrower 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.
"Bond Fund" -- See Section 502.
"Bondholder" means, as of any time, the registered owner of any Bond as
shown in the register kept by the Trustee as bond registrar.
"Bondholder's Election Notice" -- See Section 401(d).
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"Bond Pledge Agreement" means the Bond Pledge Agreement of even date
herewith among the Borrower, the Bank and the Trustee and entered into pursuant
to the Reimbursement Agreement.
"Bond Purchase Agreement" means the Bond Purchase Agreement of even date
herewith among the Issuer, the Borrower and the initial purchaser or purchasers
of the Bonds.
"Bond Year" means any one-year period ending on the anniversary of the
Closing Date.
"Bonds" -- See Recitals in this Indenture.
"Borrower -- See Recitals in this Indenture.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks are authorized or required to be closed in the City of Boston or the
City of San Diego.
"Certificate as to Arbitrage" means the Certificate as to Arbitrage dated
the Closing Date among the Issuer, the Borrower and the Remarketing Agent.
"Closing Date" means December 31, 1985.
"Code" means the Internal Revenue Code of 1954, as amended.
"Completion Certificate" -- See Section 602.
"Computation Date" -- See Section 304(b).
"Conversion Date" -- See Section 304(b).
"Cost" or "Cost of the Project" or "Project Cost" means and is deemed to
include to the extent permitted by the Enabling Act, whether incurred prior to
or after the date of this Indenture, (a) obligations of the Issuer or of the
Borrower incurred for labor, materials and other expenses and to contractors,
builders and materialmen in connection with the acquisition, construction,
installation and equipping of the Project and improvements thereto; (b) the cost
of contract or performance bonds or of other bonds and of insurance of all kinds
that may be required or necessary during the course of construction of the
Project; (c) all costs of engineering services, including the expenses of the
Issuer and the Borrower for test borings, surveys, test and pilot operations,
estimates, plans and specifications and preliminary investigations therefor, and
for supervising construction, as well as for the performance of all other duties
required by or consequent upon the proper construction of the
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Project; (d) compensation and expenses of the Trustee, legal, accounting,
financial and printing expenses, fees and all other expenses incurred in
connection with the issuance of the Bonds, which are not otherwise provided for
under the terms of this Indenture; (e) interest on the Bonds during the period
of construction of the Project, and for a period not exceeding one year after
completion of construction of the Project; (f) all other costs which the Issuer
or the Borrower shall be required to pay under the terms of any contract or
contracts for the acquisition (by purchase, lease or otherwise), construction or
installation of the Project; and (g) any sums required to reimburse the Issuer
or the Borrower for advances made by either of them for any of the above items,
or for any other costs incurred and for work done by any of them, which are
properly chargeable to the facilities being acquired, constructed or installed.
"Costs of Collection" means all attorneys' reasonable fees and out-of-
pocket expenses incurred by the Trustee and all reasonable costs and expenses
associated with travel on behalf of the Trustee, which costs and expenses are
directly or indirectly related to the Trustee's efforts to collect and/or
enforce the Bonds, this Indenture, the Bond Purchase Agreement, and/or any of
the Trustee's rights, remedies, powers, privileges, or discretions against or in
respect of the Borrower and/or any lessee of the Borrower (whether or not suit
is instituted in connection with any of the foregoing).
"Default" and "event of default" -- See Section 1101.
"Depositary" means The First National Bank of Boston as depositary under
the Depositary Agreement and its permitted successors and assigns.
"Depositary Agreement" means the Depositary Agreement of even date herewith
among the Trustee, the Borrower, the Depositary and the Remarketing Agent.
"Determination of Taxability" means a determination that the interest
income on any of the Bonds does not qualify as exempt interest under Section 103
of the Internal Revenue Code of 1954, as amended ("exempt interest"), for a
reason other than that a Bondholder is a "substantial user" of the Project or a
"related person" of the Borrower within the meaning of Section 103(b)(13) of
said Code, which determination shall be deemed to have been made upon the
occurrence of the first to occur of the following:
(a) the date on which the Trustee receives an opinion of Bond Counsel
that the interest income on any of the Bonds does not qualify as exempt
interest; or
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(b) the date on which the Trustee receives notice that any change in
law or regulation has become effective or that the Internal Revenue Service has
issued any private ruling, technical advice or any other written communication
with or to the effect that the interest income on any of the Bonds does not
qualify as exempt interest; or
(c) the date on which the Borrower receives notice from the Trustee in
writing that the Trustee has been advised by any holder of any Bonds that the
Internal Revenue Service has issued a thirty-day letter or other notice which
asserts that the interest on the Bonds does not qualify as exempt interest.
"Enabling Act" means Chapter 8 (commencing 3375) of Part l of Division 24
of the Health and Safety Code of the State of California, as amended.
"First Deed of Trust" means the First Deed of Trust on The Mortgaged
Property to be entered into among the Borrower, as trustor, Founders Title
Company, as trustee, and the Trustee, as Beneficiary, as provided in Section
603B hereof for the purpose of securing the Borrower's obligations to the Issuer
hereunder.
"Fixed Interest Index" means the interest rate index, determined by the
Remarketing Agent and announced to the Trustee, the Issuer, the Bank and the
Borrower from time to time, based upon yield evaluations at par (on the basis of
a term approximately equal to the time remaining until the maturity of the
Bonds) of not less than ten component issuers of comparable credit quality
selected by the Remarketing Agent which may include, without limitation, issuers
of industrial development revenue bonds and other limited and special obligation
bonds, the interest on which is exempt from federal income taxation. In the
event the Letter of Credit will remain outstanding and available on and after
the Conversion Date or a Substitute Letter of Credit will be issued and
available on and after the Conversion Date, the component issuers shall be of
the same rating category as shall be assigned to the Bonds (or, if the Bonds are
not rated, the long-term obligations of the issuer of the Letter of Credit or
such Substitute Letter of Credit, as the case may be) by Moody's or S&P based on
the availability of either such Letter of Credit. In the event the Letter of
Credit will not remain outstanding and available on and after the Conversion
Date, the component issuers shall be of the same credit quality as the Borrower
in the judgment of the Remarketing Agent. The specific issuers included in the
component issuers may be changed from time to time by the Remarketing Agent in
its discretion. In the event the Fixed Interest Index cannot be determined by
the aforementioned methods, such Index shall be equal to 95% of the
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most recent Bond Buyer Revenue Bond Index, provided that if the Bond Buyer
Revenue Bond Index is no longer published at the time, then the Fixed Interest
Index shall be equal to 90% of the average of the yield evaluations at par of
United States Treasury obligations having a term to maturity within one year of
the remaining term to maturity of the Bonds, as computed by the Remarketing
Agent. In the event that the Fixed Interest Index cannot be determined by any of
the aforementioned methods, the Fixed Interest Index shall be equal to twelve
and one-half percent (12 1/2%) per annum.
"Fixed Period Interest Payment Dates" means the January 1 or July 1 next
succeeding the Conversion Date and each January 1 and July l thereafter until
the principal of, and premium, if any, and interest on, the Bonds shall have
been paid in full or provision shall have been made for the payment thereof in
accordance with this Indenture.
"Fixed Rate" means the rate of interest certified to the Borrower, the
Issuer, the Bank and the Trustee by the Remarketing Agent no fewer than three
Business Days prior to the Conversion Date as the minimum rate of interest
which, in the opinion of the Remarketing Agent, is necessary to sell the Bonds
in a secondary sale (by private placement, so long as the Remarketing Agent
shall be an entity not allowed to sell Bonds publicly) on the Conversion Date at
a price equal to 100% of the outstanding principal amount thereof; provided,
however, that such rate of interest shall not be less than 75% nor more than
125% of the Fixed Interest Index as of the Computation Date.
"Fixed Rate Period" means the period during which interest on the Bonds
shall be payable at the Fixed Rate.
"FNBB Base Rate" means the per annum rate of interest from time to time
announced by The First National Bank of Boston at its principal office in
Boston, Massachusetts as its Base Rate.
"Income Certification" means an income certification substantially in the
form attached hereto as Exhibit 906A, as such form may be revised by the Issuer
from time to time.
"Indenture" -- See first paragraph of this Indenture.
"Intercreditor Agreement" means the Intercreditor Agreement to be entered
into among the Bank, the Trustee and the Borrower at the time provided in
Section 603.
"Interest Payment Dates" means, collectively, the Adjustable Period
Interest Payment Dates and the Fixed Period Interest Payment Dates.
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"Issuer" -- See first paragraph of this Indenture.
"Land Use Restriction Agreement" means that Land Use Restriction Agreement
to be entered into by and among the Issuer, the Trustee and the Borrower.
"Letter of Credit" means the direct draw Letter of Credit originally issued
under the Reimbursement Agreement, in substantially the form of Exhibit A
thereto and having an original Stated Amount (as therein defined) of
$13,712,672, of which an amount not exceeding $13,500,000 may be drawn to pay
unpaid principal on the Bonds, an amount not exceeding $212,672 may be drawn to
pay up to 46 days interest accrued on Bonds, or any Substitute Letter of Credit.
"Letter of Credit Fund" -- See Section 503.
"Loan" -- See Recitals in this Indenture.
"Lower-Income Tenants" means "Individuals of low or moderate income within
the meaning of Section 103(b)(4)(A) of the Code.
"Majority of the Bondholders" means the holders of more than fifty percent
of the aggregate principal amount of Bonds at the time outstanding (other than
Bonds registered in the name of the Borrower).
"Monitoring Agent" means the monitoring agent appointed by the Borrower or
the Trustee under the Monitoring Agreement.
"Monitoring Agreement" means the Monitoring Agency Agreement to be executed
among the Trustee, the Borrower and the Monitoring Agent substantially in the
form of Exhibit 904B hereto or such other agreement as may be in effect from
time to time pursuant to Section 904(i).
"Moody's" means Moody's Investors Service, Inc., a corporation organized
and existing under the laws of the State of Delaware, its successors and
assigns, and, if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized securities rating agency
designated by the Issuer, with the approval of the Borrower, by notice to the
Trustee and the Borrower.
"Mortgaged Property" means the real property and improvements comprising
the Project which are subject to the liens of the First Deed of Trust and the
Second Deed of Trust.
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"Notice Address" means:
(a) As to the Borrower: San Marcos Retirement Village
c/o Brim & Associates, Inc.,
Managing Partner
177 N.E. 102nd Avenue
Portland, Oregon 97220
and to
University Financial Corporation
12651 High Bluff Dr., Suite 200
San Diego, California 92130
(b) As to the Issuer: The Redevelopment Agency of the
City of San Marcos
105 West Richmar
San Marcos, California 92069
Attn: Executive Director
(c) As to the Trustee The First National Bank of
or the Depositary Boston
for delivery by 100 Federal Street
hand or overnight Boston, Massachusetts 02110
courier:
Attn: Manager Corporate Trust
Division
(d) As to the Trustee, The First National Bank
for delivery by of Boston
U.S. Mail: P.O. Box 1618
Boston, Massachusetts 02105
Attn: Manager Corporate Trust
Division
(e) As to the Bank: Security Pacific National Bank
1200 Third Avenue, Suite 200
San Diego, California 92101
Attn: Eugene Watson,
Vice President
(f) As to the Depositary The First National Bank
for delivery by U.S. of Boston
Mail P.O. Box 1897
Boston, Massachusetts 02105
Attn: Corporate Trust Division
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or to such other address or addresses as any such party shall designate by
notice to the other parties.
"Option to Convert" means the Borrower's and the Bank's right and option to
convert the rate of interest payable on the Bonds from the Adjustable Rate to
the Fixed Rate as provided in Section 304(b).
"Outstanding Bonds" or "Bonds outstanding" means the amount of principal of
the Bonds which has not at the time been paid, exclusive of (a) Bonds in lieu of
which others have been authenticated under Section 303 and (b) principal of any
Bond which has become due (whether by maturity, call for redemption or
otherwise) and for which provision for payment as required herein has been made.
"Paying Agent" means the Trustee or any other paying agent appointed in
accordance with Section 1210 hereof.
"Payment Date" means each date on which any principal of, premium, if any,
or interest on any Bond is due and payable for any reason.
"Permitted Encumbrances" means liens and encumbrances permitted hereby,
including the lien upon the Mortgaged Property created by this Indenture, the
liens upon the Mortgaged Property created by the First Deed of Trust and Second
Deed of Trust and the liens upon the Mortgaged Property created by the Land Use
Restriction Agreement; liens for ad valorem taxes or betterment assessments not
then delinquent; and any other liens, encumbrances, easements and rights of way
permitted under the Reimbursement Agreement or by the Bank.
"Persons" means natural persons, firms, associations, partnerships, trusts,
corporations, public bodies and other legal entities.
"Plans and Specifications" means the Project as described in Exhibit 601.
"Pledged Receipts" means all of the Issuer's right, title and interest in
the Loan and all payments and other revenues received or receivable by the
Issuer, or the Trustee for the account of the Issuer, in respect of the Loan,
including without limitation moneys, investments and proceeds in the Bond Fund
and the Project Fund, except for amounts in the Rebate Fund and payments to the
Issuer under clauses (a) and (b) of Section 1001B or under Section 1008, and
subject to the provisions of Section 507 regarding moneys for the benefit of the
holders of particular Bonds.
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"Principal Office" when used with respect to the Trustee, means the office
located at 100 Federal Street, Boston, Massachusetts 02110 and, when used with
respect to any other Paying Agent and the Depositary means the office thereof
designated in writing to the Trustee.
"Priority Funds" means (a) with respect to any Payment Date occurring prior
to the termination of the Letter of Credit and the disbursement of proceeds of
any final drawing thereunder (i) moneys deposited in the Bond Fund pursuant to
subsection (a) of Section 502 and any earnings thereon, (ii) moneys deposited in
the Letter of Credit Fund pursuant to Section 503 and (iii) moneys deposited in
the Bond Fund pursuant to subsection (b), (c), (d), (e) or (f) of Section 502,
and any earnings thereon, which have been held by the Trustee, as agent and
bailee, for at least 123 consecutive days, but only if no Bankruptcy has
occurred prior to or during such 123-day period and if the chief executive or
chief financial officer of the managing partner of the Borrower shall have
delivered to the Trustee a certificate stating, as of a date no earlier than the
last day of such period, that no Bankruptcy has occurred and (b) with respect to
any Payment Date occurring after the termination of the Letter of Credit and the
disbursement of proceeds of any final drawing thereunder, monies held by the
Trustee and the proceeds thereof. Notwithstanding the foregoing, when used with
respect to payment of any amount due in respect of any Tendered Bonds, the term
Priority Funds shall mean any monies held by the Trustee and the proceeds from
the investment thereof, except for monies drawn under the Letter of Credit.
"Project" means the residential dwelling units and facilities for the
elderly constructed, acquired and installed with the Loan, including without
limitation the facilities described in Exhibit 601 and any permitted
modification, substitutions and additions.
"Project Fund" -- See Section 501.
"Project Supervisor" means the person and each alternate designated to
supervise the Project hereunder by written certificate furnished to the Issuer,
the Trustee and the Bank, containing the specimen signature of such person and
signed on behalf of the Borrower by the chief executive or chief financial
officer of the managing partner of the Borrower. If the Borrower fails to
designate at least one replacement within ten days after the Unavailability or
inability of all such persons to act, the Bank may, but shall have no obligation
to, appoint a successor who shall be any engineer qualified to practice the
profession of engineering in California.
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"Purchase Draw" means a draw by the Trustee under the Letter of Credit to
finance the purchase at a price equal to principal plus accrued interest to the
date of purchase of the Bonds which the Remarketing Agent has failed or is
unable to remarket on or prior to the applicable date of purchase thereof under
Section 401(d).
"Purchaser" -- See Section 401(e).
"Qualified Investments" means (i) any bonds or obligations which as to
principal and interest constitute direct obligations of or are guaranteed by the
United States of America, (ii) certificates of deposit or banker's acceptances
or interest bearing deposits of the Trustee or the Bank and banks affiliated
with the Trustee or the Bank and banks or trust companies organized under the
laws of the United States of America or any state thereof, which have capital
and surplus of at least $100,000,000, (iii) commercial paper or finance company
paper, including that of any affiliate of the Trustee or the Bank, which is
rated not less than prime-one or A-1 or their equivalents by Moody's or S&P or
their successors, (iv) bonds, obligations or commercial paper the interest on
which is exempt from federal income taxation and which are rated not less than A
by Moody's or S&P or their successors, and (v) any bonds or obligations of the
District of Columbia, any territory of the United States of America or any state
of the United States of America or of any political subdivision or other
instrumentality of the foregoing which are rated in one of the two highest
categories for such securities by Moody's or S&P or their successors; provided
that such investment or deposit is not prohibited by federal or state banking
laws applicable to the Trustee.
"Qualified Project Costs" means Project Costs, but only to the extent that
such costs (i) were paid or incurred after April 9, 1985, (ii) are chargeable to
the Project's capital account or would be so chargeable either with a proper
election or but for a proper election to deduct such costs, within the meaning
of Treasury Regulation l.103-8(a)(1), as the same may be amended from time to
time and (iii) are deemed to be "residential rental property" or "functionally
related and subordinate" under Treasury Regulation 1.103-8(b).
"Qualified Project Period" means that period beginning on the first day on
which at least 10% of the units in the Project are first occupied (or, if later,
the date of initial issuance and delivery of the Bonds) and ending on the latest
of (a) the date which is ten years after the date on which at least 50% of the
units in such Project are occupied (or, if later, the date of initial issuance
and delivery of the Bonds), (b) the date equal
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to 50% of the term of the Bonds with the longest maturity, measured from the
date on which any completed unit in the Project is occupied initially (or, if
later, the date of initial issuance and delivery of the Bonds) or (c) the date
on which any assistance provided with respect to such Project under Section 8 of
the United States Housing Action of 1937, as amended, terminates.
"Record Date" means (a) with respect to any Adjustable Period Interest
Payment Date, the Business Day next preceding such Interest Payment Date, or (b)
with respect to any Fixed Period Interest Payment Date, the fifteenth day of the
month next preceding such Interest Payment Date, or, if such day shall not be a
Business Day, the next preceding Business Day.
"Reimbursement Agreement" means the Reimbursement Agreement of even date
herewith between the Borrower and the Bank, as from time to time amended, and
any agreement to which the Borrower and any Bank are parties and pursuant to
which a Substitute Letter of Credit is issued.
"Remarketing Agent" means The First National Bank of Boston or such other
remarketing agent as may be appointed from time to time pursuant to the
Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement of even date
herewith between the Borrower and the Remarketing Agent, as from time to time
amended, pursuant to which the Borrower has appointed the Remarketing Agent as
the exclusive agent for the remarketing of Bonds tendered by Bondholders for
purchase or redemption pursuant to Sections 401(d) and 401(e) and such other
agreement appointing a Remarketing Agent as may be in effect from time to time.
"Required Property Insurance Coverage" means a policy or policies of
insurance insuring against loss or damage of the kinds usually insured against
by similar businesses in the area, including without limitation insurance with
respect to the Mortgaged Property against loss or damage by fire and other risks
from time to time included under extended coverage policies and federal flood
insurance (if the Mortgaged Property is in a designated flood plain area), and
insuring against such other risks as the Bank may from time to time reasonably
request, all such insurance to be in amounts and with such deductibles as the
Bank may from time to time reasonably request or approve.
"Required Public Liability Insurance" means insurance against death or
bodily injury and property damage in such amounts and with such deductibles as
the Bank from time to time may reasonably request or agree to.
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"S&P" means Standard & Poor's Corporation, a corporation organized and
existing under the laws of the State of New York, its successors and assigns,
and, if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, "S&P" shall be deemed to
refer to any other nationally recognized securities rating agency designated by
the Issuer, with the approval of the Borrower, by notice to the Trustee and the
Borrower.
"Second Deed of Trust" means the Second Deed of Trust on the Mortgaged
Property to be entered into among the Borrower, as trustor, the Bank, as
beneficiary, and Founders Title Company as trustee, as provided in Section 603
hereof for the purpose of securing the Bank Obligations.
"Substitute Letter of Credit" means any irrevocable transferable letter of
credit, insurance policy, guaranty, surety bond or other agreement substituted
for the Letter of Credit in accordance with Section 509.
"Tendered Bonds" has the meaning provided therefor in the Depositary
Agreement.
"Trust Estate" -- See Section 101.
"Trustee" -- See first paragraph of this Indenture.
"Uniform Commercial Code" means the California Commercial Code.
Any reference in this Indenture to the Borrower, the Issuer, the Trustee,
the Bank, the Remarketing Agent or the Depositary shall include those which
succeed to their functions, duties or responsibilities pursuant to or by
operation of law or who are lawfully performing their functions. Any reference
in this Indenture to any statute or law or chapter or section thereof shall
include all amendments, supplements or successor provisions thereto.
PART II:
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THE BONDS
ARTICLE 3 - The Bonds
Section 301. Issuance of Bonds. The Bonds shall be designated "The
-----------------
Redevelopment Agency of the City of San Marcos Adjustable/Fixed Rate Multifamily
Housing Bonds (San Marcos
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Retirement Village Project)"; shall be issued in the aggregate principal amount
of $13,500,000; shall be numbered consecutively from R-1 upwards; shall be
issued in fully registered form; shall mature on December 1, 2010, except as
provided herein; shall be substantially in the form set forth in Exhibit 301
attached hereto, with such variations, omissions and insertions as are permitted
or required hereby; and shall be dated as of the Closing Date if authenticated
prior to the first Interest Payment Date and otherwise shall be dated as of the
Interest Payment Date next preceding the date of their authentication, except
that if authenticated on an Interest Payment Date they shall be dated as of such
date of authentication; provided that if at the time of authentication interest
thereon is in default, they shall be dated as of the date to which interest has
been paid or if no interest has been paid, they shall be dated as of the Closing
Date. The Bonds shall be issued initially in fully registered form without
coupons numbered from R-1 upwards in such denominations as shall be requested by
the initial purchaser or purchasers of the Bonds.
Interest on each Bond shall accrue from its date; provided, that interest
shall not accrue on Bonds held by the Trustee for the account of the Borrower
pursuant to the Bond Pledge Agreement as a result of a Purchase Draw under the
Letter of Credit as provided in Section 503(c) hereof.
Section 302. Delivery of Bonds. Upon the execution and delivery of this
-----------------
Indenture, the Issuer shall execute and deliver the Bonds to the Trustee and the
Trustee shall authenticate the Bonds and deliver them to the initial purchaser
or purchasers as provided in Section 2 of the Bond Purchase Agreement upon the
direction of the Issuer.
Prior to delivery by the Trustee of the Bonds, there shall be filed with
the Trustee:
(a) A copy, duly certified on behalf of the Issuer, of the resolutions
adopted by the Issuer authorizing the execution and delivery of this Indenture
and the issuance and sale of the Bonds.
(b) The Letter of Credit.
(c) An executed counterpart of this Indenture.
(d) The Issuer's due request and authorization to the Trustee to
authenticate and deliver the Bonds to the initial purchaser or purchasers upon
payment of a specified sum to the Trustee for the account of the Issuer.
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Section 303. Execution; Authentication. Bonds shall be executed on behalf
-------------------------
of the Issuer by the manual or facsimile signature of Executive Director and
attested by the Chairman. The official seal (which may be facsimile) of the
Issuer shall be impressed or imprinted on all Bonds. In case any officer whose
signature shall appear on the Bonds shall cease to be such Officer before the
delivery of such Bonds, such signature shall nevertheless be valid and
sufficient.
No Bond shall be valid or obligatory until authenticated as provided in
Exhibit 301 by the Trustee. Such authentication shall be conclusive evidence
that such Bond has been authenticated and delivered hereunder. The certificate
of authentication on any Bond shall be deemed to have been executed by the
Trustee if manually signed by an authorized signatory of the Trustee, but it
shall not be necessary that the same Person sign the certificate of
authentication on all of the Bonds issued hereunder.
Section 304. Interest on Bonds.
-----------------
(a) The Bonds shall bear interest from and including the date thereof
(except as herein provided) until payment of the principal thereof shall have
been made or provided for in accordance with the provisions hereof, whether at
maturity, upon redemption or otherwise. Prior to the Conversion Date interest
accrued on the Bonds shall be computed on the basis of a 365 or 366-day year, as
applicable, for the number of days actually elapsed. On and after the Conversion
Date interest accrued on the Bonds shall be computed upon the basis of a 360-day
year, consisting of twelve (12) thirty (30) day months.
During the Adjustable Rate Period the Bonds will bear interest at the
Adjustable Rate. Subsequent to the Conversion Date, the Bonds shall bear
interest at the Fixed Rate. Interest will be payable as provided in Exhibit 301
on each Interest Payment Date, commencing February 5, 1986.
(b) The Bonds will be issued subject to the provision that the
interest rate on the Bonds will cease to be at the Adjustable Rate and will
become fixed until maturity at the Fixed Rate upon the election by the Borrower
(or, under the circumstances set forth in Section 10.3 of the Reimbursement
Agreement, the Bank) to exercise the Option to Convert as herein provided on
such date which is a Business Day as the Borrower (or the Bank) shall select,
subject to the terms and conditions hereof (the "Conversion Date"). The Borrower
(or the Bank) may exercise the Option to Convert at any time subsequent to the
six month anniversary of the Closing Date by giving written notice to
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the Issuer, the Trustee and the Bank (or the Borrower) stating (A) its election
to convert to the Fixed Rate, which notice shall specify the date as of which
the Fixed Interest Index was or shall be computed (the "Computation Date"),
which date shall be not more than five Business Days from the date of such
notice, (B) the Conversion Date, which date shall not be less than 20 nor more
than 60 days from the date of such notice, and (C) whether the Letter of Credit
has been extended and the terms thereof, or whether a Substitute Letter of
Credit has been obtained and the terms thereof. Such notice shall be accompanied
by an opinion of Bond Counsel stating that the establishment of the Fixed Rate
and the purchase and resale of the Bonds in connection therewith are authorized
and permitted by this Indenture and the Enabling Act and will not have an
adverse effect on the income tax exemption of interest on the Bonds. Upon
receipt of such written notice the Trustee in the name of the Issuer shall call
all the Bonds for redemption as provided in Sections 401(e) and 403 hereof.
As and for a sinking fund for the Bonds subsequent to the
Conversion Date, the Issuer shall cause to be deposited into the Bond Fund on
the first anniversary of the Conversion Date and on the same day of each year
thereafter an amount which shall amortize the principal amount of Bonds
outstanding at the Fixed Rate from the first anniversary of the Conversion Date
to and including the Maturity Date so as to produce substantially equal debt
service payments (principal and interest) on the Bonds in each such year (after
taking into account considerations relating to the marketability of the Bonds).
Such amounts shall be set forth in a supplemental indenture executed and
delivered for such purpose.
(c) No interest, principal or premium shall be paid or interest paid
or accrued on Bonds purchased for the account of the Borrower pursuant to a
Purchase Draw under the Letter of Credit as provided in Section 503(c) hereof
for so long as such Bonds are held by the Trustee pursuant to the Bond Pledge
Agreement.
Section 305. Lost Bonds; Exchange and Transfer of Bonds; Additional
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Interest Only Assignable by Separate Writing. If any of the Bonds are lost,
- --------------------------------------------
wrongfully taken, mutilated, destroyed or improperly cancelled, the Issuer shall
authorize the issuance of new Bonds to replace them upon proof satisfactory to
the Issuer and the Trustee and (except in the case of mutilated or improperly
cancelled Bonds which are surrendered to the Trustee) upon giving to the Issuer
and Trustee an indemnity bond in such amount as the Issuer and Trustee may
require (except as to any institutional holder, in which case its own agreement
of indemnity shall be sufficient). Each new Bond shall in all
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respects be identical with the mutilated, lost, stolen, destroyed or improperly
cancelled Bond, except that it shall include a notation of all principal
previously advanced, paid or redeemed.
Each such new Bond shall be signed by the same officers or duly authorized
signatories of the Issuer and the Trustee who signed the original Bond; provided
that if an officer or duly authorized signatory who executed the original Bond
no longer occupies the same office with the Issuer or the Trustee or is
otherwise unavailable, then such new Bond shall be signed by a duly authorized
officer or signatory then in office. The obligation of the Issuer upon the new
Bond shall be identical with its obligation upon the original Bond, and the
rights of the holder shall be the same as those conferred by the original Bond.
The Issuer and the Trustee may charge the owner of the Bond with their
reasonable fees and expenses in connection with the issuance of a new Bond under
this Section 305.
The person in whose name a Bond is registered on the Bond register
maintained by the Trustee shall be deemed the absolute owner for all purposes;
and payment of any principal of or interest on any Bond shall be made only to or
upon the order of the registered owner thereof or the owners attorney or legal
representative. Such payments shall fully discharge the liability on the Bond to
the extent of the sums so paid.
At the option of the Bondholder, any Bond may be presented at the corporate
trust office of the Trustee for endorsement showing the balance of principal due
thereon and the date to which interest has been paid.
Upon surrender of a Bond at the corporate trust office of the Trustee, as
bond registrar, together with an assignment duly executed by the registered
owner or his attorney or legal representative in such form as shall be
satisfactory to the Trustee, the Bond may be exchanged for Bonds of the same
maturity, aggregating in amount the then unpaid principal amount of the Bonds
surrendered, of denominations of not less than $500,000 and integral multiples
of $50,000 during the Adjustable Rate Period and of denominations of not less
than $5,000 and integral multiples thereof during the Fixed Rate period and
bearing interest at the same rate, and in the same form as the Bonds surrendered
for exchange.
Any Bond may be transferred upon the books kept for the registration and
transfer of Bonds only upon surrender thereof to the Trustee, as bond registrar,
together with an assignment duly executed by the registered owner or his
attorney or legal representative in such form as shall be satisfactory to the
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Trustee. Upon the transfer of any such Bond the Trustee shall authenticate and
deliver in the name of the transferee or transferees, a new Bond or Bonds of the
same maturity, of denominations of not less than $500,000 and integral multiples
of $50,000 during the Adjustable Rate Period and of denominations of not less
than $5,000 and integral multiples thereof during the Fixed Rate Period,
aggregating in amount the then unpaid principal of the Bond surrendered, and
bearing interest at the same rate and, in the same form as the Bonds
surrendered.
For the purpose of registration of transfers of Bonds purchased in lieu of
redemption in accordance with Section 401(e), each Bondholder, by its acceptance
of such Bonds appoints the Trustee as its duly authorized representative for
purposes of endorsing such Bond so purchased for transfer to the purchaser
thereof in accordance with said Section 401(e).
In all cases in which Bonds shall be issued in exchange for or in
replacement of other Bonds, the Bonds to be issued shall be signed and sealed on
behalf of the Issuer, and authenticated by the Trustee as provided in Section
303. The obligation of the Issuer and the rights of the holders with respect to
such Bonds shall be the same as with respect to the Bonds being exchanged or
replaced. The Issuer and the Trustee may charge the holder of such exchanged or
replaced Bond their reasonable fees and expenses for effecting such exchange or
replacement, except that where such exchange or replacement occurs in connection
with a transfer of ownership of a Bond such charge shall be borne by the
Borrower.
Whenever any outstanding Bond shall be delivered to the Trustee for
cancellation pursuant to this Indenture, or for exchange and transfer pursuant
to this Section 305, such Bond shall be promptly cancelled and destroyed by the
Trustee and counterparts of a certificate of destruction evidencing such
destruction shall be furnished by the Trustee to the Issuer and the Borrower.
Section 306. Temporary Bonds. Pending the preparation of definitive
---------------
Bonds, the Issuer may execute, and upon its request in writing, the Trustee
shall authenticate and deliver one or more printed, lithographed or typewritten
temporary Bonds. Temporary Bonds shall be issuable as registered Bonds without
coupons, of any authorized denomination, and substantially in the form of
definitive Bonds but with such omissions, insertions and variations as may be
appropriate for temporary Bonds, all as may be determined by the Issuer.
Temporary Bonds may contain such reference to any provisions of this Indenture
as may be appropriate. Every temporary Bond shall be executed by the
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Issuer and be authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with like effect, as the definitive Bonds. As
promptly as practicable the Issuer shall execute and shall furnish definitive
registered Bonds without coupons and thereupon temporary Bonds may be
surrendered in exchange therefor without charge at the Principal Office of the
Trustee, and the Trustee shall authenticate and deliver in exchange for such
temporary Bonds a like aggregate principal amount of definitive Bonds of
authorized denominations. Until so exchanged the temporary Bonds shall be
entitled to the same benefits under this Indenture as definitive Bonds. At or
prior to the initial issuance of the Bonds, the Issuer shall deliver to the
Trustee six extra unnumbered temporary Bonds, signed and sealed on behalf of the
Issuer for the Trustee's use in connection with transfers.
ARTICLE 4 - Redemption or Purchase of Bonds Before Maturity
Section 401. Redemption or Purchase of Bonds. The Bonds are subject to
-------------------------------
redemption or purchase prior to maturity as follows:
(a) Optional Redemption. The Bonds shall be subject to redemption by
-------------------
the Issuer, at the written direction of the Borrower, as provided in this
Section 401(a):
(i) During the Adjustable Rate Period, the Bonds shall be subject
to redemption from funds other than those deposited as mandatory sinking fund
requirements under Section 402, on any Adjustable Period Interest Payment Date
in each January, April, July and October by the Issuer, at the written direction
of the Borrower, as a whole or in part in the amount of $500,000 or any integral
multiple of $50,000 above $500,000 from time to time, at a redemption price
equal to the principal amount thereof, plus accrued interest to the Adjustable
Period Interest Payment Date fixed for redemption; provided, however, that the
Bonds shall not be subject to redemption as provided in this subparagraph (i)
prior to July 1, 1986, or (ii) at any time after the Conversion Date; and
provided, further, that the Borrower has deposited money with the Trustee in
sufficient amounts to provide Priority Funds or has obtained the consent of the
Bank to pay the redemption price with a draw on the Letter of Credit.
(ii) Subsequent to the fifth anniversary of the Conversion Date,
the Bonds shall be subject to redemption by the Issuer, at the written direction
of the Borrower, on any Interest Payment Date, as a whole or from time to time
in part in the amount of $500,000, or any integral multiple of $50,000 above
$500,000 at a redemption price equal to the principal of and
-25-
accrued interest on the Bonds to the date fixed for redemption by the Borrower
plus a premium equal to 3% during the first twelve months the Bonds are so
subject to redemption, declining 1% per year thereafter until the premium equals
zero; provided the Borrower has deposited money with the Trustee in sufficient
amounts to provide Priority Funds or has obtained the consent of the Bank to pay
the redemption price with a draw on the Letter of credit.
(b) Extraordinary Optional Redemption. The Bonds may be redeemed in
---------------------------------
whole but not in part by the Issuer at any time, at the written direction of the
Borrower, at a redemption price equal to 100% of the principal amount thereof
plus accrued interest thereon to the redemption date, without premium, under any
of the following conditions:
(i) The Project or any production facility served thereby shall
have been damaged or destroyed to such extent that (a) the Project cannot be
reasonably restored within a period of twelve months from the date of such
damage or destruction, or (b) the Borrower is thereby prevented from carrying on
its normal operation of the Project for a period of twelve months from the date
of such damage or destruction; or
(ii) Title to, or the temporary use of all or substantially all
of the Project or any production facility served thereby shall have been taken
or condemned by a competent authority, which taking or condemnation results or
is likely to result in the Borrower being thereby prevented or likely to be
prevented from carrying on its normal operation of the Project for a period of
twelve months; or
(iii) As a result of changes in the Constitution of the United
States of America or of the State of California or of legislative or executive
action (whether state or federal) or by final decree or judgment of any court or
administrative body (whether state or federal), the Bonds or this Indenture
become void or unenforceable or impossible of performance in accordance with the
intent and purpose of the parties as expressed therein or herein or unreasonable
burdens or excessive liabilities are imposed upon the Borrower by reason of the
operation of the Project; or
(iv) There shall have occurred a change in the economic
availability or utility of raw materials, manufactured products, energy sources,
operating supplies or facilities necessary for the operation of the Project or a
technological or other change, which in the reasonable judgment of the Borrower
-26-
renders the Project uneconomic, impractical or unfeasible for the purposes for
which originally acquired, installed and equipped; provided, however, with
respect to each of the foregoing, the Borrower has deposited with the Trustee
money in sufficient amounts to provide Priority Funds or has obtained the
consent of the Bank to pay the redemption price with a draw on the Letter of
Credit.
(c) Mandatory Redemption. The Bonds shall be subject to mandatory
--------------------
redemption as provided in this Section 401(c):
(i) At any time upon the occurrence of a Determination of
Taxability the Bonds shall be redeemed, by a draw under the Letter of Credit in
the amount specified in Section 503(b) hereof, in whole at a redemption price
equal to 100% of the principal amount thereof plus accrued and unpaid interest
to the redemption date plus, if the Determination of Taxability occurs during
the Fixed Rate Period a premium equal to 3% of the outstanding principal amount
of the Bonds.
(ii) Upon the failure of the Borrower to comply with the provisions
of Section 603 hereof on or before the date specified therein, the Bonds shall
be redeemed pursuant to the terms of paragraph (b) of Section 501B in whole at a
redemption price equal to 100% of the principal amount thereof plus accrued and
unpaid interest to the redemption date; provided, however, that such redemption
shall be made only after such moneys become Priority Funds .
(iii) Mandatory redemptions may also be required pursuant to the
terms of paragraph (e) of this Section 401, and paragraph (a) of Section 501B
and Sections 402 and 502(d).
(d) Tender for Purchase upon Election of Bondholder.
-----------------------------------------------
(i) On or prior to the Conversion Date any Bond (or portion
thereof that is an integral multiple of $50,000 equal to or in excess of
$500,000) shall be redeemed by the Issuer or purchased in accordance with the
terms of the Depositary Agreement on the demand of the registered owner thereof,
on any Business Day at a price equal to the principal amount thereof plus
accrued interest, if any, to the date of redemption or purchase, upon: (A)
delivery to the Trustee at its Principal Office of a written notice in the form
of Exhibit 401 hereto (a
-27-
"Bondholder's Election Notice") which (i) states the principal amount of such
Bond, (ii) states the date (the "Purchase Date") on which such Bond or specified
portion thereof shall be redeemed or purchased pursuant to this Section, which
date shall not be prior to the seventh day next succeeding the date of the
delivery of such notice to the Trustee, (iii) irrevocably requests such
redemption and (iv) contains an undertaking of the registered owner to deliver
the Bond to the Depositary in accordance with this Indenture; and (B) delivery
of such Bond duly endorsed in blank for transfer at the Principal Office of the
Depositary at or prior to 10:00 A.M., Boston time, on the Purchase Date.
(ii) By the acceptance of each Bond, the registered owner thereof
agrees that if there are funds available for such purpose in the Bond Purchase
Fund established with the Depositary under the Depositary Agreement, then any
Bond or specified portion thereof so delivered to the Depositary in accordance
with this Section 401(d) shall be, on the Purchase Date specified in the
Bondholder's Election Notice, purchased and not redeemed at a purchase price
equal to the principal amount thereof plus accrued interest, if any, to the
Purchase Date; provided, however, that, if the Purchase Date for any Bond is an
Interest Payment Date, the purchase price thereof shall be the principal amount
thereof and interest on such Bond shall be paid to the registered owner of such
Bond in the normal course. All Bonds purchased with moneys in the Letter of
Credit Account in the Bond Purchase Fund referred to above and Bonds issued in
replacement therefor shall remain duly authorized, issued and outstanding Bonds;
shall remain the valid and binding limited obligations of the Issuer,
enforceable in accordance with their respective terms; and shall be registered
in the name of the Borrower and held by the Trustee pursuant to the Bond Pledge
Agreement.
(iii) At 1:00 P.M., Boston time (or as soon thereafter as
possible), on each Purchase Date, moneys constituting immediately available
funds in the Bond Purchase Fund (as defined in the Depositary Agreement) shall
be used by the Depositary to purchase Tendered Bonds in the chronological order
delivered to the Depositary at the purchase price thereof established pursuant
to subparagraph (ii) of this Section 401(d), to the extent of such moneys. In
the event that any Tendered Bond shall not have been delivered to the Depositary
as provided by such subparagraph (ii), an amount equal to the purchase price
thereof shall be delivered by the Depositary to the Trustee and held by the
Trustee pursuant to Section 507; if such Tendered Bond subsequently is delivered
to the Depositary, then the Depositary shall deliver such Tendered Bond to the
Trustee for payment.
-28-
(e) Tender for Redemption or Purchase upon Expiration of Letter of
--------------------------------------------------------------
Credit or Occurrence of Conversion Date.
- ---------------------------------------
(i) The Bonds shall be redeemed by the Issuer on the expiration
of the Letter of Credit (but only in circumstances where the same is not being
renewed or replaced as contemplated by Section 509), at a price equal to 100% of
the principal amount thereof plus accrued interest to the redemption date. In
addition, the Bonds shall be subject to mandatory redemption on the Conversion
Date even if the Letter of Credit has not expired or been terminated. (The date
of redemption or purchase being herein referred to in the previous two sentences
is referred to as the "Redemption Date"). In the event that the mandatory
redemption is in connection with the occurrence of the Conversion Date, no
redemption shall take place with respect to Bonds purchased as contemplated by
subparagraph (ii) hereof, and Bonds issued in exchange for or upon the
registration or transfer of such Bonds.
(ii) (A) Bonds called for and subject to redemption pursuant to
this paragraph (e) may be purchased, in lieu of redemption, by the Borrower's
designee, which may be the Remarketing Agent (the "Purchaser"), if notice to
that effect is given to the Trustee by the Borrower no later than 2:00 P.M.,
Boston time, on the second Business Day immediately preceding the Redemption
Date, which notice shall include the identity of the Purchaser, and the
conditions set forth in this subparagraph (ii) are satisfied.
(B) By 4:00 P.M., Boston time, on the second Business Day
next preceding the Redemption Date, the Trustee shall give notice, by telephone,
promptly confirmed in writing, to the Borrower and the Remarketing Agent as to
the number of the account of the Trustee to which the purchase price for Bonds
to be purchased pursuant to this subparagraph (ii) should be sent. To the extent
the Purchaser identified by the Borrower in its notice given pursuant to
subclause (A) above has deposited on or before 11:00 A.M., Boston time, on the
Redemption Date in the account designated by the Trustee for such purpose an
amount equal to or greater than the aggregate principal amount of Bonds called
for redemption pursuant to this paragraph (e) plus interest thereon to the
Redemption Date, the tendered Bonds shall be purchased, and not redeemed, on the
Redemption Date with funds deposited in the aforesaid account at a purchase
price for each bond equal to the principal amount thereof plus interest, if
any, thereon to the Redemption Date.
(C) In the event that any Bond purchased as provided in the
preceding clause (B) shall not have been
-29-
delivered to the Trustee on the Redemption Date, an amount equal to the purchase
price thereof shall be retained by the Trustee pursuant to Section 507 for
payment to the registered owner of such purchased Bond (without interest after
the Redemption Date) upon delivery thereof to the Trustee. Any other moneys
remaining in the aforesaid account at the close of business on the Redemption
Date after making the payments specified in this subparagraph (ii), shall be
wired by the Trustee to such account as may be designated by the depositor
thereof as promptly as practicable. All Bonds purchased as herein provided in
the event of a call for redemption upon the termination of the Letter of Credit
(unless the termination date is the Conversion Date) shall be registered by the
Trustee for transfer (pursuant to the authority contained in Section 305) and
redelivered to such Person or Persons as shall be designated by the Purchaser.
All Bonds purchased as herein provided following the exercise of an Option to
Convert shall be exchanged for Bonds of denominations of $5,000 or any integral
multiple thereof and delivered to such Person or Persons as shall be designated
by the Purchaser.
Section 402. [Not Used.]
Section 403. Selection of Bonds to be Redeemed. A redemption of
---------------------------------
Bonds shall be a redemption of the whole or of any part of the Bonds from any
funds available for that purpose in accordance with the provisions of this
Indenture, provided, that there shall be no partial redemption of less than
$50,000 in principal amount of Bonds during the Adjustable Rate Period and
$5,000 in principal amount of Bonds during the Fixed Rate Period. If less than
all the Bonds shall be called for redemption under any provision of this
Indenture permitting such partial redemption (other than purchase of Bonds under
Section 401(d) hereof) the particular Bonds to be redeemed shall be selected by
the Trustee, in such manner as the Trustee in its discretion may deem fair and
appropriate; provided, however, (a) that the portion of any Bond to be redeemed
shall be in the principal amount of $5,000 or some integral multiple thereof,
(b) that, in selecting Bonds for redemption, the Trustee shall treat each Bond
as representing that number of Bonds which is obtained by dividing the principal
amount of such Bond by $5,000, and (c) that during the Adjustable Rate Period no
partial redemption of a Bond may reduce the principal amount thereof to less
than $100,000. If there shall be called for redemption less than all of a Bond,
the Issuer shall execute and deliver and the Trustee shall authenticate, upon
surrender of such Bond, and at the expense of the Borrower and without charge to
the owner thereof, for the unredeemed balance of the Bond so surrendered, Bonds
of like series.
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Section 404. Procedure for Redemption.
------------------------
(a) Except for redemptions of Bonds pursuant to section 401(d), in
the event any of the Bonds are called for redemption, the Trustee shall give
notice, in the name of the Issuer, of the redemption of such Bonds, which notice
shall (i) specify the Bonds to be redeemed, the redemption date, the redemption
price, and the place or places where amounts due upon such redemption will be
payable (which shall be the principal Office of the Paying Agent) and, if less
than all of the Bonds are to be redeemed, the numbers of the Bonds, and the
portions of Bonds, so to be redeemed, (ii) state any condition to such
redemption provided for in this Article, and (iii) state that on the redemption
date, and upon the satisfaction of any such condition, the Bonds to be redeemed
shall cease to bear interest. Such notice may set forth any additional
information relating to such redemption. Such notice shall be given by mail at
least ten days prior to the date fixed for redemption to the registered owners
of Bonds to be redeemed at the address shown on the registration books kept by
the Trustee; provided, however, that failure to give such notice to any
Bondholder or any defect in such notice shall not affect the validity of the
proceedings for the redemption of any of the other Bonds.
(b) Any Bonds and portions of Bonds which have been duly selected
for redemption and which are deemed to be paid in accordance with Section 507
shall cease to bear interest on the specified redemption date.
Section 405. No Partial Redemption After Default. Anything in this
-----------------------------------
Indenture to the contrary notwithstanding, if there shall have occurred and be
continuing an Event of Default, there shall be no redemption of less than all of
the Bonds at the time outstanding.
Section 406. Trustee to Notify Bank of Redemption of Principal. Promptly
-------------------------------------------------
after any redemption of principal of the Bonds made from Priority Funds other
than amounts drawn under the Letter of Credit, the Trustee shall certify such
redemption to the Bank in writing designating the amount of such redemption, the
date on which such redemption was made and the amount by which the Stated Amount
of the Letter of Credit (as defined therein) shall be reduced by reason of such
redemption.
ARTICLE 5 - Source and Application of Funds
Section 501. Project Fund. A Project Fund is hereby established by the
------------
Issuer with the Trustee. Deposit of Bond proceeds into the Project Fund shall
constitute the Loan.
-31-
A. Source and Disbursements. Proceeds of the issuance of the Bonds (other
------------------------
than any accrued interest required to be deposited in the Bond Fund) shall be
deposited in the Project Fund.
Disbursements from the Project Fund shall be applied for the payment or
reimbursement of Costs of the Project.
Such disbursements shall be made only in compliance with the Covenants and
Disbursement Procedures set forth in Appendix I to the Reimbursement Agreement
and upon receipt by the Trustee of a written requisition signed by the managing
partner or partners of the Borrower and approved by Bank in substantially the
form provided in such Covenants and Disbursement Procedures and paid as set
forth in the written requisition; provided that, without requisition, the
Trustee shall at the written direction of the Borrower transfer funds to the
Bond Fund to pay construction interest. No requisition shall be submitted to
the Trustee which requests reimbursement for payments or payment for obligations
originally paid or incurred before April 15, 1985, except for amounts not to
exceed $828,700. In addition, no requisition shall be submitted to the Trustee
for payment of any Project Costs (other than cost and expenses incurred in
connection with the issuance of the Bonds set forth on Exhibit 501 not to exceed
$375,670) until (a) the Borrower shall have complied with the first sentence of
Section 603 and (b) the Remarketing Agent shall have notified the Trustee that
the Remarketing Agent has received an opinion of Bond Counsel, in form and
substance acceptable to the Remarketing Agent, addressed to the Trustee, the
Remarketing Agent and the Bondholders and dated as of the Closing Date or such
later date as the Remarketing Agent shall approve, to the effect that payments
of principal and interest on the Bonds to the Bondholders from funds drawn under
the Letter of Credit (or other Priority Funds) will not constitute a preference
or transfer voidable under the United States Bankruptcy Code in the event of a
bankruptcy or insolvency of any Person other than the Bank and as to such
related matters as the Remarketing Agent shall have requested. In addition, in
any event, no requisition shall be submitted to the Trustee for payment of land
acquisition costs without the written approval of Kutak, Rock & Campbell.
B. Transfer of Funds from Project Fund to Bond Fund.
------------------------------------------------
(a) All moneys in the Project Fund (including moneys earned thereon by
investment) remaining after delivery of the Completion Certificate and payment
or provision for payment in full of the Costs which are then due and payable
shall promptly at the written direction of the chief executive officer or chief
financial officer of the managing partner of the Borrower be (i) used for the
purchase of Bonds in the open market for the
-32-
purpose of cancellation at prices not exceeding the current price at which Bonds
may be prepaid plus accrued interest thereon to the date of payment therefor, or
(ii) paid into the Bond Fund and applied in accordance with Section 401(a)
hereof to pay principal of the Bonds on the first optional prepayment date on
which Bonds may be prepaid without premium, without further authorization from
the Borrower or the Issuer, or (iii) paid into the Bond Fund and applied to pay
interest on the Bonds, or (iv) such combination of any or all of the foregoing
as is provided in such direction; provided that (l) before any funds are applied
pursuant to this paragraph the Trustee shall have received an opinion of Bond
Counsel or a ruling of the Internal Revenue Service that such payment will not
adversely affect the exemption from federal income taxation of the interest paid
on the Bonds, (2) the funds applied pursuant to this paragraph shall have become
Priority Funds and (3) the Trustee shall give notice of any prepayment of Bonds
pursuant to this paragraph to the Bondholders at least 15 days prior to the
prepayment date and otherwise in accordance with Section 403 hereof. However,
amounts approved by the Project Supervisor shall be retained in the Project Fund
for payment of Costs not then due and payable. Any such retained funds remaining
after full payment of all such Costs shall be likewise applied as aforesaid. All
moneys in the Bond Fund representing capitalized interest remaining after
delivery of the Completion Certificate shall also be applied as aforesaid.
(b) In the event the Borrower fails to comply with the provisions of
Section 603 hereof on or before the date specified therein, all moneys in the
Project Fund (including moneys earned thereon by investment and moneys held in
the Cash Collateral Account established pursuant to Section 501E) remaining on
such date shall promptly be transferred by the Trustee to the Bond Fund.
(c) Any amounts deposited into the Bond Fund pursuant to subparagraph
(a) or (b) of this Section 501B or any amounts in the Bond Fund representing
capitalized interest remaining after delivery of the Completion Certificate
shall be held in a separate account in escrow invested at the direction of the
Issuer, which shall ensure that such investment proceeds to produce a yield not
"materially higher" (as that term is used in Section 103(c) of the Code), than
the yield on the Bonds unless the Trustee receives an opinion of Bond Counsel or
a ruling of the Internal Revenue Service that investment of such amounts at a
"materially higher" yield will not adversely affect the exemption from federal
income taxation of the interest paid on the Bonds. The Trustee shall not be
responsible if any such investments produce a yield in violation of such Code
section.
-33-
C. Borrower Required to Pay Costs if Project Fund insufficient. If the
-----------------------------------------------------------
moneys in the Project Fund are not sufficient to pay in full the Costs to be
paid therefrom, the borrower agrees, in order to fulfill the purposes of the
Enabling Act, to complete the acquisition of the Project and to pay all Costs
therefor in excess of the moneys available in the Project Fund. The Issuer
makes no warranty, express or implied, that moneys paid into the Project Fund or
otherwise available to complete the Project will be sufficient to pay all Costs
therefor.
D. Obligation of the Parties to Furnish Documents. The Borrower agrees to
----------------------------------------------
cooperate in furnishing to the Trustee the documents that are required to effect
payments out of the Project Fund. Such obligation is subject to any provisions
of this Indenture requiring additional documentation with respect to payments
and shall not extend beyond the moneys in the Project Fund available for payment
under the terms of the Indenture.
E. Cash Collateral Account. There shall also be established as a separate
-----------------------
account with the Bank a "Cash Collateral Account" into which the Borrower shall
deposit with the Bank on or before the Closing Date certificates of deposit
representing the amount of $803,545, $375,670 of which represents the estimated
costs associated with the issuance of the Bonds as set forth on Exhibit 501 and
$427,875 of which represents up to one hundred twenty (120) days interest on the
Bonds at the maximum rate of 12 1/2%, to secure the performance of the
Borrower's obligations under Section 603 hereof. The Bank shall ensure that
these certificates of deposit are issued in the name of "The First National Bank
of Boston, as Trustee." In the event the Borrower fails to comply with the
provisions of Section 603, the Trustee shall, upon the request of the Bank,
direct that all moneys held in the Cash Collateral Account be applied in
accordance with subparagraph (b) of Section 501B. Upon compliance by the
Borrower of all the terms and conditions of Section 603 hereof, and upon
certification by the Bank to the Trustee of the Borrower's compliance with the
requirements of Paragraph A.4(h) of Appendix I of Reimbursement Agreement, the
Trustee shall direct the Bank to promptly pay all moneys held in the Cash
Collateral Account to the Borrower. Amounts held in the Cash Collateral Account
shall be invested at the direction of the Bank. The Trustee shall not be
responsible if any such investments produce a yield in violation of such Code
section. The Bank agrees to indemnify and hold the Trustee harmless for all
liability or responsibility resulting from the Borrower's failure to deposit the
certificates of deposit and issue them in the name of the Trustee, as required
by this Section. At the closing, or promptly thereafter, the Bank shall provide
evidence satisfactory to the Trustee that the certificates of deposit have been
properly deposited and issued.
-34-
F. Interest Reserve Account. There is hereby established an "Interest
------------------------
Reserve Account" into which the Trustee shall deposit out of the proceeds of the
issuance of the Bonds the sum of $1,500,000. Such amounts shall be disbursed in
accordance with the provisions of Section 503(e) hereof.
G. Remarketing Reserve Account. There is hereby established a
---------------------------
"Remarketing Reserve Account" into which the Trustee shall deposit out of the
proceeds of the issuance of the Bonds an amount equal to 4% of the original
principal amount of the Bonds. Upon reaching the Break Even Date (as defined in
the Reimbursement Agreement), all of the positive cash flow of the project shall
be deposited by the Borrower quarterly in the Remarketing Reserve Account on the
fifteenth day of each January, April, July and October until the amount held in
such Remarketing Reserve Account equals eight percent (8.0%) of the Stated
Amount; provided, however, that the Borrower shall not be required to make
deposits from positive cash flow in excess of two percent (2.0%) in any one
calendar year. Thereafter on each January 15th, the Borrower shall deposit such
amount, if any, as is necessary to cause the amount on deposit in the
Remarketing Reserve Account to be at least equal to eight percent (8.0%) of the
Stated Amount. Amounts on deposit in the Remarketing Reserve Account shall be
invested in time or demand deposits in the Bank, and such investments shall be
valued at cost. Prior to completion of the Project, investment earnings in the
Reserve Account shall be transferred to the Project Fund. Funds on deposit in
the Remarketing Reserve Account shall be (i) transferred to the Bank to
reimburse it for any draws on the Letter of Credit honored by the Bank when an
Event of Default under the Reimbursement Agreement has been occurred and is
continuing or (ii) used to make payments of principal and interest with respect
to the Bonds in the event the Bank does not honor a draw upon the Letter of
Credit. Amounts on deposit in the Remarketing Reserve Account shall also be
used to reimburse the Bank for any payment under the Letter of Credit in
connection with a redemption, whether by maturity, upon acceleration, or
otherwise, of any of the Bonds. At such times as the Project reaches break even
in cash flow (taking into account operating costs as accrued and payable and
Project debt service at an assumed interest rate of an average of the interest
rate applicable to the Bonds during the relevant period) for a period of six
consecutive months (as certified to the Trustee by the Borrower and the Bank),
the Borrower's obligation to maintain the Remarketing Reserve Account pursuant
to this Section 501G shall be reduced to four percent (4.0%) of the Stated
Amount for the remainder of the term of the Reimbursement Agreement. All
amounts in excess of such requirement shall be transferred by the Trustee to the
Borrower.
-35-
Section 502. Bond Fund. A Bond Fund is hereby established by the Issuer
---------
with the Trustee, and the Trustee is hereby appointed paying agent for the
Bonds. Except as otherwise provided in this Indenture, the Bond Fund shall be
used solely for the payment of the principal (including redemptions), interest
and any premium on the Bonds and, to the extent permitted hereunder, Additional
Payments, as and when the same shall become due. Moneys shall be deposited in
the Bond Fund from time to time as follows:
(a) Proceeds equal to any accrued interest and premium paid by purchasers
of any Bonds shall be deposited into the Bond Fund.
(b) Upon completion of the Project, funds shall be transferred from the
Project Fund to the Bond Fund and applied as provided in subparagraph (a) of
Section 501B.
(c) Payments of construction interest pursuant to Section 501A and Loan
payments by the Borrower pursuant to Section 1001A shall be deposited into the
Bond Fund.
(d) Proceeds from damage to the Project and condemnation awards shall be
deposited into the Bond Fund when required by Article 7 and Section 1005. The
Trustee shall use such amounts as provided in Section 403 for the redemption,
without penalty, of principal of the Bonds immediately upon the earliest
practicable redemption date on or after which such amounts have become Priority
Funds selected by the Trustee for the redemption without further authorization
from the Borrower or the Issuer so as, to the extent possible, to exhaust such
amount. Any balance remaining after such application shall be deemed part of
the Bond Fund and available for any purposes of the Bond Fund.
(e) Sums received upon exercise of remedies by the Trustee or the Issuer
after an event of default shall be deposited in the Bond Fund, except sums
received by the Issuer pursuant to (i) the third sentence of Section 1112 or
(ii) rights not assigned hereunder.
(f) Sums transferred from the Project Fund as provided in subparagraph (b)
of Section 501B.
Section 503. Letter of Credit Fund; Draws Under Letter of Credit. A
---------------------------------------------------
Letter of Credit Fund is hereby established with the Trustee for the benefit of
the Bondholders and the Bank. The moneys deposited in the Letter of Credit Fund
shall be held in escrow by the Trustee and shall consist solely of sums drawn by
-36-
the Trustee under the Letter of Credit and any earnings thereon. The Trustee
shall make draws upon the Letter of Credit for deposit into the Letter of Credit
Fund as follows:
(a) At or prior to 4:00 P.M., Boston time, on the second Business Day
immediately preceding each Interest Payment date the Trustee shall draw upon the
Letter of Credit in accordance with the terms thereof in an amount equal to such
interest then becoming due and payable, to the extent that priority Funds are
not then available therefor, in order to pay the interest on the Bonds becoming
due and payable on such Interest Payment Date.
(b) At or prior to 4:00 P.M., Boston time, on the second Business Day
immediately preceding each Payment Date on which a payment of principal, and any
premium on, of the Bonds is due and payable, whether by redemption pursuant to
Section 401 or 402 hereof, by acceleration of the Bonds pursuant to Section 1102
or upon final maturity of the Bonds, the Trustee shall draw upon the Letter of
Credit in accordance with the terms thereof in an amount equal to such
principal, any premium and accrued interest thereon, then becoming due and
payable, to the extent that Priority Funds are not then available therefor, in
order to provide moneys necessary to pay the principal, any premium and accrued
interest thereon, then becoming due and payable.
(c) At or prior to the time specified in the Depository Agreement,
the Trustee shall draw upon the Letter of Credit, in order to make timely
payment of the Purchase Price of the Bonds tendered for purchase on the Purchase
Date. All moneys received by the Trustee pursuant to a Purchase Draw under the
Letter of Credit shall be deposited by the Trustee in the Letter of Credit
account of the Bond Purchase Fund established in accordance with the Depositary
Agreement to be used solely for the payment of the Purchase Price of tendered
Bonds. Any Bonds so purchased with a Purchase Draw shall be registered in the
name of the Borrower and held pursuant to the Bond Pledge Agreement for the
benefit of the Bank as security for the reimbursement of the amount of such
Purchase Draw by the Borrower.
(d) In the event of a drawing upon the Letter of Credit under Section
503(b) to pay principal and interest on the Bonds to be purchased or redeemed
pursuant to Section 401(d) or (e), then immediately following its receipt of the
proceeds of such drawing the Trustee shall on the Conversion Date wire to the
Bank in immediately available funds the amount deposited with the Trustee by the
Purchaser pursuant to clause (B) of subparagraph (ii) of Section 401(e), which
amount shall be applied by the Bank to the payment of the obligations of the
Borrower to the Bank under the Reimbursement Agreement.
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(e) In the event of a drawing upon the Letter of Credit under Section
503(a) to pay interest in the Bonds, then following its receipt of the proceeds
of such drawing, the Trustee shall, on the Interest Payment Date for which the
drawing was made, wire to the Bank in immediately available funds from monies,
if any, remaining on deposit in the Interest Reserve Account established
pursuant to Section 501F an amount sufficient to reimburse the Bank for the
amount of the drawing on the Letter of Credit. Within five (5) business days of
the Interest Payment Date on which a reimbursement payment is made to the Bank
pursuant to this Section 503(e) which reduces the amount remaining in the
Interest Reserve Account to an amount which is insufficient to reimburse the
Bank for the interest drawing on the next succeeding Interest Payment Date, the
Trustee shall give written notice to the Borrower to the effect that the
Borrower shall be responsible for making the reimbursement payments to the Bank
on the next succeeding Interest Payment Date in accordance with the terms of the
Reimbursement Agreement. Any monies remaining in the Interest Reserve Account
after the giving of such notice shall be transferred to the Project Fund and
applied as provided herein.
Section 504. Investment of Moneys in Funds. The Trustee shall invest
-----------------------------
moneys in the Project Fund in any Qualified Investments and may sell or
liquidate any such investment upon the written direction of the chief executive
officer or chief financial officer of the managing partner of the Borrower, if
the Borrower is not then in default hereunder; provided, however, until the
conditions set forth in Section 603 hereof are satisfied, such direction of the
Borrower is to be made only with the prior written consent of the Bank. Moneys
in the Bond Fund and the Letter of Credit Fund shall be invested by the Trustee
(but only to the extent that such investments are available) only in direct
obligations of the United States, the maturities or redemption dates of which
shall coincide as nearly as practicable with, but not be later than, the time or
times at which said moneys will be required for the purposes of this Indenture;
provided, however, that moneys drawn under the Letter of Credit shall be
invested only in direct obligations of the United States with maturities of 30
or fewer days. The making of any such investments or the sale or other
liquidation thereof shall not be subject to the control of the Borrower and
neither the Trustee nor, without limiting its obligations under the Basic
Agreements, the Borrower shall have any responsibility for any losses resulting
from such investment. Any investments pursuant to this Section may be purchased
from the Trustee or the Bank. Except with respect to the Project Fund the
Trustee is authorized to sell or otherwise convert into cash investments
credited to any Fund at the times and in the amounts necessary to meet payments
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when due from such Fund. No order of the Borrower shall restrict such
authorization, and the Trustee shall not be liable for any loss occurring from
such sale or conversion to cash. Each Fund shall include all investments made
from moneys credited to such Fund and shall include all proceeds from such
investments. For purposes of this Indenture, such investments shall be valued at
face amount or market value, whichever is less. All proceeds of the Bonds,
including without limitation funds and accounts established under the Indenture
and any monies pledged under the Reimbursement Agreement, may be invested
without regard to yield restriction until February 28, 1986 inclusive, at which
time such proceeds must be invested in obligations described in Section 103(a)
of the Code, unless in the opinion of Kutak, Rock & Campbell provided to the
Trustee, the continued investment of such funds without respect to yield
limitations will not adversely affect the exemption from federal income tax of
interest on the Bonds.
Section 504A. Payment of Bonds From Funds. The Trustee shall apply moneys
---------------------------
on each Payment Date for the purpose of paying principal and premium, if any,
and principal on the Bonds then due and payable from the monies and in the
reference indicated:
(a) Moneys deposited into the Bond Fund pursuant to Section 502(a)
and any investment earnings thereon;
(b) Other Priority Funds held in the Bond Fund;
(c) Moneys drawn by the Trustee under the Letter of Credit and
deposited in the Letter of Credit Fund pursuant to Section 503;
(d) After the acceleration of the maturity of the Bonds under Section
1102, after funds held in the Bond Fund; and
(e) After the acceleration of the maturity of the Bonds under Section
1102, received by the Trustee from any other source.
Section 505. Avoidance of Arbitrage. The Borrower agrees to restrict the
----------------------
use of Bond proceeds in such manner and to such extent as necessary to assure
that the Bonds will not constitute arbitrage bonds under Section 103(c) of the
Internal Revenue Code and the regulations prescribed under that Section. The
Chairman of the Issuer is authorized and directed, alone or in conjunction with
any other officer, employee or consultant of the Issuer or the Borrower, to give
an appropriate certificate on behalf of the Issuer, for inclusion in the
transcript of proceedings for the Bonds, setting forth the facts, estimates and
circumstances and reasonable expectations pertaining to Section 103(c) of the
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Internal Revenue Code of 1954, as amended and the regulations thereunder.
Section 506. Authorized Application of Funds; Moneys to be Held in Trust.
-----------------------------------------------------------
The Trustee is authorized to apply each Fund as provided in this Indenture. All
moneys deposited with the Trustee hereunder shall be held by the Trustee in
trust but need not be Segregated from other funds except as required by law. The
Trustee will withdraw sufficient funds from the Bond Fund or the Letter of
Credit Fund, as the case may be, to pay principal of and premium, if any, and
interest on the Bonds on behalf of the Issuer as the same become due and
payable. If and to the extent that, following acceleration, by declaration or
otherwise, under Section 1102, sufficient Priority Funds, including moneys drawn
under the Letter of Credit, are not available to pay principal of, premium, if
any, and interest on the Bonds, then other available moneys, including amounts
realized pursuant to Article 11, shall be used to pay principal of and premium,
if any, and interest on the Bonds.
Section 507. Nonpresentment of Bonds. If funds sufficient to pay
-----------------------
principal of and interest on any Bond (including without limitation any Tendered
Bond or other Bond purchased as provided in Section 401(d) or (e) hereof) have
been deposited with the Trustee and irrevocably committed thereto, all liability
of the Issuer and the Borrower for the payment of such amount shall forthwith
cease. The Trustee shall hold such funds, without liability for interest
thereon, for the benefit of the registered owner of such Bond or Tendered Bond,
who shall thereafter be restricted exclusively to such funds for any claim with
respect to such amount. Any such funds which remain unclaimed for four years
after such due date shall upon request in writing by the Borrower be paid to the
Borrower without any interest thereon, and the Trustee shall have no further
responsibility with respect to such moneys.
Section 508. Bonds Are Not General Obligations. The Bonds do not now and
---------------------------------
shall never constitute a general obligation of the Issuer nor a debt or pledge
of the faith and credit of the State of California, and each covenant and
undertaking by the Issuer herein and in the Bonds to make payments is not a
general obligation of the Issuer or of the State of California or a debt or a
pledge of the faith and credit of the State of California, but is a special,
limited obligation payable solely from the Pledged Receipts and is a valid claim
of the holders only against such Pledged Receipts (but in addition is secured by
the First Deed of Trust on and security interest in certain properties of the
Borrower). Nothing herein shall be construed as requiring the Issuer to use any
funds or revenues from any source other than the Pledged Receipts.
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Section 509. Substitute Letter of Credit. At any time prior to the
---------------------------
expiration of the Letter of Credit, the Borrower may, at its option, provide for
the delivery to the Trustee of a substitute Letter of Credit. The stated
termination date of any substitute Letter of Credit shall not be earlier than
one year subsequent to the date on which such Substitute Letter of Credit is
issued, except that any Substitute Letter of Credit issued during the Adjustable
Rate Period may provide that it will terminate on the Conversion Date. Any
Substitute Letter of credit provided for the Fixed Rate Period or any portion
thereof shall provide for the payment of at least 210 days interest accrued on
the Bonds (calculated on the basis of a year having 360 days) and a redemption
premium in the amount of 3% of the outstanding principal amount of the Bonds.
On or prior to the date of the delivery of such Substitute Letter of Credit to
the Trustee, the Borrower shall furnish to the Trustee and the Issuer (i) an
opinion of Bond Counsel stating that the delivery of such substitute Letter of
Credit to the Trustee is authorized under this Indenture and complies with the
terms hereof, (ii) an opinion of counsel in form and substance reasonably
satisfactory to the Trustee (and substantially similar in content with respect
to the Substitute Letter of Credit as those opinions originally rendered with
respect to the Letter of Credit in connection with the original issuance of the
Bonds) to the effect that the Substitute Letter of Credit is the valid, binding
and enforceable obligation of the bank or other financial institution issuing it
(subject to customary exceptions as to limitations on enforceability by
bankruptcy and other laws affecting creditors' rights generally and by the
application of equitable principles) and that payments on the Bonds out of the
proceeds of a drawing on the Substitute Letter of Credit will not constitute
voidable preferences under the federal Bankruptcy Code or other applicable laws
and regulations, and (iii) either (A) written evidence from Moody's if the Bonds
are rated by Moody's, and S&P, if the Bonds are rated by S&P, to the effect that
such rating agency has reviewed the proposed Substitute Letter of Credit and
that the substitution of the proposed Substitute Letter of Credit for the Letter
of Credit will not, by itself, result in a reduction of its ratings of the Bonds
from those which then prevail, or (B) written evidence satisfactory to the
Trustee that the commercial bank or other financial institution issuing such
Substitute Letter of Credit has a rating on its long-term obligations from
Moody's and/or S&P which is (x) equal to or better than the second highest long-
term debt rating category, or (y) equal to or better than such ratings of long-
term obligations of the issuer of the credit facility being replaced by such
Substitute Letter of Credit.
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The Letter of Credit may by its terms provide for extensions thereof and
the Borrower may, at its election, and with the consent of the Bank, provide for
one or more additional extensions of the Letter of Credit for any period
commencing after the expiration of such Letter of Credit.
PART III:
--------
THE PROJECT
ARTICLE 6 - Completion of the Project; Subdivision of Project Site
Section 601. Borrower's Obligations to Complete Project, etc. The
-----------------------------------------------
Borrower shall cause the Project to be completed as promptly as feasible but in
no event later than December 1, 1987 unless otherwise approved by the Bank which
approval shall not be unreasonably withheld, and shall at its expense do or
cause to be done all things necessary or proper for such completion in
accordance with applicable law and regulations.
Until completion of the Project, the Borrower shall make no changes in the
Plans and Specifications or take any other action which would affect the
qualification of the Project as a "project", as defined in the Enabling Act, or
would affect in any material respect the description of the Project approved by
the Issuer.
Section 602. Completion Certificate. Completion of the Project shall be
----------------------
evidenced to the Trustee by a Completion Certificate signed by the Project
Supervisor and approved by the Bank, which approval shall not be unreasonably
withheld or delayed, (i) stating that the Project or such additional facilities,
as the case may be, has been substantially completed in accordance with the
Plans and Specifications so as to permit efficient operation thereof, and all
costs then due and payable in connection therewith have been paid, and that
completion has been accomplished in such a manner as to conform with all
applicable zoning, planning, building, environmental and other regulations of
all governmental authorities having jurisdiction; (ii) specifying the date by
which the foregoing events had occurred; (iii) stating that there is no laborer,
supplier, materialman, or other person then entitled to assert a materialman's
or other similar lien upon the Mortgaged Property; (iv) indicating the nature
and estimated cost of any work to be done on the Mortgaged Property which is
ancillary or supplemental to the Project; and (v) stating that it is given
without prejudice to any rights against third parties which then exist or may
subsequently come into being.
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Section 603. Subdivision of Project Site. The Borrower shall cause the
---------------------------
subdivision map of the Project site to be filed and recorded with the San Diego
County Recorder's Office on or before May 1, 1986, or such later date as may be
approved by the bank. Immediately after the recordation of such map, the
Borrower shall cause to be submitted to the Trustee a certification from the
Bank that the conditions set forth in paragraph A.4(h) of Appendix I to the
Reimbursement Agreement have been satisfied and shall submit a written
requisition as provided in Section 501A for disbursement of moneys sufficient to
pay the purchase price for the Project site and shall enter into and record with
the San Diego County Recorder's Office the First deed of Trust, the Second Deed
of Trust and shall enter into and deliver the Intercreditor Agreement, the Land
Use Restriction Agreement and such other instruments or collateral assignments
as the Bank may reasonably request.
ARTICLE 7 - Damage and Destruction
Section 701. Damage and Destruction. If the Mortgaged Property shall be
----------------------
damaged or destroyed by fire, flood, or other casualty, there shall be no
abatement or reduction in the payments required to be made by the Borrower
hereunder and (i) the Borrower shall repair, replace, restore or reconstruct the
Mortgaged Property so as to restore it to substantially its prior value and to a
state suitable for its continued use as a residential dwelling facility for the
elderly as reasonably determined by the Borrower and (ii) any net proceeds of
insurance shall be held in a separate account by the Trustee and applied for
such purpose in the manner provided for moneys in the Project Fund. If such net
proceeds are insufficient, the Borrower will complete such restoration and will
provide for payment of the costs of such completion from its own moneys. Any
insurance proceeds remaining after the payment of all such costs shall be paid
to the Bank to the extent of any unreimbursed obligations under the
Reimbursement Agreement and then to the Borrower. However, if within 30 days
after the damage or destruction, the Borrower determines in good faith that the
Mortgaged Property cannot be reasonably restored within twelve months to a
condition substantially equivalent to that immediately preceding such damage or
destruction and so notifies the Trustee and the Bank in writing, the Borrower
shall not be obligated to restore the Mortgaged Property and the net insurance
proceeds shall be paid into the Bond Fund.
Section 702. Eminent Domain. If title to or the temporary use of all or
--------------
part of the Mortgaged Property shall be taken under exercise of any power of
eminent domain, there shall be no abatement or reduction in the payments
required to be made by the
-43-
Borrower hereunder and any net proceeds from any award for such taking shall be
paid to the Trustee and held in a special account and invested and disbursed in
the manner provided for moneys in the Project Fund, and applied as follows:
(a) The restoration of the Mortgaged Property to an economic unit
comparable to its previous state.
(b) The acquisition or construction of other land and improvements,
exclusive of movables, deemed by the Borrower to be adequate for the continuance
of its business operations at the project site (which improvements shall be
deemed a part of the project); but only if such land and improvements are
acquired by the Borrower subject only to liens and encumbrances constituting
permitted Encumbrances.
(c) Payment into the Bond Fund.
Within 90 days following entry of a final order in any eminent domain
proceedings granting condemnation, an officer of the managing partner of the
Borrower shall elect in a writing furnished to the Trustee and the Bank one of
the above uses. Absent such notice, the Trustee shall pay such proceeds into the
Bond Fund. Any net proceeds not applied for the purposes set forth in
subsections (a) or (b) above shall be paid into the Bond Fund. The Borrower
agrees that, if it shall elect to apply the proceeds to the purposes set forth
in either subsection (a) or subsection (b) above, the Borrower shall grant the
Trustee and the Bank a deed of trust on and a security interest in any land or
other property acquired with such proceeds, and such property shall be included
in the Mortgaged Property for the purposes of this Indenture.
Section 703. Payment to Borrower. Upon the termination of the lien of
-------------------
this Indenture, unexpended proceeds of any insurance or condemnation award shall
be paid to the Borrower free of any obligation hereunder.
PART IV
-------
REPRESENTATIONS AND AGREEMENTS
OF ISSUER AND BORROWER
ARTICLE 8 - Representations and Agreements of Issuer
Section 801. Due Organization, etc. The Issuer represents and warrants as
---------------------
follows:
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(a) It is a political subdivision of the State of California, with
the power under and pursuant to the Enabling Act, to execute, deliver and
perform its obligations under this Indenture and the Bond Purchase Agreement,
and to issue and sell the Bonds.
(b) It has taken all necessary action and has complied with all
provisions of the Constitution of the State of California and the Enabling Act
required to make this Indenture, the Bond Purchase Agreement, the Land Use
Restriction Agreement and the Bonds the valid obligations of the Issuer which
they purport to be; and, when executed and delivered by the parties hereto, this
Indenture, the Land Use Restriction Agreement and the Bond Purchase Agreement
will each constitute a valid and binding agreement of the Issuer and be
enforceable in accordance with its terms, except as enforceability may be
subject to the exercise of judicial discretion in accordance with general
equitable principles and to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws for the relief of debtors heretofore or hereafter
enacted to the extent that the same may be constitutionally applied.
(c) When delivered to and paid for by the initial purchaser or
purchasers in accordance with the terms of the Bond Purchase Agreement and this
Indenture, the Bonds will constitute valid and binding special, limited
obligations of the Issuer enforceable in accordance with their terms, except as
enforceability may be subject to the exercise of judicial discretion in
accordance with general equitable principles and to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws for the relief of debtors
heretofore or hereafter enacted to the extent that the same may be
constitutionally applied, and will be entitled to the benefits of this
Indenture.
Section 802. Payment of Bonds; Trustee's Rights with Respect to the Loan;
------------------------------------------------------------
Cooperation with Trustee. The Issuer agrees that it will promptly pay or cause
- ------------------------
to be paid the principal of and interest on all Bonds as herein provided. The
Issuer agrees that the Trustee may enforce all rights of the Issuer (except
those rights not assigned under this Indenture) and all obligations of the
Borrower with respect to the Loan for and on behalf of the Bondholders, whether
or not the Issuer is in default hereunder. The Issuer agrees that, except as
provided herein, it will not mortgage, encumber or alienate any part of the
Pledged Receipts. The Issuer further agrees to provide assurances to the same
extent as required of the Borrower under the first paragraph of Section 1006.
All agreements of the Issuer in this Section 802 are subject to the
limitation described in Section 508.
-45-
ARTICLE 9 - Representations and Covenants of the Borrower
The Borrower hereby confirms to the Issuer and the Trustee its
representations and warranties made or incorporated by reference in Section 5 of
the Reimbursement Agreement, and hereby further represents and warrants and, as
to Sections 904, 905, 906, 907 and 908 covenants as follows:
Section 901. Legal Proceedings. There is no action, suit, proceeding or
-----------------
investigation at law or in equity before or by any court or public board or body
pending or, to the knowledge of the borrower, threatened against it, wherein
an unfavorable decision, ruling or finding would in any material respect
adversely affect the business, assets or condition (financial or otherwise) of
the Borrower or the transactions contemplated by the Basic Agreements, or which
in any way would adversely affect the validity of the Basic Agreements.
Section 902. Compliance with Law; Consents, etc. The Borrower is not in
----------------------------------
violation of any term or provision of its partnership agreement, or in material
violation of any term or provision of any mortgage, lease, agreement or other
instrument which is material to its business or assets, or of any judgment,
decree, governmental order, statute, rule or regulation by which it is bound or
to which it or any of its assets is subject. The execution, delivery and
performance of and compliance with the Basic Agreements will not violate or
constitute a default under the partnership agreement of the Borrower or of any
term or provision of any mortgage, lease, agreement or other instrument, or of
any judgment, decree, governmental order, statute, rule or regulation by which
the Borrower is bound or to which any of its assets is subject. No approval by,
authorization of, or filing with any federal, state, or municipal or other
governmental commission, board, or agency or other governmental authority is
necessary in connection with the execution and delivery of any of the Basic
Agreements by the Borrower other than those not obtainable at this time which
are not required to be obtained at this time, except for necessary approvals
under the Enabling Act, which have been, or by the time of delivery of the Bonds
will have been, obtained.
Section 903. Adequacy of Disclosure. Neither this Indenture nor the
----------------------
Reimbursement Agreement or any other document, certificate or statement
furnished to the initial purchaser or purchasers or the Issuer by or on behalf
of the Borrower in connection with the transactions contemplated hereby or
thereby contains any untrue statement of a material fact or omits to state a
material fact pertaining to the Borrower, the Project, the Mortgaged Property
necessary in order to make the statements contained herein and therein not
misleading.
-46-
Section 904. Acquisition, Construction and Completion of Project.
---------------------------------------------------
(a) The Borrower has entered into a substantial binding obligation to
purchase the land for the Project, and the Borrower intends to commence
construction of the Project within six months of the date hereof, pursuant to
which the Borrower is obligated to expend at least the lesser of $100,000 or 2-
1/2% of the total cost of acquisition and construction of the Project and will
proceed with due diligence to complete the Project in accordance with the
provisions hereof;
(b) The Borrower reasonably expects that the total cost of
acquisition, construction and development of the Project will be at least
$13,500,000 and the Borrower reasonably expects to complete the acquisition,
development and construction of the project and to expend the full amount
remaining in the Project Fund for Project Costs within 36 months after the
delivery of the Bonds;
(c) Substantially all (at least 90%) of the aggregate amount
disbursed from the Project Fund (minus amounts expended for "Neutral Project
Costs" as shown on Schedule C of Exhibit 904A hereto) to pay or reimburse
Project Costs shall be applied to pay or reimburse qualified Project Costs and
that not more than an insubstantial portion (not more than 10%) of the aggregate
amount disbursed from the Project Fund (minus amounts expended for "Neutral
Project Costs" as shown on Schedule C of Exhibit 904A hereto) to pay or
reimburse Projects Costs shall be applied to pay or reimburse Project Costs
other than Qualified Project Costs. In connection with this covenant, Borrower
shall execute the Borrower's Certificate attached hereto as Exhibit 904A;
(d) Any and all contracts to acquire any part of the Project which
were entered into prior to April 15, 1985 (with respect to which payments are to
be made from the proceeds of Bonds as Qualified Project Costs) were, on such
date, fully executory in nature, and none of the burdens or benefits of
ownership of any property which was the subject of such contracts had accrued to
or been imposed upon the Borrower or any 'related person," as such term is
defined in the Code, prior to such date;
(e) The Borrower shall submit to the Trustee, prior to or upon the
date of each disbursement from the Project Fund, a statement (which statement
may be contained in the Borrower's requisition for payment hereunder) certifying
that the full amount of such disbursement will be applied to pay or reimburse
Project Costs and that after taking into account the proposed
-47-
disbursement substantially all (at least 90%) of the aggregate disbursements
from the Project Fund (minus amounts expended for "Neutral Project Costs", as
shown on Schedule C of Exhibit 904A hereto) will have been applied to pay or
reimburse the Borrower for paying Qualified Project Costs;
(f) Upon the completion of the Project the Borrower shall submit to
the Issuer and the Trustee a certificate of completion (which certificate shall
be signed by the Bank) which, in addition to the requirements of Section 602
hereof, will contain the following (i) the Borrower's statement that the project
has been substantially completed and is ready and available for occupancy as of
a specified date (which shall be the "Completion Date"); (ii) the Borrower's
statement, of the aggregate amount expected to be disbursed from the Project
Fund upon the Completion Date; and (iii) the Borrower's certification that all
of the amounts expected to be disbursed from the Project Fund will be applied to
pay or reimburse Project Costs and that none of the amounts disbursed from the
Project Fund are expected to be applied to pay or reimburse costs or expenses
other than project Costs; and (iv) the Borrower's certification that
substantially all (at least 90%) of the amounts disbursed from the Project Fund
(minus amounts expended for "Neutral Project Costs" as shown on Schedule C of
Exhibit 904A hereto) will be applied to pay or reimburse Qualified Project Costs
and that no more than an insubstantial amount (not more than 10%) of the amounts
disbursed form the Project Fund will be applied to pay or reimburse costs or
expenses other than Qualified Project Costs;
(g) Money on deposit in any fund or account in connection with the
Bonds, whether or not such money was derived from other sources, will not be
used by or under the direction of the Borrower in a manner which would cause the
Bonds to be "arbitrage bonds" within the meaning of Section 103(c) of the Code,
and the Borrower specifically agrees that the investment of money in any fund
created hereunder shall be restricted as may be necessary to prevent the Bonds
from being "arbitrage bonds" under the Code;
(h) The Borrower will not take or omit to take any action if such
action or omission would cause interest on the Bonds to become subject to
federal income taxation, except during such period as the Bonds are owned by a
"substantial user" of the Project or a "related person" and except for,, any
federal tax characterized as a "minimum" or "preference tax to the extent such
tax affects the includability of interest on the Bonds in the income of the
recipient thereof; and
-48-
(i) Prior to the commencement of the Qualified Project period, the
Borrower will appoint a Monitoring Agent and enter into a Monitoring Agreement
substantially in the form attached hereto as Exhibit 904B, with such substantive
changes, modifications or deletions as may be approved by Bond Counsel.
Section 905. Residential Rental Property. The Borrower hereby
---------------------------
acknowledges and agrees that the Project is to be owned, managed and operated as
a project for "residential rental property" as such term is defined in Section
103(b)(4)(A) of the code. To that end, the Borrower hereby represents, warrants
and covenants for the Qualified Project Period or until the Bonds are no longer
Outstanding Bonds, whichever is later, as follows:
(a) That the Project will be acquired and constructed for the purpose
of providing multifamily residential rental property, and that the Project shall
be owned, managed and operated as a project to provide multifamily residential
property comprised of a building or structure or several proximate and
interrelated buildings or structures owned by the same person for federal income
tax purposes, financed by the Bonds and containing one or more dwelling units
and facilities functionally related and subordinate to such units, in accordance
with Section 103(b)(4)(A) of the Code;
(b) That substantially all of the Project will consist of units of
similar quality and type of construction, containing facilities for living,
sleeping, eating, cooking and sanitation for a single person or a family;
(c) That none of the dwelling units in the Project shall at any time
be utilized on a transient basis, shall ever be leased or rented for a period of
less than thirty days, and shall ever be used as a hotel, motel, dormitory,
fraternity house, sorority house, rooming house, hospital, sanitarium or rest
home;
(d) That the dwelling units in the Project shall be leased, rented or
available for lease or rental to members of the general public, including Lower-
Income Tenants;
(e) That the Project is located on a single tract of land or on two
or more contiguous tracts of land, and that all of the buildings, structures and
facilities which are part of the Project comprise a single geographically and
functionally integrated project for residential rental property, as evidenced by
the ownership, management, accounting and operation of the Project;
-49-
(f) That the Borrower has no present plan nor does there exist any
contractual arrangement, formal or informal, to convert the Project during the
period of this covenant to any use other than use as residential rental
property; and
(g) That, if the Project contains fewer than five units, none of the
units will at any time be occupied by the "owner" of the Project for federal
income tax purposes.
Section 906. Lower Income Tenants. The Borrower will execute the Land Use
--------------------
Restriction Agreement to satisfy the requirements of Section 103(b)(4)(A) of the
Code and the Enabling Act and to meet the foregoing requirements, the Borrower
will for the Qualified Project Period (or such other period specified):
(a) (i) rent initially (or hold available for rent) at least 20% of
the completed dwelling units in the Project to Lower-Income Tenants, prior to
the satisfaction of which no additional units shall be rented or leased to
persons other than Lower-Income Tenants, and (ii) after initial rental occupancy
of such dwelling units by Lower-Income Tenants, at least 20% of the completed
dwelling units in the Project shall be rented to and occupied (or held available
for rent if previously rented to and occupied by Lower-Income Tenants) by Lower-
Income Tenants as required by Section 103(b)(4)(A) of the Code;
(b) obtain and maintain on file Income Certifications from each
Lower-Income Tenant each certification dated or confirmed within five days
immediately prior to the initial occupancy of such tenant in the Project in the
form attached hereto as Exhibit 906A;
(c) file with the Issuer (with a copy to the Bank) reports
substantially in the form attached hereto as Exhibit 906B within 30 days after
the end of each calendar quarter, commencing with the first calendar quarter
during the Qualified Project Period.
(d) for the entire term of the Bonds, maintain complete and accurate
records pertaining to the dwelling Units occupied or to be occupied by all
tenants in the Project, and permit any duly authorized representative of the
Trustee, the Issuer, the Bank, the Monitoring Agent, the Department of the
Treasury or the Internal Revenue Service to inspect the books and records of the
Borrower pertaining to the Income Certifications of Lower-Income Tenants
residing in the Project.
-50-
Section 907. Tax-Exempt Status of the Bonds.
------------------------------
(a) The Borrower will not take or permit, or omit to take or cause to
be taken, any action that would adversely affect the exemption from federal
income taxation of the interest on the Bonds and, if it should take or permit,
or omit to take or cause to be taken, any such action, the Borrower shall take
all lawful actions necessary to rescind or correct such actions or omissions
promptly upon having knowledge thereof;
(b) The Borrower will take such action or actions as may be
necessary, in the opinion of Bond Counsel, to comply fully with all applicable
rules, rulings, policies, procedures, regulations or other official statements
promulgated, proposed or made by the Department of the Treasury or the Internal
Revenue Service pertaining to obligations issued under Section 103(b)(4)(A) of
the Code;
(c) The Borrower will file of record such documents and take any
other steps as are necessary, in the opinion of Bond Counsel, in order to insure
that the requirements and restrictions of this Indenture will be binding upon
all owners of the Project, including, but not limited to, the execution and
recordation of the Land Use Restriction Agreement. The Borrower hereby covenants
to include such requirements and restrictions in any documents transferring any
interest in the Project to another to the end that such transferee has notice
of, and is bound by such restrictions and to obtain the agreement from any
transferee to so abide.
Section 908. Modification and Termination of Special Tax Covenants.
-----------------------------------------------------
(a) Subsequent to the issuance of the Bonds and prior to their
payment in full (or provision for the payment thereof having been made in
accordance with the provisions of this Indenture), Sections 905 and 906 of this
Indenture may not be amended, changed, modified, altered or terminated except as
permitted pursuant to this Section 908. Anything to the contrary
notwithstanding, the Issuer, the Trustee, the Bank and the Borrower hereby agree
to amend this Indenture to the extent required or permitted, in the opinion of
Bond Counsel, for interest on the Bonds to remain exempt from federal income
taxation under Section 103(b)(4)(A) of the Code. The party requesting such
amendment shall notify the other parties to this Indenture, with a copy of such
requested amendment to Bond Counsel. After review of such proposed amendment,
Bond Counsel Shall render to the Trustee an opinion as to the effect of such
Proposed amendment upon the includability of interest on the
-51-
bonds in the income of the recipient thereof for federal income tax purposes.
The Borrower shall pay an amount to the Trustee sufficient to reasonably
compensate Bond Counsel for rendering such opinion.
(b) The Borrower, the Issuer and, where applicable, the Trustee shall
execute, deliver and, if applicable, the Borrower or the Issuer shall file and
record any and all documents and instruments, including, without limitation, an
amendment to the Land Use Restriction Agreement, necessary to effectuate the
intent of this Section 908, and in the event that the Borrower or the Issuer
fails to file of record such documents or instruments both the Borrower and the
Issuer hereby authorize the Trustee at its option to execute, deliver and, if
applicable, file and record on behalf of the Borrower or the Issuer, as is
applicable, any such document or instrument (in such form as may be approved by
Bond Counsel) if either the Borrower or the Issuer defaults in the performance
of its obligation under this subsection (b); provided, however, that the Trustee
shall take no action under this subsection (b) without first notifying the
Borrower or the Issuer, or both, as is applicable, of its intention to take such
action and providing the Borrower or the Issuer, or both, as is applicable, a
reasonable opportunity to comply with the requirements of this Section 908.
(c) Notwithstanding anything to the contrary contained in this
Section 908, the restrictions provided herein regarding the use and operation of
the Project shall be terminated upon the occurrence of any event of involuntary
noncompliance contemplated by Section 103(b)(4)(A) of the Code and certified by
a certificate of the chief executive officer or chief financial officer of the
managing partner of the Borrower, supported by an opinion of Bond Counsel,
furnished to the Trustee, including fire, seizure, requisition, foreclosure,
transfer of title by deed in lieu of foreclosure, change in federal law or
action of a federal agency, condemnation or similar event after the issuance of
the Bonds which prevents the Issuer from enforcing the requirements of Sections
905 and 906 of this Indenture, so long as the Bonds are redeemed within sixty
days following the date certified by the Authorized Borrower Representative as
of the date of involuntary noncompliance (or within a period of time thereafter
determined by the Trustee to be reasonable).
Section 909. Sale of Project. In the event of any sale, transfer,
---------------
assignment or other disposition of the Project in accordance with the provisions
hereof, the purchaser, transferee or assignee shall assume the obligations of
the Borrower under Article 9 hereof and under the Land Use Restriction
Agreement.
-52-
ARTICLE 10 - Certain Agreements of Borrower
The Borrower agrees as follows:
Section 1001. Borrower to Make Loan Payments Sufficient to Meet Debt
------------------------------------------------------
Service on Bonds and Additional Payments.
- ----------------------------------------
A. Borrower's Loan Payments. The Borrower agrees to pay as a Loan
------------------------
payment to the Trustee a sum in immediately available funds which, including
amounts deposited pursuant to the next following paragraph of this Section 1001
(plus interest accrued thereon) but excluding amounts which are then held for
purposes other than the next succeeding payment of principal, premium, if any,
and interest on the Bonds, equals all payments due on the Bonds on such Payment
Date (excluding amounts excluded pursuant to Section 304(c) hereof). The
Borrower shall receive a credit against its obligation to make Loan payments to
the extent of (i) any moneys drawn by the Trustee under the Letter of Credit,
and (ii) the amount of any other Priority Funds available to make the
corresponding payment with respect to the Bonds.
In any event the Loan payments payable under this Section shall be
sufficient to pay the total amount due with respect to such principal of and
interest and any premium on the Bonds as and when due. If at any time when said
payments are due the balance in the Bond Fund available for said purpose is
insufficient to make such payments, the Borrower forthwith will pay to the
Trustee any such deficiency. Subject to such obligation and the obligation of
the Borrower under the immediately preceding paragraph, the Borrower shall not
be required to make any Loan payment to the extent its application would result
in an excess in the Bond Fund over the amounts necessary to meet obligations
then due and payable from the Bond Fund plus any additional amounts then
required to be maintained in the Bond Fund.
B. Additional Payments. The Borrower agrees to duly make on demand (by
-------------------
the Issuer or the Trustee, as the case may be) Additional Payments as follows:
(a) To the Issuer, as reimbursement for all reasonable costs,
expenses and liabilities paid or incurred by the Issuer in satisfaction of any
obligations-of the Borrower not performed by the Borrower as required hereunder
or under the Bond Purchase Agreement.
-53-
(b) To the Issuer, as reimbursement for or prepayment of all
reasonable costs, expenses and liabilities paid or incurred or to be paid or
incurred by the Issuer or any of its directors, officers, employees or agents at
the request of the Borrower or as required by this Indenture, the Enabling Act,
other than any rebates due to the United States of America under Section
103(c)(6) of the Code on account of moneys and investments held by the Issuer.
(c) To the Trustee, its reasonable fees and expenses as trustee, bond
registrar and paying agent, including the reasonable fees and expenses of its
attorneys and agents, and any other amounts due to the Trustee under this
Indenture.
C. Bank Obligations. The Borrower agrees to pay all Bank Obligations
----------------
when due.
D. Obligations Unconditional. The Borrower's obligations to make the
-------------------------
payments required by this Indenture shall be absolute and unconditional and
shall not be subject to any right of recoupment or set-off. Until the lien of
this Indenture has terminated and ceased to have effect, the Borrower will not
(i) suspend or discontinue any payments required by this Indenture or (ii) fail
to fulfill its other agreements herein for any cause including without
limitation failure fully to acquire and install the Project, or damage to the
Project, any failure of consideration or commercial frustration of purpose, any
change in federal or state or other laws or administrative rulings or actions or
any failure of the Issuer to fulfill any agreement, duty, liability or
obligation related to this Indenture.
Section 1002. Borrower to Maintain Its Legal Existence. The Borrower will
----------------------------------------
maintain its legal existence and qualification under the laws of the State of
California.
Section 1003. [Not Used].
Section 1004. Borrower to Give Notice of Event Adversely Affecting Tax-
---------------------------------------------------------
Exempt Status of Interest on Bonds. The Borrower will give prompt written
- ----------------------------------
notice to the Trustee and the Bank of the occurrence of any Determination of
Taxability or any basis therefor, and of any allegation by any federal or state
agency that any such event has occurred, of which the Borrower has or acquires
knowledge.
-54-
Section 1005. Covenants Related to Mortgaged Property.
---------------------------------------
A. Maintenance and Modifications of Mortgaged Property by Borrower;
----------------------------------------------------------------
Restrictions on Prior Liens, etc. Subject to the provisions of this Section
- --------------------------------
1005 and Article 7 (dealing with damage and destruction), the Borrower will
maintain the Mortgaged property in good repair, working order and condition and
will from time to time make or cause to be made all necessary and proper
repairs, replacements and renewals.
The Mortgaged Property and any use thereof by the Borrower or any lessee
shall conform with all applicable zoning, planning, building, environmental and
other regulations of governmental authorities having jurisdiction over the
Borrower, and neither the Borrower nor any lessee shall permit a nuisance
thereon. Subject to the foregoing, the Borrower may at its cost remodel or make
substitutions, modifications and improvements to the Mortgaged Property as it
deems desirable for its uses and purposes and the same shall be the property of
the Borrower and be included as part of the Mortgaged Property and the Project;
provided that the Borrower shall advise the Bank and the Trustee of any such
substitutions, modifications and improvements involving the expenditure of more
than $350,000 in the aggregate or $25,000 individually in any fiscal year.
So long as the Letter of Credit or the Substitute Letter of Credit is
outstanding, except as expressly permitted hereunder, the Borrower will not sell
or transfer any part of the Mortgaged Property, or create, incur, assume or
permit to exist any encumbrance, lien or charge of any kind on the Trust Estate
(except Permitted Encumbrances) without the written consent of the Bank. The
Borrower shall not suffer or permit any mechanics lien or other encumbrance to
remain against the Trust Estate by reason of work, labor, services or materials
supplied or claimed to be supplied, in connection with the Mortgaged Property;
provided that after notice to the Trustee and the Bank, the Borrower may contest
promptly the validity or the amount of any such lien or encumbrance by
appropriate proceedings timely instituted, unless the Trustee or the Bank shall
notify the Borrower that, in the opinion of its counsel, by nonpayment of any
such items the lien of this Indenture as to any part of the Trust Estate will be
subject to loss or forfeiture, in which event the Borrower shall promptly cause
such mechanics' lien or other encumbrance to be discharged or dissolved.
B. Disposition of Portions of Mortgaged Property. The Borrower in its
---------------------------------------------
sound discretion may sell or otherwise dispose of any machinery or equipment or
other personal property included in the Mortgaged Property owned by it which it
determines has become
-55-
inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary,
Provided:
(a) substitute property having equal or greater utility (but not
necessarily having the same function) in the operation of the facility at which
the replaced property was located is installed anywhere at such facility; such
removal and substitution will not impair operating utility or change the nature
of such facility to the extent that it would not constitute the type of facility
operated prior to such replacement; and such property shall be free of all liens
and encumbrances (other than Permitted Encumbrances) and shall become a part of
the Mortgaged Property; or
(b) the Project Supervisor shall certify that removal of such
Property, together with any substitution, will not materially impair the
efficiency of the Borrower's operations or adversely affect the Structural
integrity of such facility or change the nature of such facility to the extent
that it would not constitute the type of facility operated prior to such
replacement; and (except as hereinafter provided) any disposition proceeds or
trade-in credit are paid into the Bond Fund.
Any damage to structures not being removed shall be repaired at the cost of
the Borrower, utilizing insurance Proceeds to the extent available.
Except as may be waived in writing by the Bank, the Borrower shall Promptly
report to the Trustee and the Bank each such removal, substitution, sale and
other disposition and shall pay to the Trustee any amounts required hereunder;
but no such report or payment need be made unless the aggregate fair market
value of all machinery or equipment or other Personal Property included in the
Mortgaged Property sold or otherwise disposed of exceeds $350,000 in the
aggregate or $25,000 individually in any fiscal year.
Notwithstanding any other provision in this Indenture, the Borrower, with
the written approval of the Bank, may sell or dispose of all or any part of the
Mortgaged Property.
C. Taxes, Other Governmental Charges and Utility Charges. The Borrower
-----------------------------------------------------
shall duly pay or cause to be paid all taxes and governmental charges of any
kind that may at any time be lawfully assessed or levied against or with respect
to the Mortgaged Property, all utility and other charges incurred in the
operation, maintenance, use, occupancy and upkeep of the Mortgaged Property are
all assessments and charges lawfully made by any governmental body for public
improvements that may be
-56-
secured by a lien on the Mortgaged Property. However, the Borrower may contest
in good faith any such items, assessments and other charges and, in such event,
may Permit the taxes, assessments or other charges so contested to remain unpaid
during any period, including appeals, when the Borrower is in good faith
contesting the same, so long as adequate reserves have been established and
enforcement of the contested item is effectively stayed, unless the Trustee or
the Bank shall notify the Borrower that, in the opinion of Its counsel, by
nonpayment of such items the lien of the Indenture as to any part of the Trust
Estate will be subject to loss or forfeiture, in which event the Borrower shall
Promptly cause such taxes and charges to be discharged.
D. Right of Access. The Borrower agrees that upon reasonable request In
---------------
writing to the Project Supervisor, the Issuer, the Trustee and the Bank and
their representatives may at all reasonable times examine and inspect the
Mortgaged Property.
E. Location. The Borrower will not change its name or the location of
--------
its Principal Place of business without notice to the Trustee and the Bank at
least thirty days prior to such change.
Section 1006. Instruments of Further Assurance; Recordings and Filing.
-------------------------------------------------------
The Borrower will do, execute, acknowledge and deliver or cause to be so
Performed such supplemental indentures and such further acts, instruments and
transfers as the.Trustee or the Bank may reasonably require for the better
assuring, transferring, Pledging, assigning and conferring unto the Trustee and
the Bank the Property and rights herein described and the income and revenue
Pledged hereby.
The Borrower will cause this Indenture and any necessary financing
statements, and other instruments (and Supplements and amendments to any of the
foregoing) to be recorded and filed as may be required by law in order to
preserve fully and protect the security of the Bank and the holders of the Bonds
and the rights of the Trustee hereunder.
The Trustee shall cause to be filed any continuation statements or
instruments of a similar character which, in its opinion, are required by law in
order to Preserve and protect the security of the Bondholders and the Bank.
Section 1007. Insurance and Worker's Compensation Coverage. The Borrower
--------------------------------------------
will insure or cause to be Insured the Mortgaged Property in the amount and with
the coverage of the Required Property Insurance Coverage. Any insurance policy
Issued pursuant to this Section shall be so written as to name the Trustee and
the Bank as additional insureds and to make losses
-57-
with respect to the Mortgaged Property payable directly to the Trustee to be
held by the Trustee in a separate insurance loss account and disbursed in the
manner provided in Section 701.
The Borrower will cause all such policies of insurance to (i) provide that
all insurance proceeds shall be adjusted with and payable to the Trustee and the
Bank, (ii) include waivers by the insurer of all claims for insurance premiums
against the Trustee or the Bank, and (iii) provide that any losses shall be
payable to the Trustee and the Bank notwithstanding any act or failure to act or
negligence by either of the Trustee or the Bank, or violation of warranties,
declarations or conditions contained in any policy and notwithstanding
foreclosure or other proceedings or notice of sale of such property or any
change in title or ownership of such property.
The Borrower will carry or cause to be carried Required public Liability
Insurance applicable to the Mortgaged Property. Proceeds of such insurance shall
be applied against the related liability. The Borrower will maintain all
worker's compensation coverage required of it by the applicable laws of the
State of California.
All insurance acquired hereunder shall be with generally recognized
responsible insurance companies authorized to do business in the State of
California selected by the Borrower as approved by the Bank. Such insurance may
be blanket insurance and shall provide that it may not be cancelled or
materially altered without 30 days' prior written notice to the Trustee and the
Bank. The Borrower shall furnish the Trustee and the Bank (and keep updated)
evidence of such insurance in such form as the Trustee or the Bank may require.
Substitutions for or omissions from the coverage required by this Article
may be made upon the written consent of the Bank.
Section 1008. Indemnification of Issuer, Bank and Trustee. Notwithstanding
-------------------------------------------
its insurance agreements, the Borrower shall to the extent not prohibited by
applicable law indemnify and save harmless the Issuer, the Bank and the Trustee
and their respective directors, officers, employees and agents against and from
(a) all claims by or on behalf of any person arising out of (i) any condition of
the Mortgaged Property, or (ii) the acquisition, installation or use of it, or
(iii) any accident, injury or damage to any person occurring in or about the
Mortgaged Property, or (iv) any breach or default by the Borrower of any of its
obligations under the Basic Agreements, or (v) any act or omission of the
Borrower or any of its agents, contractors, servants, employees, or licensees,
or (vi) to the
-58-
extent not Prohibited by applicable law, the offering, issuance, sale or resale
of the Bonds, or (vii) in the case of the Trustee, all losses, costs, charges,
expenses, judgments and liabilities to third parties arising out of its
acceptance, performance or administration of this Indenture and the transactions
contemplated hereby and (b) all reasonable costs, counsel fees, expenses or
liability reasonably incurred in connection with any such claim or any action or
Proceeding brought thereon. Any indemnification of the Trustee under clause (i),
(ii) or (iii) shall not be effective if the claim arises while the Trustee is in
possession of the Mortgaged Property Pursuant to the provisions of the First
Deed of Trust, If any action or proceeding is brought against the Issuer, the
Bank or the Trustee or any such director, officer, employee or agent by reason
of any indemnified claim, the Borrower upon notice from the affected party shall
resist or defend such action or proceeding. Subject to the foregoing, the
Issuer, the Bank and the Trustee shall cooperate and join with the Borrower at
the expense of the Borrower as may be required in connection with any action
taken or defended by the Borrower.
The Issuer, the Bank and the Trustee and their respective directors,
officers, employees and agents shall be entitled to the advice of counsel (who
may also be counsel for the Borrower or any Bondholder) and shall be wholly
Protected as to action taken or omitted to be taken in good faith in reliance on
such advice. They may rely conclusively on any communication or other document
furnished to them under the Basic Agreements and reasonably believed by them to
be genuine. They shall not be liable for any action (i) taken by them in good
faith and reasonably believed by them to be within the discretion or powers
conferred upon them, or (ii) in good faith not taken by them because reasonably
believed to be beyond the discretion or powers conferred upon them, or (iii)
taken by them Pursuant to any direction or instruction by which they are
governed by the Basic Agreements, or (iv) omitted to be taken by them by reason
of the lack of any direction or instruction required hereby or by the Bond
Purchase Agreement for such action; nor shall they be responsible for the
consequence of any error or judgment reasonably made by them. The Issuer, the
Bank and the Trustee shall in no event be liable for the application or
misapplication of funds, or for other acts or defaults, by any Person, except
their own directors, officers and employees and others specified in Section
1201(b). When any consent or other action by them is called for by the Basic
Agreements, they may defer such action pending such investigation, inquiry, or
supporting evidence as they may require. They shall not be required to take any
remedial action (other than the giving of notice) unless indemnity reasonably
satisfactory to them is furnished for any
-59-
expense or liability to be incurred thereby. They shall be entitled to
reimbursement for expenses reasonably incurred or advances reasonably made, with
interest at the FNBB Base Rate, in the exercise of their rights or the
performance of their obligations hereunder, to the extent that they act without
previously obtaining indemnity. No permissive right or power to act which they
may have shall be construed as a requirement to act; and no delay in the
exercise of a right or power shall affect the subsequent exercise of that right
or power. The Issuer shall not be required to take notice of any breach or
default by the Borrower under any Basic Agreement, except when given notice
thereof by the Trustee. No recourse shall be had by the Borrower, the Trustee,
the Bank or any Bondholder for any claim based on any Basic Agreement against
any director, officer, employee or agent of the Issuer alleging Personal
liability on the part of such person unless such claim is based upon the willful
dishonesty of or intentional violation of law by such person.
Section 1009. Inconsistencies Between Indenture and Reimbursement
---------------------------------------------------
Agreement. With respect to any obligations of the Borrower under this Article X
- ---------
owing to the Bank, any inconsistency between the Provisions of this Indenture
and those contained in the Reimbursement Agreement shall be interpreted in favor
of the agreements contained in the Reimbursement Agreement.
PART V
------
EVENTS OF DEFAULT
-----------------
ARTICLE 11 - Default Provisions and Remedies of Trustee, Bank, Bondholders
and Issuer
Section 1101. Events of Default; Defaults. The occurrence of any of the
---------------------------
following events shall constitute an event of default" hereunder:
(a) Failure by the Issuer to pay interest on any Bond when due and
payable.
(b) Failure by the Issuer to pay any Principal or premium on any Bond
when due and payable, whether at stated maturity or by acceleration or pursuant
to any redemption or Purchase requirements under Section 401.
(c) Failure by the Borrower to make any Loan payment or Additional
Payment when due and payable.
-60-
(d) Failure by the Borrower or the Issuer to observe or perform any
other covenant, condition or agreement on its part to be observed or performed
in this Indenture or the Bonds, for a period of 30 days after notice of such
failure shall have been given to the Borrower and the Bank by the Trustee or the
Issuer or to the Issuer and the Bank by the Trustee, unless (l) the Trustee
receives an opinion of Bond Counsel stating that (i) such failure does not cause
the interest on the Bonds to cease to be exempt from federal income taxation or
(ii) such failure can be remedied with the effect of Permitting the interest on
the Bonds to continue to be exempt from federal income taxation and (iii) such
failure does not cause a violation of the Enabling Act by the Issuer or the
Borrower and (2) such failure is remedied within the period of time determined
by Bond Counsel to be necessary to permit interest on the Bonds to continue to
be exempt from federal income taxation.
(e) Receipt by the Trustee of notice from the Bank that an "Event of
Default" within the meaning of the Reimbursement Agreement has occurred.
(f) The Letter of Credit shall be revoked or terminated for any
reason prior to its stated expiration date and a Substitute Letter of Credit
shall not have been issued within 30 days after such revocation or termination,
or the Bank shall wrongfully refuse to honor the Letter of Credit.
(g) The material inaccuracy or incompleteness of any material
representation or warranty made in writing by or on behalf of the Borrower in
connection with the transactions contemplated hereby.
(h) The occurrence of a Bankruptcy.
(i) An occurrence of an Act of Bank Bankruptcy unless a Substitute
Letter of Credit has been issued within 30 days after such event.
(j) The occurrence of any default under the Land Use Restriction
Agreement.
(k) Receipt by the Trustee, on or after March 1, 1986, of notice from
the Remarketing Agent that the Remarketing Agent has not received the opinion of
Bond Counsel described in Section 501A.
The term "default" hereunder means a default by the Issuer or the Borrower
which, with the passage of time or giving of notice or both, would constitute an
event of default.
-61-
The Borrower agrees to notify the Issuer and the Trustee promptly in
writing of the occurrence of any known event of default.
Within five days after actual knowledge of an event of default under
subsection (a), (b), (c) or (e) above by an Officer in its Corporate Trust
Division, the Trustee shall give written notice, by registered or Certified
mail, to the Issuer, the Borrower, the Bank and all of the Bondholders, and upon
notice as provided in Section 1201(d) shall give similar notice of any other
event of default.
Section 1102. Acceleration. Upon occurrence of any event of default
------------
described in the subsection (a), (b), (e), (f), (h), (i) or (k) of Section 1101,
the Trustee shall immediately, and upon the occurrence of an event of default
described in any other subsection of Section 1101 the Trustee shall, upon and
only upon the written request of the Bank, declare all Bonds then outstanding to
be due and payable immediately, and, upon the declaration, all Principal and
interest accrued thereon shall become immediately due and payable, and there
shall be an automatic corresponding acceleration of the Borrower's indebtedness
on the Loan; Provided, however, that if there shall have occurred any event of
-------- -------
default under subsection (h) or (i) of Section 1101, the Principal of and
Premium, if any, on all Bonds then outstanding and the interest accrued thereon
automatically shall become immediately due and payable without any action by the
Trustee. Interest shall accrue to the Payment date determined by the Trustee
(which Payment date shall be not later than 15 days following the acceleration)
or the actual payment date, if later.
The Provisions of this Section 1102 are subject to the condition that with
respect to an event of default under subsection (e) of Section 1101, any waiver
by the Bank of any "Event of Default" under the Reimbursement Agreement and
rescission and annulment of its consequences shall constitute a waiver of the
corresponding event of default under this Indenture and a rescission and
annulment of the consequences thereof. No such waiver, rescission and annulment
shall extend to or affect any subsequent event of default or impair any right or
remedy consequent thereon.
Notwithstanding the foregoing, no waiver, rescission or annulment of an
event of default hereunder shall be made if the Bank shall theretofore have
honored in full a drawing under the Letter of Credit in respect of such event of
default.
-62-
Section 1103. [Not used].
Section 1104. Remedies; Rights of Bank and Bondholders.
----------------------------------------
Upon acceleration under Section 1102, or upon the occurrence of an event of
default under subsection (h) or (i) of Section 1101, whether or not acceleration
has occurred, the Trustee immediately shall draw upon the Letter of Credit as
Provided in Section 503(b) in an amount equal to the Principal of the Bonds,
together with interest thereon to the Payment Date established by the Trustee
under Section 1102.
Upon the continuance of an event of default, if so requested by the Bank
or, unless and until the Principal of and interest on the Bonds shall be paid in
full, a Majority of the Bondholders, and if Satisfactory indemnity has been
furnished to it, the Trustee shall exercise such of the rights and Powers
conferred by this Indenture or the First Deed of Trust as the Trustee, being
advised by counsel, shall deem most effective to enforce and protect the
interests of the Bondholders and the Bank.
No remedy under this Indenture or the First Deed of Trust is intended to be
exclusive, and to the extent Permitted by law each remedy shall be cumulative
and in addition to any other remedy hereunder or now or hereafter existing;
Provided, however, that upon acceleration under Section 1102 the Trustee shall
first draw upon the Letter of Credit as Provided in Section 503(b).
No delay or omission to exercise any right or power shall impair such right
or power or constitute a waiver of any default or event of default or
acquiescence therein; and each such right and power may be exercised as often as
deemed expedient.
No waiver by the Trustee, the Bank or the Bondholders of any default or
event of default shall extend to any subsequent default or event of default.
Section 1105. Right of Bank and Bondholders to Direct Proceedings.
---------------------------------------------------
Anything in this Indenture to the contrary notwithstanding, the Bank and, so
long as Bonds are outstanding, a Majority of the Bondholders shall have the
right at any time, by an instrument or instruments in writing executed and
delivered to the Trustee, to direct the method and place of conducting all
proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, or for the appointment of a receiver or any other
proceeding hereunder; provided that such direction shall be in accordance with
applicable law and this Indenture, and Provided that the Trustee shall be
indemnified to its satisfaction. In the event of a disagreement between the Bank
and a Majority of the Bondholders in the exercise of their
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rights hereunder, then so long as the Bonds have been accelerated under Section
1102 and are outstanding, the direction of a Majority of the Bondholders shall
be controlling.
Section 1106. Appointment of Receiver. Upon the occurrence and
-----------------------
continuance of an event of default and commencement of judicial Proceedings to
enforce the rights of the Trustee and of the Bondholders and the Bank under this
Indenture, the Trustee shall be entitled, as a matter of right, to the
appointment of a receiver or receivers of the Mortgaged Property, Pending such
proceedings, with such power as the court making such appointment shall confer.
Section 1107. Application of Moneys. Upon the occurrence and continuance
---------------------
of an event of default, there shall be deposited in the Bond Fund all moneys and
proceeds held or received by the Trustee or any receiver Pursuant to this
Indenture or the First Deed of Trust or any related document or the exercise of
any rights granted hereby or thereby, except amounts drawn under the Letter of
Credit, which amounts shall be deposited in the Letter of Credit Fund, and all
moneys in the Letter of Credit Fund shall be applied to the payment of interest
on and principal of (and, during the Fixed Rate Period, premium, if any, on) the
Bonds, and all moneys in the Bond Fund (except funds for which provision has
been made under Section 507) shall be applied after payment of all Costs of
Collection incurred by the Trustee or any receiver (i) to the payment of any
amounts due as Additional Payments under Section 1001B or amounts due under
Section 1008, (ii) then to the payment of interest, including interest on
overdue principal, then due on the Bonds, without regard to when such interest
became due, (iii) then to the payment of principal and premium, if any, then due
on the Bonds, without regard to when such principal became due, and (iv) then to
the payment of any Bank Obligations then remaining due; or in such other order
as may be determined by the Trustee with the written consent of all of the
Bondholders and, if the Issuer is affected thereby, the written consent of the
Issuer. Payments shall be made ratably, according to the amounts due
respectively for interest and principal and premium if any, among Bondholders
entitled to receive the payment being made.
Section 1108. Remedies Vested in Trustee. All rights of action (including
--------------------------
the right to file proofs of claim) under this Indenture or under any of the
Bonds may be enforced by the Trustee without the possession of any of the Bonds
or their production in any proceeding; and any such proceeding instituted by
the Trustee shall be brought in its name, as Trustee, without the necessity of
joining as plaintiffs or defendants any holders of the Bonds or the Bank; and
any recovery of the judgment shall
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be for the benefit of the holders of the outstanding Bonds and the Bank,
subject, however, to the provisions of this Indenture.
Section 1109. Rights and Remedies of Bank and Bondholders.
-------------------------------------------
Neither the Bank nor any Bondholder shall have any right to institute any
proceeding for the enforcement of this Indenture or any right or remedy granted
hereby unless (i) an event of default is continuing, (ii) the Trustee has due
notice thereof and has been notified as provided In Section 1201(d), (iii) the
Bank or the holders of at least 25% in aggregate principal amount of Bonds then
outstanding shall have made written request to the Trustee and shall have
afforded the Trustee reasonable opportunity to exercise its powers or to
institute such proceeding in its own name, and have offered to the Trustee
indemnity satisfactory to It, and (iv) the Trustee shall have failed or refused
to exercise its power or to institute such proceeding. Such notice, request and
offer of Indemnity shall at the option of the Trustee be conditions Precedent to
the execution of the powers and trusts of this Indenture, and to any action for
the enforcement of this Indenture or of any right or remedy granted hereby; it
being understood and intended that neither the Bank nor any one or more holders
of the Bonds shall have any right to affect or prejudice the lien of this
Indenture by its or their action or to enforce any right hereunder except in the
manner herein provided and that proceedings shall be instituted and maintained
in the manner herein provided and for the benefit of the Bank and the holders of
all Bonds then outstanding. Notwithstanding the foregoing, each Bondholder shall
have a right of action to enforce the payment of the principal of and premium,
if any, and interest on any Bond held by it at and after the maturity thereof,
at the place, from the sources and in the manner expressed in such Bond.
Section 1110. Waivers of Events of Default. The Trustee shall waive (in
----------------------------
advance or otherwise) any event of default and its consequences and rescind any
declaration of maturity of principal upon the written request of all of the
Bondholders (or, if the Bonds are no longer outstanding, the Bank) and, with
respect to any right of the Issuer to payment or reimbursement pursuant to
Section 1001B or 1008, the written consent of the Issuer, but no such waiver
(except as specifically provided therein) or rescission shall extend to any
subsequent or other event of default. Notwithstanding the foregoing, the Trustee
shall waive an event of default under Section 1101(e) and its consequences and
rescind any declaration of maturity of principal only upon the express written
consent of the Bank.
Section 1111. Intervention by Trustee. In any judicial Proceeding which
-----------------------
the Trustee believes has a substantial bearing
-65-
on the interests of the Bank or the Bondholders, the Trustee may intervene on
behalf of the Bank or the Bondholders.
Section 1112. Remedies of Issuer on Event of Default. Upon the occurrence
--------------------------------------
and continuance of an event of default, the Issuer (i) shall, if requested by
the Trustee, confirm in writing any acceleration of Loan indebtedness, (ii) may,
upon the request of the Trustee, take such action in law or equity as may appear
desirable to collect any Past due or accelerated Loan indebtedness or other
payments hereunder or to enforce compliance with any obligation or agreement of
the Borrower in this Indenture and (iii) shall have access to and may examine
and make copies of the books, accounts and other data and tax returns of the
Borrower insofar as they pertain to the Mortgaged Property or to the Borrower's
operation thereof. However, the Issuer shall not be required to take any action
which in its opinion might cause it to expend time or money or otherwise incur
any liability unless satisfactory indemnity has been furnished to it. Anything
in this Indenture to the contrary notwithstanding, the Issuer may enforce its
rights under Sections 1001B and 1008 of this Indenture by any lawful available
remedy.
Section 1113. Non-Recourse. If an event of default shall occur hereunder,
------------
the sole remedy of the Trustee, Issuer and Bank shall be hereunder against the
Mortgaged Property and under any other instruments or collateral given as
security for the Borrower's obligations under this Indenture and the Bank
Obligations, and the Borrower shall not have any liability for any deficiency of
the Borrower's obligations under the Loan, or for any default under this
Indenture or the Bank Obligations.
PART VI
-------
THE TRUSTEE
ARTICLE 12 - The Trustee
Section 1201. Acceptance of Trusts. The Trustee accepts the trusts
--------------------
imposed upon it by this Indenture and agrees to perform such trusts, but only
upon the terms and conditions contained herein and in Section 1008.
(a) The Trustee, prior to the occurrence of an event of default and
after the curing of all events of default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Indenture, and no implied agreements or obligations shall be read into this
Indenture against the Trustee. In case an event of default has
-66-
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in its exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
(b) The Trustee may execute any of its trusts or powers and perform
any of its duties through attorneys, agents, receivers or employees but shall be
answerable for their conduct in accordance with the above standard, except that
as to attorneys, agents and receivers the Trustee shall be answerable only as to
the selection of same in accordance with said standards. The Trustee shall be
entitled to advice of counsel concerning all matters of trust duties hereunder,
and may pay reasonable compensation to all such attorneys, agents, receivers,
employees and counsel as may reasonably be employed.
(c) Any action taken by the Trustee Pursuant to this Indenture upon
the request or authority or consent of any person who at the time of making such
request or giving such authority or consent is the holder of any Bond shall be
conclusive and binding upon all future holders of such Bond.
(d) The Trustee shall not be required to take notice or be deemed to
have notice of any default hereunder, except defaults described in Section
1101(a), (b), (c) or (e), unless an officer in its Corporate Trust Division
shall be notified in writing of such default by the Borrower, the Issuer, the
Bank or by the holders of at least 25% in aggregate principal amount of Bonds
then outstanding. Until such notice is received, the Trustee may conclusively
assume there is no such default.
(e) The Trustee shall not be required to give any bond or surety.
Section 1202. Fees and Expenses of Trustee. The Trustee shall be entitled
----------------------------
to fees for its services rendered hereunder in the amounts of an acceptance fee
of $3,200 payable on the date of delivery of the Bonds to the initial purchaser
or purchasers and an annual fee of $5,000 or such other amount as may be agreed
to from time to time between the Trustee and the Borrower payable annually in
advance on the date of delivery of the Bonds to the initial purchaser or
purchasers and thereafter on the first Wednesday in December in each year,
commencing December 3, 1986. The Trustee also shall be entitled to reimbursement
of all advances, counsel fees and other out-of-pocket expenses reasonably made
or incurred by the Trustee in connection with such services, including but not
limited to wire transfer and telex expenses, and for such reasonable fees and
expenses as it
-67-
may charge after an event of default has occurred and is continuing.
Section 1203. Successor Trustee. Any corporation or association into
-----------------
which the Trustee may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer all or substantially all its
trust business and assets, and any corporation or association resulting from any
such conversion, sale, merger, consolidation or transfer, ipso facto, shall be
---- -----
and become successor Trustee hereunder and vested with all the trusts, powers,
discretions, immunities, privileges and all other matters as was its
Predecessor, without the execution or filing of any instrument or any further
act on the part of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that any such successor Trustee shall be a
trust company or bank in good standing having trust powers.
Section 1204. Resignation by Trustee; Removal. The Trustee may at any
-------------------------------
time resign from the trusts hereby created by giving 30 days written notice to
the Issuer, to the Borrower, to the Bank and to each Bondholder, but such
resignation shall not take effect until the appointment of a successor Trustee
and acceptance by the successor Trustee of such trusts. The Trustee may be
removed at any time by an instrument or concurrent instruments in writing
delivered to the Trustee and to the Issuer and signed by a Majority of the
Bondholders or, if the Bonds are no longer outstanding, the Bank.
Section 1205. Appointment of Successor Trustee. If the Trustee hereunder
--------------------------------
shall resign or be removed, or be dissolved, or otherwise become incapable of
acting hereunder, or in case it shall be taken under the control of any public
officer or officers, or of a receiver appointed by a court, a successor shall be
appointed by the Borrower. At any time within one year after any such vacancy
shall have occurred, a Majority of the Bondholders or, if a Majority of the
Bondholders have not so acted or the Bonds are no longer outstanding, the Bank
may appoint a successor Trustee by an instrument or concurrent instruments in
writing signed by or on behalf of such holders, which appointment shall
supersede any Trustee theretofore appointed by the Borrower. Each successor
Trustee shall be a trust company or bank in good standing having trust powers
and having a reported capital and surplus of not less than $25,000,000. Any such
successor Trustee shall become Trustee upon giving notice to the Borrower, the
Issuer, the Bank and the Bondholders, if any, of its acceptance of the
appointment, vested with all the property, rights and powers of the Trustee
hereunder, without any further act or conveyance. Any predecessor Trustee shall
execute, deliver and record and file
-68-
such instruments as the Trustee may reasonably require to confirm or perfect any
such succession. In the event that a successor Trustee is not appointed within
30 days of the resignation of the Trustee, then the Trustee may petition a court
of competent jurisdiction to appoint its own successor.
Section 1206. Dealing in Bonds. The Trustee and any of its directors,
----------------
officers, employees or agents may become the owners of any or all of the Bonds
secured hereby.
Section 1207. Trustee as Bond Registrar; List of Bondholders. The Trustee
----------------------------------------------
is hereby designated as bond registrar for the Bonds and, as such, will keep on
file a list of names and addresses of the holders of all Bonds; provided,
however, that the Trustee shall be under no responsibility with regard to the
accuracy of the address of any Bondholder. At reasonable times and under
reasonable regulations established by the Trustee, such list may be inspected
and copied by the Borrower or by owners (or a designated representative thereof)
of Bonds then outstanding, such ownership and the authority of any such
designated representative to be evidenced to the satisfaction of the Trustee.
Section 1208. Successor Trustee as Custodian of Funds, Bond Registrar and
-----------------------------------------------------------
Paying Agent. In the event of a change in the office of Trustee, the
- ------------
predecessor Trustee which has resigned or been removed shall cease to be
custodian of any funds it may hold pursuant to this Indenture, and cease to be
the bond registrar and Paying Agent for any of the Bonds, and the successor
trustee shall become such custodian, bond registrar and Paying Agent.
Section 1209. Adoption of Authentication. In case any Bonds shall have
--------------------------
been authenticated but not delivered, any successor Trustee may adopt the
certificate of authentication of the predecessor Trustee and deliver the Bonds
as so authenticated.
Section 1210. Designation and Succession of Paying Agents. After 15 days'
-------------------------------------------
written notice to the Borrower and subject to the Borrower's approval, the
Trustee may designate any other banks or trust companies as Paying Agents.
Any bank or trust company with or into which any Paying Agent other than
the Trustee may be merged or consolidated, or to which the assets and business
of such Paying Agent may be sold, shall be deemed the successor of such Paying
Agent for the purposes of this Indenture. If the posItion of such Paying Agent
shall become vacant for any reason, the Trustee shall, within 30 days
thereafter, appoint a bank or trust company located in the same State as such
Paying Agent to fill such vacancy.
-69-
The paying Agents shall enjoy the same protective provisions as the
performance of their duties hereunder as are specified in Section 1201 with
respect to the Trustee, insofar as such provisions may be applicable.
Section 1211. Appointment of Co-Trustee. It is the purpose of this
-------------------------
Indenture and the other Basic Agreements that there shall be no violation of any
law of any jurisdiction (including particularly the law of the State of
California) denying or restricting the right of banking corporations or
associations to transact business as Trustee in such jurisdiction. It is
recognized that in case of litigation under this Indenture or any other Basic
Agreement and in particular in case of the enforcement thereof on the occurrence
of an event of default, or in case the Trustee deems that by reason of any
present or future law of any jurisdiction it may not exercise any of the powers,
rights or remedies herein or therein granted to the Trustee or hold title to the
properties, in trust, as herein granted, or take any other action which may be
desirable or necessary in connection therewith, the Trustee may appoint an
additional individual or institution as a separate or Co-Trustee, in which event
each and every remedy, power, right, claim, demand, cause of action, immunity,
estate, title, interest and lien expressed or intended by this Indenture or any
other Basic Agreement to be exercised by or vested in or conveyed to the Trustee
with respect thereto shall be exercisable by and vest in such separate or Co-
Trustee to exercise such powers, rights and remedies, and every covenant and
obligation necessary to the exercise thereof by such separate or Co-Trustee
shall run to and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the Issuer be
required by the separate or Co-Trustee so appointed by the Trustee for more
fully and certainly vesting in and confirming to him or it such properties,
rights, powers, trusts, duties and obligations, any and all such deeds,
conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer. In case any separate or Co-Trustee, or
a successor, shall die, become incapable of acting, resign or be removed, all
the estates, properties, rights, powers, trusts, duties and obligations of such
separate or Co-Trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a successor to Such separate
or Co-Trustee. Any Co-Trustee appointed by the Trustee pursuant to this Section
may be removed by the Trustee, in which case all powers, rights and remedies
vested in the Co-Trustee shall again vest in the Trustee as if no such
Appointment of a Co-Trustee had been made. In no event shall the Trustee be held
liable or responsible for the actions of the Co-Trustee, provided that the Co-
Trustee has been selected with due care.
-70-
PART VII
--------
SUPPLEMENTAL INDENTURE AND WAIVERS: MISCELLANEOUS
ARTICLE 13 - Supplemental Indentures and Waivers
Section 1301. Supplemental Indentures Not Requiring Consent of
------------------------------------------------
Bondholders. The parties may without the consent of, or notice to, any of the
- ------------
Bondholders, enter into indentures supplemental to this Indenture and financing
statements or other instruments evidencing the existence of a lien as shall not,
in their opinion, be inconsistent with the terms and provisions hereof for any
one or more of the following purposes:
(a) To cure any ambiguity, inconsistency or formal defect or omission
in this Indenture;
(b) To grant to or confer upon the Trustee for the benefit of the
Bondholders and the Bank any additional rights, remedies, powers, or authority
that may lawfully be granted to or conferred upon the Bondholders, the Bank or
the Trustee;
(c) To subject to the lien and pledge of this Indenture additional
revenues, properties or collateral;
(d) To evidence any succession to the Issuer and the assumption by
such successor of the agreements of the Issuer contained in this Indenture and
the Bonds;
(e) To the extent required by law, to permit registration of the
Bonds under the federal Securities Act of 1933, as amended, and the federal
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and to
permit qualification of the Indenture under the Trust Indenture Act;
(f) To provide for uncertificated Bonds or, to the extent permitted
by law, for the issuance of coupons and bearer Bonds or Bonds registered only as
to principal without causing interest on such Bonds to be subject to federal
income taxation;
(g) To the extent permitted by Section 908 hereof;
(h) To effect any other change herein which is necessary or proper in
order to obtain a rating of the Bonds by Moody's or S & P equal to the rating
applicable to the Bank or to
-71-
enable Bond Counsel to render the opinion referred to in section 501A and which,
in the judgment of the Remarketing Agent, is not to the prejudice of the holders
of the Bonds; and
(i) To effect any other change herein which, in the judgment of the
Trustee and the Bank, is not to the prejudice of the holders of the Bonds.
Section 1302. Supplemental Indentures Requiring Consent of Bondholders.
--------------------------------------------------------
In addition to Supplemental indentures Permitted by section 1301, a Majority of
the Bondholders shall have the right, from time to time, to consent to and
approve the execution by the parties hereto of such other indenture or
indentures Supplemental hereto for the purpose of modifying, altering, amending,
adding to or rescinding, in any particular, any of the terms or provisions
contained in this Indenture or in any Supplemental indenture; provided, however,
that nothing in this Section contained shall permit (a) an extension of the
stated maturity of the principal of or the interest on any Bond without the
consent of the holder of such Bond; (b) a reduction in the principal amount of
any Bond, the rate of interest thereon or the premium to be paid upon the
prepayment thereof prior to maturity without the consent of the holder of such
Bond; (c) the establishment of a privilege or priority of any Bond or Bonds over
any other Bond or Bonds without the consent of all the Bondholders; (d) a
reduction in the aggregate principal amount of Bonds the holders of which are
required to consent to any such Supplemental indenture without the consent of
the holders of all the Bonds at the time outstanding which would be affected by
the action to be taken; (e) a modification of the rights, duties or immunities
of the Issuer, the Trustee or the Bondholders without the written consent of the
affected party and all the Bondholders; (f) any amendment of the provisions of
this Indenture pertaining to the drawing and application of proceeds of the
Letter of Credit or the definition or application of Priority Funds without the
consent of the holders of all the Bonds outstanding; or (g) subject to the
provisions of Section 1304, any modification, amendment or revocation of the
Letter of Credit without the consent of the holders of all of the Bonds secured
thereby.
If at any time the Issuer shall request the Trustee to enter into any
Supplemental indenture pursuant to this Section, the Trustee shall, upon being
satisfactorily indemnified with respect to expenses, cause notice of the
proposed execution to be made in the manner required for redemptions of
principal of Bonds pursuant to Section 402; provided, however, that failure to
give such notice, or any defect therein, shall not affect the validity of the
proceedings.
-72-
Such notice shall briefly set forth the nature of the proposed supplemental
indenture and shall state that copies thereof are on file at the corporate trust
office of the Trustee for inspection by all Bondholders. Except as otherwise
provided in this Section 1302, if, within 60 days or such longer period (not to
exceed two years) as shall be prescribed by the Issuer following the final
mailing of such notice, not less than a majority of the Bondholders at the time
of the execution of any such supplemental indenture, shall have consented to and
approved the execution thereof, no holder of any Bond shall have any right to
object to any of the terms and provisions contained therein, or the operation
thereof, or in any manner to question the propriety of the execution thereof, or
to enjoin or restrain the Trustee or the Issuer from executing the same or from
taking any action pursuant to the provisions thereof. Upon the execution of any
such Supplemental indenture as in this Section permitted and provided this
Indenture shall be and be deemed to be modified and amended in accordance
therewith.
Section 1303. Opinion of Counsel. The Trustee shall be entitled to
------------------
receive, and shall be fully protected in relying upon, the opinion of any
counsel approved by it, who may be counsel for the Issuer or the Bank, as
conclusive evidence that any such proposed Supplemental indenture complies with
the provisions of this Indenture and that it is proper for the Trustee, under
the provisions of this Article, to join in the execution of such supplemental
indenture.
Section 1304. Consent of Bank; Amendments to Letter of Credit. Anything
-----------------------------------------------
herein to the contrary notwithstanding, a supplemental indenture under this
Article shall not become effective unless and until the Bank shall have
consented in Writing to the execution and delivery of such Supplemental
indenture. The Letter of Credit may not be amended without the consent of the
holders of all of the Bonds secured thereby except to correct a mistake or
omission so long as such correction is not prejudicial to any Bondholder.
Subject to the foregoing, the Reimbursement Agreement may be amended without
notice to or consent of any Person other than the Bank and the Borrower.
Section 1305. Modification by Unanimous Consent. Notwithstanding anything
---------------------------------
contained elsewhere in the Indenture, the rights and obligations of the Issuer
and of the holders of the Bonds, and the terms and provisions of the Bonds and
this Indenture or any Supplemental indenture may be modified or altered in any
respect with the consent of the Borrower, the Issuer, the Trustee, the holders
of all of the Bonds then outstanding and the Bank.
-73-
Article 14 - Miscellaneous
Section 1401. Consents, etc., of Bondholders. Any consent, request,
------------------------------
direction, approval, objection or other instrument required by this Indenture to
be executed by the Bondholders may be in any number of concurrent writings of
similar tenor and may be executed by such Bondholders in person or by agent
appointed in writing.
Section 1402. Limitation of Rights. With the exception of rights herein
--------------------
expressly conferred, nothing expressed or implied from this Indenture or the
Bonds shall give to any Person other than the parties hereto and the holders of
the Bonds any right or remedy with respect to this Indenture. This Indenture and
all of the covenants, conditions and provisions hereof are for the sole and
exclusive benefit of the parties hereto and the holders of the Bonds as herein
provided.
Section 1403. Severability. In the event that any provision of this
------------
Indenture shall be held to be invalid in any circumstance, such invalidity shall
not affect any other provision or circumstance.
Section 1404. Notices. All notices, certificates or other communications
-------
hereunder shall be sufficiently given and, except as provided in Section 1201(d)
hereof, shall be deemed given when mailed by registered or certified mail,
postage prepaid, or sent by telegram addressed to the appropriate Notice
Address, with a copy to each other party hereto.
Section 1405. Payments Due on Saturdays, Sundays and Holidays. In any
-----------------------------------------------
case where a Payment Date is a Saturday or Sunday or a day on which the Trustee
is required, or authorized or not prohibited, by law (including executive
orders) to close and is closed, then payment of interest or principal and any
premium due on such day need not be made by the Trustee on such date but may be
made on the next succeeding Business Day on which the Trustee is open for
business with the same force and effect as if made on the Payment Date.
Section 1406. Extent of Issuer Covenants; No Personal Liability. No
-------------------------------------------------
covenant, stipulation, obligation or agreement of the Issuer contained in this
Indenture shall be deemed to be a covenant, stipulation, obligation or agreement
of any present or future director, officer, employee or agent of the Issuer in
his individual capacity; and no such person (including any such person executing
the Bonds) shall be liable personally on the Bonds or be subject to any personal
liability by reason of their issuance.
-74-
Section 1407. Bonds Owned by Issuer or Borrower. In determining whether
---------------------------------
Bondholders of the requisite aggregate principal amount of the Bonds have
concurred in any direction, consent or waiver under this Indenture, Bonds which
are owned by the Issuer, the Borrower, or any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Borrower (unless the Issuer, the Borrower, or such person owns all Bonds which
are then outstanding, determined without regard to this Section 1407) shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver, only
Bonds of which an officer in the Corporate Trust Division of the Trustee has
actual knowledge are so owned shall be so disregarded. Bonds so owned which have
been pledged in good faith may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Bonds and that the pledgee is not the Issuer, the Borrower,
or any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Borrower (unless such pledgee owns
all Bonds which are then outstanding, determined without regard to this Section
1407). In case of a dispute as to such right, any decision by the Trustee taken
in good faith upon the advice of counsel shall be full protection to the Trustee
in accordance with its standards of performance hereunder.
Section 1408. Captions; Index. The captions, headings and index in this
---------------
Indenture are for convenience only and in no way define or describe the scope or
content of any provision of this Indenture.
Section 1409. Counterparts. This Indenture may be executed in several
------------
counterparts, each of which shall be an original and all of which shall
constitute but one and the same Indenture.
Section 1410. Governing Law; Sealed Instrument. The validity and
---------------------------------
interpretation of this Indenture and the Bonds shall be governed by the laws of
the State of California. It is intended that this Indenture shall have the
effect of a sealed instrument.
Section 1411. Agreements to Constitute Covenants. Words of agreement and
----------------------------------
promises shall also constitute covenants.
-75-
IN WITNESS WHEREOF, each of the Borrower, the Issuer and the Bank has
caused this Indenture to be executed and delivered in its name and behalf by its
partners or authorized officer and to evidence its acceptance of the trusts
hereby created, the Trustee has caused this Indenture to be executed in its name
and behalf by its authorized officer, all as of the date appearing on page 1.
(Seal) THE REDEVELOPMENT AGENCY OF THE
CITY OF SAN MARCOS
By [signature illegible] By [signature illegible]
-------------------------- -------------------------------
SAN MARCOS RETIREMENT VILLAGE
UNIVERSITY FINANCIAL
CORPORATION, Partner
By [signature illegible]
-------------------------------
Vice President
BRIM & ASSOCIATES, INC.
By [signature illegible]
-------------------------------
Vice President
THE FIRST NATIONAL BANK OF
BOSTON, AS TRUSTEE
By [signature illegible]
-------------------------------
Vice President
SECURITY PACIFIC NATIONAL BANK
By [signature illegible]
-------------------------------
Vice President
By Eugene B. Watson
-------------------------------
Vice President
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 30th day of December, 1985, before me, Barbara J. Juric, the
undersigned Notary Public, personally appeared Lionel E. Burton and
____________________________,
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the person(s) who executed the within instrument as
_______________________________ and ___________________________ or on behalf of
The Redevelopment Agency of the City of San Marcos therein named, and
acknowledged to me that the Agency executed it.
WITNESS my hand and official seal.
/s/ Barbara J. Juric
-----------------------------
Notary's Signature
(S E A L)
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared Wendy A. Warnick,
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the Vice President of University Financial Corporation, a partner of the
partnership that executed the within instrument on behalf of the partnership
therein named, and acknowledged to me that the corporation executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
-----------------------------
Notary's Signature
(S E A L)
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared Bruce A. Schoen,
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the Vice President of Brim & Associates, Inc., a partner of the
partnership that executed the within instrument on behalf of the partnership
therein named, and acknowledged to me that the partnership executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
-----------------------------
Notary's Signature
(S E A L)
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared K. D. Woods,
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the person(s) who executed the within instrument as Vice President on
behalf of The First National Bank of Boston therein named, and acknowledged to
me that the bank executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
-----------------------------
Notary's Signature
(S E A L)
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December 31, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared G. O. Clements.
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the person(s) who executed the within instrument as Vice President or on
behalf of Security Pacific National Bank therein named, and acknowledged to me
that the bank executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
-------------------------------
Notary's Signature
(S E A L)
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December 31, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared Eugene Watson.
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the person(s) who executed the within instrument as Vice President or on
behalf of Security Pacific National Bank therein named, and acknowledged to me
that the bank executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
------------------------------
Notary's Signature
(S E A L)
EXHIBIT 301
-----------
FORM OF BOND
________________________________________________________________________________
The form of the Bonds is, for the sake of convenience, shown as a
single, fully registered Bond. Appropriate and necessary changes should be made
in any Bond or Bonds subsequently issued.
________________________________________________________________________________
No. R_ $____________
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
THE REDEVELOPMENT AGENCY OF THE CITY OF SAN MARCOS
ADJUSTABLE/FIXED RATE
MULTIFAMILY HOUSING BOND
(SAN MARCOS RETIREMENT VILLAGE)
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
MATURITY DATE December ____, 2010
BOND DATE: As of December 31, 1985
________________________________________________________________________________
THIS BOND IS NOT A GENERAL OBLIGATION OF THE CITY OF SAN MARCOS OR THE
REDEVELOPMENT AGENCY OF THE CITY OF SAN MARCOS NOR A DEBT OR A PLEDGE OF THE
FAITH AND CREDIT OF THE STATE OF CALIFORNIA, BUT IS PAYABLE SOLELY FROM THE
REVENUES PLEDGED FOR ITS PAYMENT IN ACCORDANCE WITH THE DEED OF TRUST, INDENTURE
OF TRUST AND AGREEMENT REFERRED TO BELOW.
________________________________________________________________________________
-1-
1. Payment Provisions. The Redevelopment Agency of the city of San
------------------
Marcos, (the "Issuer"), for value received, promises to pay to the Registered
Owner of this Bond, or registered assigns or legal representatives (but only
from the special, limited sources and in the manner hereinafter described), the
Principal Amount on the Maturity Date unless redeemed prior thereto as
hereinafter provided, and to pay interest from the Bond Date, at the rates, and
payable on the dates, set forth below on the unpaid principal amount of this
Bond outstanding from time to time.
The final payment of principal and premium, if any, and interest shall
be payable in immediately available funds at the corporate trust office of the
Trustee (hereinafter defined) upon surrender of this Bond, and other payments
(except as otherwise provided herein) shall be payable by wire transfer of
immediately available funds, provided sufficient wire transfer instructions have
been given to the Trustee, and otherwise by check or draft mailed by the Trustee
to the Registered Owner at its address appearing on the bond register kept by
the Trustee, as of the close of business on the Record Date, which when used
herein shall mean (a) with respect to any Adjustable Period Interest Payment
Date (as hereinafter defined), the business day next preceding such Adjustable
Period Interest Payment Date or (b) with respect to any Fixed Period Interest
Payment Date (as hereinafter defined), the fifteenth day of the month next
preceding such Fixed Period Interest Payment Date, or, if such day shall not be
a business day, the next preceding business day.
The terms and conditions of this Bond are continued on the reverse
hereof and such continued terms and provisions shall for all purposes have the
same effect as though fully set forth at this place.
Principal and premium, if any, and interest are payable in lawful
money of the United States of America.
a. Adjustable Rate Period. This Bond shall bear interest from and
----------------------
including the date hereof (except as herein provided) until payment of the
principal thereof shall have been made or provided for in accordance with the
provisions hereof and of the Indenture (hereinafter defined) whether at
maturity, upon redemption or otherwise. Prior to the date on which San Marcos
Retirement Village, a California general partnership, (the "Borrower"), or the
LOC Bank (hereinafter defined) elects to exercise the option Under the Indenture
to convert the interest rate hereon to a fixed rate as hereinbelow described
(the "Conversion Date"), this Bond
-2-
shall bear interest at a rate (the "Adjustable Rate") equal to the lesser of (a)
12 1/2% per annum and (b) a floating rate established as herein provided.
Except as provided in the last sentence of this paragraph, the
floating rate shall be equal to ARBI plus a fixed interest component ("FIC")
equal to (x) one quarter of one percent (1/4th of 1%) or (y) from and after the
first Wednesday of the Adjustable Rate Interest Period next succeeding the 15th
day after the Remarketing Agent gives notice to the Registered Owners of the
Bonds that the Bonds have been rated AA or better (or the equivalent thereof) by
S&P or Moody's or their respective successors and so long as such rating shall
remain in effect, one-eighth of one percent (1/8th of 1%), provided that:
i. if the Trustee shall have received a notice tendering any of the
Bonds for purchase as described in Section 401(d) of the Indenture and if the
Remarketing Agent (initially The First National Bank of Boston pursuant to a
Remarketing Agreement dated as of December 1, 1985 among the Borrower, the
Trustee and said Bank and including any successor or replacement Remarketing
Agent) shall remarket all or a portion of the Bonds, the floating rate of
interest for all of the Bonds shall be equal to the sum of (A) ARBI, plus (B)
the FIC, plus (C), if required to enable the Remarketing Agent to remarket such
tendered Bonds at par plus accrued interest, an additional interest component
("AIC") determined as hereinafter provided. The AIC shall be equal to that
percentage of interest, determined by the Remarketing Agent in connection with
any remarketing effort and expressed in increments of 1/8th of 1% per annum,
which when added to the sum of ARBI plus the FIC will produce the interest rate
per annum necessary to enable the Remarketing Agent to remarket such Bonds at
par plus accrued interest. The AIC shall become effective with respect to all
Bonds as of the purchase date with respect to Bonds tendered Under Section
401(d) of the Indenture, unless such date occurs after the last Wednesday of a
Adjustable Rate Interest Period, in which case such AIC shall become effective
as of the first Wednesday of the next Adjustable Rate Interest Period; and
ii. if an AIC is added to the floating rate pursuant to the preceding
clause (i), such AIC shall remain in effect Until the end of the Adjustable Rate
Interest Period following the Adjustable Rate Interest Period in which Bonds
Were remarketed (except as provided in clause (iii) below), until a further
adjustment to the floating rate is made pursuant to the preceding clause (i) or
Until the interest rate on the Bonds is otherwise determined as Provided herein;
and
-3-
iii. if the Remarketing Agent shall have advised the Borrower, the
Issuer, the Trustee and each Registered Owner not less than seven days prior to
the first Wednesday of any Adjustable Rate Interest Period that the
discontinuance of the AIC would result in the Bonds bearing interest at a rate
different from the interest rate per annum necessary to enable the Remarketing
Agent to remarket the Bonds at par plus accrued interest, the floating rate
shall be equal to the floating rate as last adjusted pursuant to the preceding
clause (i) until such time as the floating rate may again be adjusted pursuant
to such clause (i) or until the interest rate on the Bonds is otherwise
determined as provided for herein and;
iv. in the event that the Remarketing Agent shall have determined
(which determination shall be within the judgment and discretion of the
Remarketing Agent) that the Bonds may be remarketed at par plus accrued interest
at an adjustable Rate equal to ARBI, then from and after the first Wednesday of
the Adjustable Rate Interest Period next succeeding the 15th day after the
Remarketing Agent gives notice to the Registered Owners of the Bonds that it has
made such determination and so long as such determination shall remain in
effect, the FIC shall equal zero.
In the event that The First National Bank of Boston discontinues
the announcement of ARBI, the floating rate shall be equal to the average coupon
rate of interest expressed as a percentage of the yield evaluations at par of
United States Treasury obligations having a maturity of 91 days, which is
determined by the Remarketing Agent as necessary to remarket the Bonds at par
plus accrued interest, and which shall be announced by the Remarketing Agent to
the Trustee, the Issuer and the Borrower on Wednesday of each week, beginning on
the first such Wednesday following the discontinuance of ARBI, each change in
such floating rate to take effect on the Wednesday next following its
announcement.
As used herein, "ARBI" means the rate, calculated as a percentage
(the "ARBI Percent") of the FNBB Base Rate, which is announced by The First
National Bank of Boston from time to time, as the annual rate of interest which,
in the sole judgment of The First National Bank of Boston, will result in the
minimum yield attainable on tax-exempt adjustable-rate bonds supported by the
letter of credit of The First National Bank of Boston. ARBI shall change as and
when the FNBB Base Rate changes, provided that (a) ARBI shall not be lower on
any day during any Adjustable Rate Interest Period, than on the first Wednesday
of such Adjustable Rate Interest Period, and (b) changes in the FNBB Base Rate
of which the
-4-
Trustee is given notice after the last Wednesday in any Adjustable Rate Interest
Period shall become effective on the first Wednesday of the next succeeding
Adjustable Rate Interest Period. Changes in ARBI which result from a change in
the ARBI percent shall become effective with respect to a Adjustable rate
Interest Period only if the Trustee is given notice of such change in the ARBI
Percent at least seven days prior to the first Wednesday of such Adjustable Rate
Interest Period. Changes in the FNBB Base Rate and ARBI Percent shall be
communicated by The First National Bank of Boston to the Trustee and the
Remarketing Agent promptly after they are announced. As used herein, "FNBB Base
Rate" means the per annum rate of interest from time to time announced by The
First National Bank of Boston at its principal office in Boston, Massachusetts
as its Base Rate. As used herein, "Adjustable Rate Interest Period" means each
period during the Adjustable Rate Period commencing on (and including) the first
Wednesday of each calendar month (or in the case of the first such period the
date of delivery of the Bonds to the original purchaser) and ending on (but
excluding) the first Wednesday of the next succeeding calendar month.
Interest prior to the Conversion Date shall be computed on the
basis of a 365 or 366-day year, as applicable, for the number of days actually
elapsed, and shall be payable on (i) the first Wednesday in each calendar month
during the Adjustable Rate Period commencing February 5, 1986, and (ii) the
Conversion Date (each such date being herein referred to as an "Adjustable
Period Interest Payment Date").
b. Fixed Rate Period. Subsequent to the Conversion Date, this Bond
-----------------
shall bear interest at a fixed rate as hereinafter described. Such interest
shall be computed on the basis of a 360-day year, consisting of twelve 30-day
months, and shall be payable on each January l and July l thereafter Until the
principal of and premium, if any, and interest on, this Bond shall have been
paid in full or provision shall have been made for the payment thereof in
accordance with the Indenture (each such date being herein referred to as a
"Fixed Period Interest Payment Date").
Notwithstanding anything herein contained to the contrary, the
interest rate on this Bond shall be established at a fixed rate (the "Fixed
Rate") upon the election by the Borrower (or Under certain circumstances the LOC
Bank as hereinafter defined) to exercise the Option to Covert (as hereinafter
defined) on such date which is a business day as the Borrower (or the LOC Bank)
shall select, subject to the terms and conditions of the Indenture. The
-5-
Fixed Rate will be the rate of interest certified to the Borrower, the LOC Bank
and the Trustee by the Remarketing Agent no fewer than three business days prior
to the Conversion Date as the minimum rate of interest which, in the opinion of
the Remarketing Agent, is necessary to sell the Bonds in a secondary sale (by
private placement, so long as the Remarketing Agent shall be an entity not
allowed to sell the bonds publicly) on the Conversion Date at a price equal to
100% of the outstanding principal amount thereof; provided, however, that such
rate of interest shall not be less than 75% nor more than 125% of an index
computed as hereinafter described (the "Fixed Interest Index") as of the
Computation Date (as hereinafter defined). The Fixed Interest Index shall mean
the interest rate index, determined by the Remarketing Agent and announced to
the Trustee, the Issuer and the Borrower from time to time, based upon yield
evaluations at par (on the basis of a term approximately equal to the time
remaining until the maturity of the Bonds) of not less than ten component
issuers of comparable credit quality selected by the Remarketing Agent which may
include, without limitation, issuers of industrial development revenue bonds and
other limited and special obligation bonds, the interest on which is exempt from
federal income taxation. In the event the Letter of Credit (hereinafter defined)
remains outstanding and available on and after the Conversion Date or a
substitute credit facility is issued and available on and after such date, the
component issuers are required to be of the same rating category as shall then
be assigned to the Bonds (or, if the Bonds are not rated, the long-term
obligations of the issuer of the Letter of Credit or such substitute credit
facility, as the case may be) by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P"). In the event the Letter of Credit will
not remain outstanding and available on and after the Conversion Date and no
substitute credit facility will be issued and available on and after the
Conversion Date, then the component issuers shall be of the same credit quality
as the Borrower in the judgment of the Remarketing Agent. The specific issuers
included in the component issuers may be changed from time to time by the
Remarketing Agent in its discretion. In the event the Fixed Interest Index
cannot be determined by the aforementioned method, such Index will be equal to
95% of the most recent Bond Buyer Revenue Bond Index; provided that if the Bond
Buyer Revenue Bond Index is no longer published, then such Index will be equal
to 90% of the average of the yield evaluations at par of United States Treasury
obligations having a term to maturity within one year of the regaining time to
maturity of the Bonds as computed by the Remarketing Agent; and provided further
that if such Index cannot be determined by any of such methods, then it will be
equal to 12 1/2%.
-6-
As and for a sinking fund for the Bonds subsequent to the
Conversion Date, the Issuer shall cause to be deposited into the Bond Fund on
the first anniversary of the Conversion Date and on the same day of each year
thereafter an amount which shall amortize the principal amount of Bonds
outstanding at the Fixed Rate from the first anniversary of the Conversion Date
to and including the Maturity Date so as to produce substantially equal debt
service payments (principal and interest) on the Bonds in each such year (after
taking into account considerations relating to the marketability of the Bonds).
Such amounts shall be set forth in a supplemental indenture executed and
delivered for such purpose.
c. Option to Convert. The Borrower (or under certain circumstances
-----------------
the LOC Bank hereinafter defined) may exercise the right to convert to a fixed
rate (the "Option to Convert") at any time on or after the six month anniversary
of the Bond Date by giving written notice to the Issuer, the trustee and the LOC
Bank stating (i) its election to convert to the Fixed Rate, which notice shall
specify the date as of which the Fixed Interest Index shall be computed (the
"Computation Date") (which date shall not be more than five business days from
the date of such notice), (ii) the Conversion Date, which date shall not be less
than 20 nor more than 60 days from the date the Borrower gives such notice,
(iii) whether the Letter of Credit has been extended and the terms thereof, or
whether a substitute credit facility has been obtained and the terms thereof,
(iv) a debt service schedule for the Bonds and (v) a form of notice of
redemption satisfying the requirements of the indenture and containing all the
information required to be included in such notice. Such notice shall be
accompanied by an opinion of Bond Counsel stating that the establishment of the
Fixed Rate and the purchase and resale of the Bonds in connection therewith are
authorized and permitted by the Indenture and the Enabling Act, and will not
have an adverse effect on the exemption from federal income tax of interest on
the Bonds.
2. Effect of Determination of Taxability. The Bonds shall be
-------------------------------------
redeemed by the Issuer (but only from the limited sources and in the manner
hereinafter described), prior to stated maturity, in whole, upon the occurrence
of a Determination of Taxability (hereinafter defined). The redemption price for
the Bonds to be redeemed in such event shall be equal to the sum of the
outstanding principal amount thereof plus accrued and unpaid interest thereon to
the redemption date, at the Adjustable Rate or the Fixed Rate, as the case may
be, plus if the Determination of Taxability occurs during the Fixed Rate Period
(hereinafter defined) a premium equal to 3% of the outstanding principal amount
of the Bonds.
-7-
"Determination of Taxability" means a determination that the interest
income on any of the Bonds does not qualify as exempt interest under Section 103
of the Internal Revenue Code of 1954, as amended ("exempt interest"), for a
reason other than that a Registered Owner is a "substantial user" of the Project
or a "related person" of the Borrower within the meaning of Section 103(b)(13)
of said Code, which determination shall be deemed to have been made upon the
occurrence of the first to occur of the following:
a. the date on which the Trustee receives an opinion of Bond Counsel
that the interest income on any of the Bonds does not qualify as exempt
interest; or
b. the date on which the Trustee receive notice that any change in
law or regulation has become effective or that the Internal Revenue Service has
issued any private ruling, technical advice or any other written communication
with or to the effect that the interest income on any of the Bonds does not
qualify as exempt interest; or
c. the date on which the Borrower receives notice from the Trustee
in writing that the Trustee has been advised by any Registered Owner that the
Internal Revenue service has issued a thirty-day letter or other notice which
asserts that the interest on the Bonds does not qualify as exempt interest.
Any such redemption shall be made not less than 15 days after the
Determination of Taxability. Any Determination of Taxability shall be conclusive
as to the Issuer, the Borrower and the Registered Owner.
3. Description of Bond Issue. This Bond is one of an issue of
-------------------------
$13,500,000 Adjustable/Fixed Rate Industrial Development Revenue Bonds (San
Marcos Retirement Village Project) (the "Bonds") issued under an Indenture of
Trust and Agreement dated as of December 1, 1985 (together with any supplements,
the "Indenture") among the Borrower, the Issuer, The First National Bank of
Boston, as Trustee (the "Trustee", which term includes any successors in said
trust), and Security Pacific National Bank. The proceeds of the Bonds will be
loaned (the "Loan") by the Issuer to the Borrower Under the Indenture to finance
costs of acquiring, improving and equipping residential dwelling units and
facilities for the elderly (the "Project"), including costs incidental thereto
and to the financing thereof, for use by the Borrower within the City of San
Marcos, California (the "City"), thereby providing for development and
employment opportunities. The Bonds are
-8-
issued pursuant to and in full compliance with the Constitution and laws of the
State of California and pursuant to Chapter 8 (commencing with Section 3375) of
Part 1 of Division 24 of the health and Safety Code of the State of California,
as amended, and resolutions duly adopted by Issuer, which resolutions also
authorize the execution and delivery of the Indenture.
Simultaneously with the delivery of the Bonds, there has been
delivered to the Trustee an irrevocable direct draw letter of credit (the
"Letter of Credit") issued by Security Pacific National Bank (the "LOC Bank")
pursuant to a Reimbursement Agreement between the Borrower and the LOC Bank,
dated as of December 1, 1985 (the "Reimbursement Agreement"), to provide for the
payment of principal of and premium, if any, on the Bonds, and up to 46 days'
interest (subject to reinstatement as provided therein) accrued on the Bonds. By
its terms, the Letter of Credit will expire on December 31, 1992, but may be
extended, renewed or replaced by a substitute credit facility (including an
irrevocable transferable letter of credit, insurance policy, guaranty, surety
bond or other agreement) on or before such date, if the Borrower shall furnish
to the Trustee (i) an opinion of Bond Counsel stating that the delivery of such
substitute credit facility to the Trustee is authorized under the Indenture and
complies with the terms thereof, (ii) an opinion of counsel in form and
substance reasonably satisfactory to the Trustee (and substantially similar in
content with respect to the substitute credit facility as those opinions
originally rendered with respect to the Letter of Credit in connection with the
original issuance of the Bonds) to the effect that the substitute credit
facility is the valid, binding and enforceable obligation of the bank or other
institution issuing it and that payments on the Bonds out of the proceeds of a
drawing on the substitute credit facility will not constitute voidable
preferences under the federal Bankruptcy Code or other applicable laws and
regulations and (iii) written evidence from Moody's, if this Bond is rated by
such rating agency, and S&P, if this Bond is rated by such rating agency in each
case to the effect that such rating agency has reviewed the proposed substitute
credit facility and that the substitution of the proposed substitute credit
facility for the Letter of Credit will not, by itself, result in a reduction of
its rating of this Bond from that which then Prevails. The Borrower, at its
election, may, with the consent of the LOC Bank, extend the credit facility or
may provide for a Substitute Letter of Credit for the period after the
expiration of the Letter of Credit.
The obligations of the Borrower to pay or cause to be paid Loan
payments sufficient for the prompt payment when
-9-
due of the principal of, premium, if any, and interest on the Bonds are expected
to be secured by a first deed of trust on and security interest in certain
property of the Borrower (the "Mortgaged Property"). As security for the
performance by the Borrower of its obligations under the Reimbursement Agreement
to reimburse the LOC Bank with respect to drawings under the Letter of Credit,
the Borrower is expected to grant to the Trustee for the benefit of the LOC
Bank, a second deed of trust on and security interest in any Mortgaged Property.
The Bonds are to be equally and ratably secured and entitled to the
protection given by the Indenture and the Letter of Credit or any substitute
credit facility. Reference is hereby made to such documents for a description of
the nature and the extent of the security for the Bonds, the rights, duties and
obligations and immunities of the Issuer, the Trustee and the Registered Owners
and the terms upon which the Bonds are or may be issued and secured.
4. Exchange and Transfer. This Bond is exchangeable for fully registered
---------------------
bonds in denominations of not less than $500,000 and integral multiples of
$50,000 during the Adjustable Rate Period and not less than $5,000 and integral
multiples thereof during the Fixed Rate Period, as Provided in the Indenture.
This Bond is transferable on the bond register upon its Surrender at
the corporate trust office of the Trustee, accompanied by a written instrument
of transfer in form satisfactory to the Trustee, duly executed by the Registered
Owner or its attorney or legal representative, as provided in the Indenture.
The Issuer and the Trustee may treat the Registered Owner as the absolute owner
hereof for all purposes and shall not be affected by any notices to the
contrary.
5. Redemption. Principal of the Bonds is subject to redemption as
----------
follows:
a. Optional Redemption. The Bonds may be called for redemption on
-------------------
or prior to the Conversion Date, as Provided by Section 401(a) of the Indenture,
by the Issuer at the direction of the Borrower (but only from the limited
sources and in the manner hereinabove described), in whole or in part in the
amount of $500,000 or any integral multiple of $50,000 above $500,000, from time
to time on any Adjustable Period Interest Payment Date in each January, April,
July and October, at a redemption price equal to the principal amount thereof
together with accrued interest thereon to the
-10-
Adjustable Period Interest Payment Date fixed for redemption; provided, however,
that no such redemption may be effected prior to July 1, 1986, and, provided
further that the Borrower has deposited money with the Trustee in sufficient
amounts to provide Priority Funds or has obtained the consent of the Bank to pay
the redemption price with a draw on the Letter of Credit.
The Bonds may be called for redemption subsequent to the fifth
anniversary of the Conversion Date, as provided by section 401(a) of the
Indenture, by the Issuer at the direction of the Borrower on any Interest
Payment Date (but only from the limited sources and in the manner hereinabove
described) as a whole or from time to time in part in the amount of $500,000 or
any integral multiple of $50,000 above $500,000, at a redemption price equal to
the principal of and accrued interest on the Bonds to the date fixed for
redemption plus a premium equal to 3% in the first year the Bonds are so subject
to redemption, declining 1% per year thereafter until the premium equals zero;
provided that the Borrower has deposited money with the Trustee in sufficient
amounts to provide Priority Funds or has obtained the consent of the Bank to pay
the redemption price with a draw on the Letter of Credit.
b. Extraordinary Redemption. Principal of the Bonds shall be
------------------------
redeemed in whole but not in part by the Issuer (but only from the limited
sources and in the manner hereinbelow described), at the option and direction of
the Borrower, on any date at a redemption price of 100% of the principal amount
redeemed, plus accrued interest to the redemption date, if any of the following
events shall have occurred:
i. The Project or any production facility served thereby shall
have been damaged or destroyed to such extent that, in the opinion of the
Borrower, the Project cannot be reasonably restored within a period of twelve
months from the date of such damage or destruction, or the Borrower is thereby
prevented from carrying on its normal operation of the Project for a period of
twelve months from the date of such damage or destruction; or
ii. Title to or the temporary use of all or Substantially all of
the Project or any production facility Served thereby shall have been taken or
condemned by a competent authority, which taking or condemnation results or is
likely to result in the Borrower being thereby prevented from carrying on its
normal operation of the Project for a period of twelve months; or
-11-
iii. As a result of changes in the constitution of the United
States of America or of the State of california or of legislative or
administrative action (whether state or federal) or by final decree or judgment
of any court or administrative body (whether state or federal), the Bonds or the
Indenture become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as expressed therein or
unreasonable burdens or excessive liabilities are imposed upon the Borrower, by
reason of the operation of the project; or
iv. There shall have occurred a change in the economic
availability of raw materials, manufactured products, energy sources, operating
supplies or facilities necessary for the operation of the Project or a
technological or other change which in the reasonable judgment of the Borrower
renders the project uneconomic, impractical or infeasible for the purposes for
which originally acquired, improved and equipped.
provided that the Borrower has deposited money with the Trustee in sufficient
amounts to provide Priority Funds or has obtained the consent of the Bank to pay
the redemption price with a draw on the Letter of Credit.
To exercise its option pursuant to this subparagraph (b) the
Borrower shall give notice of its intention to redeem to the Issuer and the
Trustee within twelve months after the occurrence of an event described above.
The notice shall refer to the applicable section of this paragraph, describe and
give the date of such event and direct the redemption of all outstanding Bonds
on a Specified date which shall not be earlier than 30 days following the date
of such notice.
c. Mandatory Redemption. Principal of the Bonds shall be redeemed
without premium from funds deposited in the Bond Fund pursuant to subparagraphs
(a) and (b) of section 501B or pursuant to 502(e) of the indenture to the
extent, in the manner and at the times Provided for therein at 100% of the
principal amount redeemed in whole and not in part, plus accrued interest to
the redemption date. The Bonds shall be redeemed, as provided in Paragraph 2
above, upon a Determination of Taxability.
-12-
d. Tender for Purchase upon Election of Bondholder. As provided in
Section 401(d) of the Indenture, on or prior to the Conversion Date this Bond
may be tendered for purchase on the demand of the Registered Owner (but only
from the limited sources and in the manner hereinabove described) on any
business day at the purchase price specified in the next paragraph of this Bond
upon delivery to the Trustee at its principal office of a written notice in the
form of such notice appended hereto at the time of issuance of this Bond (a
"Bondholder's Election Notice") which (i) states the principal amount of this
Bond, (ii) states the date on which this Bond shall be purchased, which date
shall not be prior to the seventh day next succeeding the date of the delivery
of such notice to the Trustee (provided, however, that if the seventh day next
succeeding the date of such delivery is not a business day such date may be the
next preceding business day), (iii) irrevocably requests such purchase, and (iv)
contains an undertaking of the registered owner hereof to deliver this Bond to
The First National Bank of Boston, as depositary (the "Depositary"), as provided
in such notice.
By the acceptance of this Bond, the Registered Owner agrees that
if there are funds available for such purpose in the Bond Purchase Fund
established with the Depositary under the Depositary Agreement dated as of
December 1, 1985 among the Trustee, the Borrower and the Depositary, then any
Bond tendered to the Depositary for purchase as Provided in the preceding
Paragraph shall be, on the date specified in the Bondholders Election Notice,
purchased at a purchase price equal to the Principal amount thereof plus accrued
interest, if any, to the date of Purchase; provided, however, that if the
Purchase date for any Bond is an Interest Payment Date, the purchase price
thereof shall be the principal amount thereof and interest on such Bond shall be
paid to the Registered Owner in the normal course.
NOTICE BY THE REGISTERED OWNER OF TENDER OF THIS BOND IS
IRREVOCABLE. BY ACCEPTANCE OF THIS BOND THE REGISTERED OWNER AGREES (1) THAT
UPON RECEIPT BY THE DEPOSITARY OF THE PURCHASE PRICE FROM A PURCHASER HEREOF THE
REGISTERED OWNER SHALL SURRENDER THIS BOND TO THE DEPOSITARY, (2) THE OWNERSHIP
OF THIS BOND SHALL BE TRANSFERRED TO THE PURCHASER WHETHER OR NOT SO SURRENDERED
TO THE DEPOSITARY, (3) THEREAFTER THIS BOND SHALL NOT BE CONSIDERED AN
OUTSTANDING BOND UNDER THE INDENTURE AND (4) THE REGISTERED OWNER SHALL BE
ENTITLED ON AND AFTER THE PURCHASE DATE ONLY TO RECEIVE PAYMENT FROM THE
PURCHASE PRICE SO DEPOSITED WITH THE DEPOSITARY, WITHOUT FURTHER ACCRUAL OF
INTEREST.
-13-
e. Tender for Redemption or Purchase upon Expiration of Letter of
Credit or Occurrence of Conversion Date. As Provided in Section 401(e) of the
Indenture, this Bond shall be redeemed by the Issuer or Purchased in accordance
with the terms of the Depositary Agreement at a price equal to the principal
amount thereof plus accrued interest to the redemption date seven days prior to
the date of expiration of the Letter of Credit and on the Conversion Date. In
the event such redemption is in connection with the occurrence of the conversion
Date no redemption shall take place with respect to Bonds Purchased by the
Borrower's designee in accordance with the Indenture.
By acceptance of this Bond, the Registered owner agrees that any
Bonds called for redemption in connection with the occurrence of the Conversion
Date Pursuant to Section 401(e) of the Indenture may be purchased in lieu of
redemption, by the Borrower's designee, which may not be the Borrower or a
subsidiary or affiliate of the Borrower at a purchase price for each Bond equal
to the Principal amount thereof plus interest, if any, thereon to the date of
payment. The Purchase price will be paid from moneys deposited by the purchaser
into an account designated by the Trustee.
f. Notice of Redemption; Selection of Bonds to be Redeemed. Any
redemption either as a whole or in part, shall be made upon notice given by mail
at least ten days prior to the date fixed for redemption to the Registered
Owners of Bonds to be redeemed; provided, however, that failure duly to give
such notice by mail to any Registered Owner, or any defect therein, shall not
affect the validity of the Proceedings for the redemption of any of the other
Bonds. On the date designated for redemption, notice having been given as
provided in the Indenture, the Bonds or portions thereof so called for
redemption shall become and be due and payable at the redemption price Provided
for redemption of such Bonds or such portions thereof on such date, and, if
moneys for payment of the redemption price and the accrued interest shall be
held by the Trustee or any paying agent, all as provided in the Indenture,
interest on such Bonds or such portions thereof so Called for redemption shall
cease to accrue, such Bonds or such portions thereof so called for redemption
shall cease to be entitled to any benefit or security for redemption under the
Indenture, and the owners thereof shall have no rights in respect of such Bonds
or such Portions thereof so called for redemption except to receive payment of
the redemption price thereof and the accrued interest so held by the Trustee or
by any paying agent. If a portion of this Bond shall be called for redemption, a
new registered Bond without coupons in
-14-
principal amount equal to the unredeemed portion hereof will be issued to the
registered owner upon the surrender hereof.
If less than all of the Bonds shall be called for redemption
pursuant to the foregoing subparagraphs (a) or (c), the Particular Bonds or
portions of Bonds to be redeemed shall be selected by the Trustee in the manner
provided in Section 403 of the Indenture. All payments upon partial redemption
of the Bonds shall be of amounts of not less than $50,000 during the Adjustable
Rate Period and $5,000 during the Fixed Rate Period. Notice of any redemption
shall be given to the extent, and in the manner, required by the Indenture. That
portion of this Bond called for redemption shall cease to bear interest on the
specified redemption date provided sufficient Priority Funds (as defined in the
indenture) to redeem such portion and to pay accrued interest thereon to the
redemption date are on deposit with the Trustee at that time. Thereafter such
portion shall cease to be outstanding under the Indenture.
6. Additional Provisions. The Registered Owner shall have no right to
---------------------
enforce the provisions of the Indenture or to institute or appear in Proceedings
with respect to the Indenture or its enforcement except as provided in the
indenture. In certain events as provided in the Indenture, the principal of all
the Bonds then outstanding under the Indenture may become or be declared due and
payable before their stated maturity, together with interest accrued thereon.
Modifications or alterations of the Indenture, or of any supplements thereto,
may be made only as Provided by the indenture.
The Bonds shall not constitute the personal obligation, either jointly
or severally, of any director, officer, employee or agent of the Issuer.
-15-
This Bond shall not be valid or entitled to any security or benefit
under the Indenture until the certificate of authentication hereon shall have
been signed by the Trustee.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be duly executed,
and its corporate seal to be hereunto affixed by the _________________________
of __________________________.
(Seal) THE REDEVELOPMENT AGENCY OF THE
CITY OF SAN MARCOS
Attest:
By _____________________________ By ____________________________
-16-
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the aforementioned Indenture.
The First National Bank of Boston,
as Trustee
By ________________________________
Authorized Officer
-17-
ASSIGNMENT
FOR VALUE RECEIVED, _________________________________ , the undersigned,
hereby sells, assigns, and transfers unto _________________________
Please insert Social Security or other identifying number of assignee
________________________________________________________________________________
________________________________________________________________________________
(please print or typewrite name and address including zip code of transferee)
________________________________________________________________________________
the within Bond and all rights thereunder and hereby irrevocably constitutes and
appoints
________________________________________________________________________________
attorney to transfer the within Bond on the books kept for registration thereof,
with full power of substitution in the premises.
Dated: _______________________________
____________________________________________________________
NOTICE: The signature to this assignment must correspond
with the name as it appears upon the face of the within Bond
in every particular, without alteration or enlargement or
any change whatever
-18-
EXHIBIT 401
-----------
FORM OF BONDHOLDER'S ELECTION NOTICE
Date ___________________________________________________________________________
To: The First National Bank of Boston, as Trustee under the Indenture of Trust
and Agreement dated as of December 1, 1985 (the "Indenture") among The
Redevelopment Agency of the City of San Marcos, San Marcos Retirement
Village, The First National Bank of Boston, as Trustee and Security Pacific
National Bank
Attention: Corporate Trust Division
Gentlemen:
Pursuant to the provisions of the Indenture, the undersigned hereby
irrevocably request(s) the purchase of all or a portion of the Bond described
below.
1. The Bond is one of the The Redevelopment Agency of the City of San
Marcos Adjustable/Fixed Rate Multifamily Housing Bonds (San Marcos
Retirement Village Project), numbered R__, the Principal amount of
which is $______________; and if only a portion of the Bond is
requested to be purchased, the Principal amount of such portion is
$__________ (which must be an integral multiple of $100,000).
2. The date on which the Bond shall be Purchased (a day other than a
Saturday, Sunday or other day on which banks are authorized or
required to be closed in the City of Boston or the City of San Diego,
but not prior to the seventh calendar day immediately following the
date of delivery of this Notice) shall be ____________.
3. The name of the registered owner is _______________________________
and the address of such owner is __________________________________
__________________________________________________________________.
-19-
4. The person to whom or to whose order the proceeds of the purchase of
the Bond are to be paid, and the address of such payee is
__________________________________________________.
I (we) hereby undertake to deliver such Bond to the Depositary at 100
Federal Street, Boston, Massachusetts 02110 no later than 10:00 A.M., Boston
time, on the business day set forth in paragraph 2 above.
Name and signature of registered owner or registered owner's
duly authorized attorney-in-fact:
Name Signatures
---- ----------
-20-
EXHIBIT 501
-----------
COST OF ISSUANCE
DISBURSEMENTS
----------------
Letter Of Credit Fee $102,845
Bond Counsel 37,000
Trustee Fee 8,200
Placement Fee 101,250
Annual Fee 16,875
Bank's Attorney 45,000
Borrower's Attorney 40,000
Printing and rating 15,000
Trustee Counsel Fee 5,250
Application & Filing (City of San Marcos) 1,500
Trustee Out-Of-Pocket 2,750
--------
TOTAL $375,670
EXHIBIT 601
-----------
THE PROJECT
The Project includes the construction in the City of San Marcos,
California, of a two and three-story wood frame building containing
approximately 170,000 square feet or floor space and will be approximately
a 212-unit congregate rental facility for the elderly. Common areas will
include a central kitchen and dining room with seating capacity for
approximately 200 individuals. Activity areas and lounge space will be
provided, as well as a beauty and barber shop, administrative offices,
laundry, public restrooms and open areas for recreation Approximately 4
elevators will be located throughout the facility. The grounds will be
landscaped. Approximately 120 parking spaces will be provided for residents,
guests, and employees.
The 212 units include approximately 38 studio units, approximately 140 one-
bedroom units, and approximately 34 two-bedroom units. An emergency call system
will connect each apartment unit to the central reception area. The Project will
include a full service dietary program, housekeeping, security services and
emergency call.
EXHIBIT 904A
------------
BORROWER'S CERTIFICATE OF PROJECT COSTS
---------------------------------------
Each of the undersigned, as members of the Executive committee of San
Marcos Retirement Village, a California general partnership (the "Borrower"), DO
HEREBY CERTIFY to The Redevelopment Agency of the City of San Marcos (the
"Issuer")
1. I am a member of the Executive Committee of the Borrower, which is the
owner of a residential congregate care housing project known as "San Marcos
Retirement Village" (the "Project"), and am authorized to execute and deliver
this certificate on behalf of the Borrower. The Borrower has applied to the
Issuer for a loan (the "Loan") to finance a portion of the cost of the Project.
2. The total cost of the Project is not less than $ . The total cost
to be financed by the Loan and Investment earnings on the Loan is $ ,
which is the total of the costs in the categories and amounts set forth in
schedules A, B and C hereto.
3. The costs set forth in Schedules A, B and C are
reasonable estimates of the cost of the Project, and such estimates will be
reasonable upon issuance of the governmental obligations issued to finance the
Project (the "Bonds").
4. Except as set forth on Schedules B and C hereto:
(a) All of the costs of the Project are used to provide "residential
rental property" as provided in Section 103(b)(4)(A) of the Internal Revenue
Code of 1954, as amended (the "Code") and the Federal Income Tax Regulations
(the "Regulations") promulgated thereunder, and are either:
(i) amounts which are chargeable to capital account to increase
the federal tax bases of the land and depreciable property which constitute the
Project (or would be so chargeable with a proper election by the Borrower or but
for a proper election by the Borrower to deduct such amounts), or
(ii) amounts which represent the costs of securing the loan, and
which may be deducted for federal income tax purposes ratably over the life of
the Loan or may be chargeable to the Project capital account; and
(b) With respect to all the land and depreciable property whose costs
are listed on Schedule A:
(i) improvements on the land consist of buildings or structures
each containing one or more similarly constructed units or one or more proximate
buildings or structures which have similarly constructed units (including all
such buildings that are owned for federal tax purposes by the same person and
financed pursuant to a common plan),
(ii) all of the aggregate number of units in the buildings
described in 4(b)(i) above are used other than on a transient basis, are
available to members of the general public, and are complete facilities for
living, sleeping, eating, cooking and sanitation,
(iii) all of the units in the buildings described in 4(b)(i)
above will be rented or available for rental on a continuous bases during the
longer of the remaining term of the Bonds or the qualified project period as
defined in Section 103(b)(12)(B) of the Code,
(iv) land and other facilities that are functionally related and
subordinate to the facilities described in this section 4(b) are of a character
and size commensurate with the number and size of the living units, and
(v) in the event one unit in a building is occupied by the
owner thereof, such building must contain at least 5 units.
For purposes of the above, buildings are proximate if they are located on a
single tract of land or any parcel or parcels of land which are contiguous
except for the interposition of a road, street, stream or similar property. For
purposes of the above, the qualified project period shall be a period beginning
on the first day on which at least 10% of the aggregate number of units in
buildings described in 4(b)(i) above are first occupied (or, if later, the date
of issuance of the Bonds) and ending on the later of the date:
(a) which is 10 years after the date on which at least 50% of
aggregate number of units are first occupied,
(b) which is that number of days after which any of the units are
first occupied equal to 50% of the total number of days in the term of those
Bonds with the longest maturity, or
guidelines established by the Internal Revenue Service set forth in Rev. Proc.
62-21, 1962-2 C.B.418.
IN WITNESS WHEREOF, I have signed this Certificate on December 31, 1985,
and I declare under penalty of perjury that the foregoing statements are true to
the best of my knowledge after investigation.
SAN MARCOS RETIREMENT VILLAGE
By ____________________________________
Bruce Schoen
By ____________________________________
P.Garcia Ovies
Schedule A
(Qualifying Costs)
(All qualifying costs must be costs paid or incurred
after the inducement resolution)
1. Land cost
Acquisition $______________
Site improvements $______________
2. Building costs
Construction $______________
Acquisition $______________
Remodeling $______________
Moving $______________
3. Machinery and equipment $______________
4. Personal property installed in project $______________
5. Interest during construction on
qualifying costs $______________
6. Ongoing letter of credit fee during
construction attributable to
qualifying costs $______________
7. Title and guaranty expenses $______________
8. Architect's fees $______________
9. Financing fees
(excluding bond issuance costs) $______________
10. Legal and accounting fees
(excluding bond issuance costs) $______________
11. Inspection fees $______________
12. Other costs (specify) $______________
Project Mgmt./Construction Mgmt. $______________
Pre-opening Marketing $______________
Schedule B
(Non-qualifying costs)
1. Any expenditures paid or incurred prior
to issuer's inducement resolution for
the bond or other similar official
action (including architect's fees,
costs of plans and specifications and
legal and financing charges) $______________
2. Post-construction interest $______________
3. Post-construction premiums and
letter of credit fees $______________
4. Real estate taxes after completion of
construction $______________
5. Management fees $______________
6. Developer's profit $______________
7. Interest during construction on non-
qualifying costs $______________
8. Ongoing letter of credit fees during
construction attributable to non-
qualifying costs $______________
9. Other costs (please specify) $______________
Schedule C
(Neutral costs)
1. Fees
Bond counsel $______________
Company counsel $______________
Other counsel $______________
Application and filing $______________
Remarketing $______________
Financial Consulting $______________
Trustee Fee $______________
2. Other costs in connection with the
bonds (please specify) $______________
3. Interest Reserve $______________
4. Insurance premiums paid at closing or
paid during construction period $______________
5. Initial letter of credit fee $______________
6. Placement Fee $______________
EXHIBIT 904B
MONITORING AGREEMENT
This MONITORING AGREEMENT (sometimes herein this "Agreement"), is made as
of the ______ day of ________________ , 19___ by and among
___________________________ (the "Monitoring Agent"), a
_________________________________ firm whose principal offices are located at
______________________________________________________________________________
SAN MARCOS RETIREMENT VILLAGE, a California partnership (the "Borrower") and THE
FIRST NATIONAL BANK OF BOSTON (the Trustee"), the trustee under an Indenture of
Trust and Agreement (the "Indenture") dated as of December 1, 1985, among The
Redevelopment Agency of the City of San Marcos (the "Issuer"), the Borrower,
Security Pacific National Bank and the Trustee in connection with a project
known as San Marcos Retirement Village project (the "Project").
WHEREAS, the Issuer has issued $13,500,000 of its Adjustable/Fixed Rate
Multifamily Housing Bonds (San Marcos Retirement Village Project) (the "Bonds"),
the proceeds of which have been or will be loaned by the Issuer to the Borrower
(the "Loan"), pursuant to the Indenture, the proceeds of the Loan to be used by
the Borrower to finance the construction, acquisition and equipping of the
Project; and
WHEREAS, in order to preserve the tax-exempt status of the bonds under
Section 103 of the Internal Revenue Code of 1954, as amended, and rulings and
regulations promulgated thereunder ("Section 103"), the Borrower and the Issuer
have entered into a certain Land Use Restriction Agreement dated as of December
1, 1985 (the "Land Use Restriction Agreement"), whereby the Borrower has agreed
that the Project shall be operated in a manner so as to comply with the
requirements of Section 103; and
WHEREAS, to assure compliance with the terms and conditions of the Land Use
Restriction Agreement and with the requirements of Section 103, the Trustee
desires to employ a monitoring agent to monitor and to enforce the terms and
conditions of the Land Use Restriction Agreement and to assist the Trustee in
performing its duties thereunder; and
WHEREAS, the Monitoring Agent is engaged in the business of originating and
servicing mortgage loans financed by the issuance of tax-exempt bonds and notes
and as such is capable of undertaking, on behalf of the Trustee, to monitor and
to enforce the
-1-
terms and conditions of the Land Use Restriction Agreement so as to assure
compliance with Section 103 requirements.
NOW THEREFORE, the Trustee and the Monitoring Agent agree as follows:
I. DEFINITIONS
-----------
Capitalized terms not otherwise defined herein shall have the meanings set
forth in the Land Use Restriction Agreement unless the context clearly indicates
otherwise.
II. POWERS AND DUTIES
-----------------
A. Lower-Income Requirement. Monitoring Agent shall, prior to the
------------------------
beginning of the Qualified Project Period, undertake to determine through review
of the Income Certifications, the form of which is attached to the Land Use
Restriction Agreement, from each prospective tenant and other reasonable means
that the Lower-Income Requirement is satisfied during the Qualified Project
Period and that all requirements of Paragraph 1 of the Land Use Restriction
Agreement are continually satisfied for the periods required therein.
Monitoring Agent shall receive from the Borrower an Income Certification
from each prospective tenant who is to be the initial occupant of a Lower-Income
Unit within ten (10) days after entering into a lease with such tenant and at
least ten (10) days prior to said tenant's occupancy of the Lower-Income Unit.
B. Monthly and Annual Reviews. Monitoring Agent shall undertake a
--------------------------
periodic review of Project operations through review of quarterly and annual
reports and Income Certifications and annual certificates of the Borrower to
determine that the Project is being operated in compliance with the requirements
of the Land Use Restriction Agreement. Periodic review by the Monitoring Agent
shall include the following procedures:
1. Monthly Review
--------------
a. Monitoring Agent shall receive from the Borrower Within ten (10)
days after the end of each month, Income Certifications for each tenant who
commenced occupancy of a Lower-Income Unit during the preceding month and shall
review the Income Certifications for compliance with low or moderate income
standards (Note: Individuals who are qualifying individuals upon initial
occupancy continue to be qualifying individuals even though they subsequently
cease to be of low or moderate income).
-2-
b. Monitoring Agent shall review Income Certifications and make a
quarterly review of the books of the managing agent of the Project to determine
that Lower-Income Units have not been either subleased or subsequently leased to
other than qualifying individuals, and not occupied for a temporary period
exceeding thirty-one (31) days by other than a qualifying individual.
2. Annual Review.
-------------
a. Monitoring Agent shall receive from the Borrower within twenty
(20) days after the anniversary of the beginning of the Qualified Project Period
a certification by the Borrower supporting reports:
(i) Indicating the number and percent of units in the Project that
were Lower-Income Units at all times during the year preceding the date of such
certification.
(ii) Certifying that the rental requirements set forth in Paragraph 5
of the Land Use Restriction Agreement has been met from the beginning of the
Qualified Project Period to date.
(iii) Certifying that any of the Lower-Income Units which were vacant
at any time during the preceding year were not at any time occupied by other
than a qualifying individual for a period exceeding thirty-one (31) days.
(iv) Certifying that all things necessary and all actions required to
assure compliance with the obligations of the Borrower under the Land Use
Restriction Agreement, and to assure management and operation of the Project in
accordance with the requirements under Section 103, have been done, do exist and
are continuing.
(v) Any non-compliance with the requirements under the Land Use
Restriction Agreement shall, upon notice or discovery and within a period not to
exceed sixty (60) days, be immediately cured, so that the Project is in full
compliance with these requirements.
b. Monitoring Agent shall within forty-five (45) days following the
anniversary of the beginning of the Qualified Project Period submit a written
report to the Issuer and the Trustee regarding the prior year s operation of the
Project, which shall include a certification by the Monitoring Agent that to the
best of the Monitoring Agent's knowledge and belief, upon reasonable
investigation, the Project has been operated in compliance with the terms and
conditions of the Land Use Restriction Agreement.
-3-
C. Notice of Non-Compliance. Monitoring Agent shall act on behalf of
------------------------
the Issuer and the Trustee to assure compliance by the Borrower with the terms
and conditions of the Land Use Restriction Agreement, and where the Borrower
fails to comply with the terms and conditions of the Land Use Restriction
Agreement, to notify the Borrower, the Issuer and the Trustee of such non-
compliance within ten (10) days of notice or discovery of much non-compliance.
D. Notice of Certain Facts. Monitoring Agent shall, upon notice from the
-----------------------
Borrower or upon discovery otherwise of any of the following, give immediately
(within fifteen (15) days) notice of such facts to the Issuer and the Trustee,
and where appropriate the Borrower:
1. Involuntary loss of the Project by the Borrower including losses
resulting from fire, requisition, foreclosure, transfer of title, deed in
lieu of foreclosure.
2. Planned conversion of the Project to a cooperative or a
condominium.
3. Any non-compliance with the requirements under the Land Use
Restriction Agreement.
E. Notice of Cure. Monitoring Agent, upon notice or discovery of any
--------------
non-compliance with the Land Use Restriction Agreement, shall give written
notice by registered or certified mail of said non-compliance to the Borrower,
the Issuer, and the Trustee immediately within fifteen (15) days) upon such
notice or discovery and undertake at the direction of the Issuer, within a
reasonable period (not more than sixty (60) days), to effect a cure of any non-
compliance.
F. Agency. Monitoring Agent shall carry out on behalf of the Trustee all
------
of the actions specified in subparagraphs A through E above as agent for the
Trustee, and shall have no power or authority (expressed or implied) beyond the
express power and authority set out herein.
III. LIMITATIONS
-----------
Monitoring Agent has no power or authority, express, implied or otherwise,
other than those expressly granted above. The Issuer shall have no liability
for any costs, expenses or damages Incurred by or against Monitoring Agent
except to the extent expressly provided in the Indenture.
-4-
IV. TERMINATION
-----------
A. This Agreement may be terminated for cause by the Trustee upon written
notice by it being mailed or delivered to the Monitoring Agent's address last
known to the Trustee or upon oral notice by the Trustee, followed by such
written notice, or by Monitoring Agent upon actual written notice to the
Trustee.
B. Termination of this Agreement in accordance with subsection A above
shall in no way affect the parties' rights and liabilities under subparagraph D
hereof.
C. Any attempt on the part of the Monitoring Agent to assign or otherwise
transfer any or all of its duties under this Agreement shall result in the
termination of this Agreement and all power and authority of the Monitoring
Agent, expressed herein or otherwise implied, shall expire immediately upon such
attempted assignment or transfer.
D. The Trustee, at its option, shall have the right to cancel this
Agreement, without cause or reason, by giving notice to Monitoring Agent of not
less than twenty (20) days. In the event of such cancellation, all rights and
duties of Monitoring Agent and its rights to further compensation hereunder
shall cease with respect to this Agreement, and Monitoring Agent shall transfer
and deliver to or on the order of Trustee all information in its possession
relating to the performances by the Borrower of its obligations under the Land
Use Restriction Agreement which are in the possession of the Monitoring Agent or
under its custody or control.
V. CONFIDENTIALITY
---------------
Monitoring Agent recognizes and agrees that any and all information
regarding non-compliance with Section 103 and the Land Use Restriction Agreement
shall be confidential as between the Monitoring Agent, the Issuer, the Borrower
and the Trustee, and that the Monitoring Agent shall not otherwise disclose any
fact or information regarding said non-compliance to any person, group or agency
without the prior written consent of the Trustee and the Issuer.
VI. COMPENSATION
------------
A. As full compliance for performing the duties herein provided and the
monitoring procedures performed by the Monitoring Agent, the Monitoring Agent
shall be entitled to receive an initial fee of $____________ and a quarterly fee
of $____________ to be increased annually by the percentage increase in
applicable median income. The Monitoring Agent shall be required to pay all
-5-
expenses incurred by it in connection with its monitoring under this Agreement,
but will be reimbursed for any expenses and attorney's fees incurred by it in
connection with the following:
(i) Expenses and attorney's fees resulting enforcement upon the
direction of the Trustee or the Issuer any provision of the Land Use Restriction
Agreement.
(ii) Extraordinary expenses incurred in connection with the
investigation of non-compliance by the Borrower with the Land Use Restriction
Agreement outside of the scope of the review procedure described hereunder.
VII. AMENDMENT
---------
If, as a result of an amendment to the Land Use Restriction Agreement, the
duties and procedures set out herein with respect to review for compliance with
the Land Use Restriction Agreement must be amended to assure compliance with the
amended Land Use Restriction Agreement and the requirements of Section 103 or
any successor provision, then this Agreement shall be subject to amendment with
respect to the duties and compensation of the Monitoring Agent.
VIII. TERM OF AGREEMENT
-----------------
Unless sooner terminated or canceled as herein provided or by mutual
agreement, this Agreement shall continue in full force and effect during the
period the Land Use Restriction Agreement is in effect.
IX. CAPTIONS
--------
The captions of the paragraphs of this Agreement are inserted only as a
matter of convenience and for reference only and they in no way define, limit or
describe the scope of any paragraph of this Agreement or the intent of any
provision hereof.
X. SEVERABILITY
------------
If any provision of this Agreement shall be held or deemed to be or shall,
in fact, be illegal, inoperative or unenforceable, the same shall not affect any
other provision or provisions herein contained or render the same invalid,
inoperative or Unenforceable to any extent whatsoever.
-6-
XI. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with the
applicable laws of the State of California, except to the extent that the laws
of the United States may prevail.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective representatives.
By ___________________________________
Title _______________________________
SAN MARCOS RETIREMENT
By Brim and Associates, Inc.
By _____________________________
Name:
Title:
By University Financial
Corporation
By _____________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By _____________________________________
Title __________________________________
-7-
EXHIBIT 906A
------------
INCOME CERTIFICATION
--------------------
The undersigned hereby (certify) (certifies) that:
1. This Income Certification is being delivered in connection with the
undersigned's application for occupancy of Apartment #_____ in the San Marcos
Retirement Village, in the city of San Marcos, California.
2. List all the occupants of the apartment, the relationship (if any) of
the various occupants, their ages, and indicate whether they are students (for
this purpose, a student is any individual who has been, or will be, a full-time
student at an educational institution during five months of the year in which
this application is submitted, other than correspondence school, with regular
facilities and students).
Student
Occupant Relationship Age (Yes or No)
- ---------- ------------ --- -----------
(a) _________________ _______________ ___ ___________
(b) _________________ _______________ ___ ___________
(c) _________________ _______________ ___ ___________
(d) _________________ _______________ ___ ___________
(e) _________________ _______________ ___ ___________
3. Are any of the students listed in 2 above eligible to file a joint
return for Federal income tax purposes?
Yes No
4. The total anticipated income for each person listed in 2 above during
the 12 month period commencing with the date occupancy will begin including:
full amount, before any payroll deductions of wages, salaries,
overtime, commissions, fees, tips and bonuses; net income from operation of
a business or profession; interest and dividends and other net income from
real or personal property; periodic payments from social security,
annuities, insurance policies, retirement funds, pensions, disability or
death benefits and other similar types of periodic payments; payments in
lieu of earnings, such as
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unemployment and disability compensation, workers compensation and
severance pay; public assistance income, where payments include
amounts specifically designated for shelter and utilities; periodic
and determinable allowances such as alimony and child support, and
regular contributions or gifts from persons not residing in the
dwelling; all regular and special pay and allowances of members of the
Armed Forces (whether or not living in the dwelling) who are the head
of the family or spouse; and any earned income tax credit to the
extent it exceeds income tax liability;
but excluding:
casual, sporadic or irregular gifts; amounts which are Specifically
for reimbursement of medical expenses; lump sum additions to family
assets, such as inheritances, insurance payments (including payments
under health and accident insurance and workers' compensation),
capital gains and settlement for personal or property losses; amounts
of educational scholarships paid directly to the student or the
educational institution, and amounts paid by the government to a
veteran for use in meeting the costs of tuition, fees, books and
equipment, but in either case only to the extent used for such
purposes; special pay to a serviceman head of a family who is away
from home and exposed to hostile fire; relocation payments under Title
II of the Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970; foster child care payments; the value of coupon
allotments for the purchase of food pursuant to the Food Stamp Act of
1964 which is in excess of the amount actually charged for the
allotments; payments received pursuant to participation in ACTION
volunteer programs; and income from the employment of children
(including foster children) under the age of 18 years;
is as follows:
Anticipated
Occupant Annual Income
-------- -------------
(a) ____________________________________ __________________________
(b) ____________________________________ __________________________
(c) ____________________________________ __________________________
(d) ____________________________________ __________________________
(e) ____________________________________ __________________________
Total __________________________
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5. If any of the occupants listed in 2 above has any Savings, bonds,
equity in real property, or other form of capital investment (but do not include
necessary items such as furniture or automobiles),* enter the following amounts:
a. the total value of all such assets owned by all such persons:
$______________,
b. the amount of income expected to be derived from such assets in
the 12 month period commencing with the occupancy of the unit:
$_______________, and
c. the amount of such income in 5(b) which is included in 4:
$______________.
6. RESIDENT'S STATEMENT: The information on this form is to be used to
determine maximum income for eligibility. I/We have provided, for each person
set forth in Section 2, either (1) an Employer's Verification of current
anticipated annual income, if the occupant is currently employed or (2) copies
of their most recent federal income tax return, if a return was filed for the
most recent year. I/We certify that the statements above are true and complete
to the best of my/our knowledge and belief and are given under the penalty of
perjury.
Date: (a) ______________________________________________
(b) ______________________________________________
(c) ______________________________________________
(d) ______________________________________________
(e) ______________________________________________
______________________
* Include the value over and above actual consideration received, except in a
foreclosure or bankruptcy, of any asset disposed of for less than fair market
value within two years of the date of this Income Certification.
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
7. BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day, personally appeared _________________________, known to me
to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this _______ day of ______________,
19__.
----------------------------------------
Notary Public in and for San Diego
County, California
My commission expires: _________________
8. OWNER/DEVELOPER'S STATEMENT: The family or individual(s) named in
Section 2 of this Income Certification is eligible under the provisions of the
Land Use Restriction Agreement, to live in a unit in the Project, as defined in
the Indenture of Trust Agreement among its owner, Security Pacific National
Bank, The Redevelopment Agency of the City of San Marcos and The First National
Bank of Boston, as trustee, and, the anticipated annual income from paragraph 4
and, if applicable, from paragraph 5 will be $___________. Thus, the family or
individual(s) constitute(s):
_______ a. Lower-Income Resident;
_______ b. An Eligible Resident other than a Lower-Income
Resident.
- --------------------------------- ---------------------------------
Signature of Owner's Date
Authorized Representative
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SUBJECT: DEVELOPER INSTRUCTIONS FOR INCOME CERTIFICATION
In order to qualify as tax-exempt under Section 103(b)(4)(A) of the
Internal Revenue Code, 15 percent or more in the case of targeted area projects,
or 20 percent or more in the case of any other project, of the units in each
multi-family residential rental project must be occupied by individuals of low
or moderate income. In addition, state law requires that the balance of the
units in such project be occupied by income-eligible persons. The purpose of the
Income certification is to assist in determining whether the occupants of a
particular unit are of "low or moderate" income for federal tax purposes or
income-eligible for state law purposes.
Part I of the Certificate asks for the Project Name, project Address
et al., and should be filled out by a representative of the Developer.
- -- --
Similarly Part II of the certificate asks for the Apartment Address et al. and
-----
should also be filled out by a representative of the Developer.
Part III, Section I of the Certificate asks the occupants to list
their names, relationship, ages, and whether they are students. Part II, Section
2 of the Certificate asks whether any of the students listed in Part III,
Section l are able to file a joint return for Federal income tax purposes (i.e.,
are they married). Part III, Section 3 of the Certificate asks each occupant to
list his/her anticipated annual income, as defined. Finally, Part III, Section 4
asks the occupants to estimate the value of all "capital investments" (excluding
necessary items"), the estimated amount of income expected to be derived from
these "capital investments" that has already been included in Part III, Section
3 of the Certificate. The occupant is referred to in instructions on the reverse
of the Certificate to assist him/her in filling out the various Sections.
The information provided in Sections 1 through 4 of Part III of the
Certificate should be sufficient to determine whether an individual(s) or the
family constitutes a lower-income resident for Federal income tax purposes, and
whether the individual(s) or the family constitutes an eligible resident for
state law purposes, if applicable.
The Income Tax Regulations provide that the occupants of a unit shall
not be considered "of low or moderate income" if all of the occupants are
students no one of whom is entitled
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to file a joint return for Federal income tax purposes. Thus, if Section III,
Section 1 of the Certificate indicates that all of the occupants are students,
---
and if Part III, Section 2 of the Certificate indicates that none of the
- --- ----
students are able to file a joint return for Federal income tax purposes, (i.e.,
none of the students are married) the occupants are not "lower-income residents"
even if the occupants have no income. It should be noted, however, that even
though the occupants may not qualify as "lower income" for Federal income tax
purposes, they may, in fact, qualify as "eligible residents" for State purposes.
Assuming the occupants of the units are not all students, none of whom
are entitled to file a joint return for Federal income tax purposes, the next
step in filling out the certificate is to determine the "anticipated annual
income" of the occupants of the unit for the "certification year. The
"certification year" is the twelve-month period of time that begins on the date
the unit is first occupied. Thus, if the certification is completed before the
prospective occupants move in, the occupants should recertify the Certificate on
the date they actually move into the unit so that you may determine whether they
qualify as lower-income occupants.
All payments from all sources received by the Family head (even if
temporarily absent) and each additional member of the Family household, they
main exception being the income from employment of children (including foster
---------- --------
children) under the age of 18 years that are members of the household, should be
included in "anticipated annual income." For example, if a 17-year old son or
daughter has a part- or full-time job that pays $5,000 per year and has income
from bank deposits of $100 per year, only the $100 should be listed. Part III,
Section l of the Certificate indicates the various relationships of the
occupants in a household and their ages.
Once the anticipated annual income in Part III, Section 3 of the
Certificate has been totaled, you should determine whether the occupants have
"capital investment," including capital investments of any children in the
family, of more than $5,000 listed in Part III, Section 4a of the Certificate.
If the "capital investments" exceed $5,000, "anticipated annual income" will be
the sum of the amount totaled in Part III, Section 3 of the Certificate plus the
----
greater of, if any, (a) the actual amount of income in Part III, Section 4b,
- -------
minus the amount of income enumerated in Part III, Section 4c, if any, or (b)
the "imputed amount of income" minus the amount of income enumerated in Part
III, Section 4c, if any. The "imputed amount of income" is the
-2-
value of the assets listed in Part III, Section 4a of the Income Certification
multiplied by the "current passbook Savings rate" as determined by the United
States Department of Housing and Urban Development. (The "current passbook
savings rate" will vary from time to time and will first be available around
October 1, 1984; if the "current passbook savings rate" is unavailable, you
should multiply the value of the assets by 10%. For example, if the prospective
occupants list assets of $7,000 in Part III, Section 4a of the Income
Certification, and the "current passbook savings rate" is 6%, the "imputed
amount of income is $420.
The "anticipated annual income" of Part III, Section 3 of the
Certificate plus, if the capital investments exceed $5,000, the necessary
adjustments of Part III, Section 4 of the Certificate, as discussed in the
preceding paragraph should be entered in the blank on the third line of the
Owner/Developer Statement portion of the certificate. If this amount does not
exceed 80 percent of the median gross income for the area, the occupants qualify
as a lower-income residents and (a) should be checked in the Owner/Developer
portion of the Certificate. If this amount exceeds 80 percent of the median
gross income of the area, the occupants do not qualify as lower-income
---
residents. In such case, the occupants still may qualify as "eligible residents"
for state law purposes and, if they so qualify (b) should be checked in the
Owner/Developer portion of the Certificate.
The "low or moderate" income requirement must be met for the
"qualified project period." Thus, 20 percent, or 15 percent in the case of a
targeted area, of the occupants at any one time must be of lower income
beginning at the time when 10 percent of the units are first occupied. For
example, if a project in a non-targeted area contains 200 units, the low income
restrictions need not be met until 20 units have been occupied. However, as
---
soon as 20 units have been occupied, 4 Units must actually be occupied by
--------
occupants of "low or moderate" income, or must have been previously occupied by
occupants of "low or moderate" income, i.e., it is not sufficient that 4 units
are reserved for lower income families.
--------
It should be noted that a unit occupied by an individual or family who
at the commencement of such occupancy is of lower income is treated as occupied
by such an individual or family during their occupancy of such an individual of
family during their occupancy of such unit, even though they later cease to be
of lower income. Further, if a tenant has occupied a unit for a length of time
and decides to add a roommate, the "anticipated annual income" of the new tenant
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when he/she first occupies the unit, and the "anticipated annual income of the
existing tenant when he/she first occupied the unit must be aggregated to
determine whether the unit may continue to be certified as being occupied by
"low or moderate" income individuals. If, however, the occupants of a unit move
into another unit in the project, the second unit will be treated as occupied by
a lower-income occupant only if the occupants qualified as lower income at the
time of the move. Moreover, if a lower-income occupant moves out of a unit, such
unit is treated as occupied by an individual or family of lower income until
reoccupied at which time the character of the unit shall be redetermined.
-4-
EXHIBIT 906B
------------
COMPLIANCE CERTIFICATE
----------------------
The undersigned, on behalf of San Marcos Retirement Village, a California
partnership (the "Company"), has read and is thoroughly familiar with the
provisions of the various loan documents associated with the issuance by The
Redevelopment Agency of The City of San Marcos (the "Issuer"), of its
$13,500,000 Adjustable/Fixed Rate Multifamily Housing Bonds (San Marcos
Retirement Village Project), which documents include the following: (1) the Land
Use Restriction Agreement dated as of __________ 1986 (the "Agreement") among
the Company, The First National Bank of Boston, a national banking association
(the "Trustee") and the Issuer and (2) the Indenture of Trust and Agreement
between the Issuer, the Company and Security Pacific National Bank, and the
Trustee dated as of December 1, 1985 (the "Indenture").
The undersigned hereby certifies on behalf of the Company that during the
entire calendar quarter immediately preceding the date of this certificate, (i)
the following number of units in the Project were first occupied during such
calendar quarter by Lower-Income Tenants (as such terms are defined in the
Agreement) and (ii) the following number and percentages of dwelling units in
the Project were either occupied by Lower-Income Tenants or were held vacant and
available for such occupancy for all of such period:
Percent of
Total Number Total Units
Number Newly Units Occupied Occupied
Occupied Units or Available or Available
Lower-Income
Tenants: ______________ ______________ ______________%
All Tenants: ______________ ______________ ______________%
The Company further certifies that attached hereto is a listing of all
tenants who commenced occupancy or terminated occupancy of a unit in the Project
during the preceding month, identified by name and unit number.
The undersigned hereby certifies that the representations, warranties and
agreements of the Company contained in the Land Use Restriction Agreement are
and true and correct and have been duly performed by the Company in all
respects, all as of the date of this certificate, and that to the best of the
Company's knowledge the Company is not in default under any of the above
documents, with the exception of the following (if none, please so state):
SAN MARCOS RETIREMENT VILLAGE, a
California partnership
By: __________________________________
Date:_____________________